How to Deal When Conflict Minerals Emerge in Your Supply Chain

The requirement to report conflict minerals is nothing new. Since the Dodd-Frank Wall Street Reform and Consumer Protection Act was laid out in 2010, finalized by the United States Securities and Exchange Commission (SEC) in 2012, with its first reporting period underway in 2013, the automotive industry and others have been faced with weeding out conflict minerals in supply chains and final products.  

This act, which is an effort to halt the support of militant groups in conflict regions such as the Democratic Republic of Congo and centers around minerals titled “3TG” — tin, tantalum, tungsten and gold — is important in protecting human rights around the world.  

And even as companies increase awareness, education and pressure on their supply chains, in reality it will take time for supply chain minerals to meet 100% certification with the Responsible Minerals Initiative (RMI).    

With many company’s supply chains spanning into the thousands as well, manufacturers have likely faced the tough question: What do I do if my smelter is using minerals not certified as conflict-free by RMI?   

There is no easy answer. But there is a long-term strategy you can put in place now to ensure compliance over time.  

Develop a Company Policy and Processes for Guidance 

 As these issues and this regulation gain increased awareness, its advocacy will trickle down to shareholders as well as consumers, who will apply greater pressure on manufacturers to have products that are 100 percent conflict mineral free. 

While in the short term, this is not feasible for many manufacturers, due to the complexity of supply chains and the ambiguity of conflict minerals’ true impact, it will need to be addressed over time and companies will need processes in place.  

While your organization likely has a human rights policy in place, as this regulation cements itself into the industry for the long term and spans worldwide, it is important to develop a specific guiding principal for conflict minerals. By doing so, your internal team can rally around the guidance, your supply chain members can buy-in, and there are clear boundaries for what is and is not acceptable.  

Your company policy and processes should answer questions such as:  

  • Which department and which stakeholders are responsible for ensuring compliance?  
  • How will we audit our supply chains and smelters?  
  • In what instances will our company allow the use of conflict minerals?  
  • In what instances will we find alternative suppliers?  
  • What system will we gather and track this information?  
  • What will our communication process with suppliers look like?  

Follow-up With and Reassess Conflict Minerals in Your Supply Chain 

In most cases, upon learning of a potential conflict mineral in your supply chain, it will be most appropriate to follow up with a smelter to learn more.  

In truth, just because a smelter does not conform with RMI does not mean it is inherently bad or directly funding DRC violence. The smelter may not be actively sourcing minerals from a conflicted area but rather is using recycled goods for instance. Following up for clarity is important here.    

Likely, as this regulation is still young, you will face confusion across your supply chain. Some may respond that they do not know whether they use conflict minerals or what constitutes a conflict mineral. Other global companies outside the United States may think this does not apply to them. Clear communication and early buy-in of your policy (see above) surrounding conflict minerals is imperative.  

Your best bet is to make a hierarchy of high-risk suppliers and work your way down the line. This regulation comes with the expectation of conflict free minerals over time, not instantly. When you look at the highest risk smelters, you can provide them information to start working to comply with the Responsible Minerals Assurance Process (RMAP) and RMI.  

Understand and Accept That 100 Percent Compliance Will Take Time 

Over time, it will make more sense to convince the smelters in your supply chain to comply with RMAP rather than being quick to finding an alternative supplier.  

To help your smelters understand the importance of undergoing an RMAP audit to achieve compliance with RMI are as follows:  

  • Lowering risk of the customer finding another supplier because of ethical sourcing concerns.  
  • Increasing business across all industries, as the smelter will be considered low-risk.  
  • Growing the knowledge of your supply chain, I.e., chain of custody.  

As this regulation continues to mature, smelters will start to become more conformant and progress will be made each year, as it already has. Eventually, conflict-free smelters will be the industry standard.    

In the Meantime, Get Support You Need 

Conflict minerals programs can be a confusing and timeconsuming process. We can remove the guesswork and complete any part of the process, including to educate your supply chain through consultations and trainings on smelter validation, smelter outreach, data collection and review, and turnkey program implementation.  

Email conflictminerals@tetratech.com to learn more about how we can serve your operation.  

 

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Be Prepared: ECHA WFD Will Affect Your North American Automotive Company Chemical Reporting

Though REACH has no substantial upcoming changes in 2020, new EU legislation will have major impacts on how automotive companies that import to the European Union report chemicals. 

In July 2018, the European Chemicals Agency (ECHA) revised the Waste Framework Directive. As a result, ECHA will develop a database for companies to record the presence of hazardous chemicals in articles, to be accessible to waste treatment operators and consumers. Any company that produces, imports or sells articles into the European Union that contain Candidate List substances at greater than 0.1% concentration must input its chemicals into the database by the end of 2020.  

While the intended consequences of this effort will directly impact the European Union member states as the EU works toward a circular economy — its requirements extend to all exporters into the EU, including North American automotive companies.  

There is much left to be decided and finalized by the EU for its revised Waste Framework Directive, such as how to fund this database, what the database’s framework will become, and more.   

Expect to Comply 100 Percent 

The requirement to report hazardous — or Candidate List — substances should be nothing new for your North American automotive company. Yet there has not been any comprehensive mechanism for accountability in the past that held companies to this responsibility.  

Now with the upcoming Waste Framework Directive database, automotive companies and many other industries will have their Candidate List substances easily accessible and on display to the public. As such there will be greater pressure and enforcement of this directive, pushing many companies that have not complied completely in the past to do so in 2020.  

Prepare for Greater Transparency as Consumers Apply More Pressure 

The pressure from consumers does not stop at simply making Candidate List substances available on the WFD database either. Companies in the European Union will face pushback from consumers, especially regarding the REACH Article 33.2 “Right to Know” consumer request initiative. Per this law, EU companies that receive a Right to Know request must provide information about their substances of very high concern within 45 days of the request.  

North American companies are not legally obliged to comply with these requests, though they may receive them from consumers, and it would be an ill branding move to ignore such requests. Likewise, many EU companies that receive these requests will turn to their supply chains from around the world to provide the relevant information in a timely manner. Over the next five to 10 years, consumer pushback and responsibility will only continue to increase. Eventually a result of this will be a drive toward finding alternatives to some hazardous substances.  

Start Discussing Your Company’s Organizational Framework to Comply  

Until the database becomes more than a prototype, it will be hard to solidify organizational plans for compliance by the end of 2020. But if an organization can begin to identify those who will lead this compliance effort and other key stakeholders to be involved, things will be better streamlined when more details become available and 2020 is upon us. Although the database does not yet exist, we are certain the undertaking will be extensive and comprehensive, with a firm due date attached.   

Stay Informed  

There is much left to learn about the new Waste Framework Directive and how it will affect the automotive industry and others in 2020 and beyond. To receive our monthly updates as we follow its progress and effects to chemical reporting, please subscribe by emailing reach@tetratech.com 

 

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