CSCMP 2014: Conflict Minerals in your Supply Chain - Tord Dennis (WSP)
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Transcript of CSCMP 2014: Conflict Minerals in your Supply Chain - Tord Dennis (WSP)
Conflict Minerals in Your Supply Chain
Tord Dennis
Practice Leader
http://www.wspgroup.com/
What is the Conflict Minerals Rule?
TinTantalum
Gold
• The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in July 2010
• The SEC published the final conflict minerals rule in August 2012
• Final rule took effect beginning with the 2013 calendar year
• Conflict minerals are tin, tantalum, tungsten, and gold (and their derivatives) commonly known as 3TG
• Companies must conduct a reasonable country of origin inquiry (RCOI) to identify source of conflict minerals
• Disclosure to the SEC using Form SD must be completed by May 31 for previous year
• May need to include Conflict Minerals Report (CMR) and an independent private sector audit
Tungsten
What does this mean to you?
• Do you file with the SEC?• Does your customer file with the SEC?
What are you expected to do?
• Do you have conflict minerals in your product?• If so do they come from the DRC or “covered countries?”
Conflict Free Sourcing Initiative
• Consortium of more than 200 companies from seven different industries
• Runs regular workshops on conflict minerals issues and contributes to policy development and debates with leading civil society organizations and governments
• Provides a range of tools and resources including the Conflict-Free Smelter Program, the Conflict Minerals Reporting Template (CMRT), Reasonable Country of Origin Inquiry data and a range of guidance documents on conflict minerals sourcing
http://www.conflictfreesourcing.org/
Conflict Minerals Reporting Template (CMRT)
• Formerly known as the EICC/GeSI template
• The Conflict Minerals Reporting Template is a free, standardized reporting template developed by the CFSI
• The template also facilitates the identification of new smelters and refiners to potentially undergo an audit via the CFSI’s Conflict-Free Smelter Program
• For 2014 data / 2015 SEC filings download CMRT 3.01 (May 2014) from http://www.conflictfreesourcing.org/
What should you do next?
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171484002
• Download and review the Final Rule• Consult with your Legal department• Begin developing a Due Diligence plan
Step 1: Applicability
Step 2: RCOI
Step 3: Due Diligence
Reporting: Form SD/ CMR/IPSA
Flow Chart from Final Rule
Do you have to file?
• STEP 1:APPLICABILITY
Rule applies to companies that file with SEC under Section 13(a) or 15(d) of the Securities Exchange Act (publicly traded companies, foreign private issuers)
However, suppliers to reporting entities will be affected by rule
Rule applies if conflict minerals are “necessary to functionality or production of a product”
Conflict minerals must be present in product
Intentionally added and not background concentration
Rule applies if a product is “manufactured or contracted to be manufactured” by a company
Focus is on whether entity has actual influence over the manufacture of product
- Branders of third party products potentially excluded
- Retailers may be excluded
Consult with your Legal department
Do you have any Conflict Minerals in your Products and where do they come from?
• STEP 2: RCOI
SEC final rule indicates that scope of RCOI must be conducted in good faith and “reasonably designed” to determine whether the conflict minerals originate from DRC or an adjoining country (“covered countries”)
The scope of the RCOI will depend on your company’s size, products, and supply chain, but the rule provides some guidance:
Representations, directly from facility at which conflict minerals were processed or indirectly through immediate suppliers (if reasonably reliable) are ok
“Conflict free” designations from a recognized industry group audit program are ok
Scrap and recycled content is exempt
Inquiry does not need to cover 100% of suppliers
What Level of Due Diligence is required for Compliance?
• STEP 3: DUE DILIGENCE
Must conform to a nationally or internationally recognized framework
Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance is cited by SEC as meeting this requirement
Each company’s due diligence process will reflect the company’s unique circumstances
Independent Private Sector Audit (IPSA), if required, is a critical component
Effective due diligence will flow from a written plan; it will be difficult to demonstrate knowledge in absence of good data
Reporting
• File Disclosure with SEC by May 31 each year (if required)
• Form SD if RCOI or due diligence determines conflict minerals are not from covered countries or are from recycled or scrap sources (no CMR)
• Form SD + CMR (as exhibit to form) if conflict minerals originated from covered countries and are not from recycled or scrap sources
• Majority of issuers will have to complete a CMR
• Independent private sector audit (IPSA) may be required
• Audit is expected to address conformance with established framework and implementation of due diligence process
• End to end consistency of due diligence with a defined process (e.g., in a due diligence plan) is key to avoiding audit failures
• Post disclosure on company’s external website (include web address in filing)
Dedicate a Project Manager!
Decide on roles/responsibilities for compliance and align internally
Develop a written Due Diligence Plan and a roadmap covering RCOI, due diligence implementation, and reporting
Document in the Due Diligence Plan what is “reasonable” for your company and supply chain and/or what is REQUIRED by your customer
Add a “conflict minerals” policy to supplier contacts
Use available tools such as the CMRT Version 3.01 (May 2014)
Focus the scope of the RCOI
Initiate the RCOI with your direct suppliers
Focus on “company level” reporting but keep in mind that many companies are already focusing on “product level” reporting
Focus on suppliers with parts most likely to contain 3TG
Set a clear drop-dead deadline for responses
Compare smelters with those on “approved” lists such as the CFSI’s “Conflict-Free Smelters & Refiners” list - http://www.conflictfreesourcing.org/
Suggested Best Practices to meet the 2015 Filing Deadline
Do not underestimate the length/depth of your supply chain
Do not overestimate the accuracy of your supply chain info
The longest part of the process is waiting for your suppliers to respond – you can’t control this
Distributors can be a dead-end
Don’t rely completely on software
Leverage industry knowledge
Points to note
This issue is not going away
Start today
CMRTs are required for each calendar year
SEC requires record retention for 7 years
Prepare a Due Diligence plan and identify internal resources
Add conflict minerals clauses to supplier terms and conditions
Source from conflict-free smelters
Encourage your smelters to join the Conflict-Free Smelter Program (CFSP)
View filings for the 2013 reporting period
Summary
Conflict-Free Smelter Program
http://www.conflictfreesourcing.org/
Conflict-Free Smelters & Refiners
http://www.conflictfreesourcing.org/
WE PLAN, DESIGN, ENGINEER AND MANAGE BUILDINGS, TRANSPORT, INFRASTRUTURE, INDUSTRIAL, ENVIRONMENTAL, AND ENERGY PROJECTS
WHO IS WSP?
BUILDINGSFrom achieving the highest levels of sustainable design to creating inspirational spaces in a cultural buildings and designing iconic landmark structures: buildings are for people.
ENERGYFrom efficiency programs, to front end design, engineering and project management, we help to reduce energy demand and deliver future energy schemes to help create a sustainable future.
INDUSTRYWe help our clients to maximize industrial assets, improve efficiencies and translate the latest process technologies into workable designs – whatever the field or the scale of their operations.
ENVIRONMENTALWe help to manage environmental, sustainability and climate change issues to reduce risk, optimize opportunities, create competitive advantage and deliver responsible and sustainable businesses
MININGWe support operations throughout the life of a mine with expert advice from ore evaluations during exploration through rehabilitation plans for mine closures and everything in between.
TRANSPORT AND INFRASTRUCTURE
With over 5000 transportation and infrastructure professionals employed worldwide, our reputation as one of the foremost transport and infrastructure specialists has been developed over many successful global projects.
17,500EMPLOYEES
WORLDWIDE
$180.6M EBITDA*
$1.7 B n2013 Net Revenues
*Excluding restructuring charges
WSP’s Conflict Minerals Services
Trusted advisors on conflict minerals requirements providing pragmatic business strategies for product compliance & supply chain management
• Support “end to end” conflict minerals process including: strategy development, country of origin inquiries, supplier data collection & risk assessment
• Strong industry background in materials sciences and supply chain engagement to collect and interpret complex data
• Due diligence experts: prioritize suppliers for due diligence, document due diligence per plan, etc.
• Prepare outbound Conflict Minerals Report Template (CMRT)
• Support Conflict Minerals Report (CMR) and Form SD preparation
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Conflict Minerals in Your Supply Chain
Tord Dennis
http://www.wspgroup.com/