14th conflict-free sourcing initiative workshop, day 1
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The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Day 1: September 29, 2014
Conflict Free Minerals
Supply Chain Workshop 14
CFSI Commitment
Helping companies make informed choices about conflict minerals in their supply chains.
• The CFSI is committed to improving transparency in the supply chain for Tin, Tantalum, Tungsten and Gold .
• Mining activities that fuel conflict are unacceptable.
3
In-Region Schemes
Conflict-Free Smelter Program (CFS)
Company Assurance
Finished Product
MINE SMELTER/REFINERY OEMS
(pinch point)
Conflict Free Sourcing Initiative (CFSI)4
CFSI Approach to Conflict-Free Sourcing
2014 Goals1. Continually evolve the Conflict-Free Smelter Program (CFSP)
2. Continue development and implementation of the Conflict-Free Sourcing Initiative (CFSI)
3. Continually evolve common cross-industry approaches to support the disclosure and due diligence expectations of the U.S. SEC, OECD, ICGLR and UN;
4. Support the implementation of verifiable traceability programs for the Democratic Republic of Congo (DRC) and covered countries for conflict-free minerals
5. Build and maintain strong relationships and increase transparency, communications and efficiency to enhance credibility in the CFSI activities
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 5
Governance Changes for the CFSI
The initiative is undergoing continuous improvement:
• Continued work on governance structure
• Steering Committee Established
• Cross-industry composition
• Operating Procedures Developed
• Increased Staffing
• Revenue generation options being considered (membership and royalties)
Overall development and implementation continues in 2014 and beyond
6
CFSP Growth
7
• 4th quarter of 2013: 70 active / 45 compliant
• Today: 136 active / 102 compliant
0
20
40
60
80
100
120
140
160
2013 2014
ActiveCompliant
CFSI Growth
0
50
100
150
200
250
2013 2014
Partner Members
EICC-GeSI Members
The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 8
• 22 Partner members at beginning of Q4 2013
• 82 Partner members at beginning of Q4 2014!
Summary
• The CFSI continues to drive improvements in its programs to enable companies in their ability to source conflict-free minerals
• Improving governance of the initiative, both in structure and revenue generation are key to sustainability and health
• Company assurance activities of the CFSI are focused on improving company capabilities to validate responsible sourcing of materials by creating common standards, tools and processes
9
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
International
Conference on
the Great Lakes
Region
The importance of supply chain collaboration
Progress and Developments in the Great Lakes Region
byGerard Nayuburundi
Coordinator, Technical Unit on Natural Resourcesat
The International Conference on the Great Lakes Region
14th CFSI WorkshopBurlingame, San Francisco, CA
Pact on Security, Stability and Development (Nairobi, 15 December 2006
Protocol against the Illegal Exploitation of Natural Resources
Regional Initiative on Natural Resources (Lusaka, 15 December 2010)
Six tools
The Six Tools
Regional Certification Mechanism
2. Regional Mineral Tracking via an ICGLR database
3. Third Party Audits
4. Independent Mineral Chain
Auditor
1. ICGLR Mineral Tracking and Certification Scheme:i. Mine Site Inspection and Validation
ii. Chain of Custody Tracking System
iii. Export Mineral Certification
2. Regional Mineral Tracking via an ICGLR database
3 categories of data: Mine site data Chain of custody (traceability) data Mineral exporters data
Solely dependent on national databases ICGLR’s role: constantly update the status of Mine sites and
exporters as mine site inspection results and third party audit and mineral chain auditor reports are received
Monthly (if not possible, quarterly) data transmission by member states
AFP: a combination of analytical techniques allowing the identification of source-characteristic geochemical, mineralogical, and geo-chronological features of mineral concentrates
3. Third Party Audits
Managed by the Tripartite Audit Committee of ICGLR 3 major roles of the ICGLR Audit Committee:
Accreditation of third party auditors Review of third party audit reports Setting up or review of third party audit standards and procedures
Third party audits focus on mineral exporters running from the exporter all the way back up the mineral chain to the mine site
Third party audits are valid for one year maximum; Recent developments
4. Independent Mineral Chain Auditor (IMCA)
The IMCA plays a role of an ombudsman and “special investigator” within the RCM scheme.
The role of the IMCA: Evaluate member state chain of custody systems;
Conduct independent investigations;
Undertake ongoing risk assessments
Will make information (through the ICGLR secretariat) contained in reports fully accessible via website (except for information which is likely to put informants at risk);
Recent developments
Conclusion
ICGLR mineral certification scheme is the most comprehensive as it includes aspects such as environmental protection, social sustainability , child labor, etc., on top of conflict issues;
ICGLR mineral certification scheme is a government-led with political commitment and support of governments of all 12 member states;
ICGLR calls for CFSI/EICC/CFSP support to the ICGLR efforts through:
Official recognition of the ICGLR certificate as the only legitimate and reliable document to certify conflict free minerals from the African Great lakes Region;
Establishing a platform through which ICGLR and CFSI/EICC/CFSP can exchange on best practices on issues regarding third party audit management
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Panel
Discussion:
Transparency,
Reporting, and
Supply Chain
Due Diligence
What did we learn from the first year of SEC reports?
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 20Audit | Tax | Advisory | Risk | Performance
Conflict Minerals Compliance & Audit
Planning for 2014
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 21Audit | Tax | Advisory | Risk | Performance
Lessons Learned From 2013
Conflict minerals is here to stay – Legal challenges failed and other countries are adopting
similar legislation. The scope may even expand to include other precious minerals or
regions
Many industry leaders are going above and beyond the requirements of the law and
establishing strict conflict-free policies.
No standard approach to compliance. A reasonable approach to compliance depends on
the readers of your filings (i.e. customers, NGOs, and SRIs)
Move from a reactive project to a proactive process and then forward to influencing the
supply chain
Support industry initiatives such as the Conflict-Free Sourcing Initiative (CFSI) or industry-
specific organizations (such as the AIAG)
More specificity - Transitioning from company-wide declarations to parts-level
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 22Audit | Tax | Advisory | Risk | Performance
Sampling of Recent Press
Intel Says Its Chips Are Now Conflict Mineral-Free
CES Keynote Speech by Brian Krzanich 2/6/14
Apple to name-and-shame suppliers of ‘conflict minerals’
Financial Times 2/13/14
EU drafts conflict minerals law
Euractive 4/3/24
Time to make Canada free of Conflict Minerals
The Star 4/3/14
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 23Audit | Tax | Advisory | Risk | Performance
Overview of Filings – Top 10 Industries
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 24Audit | Tax | Advisory | Risk | Performance
Planning for 2014
Suggestions to enhance program and to move project to a process:
Refresh policy if needed
Adapt current grievance mechanisms for conflict minerals
Update systems to better collect data
Use commodity codes or sub-codes to determine whether CM is necessary to the
functionality
Move to full material disclosure to identify all materials/substances in the parts you
are purchasing
Expand document retention policies for conflict minerals (i.e. 5 year hold)
The Unique Alternative to the Big Four®
© 2014 Crowe Horwath LLP 25Audit | Tax | Advisory | Risk | Performance
Planning for 2014
Suggestions to enhance program and to move project to a process:
Enhance supplier acceptance procedures
Incorporate conflict minerals compliance into onboarding procedures for suppliers
Supplier outreach programs
Hold trainings for suppliers
Update contract and purchase order language
Recertify suppliers who have previously responded
Engage with distributors on compliance alternatives:
Complete transparency vs. “Step into the role”
Identify audit provider now and engage early to ensure compliance
Dodd Frank’s impact: a view from the ground
Enough | The Project to End Genocide and Crimes Against Humanity
Congo’s armed conflict:
• Ongoing for almost two decades• Deadliest war since World War II• Dozens of active armed groups controlling mining
areas• Regional governments controlling minerals
through proxy fighters
• Violence concentrated in the minerals-rich east (Ituri province and North and South Kivu)
• Widespread war crimes and crimes against humanity, including unprecedented levels of sexual violence
Dodd Frank 1502: “promoting peace and security in the Democratic Republic of the Congo”
“the exploitation and trade of
conflict minerals originating in the
Democratic Republic of the
Congo is helping to finance
conflict characterized by extreme
levels of violence in the eastern
Democratic Republic of the
Congo, particularly sexual- and
gender-based violence, and
contributing to an emergency
humanitarian situation therein,”
The strategy…shall include the
following:
(i)A plan to promote peace and
security in the Democratic
Republic of the Congo by
supporting efforts of the
Government of the Democratic
Republic of the Congo, including
the Ministry of Mines and other
relevant agencies, adjoining
Downstream action and innovation
• An increasing number of retail companies have conflict minerals policies and consumer engagement plans
• Supply chain assurance programs, due diligence protocols, and supply chain collaboration are growing
Increasing list of certified conflict-free smelters
• The Conflict Free Smelter Program has encouraged smelters worldwide to come into alignment with OECD standards
• Roughly half the world’s 3T smelters have passed third party conflict free audits, including 19 Chinese smelters, shrinking the market for conflict minerals and encouraging responsible sourcing practices
Demilitarized mines
• Untraceable tin, tantalum and tungsten has dropped in value between 30-60% in recent years, making it unprofitable for armed groups to keep trading illegally
• Four years ago, nearly all mines in eastern Congo were militarized; according to an independent international study last fall, two-thirds of mines surveyed in eastern Congo were free of armed groups
In-region reforms and investment in large-scale mining
• For the first time in Congo’s history, it has a conflict-free validation process
• New mining police forces monitor security and civil society watchdogs help ensure responsible, legal trading
• At least 21 electronics and other companies now source from 16 conflict-free mines
• Solutions for Hope pilot closed-pipe mines give companies a conflict-free sourcing option and serve as a model for responsible investment
More progress is needed.
• Gold remains lucrative for active armed groups
• Increased livelihood programs are needed for artisanal miners and impacted communities
• The ICGLR certification scheme needs to be finalized to ensure conflict-free trading
• Large-scale mining companies operating in Congo must meet international human rights and environmental standards and consult with local communities
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Assessment of
Responsible
Sourcing
Options –
Impacts,
Challenges, and
Opportunities
Review of GAO’s 2014 report on conflict minerals and plans for 2015 report, including opportunities to engage with GAO
Dodd Frank Section 1502: Overview of
GAO’s Mandate and Reporting
Presented at the
Conflict-Free Sourcing Initiative Workshop
Burlingame, CA
September 29-30, 2014
Page 38
Outline of Discussion
• Overview of GAO’s Mission and Sources of Work
• Approach to Work
• GAO’s Mandate under Dodd-Frank
• GAO’s 2013 Findings (Brief Review)
• GAO’s 2014 Report - USG and Stakeholder Actions
• GAO’s Planned Work for 2015 Report
Page 39
Overview of GAO’s Mission and Sources of
Work
• Support the Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure
the accountability of the federal government for the benefit of the
American people
• Provide Congress with timely information that is objective, fact-
based, nonpartisan, nonideological, fair, and balanced
• Three sources of work:
1) Congressional mandate – one-time or recurring
2) Request letter from congressional committees or members
3) Comptroller General Authority (CGA)
Page 40
Approach to Work
Steps in the GAO engagement:
1) Congressional request received/mandate/CGA
2) Gather background information
3) Develop engagement objectives/questions
4) Determine methodology and data collection strategy
5) Develop findings and agree on message
6) Develop final product: conclusions and recommendations
Page 41
GAO’s Mandate under Dodd-Frank
• In July 2010, Congress included in the Dodd-Frank Wall Street Reform and Consumer Protection Act provisions pertaining to the trade of DRC conflict minerals.
• GAO’s mandates under Section 1502 includes these provisions:
(1) Assess the rate of sexual violence in the DRC and adjoining countries (annually—1st report due July 2011)
(2) Evaluate the effectiveness of SEC’s conflict minerals disclosure rule (annually—1st report due July 2012)
• Describe any issues that SEC encountered in promulgating a conflict minerals disclosure rule
• Describe information about entities that use conflict minerals and are not required to report to SEC under the conflict minerals disclosure rule
• Report to 8 congressional committees of jurisdiction
Page 42
GAO’s 2013 Findings (Brief Review)
Page 43
Simplified Conflict Minerals Supply Chain• Industry
representatives stated
that original equipment
manufacturers have
less visibility beyond
first-tier suppliers.
• Industry
representatives and
companies reported
challenges with
obtaining information
from suppliers up the
supply chain.
GAO’s 2014 Report – USG Actions
• Responding to the Act, State and USAID developed a strategy in
2011 to address the linkages among human rights abuses,
armed groups, the mining of conflict minerals, and commercial
products.
• The strategy has five objectives: (1) promote an appropriate role
of security forces, (2) enhance civilian regulation of minerals
trade in the DRC, (3) protect artisanal miners and local
communities, (4) strengthen regional and international efforts,
and (5) promote due diligence and responsible trade through
public outreach.
Page 44
GAO’s 2014 Report – USG Actions
• In 2011, State developed a map of mineral-rich zones and areas
under control of armed groups in the DRC and has subsequently
published several updated maps, as required by the Act.
• State’s most current map was published in February 2014.
• State reported that lack of complete or fully verifiable data
makes it difficult to confirm the location of many mine sites, to
establish which mine sites are active at any given time, and to
comprehensively verify reports of armed groups.
Page 45
GAO’s 2014 Report – USG Actions
• Section 1502 directed Commerce to report, among other things, a list of all known conflict minerals processing facilities worldwide to appropriate congressional committees annually starting no later than 30 months after the Act’s enactment—that is, by January 2013.
• GAO recommended that Commerce provide to Congress a plan that outlines the steps, with associated timeframes, to develop and report the required information about smelters and refiners of conflict minerals worldwide.
• In response, Commerce indicated that it would submit a listing of all known conflict minerals processing facilities worldwide to Congress by September 1, 2014 and published this list in early September.
Page 46
GAO’s 2014 Report – USG Actions
• U.S. government agencies have engaged in a variety of
activities that involve partnerships and coordination with other
stakeholders or outreach to stakeholders, and some agencies
have provided technical assistance to stakeholders regarding
responsible sourcing of conflict minerals.
• Example: State and USAID coordinate with other stakeholders
through the Public-Private Alliance for Responsible Minerals
Trade (PPA) to fund and support organizations working on
responsible sourcing efforts. Both State and USAID are on the
PPA’s Governance Committee, which consists of participants
from foreign governments, industry, and civil society.
Page 47
GAO’s 2014 Report – Stakeholder Actions
• Stakeholders have expanded existing initiatives and added new
initiatives focused on responsible sourcing of conflict minerals in
the DRC and adjoining countries, to include new mine sites,
countries, and smelters.
Page 48
GAO’s 2014 Report – Stakeholder Actions
• The Conflict-Free Sourcing Initiative (CFSI) has expanded in several
aspects related to responsible sourcing.
• First, CFSI’s Conflict-Free Smelter Program has expanded the number
of smelters it has certified as conflict free.
• Second, according to CFSI representatives, through outreach to
industry, CFSI has expanded its collaboration with companies involved
with the conflict minerals supply chain.
• Third, in 2014, CFSI began offering its members information about the
SEC-required “reasonable country of origin” data for conflict minerals,
providing the most detailed information currently available about the
source of conflict minerals for smelting and refining facilities that are
validated through the Conflict-Free Smelter Program.
Page 49
GAO’s 2014 Report – Stakeholder Actions
• The Responsible Jewellery Council—a diamond and precious
metals industry association—launched a chain-of-custody
certification program in March 2012 to help its member
companies identify and track conflict-free gold throughout their
supply chains.
• The ITRI Tin Supply Chain Initiative (iTSCi) recently announced
that it is expanding its in-region operations.
• Launched by Motorola Solutions and AVX in 2011, the Solutions
for Hope tantalum program is a “closed-pipeline” initiative that
traces the flow of tantalum from the mine to the end-use
company.
Page 50
GAO’s 2014 Report – Stakeholder Actions
• The German government’s Federal Institute for Geosciences
and Natural Resources (BGR) has initiated the Analytical
Fingerprint Project to allow for independent verification of the
origin of the conflict mineral by comparing the composition of
tantalum, tin, and tungsten concentrate samples of a known
origin with unknown samples, similar to a DNA test.
• The Better Sourcing Program (BSP), a private company that
offers an independently audited due diligence assurance
program to enable companies to source tantalum, tin, tungsten,
and gold from the region.
Page 51
GAO’s 2014 Report – Stakeholder Actions
• Some stakeholders and governments in the region provide
publicly available information related to in-region mining of
conflict minerals and responsible sourcing initiatives.
• We found that iTSCi publishes various reports on its public
website as part of its due diligence system for its members.
• Some quantitative government data on the production and
exports of conflict minerals from the DRC and adjoining
countries are available.
Page 52
GAO’s Planned Work for 2015 Report
Effectiveness of the SEC rule:
• State and USAID in-region efforts
• Company SEC filings
• Processing facilities’ role - challenges and opportunities
• Gender based violence
Page 53
GAO Contacts
• GAO on the Web• Web site: http://www.gao.gov/
• Public Affairs• Chuck Young, Managing Director, youngc1@gao.gov
(202) 512-4800, U.S. Government Accountability Office441 G Street, NW, Room 7149, Washington, DC 20548
• Copyright• This is a work of the U.S. government and is not subject to copyright
protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.
Page 54
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Panel
Discussion:
Managing Your
Supplier Data
Lessons from the first reporting year of supply chain data collection, including CFSI member survey
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
September 2014
CFSI Member Due Diligence
Poll
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 57
CFSI polled members about their experience with SEC filing
in 2014.
41 Companies completed our brief survey.
The size of the participants, in terms of revenue:
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 58
For those employing a risk-based approach to prioritize
supplier inquiry, upon what was it based?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 59
Which of the following best describes how your company
reported its product categories to the SEC?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 60
Did you describe the conflict status of your products as
"DRC Conflict-Free" or "DRC Conflict Undeterminable" in
your Form SD or Conflict Minerals Report (CMR)?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 61
How did you survey your supply chain?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 62
At what frequency do you expect your suppliers to provide
2014 responses?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 63
How do you evaluate and aggregate CMRTs from you
suppliers today?
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 64
Did you make conflict minerals information publicly
available via channels other than your SEC filings?
Thank you to our participating members.
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
Reducing Cost and Mitigating
Risk with a Scalable Conflict
Minerals Program
John Kuta
Director Solution Management
Materials Compliance
September 29, 2014
67
750+partners
10 millionstudents participating in PTC Global
Academic Program
150+sponsored FIRST® Teams(For Inspiration and Recognition of Science & Technology)
27,000+active customers
1,456,000+active PTC Windchill Seats
1,931,000+total active Seats
PTC: Product and Service Advantage
6,000+employees
2,000+employees in R&D
1,360+service professionals
ORGANIZATIONAL STRENGTH STRONG MARKET PRESENCE STRONG COMMUNITY SUPPORT
FINANCIAL STRENGTH FOCUSED ON MANUFACTURING GLOBAL FOOTPRINT
$100
$150
$200
$250
$300
$350
$400
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
2010 2011 2012 2013
8%
16%
3%8%
3%
Total Revenue ($ millions)
Total non-GAAP operating profits* ($ millions)
% = YOY growth
2014
Guidance
FY 2013 revenue by vertical
Life Sciences:
4%
Industrial
Products:
30%
Federal, Aerospace
& Defense:
18%
Electronics &
High Tech:
18%
Automotive:
12%
Retail &
Consumer:
8%
Other:
10%
FY 2013 revenue by region
Americas
41%
Europe
37%AP
22%
YoY Stock Performance: Up 85%
68
Global Product Regulations on the Rise!
Source: Compliance and Risks 2014
20062005 2007 2008 2009 2010 2011 2012 2013
1,000
6,000
5,000
4,000
3,000
2,000
TODAY
REACH
RoHS
RoHS 2
EU Battery
# Global
Regs
ELV/GADSL
Companies facing increasing ...
RegulatoryComplexity
CustomerDemands
Effort to Fulfill Obligations
Conf l i c tM inera l s
2000
© PTC 2014
69
Why the Trend Will Continue … “It’s Working”
Regardless of opinions of its effectiveness, the law exists.
Public still supports social responsibility / environmental legislation.
© PTC 2014
72%Certified
28%
Pending
T H E G U A R D I A N
“Mine certification process
worked”
H U M A N O S P H E R E
W H AT ’ S Y O U R O P I N I O N ?
70
Year 1 is History ...
© PTC2014
GOOD ENOUGH?
Clear Conflict Minerals policy
Evidence of progress towards
Conflict-Free sourcing
Conflict-Free products / audits
Smelters – included sources of
minerals including COO
RCOI metrics / high supplier
response rates
Corrective action plans
Industry “involvement”
/ CFSI membership
? RCOI and DD efforts documented,
but vague on details / description of process
? No action plans to achieve CF sourcing
Misinterpreted requirements
Insufficient or no evidence of RCOI
“Boilerplate” CMR
INADEQUATE
OR WRONGBEST-IN-CLASS“ ” “
”
“Only” 1,315 companies filed.
“Lite” 3rd-party evaluations so far, but “stay-tuned”: more on the way!
“ ”
!
R AT E Y O U R C O M PA N Y ’ S F I L I N G
71
What Do WE Expect for Year 2?
© PTC2014
• Continued Use of CFSI CMRT
– 70% used CMRT, higher for high-tech, industrial companies.
• More Audits / Conflict-Free Products
– 4 audits, 2 listed DRC CF products
– Expect more audits / companies will take steps to find and list Conflict-Free products including product-level CMRT requests.
• More Smelter Lists
– 10% included smelters and countries of origin in their filings as proof of due-diligence.
– Expect more companies to include smelter and COO info.
• More Supplier RCOI Metrics
– 1 in 3 provided supplier RCOI response rates as proof of due-diligence with about half reporting 75% or better response rate.
– Expect more companies to add supplier RCOI metrics.– Expect increasing response rates.
More standardization & conformance to practices of “best-in-class”
72
2014 Challenge:Streamlining the Supplier RCOI and Due-Diligence Process
© PTC 2014
“ How do we build an efficient
process that is both flexible
and efficient ? ”
“ Can we use a common
compliance system to
manage all supplier request
data to avoid waste and
redundancy ? ”
“ Is there a proven approach for
maximizing supplier response
rate with minimum effort ? ”
“ How do we create the product
level reports our customers
require ? ”
“ Where will we store and
manage the data? We need a
central repository for this
information. ”
“ What is the best communication method for
our global, diverse supply base – from tiny
“mom & pop” fab shops to global
conglomerates ? ”
Process automation increases efficiency, response rate, and accuracy
73
Company-Level Product-Level
2015 and Beyond:Transitioning to Product-Level Reporting
© PTC 2014
Product-level reporting will differentiate
Y O U R
S U P P L I E R S
Y O UR
S U P P L I E R S ’
P R O D U C T S
Y O U
Product-level RCOI to find
products made from 100%
DRC Conflict-Free
supplier parts.
Very few suppliers will ever
report DRC Conflict-Free at
the company level.
… …
74
2015 and Beyond:Transitioning to Product-Level Reporting
20162013 2014 2015
© PTC 2014
Companies reporting
only no status or
Undeterminable
“We don’t know
& we don’t care”
Companies reporting
“DRC Conflict-Free”
products
demonstrate
priority and efforts
to achieve policy
4 out of 1,315 filings
were audited in 2013
Expecting increased product-level reporting
75
PTC and Conflict Minerals
Leadership
• High awareness, brand recognition, recognized leader.
• Reference-able world leading manufacturing clients.
• Strong partner community (well-known in Consulting, Legal, etc.)
Proven Track
Record
• 10 year history as leading Materials Compliance solution provider.
• 1st to market with RoHS software application.
• First Conflict Minerals solution released in April 2012.
Best Conflict
Minerals Solution
• Proven low touch / high efficiency solution.
• Comprehensive functionality for 5 Step SEC compliance process.
• Hosted subscription or rapidly deployed on-premise options.
Built on a Scalable
Product Analytics
Platform
• Modular, enterprise compliance platform for RoHS, REACH, ELV, etc.
• Manage product compliance beginning early in design.
• Fully integrated with PLM for supplier, part, and product-level reporting.
1
2
3
4
© PTC 2014
76
Driving Proven Results
Whirlpool Corporation is a leader of the $120 billion global home
appliance industry. Their appliances are marketed in nearly every country
around the world.
“ Whirlpool was able to implement PTC’s
Conflict Minerals solution within a matter of
weeks. By leveraging the systematic
solution…able to improve our supplier
response rate and meet our customer
reporting obligations.”
“ IT JUST WORKS”
Bill Hester, Global Information
Systems, Critical Materials
Management
© PTC 2014
Presented by:
Tim Holt
Regulatory Affairs
September 29, 2014
Smelter RCOI & Due Diligence
Claigan - Conflict Minerals
• Conflict Minerals
- Leader in Conflict Minerals compliance
- Services:
• Program development
• Reasonable Country of Origin Inquiry
• Due diligence, disclosure, and reporting
• Overall Experience
- Claigan was the only service provider requested as a witness to the US House of
Representatives on Conflict Minerals.
- Claigan is quoted 18 times in the SEC final rules.
- Claigan has met with the SEC on conflict minerals eight times
• Restricted materials compliance experience
- Danaher, Covidien, Legrand, Hamilton Beach, Abbott Laboratories, Smiths
Medical, Smith & Nephew, Beckman Coulter, Moog, Instrumentation Laboratory,
GE, Fluke, Hach, Schneider Electric, KavoKerr, Microsemi, Agilent, Barrx, Tyco,
Johnson & Johnson, Smart Technologies, Pelton & Crane, Atricure, CAE, EMC,
Philips, Plexus, Jabil, FLIR, Trojan, Deltrol Controls, LoJack, Thermo Scientific,
Li-Cor, Avid, and US Commercial Service.
3 Steps in Section 15021. Issuer to determine whether it is subject to the requirements
- Necessary to the functionality or production of a product
manufactured or contracted by that issuer to be manufactured
2. Issuer to conduct a reasonable country of origin inquiry
regarding the origin of its conflict minerals
- RCOI process to determine whether or not their conflict minerals
originate in the DRC or adjoining countries
3. Issuer to conduct due diligence on the source and chain of
custody of its conflict minerals and provide a Conflict
Minerals Report
- if, based on its RCOI, the issuer knows or has reason to believe,
that it has necessary conflict minerals that originated in the
Covered Countries and did not come from recycled or scrap
sources.
- Only applies to those conflict minerals sourced from the DRC or
adjoining countries
RCOI – Sourcing from the DRC
• RCOI Standard – SEC Final Rules – p. 148
- “We do view an issuer as satisfying the reasonable country of origin
inquiry standard if it seeks and obtains reasonable representations
indicating the facility at which its conflict minerals were processed and
demonstrating that those conflict minerals did not originate in the
Covered Countries…These representations could come either directly
from the facility or indirectly through the issuer’s immediate suppliers,
but the issuer must have a reason to believe these representations are
true given the facts and circumstances surrounding those
representations.”
• Additional Key Passage – p. 153
- “This revised approach does not require an issuer to prove a negative
to avoid moving to step three, but it also does not allow an issuer to
ignore or be wilfully blind to warning signs or other circumstances
indicating that its conflict minerals may have originated in the Covered
Countries.
Smelter RCOI & Due Diligence
AIDA Chemical Industries
Malaysia Smelting Company
Zijin Mining
Summary• Process
• Determine necessary 3TGs
• Perform RCOI on suppliers and smelters
• Conduct due diligence on those smelters sourcing from the region
• Smelter centric due diligence
• Required by the SEC final rules
• Only required for smelters sourcing from the region
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
CFSI Impacts:
Concept to
Reality
A retrospective analysis of accomplishments of CFSI programs, including measures of compliant facilities and estimates of minerals production in the system
CFSI IMPACTS: CONCEPT TO
REALITY
Pro f . S teven B. Young
Univers i t y o f Water loo
Water loo , Ontar io , Canada
Presentation to 14th Conflict Free Sourcing Initiative (CFSI) WorkshopBurlingame, California, USA
RESEARCH PROJECT
• 3TG smelters and refineries have been
identified by the CFSI and others
• Many facilities have attained conflict-
free status
• What can we say about the fraction of
world production of 3TG metals that is
“conflict-free”?
Numbers of compliant facilities
Quantity of production from compliant
facilities
89
APPROX. VALUE OF 3TG METALS
(BILLIONS USD)
Tantalum ($0.13)
Tin ($9.8)
Tungsten ($3.9)
Gold ($150)
Source: USGS (2012), Published commodity prices
Primary production –excludes recycled production
DRC CONTRIBUTION TO TOTAL
ANNUAL PRODUCTION
91
0%
5%
10%
15%
20%
Tin Tantalum Tungsten Gold
Fraction of world production of 3TG metals from the DRC (including mining and other sources) (EICC-GeSI, 2011; WGC, 2012)
Metal production
“Bad”
WHAT IS THE AIM OF
SMELTER/REFINERY CERTIFICATION?
Provide assured
supply to
downstream
users
Grow “good”
suppl ies wi th
conf l ic t - free
sourcing
Does i t reduce
the “bad”?
92
“Good”
APPROACH & DATA
Database of 3TG faci l i t iesSmel ters and re f inery l oca t ions - mapped
Conf l ic t - f ree s ta tus t racked
Other parameters
Faci l i ty product ion est imates ( tonnes/year)
Annua l p roduct ion • S n p u b l i s he d b y i n d u s t r y
Product ion capac i ty• Ta f a c i l i t y we b s i t e s , t r a d e
d a t a , i n d u s t r y a n a l ys i s
• W – n o a n a l ys i s t o d a t e
• A u c a p a c i t i es a r e p u b l i s he d o r i m p l i e d
93
TIN SMELTERS & REFINERIES
– JAN 2014
Source: www.sbyoung.com/3TG
TIN – SOUTHEAST ASIAN
PRODUCTION
Bangka & Belitung Islands
Image: Reuters (2013)
Source: www.sbyoung.com/3TG
TANTALUM SMELTERS
– JAN 2014
Source: www.sbyoung.com/3TG
TUNGSTEN PROCESSORS
(SMELTERS) – JAN. 2014
Source: www.sbyoung.com/3TG
GOLD REFINERIES
98
DRAFT RESEARCH
PAPER
Yo u n g , S . B . ( 2 0 1 4 ) ,
R e s p o ns i b l e s o u r c i n g o f
m e t a l s : C e r t i f i c a t i o n
a p p r oac h es f o r c o n f l i c t
m i n e r a l s a n d c o n f l i c t - f r ee
m e t a l s , I n t e rna t i o na l J o u r na l
o f L i f e C y c l e A s s e s s m en t
99
DRAFT RESULTS
CFSP NUMBER OF FACILITIES
(EARLY 2014)
TANTALUM – JAN. 2014
101
0
50
100
150
200
250
300
CFS compliant non-CFS
Tantalum smelters ranked by estimated annual production (tonne Ta)
TANTALUM – SEPT. 2014
102
0
50
100
150
200
250
300
CFS compliant non-CFS
Tantalum smelters ranked by estimated annual production (tonne Ta)
No production data
TANTALUM – CIRCA 2009
Ta
~20% “ i l l ic i t ” in 2009
(B le ischwi tz 2012)
103
“Our estimation is that the value of such illicit trade comes close to $27 million annually (2009), roughly one-fifth of the world market volume for tantalum production.”
R. Bleischwitz, M. Dittrich, and C. Pierdicca, “Coltan from Central Africa, international trade and implications for any certification,” Resour. Policy, vol. 37, no. 1, pp. 19–29, Mar. 2012.
TANTALUM – ESTIMATE 2014
Ta
~10% non-compl iant
to CFSI
(2014)
104
sbYOUNG analysis
GOLD – JAN. 2014
0
200
400
600
800
1000
1200
1C
HE0
63
1C
HE0
35
1ZA
F04
91
JPN
05
81
CH
E04
51
CH
E00
41
DEU
01
81
RU
S01
61
RU
S04
41
AU
S04
61
RU
S04
71
USA
02
51
CA
N0
24
XX
X1
HK
G0
19
1H
KG
03
61
CH
N0
65
1U
SA0
37
1U
SA0
43
1C
AN
05
01
TUR
07
01
BEL
06
2X
XX
1B
RA
00
31
TUR
06
91
JPN
06
0X
XX
1TW
N0
56
1R
US0
67
1C
AN
06
41
JPN
03
91
CH
E06
81
JPN
05
71
JPN
02
81
DEU
00
11
NLD
05
11
BR
A0
61
1ID
N0
48
1D
EU0
07
XX
X1
CH
N0
23
1JP
N0
40
1JP
N0
71
1JP
N0
80
1C
HN
05
91
CH
N0
66
1U
ZB0
02
1SW
E00
91
JPN
02
2
CFSP
RJC
LBMA Responsible Gold
LBMA Good Delivery
Non-compliant
105
Tantalum smelters ranked by production capacity (tonne Au)
Long tail
ANNUAL PRODUCTION: AU
• $500 mi l l ion
smuggled f rom DRC
in 2012 (<0.2% of
g lobal product ion)
• Market assoc iat ions
cover >80% of
indust r ia l go ld
• But what is actua l
to ta l annual
product ion?
106
“Gold is now the most important conflict mineral in eastern Congo, with at least 12 tons worth roughly $500 million smuggled out of the east every year.”
Koning, R. de, & Enough Project. (2013). Striking Gold: How M23 and its Allies are Infiltrating Congo’s Gold Trade. Washington, DC.
OBSERVATION AND SPECULATION
Tanta lum
Cer t i f i ca t ion appears to
have “sh runk ” the “bad”
CFSI comp l iance i s a
marke t requ i rement
Gold
Are we mere l y ce r t i f y i ng
t he “good”?
I s the marke t s imp ly
b i fu rca t i ng?
• T h e s i z e o f t h e
“ u n r egu la t ed ” g o l d m a r k e t
i s g r e a te r t h a n a l l DRC
p r o d uc t i on
Conf l ic t - f ree sourc ing has
advanced rap id ly
number o f comp l ian t
fac i l i t i es
impac ts on commod i t y
marke ts
4 years , overa l l >1/3 of
ident i f ied operat ions are
compl iant (and growing)
Compare
Fores t S tewardsh ip
Counc i l 12% o f work ing
f o res ts i n 15 years
Round tab le on Sus ta inab le
Pa lm Oi l 14% in 4 years
107
FUTURE RESEARCH
Expanding smel ter maps
Onl ine access
Improved determinat ion of
product ion va lues
Different ia t ing sources used
at smel ters
Mined vs . recyc l i ng
Evaluat ing technology and
management barr iers and
oppor tun i t ies
Model l ing f low re la t ionships
a long the l i fe cyc le
Min ing , sme l t i ng , re f i n ing ,
manu fac tu r ing
New methodologies for l i fe
cyc le assessment and
susta inable supply -chains
Connect ing to impacts on - the-
ground
Where i t coun ts
The Conflict-Free Sourcing Initiativewww.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect
A View from the
GroundReflections and footage from recent travels in the Great Lakes Region from Peabody and Emmy Award-winning filmmaker, Paul Freedman
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