The U.S. Securities and Exchange Commission (SEC) published final rules for Dodd-Frank Conflict Minerals (DFCM) on August 22, 2012. “Conflict minerals” are
These metals are used in electronics, jewelry, and many other products. The rules will be effective for 2013 for most affected companies. This SEC rule affects many functions: accounting, audit, environmental, investor relations, legal, marketing, operations, risk management, and others. Much of what’s been written so far discusses the potential effect on one or two functions. An enterprise-wide focus offers a different perspective.
Here are 5 myths about the Dodd-Frank Conflict Minerals final rule.
1. Environmental, social, and financial folks are finally on the same page.
DFCM is important to each, but there continue to be differences:
Environmental regulations tend to be prescriptive and exact.
Social standards seek equitable changes in the fabric of society.
Accounting rules emphasize process, materiality, support, and documentation.
2. Our supplier said “OK”, so we’re done.
Suppliers may use different systems, controls, criteria, or standards.
A supplier may have different materiality for your company than it does for others.
Your company may change specifications, or the supplier may change their operations.
3. That other group will take care of it.
Product components (including conflict minerals) touch many functional groups. Whoever is leading the DFCM effort — Legal, Accounting, or Supply Chain — cannot understand the perspectives, needs, and capabilities of other groups if they are not at the table. Cross-functional teams work best.
4. The audit will make sure everything is fine.
Many companies’ evaluations will end with the Country of Origin Inquiry (COI) effort, and the appropriate disclosures – no audit will be performed.
When audits are required, the audit objective is very limited, and does not provide the assurance that many stakeholders asked for in comments.
5. After we do this, we’re done.
DFCM requires annual updates.
Similar information is requested via standard global Sustainability reporting frameworks, investor requests, proxy filings, and other means. Requests are likely to broaden to other geographies (Indonesia) and other minerals.