Most Companies Reported Whether Minerals Came From Conflict Regions in 2016, GAO Finds
Nearly all companies required to disclose whether they sourced four “conflict minerals” from the Democratic Republic of the Congo and adjoining countries did so in 2016, but they provided varying amounts of data, according to a Government Accountability Office report (here). Last year, 96 percent of companies followed their obligation to report the source of the information, pursuant to the Securities and Exchange Commission’s (SEC’s) conflict minerals reporting rule, which covers tin, tantalum, gold and tungsten, the GAO said. The SEC announced earlier this month that it won’t enforce the requirements as it reviews how to proceed (see 1704100023).
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Conflict minerals filings in 2016 were similar to prior years’ disclosures, but officials observed that some companies gave only the name and location of smelter or refiner facilities on SEC’s Form SD, rather than the required country of origin of minerals used by the facilities; that companies often didn’t define or clarify terms describing due diligence activities; and that some companies called their products conflict-free without the required “DRC conflict free” designation and without getting an independent private-sector audit, the GAO said. Many companies mentioned efforts to improve due diligence. Among those efforts were contacting suppliers to encourage conflict-free sourcing and working directly with suppliers to help conflict-free sourcing, the GAO said.
An estimated 55 percent of companies reported an inability to confirm the source of conflict minerals in their products, and 99 percent reported they couldn’t determine whether the minerals funded or benefited armed groups, the GAO said. However, 67 percent of filing companies said they were unable to confirm the source of conflict minerals in their products in 2015. Approximately 49 percent of companies in 2016 reported whether conflict minerals in their products came from countries covered by the SEC rule, the same percentage as 2015. Forty-one percent of reporting companies, however, were unable to determine the minerals’ countries of origin.
In GAO’s interviews for its report, “a few representatives of companies” that filed disclosures noted that the process for collecting conflict mineral supply chain data has become more routine and standardized since implementation of the requirements, the GAO said. Some company representatives also said the SEC rule requirements increased their understanding of supply chains and awareness of suppliers of the use of conflict minerals. “As in prior years, many companies reported encountering challenges in determining the country of origin of conflict minerals, due in part to complex supply chains involving many suppliers and processing facilities,” the report says. “However, in the filings we reviewed, some companies indicated that they had taken actions to improve their data collection processes, such as gathering missing information about their supply chains and implementing new technologies to facilitate the data collection process.”