Back in August 2012, the U.S. Securities and Exchange Commission (SEC) voted to pass rules that required companies to disclose the purchase of four minerals from the war-torn Democratic Republic of Congo. But with only four months to go until the rules kick in, research firm IHS claims that huge swathes of the industry is still unprepared for the new rules.
Conflict minerals — specifically tin, tantalum, tungsten and gold — are defined as those mined in areas of armed conflict and human rights abuses. As the demand for consumer electronics grows, so does the demand for these minerals, which in turn increases the likelihood that they will originate from areas of the world where wars rage on.
During a webinar held on the subject in December 2013, IHS found that fully 42 percent of participating companies in a survey professed uncertainty on what to do, or appear unprepared for the May 2014 deadline on conflict minerals.
Of the 42 percent of the respondents, 22 percent said they were "unsure" on how to go about meeting the new regulations on conflict minerals. Meanwhile, 20 percent admitted they were just in the process of putting a plan together or "determining that approach now."
Half of those surveyed admitted they could use help in collecting conflict minerals information from their suppliers.
Conflict minerals are big business. For example, IHS estimates that about $0.15 worth of tantalum was contained in every smartphone shipped in 2010, and as of 2012 that amount to $93 million worth of tantalum being used yearly in the production of smartphones alone.
The new rules by the SEC will now require all publicly trading companies in the U.S. — some 6,000 in total — to tell customers where the minerals originated. The rules, however, do not prohibit companies from using blood minerals.
The rules coming into effect May 2014 require companies to make their first minerals disclosure. However, for the first two years companies will have the option of saying that they cannot determine if the minerals they use are conflict minerals or not.
While there no doubt that the process is going to be costly (the SEC has estimated that the compliance costs could total as much as $5 billion initially, falling to between $200 to $600 million annually as compliance procedures are put in place), one of the key industries involved in processing conflict minerals — smelters — are getting involved in and supporting compliance efforts, said Scott Wilson, content solution strategist at IHS.
"Smelters are a good control point, and this simplifies how far back in the supply chain companies have to go," Wilson told the webinar audience.
The SEC rules are estimated to directly impact 5,994 companies that file reports to the SEC, and hundreds of thousands of their suppliers.
Some companies have already taken it upon themselves to eliminate conflict minerals from the market or their own supply chains. Intel is committed to "conflict-free" processors by 2013, while Apple was the first company to draw up a list of all 175 of its supply chain suppliers, and require that they are audited where possible.
Other companies such as General Electric, HP, and Motorola have joined forces to create the Public-Private Alliance for Responsible Minerals Trade with the aim of helping those in the Congo and other governments in the region to break ties with the conflict mineral trade.