Conflict Minerals: Delivering an Effective Compliance Program
PTC outlines the SEC’s conflict minerals reporting requirements and provides an overview of how our leading technology solutions enable you to ensure compliance and streamline your reporting efforts.
Assess Risk, Collect Supplier Data, and Accurately Report to SEC
The United States Dodd-Frank Act, Section 1502, is landmark legislation that requires manufacturing companies to understand and disclose the use of minerals mined in or around the war-torn region of the Democratic Republic of the Congo (DRC).
Companies listed on the U.S. stock market have until May 31, 2014 to make their first disclosure about whether the minerals they use are “conflict free.” And companies not directly regulated by the SEC will be impacted too as audit requirements are pushed down through the entire supply chain including privately-held and international companies.
- Introduction
- Expert Perspectives
- Solution Overview
- Customer Success
What You Need to Do
Section 1502 of the Dodd-Frank Act requires SEC registrants to report information about the source of any 3TG (tin, tantalum, tungsten and gold) minerals in their products. Specifically, companies must make a reasonable determination whether these minerals were sourced from the DRC region.
The three critical requirements of the conflict minerals reporting process are:
- Determine if any of your products contain 3TG conflict minerals
- Determine if the country of origin of the 3TG minerals is in the DRC region
- For any 3TG minerals sourced from the DRC region, conduct due diligence over the chain of custody
How PTC Can Help
PTC provides the technology solutions and best practices expertise to address these requirements, enabling manufacturers to easily identify and report on any 3TG minerals in their supply chain.
The conflict minerals reporting deadline of May, 2014 is rapidly approaching. PTC’s solution can be quickly configured and implemented to address your immediate reporting needs, enabling your organization to:
- Systematically assess and report on conflict minerals status in products, product families and across suppliers
- Automate the collection of supply chain data and reasonable country of origin inquiries (RCOI)
- Generate internal risk assessment reports and key information for final SEC reports and customers
- Easily demonstrate due diligence for auditors
In addition to these immediate reporting benefits, PTC’s solution also enables your organization to integrate conflict free initiatives with critically impacted product development processes, such as new part introduction, supplier authorizations and change requests.
Contact PTC to find out how our technology solution can be quickly and easily implemented to help you reduce reporting costs, protect revenue and mitigate brand risk.
The impact of Section 1502 of the 2010 Dodd-Frank Act will be felt across a wide range of industries. What can your organization do to prepare? And, what are the challenges and opportunities that this regulation presents for your supply chain strategy and overall brand image? As auditors and manufacturers alike prepare for the first wave of Conflict Minerals submissions to the SEC, some early key findings and best practices are emerging.
The ChainLink Research white paper “Turning Conflict Minerals Law Compliance into a Competitive Advantage” provides a holistic strategy that will enable discrete manufacturers to address the Conflict Minerals Rule requirements and build the organizational capabilities to efficiently respond to future regulatory challenges. Read the full report.
- “This is not unlike other cross-functional product goals, such as design-for-serviceability or design-for-sustainability. Successful companies will provide supplier education and follow-up programs and mechanisms.”
- “A company that excels at meeting and exceeding environmental and sustainability requirements can also leverage it for branding and customer service (rapid, thorough, accurate responses to requests for compliance and materials data).”
- “Automating product compliance processes will not only save money, but will also free up your most valuable engineering and sourcing staff for more strategic work."
Pricewaterhouse Coopers (PwC) published its findings on the readiness of companies for the May 2014 filing deadline, and the anticipated challenges, in "Conflict minerals survey – How Companies are preparing." Read the full report.
- "…32.4% of the respondents believe that their first-year costs for complying will be less than $500,000, which is lower than many average estimates. However…more than half of the respondents are unsure of what the cost will be at this point."
- "The complexity, time and resources necessary to comply can vary dramatically from company to company, even within the same industry….There’s no time to waste."
PwC also provides information about the rules and their insights into ways in which companies are addressing the associated compliance requirement in “10 Minutes on Conflict Minerals.” Read the full report.
- "Some businesses consider the rule a compliance exercise, while others view it as an opportunity to strengthen their supply chains and brand."
- "Businesses should consider how being more strategic about compliance efforts can help them reap supply chain benefits."
- "It can also potentially reduce costs, create a more responsive procurement function, and streamline your supplier base."
KPMG outlines the need for an auditable technology solution as part of the overall methodology, in “Dodd-Frank Act Conflict Minerals (Section 1502).” Read the full report.
- "The SEC requires product level reporting…in addition to supplier data, you will need engineering or some other data tables for mapping parts from suppliers to your products."
Additionally, KPMG outlines the high-level governance structure that companies will need for the compliance process and highlights the obstacles to achieving supply chain transparency in "Conflict minerals and beyond - Part one: Developing a global compliance strategy." Read the full report.
- "Building a Section 1502 reporting structure below the CFO and chief operations officer is likely to be demanding. At least four corporate departments will be required to work together: supply chain and procurement, legal counsel, finance and internal audit."
- "There are, for example, 5 million parts in a typical commercial airplane. Firms such as Toyota, Lockheed, and Philips are final assemblers or integrators…there may be a dozen or more tiers of suppliers, each tier made up of a web of (usually confidential) commercial agreements."
Ernst & Young provides an in-depth review of the disclosure process for Conflict Minerals, and addresses some of the questions that have been answered in more recent SEC rulings, in “Conflict Minerals: New Rules and Next Steps.” Read the full report.
- "The final rule exempts any conflict minerals that are ‘outside the supply chain’ prior to 31 January 2013."
- "The SEC has estimated that 75% of registrants subject to Section 1502 will need to develop a Conflict Minerals Report and have it audited by an independent third party."
- "The final rule specifies that an issuer must make its Form SD disclosure or its Conflict Minerals Report available on the issuer’s Internet website for one year."
Deloitte addresses an extensive list of Conflict Minerals FAQs, and describes the best practices for achieving compliance, in “Conflict Minerals: understanding compliance challenges.” Read the full report.
- "In our experience…companies should first evaluate their own internal capabilities to fully understand the course of action to take in terms of implementing new regulations."
- "Technology: Leverage a system/tool that could support a conflict minerals program and assist in documenting the process."
- "Beyond the regulation requirement, consider the implication of the approach taken from a corporate brand and reputation standpoint."
IPC – Association Connecting Electronics Industries presents industry research on the estimated resource requirements and workload for compliance, in “Comments on SEC Proposed Rule on Conflict Minerals.” Read the full report.
- "It may require the implementation of a tracking system similar to one used for the European Union Restriction on Hazardous Substances (RoHS) Directive."
- "EMS companies anticipate a significantly greater first-year impact than other industry segments. The typical EMS company, as defined by the median figures, expects to spend more than 2,200 staff hours in the first year and 850 in the following year."
Green Research presents research findings on the estimate costs, best practices, and potential business advantages associated with conflict minerals compliance in “The Costs and Benefits of Dodd-Frank Section 1502.” The key findings of the report are available here. You can also receive the full report by contacting Green Research.
- "Executives interviewed cited better risk management, improved supply chain performance, [and] new innovation opportunities…as potential benefits of the new compliance regime."
- "The largest companies…are facing one-time costs ranging from $500,000 to $2 million; companies with well-developed responsible sourcing systems may need to spend only half as much."
- "In general, companies will need to implement or modify IT systems to track new information…and they’ll need to revise their processes for creating SEC reports and communicating with customers."
How PTC’s Industry Leading Solutions Help
For over a decade, PTC has provided dynamic solutions that have helped manufacturers gain visibility into product risk and compliance through all stages of product development, and across their entire supply chain. Our purpose-built solution enables you to collect supplier information and report on the materials used in each product – down to the component level.
The PTC technology solution for conflict minerals provides a complete systematic and automated process approach to address the SEC’s requirements to:
- Identify where 3TG (tin, tantalum, tungsten and gold) materials are used in products and the supply chain
- Conduct a reasonable country of origin inquiry (RCOI)
- Generate internal risk assessment reports and final reports for the SEC, customers and shareholders
The PTC Materials Compliance solution is a single system that integrates with multiple product lifecycle management (PLM) and enterprise resource planning (ERP) systems for the most complete visibility into part, material and supplier information.
Contact PTC to find out how our technology solution can be quickly and easily implemented to help you reduce reporting costs, protect revenue and mitigate brand risk.
Motorola’s Innovative Approach to Conflict Minerals Management and Reporting
Best practice policies, a leading technology solution, and a strong philosophy of corporate responsibility come together in one forward-thinking strategy.
Motorola Mobility, a Google company, is setting a powerful example for other leading organizations by treating conflict minerals as more than a simple compliance issue. In this presentation at PTC’s Conflict Minerals Compliance Seminar in Chicago on June 25, 2013, Wilhelm Janisch, Senior Manager of Environmental Compliance and Sustainability for Motorola Mobility describes the company’s method for addressing the issue of conflict minerals.
The exercise of developing a conflict minerals reporting framework for 2014 is a critical element of Motorola Mobility’s long-term supply chain strategy. The company is implementing technology solutions from PTC to automate and streamline its conflict minerals reporting to the SEC, ensuring that it has a documented audit trail for the 2014 filing and establishing a solid reporting system for future regulatory requirements.
Motorola Mobility has also made conflict minerals a component of its Corporate Responsibility platform, participating in two industry workgroups and a pilot program with AVX Corporation that aim to address the issue of conflict minerals and help support economic sustainability to the Democratic Republic of Congo and its neighboring countries.