a cfsi update for the 2016 conflict minerals compliance year

A CFSI Update for the 2016 Conflict Minerals Compliance Year

December 14, 2106

ADVANCED SUPPLY CHAIN COMPLIANCE SERIES

Michael Littenberg

Michael R. Littenberg Partner T +1 212 596 9160 F +1 646 728 2554 [email protected]

Michael Littenberg is a partner in the securities & public companies practice group at Ropes & Gray.

As part of his practice, for more than 25 years, Michael has been active in advising leading public and private companies on supply chain and corporate social responsibility matters, including relating to, among other areas, anti-human trafficking and conflict minerals and other commodities, and he is widely viewed as the leading practitioner in this emerging area.

Michael advises a significant number of companies on compliance with the US Conflict Minerals Rule, the pending EU Conflict Minerals regulation, the California Transparency in Supply Chains Act, the UK Modern Slavery Act, the FAR anti-human trafficking rule, REACH, RoHS and other supply chain regulations. Michael advises clients on, among other things, disclosure and compliance with legal requirements, the construction and implementation of compliance programs, mitigating customer, litigation, NGO and socially responsible investor risk and in their interactions with these constituencies.

Michael was previously a partner at Schulte Roth & Zabel.

The Conflict-Free Sourcing Initiative www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Conflict-Free Sourcing Initiative: Progress and Updates December 14, 2016

The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 2

2008 2014 2016 2017 MEMBERS 65 200 350 ?

COMPOSITION Electronics Multi-industry Multi-industry Multi-industry

DRIVERS NGO DFA, OECD DFA, OECD, EU, China, NGO, Members

DFA, OECD, EU, China, NGO,

Members, SRIs +

MINERALS tin, tantalum, cobalt 3TG 3TG 3TG +

GEOGRAPHIC SCOPE DRC Covered Countries Global CAHRAs Global

RISK SCOPE Conflict Conflict OECD Annex II risks

OECD MNE Guidelines, UN

Guiding Principles

RECOGNITION New initiative Dodd-Frank Compliance Global 3TG Due Diligence

Global Raw Materials Due Diligence

Evolution of an Initiative…

The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect 3

AIAG, JEITA, USFIA, VDA

Assent Compliance, Gensuite, iPoint, Source Intelligence, Total Parts Plus


2010 2011 2012 2013 2014 2015 2016Au 0 0 11 31 56 78 89W 0 0 0 1 9 29 40Sn 0 0 3 9 22 56 65Ta 2 10 15 23 43 46 47Totals 2 10 29 64 130 210 241

0

50

100

150

200

250

300

Num

ber o

f Com

plia

nt S

mel

ters

YOY Trend of CFSP Compliant Smelters

5

Smelter/Refiner Participation

The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ta 2015 Ta Today Sn 2015 Sn Today W 2015 W Today Au 2015 Au Today Total2015

TotalToday

Active Compliant Other

Smelter/Refiner Research


324, 12%

719, 26% 1690,

62%

2015

Eligible Alleged Not Eligible

319, 11%

471, 16%

2,175, 73%

2016

Eligible Alleged Not-Eligible

OECD Alignment Assessment Objective • To evaluate the alignment of industry programmes’ standards and systems with the

OECD Guidance • To evaluate the alignment of the industry programmes’ implementation efforts with

the OECD Guidance Tools and results • Methodology (assessment tool and instructions) – available online • Report on assessment of industry programmes (Q1 2017)

New CFSP Protocol Components Scope

– Includes all OECD Annex II risks – Level 3 conflict-affected and

high risk areas, including but not limited to Covered Countries

Key areas of focus

– Internal Management Systems – Identification and assessment of

supply-chain risk(s) – Risk management – Public reporting on supply-chain

due diligence The Conflict-Free Sourcing Initiative | www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect 8

OECD Due Diligence Guidance Application for CFSP Audit

Step 1: Strong Management Systems

All smelters

Step 2: Identify and assess supply-chain risk(s)

All smelters

Step 3: Risk Management Only if Step 2 identified risks

Step 4: Third Party Audit of Due Diligence

Conducted by the CFSP

Step 5: Reporting on Due Diligence

All smelters

System Strengthening and Support

• EICC Foundation

• Support upstream due diligence systems initiation and continual improvement

• Leverage public funding for development of publically-available resources

• Grievance Mechanism


Plausibility….3TG Production Figures by Country

• Production volumes by metal and country –Minerals UK, USGS, TIC, ITRI, TI-CMC, World Gold Council, etc.

• Useful for: – CFSP for additional cross-checks of

audit data and macro-analysis of material flows

– Auditors for review of Country of Origin information


Upstream Incident Review Process


• Raising awareness about upstream incidents, reporting processes, and outcomes to companies further downstream

• Facilitating active involvement of supply chain actors to encourage attention

and action around key trends and issues, at the appropriate level

• Generating discussion by international actors from industry, civil society, government and international organizations

NEW! Risk Readiness Assessment

• EICC/CFSI roll-out in 2017 • Identifies risks in upstream

supply chains • Inform the use of

appropriate standard(s) • Support risk-based

reporting • Align industry efforts to

leverage collective action

12

NEW! Responsible Raw Materials Initiative

• Mining is an intensive process involving potential social & environmental risks

• Growing body of research points to risks beyond the tin, tungsten, tantalum and gold (3TG)

• Governments, NGOs, investors, customers and other stakeholders are increasing their expectations on private sector

• The “downstream” voice lacks organization creating the opportunity for a new type of initiative in this space

• Launched at the EICC/CFSI 2016 Annual Conference

• Developed in collaboration with informal EICC and CFSI member work group and input from external stakeholders

• Purpose is to prioritize and act on salient responsible raw material sourcing issues for the industry

• EICC/CFSI members join with non-binding ‘Declaration of Support’

Responsible Raw Materials Initiative (RRMI)

15

Attribute RRMI Mineral scope All metals and minerals Risk scope All risks

Geographical scope All geographies

Core objective Organize the demand (downstream) voice for responsible mining

Annual Funding Requirement Free with EICC or CFSI membership

Membership Composition Private sector membership with stakeholder advisory group

Participating entities (as of Nov 29, 2017) 17 companies

Responsible Raw Materials Initiative (RRMI)

• We have an opportunity and responsibility to include prioritized raw materials in our responsible sourcing strategies.

• We acknowledge the challenges of achieving a state where industry can collectively understand and agree to its part in advancing responsible sourcing of raw materials.

• We support the RRMI‘s goal of understanding and contributing to mitigating the salient social and environmental impacts of extraction and processing of raw materials in supply chains.

• Contact Bob Mitchell for more information: [email protected]

RRMI Supporting Principles

mailto:[email protected]

Downstream companies within the tin, tantalum, tungsten and gold supply chains who seek validation of their sourcing practices yet are not eligible to participate in

the Conflict Free Smelter Program (CFSP).

NEW! CFSI Downstream Audit

Procures 3TG products to transform, process or treat

the material. Not considered a “smelter” or “refiner” under the CFSP

Audit Protocol.

Trade 3TG products without transforming, processing or

otherwise treating the material and who do not include the

material in a product.

Sources 3TG products indirectly from smelters

or refineries to be used in the company’s products.

CATEGORY ONE CATEGORY TWO (To be developed)

CATEGORY THREE

Processor Trader Manufacturer


Determination of Scope • The audit reviews the company's process to

determine the products and suppliers included in the effort to identify smelters and refineries in the supply chain to confirm that the scope is correctly defined.

Supplier Management (category 1 and 2 only) • An assessment of the process to select, approve and

monitor suppliers of 3TG or products containing 3TG.

• Review of a sample of supplier files to confirm the implementation of the process.

Supply Chain Transparency (category 1 and 2 only) • Review the process to monitor transactions of 3TG

received and to maintain adequate documentation to confirm the origin of 3TG or 3TG containing product.

Due Diligence • An assessment of the company's

management systems, risk assessment and risk mitigation process.

CMRT Review (limited to company CMRT for category 1) • The audit reviews the process to gather,

review supplier CMRTs. • An assessment of the process to follow up

and address any and all reporting errors in supplier CMRTs.

• Review of the process to aggregate supplier data and prepare the company's own CMRT

Audit Activities

Meet customer requirement to demonstrate responsible sourcing practices

Streamline conflict minerals audit requests

Provide independently validated information to downstream customer on due diligence activities

Prepare for the upcoming EU regulation

Improved due diligence systems facilitate responsible sourcing practices

International recognition by being listed on public registry

CFSI Downstream

Audit Program

What are the Audit Benefits?

Interested downstream companies and auditors please contact:

Hillary Amster CFSP Audit Program Manager

[email protected]

Michèle Brülhart Head of Auditing, RCS Global

[email protected]



2017 Strategic Priorities

20

Key Priority Area Examples

Market Acceptance - Program Credibility

OECD Conformance ISEAL Full Membership Grievance Mechanism

Upstream incident review process (iTSCi)

Audit Programs and Workgroups

Online audits Public reporting

Due diligence training leadership Downstream Audit Program (EU market applicability)

Partnerships and Public Affairs Bridge to needs in European Union and China EPRM, PPA, iTSCi, BSP, etc.

Effectiveness, Success, Impact Audit and supply chain data analytics Monitoring and evaluation of new metrics and KPIs

Business Model - Financial Sustainability Increasingly diversified and growing member base Rebranding to reflect scope of program

Emerging Issues Responsible Raw Materials Initiative Enhanced risk identification and assessment tools

http://www.conflictfreesourcing.org/conflict-free-smelter-program/grievances-and-complaints-mechanism/

http://www.conflictfreesourcing.org/additional-training-and-resources/downstream-program/

http://www.eiccoalition.org/initiatives/rrmi/?utm_source=website&utm_campaign=RRMI_announcement&utm_medium=banner&utm_content=eicc

WORKGROUP REGULAR CALLS

CFSI PLENARY BODY 3rd Wednesday 11:00 AM, Monthly

CFSI MULTI-STAKEHOLDER GROUP 1st Monday 11:00 AM, Monthly

MARKET ACCEPTANCE TEAM Tuesday 11:00 AM, Twice a Month

GOLD TEAM 3rd Tuesday 12:00 PM, Monthly

CMRT TEAM Wednesday 12:00 PM, Twice a Month

SMELTER DATA MANAGEMENT TEAM Wednesday 3:00 PM, Twice a Month

SMELTER ENGAGEMENT TEAM Thursday 2:00 PM, Twice a Month

DUE DILIGENCE PRACTICES TEAM Friday 11:00 AM, Twice a Month


The Conflict-Free Sourcing Initiative www.conflictfreesourcing.org | @EICCoalition | @GeSIConnect

Thank you Contact: [email protected]

QUESTIONS & ANSWERS

a cfsi update for the 2016 conflict minerals compliance year

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