Act now with suppliers to ensure compliance with conflict minerals legislation - Supply Management

Act now with suppliers to ensure compliance with conflict minerals legislation

Mickey North Rizza
24 November 2015

As regulations tighten across the globe regarding the sourcing of conflict minerals, procurement organisations are racing to find ways to avoid fines and embarrassing headlines.

The materials in question – tin, tungsten, tantalum and gold – are well-known as critical parts of electronics equipment. However, these minerals show up in many more products than one might think – seat cushions, batteries, glass and much more – making the call to action one that nearly anyone in manufacturing or importing needs to heed.

While the nuances of regulations do differ from country to country, and in many places the details of the consequences are still evolving, the implications of non-compliance are shared:

•    Delays in product delivery: may require replacing a supplier – especially one for a material not readily available – on short notice and can cost you precious time moving products to market, revenue and market share.
•    Stock performance: negative financial results, whether caused by product delays or fines, can lower your stock price, and ultimately limit your access to the capital necessary to run and grow your business.
•    Damage to your brand: consumers are increasingly looking to do business with companies who are known to be socially responsible. Negative publicity about your sourcing policies can cost you customers today and it may take years to recover.

The challenge, of course, is that supply chains have increasingly become longer and more complex, with tiers that go deep and wide, making it difficult to quickly determine exactly who you are buying from and from whom they are buying. Regardless, the responsibility for these decisions is likely to be laid at the feet of the brand owner, making immediate action a must.

1)    Survey your suppliers to identify any possible risks. Three questions will help you identify any potential problems and provide critical lead time in developing alternative strategies:

•    Do you provide our company with any products manufactured with tin, tantalum, tungsten, gold or any other conflict minerals?
•    If you provide these minerals, what geographic regions do they come from?
•    Are your minerals at risk of supporting conflict? How?

2)    Require suppliers to meet the same standards that you are required to meet. Contractually obligate your suppliers to ensure their products don’t include materials acquired from conflict zones. This includes tier two, three and four suppliers. Proof of compliance must be included in the contractual obligation.  

3)    Leverage technology to optimise reporting. Meeting the regulations will require significant resources for research and reporting. Technology can accelerate the accuracy and transparency needed to assure compliance. Critical to any solution is flexibility that allows you to sort and select suppliers based on evolving regulatory scenarios and that can be modified to meet requirements as they emerge.

Don’t wait to read about your organisation’s compliance scores when it comes to reporting and transparency around the delicate issue of conflict minerals on the front page of the business press – put your action plan in motion today.

☛ Mickey North Rizza is vice president of strategic services at BravoSolution.

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