Taking the Conflict Out of Conflict Minerals

Transcription

1 Taking the Conflict Out of Conflict Minerals SCCE Upper Midwest Regional Conference April 26, 2013 Mike Loch Director, Supply Chain Sustainability Motorola Solutions, Inc. 1 Agenda Overview of Conflict Minerals U.S. Law Dodd Frank Act What Are Conflict Minerals SEC Three Step Process OECD Due Diligence Requirements Industry Approach Conflict Free Smelter Program Conflict Minerals Reporting Template 2 Overview of Conflict Minerals The Democratic Republic of the Congo (DRC) is complex with many factors combining to allow for continuing violence. One of those factors is the exploitation and trade of minerals. Mining is crucial to the DRC economy. There are operations in DRC where responsibly sourced minerals are being mined. However, other mines are controlled by militant groups: Serious human rights abuses, theft, extortion Violence over control and taxation of mineral resources Forced and child labor Limited development options Conservation impact, deforestation, etc. 3 1

2 U.S. Law July President Obama signs the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd- Frank ). Section 1502 requires companies to file disclosures and reports with the U.S. Securities and Exchange Commission (SEC) related to the use of tin, tantalum, tungsten and gold in their products. The SEC issued the final rule August 2012 implementing the provisions of Section The first reporting year began January 1, 2013 and the first report to the SEC is due May 31, What are Conflict Minerals? The Dodd-Frank Act defines 'Conflict minerals' as the following minerals as well as their derivatives: 1. Columbite-tantalite (Coltan) refined into tantalum (Ta) 2. Cassiterite refined into tin (Sn) 3. Wolframite refined into tungsten (W) 4. Gold (Au) Regardless of their origin Regardless of whether connected to armed groups Commonly referred to as: 3T s plus Gold or 3TG 5 SEC Rule Overview: Basic Three-Step Process 1. Determine applicability 2. Conduct reasonable country of origin inquiry 3. Exercise due diligence and potentially file an audited Conflict Minerals Report 2

3 Step 1: Applicability Any issuer that files reports with SEC under Exchange Act sections 13(a) or 15(d) Includes: U.S. Companies that issue stock Foreign private issuers that file Form-20F or 40F Regardless of size Excludes: Foreign private issuers of unsponsored ADRs AND Conflict minerals are necessary to the functionality or production of a product the issuer manufactures or contracts to manufacture Step 2: Reasonable Country of Origin Inquiry (RCOI) Designed to evaluate whether minerals in a company s supply chain originated from: Recycled /scrap sources; or Outside Covered Countries. Determines whether Step 3 due diligence is necessary Step 3: Due Diligence Currently, due diligence means using OECD Due Diligence Guidance. 1. Establish strong management systems 2. Identify supply risks 3. Implement strategy to address the risks 4. Independent audit of Smelters/Processors 5. Report File Form SD and submit audited Conflict Minerals Report to SEC 9 3

4 Step 3: Transition Period DRC conflict free undeterminable Available for a transitional period - 2 years for all issuers - 4 years for smaller reporting companies Will allow companies time to better develop and implement RCOI and due diligence procedures Once transitional period ends, these products will have to be described as not found to be DRC conflict free Must still file CMR, but no requirement to audit during transition period Industry Approach to Conflict-Free Sourcing MINE SMELTER/REFINERY OEMS (pinch point) Finished Product In-Region Schemes Conflict-Free Smelter Program (CFS) Company Assurance 11 In-Region Schemes The ICGLR is an 11 member organization consisting of the Countries of the Great Lakes region of Africa have implemented their Regional Certification Mechanism (RCM) itsci program is the first in-region mineral tracing initiative supporting locations in DRC and Rwanda The CTC is a program supported by the German government and certifies mines to defined performance standards. The Public-Private Alliance, sponsored by the U.S. State Department and USAID with private support from industry, is creating a process to trace and certified mineral supply chains in the Great Lakes Region Solutions for Hope program sources conflict-free tantalum from Katanga province of DRC Partnership for Social and Economic Sustainability program sources conflict-free tantalum from Katanga province of DRC Conflict Free Tin Initiative program sources conflict-free tin from the South Kivu province of DRC 4

5 Conflict-Free Smelter (CFS) Program A voluntary initiative with independent 3 rd party audits of smelter and refiner procurement and tolling activities to assess if the smelter or refiner demonstrates that all the minerals they processed originated from conflict-free sources. EICC and GeSI worked in collaboration with multiple stakeholders to develop the CFS program. Why: Provides a credible mechanism that enables and encourages responsible sourcing of tantalum, tin, tungsten and gold Schedule: Addressing each metal separately, but concurrently Results: A list of smelters and refiners who are compliant with the CFS assessment protocol will be posted on the CFS website. ** Companies make their own sourcing decisions. ** 13 CFS Audit: Mass Balance 100% Company Mass Balance - Includes all warehouses/inventory - Includes all facilities Ore / Concentrate Unfinished Products Intermediates Finished Products Recycled / Scrap Toll Customer Toll Supplier Conflict Free Policy Conflict Minerals Reporting Template What is the Conflict Minerals Reporting Template? - A tool that provides a common means to collect due diligence information related to the source of conflict minerals. - Companies may use of the Template as an element of their conflict minerals DD program to assist in verifying responsible sourcing. - Companies will be able to forward a completed Template to all of their customers that request this information. 15 5

6 Issue: Due to DF Act millions of people and their livelihoods have been threatened by the de facto embargo. Action: In July of 2011 the was launched as a pilot initiative to source conflict-free tantalum from the DRC to be used in AVX, Motorola Solutions products. Solution: MSI worked with a defined set of suppliers to create a closed-pipe supply line. PAGE 16 The project supports implementing Initiatives: ICGLR Regional Certification; Traceability program by itsci; Certification of mines by BGR Certified Trading Chain (CTC); Due Diligence guidance by the OECD and the UN Group of Experts; Conflict-Free Smelter (CFS) program; and Conflict-Free Reporting Template New business model leveraging vertical integration and community re-investment that creates an initial flow of tantalum that helps enable miners to work and conflict-free systems to be developed in the DRC. PAGE 17 Results and Participants Results Over 127 metric tonnes mined DRC Green Mine Site- MaiBaridi/Luba Targeted for first ICGLR Certificate Moved from Pilot to Credible, Sustainable and Expandable Program Participating Companies AVX Coopérative Des Artisanaux Miniers du Congo (CDMC) F&X Flextronics Foxconn Global Advanced Mining (GAM) HP Intel Mining Minerals Resources (MMR) Motorola Mobility Motorola Solutions Nokia Research In Motion (RIM) Robert Bosch GmbH PAGE 18 6

7 Conflict Free Tin Initiative (CFTI) Enabling responsible sourcing from the DRC CFTI is a public-private initiative to source conflict free tin from South Kivu, eastern Congo Participants: Dutch Ministry, Industry, NGOs Goal: initiating a tightly controlled, verifiable conflict free tin supply chain from mine to end-users Success of this initiative will lead to: - More legitimate mining - Increased employment for artisanal miners - Economic development and stability - Greater security of supply for industry Timeline: - Oct 2012: first mineral bags left the mine site - Dec 2012: minerals exported to Malaysia Smelting Corporation - Mid 2013: first products with CFTI tin on the market Thank you! Questions? PAGE 20 7