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CONFLICT MINERALS
FOCUS 21
From when do the rules apply?
Companies are required to produce a report for each calendar year, irrespective of their own fi scal reporting dates. The fi rst reporting deadline (for the 2013 calendar year) is 31 May 2014, and the reporting deadline will fall on 31 May in each subsequent year.
What needs to be done?
The fi rst fi ling deadline is only half a year away and planning should begin now. The fi rst step is to determine whether disclosure will be required and, if so, to what extent. This means establishing a strong management system that includes a compliance strategy and a methodology for identifying products that use 3TG Metals.
Industrial supply chains are inevitably complex and interrelated, so compliance will need input from many functions, including the engineering, legal, and fi nancial reporting sides of the business.
IT IS LIKELY THAT IT WILL TAKE MORE THAN ONE YEAR TO ACHIEVE FULL COMPLIANCE, BUT THE EARLIER THE PROCESS STARTS, THE LOWER THE RISK.
For this reason, it is vital that the overall strategy is developed by a cross- functional team that includes people from procurement, product design and engineering, legal, sustainability, risk management, information technology and internal audit. It is likely that it will take more than one year to achieve full compliance, but the earlier the process starts, the lower the risk.
The next step is to identify and assess risk in the supply chain by identifying suppliers of 3TG Metals (the overall strategy should aim to narrow the number of suppliers that will be evaluated as far as meaningfully possible), and designing a process of necessary due diligence for those suppliers. The due diligence process will need to be repeatable and adaptable to new suppliers through the development of standard operating procedures.
Inevitably, the level of knowledge about confl ict minerals and the ability of a company to meet the compliance requirements will vary from supplier to supplier. Therefore, the best option is to develop simple-to- use communication and training material for the suppliers that need to be evaluated. Technology to support the documentation and analysis of results from across the supply chain will also need to be identifi ed.
Producing the confl ict minerals report will need considerable input from the legal, fi nance and internal audit functions. Legal will play a key role in defi ning its contents. Finance will use its experience with the external audit process to manage the execution of the confl ict minerals audit requirements. Internal audit will work with each department to ensure that the overall process is auditable and that any areas for improvement identifi ed during the due diligence process are implemented. KPMG is already helping global automotive manufacturers to design their confl ict minerals processes.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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