Conflict minerals and the Dodd-Frank Act may seem overwhelming for publically traded companies in the U.S. Compliance is scary, but it's simpler than many organizations fear. After initial hesitation, manufacturers are jumping on a variety of activities aimed at meeting the requirements.
"It's fair to say that, when I broached this with customers a year and a half ago, the attitude of businesses was to wait and see what shakes out," stated Greg Dickinson, CEO of the third-party management vendor Hiperos. "That attitude is gone now, and with the May 2013 deadline, these companies want to provide a reasonable attempt at compliance."
However, it won't happen overnight. Most organizations are talking a crawl/walk/run approach, especially because verifying the source of specific minerals in a component is a new type of task for supply chain managers.
"The reality in the supply chain is that, in today's global flat world, the procurement organization has enough to worry about with inventory concerns, outages, replacements and such," said Dickinson. "Now we are injecting the notion that you have the supply chain humming along, and you have to vet and validate any supplier or manufacturer using any kind of metal on the list."
For many organizations, it will be a daunting task at first glance. But Dickinson said the key is not to panic. He suggests a four-step process that will get OEMs started down the road to a reasonable attempt at conflict minerals compliance.
First is to eliminate suppliers that are obviously outside the scope of compliance. By filtering out manufacturing or activity codes that don't include conflict minerals, from cleaning services to nonmetal product and component suppliers. This will greatly reduce the list of potential third-party suppliers to perhaps 10-15 percent of the total.
Second, send a simple questionnaire to the remaining suppliers. A typical questionnaire provides a brief explanation of the Dodd-Frank rules regarding conflict minerals, as well as a link to the SEC Conflict Minerals regulation and/or a link to a conflict minerals statement or training video on the company website. In addition, ask a few brief questions. Do you manufacture or contract to manufacture for our company? Do you fall into one of these exception categories? If yes, who is the contact at your company who is responsible for regulatory reporting? Ask for each organization to submit a completed and digitally signed questionnaire for the company records.
Third, review suppliers flagged as potentially falling under the requirements. The proper authorities can then decide what steps to take next.
Lastly, follow up regularly with suppliers that are undetermined and with new and incoming suppliers.
Most organizations are starting slowly by evaluating Tier 1 suppliers first and then moving on to Tiers 2 and 3 as they are able. "These organizations want to demonstrate that they are making iterative process steps," said Dickinson. "They are not ignorant to the fact that these other tiers can come into play later one."