Conflict Minerals Disclosure Requirements and Corporate Social Responsibility: Trends, Challenges, and Opportunities
Publisher: CPA Journal
Author(s): Fatima Alali and Sophia I-Ling Wang
Date: 2018
Topics: Conflict Prevention, Economic Recovery, Extractive Resources, Governance, Monitoring and Evaluation
Countries: Congo (DRC), United States
Among the many topics of concern for companies and investors interested in social responsibility is the use of minerals sourced from war zones and countries suffering under despotic regimes. Recent U.S. law establishes certain requirements for public companies through their supply chains, aimed at improving human rights in such areas. The authors detail the current state of reporting on such conflict minerals, describing the relevant regulations, giving examples of reporting from leading companies, and outlining the opportunities for CPAs and accounting firms to provide assistance and assurance for companies.
In the quest to improve corporate responsibility efforts and support the global trend of addressing human rights and supply chain risks, advocates of sustainability have turned their focus to the area of conflict minerals. In the United States, the SEC’s conflict minerals rule aims at improving human rights in the Democratic Republic of the Congo (DRC) and neighboring countries. At the heart of this rule is the idea that due diligence and reporting are vital to the protection of human rights within the global supply chain.
According to the Global Reporting Initiative (GRI) Framework, reporting companies disclose how their operations and relationships with others affect various sustainability issues, of which supply chain risk reporting is an integral part. In particular, companies identify, assess, and report how due diligence is exercised in their screening of suppliers and what actions are taken to prevent and address any actual or potential negative impacts in the supply chain (GRI 414: Supplier Social Assessment 2016, http://bit.ly/2MqzyNr).
This article presents examples of what a conflict minerals report commonly entails and excludes based on an examination of selected filings in 2016 and 2017, highlights the challenges companies face when complying with the conflict minerals rule, and provides insights into governance, compliance, and technologies that companies develop and utilize to address these challenges and be socially responsible. Moreover, the article presents a spectrum of business opportunities for CPAs, both as compliance and supply chain advisors and as sustainability and conflict minerals assurers. Finally, the authors stress the importance of integrating practices to facilitate conflict minerals reporting with other sustainability efforts to reduce compliance costs and be a good global citizen.