green products and supply chain disruption: conflict minerals in the supply chain

Green Products and Supply Chain DisruptionConflict Minerals in the Supply ChainPresented by GreenBiz.com, Moderated by John Davies

John DaviesVP, Senior Analyst, GreenBiz Group

Andrew K. ReeseEditor, Supply & Demand Chain Executive

Scott WilsonContent Solution Strategist, IHS

Rory KingDirector, Global Product Marketing, IHS

Visit booth #103 to speak with IHS and obtain valuable resources.

Topics We’ll Cover

• U.S. Conflict Minerals Law

• Original Research on Conflict Minerals

• Supply Chain Sustainability – Risk and Reward

• Sustainability Tools Best Practices

3

Copyright © 2010 IHS Inc. All Rights Reserved.

Disclaimer

4

• The information contained in this presentation addresses complicated and fact-specific issues. In no way is any of this intended to convey legal or regulatory advice on matters discussed or implied. You should seek professional legal, regulatory or supply chain advice regarding any applicability of these matters and with respect to your company's specific circumstances.

© 2010 Supply & Demand Chain Executive


Conflict Minerals

Andy Reese

Editor, Supply & Demand

Chain Executive magazine

[email protected]

5Copyright © 2010 IHS Inc. All Rights Reserved.

mailto:[email protected]


Supply & Demand Chain Executive

6

The executive’s user manual for

successful supply and demand chain

transformation, providing analysis,

viewpoints and case studies to steer

executives and supply management

professionals through the world of

supply and demand chain enablement

to gain competitive advantage.

www.linkedin.com/in/andrewkreese

twitter.com/SDCExec

www.SDCExec.com

© 2010 Supply & Demand Chain Executive


Green Supply Chain Awards –

2010 Winners4flow AG D.W. Morgan Company Image Microsystems Penske Logistics

ADTRAN Damco International INSIGHT, Inc. PUMA

Aspen Logistics, Inc. DHL Express JDA Software Group, Inc. Ryder System, Inc.

Basware DSC Logistics Kaiser Permanente Saddle Creek Corporation

Black Diamond Equipment Ltd. e-LYNXX Corporation LeanLogistics SciQuest

Brightpoint EcoVadis LOG-NET, Inc. Source4Style

Brightstar Evergreen Line Maersk Line Spinnaker

Cargill eZCom Software Inc. ModusLink Global Solutions Strive Logistics, LLC

CaseStack Firefly Technology Corp. Murphy Warehouse Company SYSPRO

Cass Information Systems, Inc. Geodis Wilson National Retail Systems, Inc. The Timberland Company

Cathay Pacific Airways Limited Global eProcure Norfolk Southern Corporation Total Logistic Control

Celestica Global4PL Supply Chain Services Novartis Animal Health Trade Wings

CHEP Equipment Pooling Systems Half Price Books Novation Transplace

Cisco Systems Horizon Lines, Inc. OB10 Unisource Worldwide

Container and Pooling Solutions ID Label, Inc. OfficeMax Wallenius Wilhelmsen Logistics

Converge IHS Inc. Omnify Software Watson Land Company

YRC Worldwide

© 2010 Supply & Demand Chain Executive 7

The Country

8© 2010 Supply & Demand Chain ExecutiveVisit booth #103 to speak with IHS and obtain valuable resources.

Democratic Republic of

the Congo (DRC)

12th largest country in size

71 million people (18th largest)

GDP: $22 billion

The Country


Democratic Republic of

the Congo (DRC)

12th largest country in size

71 million people (18th largest)

GDP: $22 billion

Rich in natural resources

The Conflict

1996-1997 - First Congo War

1998-(2003) - Second Congo War

Eight African nations

25 armed groups


The Impact

5.4 million people dead

>1,000 people still dying daily

Forced labor

Child labor

Widespread sexual violence


The Law – History in Brief

Bills on conflict minerals

introduced in 2009

Dodd-Frank Wall Street Reform

and Consumer Protection Act of

2010

Signed into law on July 21, 2010

Section 1502: Conflict Minerals

12Visit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive

The Law – Provisions in Brief

Does not ban the minerals

Imposes new reporting

requirements

Annual disclosures to the SEC

Due diligence requirements

Audit / certification

requirements

13Visit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive

The Minerals

Cassiterite (tin)

Columbite-tantalite

(coltan, tantalum)

Wolframite (tungsten)

Gold

Or their derivatives

“And other minerals ...

financing conflict in

the DRC.”

14© 2010 Supply & Demand Chain Executive


Our Research Study

Objectives:

Understand awareness of Conflict Minerals issue and Dodd-Frank

legislation, and benchmark preparedness to meet law’s requirements

Assess supply chain exposure to pending legal requirements

Identify strategies for dealing with Dodd-Frank across the supply chain

Research Period:

Conducted: July – September 2010

Practitioner Peer Review and Report Preparation: October 2010

Survey Methodology:

Online surveys

Interviews and peer review

Participants:

190 Global Manufacturing & Non-Manufacturing Organizations

77% US, 23% Non-US

15


Key Findings of Original Research on Conflict Minerals

Scott Wilson

Content Solution Strategist,

IHS Inc.

[email protected]



“Innovation, Security, & Risk” by IHS Inc, featuring Supply & Demand Chain Executive

Visit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved.

IHS – A leading information provider

Energy &

Power

Design &

Supply Chain

EHS &

Sustainability

Defense, Risk &

Security

Country & Industry

ForecastsCommodities,

Pricing & Cost

• Employs 4,400 colleagues in 30 countries who

speak 50 different languages

• IHS customers include nearly 70% of the US

Fortune1000 and 80% of the Global Fortune 500

• Tens of thousands of customers and hundreds

of thousands of end-users in over 100 countries

Founded in 1959, IHS is a leading source of

information and expert analysis in pivotal areas

shaping today’s global businesses

• Public (2005), NYSE IHS

• FY10 revenue: $ 1,075 million


Yes –Aware

No – Not aware

45%

55%

Modest Awareness of the Bill Passing

Only slightly more than half of those surveyed were aware of this conflict minerals law.

Q: Were you aware that Conflict Minerals were signed into this law?

18


Coltan (tantalum)

Cassiterite (tin)


Gold

Coltan (tantalum)

Cassiterite (tin)


Gold

Coltan (tantalum)

Cassiterite (tin)


Gold

Coltan (tantalum)

Cassiterite (tin)

Wolframite (tungsten) Gold

More than one third of respondents use a significant amount of tin and gold today (42% tin and 34% gold, respectively).

Extent of Each Mineral or Derivative Used

None Used (35%)

Don’t know (11%)

Minimal Use (26%)

Moderate + Extensive Use (29%)

55%

19


Difficulty Identifying Minerals and Source

42% 29%

22%7%

Simple to Very Simple

Very Difficult

Moderately Difficult

Somewhat Difficult

93% of respondents believe that identifying these minerals and their origins will not be easy.

Q: Your Company will find indentifying these minerals and their origin as:

20


Supply Chain Impact vs. RoHS/REACH

Lower

33%

Higher

16%

About the same

21%

Unsure

30%

Compared with EU RoHS /

REACH Environmental

Compliance, what Impact will

Conflict Minerals have on the

Supply Chain?

“Requirement to report

annually to the SEC

and to submit a due

diligence plan (audited

and certified by an

independent 3rd party)

will generate more

high level attention

compared to

RoHS/REACH issues.”

- Supply Chain Professional

Opinions are almost equally divided on how Conflict Minerals compares with the impact of RoHS/REACH on the supply chain. A combined 37% say it will have the same or higher impact, 33%

say it will have less of an impact, and almost a third are unsure.

Q: Compared to RoHS/REACH, what impact will Conflict Minerals have?

21


Gap: Supply Chain Visibility and Control

Consider hazardous substances (e.g. lead in paint, EU REACH, EU ROHS), security and IP issues (e.g. ITAR/EAR and counterfeit parts), or issues like conflict minerals.

Q: What % of your materials are fully controlled and traceable to their origin today?

3.9%

11.7%

5.2%

0.0%

3.9% 3.9% 2.6%5.2% 3.9%

10.4% 9.1%

5.2%

35.1%

0%

(none)

1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-99 100% (all

of it)

Don't

know / couldn't

tell~ 1 of 4 surveyed have visibility

to < 40%

~ 1 in 4 surveyed have

visibility to 80%+

22


13%

3%

37%

28%

24%

9%

11%

Doubts of enforcement or regulation

Disbelief that this will achieve the intended …

Technical feasibility of compliance (practicality …

Cost of compliance (complexity, time, …

Lack of tools/third parties/services to …

None of the above

Other (please specify)

Q: What two (2) are most likely to PREVENT your company from acting immediately on this regulation?

Barriers to Action Today

Technical feasibility to track and trace these materials, followed by cost of compliance and lack of third party enablers, are top obstacles to immediate preparation by companies surveyed.

23


42.5%

5.8%

10.8%

10.0%

38.3%

3.3%

9.2%

2.5%

2.5%

Need to comply

Fear of market share loss to Conflict Free peers

Risk to brand from negative exposure

Continuity of supply risk / assurances

Customer requirements or requests for …

Opportunity for competitive advantage

Positive brand exposure of responsible …

None of the above

Other (please specify)

Drivers for Action Today

Q: What two (2) needs, risks, or benefits will likely INITIATE ACTION at your company?

At 42.5% and 38.3% respectively, regulatory compliance and customer requests largely outpace any other business needs, risks, or benefits to initiate action among companies surveyed.

24


Key Findings -

25

Conflict Minerals in the Supply Chain

• Moderate but growing level of awareness

• Mineral use extensive and critical among companies

• Difficulty for companies to identify use and exposure

• Preparedness low; disclosure requests materializing

• Cost and technical feasibility prevent action

• Compliance and customers will drive action


Taking Action – Get Started

26

Conflict Minerals in the Supply Chain

1. Get an understanding of the issue

2. Get involved in industry

3. Assemble and engage the organization

4. Assess your IT landscape

5. Simulate your response


Environmental Sustainability Tools –Best Practices

Rory King

Director, Global Product Marketing

IHS Inc.

[email protected]



Copyright © 2010 IHS Inc. All Rights Reserved. 28

EU RoHS Recast

EU REACH & SVHCSIN List - Substitute It Now!

US California Proposition 65

EU Battery DirectiveENERGY STAR

ISO 14064 GHG Standards Norway PoHS

Carbon Disclosure Project (CDP)

Electronic Product Environmental

Assessment Tool (EPEAT)

Japan Green

Priority Declarable Substances List

(ASD PDSL)

Environmentally Preferred Products (EPP)

Regional Greenhouse Gas Initiative (RGGI)

PCF - Product Carbon Footprint

UN Stockholm Persistent

Organic Pollutants (POPS)

US FDA

China RoHS

Thailand’s “RoHS”

US EPA Executive Orders

Toxic Substances Control Act (TSCA)Health Canada / Canada’s Chemical

Management Plan

Customer RFP

Full Material Disclosure

Product Content Disclosure

Lifecycle Assessment (LCA)Water

Hazardous

Substances

Energy

Waste

DEHP-Free

Bisphenol-A “BPA Free”

Volatile Organic Compounds

Air Safety

Health

Security

Natural Resources

Argentina RoHS

EU RoHS and WEEE

Directives

Greenpeace

EU Medical Device Directive

EU RoHS and WEEE

Directives

Every Green Issue has a Discontinuous EffectDisruptive ripple effect throughout global supply and demand balance

Conflict Minerals


Market Shift

to EU RoHS

Our Insight Shows Lifecycle Impact of EU RoHS2M+ new parts. Major part changes. Cause of over 20% EOL in „06-07.

2003 2004 2005 2006 2007 2008 2009

End of Life (EOL)

Specific to RoHS/Pb-free Environmental Compliance

2003 2004 2005 2006 2007 2008 2009

New Product Introductions (NPI)


2003 2004 2005 2006 2007 2008 2009

Product Change Notices (PCN)


NPI

EOL

PCN

RoHS in Force July 1, 2006


Past: 6 Substances Were Very “Costly”Discontinued parts lead to shortages which lead to counterfeit parts

Tin Whisker Images Courtesy of the NASA

COMPLIANCE (explicit)

Fines, Penalties, Recalls, Data, IT, Supplier Evaluation….

SUPPLY CHAIN & DESIGN COSTS

Obsolescence, Supplier Viability, Material Shortages, Continuity

PRODUCT PROFITABILITY COSTS

Price Variance, Manufacturing Processes, Inventory/LTB…

SAFETY & SECURITY COSTS

Reliability, Tin Whiskers, Counterfeits…

Japanese Electronics OEMRecall

Regulatory event = $160M+ government seizure of 1M+ product units due to high cadmium concentration levels found in system cables suspected to violate EU law.

US Consumer Products OEM

Recall

Design reliability = $1B+ recall logistics, warranty extensions, excessive rework/repair, while customer loyalty dipped to resolve reliability issues causing hardware failure.

Counterfeits and Inferior Grade Components

Source: UK MOD


Present: EU REACH is a Huge DealEuropean Commission roadmap includes 106 priority SVHC by 2012

31

Source: “EU and industry REACH different conclusions”, Jane’s, September 2009

“Airbus UK’s director of operations and compliance, said the cost of REACH had been evaluated at several million Euro over three

years, with provisions up to hundreds of millions of Euro over five years”…

“…*He+ said there is a level of ambiguity because it will depend ‘on the substances that will finally be added to the candidate list and

in Annex XIV’. Airbus UK has set its 2009 REACH budget at some EUR12 million.”

http://www.janes.com/


Future: The Next Shoe(s) Have Dropped…

U.S. Conflict Minerals Law:Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law on July 21, 2010.

Is BPA (Bisphenol-A) Next? Kaiser Permanente’s October 28, 2010 research announcement concluding, “Exposure to BPA Associated with Reduced Semen Quality.”


Entire Peer Groups Are ConcernedLast October, we held a Webcast called “Redesigning Medical Supply Chains”

… and only 1 did not attend our webcast…

Over $80B in spend among the Fortune 1000…

Sustainability Tools –Best Practices from the Congo’s ICGLR

Lessons Learned from Africa’s International Conference on the Great Lakes

Region (ICGLR) response to Conflict Minerals legislation can illustrate best

practices in approaching supply chain sustainability, specifically risk/reward.

34

About the ICGLRMember States: Angola, Burundi, Central African Republic, Republic of Congo, Democratic Republic of Congo, Kenya, Uganda, Rwanda, Sudan, Tanzania, and Zambia.

Mission: To be an effective and dynamic institution which: Coordinates; Facilitates, Monitors and Ensures the implementation of the Pact and other initiatives, in order to attain peace, security, stability and development in the Great Lakes Region.

35

SUPPLY SHOCK: “New US legislation regarding “conflict minerals” from the

Democratic Republic of Congo (DRC) is likely to push up the price of tantalum

oxide as it could lead to a supply squeeze, Africa-focused Globe Metals &

Mining…”Mining Weekly, July 2010

DEMAND SHOCK: “Compliance and our reputation as an ethical

company [is our risk exposure]. Our benefit is to make our customers’

lives easier. End consumers shouldn’t be burdened with the task of

discerning which products are ethical.”Supply & Demand Chain Executive, November 2010

Public Pressure Turned ‘Shocking’

#1 Act Immediately: Design Cycles Exceed Regulatory Timelines in Most Scenarios

37

#2: Continuity as Supplier to Market, not “Compliance”, is Your Business Case

38

#3: A Platform of Transparency is Key in the Sustainable Supply Chain Generation

39

#4: Standardizing Supply Chains Lowers Risk and Cost; Improves Time-to-Market

40


Not merely “Compliance” but…

… a matter of continuity and survival

as a supplier to global markets.

CONCLUSION


For more resources, visit - http://bit.ly/SDCEconflict1104

John DaviesVP, Senior Analyst, GreenBiz Group

Andrew K. ReeseEditor, Supply & Demand Chain Executive

Scott WilsonContent Solution Strategist, IHS

Rory KingDirector, Global Product Marketing, IHS

www.greenbiz.comwww.ihs.com

www.sdcexec.com

http://www.greenbiz.com/



http://www.ihs.com/

http://www.sdcexec.com/

green products and supply chain disruption: conflict minerals in the supply chain

Business

supply chain exposure

supply demandchain executive

successful supply

world of supply

supply chainpresented

demand chain enablement

demand chain transformation

green supply chain awards