14th Conflict-Free Sourcing Initiative Workshop, Day 2
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The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Conflict Free Minerals
Supply Chain Workshop 14Day 2: September 30, 2014
Morning Breakout Sessions on Supplier Data
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Continuous
Improvement in
Supply Chain
Management
Systems and
AccountabilityCFSI tools, developing strong company management systems, ensuring reliable and quality supplier data, and continuous improvement in supply chain accountability
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Leah Butler
CFSI Audit Program Manager
September 30, 2014
CFSI Tools and Data
AGENDA
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 5
Program Overview
Beginning to End Process
Tools and Data
2015 Improvements
Upstream Companies
Smelters /Refiners
Downstream Companies
Conflict Free Smelter
Program
Raw Materials
Finished Products
ACHIEVING A CONFLICT-FREE SUPPLY CHAIN
6
LEGITIMATE?
Research Outreach Validate Report Revise
PROCESS OVERVIEW
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 7
SMELTER?
ACTIVE?
CONFLICT-FREE?
CFSI Compliant!
TOOLS
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 8
Audit Program
Smelter Information Exchange
Smelter Identification Questionnaire
Conflict Minerals Reporting Template (CMRT)
Company research Audit reports Cross-recognized program input:
LBMA Good Delivery and RJC Chain of Custody
External smelter lists: DOC, SGE, ICDX, etc.
Audit Program
Smelter Information
Exchange
Smelter Identification Questionnaire
Conflict Minerals Reporting Template (CMRT)
DATA INPUTS
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 9
Audit Program
Smelter Information
Exchange
Smelter Identification Questionnaire
Conflict Minerals Reporting Template (CMRT)
DATA OUTPUTS
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 10
RCOI data Active and Compliant Lists Standard Smelter List Smelter records Internal management systems and
strategic planning Smelter correspondence Member reports
MASTER SMELTER DATABASE
SMELTER RECORD
Website
RCOI
Standard smelter list
Member reports
Automated messages
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 11
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 12
Smelter
Research
Confirmation
Risk Analysis
Outreach
Program inscription
Audit scheduling
Compliance determinations
Corrective Actions
Documentation and Reporting
Re-Audits
END-TO-END SOLUTION
BENEFITS
• Provide platform for collaborative, efficient, and effective research and outreach
• Hold all documentation around legitimacy, risk assignment, and audit cycle frequency
• Enable a faster and smoother communication stream with as smelters move through the program
• Support the Audit Review Committee /Corrective Action tracking
• Track smelters’ information over multiple years
• Generate the volume and quality of reports that various internal and external audiences require from CFSI
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 13
WE HAVE A LOT TO LOOK FORWARD TO…
Leah Butler
CFSI Audit Program Manager
lbutler@eiccoalition.org
Tara Holeman
CFSI Audit Program Director
tholeman@eiccoalition.org
THANK YOU!The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 14
CFSI Data Management Member Company Case Study
Meredith Haamen, Environmental Regulatory Spec, Sr. Eric Lloyd, Systems Analyst, Sr. Staff
16
About
1Smelter Landscape
2CFSI
Process
3Case Study
4Moving Forward
5
Agenda
17
Qualcomm engaged in Conflict MineralsSupporting best practices since 2010
2014
iTSCiMember
on-the-ground sourcing initiatives
RSNResponsible Sourcing Network
Active participant
EICCFull member
Board position
EICC conference
EICCActive member
EICC conference
CFSIMultiple on-site smelter visits
CFSIWeekly sub-work groups
2010
PPAfor responsible sourcing
Supporter
2011 2012 2013
BSR Human Rights working group
PACT activities
18
Smelter LandscapeData Overload
IPC 1755
CFSI Website
Country of Origin
EICC SharePoint
Active Smelters
Conflict Free Smelters
Standard Smelters
TI-CMC
LBMA, RJC, WGC
USGS, GAO, OECD
Independent Research
Dept of Commerce Smelter List
3rd Party Vendors
iTSCi
Responsible Sourcing Network
Enough Project
Free the Slaves
Fair Phone
Solutions for Hope
International Trade Administration EICC
Dubai Multi Commodities Centre
19
Company
Outreach to
suppliers to
gather info
CFSI
New smelter
identification
process
CFSI
Outreach to
smelter to
seek
participation
CFSI + Public
Smelter vetted as legitimate
Using CFSI Process and Tools
Conflict minerals reporting template
XLSX
Smelter info questionnaire
XLSX
SET communications tracker
XLSX
Standard smelter list
XLSX
Conflict free smelter list
HTML
+
CFSI + Public
Smelter
identified as
conflict free +
RCOI
Smelter Management
A lot of information, from many sources, in different forms—not connected to the central entity, the smelter
20
Drivers, business requirements− Track outgoing and incoming supplier
communication− Traceable records of smelter trending and updates− Check and improve incoming data quality− Automated record of CMRTs approvals
Challenges, data considerations− Difficult to manage data with multiple sources
(Website; SharePoint)− Manual work to connected multiple data formats
(.xlsx; PDF; HTML)− Data at risk of differing depending on source
Solution, connected system− Custom built management system to meet
business requirements− Integrated all existing CFSI tools and data sources
(CFSI, QC, Other)− Report building for historical and current reporting
Need for Qualcomm Management SystemCFSI Tool Integration
Single source
combining all data
Reporting capabilities
Error checking
System compatible
Ease of use
Highlights
21
Managemaster smelter data
View CMRT file history
Review CMRT smelter lists
View CMRT declarations
CMRT
Date, status, BU, Year / Cycle
Check smelter errors
Automatic& manual CMRT upload
CMRT approval workflow
Qualcomm’s Management SystemCMRT & Smelter Management
22
CMRT Smelter ListIdentifies valid smelters
Qualcomm’s Management System OutputSmelter Error Review
23
CMRT Smelter ListReview and approve / reject error details
Qualcomm’s Management System OutputSmelter Error Review
24
CMRT Smelter ListUpload and error stats
Qualcomm’s Management System OutputSmelter Error Review
25
Lessons Learned
Moving forwardCollaboration, consolidation
connected, central data
source
Master
Smelter
Data
1
CFSI
A solid foundation
Consensus with industry partners
Dashboard & reporting
tools
process
Data traceability
Secure data download
3rd party system integration
26
For more information on Qualcomm, visit us at: www.qualcomm.com & www.qualcomm.com/blog
Qualcomm is a trademark of Qualcomm Incorporated, registered in the United States and other countries. Other products and brand names may be trademarks or registered trademarks of their respective owners
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AIAG Smelter Engagement Team
Cross-Industry CollaborationContinuous Improvement in Supply Chain
Management Systems and Accountability
Agenda
• AIAG Overview
• Due Diligence Framework
• Smelter or Refiner (SOR) Engagement Process
• SOR Engagement Teams
• Measuring Success
• Next Steps
28
Globally recognized trade association founded in 1982
• Unique open/neutral forum to collaborate on industry issues
• OEM’s, Suppliers of all sizes, Service Providers, Government &
Academia
• 1,000+ Member companies & growing
• 35+ full-time staff
• Sr. Purchasing Executives ‘on loan’ from Chrysler, Ford and
GM
• Over 900 Industry ‘volunteers’ providing subject matter
expertise at any point in time
• Over 60 active projects and committees
AIAG: at-a-glance
29
AIAG Board Companies
Caterpillar
Chrysler
Dana
Delphi
Denso
Eaton
Federal Mogul
Ford
Freudenberg-NOK
General Motors
Honda
IBM
Infor
JCI
Magna
Nissan
Robert Bosch LLC
Specialty Products
Toyota
TRW Automotive
30
Establish
Strong
Company
Management
Systems
Identify And
Assess Risk
In The Supply
Chain
Design And
Implement A
Strategy To
Respond To
Identified
Risks
Carry Out
Independent
Third-party
Audit Of
Smelter or
Refiner (SOR)
Due Diligence
Report Out On
Supply Chain
Due Diligence
Due Diligence Framework
Prescribes Role of Filing Companies
Organization for Economic Cooperation and Development (OECD)
Due Diligence Guidance for Responsible Supply Chains of Minerals
From Conflict-Affected High-Risk Areas
1 2 3 4 5
SEC Final Rule for Conflict Minerals
3TG (Tin, Tungsten, Tantalum, Gold)
31
SOR Validation Process Flow
CFSI Members
Gain access to
CFSI Smelter Data
Participate in
various work
groups
Pay Membership
Fee
Smelter
Identification
Team
Experts make
final
determination of
true smelters
Pre-Audit Visit
Team
Explain CFSI
program, audit
expectations
and benefits
e.g. Apple,
Intel: > 35
international
visits/year
3rd Party
Auditor
Conduct site
audit, create
audit report
for review by
CFSI Audit
Review
Committee
(ARC)
CFSI - 25 Companies
AIAG - 10 Companies
~ 5-8
Companies
3rd Party Audit Post-Audit212 Companies
7 Industries
CFSI Staff &~ 5
Companies
Smelter
Engagement Team
(SET)
Research –
determine if
companies are true
smelters
Outreach –
mail/call/email true
smelters to
encourage audit
participation
Follow-up
Team
Arrange
recertification
audits
32
SOR Engagement – Research and
Outreach
• Two main areas of focus:
RESEARCH OUTREACH
• Letters,
calls,
visits
• Online research,
SOR list reviews
Summary of SORs based on CFSI Data (as of August 2014)
Strive for all green
33
AIAG Smelter Engagement Team
AIAG SET Goals:
• 5 SORs/week Research
• 1 SOR/week Outreach
In one year…
• 2,000 SORs validated
• 40 SORs contacted
TEN
COMPANIES
34
Metrics
SOR Data
Alleged SORs
Known SORs
Compliant or ActiveSORs
145
91
80
25
50
75
100
125
150
Weeks 1 - 3
AIAG SET Research Metrics
Alleged SORsAssigned forResearch
Alleged SORsDispositioned
Number ChangedDispositions
AIAG SET Contacted 22 SORsStrive for all green
35
Vision and Next Steps
• Complete integration of AIAG SET into CFSI SET
• Pre-Audit SOR Visits
• Asia Pacific Resource Engagement
36
Questions?
Thank you for your participation today.
For questions contact Alessandra Carreon (acarreo2@ford.com) or
Tanya Bolden (cr@aiag.org)
37
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Options for
Supply Chain
Data
Management
Overview of supply chain data management software and services
www.sourceintelligence.com
Conflict Minerals:
Supply Chain
Data Management
1. Internal Tool and Management
2. Third-party System
3. Do Nothing
Options for Supply Chain Data
GO IT ALONE
Internal Tool and Management
The Good• Suppliers know you
• You know your suppliers
• No middleman between suppliers and you
• Complete control
The Bad• Tracking supplier responses
• Review and follow up
• Analysis
• Disparate data centers
The Ugly• Departmental hot potato – passing the buck
OUTSOURCE IT
Third Party System
The Good• Cost
• Additional (wo)man power
• Data aggregation and analysis
• Due diligence efforts
The Bad• Supplier distrust
• IP concerns
• Confusion over software needs
The Ugly• Herding the departmental cats
Do Nothing
Every successful program will need. . .
What Needs to be Done
• Good data – where it all starts
• Stakeholder buy-in
• Regulatory understanding
• Supplier engagement, not just management
• Data management expertise
• CMRT issue identification & assessment
• Smelter sourcing practices and locations
Supplier has
smelter listed
for unused
metal
No known
smelter listed
for used metal
Indication of
covered country
sourcing
No known DRC
sourcing
smelter listed
Supplier has
incomplete
information
Unknown
smelters exist in
supply chain
Supplier has not
provided all
available info
Non-recyclers
provided as
recyclers
Platform: Supplier Side
Make it easy, give options
Platform: Supplier Side
Make sure its up to date
Platform: Supplier Side
Start Validation Early
Platform: Customer Side
Get clear, concise analysis
Questions?
© 2013 MetricStream, Inc. All Rights Reserved.
MetricStream Conflict Minerals Solution
© 2013 MetricStream, Inc. All Rights Reserved.
Supplier Governance – A Changing Landscape
• Expanding role of suppliers
• Lack of visibility across multi-tier supply
chains
• Stringent and growing compliance
requirements
o FDA, RoHS, GPSD, CPSIA, FAA,
Conflict Minerals reporting, EU Toy
Directive, EPA,REACH, California
Proposition 65, FPLA, Trade
Compliance requirements etc.
• Multiple assurance functions in an
organization interacting with supplier
information
• Need to manage customer and
regulator inquiries (mapping
customers/suppliers and products)
Organizations need to ensure compliance
across the supply chain
International Laws
National Laws
Regional Laws
ConsumersSocial and
EnvironmentRegulators
Risk
Assessment
Supply Chain
Audits
Compliance
Monitoring
Organization
Quality Policies Remediation
© 2013 MetricStream, Inc. All Rights Reserved.
Sustainable Supplier Governance with MetricStream
© 2013 MetricStream, Inc. All Rights Reserved.
Supplier
Social
Compliance
Consolidated Supplier Assessment Report
• Effective Reporting and Automated Dashboard
• – Overall Supplier Compliance Dashboards
• Regulatory Reporting
Federal and State Level Compliance Assessment
REACH & RoHS
Compliance Assessment
Conflict
Minerals
Compliance
Survey
Streamline Supplier Assessments
• Simplify assessment management
through reusable survey templates and
formats
• Streamline and standardize the supplier
assessment process across the global
enterprise
• Integrate all supplier assessments,
findings, and issues in a common
framework for complete transparency
and accountability
• Strength survey coordination by
providing a single point of reference to
communicate with suppliers
• Survey data analysis, trending, and
correlation with past data for effective
management consumption Effective Reporting and Automated
Dashboard
– Overall Supplier Compliance
Dashboards
- Regulatory Reporting
© 2013 MetricStream, Inc. All Rights Reserved.
Streamline Supplier Assessment Results
Manage
Supplier
Compliance
for multiple
regulations
© 2013 MetricStream, Inc. All Rights Reserved.
Derive Risk Intelligence from Supply Chain Information
Supply Chain
GRC
Processes
Selection & On-
Boarding
Supplier Risk
Intelligence
Policy Surveys
Audits Risk Assessments
Sub-Contracting
Control Assessments
Social Compliance
Issue Management
Heat MapsRisk MetricsKRIs, KPIs
Internal &
External Data
External FeedsSupply Chain
Solutions
Sourcing &
Procurement
Solutions
Spend Management
Solutions
© 2013 MetricStream, Inc. All Rights Reserved.
Adopt an Integrated Solution Approach for Conflict Minerals
• Manage Supplier, Product / Component, Smelter information and mapping
• Pre-Built Industry Standard Survey Templates (EICC)
• Schedule Conflict Minerals Surveys
– Suppliers Org Level OR Part level
• Survey Execution, Response Review and Approval
• Issue & Remediation
• Analysis, Reports & Dashboards
• Source and Chain of Custody Due-Diligence, Audit Mgt, Policy Mgt *
Conflict Minerals Software Conflict Minerals Services
• Planning and System Implementation
• Survey Distribution & Follow-up
• Collection of Supplier Responses
• Automate and to manage the entire Customer Inquiry and Response cycle *
• Notifications and Escalations
• Training – CM Program managers, Suppliers
• Technical support for suppliers (FAQs, Online Support/Phone Support)
• Execution of Due-diligence procedures *
* As Required
© 2013 MetricStream, Inc. All Rights Reserved.
Easing Year 2 Conflict Minerals Compliance
Simplified supplier surveys management
• Data Upload Templates to Enhance Adoption
• Adapters to pull information from database
• Pre-built EICC v3.0x Questionnaire
• Services to manage surveys
Easy Smelter Information Tracking
• Periodic Smelter data Refresh as released by CFSI
Effective Reporting• Extensive database of pre-defined reports and dashboards
• User based filtering of reports for a specific reporting period
Improve Data Quality • Validations for Spreadsheet Response
Efficient Tracking of Supplier Response
• “Red flag” supplier responses
Cumbersome Data Gathering
Inaccessible Supplier Base
Mismanaged responses from
suppliersPoor Data quality
Inefficient StrategyLack of internal
resources
Key Issues
Faced
MetricStream
Capabilities
© 2013 MetricStream, Inc. All Rights Reserved.
• Built in latest version of
EICC Templates
• Easily modify the
templates
• Assign risk scoring
criteria for questions
• Supplier communication
• Schedule annually as
well as ad-hoc for new
suppliers with defined
due-dates for surveys
• Track Survey Results
• Review & Approve
surveys
© 2013 MetricStream, Inc. All Rights Reserved.
Vendor Risk Summary Report with Risk
Scoring/Rating and Trending across
suppliers/products, regions, locations, tier,
dates.
© 2013 MetricStream, Inc. All Rights Reserved.
Track Product Component Conflict List
Drill down to the details
of product component,
supplier and smelter
information
© 2013 MetricStream, Inc. All Rights Reserved.
Customer Adoption of MetricStream Platform
Merchandise division of Multi-national Mass media & Entertainment Company• Supplier Audit Management, Monitor Licensees and Vendors to ensure review of the CAP
with the Facility• Implementation of a corrective action plan and prompt remedy to any compliance
violations identified in the Audit• Vendor/Licensee qualification, annual re-qualification, contract management, maintain
registration information and third party audits
One of the Largest Computer hardware and consumer electronics company• Conflict Minerals Compliance Solution for 100,000 suppliers• Supplier, Product , Social Compliance Assessments and Audits for supplier base• Corporate Social Responsibility & Sustainability Performance Management
Leading retailer and distributor of construction and maintenance products• More than 50,000 suppliers• Vendor Information Management, on-boarding, evaluation, RFQ, auditing, selection, Conflict Minerals Compliance Management • Central repository for supplier governance, performance management
Specialty retail and wholesaler of outdoor equipment• End-to-End solution including conflict minerals compliance management software and
synergistic supplier management services • Development and implementation of conflict minerals compliance strategy , supplier
surveys and support through online help and training services
© 2013 MetricStream, Inc. All Rights Reserved.
• Over 1,500 employees • Over 400 enterprise customers• Headquarters in Palo Alto, CA with offices worldwide
About MetricStream
Integrated Governance, Risk and Compliance (GRC) and Quality for Better Business Performance and Risk IntelligenceVision
Solutions and Services
• Supplier Governance• Conflict Minerals • Compliance Management• Audit Management • Compliance Management
Partners
Differentiators
• Combined software and content - pre-packaged EICC GESI approved smelters information
• Business led implementations, minimizes dependence on IT• Breadth of Solutions – Single Vendor for all GRC needs• Cross-industry Best Practices and Domain Knowledge• ComplianceOnline.com and GRCIntelligence.com
Organization
• Third Party Risk Management• IT-GRC• EHS & Sustainability• Policy & Document Management• Content and Training
Thank You
Keri Dawson
VP Industry Solutions and Advisory Services
MetricStream
+1 480 241 1815
kdawson@metricstream.com
SupplierSoft Confidential 66
6767
About SupplierSoft
Platform for all Supplier Interactions
“Best Conflict Minerals System”
Top 10 Vendors to Watch
Salesforce.com Innovation Showcase
Conflict Minerals Challenges
68
Suppliers In Scope
Right Contact
Who to Ask CMRT?
69
How to ask for CMRT?
Conflict Minerals Challenges
Conflict Minerals Challenges
70
What to do with CMRT?
Conflict Minerals Challenges
71
What to do with Smelters?
Do I have 3000 Smelters?
Are they a smelter?
Where do they source from?
High risk smelter?
Conflict Minerals Challenges
72
What Metrics to Track?
Slice and dice your data
Conflict Minerals Challenges
73
Audit trail?
Across Email Boxes
Across File Folders
Conflict Minerals Challenges
74
Outsource Smelter DD cheaply to CFSI!
Option to In-House?
Software best-in-class?
Supplier Management Challenges
75
Dear Supplier,
Can you fill this out too?
RoHS/REACH/CSR/Quality…
Relationship Management Platform
408-690-8575
76
balu.sharma@suppliersoft.com
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Day 2: September 30, 2014
Morning Breakout Sessions on Progress and Developments in the Great Lakes Region, Parts 1 and 2
Conflict Free Minerals
Supply Chain Workshop 14
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Progress and
Developments
in the Great
Lakes Region,
part 1Impacts in the Great Lakes region resulting from first year of SEC reporting, recent developments, and forecast of milestones and challenges in the coming year
Progress and Developments in the Great
Lakes Region
Pact on Security, Stability and Development (Nairobi, 15 December 2006
Protocol against the Illegal Exploitation of Natural Resources
Regional Initiative on Natural Resources (Lusaka, 15 December 2010)
Six tools
The Six Tools
Regional Certification Mechanism
2. Regional Mineral Tracking via an ICGLR database
3. Third Party Audits
4. Independent Mineral Chain
Auditor
1. ICGLR Mineral Tracking and Certification Scheme:i. Mine Site Inspection and Validation
ii. Chain of Custody Tracking System
iii. Export Mineral Certification
2. Regional Mineral Tracking via an ICGLR database
3 categories of data: Mine site data Chain of custody (traceability) data Mineral exporters data
Solely dependent on national databases ICGLR’s role: constantly update the status of Mine sites and
exporters as mine site inspection results and third party audit and mineral chain auditor reports are received
Monthly (if not possible, quarterly) data transmission by member states
AFP: a combination of analytical techniques allowing the identification of source-characteristic geochemical, mineralogical, and geo-chronological features of mineral concentrates
3. Third Party Audits
Managed by the Tripartite Audit Committee of ICGLR 3 major roles of the ICGLR Audit Committee:
Accreditation of third party auditors Review of third party audit reports Setting up or review of third party audit standards and procedures
Third party audits focus on mineral exporters running from the exporter all the way back up the mineral chain to the mine site
Third party audits are valid for one year maximum; Recent developments
4. Independent Mineral Chain Auditor (IMCA)
The IMCA plays a role of an ombudsman and “special investigator” within the RCM scheme.
The role of the IMCA: Evaluate member state chain of custody systems;
Conduct independent investigations;
Undertake ongoing risk assessments
Will make information (through the ICGLR secretariat) contained in reports fully accessible via website (except for information which is likely to put informants at risk);
Recent developments
Exposé :Du secteur minier criminalisé au secteur minier
porteur de croissance et moteur du développement durable à l’Est de la RDC : état
des lieux, défis et perspectives.
Par Joseph IKOLI YOMBO, Directeur de Cabinet Adjoint du Ministre des
Mines/RDCSan Francisco/USA, les 29 et 30 septembre
2014.
Mesdames,Messieurs,
Du haut de cette tribune, je remercie les organisateurs pour m’avoir invité et accepté que je prenne la parole, au nom du Ministère des Mines de la RDC.
La délégation que je conduis est composée du Directeur Général Adjoint du CEEC et Coordonnateur de la Commission Nationale de Lutte contre la Fraude Minière, Monsieur Pascal NYEMBO MUYUMBA, des experts du CEEC ainsi que des partenaires techniques et financiers, et des membres de la Société civile qui nous aident dans l’établissement des chaînes d’approvisionnement en minerais libres de conflits.
Mon exposé a pour thème, je cite : « Du secteur minier criminalisé au secteur minier porteur de croissance et moteur du développement durable à l’Est de la RDC : état des lieux, défis et perspectives » et s’articule autour de trois points, à savoir :
• Contexte et justification ;• Les efforts significatifs enregistrés pour établir des
chaines d’approvisionnements responsables des minerais ;
• Des actions de lutte contre la criminalité dans le secteur minier de l’Est de la RDC; et
• Perspectives et conclusion.
CONTEXTE ET JUSTIFICATIONIl n’est un secret pour personne que les provinces de l’Est de la RDC, riches en minerais des 3T et de l’or ont connu, durant plus de deux décennies, une situation d’insécurité généralisée due aux (1) guerres interethniques, (2) guerres d’agression et d’occupation dictées par le souci d’exploiter illégalement des ressources naturelles de la RDC par des groupes armées non étatiques tant nationaux qu’étrangers avec comme conséquence la commission des actes criminels notamment les viols des femmes, les violences sexuelles, le déplacement massif des populations, les violations des droits humains, les exactions de tout genre, les meurtres et les assassinats, etc. Cette situation, faudrait-il le rappeler, a eu des conséquences néfastes dans le secteur des Mines et dans la vie générale des populations vivant dans ces zones.
A ce sujet, s’agissant particulièrement du secteur minier, les experts l’avaient qualifié, « d’un secteur criminalisé et les minerais extraits et commercialisés en provenance de cette zone », comme étant des « minerais de conflit ou de sang », d’où l’embargo décrété de facto par les fonderies et les consommateurs finaux des minerais des filières aurifère et stannifère. Ces minerais n’avaient donc plus accès sur le marché international. Il fallait, pour la RDC, relever ce défi pour permettre l’exportation et l’acceptation de ces minerais sur le marché international.• Les efforts ont été entrepris par le Gouvernement de la
RDC et ses partenaires pour décriminaliser le secteur minier de l’Est de notre pays
Quels sont ces efforts ?
II. LES EFFORTS SIGNIFICATIFS ENREGISTRESFace aux exigences de la loi Dodd-Frank et à celles des fonderies et des consommateurs finaux que vous êtes, des actions ci-après ont été entreprises depuis 2011.
Il s’agit de :
2.1 La mise en œuvre d’un processus de qualification et de validation des sites miniers des filières stannifères et aurifères.
A date du 22/09/2014, 125 sites miniers sont certifiés par voie d’Arrêté du Ministre des Mines et répartis comme suit :• 91 sites miniers qualifiés et validés « vert » ;• 16 sites miniers qualifiés et validés « jaune » ;• 16 sites miniers qualifiés et validés « Rouges ».
Ces chiffres pourront être remis à la hausse dans la mesure où au cours de ce mois de septembre, deux missions de qualification et de validation des sites miniers viennent de se réaliser dans les provinces du Katanga et du Sud-Kivu. A ce sujet, 10 sites miniers ont été qualifiés au Katanga et huit sites miniers au Sud-Kivu.
Ce processus se poursuivra avec le concours de nos partenaires techniques et financiers. A cet effet, un projet d’Arrêté Ministériel de certification a été soumis à la signature du Ministre des Mines.
2.2 La mise en place d’un système de traçabilité « ITSCI » de l’ITRI
Ce système couvre aujourd’hui 77 sites miniers qualifiés « vert » pour les 3Ts à travers quatre provinces (Katanga, Maniema, Nord-Kivu et au Sud-Kivu).Toutefois, 228 sites miniers sont déjà dans le système ITSCI et répondent aux critères exigés par l’OCDE et la CIRGL. Mais hélas, le système ITSCI ne couvre pas tous les sites miniers. Il faudrait donc des efforts supplémentaires.
2.3 La mise en œuvre du processus de certification des minerais et des sites miniers
1) Depuis le 20 janvier 2014, la RDC a mis en circulation son certificat CIRGL en vue de répondre aux exigences du Mécanisme Régional de certification de la CIRGL. Depuis cette date, le CEEC a émis jusqu’à la date du 16/09/2014 924 certificats CIRGL/RDC
Dans ce registre, il y a lieu de signaler que plusieurs missions d’audits de certification des sites miniers ont été effectuées par les experts du Groupe de certification BGR et les auditeurs indépendants.
2.4 L’appropriation des directives du Guide de l’OCDE sur le devoir de diligence
Il a été rendu obligatoire l’exercice du devoir de diligence de l’OCDE et de l’ONU par tous les Acteurs du secteur minier des 3T et de l’or, suivant une Note-circulaire du Ministre des Mines.A cet effet, je vous informe que le Ministre des Mines a signé une feuille de route pour mettre en œuvre le Guide de l’OCDE sur le devoir de diligence avec le Secrétariat de l’OCDE depuis le mois de Mars 2014.Dans le cadre de l’exécution de cette feuille de route, les ateliers de formation sont organisés avec le concours de ce Secrétariat pour renforcer l’appropriation de ce Guide par tous les Acteurs de la RDC.
C’est ici l’occasion d’adresser un appel solennel à vous tous ici présents de répondre à l’invitation vous adressée par les Secrétariats de l’OCDE, de la CIRGL et de la Coordination du Groupe d’Experts de l’ONU sur la RDC de prendre part aux travaux du 8ème Forum CIRGL –OCDE –GE/NU qui se tiendra à Kinshasa, capitale de la République Démocratique du Congo, du 03 au 05 novembre 2014.
Je profite de cette occasion pour vous informer qu’à la fin de cette année, toutes les entreprises minières et les Services publics seront instruits de transmettre un rapport d’exercice du devoir de diligence tel que l’exigent le Guide de l’OCDE et règles édictées par la SEC.
La RDC sera également intéressée de suivre les rapports élaborés par les fonderies et les entreprises des secteurs électroniques, automobiles et aéronautiques conformément aux directives de la Security Exchange Commission des USA.
Tels sont quelques efforts qui nous ont permis d’établir des chaînes d’approvisionnement responsables en minerais libres de conflit.
III. DES ACTIONS DE LUTTE CONTRE LA CRIMINALITE DANS LE SECTEUR MINIER DE L’EST DE LA RDC
La criminalité dans le secteur minier a été et demeure l’œuvre des groupes armés non étatiques et malheureusement de quelques éléments incontrôlés des FARDC et de la PNC.
A cet effet, sous le leadership du Président de la République avec le concours du Gouvernement de la République sous la direction de son Excellence Monsieur le Premier Ministre, plusieurs mesures et/ou actions ont été menées:
1. La restauration de la paix : Mettre fin aux conflits récurrents à l’Est de la RDC
Les FARDC, avec le concours de la Brigade de la MONUSCO, ont anéanti le M23, le groupe armé non étatique le plus important, le M23 et continuent à traquer les autres forces négatives afin de ramener la paix dans les provinces de l’Est. La paix, est le facteur le plus important pour mettre fin à la criminalité dans le secteur minier.
2. La restauration de la crédibilité de l’Armée Nationale• La réforme des FARDC, de la Police Nationale congolaise et des
Services de Sécurité a été amorcée : 29 ordonnances ont été promulguées par Son Excellence Monsieur le Président de la République pour matérialiser cette réforme afin de rendre notre Armée plus performante, plus crédible et respectueuse des droits humains.
• Un code de bonne conduite est en train d’être élaboré pour réguler le comportement des troupes en responsabilisant les commandants des Unités dans la lutte contre les viols et les violences sexuelles, ainsi que dans le respect des droits humains par la proportion de signature des Actes d’engagement.
• Les militaires ayant été reconnus coupables des actes criminels ont été condamnés dans les provinces du Nord-Kivu et du Sud-Kivu.
• Pour renforcer le suivi à son niveau, Son Excellence Monsieur le Président de la République a nommé, au titre de Représentante personnelle chargée de lutte contre les violences sexuelles et le recrutement d’enfant –soldat.
• Il a été rappelé aux Autorités politico-administrative, militaires et de sécurité de ne plus s’immiscer dans les activités minières par lettre datée du 16 juillet 2014 de Son Excellence Monsieur le Premier Ministre, Chef du Gouvernement des Mines. Celle-ci a été répercutée par lettre du Vice Premier Ministre, Ministre de la Défense Nationale aux FARDC et à la Police Nationale Congolaise, ainsi qu’aux services de sécurité.
• plusieurs sites miniers ont été démilitarisés ;
• Le processus d’éloignement des unités combattantes des FARDC autour des sites miniers libérés, ainsi que leur remplacement par les éléments de la Police des Mines ;
• La formation des éléments des FARDC et de la Police Nationale aux exigences du Guide de l’OCDE sur le devoir de diligence, particulièrement celles contenues dans l’annexe II du Guide ces mesures non exhaustives que nous venons d’énumérer ont permis de passer d’un secteur minier criminalisé au secteur minier, porteur de croissance et moteur de développement durable.
IV. SECTEUR MINIER, PORTEUR DE CROISSANCE ET MOTEUR DU DEVELOPPEMENT DURABLE
Avec la paix retrouvée dans l’Est de la RDC, le secteur minier reprend son rôle de moteur du développement durable ;
• La production et les exportations minières ont repris dans les provinces du Maniema, du Katanga, du Nord-Kivu et du Sud-Kivu, et donc les caisses du Trésor Public et des provinces sont renflouées avec comme conséquence la création d’emplois, la distribution des richesses et la réalisation des projets de développement.
• Aujourd’hui, tous les opérateurs miniers ont accepté de contribuer à un « basket fund » pour le développement durable de ces provinces de l’Est de la RDC. C’est un fond de développement.
Le Ministère des Mines souhaite que les fonderies et les consommateurs finaux utilisateurs des minerais puissent contribuer également à la constitution de « ce fonds » pour financer des projets communautaires en vue d’améliorer les conditions des populations affectées par les projets miniers
Dans ce cadre, le Ministère des Mines lance un appel aux fonderies et à tous les utilisateurs finaux de participer au financement de l’initiative « CFTI » au Sud-Kivu et « Solution for Hope » au Katanga en vue de leur extension dans les autres provinces. Ces initiatives doivent continuer et s’étendre. D’autres initiatives sont les bienvenus.
V. PERSPECTIVES ET CONCLUSION
Le Ministère des Mines est déterminé à augmenter la production des minerais libres de conflits avec le concours de tous.
Afin que le secteur minier puisse être réellement porteur de croissance et moteur de développement durable, le Ministère des Mines est déterminé à augmenter la part du secteur minier au Budget de l’Etat et sa contribution au PIB de notre pays.
Avant de clore mon pays, le Ministre des Mines invite les fonderies à s’implanter en RDC. Nous avons besoin des fonderies d’étain, des raffineries d’or, bref toute industrie minière de transformation dans les secteurs des 3T et de l’or. Enfin, je formule le vœu le plus ardent de vous revoir tous à Kinshasa, du 03 au 05 novembre 2014 à l’occasion du 8ème Forum OCDE –CIRGL –GE/NU.
Je vous remercie.
Republic of Rwanda
Due Diligence on Conflict Minerals
Certification & Traceability
Mr. Venant NSANZIMFURA & Dr. Michael BIRYABAREMA
Rwanda Natural Resources Authority/Geology & Mines Department
14th CFSI Workshop, BURLINGAME,CA, 29-30 September 2014
The Rwandan Mining Sector
Rwanda (with its neighbors) forms part of African “Kibara” metal province mineralized in tin, tungsten & tantalum ores (3Ts) Continuous 3T mining since the 1930s
Intermittently operated two tin smelters
More than 230 mining companies and cooperatives currently active in Rwanda
Mining of 3Ts is important for national development Mining fastest-growing sector in Rwanda,
employing 35,000 people
Mineral exports important for national trade balance
Rwanda falls under the Dodd-Frank Act countries with due diligence requirements for 3TG sourcing
www.deloitte.com
The Rwandan Mining Sector
Development of Rwandan mineral exports vs.
traditional export products
The Regional Certification Mechanism
The RCM forms part of the ICGLR Regional
Initiative on Natural Resources
The RCM aims for OECD Due Diligence compliance
Includes shared implementation responsibilities by
national authorities & independent regional bodies
National authorities: Mine Inspections, Mineral
Traceability, Export Certification
MINIRENA regulation no 02/2012 of 28/03/2012
Regional ICGLR bodies: Audit Committee (3rd party
auditing), Independent Mineral Chain Auditor (IMCA),
Conference Secretariat, RINR Steering Committee
Mine
Inspections
Export controls
Issue ICGLR
certificate
No certificate –
no export
Implementation by national authorities –
control through independent audits
Regional Certification Mechanism - Principle
106
Traceability
RCM Mine Inspections
Preparation
An ICGLR-compliant inspection template was developed in 2012
together with BGR
Pilot inspections and training took place in 2012
A dedicated GMD inspection unit was created
Implementation
Objective: Progressively roll out annual inspections of all mines
Inspections implemented since 2013 by 6 dedicated inspectors
58 mine sites have been inspected and were found compliant with
ICGLR standards (green or yellow-flagged); database shared with
ICGLR Secretariat
More than just due diligence: safe working conditions &
environment
Examples from mine inspections
Before: unregulated digging
underground
After: professional tunnel with
adequate supports
Before: hand panning for
mineral pre-concentration
After: semi-mechanization
optimizes processing
Examples from mine inspections
Mineral Traceability
Mineral traceability started in March 2011;
100% of Rwandan 3T mineral exports are tagged from mines sites to export level;
GoR passed a mineral anti smuggling ministerial Regulations (MINIFOM, March 2011);
A dedicated Traceability Office was established; team of 131 field agents are deployed to continuously perform bagging & tagging and monitor mineral production;
Analytical Fingerprint (AFP) reference sampling for majority of Rwandan mine sites performed by GMD and BGR
Exports and ICGLR Certificates
Certification Unit created in 2013 through MOU between RNRA and RBS; now fully operational
Procedures developed in line with ICGLR standards
Professional certificate design with full set of adequate security features
ICGLR certificates are issued for single export containers certifying that due diligence has been performed for this container More than a certificate of origin:
certifies the whole RCM process
24 certificates issued since November 5, 2013
Exports and ICGLR Certificates
Certification Procedure
Performed by dedicated full-time staff upon application by exporter – due diligence assurance for mineral buyers!
Verification of… full traceability documentation for the
shipment
tax conformance and stock reconciliation
mine site status (not for red mines!)
Subject to independent auditthrough ICGLR (to be established)
Smelters should documentreception of certificate and facilitate reporting
Challenges & Lessons Learnt
Rwanda welcomes and encourages in-region sourcing by downstream clients through CFSP (including through in-region smelters)
Need for improved integration of RCM procedures directly into the CFSP requirements
currently, CFSP protocols exclusively rely on iTSCifor assurance on upstream sourcing, but Member States have selected the RCM as the base for national due diligence legislation
Need for CFSI to engage Member State & ICGLR in joint discussions
Challenge: RCM still in learning process – practical implementation not yet fully compliant with theoretical framework… but Rwanda expects the RCM to develop into a full upstream supply chain solution
Lack of adequate advocacy on upstream due diligence implementation for downstream industries and end users
Young 2014
Challenges & Lessons Learnt
No level playing field on due diligence implementation in
the region
Traceability (iTSCi) should provide regionally harmonized
implementation costs & apply same standards for all Member
States (high costs)
e.g., mineral traceability resolution in Rwanda much higher than other
ICGLR MS
Challenges
Some decisions (on our minerals) are being taken without
consulting the regional stakeholders and partners (eg. ICGLR
member states);
Despite the ITRI/iTSCi and RCM schemes, some Major
European and US companies which usually sourced minerals
from the region stop or create an ambiguity towards other
smelters and investors to not continuously buying/ investing in
the region by saying that minerals are not compliant.
Lack of IMCA and independent 3rd party audit by ICGLR
The CFSI delays to issue smelting certificate to Rwandan
Smelter (KARURUMA Smelting Plant) which affects the
innovation processes in Rwandan mining sector
Some Questions need solutions
How do CFSP value RCM? And what is its importance to you?
How US SEC considers ICGLR/RCM certification into their
policies?
What are the requirements for Rwanda to become a member
of CFSI/ CFSP?
What do smelters need to know about the ICGLR certificate?
Does the certificate give them what they need for SEC
reporting?
What are their priorities?
What are the challenges / gaps?
How do we best communicate with smelters? (CFSP)
How do we improve practices on-the-ground integration
among due diligence schemes?
MESSAGE
Rwanda is not interested in all kind of conflicts
Rwanda needs CFSI/CFSP certificate in order to add value to
our minerals as it is in our mining policies and EDPRS;
Rwanda is putting in place a very good system to improve
mining sector not only through the said schemes but also
according to National requirements.
MURAKOZE
-
THANK YOU!
Mr. Venant NSANZIMFURA
Coordinator of Rwanda-ICGLR Mineral Export
Certification Unit /RNRA
nsanzivenant@gmail.com
Mineral Traceability in Burundi
-
San Francisco,29-30 September 2014
By Evélio MUSHIMANTWARI
Email:muev2009@yahoo.fr
Ministry of Energy and Mines
Web: www.burundi-gov.bi
E-mail: energiemine@yahoo.fr
San Francisco, september 2014, Burundi Presentation
I. INTRODUCTION
II. HARMONIZE NATIONAL LEGISLATION ON THE EXPLOITATION OF MINERALS.
III. MINERALS IN THE BURUNDIAN ECONOMY
IV. ARTISANAL MINING
V. MINERAL TRACEABILITY / DUE DILIGENCE IN BURUNDI
VI. CHALLENGES OF TRACEABILITY IN BURUNDI
VII. CONCLUSIONS
I. INTRODUCTION
San Francisco, september 2014, Burundi Presentation
Entity: Republic of Burundi
Area: 27,834 Km2
Population: 8.5 millions
Capital City: Bujumbura
• Agriculture is mainly the base of Burundian economy.
• The country also produces gold, wolframite, coltan & cassiterite
• Exploration for nickel, phosphates, REE, vanadium
The Republic of Burundi is located in East Africa and is bounded to the North by the Republic of Rwanda, on the East by the United Republic of Tanzania, and to the West by the Democratic Republic of Congo. Burundi covers is located between 20 ° 20' and 4 °27' South latitude and between 28 ° 50' and 30 ° 53' East longitude. It is close to the equator. It lies astride the 30th Meridian.
San Francisco, september 2014, Burundi Presentation
San Francisco, september 2014, Burundi Presentation
• Burundi is an eastern
neighbor to DRC
• Burundi produces
“conflict minerals”
• Burundi falls under the
Dodd-Frank Act due
diligence reporting
BGR 2011
II. HARMONIZE NATIONAL LEGISLATION ON THE EXPLOITATION OF MINERALS.
This instrument is intended to revise and harmonise national legislation concerning mining ores. It is recommended that Member States domesticate the provisions of the national protocol of the ICGLR on the fight against the illegal exploitation of the natural resources within their legal framework, and harmonize national laws. Completed and ongoing steps:
the new code mining 15 October 2013.
The policy and mining strategy,
the texts of the mining code pending applications.
San Francisco, september 2014, Burundi Presentation
The Code Mines and its implementing rules encourageprospective investors to come and invest in this area.At the same time, the Government of Burundiintention to draw on the experience of other countriesthat have made the mining sector a springboard fordevelopment.
San Francisco, september 2014, Burundi Presentation
San Francisco, september 2014, Burundi Presentation
0
50
100
150
200
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Burundi Major Export Values [Mio USD]
Tea (Comtrade)
Coffee (Comtrade)
Total 3T
Gold
IIi. MINERALS IN THE BURUNDIAN ECONOMY
• Burundi is a
developing
country with
negative trade
balance
• National exports
are very
important for
development
• Major exports:
Coffee & Gold
• 3T minerals also
contributed
increasingly
San Francisco, september 2014, Burundi Presentation
0
100
200
300
400
500
600
700
800
900
1,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Burundi Mineral Export Tonnages [t]
Cassiterite
Wolframite
Coltan
II. MINERALS IN THE BURUNDIAN ECONOMY (Cont.)
• Wolframite most
important for
tonnage
• Coltan most
important for
export value
• Mineral exports
plunged in 2013:
quasi-embargo
• Creates risk for
smuggling of
Burundian
minerals into
neighboring
countries
Civil war Production recovers
Whereas the exploitation of minerals by processes craft without that this operation is preceded by the highlighting of a deposit.In Burundi artisanal mining is important for jobs and sustaining livelihoods.
Government of Burundi undertakes efforts to develop artisanal mineral sector & support due diligence:
Formalization - formation of cooperatives (already registered: 11 for gold, 22 for 3Ts)
CFSI_Brussels. Burundi Presentation, March 2014
Iv. ARTISANAL MINING
Implementation process of EITI
Cadastre system in development
Commitment to ICGLR Regional Certification Mechanism: performed 5 mine inspections in 2013
Challenge: (lack of) mineral traceability
CFSI_Brussels. Burundi Presentation, March 2014
Evolution of the number of associations/cooperatives and counters: gold and 3T
Année
Nbre
Asso.3T
Nbre
Asso.Or
Nbre
Compt.3T
Nbre
CompT.Or
Total Nbre
Assoc.
Total Nbre
comptoirs
2009 13 3 9 2 16 11
2010 16 5 9 7 21 16
2011 26 7 12 6 33 18
2012 35 10 17 8 45 25
2013 41 23 19 18 64 37
San Francisco, september 2014, Burundi Presentation
Evolution of the exported quantities reported in KgQuantité exportée en kg
Année Or Wolframite Coltan Cassitérite
2008 2.170,2 96.384 116.586 560.136
2009 971,113 14.400 24.423 23.4340
2010 309,79101 336.723,1 67.365,4 28.700
2011 1.051,9267 505.114,7 158.781,7 51.844,2
2012 2.146,85948 564.769,6 258.578,1 116.720,2
2013 2058,35933 69459,4 5767,2 -
San Francisco, september 2014, Burundi Presentation
Evolution of the exports from the EMA income
2008 752 170 000
2009 476 747 716
2010 496 877 342
2011 1 294 207 728
2012 1 754 682 220
2013 1 478 145 222
CFSI_Brussels. Burundi Presentation, March 2014
Government engaged in discussions with 3T traceability providers since 2011 (on-going)
Private sector committed to contribute
OECD: it is a private sector responsibility to establish traceability as part of due diligence efforts
San Francisco, september 2014, Burundi Presentation
V. MINERALS TRACEABILITY IN BURUNDI
San Francisco, september 2014, Burundi Presentation
102.6
9.6
4.41.2
Burundi Mineral Export Value 2012 [Mio USD]
Gold
Coltan
Wolframite
Cassiterite
• Gold generates
more value than
3Ts in Burundi
• Why are due
diligence
schemes not
developed to
include gold?
• Create demand
through
responsible
engagement
Currently, the process of traceability in Burundi is areality because the Directorate General of geology andMines whenever sends executives field to follow thisprocess. We guarantee that the ores of Burundi arewell plotted from the site until the counter prior toexport. We ask the industries of transformations tohave the confidence of the origin minerals of economicinterest from Burundi and enhance its value.
San Francisco, september 2014, Burundi Presentation
Burundi is sufficiently watered and has an abundant hydrography and rainfall are observed nine months out of twelve that includes a year and also has an ecosystem favouring tourism and the business climate. The climate is very pleasant with an annual average temperature of 25 ° C in the plain of Imbo West and 15 ° C for the rest of the country and the Sun is 12 hours per day. Be welcome to invest in Burundi
San Francisco, september 2014, Burundi Presentation
VI. CHALLENGES OF TRACEABILITY IN BURUNDI
The cost of traceability of the 3T very high relative to production, not sustainable; Differences in the prices of ores practised in neighbouring countries; Necessity of the market for ores in stock because of the embargo of export in 2012: documenting respective stocks and their chain of custody; The cost of the printing of the ICGLR certificate;
San Francisco, september 2014, Burundi Presentation
For other traceability providers, costs are too high to be borne by private sector alone.
Even with traceability in place, no guarantee for offtake from smelters/downstream (disengagement is cheaper)!
Comparison of quoted price for 3T traceability in Burundi and known costs from Rwanda:
For wolframite, traceability costs per unit (ton) would
be 10 times higher in Burundi
Not sustainable for private sector
San Francisco, september 2014, Burundi Presentation
VII. CONCLUSIONSArtisanal mining in Burundi gradually develop in a context of good governance, legality and respect for all partners. This activity reinforces its contribution to offer in decent work, to local development, the fight against poverty and social peace.
San Francisco, september 2014, Burundi Presentation
San Francisco, september 2014, Burundi Presentation
Evélio MUSHIMANTWARI
Advisor in charge of Geology and Mines
In the Ministry of Energy and Mines
Burundi
Contact: Phone: (+257) 77890386
E-mail: muev2009@yahoo.fr
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Progress and
Developments
in the Great
Lakes Region,
part 2
Responsible Minerals Progress in
Central Africa—can we get to a “tipping point?”
**At the request of the presenter, these slides are not being distributed.
Please contact presenter for copy or further information.**
Presented by Eileen Kane, US Department of State
Prepared by Dr. Richard B. Robinson, Extractive Industries Technical Adviser, USAID DRC Kinshasa
14th EICC CFSI Workshop Sept – Oct 2014
Cultivating Security Through Social and Economic Sustainability
Company Profile
• KEMET Laboratories
founded by Union Carbide
in 1919
• Headquartered in
Simpsonville, South
Carolina since 1963
• 98% of possible dielectric
solutions.
• 32,000,000,000
Capacitors shipped
in FY13
• 9,732 employees worldwide
– USA 647
– Asia 2,231
– Mexico 5,075
– Europe 1,779
• Global Sales Force “Easy-
To-Buy-From”
1994
• Threats to Human Security (UN HD Report*)
1. Economic Security
2. Food Security
3. Health Security
4. Environment Security
5. Personal Security
6. Community Security
7. Political Security
• On the ground…..
• The Congo was known to the world as Zaire.
• One month after the report as many as 800,000 were killed in Rwanda in 100 days.
• Conflict spilled over into the Congo.
• No conflict-free certified mines.
• No traceability schemes.
• No validated conflict-free smelters.
• No due diligence guidance for responsible mineral sourcing.
*United Nations Human Development Report 1994 – Oxford University Press
What’s Changed?....A lot!
Not Perfect but Progress
• Continuous demand for materials abundantly available in the region.
• Global focus on responsible sourcing.
• Industry leaders demand “conflict-free” materials.
• OECD Due Diligence Guidance
• EICC CFSI and CFSP (>160 validated or active smelters)
• Regulation/Government involvement
• Traceability schemes
• Independent mine certifications
• ICGLR
• Improving security in the region raises hope.
Framework and foundation
Closed-Pipe Model
• Developments provided a framework for changing the supply chain model.
• Initiatives sought to shorten and better control mine ---> to smelter.
• All participating in PPA independent assessment of closed-pipe model!
Solutions for Hope (Motorola and AVX)
Conflict Free Tin Initiative (Mulit-Stakeholder/Netherlands)
KEMET Partnership for Social and Economic Sustainability
Opportunity and InitiativeKEMET’s Closed Pipe Vertical Integration
K-SaltTa
Powder
Ta
Capacit
or
Electron
ic
DevicesTa Ore
Giving Back – Cultivating Security
Kisengo Foundation
Kisengo Foundation
Summary of Actions
HEALTH: New Hospital
“Doctor training” visits
Basic equipment
962 patients served
EDUCATION: New School
Teachers
Basic equipment
1,878 students
INFRASTRUCTURE
Fresh water wells
Chlorination equipment
Solar powered street lights
Bridge & Road construction and repair
Kisengo Foundation The Hospital
OldNew
Kisengo Foundation Solar Lighting and Wells
Kisengo Foundation The Old School
Kisengo Foundation The New School
Kisengo Foundation The New School
EconomicsMining and Traceability
Reality!
The Math Must Work
• I was recently asked…. what would make KEMET quit sourcing
from the region?
1. The ore cost rises above global market price.
2. Unable to source “conflict-free”
Thank You!
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Day 2: September 30, 2014 – Afternoon
Conflict Free Minerals
Supply Chain Workshop 14
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Keynote:
Jason Stearns
Between Cassandra and Polyanna:
Responsible supply chains in the Congo
Due diligence in the private
sector
• From finance to food,
from toys to cars,
private sector is very
used to due diligence
as a way of mitigating
risk and complying
with laws
Cost of Doing Business
• In 2009, McDonalds
reported that 98% of their
fish came from fisheries
with “favorable
sustainability ratings” and
97% of their
slaughterhouses were
audited and 99% passed
• Just as with fraud and
corruption, this is a cost of
doing business
1502 and the Congo:
Appropriate diagnosis?
• Conflict in the Congo
was not just caused by
minerals!
• Erosion of impartial,
strong state
• Regional feuds
• Local struggles for land
and power
1502 and the Congo:
Appropriate treatment?
• Supply chains in the eastern Congo extremely messy
• Why “conflict free”––instead of focus on process and risk mitigation?
• Asking for conflict free without bagging & tagging, auditing: embargo
And yet…
• Minerals had become
core of conflict
economy:
• 89% of exports of North
Kivu
• Biggest funding of AGs
• Rwanda-Congo battle
also over minerals
• FARDC racketeering also
over minerals
In an ideal world
Governing through the market
• Despite
• 19,000 peacekeepers
• Supplying 35-50% of budget
• Donors largely unsuccessful
a promoting state reform
through aid
• Market incentives could do
a better job at providing
incentives than aid
55%
45%
DRC Budget
Domestic revenues
Donor revenues
After 4/1 years?
• Miners lost jobs
• But fewer than suggested
• Many went into gold, employs 4x than 3T
• Much due to perception, not law
• Armed groups declined
• But not because of Dodd-Frank
• Only a handful of 500+ mines in NK and SK bagged and tagged
• Main progress on process:
• Congolese legislation
incorporating OECD
• Public Private Alliance
• DRC gov validated 91
“green”
• Fraud commission
• More ownership displayed
by Congo government than
in almost any reform
process
Main challenges
• Amount of minerals bagged
and tagged in Kivus tiny
• Audits and CMRs are
becoming box-ticking
exercises
• Don’t rely on receipts
• Don’t just look for guns in
mines
• In many cases, no OECD
audits at all
Main challenges
• Gold almost completely
uncharted
• Only ITRI doing bagging &
tagging
• Can 1502 affect violent
logic of patronage?
• Seninga & Cooperama
• Can 1502 affect DRC-
Rwanda relations?
Way forward
• Ultimate goal should not just be bagging and tagging all 800+ mines in eastern Congo
• Lower standard from conflict-free certainty to risk mitigation
• More emphasis on scrutiny, spot-checks, and audits
• Tackle impunity for racketeering
Aksanti, Melesi mingi, merci!
jason.stearns@yale.edu
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Getting a
Successful
Independent
Private Sector
Audit (IPSA)
Approaches to Managing an IPSA for a Conflict Minerals Report
IPSA Panel Agenda
Session Introduction
Informal Audience Poll and IPSA Overview
Panelist Statements including (10 minutes each topic)– (Lawrence) What an IPSA is and what it is not? A Practitioner’s Perspective
– (Bryan) IPSA, An Issuer’s Viewpoint: Intel’s observations after completing an IPSA in 2014
– (Doug) IPSA, An Auditor’s Viewpoint: Auditor’s observations after completing an IPSA in 2014
– (Ilya) Deloitte’s Observations of Year 1 and being IPSA ready for 2015 & beyond
Q&A Session
But first, a quick attendee poll . . .
1. For the 2014 SEC CM Filing year,• Who filed a CM disclosure with the SEC this year?• Who participated in an IPSA this year?
2. For the 2015 SEC CM Filing year,• Who anticipates filing a CM disclosure with the SEC next
year?• Who anticipates participating in an IPSA next year?
3. If your company doesn’t plan to conduct an IPSA in 2015, are you planning to do a “mock IPSA” to prepare for the 2016 report?
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
Suppliers
Tier1Tier2andbeyond
Refiner/SmelterChainofCustodyMineSite Issuer/Manufacturer
SEC
CFSProgram
OECDDD
LBMA
RJC
WGC
iTSCi
ICGLR
BGR
U.S.Regulation
SubjecttoInterpretation
IndustryInitiative
LocalLaw.Guidance.
Reference.
Audit
CTCValidation
RegionalCertification
Rwanda
CFTI/SfH/PSES
E-Tagging
TinSupplyChainRiskMitigation
Industry-ledClosedPipeSupplyChainTinSupplyChains
DownstreamGuidanceUpstreamGuidance
EICC/GeSI
DataGatheringTemplate
IPC
ConflictfreeGoldStandard
GoodDeliveryList
ChainofCustodyStandardGold
3T
ConflictMinerals
DueDiligenceGuidance
3T+Gold
What is an IPSA?
Simply put, an Independent Private Sector Audit (IPSA) is an audit conducted by an independent 3rd party of the assertions made in an Issuer’s Conflict Minerals Report which is filed with the SEC.• The Issuer must make two assertions, at minimum, within their Conflict
Minerals Report.
• The Auditor must audit the two required assertions then express an opinion or conclusion.
IPSA Audit Objectives (as defined by the SEC’s
Final Rule)
Express an opinion or conclusion whether:
1. the design of the issuer’s due diligence framework, as set forth in the Conflict Minerals Report, with respect to the period covered by the report, is in conformity with, in all material respects, the criteria set forth in the nationally or internationally recognized due diligence framework, and
2. whether the issuer’s description of the due diligence measures it performed as set forth in the Conflict Minerals Report, with respect to the period covered by the report, is consistent with the due diligence process that the issuer undertook.
May be done by CPA or non-CPA auditor (CIA, CRMA, CPEA)
Using attestation (CPA) or performance (non-CPA) standards of the GAO’s Generally Accepted Government Auditing Standards (aka “GAGAS” or “yellow book”)
When is an IPSA required? (SEC Fact Sheet* modified
July 29, 2014)
DRC Conflict Free — If a company determines that its products are “DRC conflict free” . . . then the company must undertake the following audit and certification requirements:
• Obtain an independent private sector audit of its Conflict Minerals Report• Certify that it obtained such an audit.• Include the audit report as part of the Conflict Minerals Report.• Identify the auditor.
Not Been Found to Be “DRC Conflict Free” — If a company’s products have not been found to be “DRC conflict free,” then the company in addition to the audit and certification requirements . . .
For those products that are “DRC conflict undeterminable,” the company is not required to obtain an independent private sector audit of the Conflict Minerals Report regarding the conflict minerals in those products.
*http://www.sec.gov/News/Article/Detail/Article/1365171562058#.VCXJ26Pn-Uk
ELM SUSTAINABILITY PARTNERS LLC
Lawrence M. Heim, CPEA
September 30, 2014
14th Conflict Free Sourcing Initiative Workshop
Burlingame, CA
An ELM GROUP Company
Audit clarification
Performance audit guidance
Writing CMRs for cost effective
Independent Private Sector Audits (IPSAs)
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
Auditor opinion/conclusion on whether the design of the due diligence is “in conformity with,
in all material respects” OECD (for now), and
company did what the CMR states was done
for due diligence measures
Limited to sections of the CMR describing
the due diligence design and measures
undertaken
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
April 7, 2014 FAQs Questions 13 – 21
All but one (#16) relate to IPSA
#13: Non-CPAs may conduct IPSA
#14: No IPSA required if any product is
undeterminable
#15: IPSA required for “DRC Conflict Free”
#17: IPSA does not address completeness or
reasonableness of due diligence performed
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
SEC April 7, 2014 FAQs Questions 13 – 21
(cont’d)
#18: IPSA does not include RCOI
#19: IPSA does not include Form SD
#20: IPSA may include due diligence measures
undertaken after the reporting year
#21: Full description of due diligence design not
required
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
You have choices when it comes
to your IPSA…
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
Performance Audit (CPA not required)
may be used for IPSAs
50% of CY2013 IPSAs were Performance
Audits
Auditor guidance published March 2014
Same level of assurance Attestations,
different report contents
Who you want to perform the audit and
how much you want to payCOPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
IPSA audit effort, cost directly reflect due
diligence definition and description in
CMR
“Novel” will require more effort and cost
RCOI description within due diligence
Numerical metrics
Inclusion of third party providers
Precise wording needed
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COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
Yes 40%
No 38%
NA - No CMR
21%
Not Stated 1%
Are RCOI Steps Described as Part of Due Diligence Measures?
COPYRIGHT 2014, ELM SUSTAINABILITY PARTNERS LLC
Yes 40%
No 38%
NA - No CMR
21%
Not Stated 1%
Are RCOI Steps Described as Part of Due Diligence Measures?
IPSA: An Issuer’s ViewpointIntel’s observations after completing an IPSA in
2014
Bryan Fiereck, Intel
IPSA is what you would expect
1. Issuer makes assertions.
2. Auditor assesses whether assertions are auditable.
3. Auditor determines sampling plan needed to verify each assertion.
4. Auditee presents evidence – sampling error rates apply.
5. Auditor expresses opinion or conclusion of the assertion.
IPSA is what you would expect (continued)Demonstrate program conforms with stated due diligence framework.Map your program components to each relevant framework section.
Ideally, implement a Standard Operating Procedure (SOP).
Demonstrate DD measures performed are consistent with DD process undertook.
Descriptions must be auditable and you must show your work.
Best to document the assertions early so you collect the right information.
Document everything and be prepared to provide copies to the auditor. If you cannot produce the written evidence, it didn’t happen.
Intel’s observationsIssuer essentially controls the audit scope.
– Cost is dependent on scope; $50-125K USD– Total audit engagement (start to finish) was ~6 weeks– Auditor was on-site for 2 days– Expect the successive audits to be easier than initial engagement
Auditor independence concerns appears to limit available auditor population.
Standardized audit report reduces confidentiality concerns as a “Report of Independent Accountants” which expresses their opinion on the filers conformance to the two different audit objective. Also clarifies non-audit activities.
Intel’s observations (continued)Advantages:
– Audit forces program’s documentation– IPSA preparation result in further program clarity which positively impacts
disclosure which results in better communication to stakeholders.
Disadvantages:– Auditor experience may vary – consultants may initially have more
expertise/knowledge than assurance auditors– Auditability requirements result in some non-ideal language. Assertion edits
may be necessary.
Summary: Start preparing now. Well organized documentation is key.If it doesn’t make sense to you, it won’t make sense to an auditor.
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
Ensuring a Successful IPSA:
An Auditor’s Perspective
Prepared for
Conflict Free Sourcing Initiative Workshop
September 30, 2014
Prepared by Douglas Hileman, CRMA, CPEA
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
Agenda
1) IPSAs: Background &
Year One
2) Other Audits
3) Ensuring a Successful
IPSA
4) Closing Comments
5) Contact Info &
Resources
205
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
DHC Disclaimer
This information has been prepared by
Douglas Hileman Consulting LLC
(“DHC”) for general information
purposes. It does not constitute
consulting services or advice.
DHC makes no representation or
warranty (express or implied) with
regard to its accuracy, completeness or
timeliness. Transmission, receipt, or
acceptance of this information does not
create a relationship with DHC.
Parties seeking advice should consult
with counsel, consultants, or other
suitable resources familiar with their
particular circumstances.
© 2014 Douglas Hileman
Consulting LLC206
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
1. IPSAs & Year One:
IPSA Auditor PerspectivesTwo objectives: Express an opinion or conclusion whether:
1. the design of the issuer’s due diligence framework, as set forth in
the Conflict Minerals Report, with respect to the period covered
by the report, is in conformity with, in all material respects, the
criteria set forth in the nationally or internationally recognized due
diligence framework, and
2. whether the issuer’s description of the due diligence measures it
performed as set forth in the Conflict Minerals Report, with
respect to the period covered by the report, is consistent with the
due diligence process that the issuer undertook.
May be done by CPA or other auditor (CIA, CRMA, CPEA)
Using attest (CPA) or performance (non-CPA) standards of “yellow
book”
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Consulting LLC207
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
IPSA ObjectivesObjective 1:
Express an opinion or conclusion whether the design of the issuer’s due
diligence framework, as set forth in the Conflict Minerals Report,
with respect to the period covered by the report, is in conformity
with, in all material respects, the criteria set forth in the nationally or
internationally recognized due diligence framework, and
IPSA Auditor Tips for Objective 1:
• Be able to map design of due diligence (DD) framework to applicable
framework (OECD or other)
• Map DD framework to the OECD 5 steps
• Consider OECD sub-steps; map where possible; provide rationale
for gaps (applicability, materiality)
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Consulting LLC208
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
IPSA ObjectivesObjective 2:
Express an opinion or conclusion whether the issuer’s description of the
due diligence measures it performed as set forth in the Conflict
Minerals Report, with respect to the period covered by the report, is
consistent with the due diligence process that the issuer undertook.
IPSA Auditor Tips for Objective 2:
• Review contents of Conflict Minerals Report (CMR)
• Segregate the section that describes what you did
• Be able to produce supporting evidence
• Segregate background, conclusions, and forward-looking
statements
© 2014 Douglas Hileman
Consulting LLC209
“If you say it, make sure you can prove it.”
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
Example of Statements to Report on
“what you did” This Year
What did You Do in 2014 to Save for Your Child’s College
Education?
• I put $3,000 into a college account.
• I enrolled in an automatic saving plan.
• I took steps so I can begin saving money next year.
• My child will be able to go to any college s/he wants.
• I made Coursera a “favorite” on my child’s browser.
© 2014 Douglas Hileman
Consulting LLC210
What is suitable audit evidence? (What is auditable?)
Do the statements align with a stakeholder’s desired outcome?
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
What did You Do in 2014
for Conflict Minerals Due Diligence?
• The company has been in business for 20 years.
• We surveyed our suppliers.
• We reviewed supplier responses.
• We made every effort to get responses from our
suppliers.
• We made sure the CMRTs were accurate.
• We will improve our procedures in 2015.
• We have a conflict-free part.
• We have quarterly meetings with our customers.
© 2014 Douglas Hileman
Consulting LLC211
What is suitable audit evidence? (What is auditable?)
Do the statements align with a stakeholder’s desired outcome?
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
2. Other Conflict Minerals Audits:
What IPSA Doesn’t Evaluate• Is the filer conflict-free?
• Was the filer conflict-free all year?
• Have they included all the products?
• Are the conclusions in the CMR correct? Reasonable?
Supported?
• Is the filer doing enough to find out?
• Is the compliance program efficient?
• Is this product conflict-free?
• Do minerals come from other conflict regions?
• Will the company be conflict free next year?
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2. Other External ReportingContent, message should be consistent among all external
reporting channels.
• Publicly-available
– Form 10-K
– Company website
– Sustainability report
– Marketing
• External, but targeted
– CMRTs
– Customer surveys
– Shareholder presentations
– Professional/ trade associations
© 2014 Douglas Hileman
Consulting LLC213
Be able to support all claims or assertions.
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
2. Other Types of
Audits/AssessmentsAudit to another standard:
• Customer requirement
• Company policy
• Progress towards a goal
• Readiness Assessment
• Focused review
• Peer Review/ Benchmarking
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©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
3. Ensuring a
Successful IPSAWhat does “successful” look like?
• Clear expectations re: objectives, audit process (plan,
procedures, output), resource needs
• Planning process creates/ confirms expectations
• Field procedures go according to plan
• Uncertainties, gaps, or findings are conveyed as soon as
possible
• Reporting is clear, concise
• Audit meets quality, schedule, budget commitments
• Client gets value from the exercise
215
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
3. Considerations in Selecting
IPSA Audit Firm
• Independence: criteria? How maintained?
• Your company’s ground rules for using financial
auditor (Sarbanes-Oxley)
• Relevant experience
– SEC filings
– Performance audits
– Subject matter: Dodd-Frank Conflict Minerals & applicable
frameworks (OECD)
– Systems, controls, business process
• Auditor staff: individuals; credentials
216
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
3. Considerations in Selecting
IPSA Audit Firm
• Understanding of the context of the IPSA (as nested
within your CMR)
• Cultural fit with your company; your instincts
• Deliverable(s)
• Costs
• References
• Commitment to a successful outcome
217
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
3. How Can an IPSA Go Wrong?
• Inadequate planning
• CMR: disorganized; irrelevant content;
unsupportable statements
• Straying beyond scope
• Mis-aligned expectations of IPSA process,
outcome, or deliverables
• Failure to include all relevant groups (Internal
Audit, SEC Counsel. Etc.)
• Resistance to change
218
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
4. IPSAs & the Year(s) Ahead
• Conflict Minerals programs could get more complicated
in 2014
– Second transition year (of two!)
– Product level activity; there could be multiple valid CMRTs at
the same time.
– Potential disconnect between CMRTs to customers and SEC
filing
• Compelled speech & IPSAs?
• Consider “trial IPSA” in 2014
• Identify/ retain IPSA auditor early
• Stay tuned for regulatory, legal developments.
219
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
5. Contact Information &
Resources
Douglas Hileman, CRMA, CPEA
www.douglashileman.com
See also:
www.DFCMAudit.com
www.DFCMTraining.com
Mobile: 818 416 6403
220
White papers on the DFCM research available on all sites.Research on filings by supply chain tier, forward-looking statements
availableSurvey on practitioners’ DFCM experiences & predictions open until
10/31/2014 (link on sites)
©2014 Douglas Hileman Consulting, LLC©2014 Douglas Hileman Consulting, LLC
Douglas Hileman Bio
(Audit & Conflict Minerals Focus)
• 35 years of experience in compliance, external reporting, auditing (9 years in industry)
• “Specialty audits”: to contracts; transaction; litigation support; enforcement; audit readiness
• 6 years at PricewaterhouseCoopers LLP: ~100 financial audit procedures; Sarbanes-Oxley; internal audit
• Audit to terms of SEC Consent Decree
• Commented on draft SEC Rule for Dodd-Frank Conflict Minerals (DFCM); referenced in final rule ~10 times
• Helped clients build, improve DFCM compliance programs; training
• Conducted an Independent Private Sector Audit (IPSA) submitted with 2013 filings
221
Conflict minerals:
Managing the independent
private sector audit (IPSA)
September 30, 2014
For discussion purposes only
223 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Filings and filers:
• The majority of filers included a Conflict Minerals Report (CMR) as an exhibit to their
Form SD. Moreover, the majority of filers were domestic registrants, although some were
foreign
Year one reporting observations
22%
78%
Form SD only
Form SD including CMR 14%
86%
Foreign
Domestic
Deloitte analysis of SEC Form SD and CMR fillings as of July 21, 2014
224 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Executive signatory and filing by industry:
• Most Form SDs were signed by the CFO, with several General Counsel signatures,
among others
• Most of the companies that filed were in the Consumer & Industrial Products industry,
followed by Technology, Media and Telecommunications industry
Year one reporting observations
48%
24%
14%
14% Finance
Legal
Operations
Other
54%
30%
4%
11%
1%
Consumer and Industrial Products
Technology, Media, and Telecommunications
Energy and Resources
Life Sciences and Health Care
Financial Services
Deloitte analysis of SEC Form SD and CMR fillings as of July 21, 2014
225 Copyright © 2014 Deloitte Development LLC. All rights reserved.
CMR Approach:
• Approximately 53 percent of registrants did not distinguish Reasonable Country of Origin
Inquiry (RCOI) from due diligence
• Approximately 49 percent of registrants intentionally separated the description of their due
diligence design (generally by making an assertion about their design) from the description
of due diligence measures performed (generally by using headings for each section)
• Approximately 47% of registrants used the steps in the Organisation for Economic Co-
operation and Development (OECD) Framework to organize their description of due
diligence measures performed
Year one reporting observations
Deloitte analysis of SEC Form SD and CMR fillings as of July 21, 2014
226 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Due diligence measures disclosed and IPSA readiness
Year one reporting observations
• Year one filings included various approaches to describing conflict minerals
compliance:
− Quantitative descriptions: number of suppliers surveyed, supplier survey
response rate
− General descriptions: requirements established for all suppliers
• Registrants should consider the attributes of suitable and available criteria that
are required for an independent private sector auditor to perform an IPSA:
− Suitable criteria is objective, measurable, complete, and relevant
− Terms such as “best practice” or “to the best of our knowledge” are not
objective or measurable
227 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Risk mitigation/future due diligence measures
Year one reporting observations
• Not required until year two, however 55% of registrants included such
disclosures
• Clearly separating due diligence measures performed from those expected to be
performed in the future is likely to help the registrant and the independent private
sector auditor distinguish whether CMR content is within or outside the final
rule’s scope for IPSA purposes
• Cautionary language regarding forward-looking statements was included in
23% of the CMRs
228 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Leading examples
Exhibit 1.01
Conflict Minerals Report (excerpt)
I. Introduction
[The registrant included an introductory section, although not required.]
II. Reasonable Country of Origin Inquiry
OECD Step 1: Establish Strong Company Management Systems
A. Adopt and commit to a supply-chain policy
Activities performed:
[Disclosed RCOI activities here]
Ill. Due Diligence
Due Diligence Design: [The registrant included an assertion in the CMR that its due diligence conforms to/is consistent
with specific steps of the nationally or internationally recognized due diligence framework that it used.]
Due Diligence Measures Performed: [The registrant used the following format to disclose the description of the
measures it has taken to exercise due diligence on the source and chain of custody of the conflict minerals.]
OECD Step 3: Design and implement a strategy to respond to identified risks.
A. Report finding to designated senior management
Due Diligence Design Due Diligence Measure Performed
[Disclosed design of due diligence] [Disclosed due diligence measures performed for calendar 2013]
229 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Leading examples
Exhibit 1.01
Conflict Minerals Report (excerpt)
I. Introduction
[The registrant included an introductory section, although not required.]
II. Reasonable Country of Origin Inquiry
OECD Step 1: Establish Strong Company Management Systems
[The registrant included a description of the RCOI measures taken in accordance with OECD Step 1.]
OECD Step 2: Identify and Assess Risk in the Supply Chain
[The registrant included a description of the RCOI measures taken in accordance with OECD Step 2.]
Ill. Due Diligence
1. Due Diligence Design: [The registrant included an assertion in the CMR that its due diligence conforms to/is consistent with
specific steps of the nationally or internationally recognized due diligence framework that it used.]
2. Due Diligence Measures Performed: [The registrant used the following format to disclose the description of the measures it has
taken to exercise due diligence on the source and chain of custody of the conflict minerals.]
OECD Step 3: Design and implement a strategy to respond to identified risks
[The registrant included a description of the due diligence measures taken in accordance with OECD Step 3.]
OECD Step 4: Carry out independent third party audit of supply-chain due diligence
[The registrant included a description of the due diligence measures taken in accordance with OECD Step 4.]
OECD Step 5: Report on supply-chain due diligence
[The registrant included a description of the due diligence measures taken in accordance with OECD Step 5.]
IV. Due Diligence Results
[The registrant included the list of smelters/refiners used to process minerals necessary to the registrant's products, the country of origin
and mines of origin.]
V. Future Measures
[The registrant included a description of future measures to improve due diligence processes]
230 Copyright © 2014 Deloitte Development LLC. All rights reserved.
• An opinion or conclusion is to be expressed as to:
1) Whether the design of the issuer’s due diligence framework set forth in the CMR, is
in conformity with, in all material respects, the criteria set forth in the nationally or
internationally recognized due diligence framework used by the issuer
2) Whether the issuer’s description of the due diligence measures set forth in the CMR
is consistent with the due diligence process that the issuer undertook
Two types of engagements are allowable:
Examination attestation engagement Performance audit
• May only be performed by CPAs or
individuals working for a licensed CPA
firm or a governmental auditing
organization
• Standard form of the report
• May be performed by other than licensed CPAs or
individuals working for a licensed CPA firm, such as
consulting firms
• Report contains the audit results, including findings,
conclusions, and recommendations including, but not limited
to:
• A description of the nature and extent of the issues
being reported and the extent of the work performed
that resulted in the finding
• Details of the performance audit, including objectives
of the procedures performed in conducting the audit
and results of such procedures
Attestation engagement versus performance audit
231 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Registrants should stay alert for the following:
• The Legal Challenge
- En banc review at the U.S. Court of Appeals for the D.C. Circuit
- The SEC and Amnesty International asked the D.C. Circuit to reconsider its ruling in
light of the AMI opinion
- Executive Order: the White House announced expanded sanction with respect to
"individuals and groups tied to militias involved in the illicit trade of natural resources
from the region" of the Democratic Republic of the Congo (DRC)
• SEC Head of Corporate Finance, Keith Higgins, observations
- “Sharpening up the precision” when describing the RCOI
- Companies should not suggest their products are conflict free if they don’t declare
“DRC conflict free” and obtain an IPSA
- Companies should disclose the smelter or refiner used to process their minerals, if
such facilities are known
Marketplace developments
232 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Registrants should also stay alert for the following:
• Expectations published by leading non-governmental organizations and sustainable and
responsible investors on this topic.
• Published expectations in the context of their industry and its position in the supply chain:
• Greater market scrutiny of additional Year 1 filings and market impact analyses, with a
focus on impact to registrants as well as impact on the region of focus.
Registrants may wish to consider the above expectations in developing their
organization’s conflict minerals compliance program and reporting process
Marketplace developments
233 Copyright © 2014 Deloitte Development LLC. All rights reserved.
Next steps
We encourage registrants to:
• Consider the potential implications related to the organization of the RCOI and
due diligence disclosed in the CMR, with an eye toward the requirements of the
IPSA.
• Evaluate the clarity and sufficiency of their disclosures in the CMR of due
diligence measures performed and the need to demonstrate suitable criteria in
anticipation of an IPSA.
• Take demonstrated and focused efforts to increase the level of confidence in the
data gathered and performance measurements related to supplier engagement,
and focus on sufficiency of documentation to support activities undertaken and
related disclosures.
This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial,
investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it
be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your
business, you should consult a qualified professional advisor.
Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.
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The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Conflict
Minerals
Regulatory
Updates
The US, the EU, and beyond
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Roadmap
• U.S. – SEC, Court of Appeals, Executive Orders, Rumors
• E.U. – Elections and implementation
• Beyond – Canada and In-region
U.S. – SEC by the Numbers
The filings are in!
• 1,315 Form SDs – Only 22% of the SEC’s estimate
• CMRs were filed with 77%– SEC estimated 75 percent of Form SD filers also file a CMR
• 80% stated “undeterminable” or similar– 4 audits a few “conflict-free” statements
• About 60% tracked to OECD 5-Steps
• 70% used the CMRT
• About 15% listed smelters or refiners
• About 15% stated CFSI membership – BUT not the same 15%
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 237
U.S – SEC Observations (Sept. 15 to ABA)1. Overlap in the RCOI and due diligence processes
– no requirement for issuers to perform an RCOI if they move directly on to the due diligence phase.
– “But if you determine that your conflict minerals didn't come from” the conflict region, “you should be providing clear and specific language about the process that you used to reach the determination.”
2. Companies that have not chosen to label their products as conflict-free should avoid disclosure that suggests so
– “If you say your [product] is conflict-free, you have to provide an independent private sector audit, so nudging up close to that with some implied statement is probably not a good idea.”
3. SEC is unlikely to provide additional interpretive guidance due to pending litigation in the U.S. Court of Appeals
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 238
U.S. – SEC Actions
SEC rumored to be working on “batch” of FAQs and guidance, including a position on compounds.
• Letter to SEC in June memorializing a telephone conversation where SEC suggested compounds are not conflict minerals for the rule’s purpose– Verbal confirmation reported in July
• BUT– No agreement in writing
– No legal opinion for SEC counsel
– No guidance likely until after court
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 239
U.S. – Court of Appeals
• Court of Appeals says: 1st Amendment prevents requirement to say “Not DRC Conflict-Free”– Magic words no longer required!
• En Banc opinion in American Meat Institute v. U.S. Dept. of Agriculture suggests otherwise– Can require factual and uncontroversial disclosure that, so long as the
government's interest is "substantial" and there is a “reasonable fit“
• SEC filed for En Banc on Conflict Minerals
• Date not yet set
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 240
U.S. – Other Dodd-Frank Issues
• Annual GAO report identified challenges to issuers and past deadlines by Dept. of Commerce
• Dept. of Commerce published a list of 3TG “processors” in Sept.– Compiled info from USGS, GAO, LBMA, DMCC, OECD, & CFSP-compliant
– Inconsistencies and likely inaccuracies inhibit its usefulness
– CFSI is educating on our process and knowledge
• Calls for evaluation on regulation’s impact region– Over 70 academics and experts
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 241
U.S. – Executive Orders
• Order from 2006, but revised in 2015 restricts trade with:– support to persons, including armed groups, involved in activities that
threaten the peace, security, or stability of the DRC;
– support to persons that undermine democratic processes or institutions in the DRC;
– the illicit trade in natural resources of the DRC;
• CFSP traceability covers much of this– Assurance that CFSP-compliant smelters are sourcing responsibly
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 242
European Union
• Refresher: Covers 3TG, but not limited to DRC– Self-certification scheme for importers
– Responsible smelter list
• Elections have removed a major supporter, but new sponsor already in place
• European Commissions working on “implementing guidelines”– CFSI providing technical and expert support to commission
• Anticipated debate and vote spring or summer 2015 – Implementation not likely until mid-late 2016
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Canada and In-Region
• Dodd-Frank 1502-type legislation voted down in Canadian Parliament on Sept.– Unlikely to re-emerge
• In-Region– Uganda revising mining law originally passed on 2003
– DRC full membership in Extractive Industries Transparency Initiative (EITI),
• global organization promoting good management of oil, gas and mineral resources
– DRC mining code revision
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Regulatory Up-Date Summary
• Plenty of activity, but very little change.
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 245
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
OECD UpdateOECD implementation program on responsible mineral supply chains (gold and 3T) and introduction to the 3-5 November Kinshasa conference and objectives
The OECD Due Diligence Guidance
Implementation programme -
update
14th CFSI workshop
30 September 2014
Mr. Louis MaréchalResponsible Business Conduct (RBC) UnitOECD
Reminder - OECD Due Diligence Guidance
for Responsible Mineral Supply Chains
Objective
To provide clear, practical guidance for companies to ensure they do not contribute to conflict or abuses of human rights through their mineral and metal procurement practices
Method and scope
5-step risk-based due diligence process, applies to all companies throughout the entire mineral supply chain that potentially use minerals conflict or high-risk areas
Features
One set of expectations throughout the entire mineral supply chain from mines until end users
Progressive approach, promoting constructive engagement with suppliers
Complementary and practical due diligence measures depending on mineral and position of company in the supply chain
Five Step Risk-Based Due Diligence
(Annex I)
Step 1• Establish strong company management systems
Step 2• Identify and assess risk in the supply chain
Step 3
• Design and implement a strategy to respond to identified risks
Step 4
• Support independent third-party audit of the smelter/ refiner’s due diligence
Step 5• Report annually on supply chain due diligence
OECD Implementation Programme
Over 500 organisations involved
– Governments (OECD and non OECD), international organisations, business, civil society and other experts
Information-sharing and promotion of due diligence
– Tools, workshops, working groups, webinars, peer learning, training
Outreach in producing regions (Africa’s Great Lakes region, West
Africa, Colombia) and processing/consuming countries (US, China, India, Middle East, Turkey etc.)
Collaboration and problem-solving
– Coordinated solutions
– Harmonisation and mutual recognition of industry programmes
– Promotion of responsible mineral sourcing from conflict-affected and high-risk areas
Bi-annual Forum on Responsible Mineral Supply Chains
Mandarin edition of the Due Diligence Guidance available since May 2014
In February2014, the OECD presented on responsible business conduct, including the Due Diligence Guidance, in workshop organised with the Chinese Enterprise Confederation and GIZ
In June 2014, OECD presented to APEC Mining Ministers Roundtable in Beijing
MOFCOM designated the China Chamber of Commerce Metals, Minerals and Chemicals (CCCMC) as key partner to work with the OECD on responsible business conduct in minerals
OECD and CCCMC are exploring collaboration and signing of a Memorandum of Understanding (MOU) on responsible mineral sourcing, to cover due diligence outreach in China and a tool to help Chinese companies operationalise the Guidance
The OECD Secretariat and CFSI will present on Responsible Mineral Supply Chains (90 minute session) on 24th October Exploration Exchange conference in Beijing, China
Implementation and outreach in 2014 -
Focus on China
Democratic Republic of the Congo
• Series of Train the Trainer sessions planned in DRC (Bukavu in July 2014, Kinshasa in November 2014, Kisangani in June 2015-TBC, etc)
• April 2014 : Gold baseline assessments launched
Turkey
• Training with Borsa Istanbul in April 2014
• Translation of the Due Diligence Guidance into Turkish (October 2014)
• Upcoming Train the Trainer planned for November 2014
Colombia
• Mission in February 2014 to lay the foundations for fruitful cooperation with the Colombian government and main mining stakeholders
• September 2014: Gold baseline assessments launched
Other - Introduction to OECD Due Diligence Guidance:
• September–Eurométaux (European Association of the Non-Ferrous Metals Industry) and Japan Business Council in Europe
Other implementation and outreach in
2014
• 3T Commercial Risk and Risk Mitigation
– Draft paper on commercial risk and risk mitigation was not adopted by the group
– Focus is now on discussing cases / real-life scenarios and risk mitigation options to help companies develop reasonable risk mitigation approaches in response to commercial risks
– Aim: to establish good practices in terms of commercial risk mitigation over time, drawing from the real-life cases discussed in the group
• Artisanal and small-scale mining (ASM) Hub
– Development of concept tool to enable buyers to source responsible gold from conflict areas
– Several webinars held on issues such as closed pipe projects, the role of large-scale mining and its engagement with ASM, the role of governments in formalisation activities, etc
Implementation - Update on working
group activities
• Worst Forms of Child Labour (WFCL) in Mining
– Draft of a set of recommended actions to help Forum stakeholders address the issue of WFCL in mining
• Audits
– A series of webinars introduces the different existing audit programmes
– Presenters include representatives from the programmes and practitioners who talk about challenges and lessons-learnt from the audits they conducted
Implementation - Update on working
group activities, cont’d
• Forum: 3-5 November at the Grand Hotel in Kinshasa
• Focus of 8th Forum:
– Review and advance implementation of upstream due diligence in the Great Lakes Region
– Emphasize the human rights elements to due diligence implementation as highlighted in Annex II of the Guidance
– Understand the due diligence expectations of responsible buyers and investors in conflict-affected and high-risk areas
– Encourage discussion and dialogue on how to formalise artisanal and small-scale mining on the ground
• Train the Trainers training for local actors on the Due Diligence Guidance: 30 and 31 October in Kinshasa, DRC
8th Forum on Responsible Mineral
Supply Chains
Regulation – update on EU initiative
► March 2014 – Draft EU initiative and legislation released:
Voluntary self-certification scheme for importers of 3T and gold into EU common market
Based on OECD Due Diligence Guidance
Accompanying measures include public procurement benefits, SME financing for due diligence, global responsible smelter lists and funds for OECD implementation programme
► Next steps:
Beginning of discussion at European parliament in November.
Intention to develop a certification scheme and draft a guidance on identification of conflict-affected an high-risk areas.
Thank you
For further information on the OECD’s work on
Responsible Business Conduct
http://mneguidelines.oecd.org/
http://mneguidelines.oecd.org/mining.htm
Or email: Louis Maréchal
louis.marechal@oecd.org
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