As noted in an earlier EE Times report, the costs of complying and preparing annual reports could amount to billions of dollars for the overall electronics supply chain.
At a conference here organized by England-based Cognition Ltd, the consensus was that just over 1,300 companies had filed their CM reports. “This is somewhat disappointing, but in view of the complexities involved, perhaps understandable,” Chris Robertson, head of regulatory compliance at engineering consultancy group ERA Technology, tells EE Times.
“Even though there is a useful template to help companies file their CM reports, backed up by comprehensive guidelines from the [Organisation for Economic Co-operation and Development] related to due diligence reporting, you get very little idea of just how much effort has gone into this first round of reporting. I suspect we will see much more comprehensive and clearer results the next time round,” says Robertson.
There seems to be a wide discrepancy amongst electronics companies in their attitudes towards the whole process, with many still questioning whether the approach is the correct one. Some argue that since CM materials necessarily travel through a long and convoluted supply chain -- from mines, smelters, refineries, traders, manufacturers, and distributors -- before they end up in a company’s smartphones, cars or aircraft, vetting the entire chain is a hugely complex and expensive business.
Indeed the SEC has estimated that compliance could cost all companies up to some $4 billion in the first year and subsequently between $200 million and $600 million each year. Yet some have been particularly proactive in their efforts. Intel, Apple, AVX, and HP were amongst those regularly mentioned at the London event. It was also noted that a few companies even consider this to be a mission-driven issue that they intend to be an increasingly important part of their sustainability and corporate responsibility efforts. Intel’s website states that the company aims to “use tantalum, tin, tungsten and gold in our products that do not directly or indirectly finance or benefit armed groups in the DRC or adjoining countries while continuing to support responsible mineral sourcing in the region.”
Robertson noted that Intel staff had actually visited 86 smelters in 21 countries to establish whether they use or have in the past sourced ores from mines in the DRC. As a consequence, the chip group maintains that while many of its devices are simply “DRC conflict undeterminable,” its microprocessors are “conflict free.”
Apple has also raised the bar. It has worked with the Conflict-Free Smelter Program (CFSP), a collaborative of smelters and other interested parties that the Electronics Industry Citizenship Coalition trade group helped establish to audit smelters worldwide. Earlier this year, Apple proclaimed the vast majority of smelters and refineries used to make devices for its products are designated “conflict free” by the CFSP, and threatened to end the contracts with the handful of other smelters unless they, too, get the audited certification.
“Smelters are clearly becoming the control point here, and the more enlightened electronics companies have recognized this,” Scott Wilson, content solutions strategist at IHS, told EE Times. “When it comes to tin there are hundreds, maybe thousands of smelters globally. Suppliers cannot be expected to keep a check on all of them so a project such as the CFSP is enormously helpful in establishing how far back in the supply chain you need to go.”
Companies such as IHS and Source Intelligence, and organizations such as the EICC, have established dedicated units to collect, verify, and assess CM data. They are offering special databases and programs to small and large suppliers and manufacturers that will help in the burden of producing CM reports. Wilson notes that reporting is done at corporate level, not at a specific product level. “It is a hugely complex process and many are struggling with the intricacies, as well as the business case -- like it or not, they need to look at the bottom line.”
The bigger the corporation, the tougher it can get. Nigel Strutt, director of customer relations and supply chain at Lockheed-Martin in the UK, admits, “We face enormous challenges at a corporation like this with a huge product portfolio of about 7,500 and perhaps 21,000 suppliers (1,000 just in the UK). The first CM report clearly showed we are not conflict-free now, and have a lot of work to do to get there.”
Over time, it will get better as corporations become smarter in dealing with the issue, suggests Strutt. “The supply chain will get the message that we are all in this together, and that they (the suppliers) will also have to up their game. And when one or two of them start losing business because they may have not complied, the industry will start getting used to this, just as it has with all previous regulations that initially seemed hugely burdensome.”
Earlier this month the Enough Project, an influential activist group, said that after five months of field work at numerous mining locations in the DRC, it is seeing early signs of success. Its latest report shows two thirds of tin, tantalum (refined from coltan), and tungsten mined in three of the worst affected parts of the DRC no longer in the hands of armed groups or the Congolese army. In its 2010 assessment, all of these metals were.
Tellingly, the report also suggests that the Dodd-Frank law and the recent audits are beginning to create a “two-tier” market for the “3T” minerals, with indications that minerals that have not passed through conflict-free programs now sell for 30% to 60% less. The pressure group regularly ranks large electronics companies as regards the progress being achieved in eliminating CMs from their supply chains. In its last report, Intel, Motorola Solutions, HP, and Apple were identified and lauded as “pioneers of progress.” Also in the top ten were AMD, Philips, and SanDisk. Laggards included Nintendo, HTC, and Sharp.