As the May 31, 2014 deadline for compliance under the SEC’s Dodd-Frank mandated Conflict Minerals Rule draws near, most public companies continue to determine their next steps in providing disclosures and transparency required under the ruling.
According to PricewaterhouseCoopers’ (PwC) conflict minerals report, almost half of the nearly 900 executives surveyed are still in the initial stages of their compliance efforts; 16 percent have not yet begun gathering information; and 32 percent are still determining if the rule even applies to them.
While more than half of the companies surveyed view this rule as primarily a compliance exercise, it’s important to realize that not only can compliance enhance brand reputation, it can also create impetus for supply chain and information system improvements that can lead to cost savings. According to the survey, 33 percent of the companies are willing to look beyond the requirements to explore some of these added benefits.
“There’s no time to waste,” said Barbara (Bobby) Kipp, Conflict Minerals Leader and Partner, Risk Assurance Services for PwC. “This can be an incredibly complex process and with the deadline fast approaching, companies will need to interpret the rule as best they can, and in a timely manner. According to our survey, the most significant challenges that companies will face include identifying relevant suppliers, obtaining accurate and relevant information from them and establishing an entity-wide conflict minerals philosophy. Companies should take these potential challenges into account when assessing their compliance timeline and project plan and designing their conflict minerals approach.”
Of the companies that started gathering information on their conflict minerals status, 72 percent are in the industrial products and manufacturing, technology and automotive industries. These industries have made the most progress in completing the reasonable country of origin inquiry (RCOI), partly due to their engagement with trade associations that are actively involved in the conflict minerals process.
“More than half of the companies surveyed in our study view this rule as primarily a compliance exercise but it’s important to realize the opportunities it can present,” said Greg Szczesny, Managing Director, Risk Assurance Services, PwC. “Not only can compliance enhance brand reputation but it can also create impetus for supply chain and information system improvements that can lead to cost savings. Industry leaders should look beyond the requirements and see the benefits their efforts could have on business objectives. Our survey shows that 33 percent of the companies are willing to explore these added benefits.”
The single most challenging task for companies is getting accurate information from their suppliers, according to the findings. While it is crucial for businesses to identify how deep into their supply chain they need to go to attain the most up to date information, 58 percent of companies have not yet done so; and more than 40 percent have not done much at all with respect to gathering information and performing their RCOI and the associated due diligence.
The majority of PwC’s survey respondents believe that the compliance team should be cross-functional, including departments such as legal; purchasing/supply chain; SEC reporting/finance; internal audit; research and development (R&D); information technology; and corporate social responsibility (CSR) and sustainability.
“Approximately 11 percent of companies plan to become conflict-free sometime in the future and almost a third of surveyed companies expect to require their suppliers to be conflict-free,” said Kipp. “However, that’s likely not happening in the near future and the deadline for compliance is quickly approaching. It’s critical for companies first to understand the population of products that are within scope, the number of suppliers that provide conflict minerals and the depth of information accessible from suppliers before they can properly design their compliance program as a whole.”