Conflict Minerals Supplier Training
January 2013
GPO-GPO-4-359-0
Table of Content
I.
Overview of Conflict Minerals
II.
Complexity of minerals supply chain
III.
Leading Industry Initiatives
IV.
Flextronics’ Conflict Minerals Policy
V.
Flextronics’s Conflict Minerals Due Diligence Procedure
VI.
Explanation and Preparation of conflict Minerals Reporting
Template
VII.
Glossary
2
Overview of Conflict Minerals
3
Overview of Conflict Minerals
Exploitation and trade of conflict minerals
originating in the Democratic Republic of the
Congo (DRC) is helping to finance conflict
characterized by extreme levels of violence in
the eastern DRC. This conflict has claimed
more than 5.4 million lives since it began in
the late 1990’s.
Mining activity is crucial to the DRC economy.
However, some mines are controlled by
militant groups causing serious social and
environmental issues in the region:
Serious human rights abuses, theft, extortion
Violence over control and taxation of mineral
resources
Forced and child labor
Limited development options ->artisanal and
small-scale mining
Conservation impact, deforestation, etc.
4
Overview of Conflict Minerals
What is DRC conflict-free?
“DRC conflict-free” is defined to mean the products that do not contain
[conflict] minerals or their derivatives determined to be directly or indirectly
financing or benefit armed groups from affected countries:
Democratic Republic of the Congo (DRC)
The Republic of the Congo
Central Africa Republic
Tanzania
The Republic of
South Sudan
Burundi
Rwanda
Zambia
Angola
Uganda
5
Overview of Conflict Minerals
Dodd-Frank Act: Section 1502 Conflict Minerals provision
Background
• The U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Act), which was signed into law on July 21, 2010. Section
1502 of the Act is a provision related to sourcing ―conflict minerals.
• The intent of the provision is to deter – through increased transparency of
companies‘ sourcing practices – the extreme violence and human rights
violations in the Democratic Republic of Congo (DRC) and neighboring countries
funded by the exploitation and trade of certain minerals.
•Section 1502 instructs the U.S. Securities and Exchange Commission (SEC), in
consultation with the U.S. Department of State, to promulgate 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. SEC issued final Conflict Minerals reporting rules on
August 22, 2012.
6
Overview of Conflict Minerals
Conflict Minerals Implementation Timeline
July 21,
2010
• The Act signed
into law
• Mandated that
the SEC
promulgate final
Section 1502
implementation
rules by April
15, 2011
December
15, 2010
• The SEC issues
proposed
implementation
rules
• Public comment
period opens
August –
December 2011
• The SEC extends
date for issuing
final rules
• The SEC holds a
Roundtable:
October 18, 2011
• The SEC defers
final rules until
2012
August 22,
2012
• SEC approved
final rules
requiring public
companies to
report on their
use of “Conflict
Minerals”
Disclosure requirement:
All issuers will file Form SD and Conflict Minerals report for the calendar year
from January 1 to December 31 regardless of the issuer’s fiscal year-end.
First Form SD disclosure report by 31 May 2014 (for the 2013 calendar year)
Annually by May 31 for each calendar year thereafter.
Exchange Act Section 13(p)(1)(A), Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ―Act‖) amends the
Exchange Act by adding new Section 13(p).
7
Overview of Conflict Minerals
SEC Disclosure Rule
SEC‘s Proposed* Steps for Section 1502 Disclosure
Determine whether compliance
is required
Company must comply with
Section 1502 if:
•It files reports with SEC under the
Exchange Act and;
•Conflict minerals are ―necessary
to the functionality or
production‖ of a product
manufactured or contracted to
be manufactured by the
company/issuer
−Provision applies even if the
mineral is not present in the end
product
(*) SEC Proposed Rule Release No. 34-63547, Conflict
Minerals.
(**) That is, products containing conflict minerals that do not
―directly or indirectly finance or benefit‖ armed groups in the
DRC countries.
Determine origin of conflict
material and resulting
disclosure
If Section 1502 applies, company
must perform a ―reasonable
country of origin inquiry to
determine whether conflict minerals
originated in DRC countries
If conflict minerals did not
originate from DRC or are DRCconflict free:**
•Disclose conclusion and how
determined in annual report
•Post disclosure on Web site,
provide Web address in annual
report
If conflict minerals originated from
DRC countries or issuer is
unable to determine if minerals
are DRC-conflict free:
•Disclose conclusion in annual
report and Web site.
Report conflict minerals
If company meets requirements in
previous column, it must:
1.Conduct supply chain due diligence,
Organisation for Economic Cooperation and Development’s (OECD)
standards considered good starting
point by SEC
2.Create and post on its Web site a
Conflict Minerals Report , includes:
•Description of due diligence performed
•Description of the products
manufactured and facilities where DRC
materials used
•Certified independent private sector
audit report
2.Obtain an independent private
sector audit (part of due diligence).
3.Furnish report as exhibit to annual
report on Form 10-K
4.Disclose auditor‘s conclusion in
annual report
8
Overview of Conflict Minerals
What are conflict minerals?
Cassiterite (tin ore), wolframite (tungsten ore), coltan (tantalum ore) and gold
Often refer as 3TG (Tin, Tantalum, Tungsten and Gold)
Originated from the Democratic Republic of Congo or an adjoining country
The Chart below shows the percentage of Conflict Minerals Supplied from
DRC:
9
Overview of Conflict Minerals
Columbite-tantalite (coltan) refined into Tantalum (Ta) :
First conflict mineral – spiked by growth in cell phone industry
Used in :
Electronic components, including mobile telephones, computers, videogame consoles, digital cameras,
as alloy for making carbide tools and jet engine components.
Cassiterite refined into Tin (Sn) :
Primary funding source of rebel groups
Used in :
Alloys, tin plating and solders for joining pipes and electronic circuits
Wolframite refined into Tungsten (W) :
DRC is worlds 5th largest producer for this mineral.
Used in :
Metal wires, electrodes, and contacts in lighting, electronic, electrical, heating and welding applications
Gold (Au) :
Used in :
Making jewelry, due to its superior electric conductivity and corrosion resistance, is also used in
electronic, communications and aerospace equipment.
10
Complexity of Minerals Supply Chain
11
Complexity of Minerals Supply Chain
The number of sources for metals used in a given product can vary over the life
of a product. This is a simplistic view of a supply chain where material flows
downstream to the retailer. More entities typically exist from mine to retailer.
Upstream2 - Mineral supply
chain from Mine to Smelter
Downstream2 - Mineral supply chain from
Smelter to Retailer
Notes:
1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive
2Upstream and downstream as defined by the OECD guidance.
12
Complexity of Minerals Supply Chain
Conflict Minerals Due diligence mechanisms approach
MINE
In-Region Sourcing
SMELTER/REFINERY
Conflict Free Smelter Program
Upstream Due Diligence
Multi-Stakeholder collaboration
to verify DRC conflict-free
smelters
•Conflict Free Smelter (CFS)
assessment
•In-Region Sourcing program
ICGLR’s mineral tracking & certification
BGR’s certification & mineral
fingerprinting
OEMS
Due Diligence
Downstream Due Diligence
Companies can ensure CFS smelters
are used in their supply chain
Company Due Diligence:
•Establish Management System
•Conduct supply chain risk assessment
•Report results
Notes:
1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive
13
Leading Industry Initiatives
14
Leading Industry Initiatives
Responsible Supplier Chain Management
International multi-stakeholder efforts are converging to put an end to conflicts in
the DRC. Many in civil society, nongovernmental organizations (NGO’s),
governments and industry are calling for companies to respect human rights
and ensure they do not contribute to the conflict.
In December 2010, the international
‘Organization for Economic Co-Operation and
Development’ (OECD1), produced a document:
“Due Diligence Guidance for
Responsible Supply Chains of
Minerals from Conflict-Affected
and High-Risk Areas and the
Supplement on Tin, Tantalum
and Tungsten2”, through its
3working group on due
diligence in the mining and
minerals sector.
1OECD:
The purpose of the
guidance is to help
companies avoid fuelling,
facilitating or exacerbating
conflict through their
sourcing practices or
contributing or being
associated with serious
human rights abuses.
Organization for Economic Co-operation and Development (www.oecd.org);
2www.oecd.org/dataoecd/13/18/46068574.pdf;
3
www.oecd.org/daf/investment/mining
15
Leading Industry Initiatives
OECD Due Diligence Guidance for Responsible Supply Chains
Guidance : 5-Step Framework for Implementation
1. Establish
Strong
Management
Systems
Strong Company
Management
System:
•Adopt a company
policy for the supply
chain of minerals
originating from
conflict-affected and
high-risk areas.
•Structure internal
management to
support supply chain
due diligence
•Establish a system
of controls and
transparency over
the mineral supply
chain
•Strengthen
company
engagement with
suppliers
2. Identify &
Assess
Risks
Identify and assess
supply chain risks:
•Identify risks in
supply chain through
supplier analysis to
determine source of
3TG metals, down to
smelter and mining
region
•It is expected that
companies engage
with industry led
efforts leveraging
relationships in order
to identify
smelters/refiners in
supply chain and
assess due diligence
practices or identify
through industry
validation schemes.
•Assess risk of
adverse impacts in
light of supply chain
policy
3. Design &
Implement
Design and
implement strategy
to respond to risks:
•Report findings of
supply chain risk
assessment
•Adopt risk
management plan,
including risk
mitigation efforts such
as suspending trade
with certain suppliers.
•Monitor track
performance of risk
mitigation efforts
4. Conduct
Independent
Third-Party
Audit
Conduct audit:
•Conduct audit of
due diligence
practices
5. Monitor &
Report
Monitor and
Report Findings:
•Publish results of
supplier due
diligence in annual
report and on
corporate website
(end of first fiscal
year after date of
SEC final ruling)
•Consider also
expanding scope of
sustainability or
corporate social
responsibility report.
16
Leading Industry Initiatives
Electronics Industry Citizenship Coalition (EICC) and
Global eSustainability Initiative (GeSI)
The *EICC and *GeSI are committed to improving conditions in the electronics
supply chain, and mining activities that fuel conflict are unacceptable.
The EICC and GeSI joint working group aims to enable companies to source
conflict-free minerals through actions including:
- Implementing Conflict-Free Smelter and Due Diligence programs to verify
conflict-free minerals down the supply chain to 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.
*EICC: Electronics Industry Citizenship Coalition (www.eicc.info)
*GeSI: Global e-Sustainability Initiative (www.gesi.org)
17
Leading Industry Initiatives
EICC - GeSI commitment on conflict minerals
The EICC/GeSI extractives workgroup will provide updated information, tools
and resources as needed to the website: http://www.eicc.info/extractives.htm
18
Flextronics’ Conflict Minerals
Policy
19
Flextronics’ Conflict Minerals Policy
This is Flextronics Corporate Policy
supporting Electronic Industry
Citizenship Coalition (EICC)/Global eSustainability Initiative (GeSI)
Initiatives to avoid the usage of
conflict minerals mined from the DRC
and adjoining countries.
This Conflict Minerals policy is in line
with the Global Business Initiatives on
Human Rights, of which Flextronics is
a member, and the framework of the
United Nations Principles of Human
Rights encouraging governments and
businesses to respect, protect and
remedy human rights
Flextronics Conflict Minerals Policy is
developed and stored on the Supplier
Information Page. Below is the web link:
http://www.flextronics.com/supplier/supplierq
uality/Files/Conflict%20Minerals%20Policy_Re
v3.pdf
20
Flextronics’s Conflict Minerals Due
Diligence Procedure
21
Flextronics’s Conflict Minerals Due Diligence Procedure
• Flextronics is an active member of the
Electronics Industry Citizens Coalition (EICC)
supporting the Conflict Minerals Due Diligence
activities.
• Flextronics adopted the common EICC Conflict
Minerals Due Diligence Reporting Template
and Dashboard as a standard questionnaire
for conducting inquiries into Flextronics
supplier’s sources of metals.
• Flextronics’ maintain the transparency of supply
chain Conflict Minerals records in internal
database.
With this goal, Flextronics
expect suppliers to adhere
to the following:
• To source materials only from
environmentally and socially
responsible suppliers.
• To comply with the Dodd-Frank
regulation and provide all
necessary declarations.
• Must pass this requirement up
the supply chain and determine
the source of specified
minerals.
22
Flextronics’s Conflict Minerals Due Diligence Procedure
Flextronics’ Conflict Minerals Overall Process Flow
Request sent to
Supplier
Flextronics adopted
the common EICC
Conflict Minerals
Due Diligence
reporting tool
Documents attached
when request sent:
• Conflict Minerals
Reporting Template
• Supplier Letter
Supplier Working
On the Reporting
Template
Supplier are
required to:
• Understand the
Conflict Minerals
(3TG) information
from their lower tier
level suppliers
• Determine whether
their products or
components
contain 3TG
• Determine the
smelter or mine
origin
Conflict Minerals
Processing Team
Validate the
report
Supplier required to
return a signed
copy of reporting
template once they
had completed the
form.
Completed template
need to send for
review:
cminerals.support@fl
extronics.com
Store in the
Sharenet
All Suppliers’
completed form will
be stored in
Flextronics Conflict
Minerals Share net
database.
All Conflict Minerals
project related
document are able
to find in
Flextronics Intranet.
• Conflict Minerals
processing Team
will check and
review on the
template.
23
Explanation and Preparation of
Conflict Minerals Reporting
Template
24
Explanation and Preparation of
Conflict Minerals Reporting Template
This Conflict Minerals reporting template was created by the Electronic Industry
Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) as a
common means for the collection of sourcing information related to “Conflict Minerals”.
Flextronics has adopt this template as a Conflict Minerals due diligence procedure to
verify the responsible sourcing of materials and to support compliance to new legislation.
This template is consistent with EICC and GeSI’s related activities including the Conflict
Free Smelter (CFS) Program. The Conflict Free program details refer to
http://www.conflictfreesmelter.org
The instruction on how to complete the Conflict Minerals Reporting Template is
available at YouTube: http://youtu.be/Enyu_V5Kd1k
With this provided Conflict Minerals Reporting Template, supplier is require to complete
the following sections (Tabs):
a)
Company Information
- Specific information about the supplier being assessed
b)
Completing 6 Due Diligence Questions (Declaration Tab)
- These 6 questions define the usage, origination and sourcing identification for each of the metals.
c)
Completing Questions A-J (Declaration Tab)
- Questions A-J are designed to access your company’s DRC conflict-free minerals sourcing due diligence activities.
d)
Completing Smelter and Mine List Tab
- Name and location of the source of the ore/ or smelters from which the minerals was obtained.
25
Explanation and Preparation of
Conflict Minerals Reporting Template
Instructions Tab Screen
Before supplier begin to fill in the “Declaration” tab and “Smelter List” tab,
supplier is required to read through the “Instructions” Tab. The instruction will
help to have more understanding on how to complete the reporting template.
This common reporting template is supported
in multiple language for supplier preference.
26
Explanation and Preparation of
Conflict Minerals Reporting Template
Declaration Tab Screen
Three section that need to be fill out:
a) Company Information
b) Used of 3TG questionnaire
c) Company Level Conflict Minerals due diligence questionnaire
Language preference
selection box
• All Columns with (*) are mandatory field to complete
• Supplier are allowed to provide the information in English ONLY
27
Explanation and Preparation of
Conflict Minerals Reporting Template
a) Declaration Tab Screen – Company Information
Suppliers are required to fill out the company information.
a) Suppliers should enter company's
Legal Name. Do not use abbreviations.
b) For Declaration scope, we
encourage suppliers to fill in the
template by company level.
c) Suppliers are required to fill in the
address, representative title and
phone number although there is
no (*) mark.
28
Explanation and Preparation of
Conflict Minerals Reporting Template
b) Declaration Tab Screen – Used of 3TG questionnaire
All the 6 questions have to be fill out.
Note:
For question 1, if supplier select
the option as “NO” for all the 4
metals, subsequent questions
( 2 – 6) fields will changed to
black color indicating empty
field not required to be
answered.
Therefore the declaration is
completed for this section.
29
Explanation and Preparation of
Conflict Minerals Reporting Template
c) Declaration Tab Screen – Company level Conflict Minerals
due diligence questionnaire
All the 10 (A-J) questions have to be fill out. Declaration based on company level.
30
Explanation and Preparation of
Conflict Minerals Reporting Template
Smelter List Tab Screen
Suppliers are able to view the latest version of the
Conflict-Free Smelter (CFS) List published in EICC and
GeSI website by clicking on this link.
www.conflictfreesmelter.org/
When supplier declared any present of 3TG minerals, all the mandatory fields are
required to complete.
Supplier is required to provide the Metal, Smelter, Facility Location, Contact Name
and Email.
31
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 1
Supplier must provide the declaration in English.
The declaration is rejected if supplier provide the information in other language.
Rejected
Accepted
32
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 2
When supplier select declaration scope as “Product Level”, they must complete
the product list information.
Rejected
Accepted
33
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 3
All the mandatory fields MUST be completed.
The yellow rows indicated that mandatory information is missing.
Rejected
Accepted
34
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 4
If supplier declared any present of 3TG minerals, all the mandatory fields at
“Smelter List” tab are required to complete accordingly.
Supplier need to make sure they fill in the correct smelter information for the
metal used in their product.
Supplier declared the used of
Tin at the “Declaration” Tab
Example above shows the supplier declare only Tin at the “Declaration” tab.
Continue next page
35
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 4 – Validating (continue)
Rejected
Rejected
2. Smelter list declared
is not Tin smelter
1. The metal declared at “smelter list”
tab is not tally with metal declared
at declaration tab.
Accepted
1.
2.
The metal declared is tally with the
“Declaration” tab
Smelter list is declared correctly for the
particular metal
36
Explanation and Preparation of
Conflict Minerals Reporting Template
Example 5 – Validating
Template will be rejected if supplier filled smelter information in Chinese.
Template will be rejected if supplier provided invalid smelter information.
(Example: Broker, distributor, solder maker, plating company, agent and etc.)
Rejected
1.
2.
Supplier fill in the information
in Chinese.
Supplier fill in invalid smelter
information.
Example of broker/ distributor/ agent are declared wrongly as smelter:
1. Shanghai Gold exchange
2. LMBA
3. Kester
4. Indium Corporation
37
Glossary
38
Glossary
EICC® and GeSI Due Diligence Reporting Template
PROBLEM STATEMENT
August 2010: Downstream electronics industry suppliers reported survey
fatigue and requested a moratorium on due diligence surveys from their
customers until a universal reporting template was available
EICC & GeSI PHILOSOPHY
EICC and GeSI define a common industry approach to support the due
diligence requirements of the SEC
OBJECTIVE
EICC and GeSI develop a universal reporting template for downstream
suppliers that enables companies to work with their supply chains through a
common interface
39
Glossary
REPORTING TEMPLATE FUNCTIONALITY
•
•
Aligns with SEC due diligence requirements for downstream companies
Enables downstream suppliers to utilize one universal reporting template for
managing data requests, analysis, aggregation, and reporting to customers
using one universal reporting template in an XML-backed form
•
Contains instructions, definitions and an educational packet
•
•
Will be freely available for multi-industry use
EICC and GeSI maintain revision control
IMPLEMENTATION OF REPORTING TEMPLATE
•
March 2011: Piloted with 60+ electronics industry suppliers. 98% supported and
requested a reporting template to be completed one time per year for their customers.
•
•
April 2011: Finalize the reporting template based on the pilot feedback.
May – June 2011: Develop an XML-backed form and dashboard tool to provide data
aggregation and reporting. Translate the template into Chinese and Japanese.
•
•
August 2011: Publish the reporting template on EICC and GeSI websites.
Ongoing: Template revisions as needed (i.e. once SEC final rules are released).
40
Glossary
EICC and GeSI are spearheading development of a multi-stakeholder
assessment process to determine if smelters/refiners are sourcing conflict-free
minerals.
WHY?
Provide a mechanism that enables and encourages
responsible sourcing of tantalum, tin, gold, tungsten
•Addressing each metal separately, but concurrently,
SCHEDULE
RESULT
• Order of priority is (1) tantalum, (2) tin, (3) tungsten, (4) gold
•Tantalum assessments are underway; tin, tungsten, and gold
smelter assessments are planned to begin in 2011.
•A list of smelters/refiners who are compliant with the CFS
assessment protocol will be posted on a public website.
• Date to be determined
• Link: www.conflictfreesmelter.org
41
Glossary
EICC and GeSI Conflict Free Smelter Tools & Resources can be found in this
website: http://www.conflictfreesmelter.org/cfshome.htm
• Compliant Tantalum Smelter List and Due Diligence Tool are available.
• Compliant Smelter List for Tin, Tungsten and Gold are in developing progress.
42
Glossary
• General Items
• Name and location of passing smelter.
• Smelters’ conflict policy.
• Materials originating from Level 1 Countries
• Country of Origin
• Materials originating from Level 2 countries
• Country of origin
• Mine of origin or region of origin (for artisanal miners)
• All points of import and export along the supply chain
• For nine surrounding countries and Kenya
• For mine sources: amount of material (weight Ta) delivered to smelter
from each mine and the mine capacity
• For artisanal sources: amount of material (weight Ta) delivered to smelter and the country
capacity
• Materials originating from Level 3 countries
• Output from credible internationally recognized DRC conflict-free mineral traceability
scheme
43
Glossary
Level 1 countries:
• All countries excepting the Democratic Republic of Congo and Level 2 countries.
Level 2 countries:
• Algeria, Angola, Belgium, Benin, Botswana, Burkina Faso, Burundi, Cameroon,
Canary Islands, Cape Verde, Central African Republic, Ceuta, Chad, Comoros,
Côte d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon,
Gambia, Germany, Ghana, Guinea, Guinea-Bissau, Hong Kong, Japan, Kenya,
Lesotho, Liberia, Libya, Madagascar, Madeira, Malawi, Mali, Mauritania, Mauritius,
Mayotte, Melilla, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Republic
of the Congo, Reunion, Rwanda, Saint Helena, São Tomé and Príncipe, Senegal,
Seychelles, Sierra Leone, Singapore, Somalia, South Africa, Sudan, Swaziland,
Tanzania, Togo, Tunisia, Uganda, United Arab Emirates, United Kingdom, United
States of America, Western Sahara, Zambia, Zimbabwe.
Level 3 country:
• Democratic Republic of Congo
44
Glossary
SEC flowchart summary of the final rule
The SEC final rule provides a flowchart to summarize its application to issuers:
45
Thank You!
46