sharing in governance of extractive industries

More companies are looking to future-proof their conflict minerals due diligence

A lack of clarity on how and when Dodd-Frank Act (DF1502) will be implemented is failing downstream businesses looking to enhance their minerals sourcing compliance. This is one of the main findings from our latest Industry Briefing Note published today.

Four years after the landmark Act was finalized, the reporting requirements for affected businesses remain under review. Yet we are seeing a small but increasing number of companies now choosing to pre-empt the legislation and future-proof their minerals supply chain against the impact of coming regulation and to safeguard their reputation.

You can view our full Briefing Note here but we thought we'd also share some top-line information from the report with our GOXI colleagues here. 


Pre-empting the regulatory time bomb

More than 6000 SEC issuers producing products containing tantalum, tin, tungsten and gold (3TG) need to make efforts to determine if these materials come from the Democratic Republic of Congo (DRC) or an adjoining country. The law affects companies ranging from major high-street brands to cutting edge tech firms. Verification of companies’ efforts and SEC filings over the ‘conflict-free’ nature of their supply chain through an Independent Private Sector Audit (IPSA) is currently suspended and remains ‘under review’.


However, a growing number of companies are now moving ahead of regulators and take part in audits which prove adherence not only to the requirements of DF1502 but also to the EU’s newly announced mandatory due diligence requirements for minerals importers and the OECD’s Due Diligence Guidance. Indeed the convergence in conflict mineral reporting requirements at the OECD and EU level means that many companies are seeing the value in proving they meet the Dodd-Frank requirements regardless of whether the reporting and verification requirements are reinstated.


Responsible supply chains are becoming a preference not an imposition


But the impetus for this growing trend is not simply compliance concerns. Increased scrutiny from media and campaigners is concentrating the minds of more and more compliance officers.


There is also an increased genuine internal focus on reputational safeguarding and CSR, with many companies simply not wanting to wait while industry laggards hold up regulation. These outliers actively want to drive reform themselves.


A readymade tool to prove good practice     


The tool the reformers are turning to is the Independent Private Sector Audit (IPSA). An IPSA audit is designed to meet the conflict minerals reporting requirements defined in Section 1502 of the Dodd Frank Act. These requirements themselves come from the OECD Due Diligence Guidance. The globally accepted standard.


For IPSA audited businesses the audit allows them to prepare for DF1502 but is also allows them to align their reporting with both the OECD and EU reporting obligations as well. Our Head of Global Audit Compliance Practice, Michèle Brülhart, emphasises this: "Fundamentally, the IPSA tests against two aspects of the company’s due diligence program: firstly, is the program designed in conformance with the OECD Due Diligence Guidance; and secondly, has the company done what it has stated it does in its conflict minerals report to the SEC?”, says RCS Global’s Head of Global Audit Practice. 


The other key value of the IPSA is that it tests the actual implementation – as opposed to just the design – of the due diligence program. It also reviews the systems in place to gather and review supply chain mapping information that is commonly collected using the EICC Conflict Minerals Reporting Template (CMRT). This can act as a foundation for a proper, in-depth review of a company’s supply chain operations and allow the audit process to actually be a tool to improving practice rather than just a box-ticking exercise. In Michèle's words "the IPSA or other conflict minerals audits are not just a way to test compliance, but also an opportunity for the client to take a bird’s eye view of their actions and develop responses that bring them closer towards more responsible supply chain”, says Michèle Brülhart, RCS Global’s Head of Global Audit Practice. 

This is just an excerpt of the full content from our paper so please do click through and read the full paper. We are also happy to speak about our experiences working on IPSA audits at any stage so please feel free to get in touch. 


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