Companies Struggle to Comply With Rules on Conflict Minerals – by Lynley Browning (New York Times – September 8, 2015)

http://www.nytimes.com/

A pink My Little Pony balloon does not usually evoke images of rifle-toting warlords in the Democratic Republic of Congo. Still, Party City Holdings, the decorations and costumes retailer, recently disclosed a possible link to securities regulators, helping to put it near the bottom of a list ranking companies on their compliance with laws against using minerals mined in war-torn regions across Africa.

Party City is just one of 1,262 companies that filed the required disclosures on their use of so-called conflict minerals. Ninety percent of those companies, including Microsoft, Apple, General Electric and Ford Motor, said they also might be using tainted supplies. Yet Party City landed near the bottom of a list compiled by Tulane University researchers that ranked the companies’ compliance records in this area, while giants like Microsoft achieved perfect scores.

“Anybody with a relative interest in ethical sourcing would be interested in this list,” said Matthew Whitteker, the marketing director for Assent Compliance, a software and services firm in Ottawa that commissioned the Tulane study. “For any company that manages this well, both Wall Street and Main Street will look at their brand favorably.”

The Tulane study is just one example of a growing business opportunity for consultants, auditors, lawyers and software firms looking to cash in on a complex provision in the Dodd-Frank financial reform law that requires companies to disclose their use of conflict minerals “necessary to the functionality or production” of products they make or contract out for manufacturing.

Conflict minerals are tantalum, tungsten, tin or gold mined from ore, and extracted in Congo or nine surrounding countries, including Angola, Rwanda and Sudan. Minerals from the countries, long mired in civil war, violence, acts of rape and the use of child soldiers, appear in a variety of products.

Tantalum, for example, allows Apple’s iPhone to maintain an electrical charge. Tungsten permits the filaments in General Electric light bulbs to get hot enough to emit a bright light without melting, and tin gives Party City’s My Little Pony balloons a special sheen. And gold, of course, is a staple of fine jewelry.

The 356-page disclosure rule is tied to State Department efforts to stamp out militias that are financed by minerals; such militias helped lead to 5.4 million deaths from 1998 to 2006 in Congo alone. The rule requires companies to conduct a “reasonable country of origin inquiry” in “good faith” to ferret out conflict minerals in a company’s final products. But the rule doesn’t define those subjective terms, leaving room for interpretation. At the end of May, companies filed their annual disclosures for the second consecutive year.

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