Removing Conflict Minerals from Global Supply Chains

Removing Conflict Minerals from
Global Supply Chains
Using OpenText™ Active Community

OpenText Confidential. ©2014 All Rights Reserved. 2
Agenda
 Introduction to the Dodd-Frank Act
 Which Minerals are Affected?
 Industry Assessment Processes
 Conducting a Supply Chain Assessment
 How Community Management Tools can
Manage the Assessment Process

Today’s Supply Chains Face Many
Regulatory, Risk & Compliance Issues
Increase
Supply Chain
Resilience
Minimize Use
of Conflict
Minerals
Improve CSR
Related
Compliance
Strengthen
Regulatory
and Legal
Compliance

What is the Dodd-Frank Act?
 U.S Congress passed the Dodd-Frank Wall Street Reform
and Consumer Protection Act, on 21 July’10
 The intent of the provision is to deter the extreme violence
and human rights violations in the Democratic Republic of
Congo (DRC) and neighbouring countries
 Section 1502 instructs the U.S Securities and Exchange
Commission (SEC), in consultation with the U.S Department
of State, to promote regulations requiring certain companies
to submit annually a description of measures taken to
exercise due diligence on the source and chain of custody of
conflict minerals

EU Mandates Optional Compliance
 EU Commission to allow companies to self-certify their
supply chains for conflict minerals
 EU ruling currently applies to importers of raw materials
and does not include manufacturers and companies
importing finished products
 EU governments have already endorsed the use of the
OECD framework, discussed later in this presentation
 It is expected that over time the new regulation will
become mandatory and may include a broader group of
minerals
 US and EU rules are intended to introduce more
transparency into supply chains, companies will be
ethically compelled to find out what is in their supply
chains

Which Minerals are Affected?
 Tantalum: regarded as the first conflict mineral and
became popular on the back of growth across the
mobile phone industry.
 Tin: widely regarded as the primary funding source of
rebel groups and used in alloys, tin plating, and solders
for joining pipes and electronic circuits
 Tungsten: used in metal wires, electrodes and contacts
which are used in a multitude of electrical and electronic
devices
 Gold: due to its superior electric conductivity and
corrosion resistance it is used in electronic,
communications and aerospace equipment
Combined, these minerals are commonly
referred to as ‘3TG’

Where are 3TG Minerals Sourced From?
 The Democratic Republic of the Congo
(DRC) is one of the most mineral rich
countries in the world
 The trade of minerals in this country is
used to fund extreme levels of violence
across the region
 Mines are typically controlled by militant
groups
 All 3TG minerals should be “DRC Conflict
Free”

Where are Conflict Minerals Used ?

Industry Readiness for Dodd-Frank
High Tech
Electronics Industry Citizenship Coalition (EICC) and Global
eSustainability Initiative (GeSI) - launched a joint initiative called the
Conflict Free Smelter (CFS) program, a voluntary program aimed at tracing
the supply chains of minerals used in electronics
Automotive
Automotive Industry Action Group (AIAG) – works to continuously
improve business processes between trading partners across the supply
chain. Developed a web based tool that can be used by companies to
identify conflict minerals across their respective supply chain.
Precious Metals
World Gold Council (WGC) – developed a draft Conflict-Free Gold
Standard which will ensure that companies producing, transporting and
refining gold meet the standards in order to claim their products are
conflict free.

Intel Vows to Stop Using Conflict
Minerals
Intel announced at the CES show in
Las Vegas in January 2014 that
they would remove conflict
minerals from their global supply
chains.
All gold used in its circuitry is now
conflict free, thus improving its
brand reputation

Recent Conflict Minerals Survey of the
Automotive Industry by PwC
Top 5 Most Difficult Challenges – (1=Greatest Challenge 9=Least Challenge)
Identifying relevant suppliers

What Strategy Should be Adopted for
Eradicating Conflict Minerals?

How Will the OECD Framework be
Implemented?
EICC and GeSI joint working group aims to help
companies deploy the OECD framework to allow the
sourcing of conflict free minerals by:
 Implementing conflict free smelter and due diligence
programs to verify conflict free minerals down the supply
chain from the OEMs
 Supporting in region sourcing schemes to enable future
legitimate trade from DRC and surrounding countries
 Supporting OECD due diligence guidance and pilot
 Engaging with stakeholders for collaboration and efficiency
 Supporting individual company’s assurance processes
through information sharing, standard tools and templates
 For the high tech industry, the OECD defines upstream and
downstream as follows…..

What Does the Process Look Like?
“The complexity of today’s supply chains combined with lack of visibility into
sourcing practices will be one of the key challenges of ensuring that Dodd-Frank
can be adhered to” – Deloitte Conflict Minerals Report, January 2012

How Will You Assess Your Supply Chain?
 From a Supply Chain Management point of view
there are two key challenges associated with the
successful reporting of conflict minerals:
1. Ensuring that contact information for each supplier
across a supply chain is up to date
2. Keeping track of every assessment completed by a
community of suppliers
 Efficient contact management is therefore critical
to the success of this particular reporting
process and hence ensure that a SEC filing is
submitted on time

Conflict Minerals Reporting Template
Spreadsheet based reporting tool needs to be emailed
to every supplier across a supply chain…..

S&P500 Company Responses for 2014
 Of the S&P500, only 184 needed to file an exhibit and of these
94% used the CFSI reporting template
 Average number of suppliers surveyed was 2500, but ranged
from just 5 to over 40,000 suppliers
 49% of respondents came from the technology, industrial and
CPG sectors
 43% of respondents showed sourcing of some portion of
minerals from the DRC
 52% of companies did not disclose supplier response rates, of
those that did respond only 15% of companies had supplier
response rate greater than 90%
 Only 27% were able to provide a list of smelters and refiners
Source:
Ernst & Young, June 2014

Challenges Faced by Respondents
Many companies who filed to the SEC faced a
number of specific challenges as part of the
conflict minerals reporting process:
 Ensuring that supplier contact information was up to date to
allow reporting template to be sent
 Some companies received no response from their direct and
sub-tier materials suppliers, partly due to the complexity of
their respective supply chains
 Information provided by suppliers was often incomplete or
inaccurate
 Suppliers had to be chased up for report submissions to meet
SEC’s May 31st deadline

Introducing OpenText™ Active Community
Aligning People and Process with Transactional B2B
Active Community is an enterprise
community management platform that
delivers people and process solutions across
your supply chain…..
As a highly scalable, cloud based application,
it enhances OpenText™ Trading Grid™
beyond pure transactional B2B OpenText™
Active Community

B2B Community Management
Automating Both Your Data Network and People Network
GXS B2B Community Management
B2B Community Management
Active Community is Part of a Comprehensive Suite of
Community Management Solutions
Active Community

OpenText™ Active Community
Improving Collaboration Across the Supply Chain

Using Active Community to Deploy the
Conflict Mineral Reporting Template

CFSI Reporting Tool Demonstration
 To see a short demonstration of the
CFSI template within Active
Community, please contact
OpenText via the details shown at
the end of this presentation
 The demonstration will provide:
 Introduction to Active Community
 Demonstration of CFSI Conflict
Minerals Reporting Tool

Benefits of Using
OpenText™ Active Community
 Provides an effective cloud based platform for
distributing and tracking responses to conflict
minerals based assessments
 Offers a simple and efficient reporting
environment to encourage 100% participation
from trading partners
 Ensures trading partner information is accurately
maintained within a centralized environment
 Allows a company to meet an important corporate
social responsibility objective and allow a conflict
minerals report to be filed on time
OpenText™
Active Community

Conclusions
 Today’s global supply chains need to adhere to
increasing levels of regulatory & legal compliance
 Embracing assessment initiatives, such as the
example from the CFSI, requires a single and
accurate view of all supplier related contact
information
 Keeping track of completed compliance
assessments, especially for a globally diverse
supplier community is time consuming
 Removing conflict minerals from today’s supply
chains should be on the agenda of every CEO

Removing Conflict Minerals from Global Supply Chains

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Editor's Notes