Conflict Minerals Webinar
description
Transcript of Conflict Minerals Webinar
Understanding and Disclosing the Use of Conflict Minerals
Robert Yoho, LiveSource
Kevin Deely, Resources Global Professionals
Roger Blumberg, LiveSource
Quick Housekeeping
• Chat box is available if you have any questions
• There will be time for Q&A at the end
• We will be recording the webinar for future viewing
• All attendees will receive a copy of the slides/recording
2
Robert Yoho Supplier Compliance
Practice Lead
Email: [email protected] Phone: 412.370.1382
Kevin Deely Senior Practice Director,
Supply Chain Management
Email: [email protected] Phone: 703.610.3436
Roger Blumberg Senior Vice President of
Sales & Operations
Email: [email protected] Phone: 412.726.1965
Agenda
• Conflict Minerals Overview
• Solving Conflict Minerals Requirements with Technology
• Consultative approach to solving conflict minerals
• Q&A
4
Conflict Minerals Overview
Roger Blumberg, LiveSource Email: [email protected] Phone: 412.726.1965
What is the U.S. Conflict Minerals Law?
6
The conflict minerals ruling, as stated in Section 1502 of the Dodd-Frank, requires that publicly traded companies and their suppliers are now required to disclose whether they manufacture products that contain conflict minerals.
What are Conflict Minerals?
7
Conflict minerals are minerals mined in conditions of armed militant groups, notably in the eastern provinces of the Democratic Republic of the Congo, where these groups exploit or have direct control over minerals traded throughout the region.
Conflict Minerals (3TG) Common Industries Select Applications
Tin
Cassiterite
Electronics
Automotive
Industrial equipment
Construction
Alloys
Solders
Plating
Wire
Tantalum
Coltan, Columbite-Tantalite
Aerospace & Defense
Automotive
Electronics
Medical devices
Industrial products
Capacitors
Circuit boards
Lab equipment
Satellites
Tungsten
Wolframite
Electronics
Lighting
Industrial products
Telecommunications
Metal wires
Electrodes
Heating elements
Welds
Gold
Aerospace & Defense
Electronics
Telecommunications
Connectors
Electric plating
Fuel cells
The DRC has essentially been in a state of civil war for more than 15 years in one form or another.
8
Where is the Democratic Republic of the Congo (DRC)?
9
What is the Timeline for Compliance?
January 2013
January 2014
January 2015
January 2016
January 2012
Compliance Year One Compliance Year Two
Aug 22, 2012
SEC Final Rule
Dec 2010
SEC Proposed Rule
Conflict Minerals Free
Not “DRC conflict free”
Undeterminable
Conflict Minerals Free
Not “DRC conflict free”
May 31, 2014
Initial filing date
May 31, 2016
Third filing date
May 31, 2015
Second filing date
July 2010
Dodd-Frank becomes law
TODAY
5 Reasons You Can’t Ignore Conflict Minerals Legislation
1. Continued conflict
2. Liability
3. Corporate social
responsibility
4. Direct supply chain route
5. Action is required now
10
Solving Conflict Minerals Requirements with Technology
Robert Yoho, LiveSource Email: [email protected] Phone: 412.370.1382
Solving Conflict Minerals with Technology
12
• Collection of multiple levels of supplier documentation
• Scalability to manage a large number of suppliers over time
• Notifications to both buyers and suppliers with expiree dates for verified documents or certifications
• Single supplier communication vehicle with verification to communicate your company’s policies regarding conflict minerals
• Flexibility to adjust to ever-changing supply base structure (M&A, supplier onboarding) and regulatory requirements
• Need to provide detailed reports for initial and ongoing supplier compliance
Compliance Tracking Through Multiple Tiers
13
Upload all Suppliers
Internal Assessment/
Survey
Certify Tier 1 Affected Suppliers
Roll out to Tier 2
Suppliers
Roll out to Tier 3 ,4,x Suppliers
Ongoing surveys to
track progress
Compliance validation for Conflict Minerals/REACH
• Certifications and tracking maintained via Supplier Intelligence System (SIS) Card
• Updates automatically generated to supplier and tracked by buyer organization
• Limited license given to Tier 2 and below suppliers for uploading certificates and reporting
Multiple Tier Graphical Representation
14
• Parent – child relationship
• Buying organizations can view actual supplier responses
• Scalable to support multiple layers of suppliers (down to smelters)
• Configurable for ongoing changes to supply base
Supplier Profiles with Embedded Survey Responses
15
Supplier Conflict Minerals Profile Supplier Survey Response
• Survey responses are versioned with time/date stamp
• Reportable to show progress over time
• Configurable to each buying organization’s needs
Compliance Reporting: Conflict Minerals/REACH/RoHS
1
• Capability to ‘roll up’ reports from multiple Tier 1 and below suppliers in a consistent and timely manner
• Reporting requirements by the buying organization to provide to internal and external customers
• Demonstrating the time element of compliance efforts and tracking the Conflict Minerals Program effectiveness
• Reporting and taking action with non-compliant suppliers
• Performing multi-tier analysis on individual supplier responses
Supplier Declarition Scope Description of Scope
Is the use of Gold (Au)
necessary to the
functionality or
production of your
company's products
that it manufactures or
contracts to
manufacture?
Is the use of Tantalum
(Ta) necessary to the
functionality or
production of your
company's products
that it manufactures or
contracts to
manufacture?
Is the use of Tin (Sn)
necessary to the
functionality or
production of your
company's products
that it manufactures or
contracts to
manufacture?
Is the use of Tungsten (W)
necessary to the
functionality or
production of your
company's products that
it manufactures or
contracts to manufacture?
Deaton Manufacturing Systems NO NO NO NO
Marshall Metal Products Inc NO NO NO NO
Robinson Metal, Inc. NO YES YES YES
Compliance validation for Conflict Minerals/REACH
17
• Expandable for REACH/RoHS compliance efforts
• Flexible to individual organizational initiatives
• Supplier compliance with visibility to both buyers and suppliers
Supplier Risk Management
Track current/future compliance initiatives as well as other supplier risk factors in one platform
Getting Started
18
Clearly there are challenges to adhering to the conflict mineral ruling requirements, but it is important to take a proactive approach.
As a starting point, consider which products need to be reported and the affected suppliers. Determining whether products are conflict free doesn’t have to be done on your own. There are tools available to help ease this process and help reduce the burden.
Consultative Approach to Solving Conflict Minerals
Kevin Deely Email: [email protected] Phone: 703.610.3436
This document is the proprietary and confidential property of Resources Global Professionals.
2
A Unique Kind of Business Partner
WE ARE A PUBLICLY-TRADED, GLOBAL PROFESSIONAL SERVICES FIRM WITH A BIG FOUR HERITAGE.
Founded in 1996 as part of Deloitte.
Management buy-out (1999) and initial public offering (2000). NASDAQ: RECN.
Selectively acquired Big Four service lines in Europe and Asia/Pacific.
We partner with business leaders and their teams to plan and execute initiatives
as well as support day to day operations.
Working collaboratively with our clients, we provide:
ADVISORY Project scoping, approach, management and execution
PROJECT Subject matter or functional expertise for specific projects
INTERIM Management level expertise for day-to-day operations
This document is the proprietary and confidential property of Resources Global Professionals.
3
High – Level SEC Compliance Roadmap
As part of the final rule, the SEC outlined a three step compliance roadmap for companies to follow.
This document is the proprietary and confidential property of Resources Global Professionals.
Are you an SEC 13(a) or 15(d) “Issuer”?
Do you manufacture, or contract to manufacture products containing Conflict Minerals?
Are Conflict Minerals necessary to the functionality or production of the product manufactured by or for you?
If yes to all three, then go to Step 2
Using an acceptable framework (i.e. Organization for Economic Cooperation and Development (OECD)), determine source and chain of custody of Conflict Minerals
Conduct a Reasonable Country of Origin Inquiry (RCOI)
Determine whether Conflict Minerals are from Covered Countries, scrap or recycled; describe methods and results
SEC defined a Specialty Disclosure Form (Form SD) for submission of the annual Conflict Minerals filing
Issuers will submit either a Form SD, or Form SD with a Conflict Minerals Report describing the measures taken in Due Diligence
Obtain and certify an independent 3rd party audit and report on methods and results
Disclose Conflict Minerals determination through filing Form SD and posting on publicly available company website
Step 1 Determine Applicability
Step 2 Due Diligence
Step 3 Compliance Reporting
Step 1 – Determine Applicability
4
Applies to any SEC 13(a) or 15(d) registrant for which conflict minerals are “necessary to the functionality or production” and contained in the final product manufactured, or contracted to be manufactured.
Includes domestic, foreign, and voluntary issuers regardless of size.
SEC estimates about 6,000 (or roughly half) of all SEC registrants will be impacted.
No “de minimis” use exception.
Considering the many industries whose products contain conflict minerals, and the breadth of supply chains involved, the potential scope is significant.
Non-public entities that are suppliers of such products to SEC registrants will be impacted through requirements to vet and certify their supply chains.
Final Rule page 48
This document is the proprietary and confidential property of Resources Global Professionals.
The regulation is focused on SEC registrants that meet certain criteria, but the regulation also impacts suppliers, foreign and domestic, that serve these companies.
5
Step 2 - Due Diligence
The SEC final rule requires the use of a recognized due diligence framework. Presently, the only internationally recognized framework comes from the Organisation for Economic Co-operation and Development (OECD).
This document is the proprietary and confidential property of Resources Global Professionals.
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas
Supplements for Tin, Tantalum, Tungsten, and Gold
Over 70 specified recommendations
Foundation for defining a company’s Conflict Minerals compliance process
1) ESTABLISH STRONG
COMPANY MANAGEMENT
SYSTEMS
3) DESIGN & IMPLEMENT A STRATEGY TO RESPOND TO
IDENTIFIED RISKS
2) IDENTIFY AND ASSESS RISKS
IN THE SUPPLY CHAIN
4) THIRD PARTY AUDIT OF SMELTER
/REFINER’S DUE DILIGENCE PRACTICES
5) REPORT ANNUALLY ON SUPPLY CHAIN DUE DILIGENCE
OECD Due Diligence Guidance page 17
Step 3 - Compliance Reporting
6
Form SD (Specialized Disclosure) and Conflict Minerals Reports are filed.
Liability for false or misleading material statements.
A Standard defense for this Liability: Can the company prove that they acted in good faith and had no knowledge that information was false or misleading.
Form SD must be signed by an executive officer of the company, but not required to be signed by the company’s directors.
This document is the proprietary and confidential property of Resources Global Professionals.
Ultimately, companies will have to file the Form SD Specialized Disclosure and potentially a Conflict Minerals Report detailing their RCOI and Due Diligence efforts and outcomes.
Form SD (Specialized Disclosure):
The determination – “DRC Conflict Free”, “DRC Not Conflict Free”, “DRC Conflict Undeterminable”.
Brief description of RCOI and Due Diligence efforts.
The results of that RCOI and Due Diligence efforts.
Conflict Minerals Report:
Due diligence on source and chain of custody.
Steps taken/to be taken to mitigate risk 3TGs benefited armed groups.
Any further steps to improve Due Diligence.
Country of origin in the Covered Countries, if known.
Smelting facilities that processed the 3TGs, if known.
Efforts to determine mine or origin with greatest possible specificity.
Describe products, facilities used to process them.
SEC Final Rule page 161 and 182
What is our vision for becoming Conflict Minerals compliant?
How are our peers proceeding with compliance and what are their expected conclusions?
What conclusion are we targeting for Year One, Year Two, and beyond?
What are the risks of concluding “not been found to be DRC conflict free” by 2015?
What is our criteria for “Necessary to the Functionality or Production” and “Contract to Manufacture”?
How will we identify 3TGs in our products and who will be involved?
Can we leverage existing compliance and sustainability initiatives for conflict minerals?
What information can we gain through the RCOI process that will help drive operational performance and reduce risk?
How aware and prepared is our supply base to address this initiative?
7
Key Considerations – Strategy and Planning
As they proceed, companies must contemplate a range of considerations to produce a cohesive compliance strategy to guide the organization.
Conflict Minerals
Compliance
This document is the proprietary and confidential property of Resources Global Professionals.
8
Key Considerations – Process, Controls, and Audit
Who is responsible for the overall design of the compliance process?
How do we capture findings, supporting documentation, and conclusions?
What technology do we plan to use to support the process (e.g., RCOI, document retention)?
What follow-up actions will be taken with suppliers who did not provide satisfactory responses?
Who is signing Form SD?
What goes into Form SD or the Conflict Minerals Report?
What controls need to be implemented?
What is the role of internal audit and/or compliance?
How do we demonstrate that we are in compliance with the OECD Guidance? And, that we adhered to a process?
If we have two to four years before a possible audit, how do we know if our process is sufficient? (i.e., Mock Audit)
What should be included in the scope of the Mock Audit?
Companies must also focus on defining a process that works for their organization, aligns to the OECD Guidance, and reduces overall compliance risk.
Conflict Minerals
Compliance
This document is the proprietary and confidential property of Resources Global Professionals.
9
Key Considerations – Governance
What organizational function(s) own Conflict Minerals compliance?
What are the organizational impediments to becoming compliant (e.g., silos, disparate organizations and technology)?
How do we ensure our process is consistently applied throughout the organization?
What metrics should be used for compliance tracking and reporting?
What changes may be required from a supplier management perspective (e.g., sourcing, quality and audit)?
Companies must also determine what type of governance model best suites their organization and culture.
Conflict Minerals
Compliance
This document is the proprietary and confidential property of Resources Global Professionals.
This document is the proprietary and confidential property of Resources Global Professionals.
Conflict Minerals Lessons Learned
11
Lessons Learned
Develop realistic expectations on timing and outcomes
Consider that varying degrees of compliance carry different costs. Determine what the appropriate level of investment to achieve your objectives.
Leverage conflict minerals compliance to establish a more formalized supply chain risk, compliance, and sustainability strategy
We see a number of companies that do not have a full appreciation of what it takes to become compliant. As well as appreciating the ancillary benefits that relate to becoming compliant.
Strategic Level Lessons Learned
12
Lessons Learned, continued
Strong program governance, detailed process design, and software selection are key in preparing to execute compliance activities.
Execution Level Lessons Learned
Develop a documentation standard and retention plan at the beginning of the process
Identify process risks and controls early in the process
Approaching the risk rating of products from the procurement/ commodity side may be more efficient given the involvement of procurement stakeholders and quality of procurement data.
Maximize internal analysis to reduce RCOI burden
Define RCOI requirements before evaluating and testing RCOI software
Develop detailed a RCOI communications and training strategy for suppliers to increase the survey response rate and completeness of responses
Establish a robust governance structure to:
Develop the company’s conflict minerals vision, strategy, policy, and program charter
Define program decision rights (e.g., executive steering committee, business unit leads, geographic leads)
Determine roles and responsibilities of key organizational functions Allocate and prioritize resources and investments Define ‘reasonableness’ of the process
This document is the proprietary and confidential property of Resources Global Professionals.
RGP’s Conflict Minerals Approach
Our readiness assessment determines an organization’s capacity to comply with Conflict Minerals provisions, identifies potential 3TG risk, and provides a compliance roadmap.
Our RCOI and Due Diligence methodology follows the SEC-endorsed OECD Guidance and prioritizes the necessary steps, tools and templates to support sustainable compliance efforts.
RGP supports the preparation of Form SD and the Conflict Minerals Report.
RGP Conflict Minerals Methodology
14 This document is the proprietary and confidential property of Resources Global Professionals.
Our end-to-end compliance methodology, which includes Quick Diagnostic, Reasonable Country of Origin Inquiry (RCOI) and Due Diligence, and Compliance Reporting.
*Each client’s timeline is tailored to fit their objectives and will address the scope and complexity of their supply chain. Some activities from one Phase to the next will be conducted in parallel. Phase 3 timing does not include a Mock Audit.
Phase 2 RCOI and Due Diligence
Phase 3 Compliance Reporting
Project Management / Stakeholder Communications / Project Risks / Status Reporting
PHASE 3 COMPLIANCE REPORTING
PHASE 2 RCOI AND DUE DILIGENCE
PHASE 1 QUICK DIAGNOSTIC
Questions?
Robert Yoho Supplier Compliance
Practice Lead
Email: [email protected] Phone: 412.370.1382
Kevin Deely Senior Practice Director,
Supply Chain Management
Email: [email protected] Phone: 703.610.3436
Roger Blumberg Senior Vice President of
Sales & Operations
Email: [email protected] Phone: 412.726.1965