Minerals such as tin, tungsten, tantalum and gold are valuable and essential for companies producing goods like consumer electronics and medical equipment. However, such products are often sourced from the Democratic Republic of the Congo (DRC), much of which is controlled by armed groups that force locals to work in mines without pay and commit violence against civilians. It can be extremely difficult for large companies to realize they are purchasing "conflict minerals" from these areas and supporting rebel groups, especially if they obtain the minerals through multiple suppliers and have lengthy and complex supply chains.
Conflict mineral sourcing may cost companies
It has become more difficult for businesses to procure these important components in recent months, as a provision of the Dodd-Frank Act requires companies to reveal whether they use conflict minerals from this area in their products. Businesses that use these minerals must gather information on their sourcing processes in 2013 and file it with the Securities and Exchange Commission (SEC) by May 2014.
The provision in the law requires businesses to take multiple steps when submitting information to the SEC. Companies must first reveal if they do use any raw materials that could be considered conflict minerals and then determine whether they were sourced from the DRC or a nearby area. Those firms that determine their minerals did not come from this region need to reveal what steps they took to prove their minerals aren't from war-torn regions, while those that do procure minerals from the DRC (and those that cannot determine where their minerals are from) will be required to trace their supply chains, reveal their suppliers and provide a conflict mineral report.
Strategic sourcing can stop the problem
Businesses that do currently source minerals from these areas may find continuing to do so will result in problems as increased legislation and requirements aim to limit the problem. This may cause more companies to look for ways they can alter their supply chains to avoid purchasing conflict minerals and reporting their use to the SEC. Implementing policies like strategic sourcing initiatives may help businesses procure minerals without supporting armed groups. Taking steps to improve sourcing efforts can also help a company better optimize its supply chain and ensure all suppliers and logistical operations are working together seamlessly, which can also assist cost savings efforts.