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Conflict Minerals Due Diligence: Strategies for a Successful Second Filing

Companies found the first filing of their conflict minerals due diligence disclosures, for the 3TG metals (tin, tantalum, tungsten and gold), more difficult than originally thought. As the May 31, 2015 second filing deadline nears, how should you prepare for disclosure—the second time around?

To identify takeaways from last year’s filing and outline strategies for a successful filing this year, BONEZONE® spoke with Michael R. Littenberg, Partner at Schulte Roth & Zabel LLP, a conflict minerals compliance and responsible sourcing practice.

Michael-Littenberg cropped_WEB“This was a harder process than a lot of companies thought it was going to be. It took more time and more internal coordination,” Littenberg said. “Companies didn’t necessarily receive a lot of information from their suppliers. That was one takeaway from year one that I think surprised a lot of companies; a lot of them were cut short on information.”

Littenberg predicts improvements in this year’s filings through greater organization and more detail, as companies now have a precedent.

Plan Ahead and Be Prepared For Changes in Your Disclosure
Start thinking about your disclosure early. Despite how well your disclosure went last year, changes are likely to appear.

“Even companies that had a pretty thoughtful, complete disclosure last year should expect that there are going to be a fair amount of changes to their disclosure this year,” Littenberg said. “Many companies’ filings are going to evolve significantly because they’re going to have greater supply chain visibility this year. There will be more disclosures on smelters and refiners in the supply chain than there were last year. Certainly, market practice is going to continue to evolve and move, and this in some portion is due to the expectations of NGOs and socially responsible investors. In other cases, companies are going to want to be incorporating best practices from the filings of competitors, peers and other companies that are perceived as market leaders.”

Educate and Train Your Suppliers
A focus on supplier education and training will serve companies well for the second conflict minerals filing. Some large companies are hosting supplier conferences, with conflict minerals modules. Others are conducting web-based training and one-on-one sessions with larger suppliers.

It’s also crucial to communicate exactly what you need from your supplier, in order to adequately prepare your filing.

“It’s not only about explaining the rule to suppliers, but more importantly, explaining exactly what the particular customer expects from the suppliers, because not all customers are looking for the same thing,” Littenberg said. “Different people have different expectations in terms of the level of granularity on information and the level of supply chain compliance and procedures, generally. We’re seeing much more focus on that this year, as there should be.”

Further reading on regulatory compliance strategies:

Unique Device Identification (UDI): Many Questions Remain

Why Won't My CAPA Process Work?

Choosing Materials in a Shifting Global Regulatory Environment


Coordinate Internally and Externally
Organization both internally and externally (with your suppliers) can create better filing results and instill a more efficient and cost-effective process for disclosure.

“Companies still have a lot of work to do on building their due diligence framework,” Littenberg said. “Last year, most companies got a pretty good start, but most had some gaps in their framework. One of our recommendations to companies this year is to continue to plug those gaps, look at your framework, benchmark it against the OECD compliance requirements and continue to implement elements of that framework, as applicable.”

Examining your current program and determining areas for improvement that will work best for your company can make your compliance process more efficient.

“For most companies, it’s not so much about putting more resources toward it, but about deploying those resources intelligently,” Littenberg said. “Last year, given that companies really didn’t have a roadmap in most cases, they weren’t sure how best to do that. There’s no one right way to do it. Every company has its own culture, its own internal organization and its own particular supply chain. The way everybody approaches this is a little different. Just like any other business process, it’s all about being efficient, saving money and complying with regulations in a cost-effective manner that mitigates your risks. This is no different.”

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