Conflict minerals... Does compliance really matter? Ask California, Australia, and the EU 

Recent Legislation and Activity Affecting Supply Chains - A comparison

 

Top Picture 

 

Executive summary

Recent examples of legislation requiring companies to make certain disclosures in their annual reports to the Securities and Exchange Commission include those around the source of conflict minerals and a company's measures to address conditions of forced labor, slavery, human trafficking, and child labor within their supply chains. Policymaking and public pressures in many of these areas are both longstanding and vary in method within and outside the United States. For example, United States federal law does not directly prohibit companies from sourcing conflict minerals or using forced labor outside the US; however, requiring public disclosure is designed to dissuade companies from engaging in certain activities. Recent legislation and activity is not limited to the United States federal government, but also United States state and local governments and other governments around the world:

• Section 1502 of the Dodd-Frank Act would require publicly traded companies in the United States to disclose whether they use minerals from the Congo and the steps they are taking to make sure the minerals are not funding mass atrocities.

• Noteworthy legislation with currently uncertain political prospects but clear intent was introduced in Congress earlier this year. The bill, referred to the House Committee on Financial Services, would "...require companies to include in their annual reports to the Securities and Exchange Commission a disclosure describing any measures the company has taken during the year to identify and address conditions of forced labor, slavery, human trafficking, and the worst forms of child labor within the company's supply chains."

• The State of California enacted a law that would prohibit the state government of California from contracting with companies that fail to comply with federal regulations (Section 1502 of the Dodd-Frank Act).

• The State of California passed a bill that would require retail sellers and manufacturers doing business in California to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale.

• The City of Pittsburgh calls on companies from all sectors in the city to factor whether electronic products contain conflict minerals in future purchasing decisions and, when available, will favor verifiably conflictfree products.

• The Australian government released due diligence guidelines for the responsible supply chain of minerals to mitigate the risk of providing direct or indirect support for conflict in the eastern part of the Democratic Republic of the Congo.

• The EU Parliament adopted a resolution calling on the bloc to create an EU law to ensure that imported minerals are traceable, as a tool to combat illegal exploitation of conflict minerals in African countries. These and other legislation affecting supply chains are reviewed in more detail on the following pages. See Appendix A (PDF) for more information regarding United States legislation and Appendix B for activity outside of the United States.

 

 

 

Appendix B: Recent activity affecting supply chains outside of the United States

Many countries around the world have begun to address the issue of responsible supply chain management. The following includes some activity that is taking placing around the world:

• The Australian government released due diligence guidelines in December 2010 for the responsible supply chain of minerals to mitigate the risk of providing direct or indirect support for conflict in the eastern part of the Democratic Republic of the Congo.

European Union (EU) actions:

 

- The EU Parliament adopted a resolution calling on the bloc to create an EU law to ensure that imported minerals are traceable, as a tool to combat illegal exploitation of conflict minerals in African countries.

 

More information

 

- The European Commission said that the issue of transparency in the extractive industry will be reflected in the EU's new communication on raw materials. It follows the 2008 Raw Materials Initiative, which set out a strategy for the EU's policy response to global resource scarcity.

 

 

- The EU plans to include "mandatory country-by-country disclosure" of money flows between mining companies and governments (which is expected to be agreed on in February 2012). This will be on the lines of U.S. regulation, which requires extractive companies listed on the U.S. stock exchanges to publish payments made to governments on a country-by-country basis (CBCR). The added disclosure can be used to hold governments accountable for the royalties received, helping to stamp out corruption.

 

More information

• Two separate bills were introduced to the Parliament in Canada:

 

1. "Trade in Conflict Minerals Act (Bill C-571)" - First Reading September 30, 2010

 

This enactment requires Canadian companies to exercise due diligence before purchasing minerals that originate in the Great Lakes Region of Africa to ensure that no illegal armed group has benefited from any transaction involving those minerals.

 

It also requires the Extractive Sector Corporate Social Responsibility Counsellor to identify, in its annual report to the Minister for International Trade, those Canadian extractive sector companies that the Counsellor has reasonable grounds to believe are not practicing corporate social responsibility in the Great Lakes Region of Africa.

 

More information

 

2. "Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act (Bill C-300) - First Reading February 9, 2009"

 

The purpose of this act is to promote environmental best practices and ensure the protection and promotion of international human rights standards in respect to the mining, oil, or gas activities of Canadian corporations in developing countries. It also gives the Minister of Foreign Affairs and Minister of International Trade the responsibility to issue guidelines that articulate corporate accountability standards for mining, oil, or gas activities, and it requires the Ministers to submit an annual report to both Houses of Parliament on the provisions and operation of this act.

 

More information