Conflict Minerals Compliance The Impacts of the Regulations

1. Conflict Minerals Compliance: The Impacts of the Regulations With the U.S. Securities and Exchange Commission (SEC) issuing its final conflict minerals reporting regulations that are due soon we are expecting many companies to focus on the due persistence required to ensure “conflict-free” products. A narrow focus on the rules neglects a point. Basic Statistical Return Code (BSR) has been regularly emphasizing in over the years working on conflict minerals, the Companies must take adequate action with a real understanding of how the activity will affect local communities, and how it will fit well into the global supply chain sustainability trends. With an increase in the number of companies acting on this issue, environmental compliance services is running a series of three blogs to highlight critical issues that are at the risk of getting lost in the rush to implement due persistence. The first write-up will look beyond the regulations to examine how supply chain policies are affecting the mining trade and conflict in the Democratic Republic of the Congo (DRC). The second article will cover the importance and relevance of local labor and environmental issues outside the conflict, and the third article will provide knowledge on the connections between conflict minerals due to persistence and new global responsible sourcing trends. There has been an arising question on, how have conflict minerals regulations and other programs, such as the international due persistence guidelines for responsible minerals supply chains process has affected what is happening on the ground in the DRC. According to a recent UN report, the new regulations have had a drastic impact on the flow of tin, tantalum, and tungsten from the DRC region. Few parts of the eastern DRC region remain unstable, and armed groups are still very much active. The report does mention the improvements in the mining sector as the government has increased exports in non-conflict areas, along with a reduction in conflict financing provided by minerals. Although the new legislation and global regulatory compliance services in the company actions have done very well outside of the conflict area, they have also created major problems inside the conflict area. This includes the deterioration of mining sector governance and increased growth in smuggling and fraud. According to the UN, the fall in production in the Kivus and Maniema has led to an increase in unemployment and increased poverty among the tens of thousands of people who depended on artisanal mining. This has created a consequently sharp negative impact for the economies of the

2. affected regions as a whole. The downfall in production has also had a major negative impact on provincial, economic and national governmental revenues. The relevance for company supply chain efforts is clear. A simple refusal to source from the region increases hardship for the people there. Companies need to strive hard for continuous engagement that can support conflict-free local sourcing and local economic development. The idea that companies should work to ensure social benefits even as they secure commercial gains is a cornerstone of BSR's sustainable local benefits work. Efforts to save the relationship between minerals, sourcing, and conflict need to be fine-tuned to decrease the hardship and provide maximum this kind of local support. The leading companies and international aid organizations have started to address this issue through programs like the Solutions for Hope project and the Public-Private Alliance. Although these are a good start we need more such actions to support the real progress.