Business

SEC Rule Will Require Tech Companies to Disclose Use of Minerals From Conflict Zones

The U.S. Securities and Exchange Commission (SEC) adopted a regulation on Wednesday requiring companies to publicly disclose if they used minerals that originated in the Democratic Republic of Congo or adjoining countries, a measure that will impact technology companies as well.

Companies should disclose their use of conflict minerals such as tantalum, tin, gold, or tungsten if those minerals are necessary to the functionality or production of a product manufactured by those companies, the SEC said in a news release. The minerals are described as conflict materials because their sale benefit armed groups in these countries. The rule was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The named materials are used in the production of electronics. Tungsten, also known as wolfram, is used in the production of integrated circuits. Gold is used in high-end wiring such as audio or USB cables because it is a good conductor. Tantalum is a rare metal that is used in the manufacturing of mobile phones and computers because it makes good capacitors, and tin can be used as solder.

Companies that use those materials for manufacturing are required to conduct a country of origin inquiry and if the company knows or has reason to believe that the minerals may have originated in one of the covered countries, or knows or has reason to believe that the minerals may not be from scrap or recycled sources, the company should file a Conflict Minerals Report with the SEC. The companies that use conflict minerals are obliged to make that report available on its website, it said.

The companies will file their first specialized disclosure reports by May 31, 2014, and annually on May 31 every year thereafter, the SEC said.

While the regulations are a positive step, after more than a year's delay in issuing the rules, it is disappointing that the SEC added an unnecessary two year phase-in period, said the Enough Project, an organization that fights to end genocide and crimes against humanity, and has voiced its concern about conflict mineral trade in Congo, in a blog post. "Such an extended phase-in period clearly caters to corporate interests over the people of eastern Congo," stated Enough Project Executive Director John Bradshaw.

The U.S. Chamber of Commerce is also still threatening to file a lawsuit against the SEC, asserting that the cost for cleaning up supply chains is too high for companies, according to the Enough Project. The reality is that major companies such as Microsoft, General Electric, and Motorola have rejected the Chamber of Commerce's stance against the regulations, it said. And technology companies such as Intel, HP, Motorola Solutions and Apple have already established conflict-free programs ahead of the required SEC regulations, proving that clean supply chains are possible and profitable, it added.

The Enough Project recently published its second Conflict Mineral Company Rankings in which it ranked the largest electronics companies on their efforts to use and invest in conflict-free minerals in their products. Over the past 18 months electronics companies have significantly stepped up those efforts, it said.

Intel, which ranked number one in the project's research, published a report on its efforts to achieve a conflict-free supply chain in Congo on its website.

However, there are still companies that rank very low on the project's list. Companies as Nintendo, HTC, Sharp, Nikon and Canon were all rated as companies who "have done next to nothing to shift their practices" on conflict-free minerals and have not taken the proper steps to investigate their supply chains, according to the Enough Project's report.

But this could change. HTC for instance said in an emailed statement that it applauds the Enough Project's effort to bring to light the use of conflict minerals across the consumer electronics industries. "HTC takes this issue very seriously and is working hard to ensure the complete elimination of conflict minerals from our global supply chain," it said.

Loek covers all things tech for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

Subscribe to the Business Brief Newsletter

Comments