Introduction

The handbook provides guidance on compliance with conflict minerals regulations, particularly focusing on the four conflict minerals—tin, tungsten, tantalum, and gold (3TGs). These minerals, often sourced from conflict zones like the Democratic Republic of the Congo (DRC), contribute to armed violence and human rights violations. The report highlights how companies must meet growing expectations from investors and customers for responsible sourcing as part of Environmental, Social, and Governance (ESG) programs.

What are conflict minerals?

Conflict minerals are defined by Section 1502 of the Dodd-Frank Act and the EU Conflict Minerals Regulation, specifically focusing on 3TGs. Companies need to be particularly diligent when sourcing from conflict-affected areas. The broader definition now encompasses regions beyond the DRC. Due diligence is a business imperative for companies to ensure they are not financing conflict through their supply chains. A key recommendation is the use of industry-standard templates, such as the Conflict Minerals Reporting Template (CMRT), to assess supply chain risks.

The expanding landscape

There is increasing pressure from human rights organisations, the media, and consumers for companies to adopt responsible sourcing practices. Beyond legal requirements, companies like Apple and Intel have implemented stricter standards, expanding due diligence efforts to cover other materials like cobalt. Finance professionals should note the growing importance of such practices for long-term risk management and compliance. Failure to meet these expectations could result in negative financial outcomes due to reputational damage and regulatory penalties.

Expectations for due diligence

Investors and customers now demand that companies deliver measurable results from their ESG programs. The report stresses the importance of supply chain engagement, data collection, and reporting. Smelters, a critical point in the supply chain, often source minerals from multiple locations, making it difficult to trace the origin. The Responsible Minerals Assurance Process (RMAP) provides criteria for assessing smelters, helping companies determine if they are conformant or non-conformant. Financial professionals should focus on ensuring their companies gather detailed smelter information and engage in responsible sourcing audits.

The why and how of conflict minerals due diligence

Due diligence should be comprehensive, covering suppliers throughout the entire supply chain. The OECD Due Diligence Guidelines provide a framework that has become the standard for companies to identify risks in sourcing from conflict-affected areas. For finance professionals, this means that proper risk mitigation strategies need to be implemented, involving extensive data collection and validation from suppliers. The CMRT is a widely-used tool that helps companies track the origin of minerals in their supply chains.

Recommendations

The report recommends that companies integrate due diligence into their day-to-day operations and focus on gathering accurate and detailed data from their supply chains. Finance professionals should prioritise using tools like the CMRT and RMAP to audit suppliers, ensuring compliance with conflict minerals regulations. Engaging third-party solutions like Assent is advised for companies struggling to manage complex supply chains.