What are Conflict Minerals and the Role of CMRT?

When you buy a smartphone, a laptop, or a car, have you ever wondered where the minerals used in the production of these products come from? In many cases, the minerals used are sourced from mines in conflict-affected regions, where armed groups exploit and abuse workers to extract valuable minerals that are sold on the global market. These minerals are known as conflict minerals, and their use in products can contribute to human rights abuses, environmental damage, and funding of armed groups.

What are Conflict Minerals?

Conflict minerals are natural resources extracted from conflict-affected areas, often by armed groups. Tantalum, tin, tungsten, and gold, collectively known as 3TG, are the primary minerals considered conflict minerals by both the U.S. and the EU. The extraction and trade of these minerals have been linked to funding armed conflicts and human rights abuses in various regions worldwide.

Profits from the extraction of conflict minerals are often used to finance armed groups, perpetuating conflict, instability, and a range of human rights violations. These violations include unsafe working conditions, child labor, and food insecurity, among others.

To address these issues, both the U.S. and the EU have implemented regulations to regulate the sourcing of 3TG in supply chains. The U.S. Dodd-Frank Act and the EU Conflict Minerals Regulation aim to ensure that 3TG is ethically sourced and does not contribute to conflict or human rights abuses. However, these regulations differ in their scope, due diligence requirements, and reporting obligations.

Conflict Minerals in Supply Chain

The supply chain for conflict minerals is complex and often opaque, making it difficult for companies to ensure that their products are not contributing to human rights abuses. The minerals are typically mined by small-scale operators, who sell them to traders and middlemen, who in turn sell them to processors and manufacturers. These minerals can be mixed with minerals from other sources, making it difficult to trace the origin of the minerals.

As a responsible business, it is important to ensure that the minerals used in product manufacturing are not sourced from conflict-affected regions. Compliance with conflict minerals regulations is essential for companies that want to ensure ethical and sustainable sourcing practices.

Conflict Minerals Reporting Requirements

Dodd-Frank Act Section 1502 (United States)

The Dodd-Frank Act Section 1502 requires publicly traded companies to report on their use of conflict minerals originating from the Democratic Republic of the Congo (DRC) and surrounding countries. If 3TG minerals are essential to a product's functionality or production, companies must file a report with the U.S. Securities and Exchange Commission (SEC). The reporting process includes:

• Conducting a Reasonable Country of Origin Inquiry (RCOI) to trace minerals back to the smelter of origin.
• Filing Form SD to disclose the results of the RCOI and, if necessary, a Conflict Minerals Report.
• Publicly disclosing the Conflict Minerals Report on the company's website if the minerals are sourced from the covered countries and not from scrap or recycled materials.

European Union Conflict Minerals Regulation

The EU Conflict Minerals Regulation applies to EU-based importers of 3TG minerals. Importers must conduct due diligence to ensure that minerals are not sourced from conflict-affected and high-risk areas. Key requirements include:

• Tracing minerals back to their smelter or mine of origin.
• Complying with the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance.
• Sharing due diligence information with downstream purchasers.
• Publicly reporting on due diligence policies and practices, along with annual third-party audit summaries.

The Role of CMRT

To address the issue of conflict minerals in supply chains, the Responsible Minerals Initiative (RMI) earlier known as Conflict-Free Sourcing Initiative (CFSI) developed the Conflict Minerals Reporting Template (CMRT). The CMRT is a standardized reporting template that companies can use to gather information from their suppliers about the use of conflict minerals in their products. The CMRT allows companies to identify the smelters and refiners in their supply chains, and to determine whether they are sourcing from conflict-affected regions.

The CMRT is an essential tool for companies seeking to ensure their products are free from conflict minerals. By using the CMRT, companies can identify and address risks in their supply chains, and take action to prevent the use of conflict minerals in their products.

Download our CMRT ebook, a step-by-step to understand reporting, or speak to our compliance experts to help you automate your CMRT reporting.

The Importance of Conflict Minerals Compliance

Compliance with conflict minerals regulations is essential for companies that want to ensure ethical and sustainable sourcing practices. Failure to comply with these regulations can result in serious legal and reputational consequences, including fines and damage to a company's brand.

To ensure compliance with conflict minerals regulations, companies should take the following steps:

• Conduct a supply chain audit to identify the presence of conflict minerals in their supply chain.
• Use the CMRT to collect information about their supply chain and identify any suppliers that may be using conflict minerals.
• Work with suppliers to develop responsible sourcing policies and ensure that they are not using conflict minerals.
• Consider third-party auditing programs to verify that their supply chain is conflict-free.

Conflict minerals and their role in the supply chain are critical issues for businesses to consider. By taking steps to ensure compliance with conflict minerals regulations, companies can demonstrate their commitment to ethical and sustainable sourcing practices. The use of tools like the CMRT can help companies identify any suppliers that may be using conflict minerals and work with them to develop responsible sourcing policies. By doing so, companies can help to create a more ethical and sustainable global marketplace.

Best Practices for Conflict Minerals Compliance

To ensure compliance with conflict minerals regulations, companies can adopt the following best practices:

• Implement a robust due diligence process to trace the source of minerals in the supply chain.
• Engage with suppliers to gather information on mineral sourcing practices.
• Utilize tools and resources, such as the OECD Due Diligence Guidance, to enhance due diligence efforts.
• Maintain accurate records and documentation of due diligence activities.
• Educate employees and suppliers on conflict minerals compliance requirements.
• Regularly review and update conflict minerals policies and procedures to align with regulatory changes.

Acquis Conflict Mineral Solution

We have tailor-made a comprehensive conflict mineral solution to help companies overcome challenges including low supplier response rates and incomplete or inaccurate data, which can consume valuable resources and expose a business to legal, financial, and reputational risk.

To avoid these challenges and reduce supply chain risk, Acquis' supplier engagement module automates collection of CMRTs from suppliers using best practices that limit supplier fatigue. The team then validates all submitted data and follows up on any inconsistent or incomplete data. Acquis also provides data verification of listed smelters and refiners. All of this information is compiled into a concise and comprehensive report for conflict minerals declaration.

Acquis Compliance's conflict minerals program covers not only regulated minerals but also unregulated ones. EMRTs and Pilot Reporting Templates (PRTs) can be collected and analyzed for reporting purposes.

To simplify conflict minerals reporting, schedule a demo with Acquis Compliance today and learn more about how they can help your business.