Companies Should Act Now: EU Conflict Minerals Rules Finalized

NOvember 30, 2016 /3BL Media/  - The European Union’s governing bodies have reached agreement on conflict minerals regulation, making it the second largest industrial region requiring companies to investigate their supply chains in order to stem the use of gold and other metals whose production funds armed conflict or utilizes modern day slavery.

Assuming the final approval schedule is maintained and the key elements of the final regulations do not change, both companies based and doing business in the EU are now faced with additional supply chain considerations.

The regulation, expected to receive final approval from EU member countries early next year, generally will require direct importers of tin, tantalum, tungsten and gold (3TG) into the EU, as well as smelters and refiners in the EU, to conduct due diligence using the OECD conflict minerals guidelines. 

There are significant elements adopted in an “informal final agreement” on Nov. 22 by the EU Council, Commission and Parliament.  For instance, the effective date has been pushed to 2021, giving companies a longer transition time to adapt to the regulation’s requirements.

Another significant provision is that “downstream users” of conflict minerals – manufacturers, importers and retailers that would be producing and selling components and finished goods – are under no mandatory reporting requirements (unlike the requirements for publicly traded companies based in the United States and governed by Section 1502 of the Dodd-Frank Act).

The EU rules will also cast a broader geographic net; conflict minerals may come from any “high-risk” area of the world.  U.S. conflict minerals regulations have generally focused on ore extractions from mines in the Democratic Republic of the Congo, as well as general restrictions on any form of trade with countries like North Korea. 

Source Intelligence, which consistently secures the most complete disclosure information for companies subject to the United States’ annual conflict minerals reporting requirements, is encouraging companies based in the European Union not to wait for final rules adoption before creating compliance strategies and ensuring resources are in place.  This includes companies that will be encouraged to do voluntary disclosures.

 “The European Parliament has invited voluntary early entry into the program by companies not otherwise subject to the regulation.  Whether there is any movement to that effect remains to be seen.  Either way, the 2021 implementation deadline will give companies adequate preparation time to dive deep into their supply chain to better understand raw materials sourcing," said Jennifer Kraus, SI’s Chief Scientific Officer.

Conflict minerals rules in the EU will have two significant impacts for European Union companies:

• Public awareness about ethical sourcing will continue to grow and likely intensify at key milestones, such as when the regulations will be adopted by all EU member countries and as 2021 approaches. Although companies will be required to disclose 3TG imports under legal pressure, heightened public awareness will result in increasing NGO and investor demands for companies to publish detailed reports on ethical and socially responsible sourcing.
• Companies will realize efficiency improvements when they begin to engage their supplies about transparency. 

Kraus said EU companies must recognize the complexity of tracking and authenticating raw materials through the hundreds of thousands of global supply chains, and how smelters use various aliases that can complicate the verification process. Source Intelligence possesses one of the largest smelter aliases data bases and works closely with internationally recognized organizations to routinely improve these processes.

Source Intelligence’s cloud-based compliance solutions is complemented by the largest network of suppliers, and a multi-lingual supplier engagement team that works with thousands of suppliers to ensure accurate data is being filed on its reporting platform. To learn more, click here.