Conflict Minerals Blog

Engaging Recalcitrant Suppliers to Achieve Conflict Minerals Compliance

Posted: July 14, 2016 Submitted by Rob Kasameyer

Pulling_Supplier.jpgAre non-complying suppliers a major barrier to achieving your company’s Conflict Minerals Reporting objectives?  Unfortunately, many suppliers employ a variety of approaches which have been effective in enabling them to dodge the Conflict Minerals Reporting requirements. Engaging recalcitrant suppliers is the essential next step for improving your Conflict Minerals Reporting compliance. Green Status Pro recommends the following approach be taken going forward.

 Many companies are stating their objectives for reporting year 2016 are:

  • Achieving 100% response from the Company’s relevant suppliers in the form of a correctly prepared, accurate CMRT V4.10.

  • Identifying all smelters in the supply chain that are not participating in the CFSP audit-protocol program.

  • Documenting Due Diligence follow-up with all suppliers that are identified as Conflict Minerals Risks.

Many suppliers employ a variety of approaches which have been effective in enabling them to dodge their Conflict Minerals Reporting requirements. These include:

  • Ignoring your Request: It is not unusual for approximately 20% of a company’s suppliers to pay no attention to any requests for their CMRT. Some suppliers employ this approach because they do not provide 3TG-containing products and choose not to be bothered with a response; but the majority simply choose not to develop their CMRT even though their products contain 3TGs.
     
  • Postponing Response: Many non-complying suppliers are taking a wait-and-see approach. They speak with their customers about the regulatory requirement to participate in mapping the 3TG supply chains, but always have an excuse (such as ‘insufficient understanding of the process’) to avoid contributing an accurate CMRT based on surveying their direct suppliers.

  • Refusing to Survey Suppliers: A significant number of suppliers state that their Supplier Agreements state no conflict minerals are allowed in the components they source and therefore they do not need to survey their own individual suppliers, which demonstrates a complete disregard for the required due diligence.

  • Providing an Inaccurate CMRT Smelter List: Numerous suppliers submitted inaccurate CMRT Smelter Lists based on a lack of understanding of the reporting requirements and/or a decision to minimize the work effort allocated to properly conducting a supplier survey and analyzing the responses.  Typically, there were too few smelters (none or 1 per metal) indicating that the supplier had not conducted a survey of its suppliers; or too many, showing that the supplier had not analyzed and cleansed the data from its suppliers; or included companies listed as smelters that have not been validated by the CFSI. 

Engaging recalcitrant suppliers is the essential next step for improving your Conflict Minerals Reporting compliance. Green Status Pro recommends the following approach be taken going forward.    

  • Communicate your plan for conflict minerals reporting to your suppliers as soon as possible. Suppliers cannot be expected to support your company without being given adequate direction in advance. In many cases, Green Status Pro has found that suppliers who in the past have been catagorized as ‘Conflict Minerals Risk’ or ‘Did Not Respond’ are waiting for direction from their customers. Wayward suppliers want their customers to provide milestone and timing details before taking any action. This communication must come directly from your senior executives.  The message and tone must be insistent.  Supplier responses must be tracked.

  • Personalize communications. To increase the effectiveness of the campaign, the communications should be personalized and documented with ALL suppliers.

  • Require all suppliers to complete a CMRT. This minimizes the risk of improperly classifying suppliers as ‘out-of-scope’ (no 3TGs in the products they sell to your company).  Those companies that do not have 3TGs in their products should be instructed to answer “No” to Declarations Questions 1 and 2 to assure consistent, correct documentation from each supplier.

  • Copy your Company’s procurement executives on all communications to the suppliers for whom they are responsible.

Green Status Pro specializes in delivering the expertise and services required for corporations to meet the regulatory and customer mandates of Dodd-Frank Section 1502 and the SEC. We will cost effectively work with you to gather and analyze the required conflict minerals data, delivering essential reports on a timely basis, as well as providing critical support services to meet customer requests as required throughout the year. Green Status Pro will assist you in meeting your customers’ requirements for 100% accurate CMRT Smelter List V4.10 and delivering the comprehensive RCOI reports required by Dodd-Frank Section 1502.

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Topics: Conflict Minerals