Evolving Transparency: From Dodd-Frank to SB-657

Evolving Transparency: From Dodd-Frank to SB-657

The emergence of legislation on conflict minerals has led to the creation of new cross-sector initiatives to evaluate supply chains, however more growth and demand for sustainable minerals is needed in order to lead to true transparency in the industry.

August 27, 2015

The electronics industry’s rapid expansion over the past 15 years has elicited increased attention to the sector, bringing the issue of child and forced labor into the legislative arena.

Coupled with persistent pressure from non-profit advocates, legislators have passed both the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, as well as the California Transparency in Supply Chains Act in 2012 (SB-657).

The Dodd-Frank Act, initially intended to address issues of transparency in financial institutions, includes a provision on corporate responsibility in regards to “conflict minerals”–cassiterite (for tin), wolframite (for tungsten), coltan (for tantalum), and gold ore, which are typically extracted from the Eastern Congo and used in electronics.

Provision 1502 of the Dodd-Frank Act stipulates public reporting requirements for those companies producing or consuming these minerals mined in specified regions, in addition to due diligence reports and private sector audits. SB-657 expanded the scope beyond the electronics industry, requiring all companies working in California that exceed $100 million in global revenue to state the measures they are taking to combat forced labor in their supply chains.

As Natalie Pregibon, Director of Research at Concordia, stated in her blog post earlier this month, corporations are now being called upon to proactively and creatively address forced labor in their supply chains. The introduction of both national and state legislation has put the onus on corporations themselves. By focusing legislation on companies’ actions, it removes the burden from third party–often non-profit–researchers who have been leading the charge in exposing the issue of forced labor. By demanding that companies pick up the tab for these evaluations, governments are forcing the private sector to internalize the externalities of their work.

To meet these requirements, companies are needing to partner with the people who have been doing the humanitarian side of this work for years. This growth in legislation is beginning to impact, and bolster, cross-sector initiatives.

Take the partnership between the Electronic Industry Citizenship Coalition (EICC) and Global e-Sustainability Initiative (GeSI) for example. Both have worked together to establish two new assessment tools that companies can use to evaluate the status of their supply chains. The first, the Conflict Minerals Reporting Template, provides an in-depth survey that brands can require their suppliers to complete in order to obtain information on the minerals they use, the products created, and the smelters from which they source. The second tool is a voluntary scheme in which smelters and refiners are audited by third parties in regards to their policies, practices and safeguards regarding the purchase and processing of conflict minerals.  Findings determine whether companies can be classified as ‘conflict free’.

Another example of how the electronic industry is responding to provisions in Dodd-Frank is through the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The Guidance lays out recommendations for the management of responsible supply chains and suggested practices to avoid perpetuating conflict through the purchase of such minerals. According to the OECD, such guidelines will allow companies to meet the requirements enforced through Dodd-Frank.

Lastly, the iTSCi, a joint initiative led by the International Tin Research Institute (ITRI), further assists companies to incorporate the actions, structures, and procedures required to adhere to OECD Due Diligence Guidance at a “practical level”, which includes small and medium businesses, as well as co-operatives and artisanal mines. Under EICC-GeSI Conflict-Free Smelter Assessment Programme stipulations, iTSCi provides information on mineral chain of custody, and thus aids US companies in their efforts to meet the requirements of the Dodd-Frank Act.

Although these initiatives are encouraging, widespread implementation and growth of the market for sustainable minerals are needed to drive meaningful supply chain transparency.

Hannah Darnton is a forced labor and supply chain consultant based in San Francisco.

This piece appears as part of KnowTheChain’s blog series on a growing trend towards supply chain transparency. Follow the discussion at: http://bit.ly/1HpEEOu

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