UPDATE: To help keep clients and others informed, we have added new insights and commentary based on further discussions with a variety of stakeholders. Our review of the final SEC regulation on conflict minerals is now available. While we strive to be first in presenting you important information, this time we chose a different path. In the days since the rule was adopted, we have had many discussions with clients, other companies, legal authorities, the SEC directly and others who raised a variety of points, preliminary interpretations and questions. Along with the technical substance of this complex ruling, our review also incorporates a number of unique insights from these discussions that are not reflected in other analyses. We have also included guidance on what companies should be doing in the next 12 months to prepare for the first reporting deadline and customer demands. We are using a stunning new presentation format (prezi) that is more effective than standard formats at communicating information/context and emphasizing key points. Prezi requires no new software or downloads and is easy to use: Full screen mode provides the optimum viewing experience. Click on the full screen icon near the lower right hand corner of the viewer. Navigate manually through
Read more →In response to yesterday’s passage by the US Securities and Exchange Commission of the final conflict minerals regulation, today marks the official launch of an international consortium formed to provide comprehensive services globally for conflict minerals due diligence, traceability, auditing and disclosure for companies impacted by conflict minerals requirements. The group, called the Conflict Minerals Solutions Consortium, was initiated by The Elm Consulting Group International LLC. Lawrence Heim, Director of Elm, stated “We don’t believe that any single entity is able to provide similar comprehensive services due to the complexity of global supply chains and material flow. Our goal was to assemble a unique and highly qualified group to serve the wide range of companies and potential requirements.“ Heim continued, “We tried to assemble project team members who are not directly working in existing conflict minerals audit/traceability programs such as those under OECD or electronics industry groups. We believe this independence will foster development of new solutions that may be more efficient and/or effective than those currently available.” Members of the Consortium include recognized experts globally representing: HSE/sustainability auditing Management systems program development RoHS/REACH/EPEAT program development Mining industry auditing/traceability program development Traceability software CSR integration/reporting Legal advisory (US and Africa)
Read more →A new study released last week from Paul Griffin, a professor in the UC Davis Graduate School of Management, claims that shareholder value has suffered in response to past (voluntary) public disclosures on conflict minerals. The release summary from Phys.org stated: Griffin and his research team examined 206 companies from December 2010 through March 2012 and found those companies — half who had voluntarily disclosed before the law became mandatory — lost $6.5 billion in shareholder value due to declining equity values. Both disclosing and nondisclosing companies were affected because of the ripple effect in capital markets when uncertainties arise about a particular business practice — using conflict minerals, in this case. The study methodology claims to correct for other factors possibly influencing stock pricing before and after such disclosures. Elm’s analysis of the impact of the 2010 Enough company rankings on corporate revenues was cited within the study, although Professor Griffin acknowledged the differing parameters and goals of the respective studies. We have only begun our review of Griffin’s study (given its timing, our plate has been full with the final SEC rule) and hope to have more detailed commentary soon.
Read more →The final SEC regulation on conflict minerals, passed earlier today by a 3-2 vote, is now available for download. Most of the attendees in the auditorium, including Elm, had a difficult time hearing the substantive commentary made on the final regulation by John Fieldsend of the SEC’s staff (we understand the audio on the webcast was far superior to what those of us in the audience experienced). Therefore, we will be publishing a summary of key points before the end of the week. In the meantime, SEC’s official meeting summary is here and click here to download from the SEC website.
Read more →Anticipating a final rulemaking by SEC on conflict minerals, the American Law Institute and American Bar Association (ALI-ABA) has announced a webinar sponsored by ABA’s Business Law Section on the matter to be held September 12 ,2012. The participants include: Planning Chair and Moderator Jeffrey W. Rubin, Hogan Lovells LLP, New York City. Mr. Rubin will be giving a substantive presentation as well. John C. Bullock, Esq., Cheshire, CT Lawrence M. Heim, CPEA, The Elm Consulting Group International LLC, Atlanta, GA Bob E. Leet, M. Sc., Intel Corporation/EICC, Portland, OR Irma Villarreal, Kraft Foods Company, Northfield, IL Virtually all ALI CLE programs are accredited in all US jurisdictions. Specific MCLE information for this course is not yet available.
Read more →Two years after its initial rankings, activists Enough! have issued their updated rankings on electronics companies’ progress on conflict minerals. Even CNN picked up this up and reported it on the front page of CNN.com. A quick review of the summary report indicates that Enough appears to have addressed some of the points from our critical review of the initial 2010 rankings. However, our comments concerning the three flawed questions remain substantially valid. Although we have not yet analyzed the detailed responses behind the summary report (those responses are available here), we plan to do so soon. Similarly as we look even further ahead, we anticipate updating our own report on the financial impact of Enough’s rankings.
Read more →Source 44, a leading provider of supply chain sustainability solutions, and The Elm Consulting Group International LLC (“Elm”) today announced they have formed a cooperative relationship that will provide a range of conflict minerals traceability and due diligence offerings. The firms are both leaders in developing groundbreaking technology and solutions that can help companies meet conflict minerals regulations outlined in Section 1502 of the Dodd-Frank Act. This announcement comes ahead of the imminent ruling expected by the U.S. Securities and Exchange Commission (SEC) on the scope of Section 1502 and the nature of the relevant reporting requirements. “Some time ago, we realized that information management tools will be a critical component of conflict minerals traceability programs,” said Lawrence Heim, Director in Elm’s Atlanta office. “We were struck by Source 44’s functionality, user interface and dashboard, as well as the auditability of the source information within the system.” Source 44 is a leader in accessing, managing and leveraging information technology to drive sustainable supply chain management. Elm has extensive experience and expertize in environmental/sustainability management systems development and auditing, including conflict minerals. Together, the firms will be able to provide a seamless solution offering for conflict minerals due diligence traceability program development,
Read more →The WSJ reported yesterday that SEC is considering toughening certain aspects of their 2010 conflict minerals proposal. The statements made in the article corroborate information provided to Elm last week by reliable sources. If the final rule passes as the article indicates and as we have been told, the official Conflict Minerals Report (CMR) audits will be conducted as Attestation Engagements and only by CPAs. The proposed rule stated that SEC and GAO felt that the audits could be done as Performance Audits, allowing EHS auditors to do those. That sentiment was also clear during the SEC’s Roundtable in October. However, we understand that SEC stands ready to finalize their determination that CMR audits must be filed rather than furnished, making the audits part of the Form 10-K and other SEC forms. If the CMR audits were to be “furnished” as the proposed rule indicated, there would be more flexibility in who could be considered appropriate auditors. One implication of this decision is that the credibility of information relied upon in due diligence processes – including any of the nice supporting audits listed in the recent GAO report – will be heavily scrutinized before CPAs and company senior management sign off on the CMR audits.
Read more →The Government Accountability Office (GAO) has published its report to Congress (mandated as part of Section 1502 of The Dodd-Frank Act) that assesses the effectiveness of Section 1502(b), describes issues encountered by the SEC in carrying out the provisions of the Act, reviews non-covered companies that have conflict minerals necessary to the functionality or production of a product manufactured by such companies; and reviews the rate of sexual-and gender-based violence in war-tom areas of the Democratic Republic of the Congo and adjoining countries. Because the final rule has not yet been promulgated, the GAO report – as stated by SEC in their June 22, 2012 written comments to the report - “examines the steps the SEC has taken toward issuing a conflict minerals disclosure rule; stakeholder-developed initiatives that may help covered companies comply with the anticipated rule; and any additional information available on the rate of sexual violence in the eastern Democratic Republic of Congo.” Key Points from the Report The following are excerpts from the report on what we think are key points. Some stakeholders’ efforts to improve their initiatives through expansion and harmonization have been hindered by the uncertainty regarding potential due diligence and disclosure requirements stemming from SEC’s delay
Read more →With approximately six weeks until SEC votes on the final conflict minerals regulations, the US Chamber of Commerce filed new comments with the Commission calling for the rule to be re-proposed based on “important questions raised during the comment period [that] remain unresolved.” The key points brought forth by the Chamber include: That the SEC did not consider the impact of the rule on companies other than those already subject to SEC. “The SEC estimate fails to reflect the costs to private companies that serve as suppliers and vendors to reporting companies, as well as the costs to other reporting companies and service as suppliers and vendors to companies that are directly impacted by the proposed Rule.” That the SEC did not address the request from the Small Business Administration (SBA) for “an amended initial regulatory flexibility analysis for the proposed rule to reflect the costs of the proposed rule and the number of small businesses impacted.” With the artificially low numbers of estimated companies affected, the cost impact is materially undermined. Other credible studies, including those from the National Association of Manufacturers (NAM) and Tulane University’s Payson Center for International Development, indicated “a disparity between the SEC estimates and those provided as
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