The transition period ended in May 2016 for most companies on calendar year 2015 reporting; based on the SEC rule as amended following the D.C. Court of Appeals decision, an IPSA is necessary only if a company voluntarily chooses to describe a product as DRC conflict free or not DRC conflict free following due diligence. 29, 2014,http://bit.ly/2Mp1SQi). James Rapp
Considerable opportunities arise for CPAs, whether inside or outside of a company, to help management and staff envision sustainability as a value-added practice that affects society as a whole and assist in developing a sustainability strategy, governance structure, and action plan. CPAs can help companies assess compliance costs, determine whether existing resources are sufficient or overextended given the increased demand on the same resources by multiple regulatory requirements, and provide a plan to acquire new resources, personnel, and technology. Khadija Lalani. var div = divs[divs.length-1]; var pid289809 = window.pid289809 || rnd; 
Congress enacted Section 1502 because of concerns that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict in the DRC region and is contributing to an emergency humanitarian crisis. specifies or negotiates contractual terms with a manufacturer that do not directly relate to the manufacturing of the product. 14 Wall St. 19th Floor Section 1502 of the Dodd-Frank Act amends the Securities Exchange Act of 1934 to add Section 13(p), which directs the Commission to issue rules requiring certain companies to disclose their use of conflict minerals if those minerals are necessary to the functionality or production of a product manufactured by those companies or contracted by those companies to be manufactured. This determination is based on the companys facts and circumstances, taking into account the degree of influence the company exercises over the products manufacturing. It is hoped that mandatory conflict minerals disclosure requirements will lead to the spread of integrated sustainability practices within and across industries. The adopted rule is in cooperation with the OECD risk-based due diligence process and ensures that the CCCMCs 6,200 member companies continue to support responsible practices throughout the global value chain (http://bit.ly/2t2lTnC). then the company must undertake due diligence on the source and chain of custody of its conflict minerals and, unless the company determines through its due diligence that its conflict minerals are not from the Covered Countries or that they come from recycled or scrap sources, file a Conflict Minerals Report as an exhibit to its Form SD filing. You can contact the Division for this purpose at (202) 551-3430 or https://tts.sec.gov/cgi-bin/corp_fin_interpretive. Considerable opportunities arise for CPAs to help management and staff envision sustainability as a value-added practice that affects society as a whole. Indeed, companies such as Intel and Royal Philips practiced social responsibility and sustainability by seeking conflict-free supply chains well before the conflict minerals rule became law. Companies that report are bringing more transparency to their supply chains and achieving a higher standard of due diligence over time, despite the recent legal challenges. http://www.sec.gov/info/smallbus/secg/conflict-minerals-disclosure-small-entity-compliance-guide.htm, http://www.sec.gov/rules/final/2012/34-67716.pdf, http://www.sec.gov/about/forms/secforms.htm, http://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf, http://www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/46740847.pdf, http://www.oecd.org/corporate/guidelinesformultinationalenterprises/FINAL%20Supplement%20on%20Gold.pdf, https://tts.sec.gov/cgi-bin/corp_fin_interpretive, the company files reports with the SEC pursuant to Exchange Act Sections 13(a) or 15(d); and. According to the blogAudit Analytics(Olga Usvyatsky, An Initial Look at Conflict Minerals & Dodd-Frank Section 1502, June 23, 2014,http://bit.ly/2LVaIEz; Derryck Coleman, Analyzing Conflict Minerals Reporting in Year 2, July 23, 2015,http://bit.ly/2ldsLdG), the semiconductors and related devices industry alone accounts for roughly 9% of the total filings (1,330 and 1,279 in 2014 and 2015, respectively). To comply with the conflict minerals rule, a company must. As a result, there have been no notable regulatory updates since the April 2017 no-action relief statement by the SECs Division of Corporation Finance. 
CPAs can also provide technologies that encourage and facilitate suppliers engagement and cooperation in collecting the requisite supply chain data for reporting. Independent Private Sector Audit: The independent private sector audit of a companys Conflict Minerals Report must be conducted in accordance with the standards set forth by the Government Accountability Office (GAO). Andrew T. Bond
The conflict minerals disclosure rules and related guidance have remained at a practical standstill for the past few years following legal challenges to the rules and a remand to the SEC for further action. The company also is required to: What Must be Included in the Conflict Minerals Report: Under the rule, a company that is required to file a Conflict Minerals Report has to exercise due diligence on the source and chain of custody of its conflict minerals. var absrc = 'https://servedbyadbutler.com/adserve/;ID=165519;size=300x600;setID=494109;type=js;sw='+screen.width+';sh='+screen.height+';spr='+window.devicePixelRatio+';kw='+abkw+';pid='+pid494109+';place='+(plc494109++)+';rnd='+rnd+';click=CLICK_MACRO_PLACEHOLDER'; var plc459481 = window.plc459481 || 0; var plc289809 = window.plc289809 || 0; Companies that voluntarily describe any of their products as DRC conflict free are required to include documentation of an independent private sector audit (IPSA) in their report. CPA firms can provide an interdisciplinary approach to compliance, as they already have a competitive advantage in the human capital and technical knowledge to integrate the sustainability, assurance, data analytics, and technology services needed to provide a platform for compliance. 
Sophia I-Ling Wang, PhD is an associate professor of accounting at the Mihaylo College of Business and Economics at California State University, Fullerton. Reviews of Form SD filings of other companies, such as Hewlett-Packard, Apple, Western Digital, and Signet Jewelers, reveal a similar structure in filings because the OECD Due Diligence Guidance is the only due diligence framework accepted under the SEC rule.
The language used in IPSAs is clear about the section of the filings that is examined and opined uponthat is, whether the companys due diligence framework conforms with the OECD Due Diligence Guidance and whether the description of the due diligence measures performed is consistent with the due diligence process undertaken. var AdButler = AdButler || {}; AdButler.ads = AdButler.ads || []; Section 1502 of the Dodd-Frank Act can be found at http://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf. A company is not deemed to have influence over the manufacturing if it merely: The requirements apply equally to all reporting companies, including small entities and domestic and foreign reporting companies. the minerals are necessary to the functionality or production of a product manufactured by the company or contracted by the company to be manufactured.
The objective of the audit is to express an opinion or conclusion on whether the design of the companys due diligence measures described in the Conflict Minerals Report is in conformity with, in all material respects, the criteria in the nationally or internationally recognized due diligence framework used by the company, and whether the companys description of the due diligence measures it performed as described in the Conflict Minerals Report is consistent with the due diligence process that it undertook. 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. Specifically, CPAs can provide technical knowledge and training to a companys compliance and governance team and other relevant personnel to better understand the conflict minerals due diligence process and disclosure requirements. They can establish suppliers channels for data collection at a global level and provide required, certified supplier reporting information on demand. 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. At the moment, the language used in conflict mineralsrelated filings does not trigger an independent private sector audit requirement. It remains to be seen, however, whether the conflict minerals rule may change in the future. })(); var rnd = window.rnd || Math.floor(Math.random()*10e6); (function(){ var abkw = window.abkw || ''; Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, Conflict Minerals Disclosures Due May 31, 2022, Congratulations to partner Virginia Milstead on being named a Leader of Influence by the Los Angeles Business Journ, The SEC proposed modifying certain bases for excluding shareholder proposals from company proxy statements. the efforts to determine the mine or location of origin with the greatest possible specificity. The company also is required to: If, following the reasonable country of origin inquiry, the company: (a) knows or has reason to believe that its conflict minerals may have originated in the Covered Countries; and. Furthermore, in May 2016, several European Union stakeholders, including Intel and Philips, formed a new public-private partnership, the European Partnership for Responsible Minerals (EPRM), which supports and complements the forthcoming EU conflict minerals legislation (Innovative European Partnership to Stimulate Responsible Mineral Trade, EPRM press release,http://bit.ly/2LRcDd2). (function(){ var absrc = 'https://servedbyadbutler.com/adserve/;ID=165519;size=300x250;setID=282686;type=js;sw='+screen.width+';sh='+screen.height+';spr='+window.devicePixelRatio+';kw='+abkw+';pid='+pid282686+';place='+(plc282686++)+';rnd='+rnd+';click=CLICK_MACRO_PLACEHOLDER'; In addition, manufacturers and suppliers may use technology to centralize data collection, verify sources, and report effectively. The filings do, however, vary in the disclosure details, and several filings report greater supplier due diligence compliance than in previous years. Compliance with the SECs conflict minerals rule seems difficult due to complex and constantly changing international supply sources and lack of transparent sourcing information, especially for smaller and outof-reach suppliers. Intel further describes how it plans to integrate acquired companies conflict minerals program with its own in the next reporting period. On August 22, 2012, the Securities and Exchange Commission (SEC) adopted a new rule and form, as mandated by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), to require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country (together with the DRC, Covered Countries). document.write('
Form for and Timing of Disclosure: Under the final rule, the company is required to provide its conflict minerals disclosure in new Form SD. All rights reserved. Such a company, however, is not required to obtain an independent private sector audit of its Conflict Minerals Report for those conflict minerals. var div = divs[divs.length-1]; var absrc = 'https://servedbyadbutler.com/adserve/;ID=165519;size=300x250;setID=228993;type=js;sw='+screen.width+';sh='+screen.height+';spr='+window.devicePixelRatio+';kw='+abkw+';pid='+pid228993+';place='+(plc228993++)+';rnd='+rnd+';click=CLICK_MACRO_PLACEHOLDER';
Because Exchange Act Section 13(p) provides that the auditing standards are to be established by the GAO, the GAO is responsible for matters pertaining to the auditing standards, including questions or concerns about the application of such standards. then in Form SD, a new specialized disclosure form filed with the SEC, the company must disclose its reasonable country of origin inquiry determination and provide a brief description of the reasonable country of origin inquiry it undertook and the results of the inquiry. 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. AdButler.ads.push({handler: function(opt){ AdButler.register(165519, 459481, [300,250], 'placement_459481_'+opt.place, opt); }, opt: { place: plc459481++, keywords: abkw, domain: 'servedbyadbutler.com', click:'CLICK_MACRO_PLACEHOLDER' }}); if (!window.AdButler){(function(){var s = document.createElement("script"); s.async = true; s.type = "text/javascript";s.src = 'https://servedbyadbutler.com/app.js';var n = document.getElementsByTagName("script")[0]; n.parentNode.insertBefore(s, n);}());}. Ryan J. Adams
Recent U.S. law establishes certain requirements for public companies through their supply chains, aimed at improving human rights in such areas. Currently, gold is the only conflict mineral with a nationally or internationally recognized due diligence framework for determining whether it is recycled or scrap, which is part of a separate gold supplement to the OECD Due Diligence Guidance. var plc459496 = window.plc459496 || 0; (b) has no reason to believe that its conflict minerals may have originated in the Covered Countries or may not be from recycled or scrap sources. To alleviate the risk of intentional misrepresentation and omission, policies can be set to communicate the tone at the top throughout the supply chain.
})(); var AdButler = AdButler || {}; AdButler.ads = AdButler.ads || []; For additional information concerning the conflict minerals rules, please see our other client alerts: Companies and their advisors with questions regarding conflict mineral reporting requirements should contact outside counsel. Another observation is that the language used in Hewlett-Packards, Western Digitals, and Apples 2016 and 2017 filings avoids classifying products as DRC conflict free or not DRC conflict free following due diligence, and thus the requirement for an IPSA is not triggered. 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). var abkw = window.abkw || ''; (a) knows that its conflict minerals did not originate in the Covered Countries or that they came from recycled or scrap sources; or. The SECs disclosure forms can be accessed on the agencys website at http://www.sec.gov/about/forms/secforms.htm. Perhaps one of the critical issues is that the right tonethat sustainable practices and compliance are beneficial to the success of the organization and to its various stakeholdersis set and propagated throughout the organization. The adopting release for this rule can be found on the SECs website at http://www.sec.gov/rules/final/2012/34-67716.pdf. These efforts afford better supply chain risk management and better integration with sustainability reporting trends. These challenges are also echoed by the Government Accountability Office (GAO) (SEC Conflict Minerals Rule: Companies Face Continuing Challenges in Determining Whether Their Conflict Minerals Benefit Armed Groups, August 2016,http://bit.ly/2JUow4A). var abkw = window.abkw || '';
The directive requires companies with more than 500 employees to file sustainability reports in each EU member country and specifies that the reports must include information relating to environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues, and diversity in their board of directors (http://bit.ly/2JRC1lx). As members of the steering committee of CFSI, they also actively work with the initiative and broaden the list of certified smelters and refiners around the world.
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