Your essential conflict minerals compliance checklist

Christopher McClure, Whitney Baney, Jen Baker
Your essential conflict minerals compliance checklist

Are you ready for the May 31 conflict minerals filing deadline? This checklist can help you assess your conflict minerals compliance program.

Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Conflict Minerals Rule, has been in effect for more than 10 years. Stakeholder pressures continue to mount regarding the quality of supply chain transparency and integration into overall environmental, social, and governance (ESG) strategy.

In today’s rapidly evolving regulatory landscape, it is important to regularly evaluate and refine your due diligence practices and programs. When assessing a conflict minerals compliance program, following industry best practices, such as reviewing the Organization for Economic Cooperation and Development’s “Due Diligence Guidance for Responsible Supply Chains of Minerals From Conflict-Affected and High-Risk Areas” can help you stay on track.

With the annual filing deadline approaching on May 31, our ESG team created a checklist you can use to assess the health of your conflict minerals compliance program, work toward compliance, and get the most out of your due diligence efforts.

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  • Refresh your policy and procedures

Reviewing existing conflict minerals policy to edit old ideas and expectations and align them with how to manage responsible sourcing now is a solid place to start. Over the last 10 years, expectations of suppliers or risk mitigation efforts have changed – in some cases, drastically.

Policy language should sync with the Securities and Exchange Commission’s (SEC’s) current requirements as well as evolving industry terminology. It’s also important to update industry group names, new reporting standards, acronyms for old standards, outdated terms such as “conflict-free,” or even references to outdated versions of guidance or templates.

  • Educate internal teams

Effective communication is vital for the success of any due diligence program. Communicating policies, procedures, and goals to new team members during onboarding is critical as is making sure current team members are notified of any policy updates. Leadership should consider annual internal training for appropriate team members to communicate policies, internal expectations, supplier expectations, and updates relating to industry and regulatory changes.

  • Communicate with suppliers clearly and often
Communication is also critical for setting expectations with suppliers. During supplier touch points and new vendor onboarding, including conflict minerals and any other compliance requests in these financial business meetings emphasizes their importance and helps set expectations. Suppliers should be aware of companies’ conflict minerals policies and supplier codes of conduct. Additionally, training sessions for suppliers can help communicate these policies and expectations.
  • Evolve your data collection

To properly advance supply chain due diligence, you should identify and onboard any new suppliers, including those suppliers added from corporate acquisition activity. Regularly assessing your approach and refining it where needed to address any blind spots in the supply chain can help avoid a “same-as-last-year” mentality.

Prioritizing larger suppliers and pushing for more detailed product-level responses can also help maximize the value and impact of your data collection efforts. Suppliers’ response rates indicated in conflict minerals reporting templates (CMRTs) are another means of monitoring and advancing the accuracy of data collection.

  • Enhance your supplier engagement methods

Supply chains are complex and include manufacturers and distributors of all sizes. Many of these suppliers might not have direct reporting obligations under the SEC’s conflict minerals rule, so communicating with suppliers regularly about conflict minerals expectations is important. Asking these questions can help guide an engagement plan:

  • Does the company require all suppliers to submit a CMRT, or is it comfortable accepting general statements and letters?
  • Is the company confident with its identification of “No 3TG” suppliers – those that do not use tin, tungsten, tantalum, and gold at a companywide level?
  • How does the company expect its suppliers to respond if a high-risk smelter is present in its supply chain?
  • Are a company’s suppliers expected to reach a targeted response rate for their own due diligence?
  • Screen smelter data broadly

Smelter data collection and review is a critical part of preparing for conflict minerals filings. When refining smelter lists, it can be helpful to consult with industry groups, such as the Responsible Minerals Initiative, to filter out any inaccurate information. Additionally, staying up to date on new concerns and changing regulations should be a priority.

In light of recent developments, it’s vital to address concerns related to Russian smelter sanctions and imports from the Xinjiang Uyghur Autonomous Region that could be subject to the rebuttable presumption under the Uyghur Forced Labor Prevention Act.

Monitoring the Office of Foreign Assets Control for current and changing information regarding sanctions can help you easily access data within customs and compliance programs and verify risk mitigation measures when called upon.

  • Meet customer expectations

In addition to regulatory obligations and corporate goals regarding conflict minerals, customer requests are a critical consideration that can affect the timing and scope of your due diligence. Clear and effective communication throughout the compliance process is important. Customers should know where to send CMRT requests and questions.

Assigning responsibility to one or more team members can help timely identify and respond to customer requests. Some might have unique deadlines and additional risk mitigation obligations that should be factored into your plan. Taking your customers’ needs into account from the start can help you create an effective program that can respond appropriately and protect your customer relationships.

  • Align with broader ESG efforts

More focus is on corporate transparency than ever before, especially since the conflict minerals rule was established. It’s likely that companies have developed one or more additional responsible sourcing policies in the last few years. Conflict minerals policies can act in tandem with other policies, such as a supplier code of conduct or a human rights policy, to embed conflict minerals requirements within supplier onboarding and audits.

Now, leadership might ask if they have taken additional risk mitigation efforts for extended minerals compliance, such as cobalt or mica. Do companies have human rights policies that intersect with their established conflict minerals policies? Are additional forced labor policies in line with the modern slavery laws of California, Australia, the United Kingdom, or Canada? When these policies are created by a similar group of company leaders and then stored in one place, consistent language can connect appropriate policies.

Take a proactive approach

By taking proactive steps, you can prioritize needs and prepare for annual conflict minerals reporting. Actively managing and updating your conflict minerals policy and processes can help keep you aligned with industry best practices and ready to meet the evolving expectations of your stakeholders.

Find even more ESG-related information in our ESG resource center.

Contact us

As you assess your conflict minerals compliance program, our responsible sourcing specialists are here to help.
Chris McClure
Christopher McClure
Partner, ESG Services Leader
Jennifer Baker
Jen Baker
Whitney Baney
Whitney Baney