Conflict Minerals Reporting, Year Two: Disclosure Remains Steady amid Uncertainty
Publisher: EY Center for Board Matters
Date: 2015
Topics: Extractive Resources, Governance
Countries: Congo (DRC)
In this second year of mandatory reporting pursuant to the Securities Exchange Commission (SEC) conflict minerals rule, boards and executives continue to navigate the challenge of complying with reporting requirements in an uncetain regulatory and legislative environment. This uncertainty appears to be causing many issuers to hesitate to expend additional resources on increasing their disclosure efforts. In year two, most companies continued to cite the need for further due diligence. Many companies have complex supply chains and continued to report difficulties in tracing product sourcing, in part given insufficient supplier responses to their inquiries. As a result, a review of year two filings found that disclosures held steady. A few other observations include:
- Across all SEC registrants, there was some decline in the number of companies filing Specizlized Disclosure Reports (Form SD), but the number of issuers filing a Conflict Minerals Report (CMR) exhibit - which is filed by issuers with reason to believe that they may have some exposure to conflict minerals from the Democratic Republic of the Congo or an adjoining country - remained consistent.
- For S&P 500 companies, the number of Form SD filiers stayed constant, but some issuers that previously filed only a Form SD included a CMR, leading to a rise in CMR filings.
- Across all companies, including among S&P 500 issuers, Forms SD generally stayed about the same length, while there was an increase in the average length of a CMR exhibit.
As boards and executives work to meet existing requirements and consider how their disclosures compared to that of peer companies, this report, based on the EY Center for Board Matters' corporate governance database, can inform views on conflict minerals disclosure.