Deadline is approaching for SEC's conflict minerals law
The U.S. Securities Exchange Commission’s (SEC) conflict minerals rule, the rule that requires companies to file disclosures informing investors whether their products contain certain "conflict minerals" from the Democratic Republic of the Congo (DRC) goes into effect on May 31. However, a recent report from PricewaterhouseCoopers (PwC) found that just 4 percent of 700 companies surveyed are in compliance with the rule.
PwC surveyed companies in 15 industries and found that 90 percent are not ready with a substantive draft document. Conflict minerals compliance "has proven more intensive" than anticipated, PwC said in its report.
Industry groups have challenged the rule and a U.S. appeals court continues to weigh whether to strike down the conflict minerals rule after industry groups challenged it.
The SEC's conflict minerals rule stems from a provision in the 2010 Dodd-Frank Wall Street reform law.
Human rights groups convinced lawmakers to tuck in the provision, in an effort to empower consumers who want to avoid products that encourage mining in areas gripped by rebel violence and humanitarian conflict.
The measure requires companies to determine if certain types of minerals, in products such as laptops and car parts, may have originated from the DRC region.
The results of the inquiry into the minerals' origin also must be disclosed to the SEC and posted on company websites.
The findings in PwC’s survey help bolster some of the complaints made by the business groups that filed a lawsuit against the SEC to challenge the rule.
The U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers are among the groups that contend the rule imposes far too many costs.
They claim it is too difficult for companies to trace the origins of very small amounts of minerals used in manufacturing through the supply chain, Reuters reported.
If there is a reason to believe some of the minerals came from the DRC region, then companies must also retain outside auditors and conduct further due diligence.
The survey found that 62 percent of companies that responded to the survey needed to devote one to two full-time staffers to help deal with conflict minerals compliance.
The sectors that have made the most progress so far in performing due diligence checks are technology, energy and metals, PwC said.
At the same time, however, some data in the survey may also back up the arguments of human rights groups that support the rule and say it is needed.
For instance, the extensive amount of compliance and the business risks from the SEC's rule have led more companies to try and source their minerals elsewhere, the survey said.
Forty-five percent of the respondents told PwC they plan to be conflict-free so their revenue does not take a hit.