Pacemakers and golf clubs aren’t exactly controversial products, but the materials used to make them are coming under scrutiny by the SEC and putting corporations and manufacturers on alert. Worldwide supply chains have experienced their fair share of challenges over the past few years, but this new regulation may require further changes in how companies source necessary manufacturing materials that fall under the category of “conflict minerals.”
In 2010, the SEC began work on a law that would require full accountability for the originating location of materials from conflict zones like the Democratic Republic of Congo, specifically "conflict minerals" such as tin, tantalum, tungsten and gold. The Securities and Exchange Commission’s web site further clarifies: “Specifically, companies would be required to disclose annually whether they use “conflict minerals” that are “necessary to the functionality or production” of a product that they either manufacture or contract to be manufactured that originate from the Democratic Republic of the Congo or adjoining countries.”
The controversy stems from violence, human rights violations and poor working conditions that surround the mining of these specific minerals within the DRC, where armed rebel groups tend to maintain control of the mines and enforce inhumane working conditions on miners. The law expands to include neighboring countries, as the DRC’s minerals frequently cross borders where they are then sent into the worldwide supply chain.
For the moment, enforcement of the SEC’s conflict minerals law has been delayed, primarily due to objections from companies that are currently ill-equipped to obtain that level of visibility into their multi-layered supply chains. Reuters reports that companies are requesting a phase-in period that will allow them to ramp up to full compliance and further consideration of exemption for products that contain only trace amounts of the minerals.
For now, the SEC appears willing to work with corporations to minimize the potentially harmful impact on the manufacturing sector, but companies will soon be required to scrutinize their supply chains to a level beyond anything that’s been required before.