Industry Survey Reveals Significant Cost for Conflict Minerals Compliance

The first year of conflict minerals reporting has come and gone, but how much did it cost? What lessons have we learned? A comprehensive Tulane University survey of 2013 issuers shows average costs per issuer, identifies qualitative measures issuers are currently using, and identifies common supply chain practices.

The survey results indicate an overall cost of $709 million. On average, issuers dedicated 2.7 employees – either part-time or full-time – to their conflict minerals compliance efforts. The procurement, supply chain and quality departments were identified as the departments primarily responsible for conflict minerals compliance. Management and legal departments were distant followers. When asked about procuring external resources, 75 percent of respondents reported they hired a consultant to assist in their compliance efforts. Several issuers also hired lawyers to assist. A company’s IT needs were generally outsourced, however, 37 percent of respondents reported they did not have any software needs.

The survey also explored various qualitative aspects of conflict minerals compliance. Survey results discuss several “good” practices exhibited by respondents. These included: verifying 3TG (tin, tantalum, tungsten and gold) presence or lack thereof; effectively and efficiently conceptualizing and implementing an internal conflict minerals program; effective supply chain communication and engagement; and collaboration and standardization through trade associations. Issuers also identified the need to pursue additional opportunities for consolidation and supply chain cost reduction.

The survey included a long list of perceived benefits from the conflict minerals legislation and ensuing regulation that an overwhelming majority of respondents disproved. Responses indicated clear disincentives from sourcing from the DRC region, including higher costs associated with additional reporting and audit requirements and potential damage to brand recognition.

The majority of respondents were downstream, U.S. companies. A total of 178 responses were received, with the electronics sector and aerospace and defense being the largest sectors represented at a combined 31 percent of total respondents.

Chris Bayer, a newly conferred International Development Ph.D., who helped author the 2011 Economic Impact Analysis, worked with the Payson Center of International Development at Tulane University Law School, to develop this survey. IPC was an integral participant in the stakeholder advisory group, which provided important feedback to Mr. Bayer on the survey, and was instrumental in advocating for issuers to participate in the survey.

Read more for complete survey findings.

 

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