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Training on conflict minerals reporting
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Conflict Minerals Supplier TrainingJanuary 2013
GPO-GPO-4-359-0
Table of Content
I. Overview of Conflict Minerals
II. Complexity of minerals supply chain
III. Leading Industry Initiatives
IV. Flextronics’ Conflict Minerals Policy
V. Flextronics’s Conflict Minerals Due Diligence Procedure
VI. Explanation and Preparation of conflict Minerals Reporting
2
VI. Explanation and Preparation of conflict Minerals Reporting Template
VII. Glossary
Overview of Conflict Minerals
3
Overview of Conflict Minerals
� Exploitation and trade of conflict minerals
originating in the Democratic Republic of theCongo (DRC) is helping to finance conflict
characterized by extreme levels of violence in
the eastern DRC. This conflict has claimed
more than 5.4 million lives since it began in
the late 1990’s.
� Mining activity is crucial to the DRC economy.
4
� Mining activity is crucial to the DRC economy.
However, some mines are controlled by
militant groups causing serious social and
environmental issues in the region:� Serious human rights abuses, theft, extortion
� Violence over control and taxation of mineral
resources
� Forced and child labor
� Limited development options ->artisanal and
small-scale mining
� Conservation impact, deforestation, etc.
Overview of Conflict Minerals
What is DRC conflict-free?
“DRC conflict-free” is defined to mean the products that do not contain
[conflict] minerals or their derivatives determined to be directly or indirectly
financing or benefit armed groups from affected countries:
� Democratic Republic of the Congo (DRC)
� Central Africa Republic
�The Republic of the Congo
�Tanzania
5
� Central Africa Republic
� The Republic of
� South Sudan
� Zambia
� Angola
�Tanzania
�Burundi
�Rwanda
�Uganda
Overview of Conflict Minerals
Dodd-Frank Act: Section 1502 Conflict Minerals provision B
ackgro
und
• The U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Act), which was signed into law on July 21, 2010. Section
1502 of the Act is a provision related to sourcing ―conflict minerals.
• The intent of the provision is to deter – through increased transparency of
companies‘ sourcing practices – the extreme violence and human rights
violations in the Democratic Republic of Congo (DRC) and neighboring countries
6
Backgro
und
violations in the Democratic Republic of Congo (DRC) and neighboring countries
funded by the exploitation and trade of certain minerals.
•Section 1502 instructs the U.S. Securities and Exchange Commission (SEC), in
consultation with the U.S. Department of State, to promulgate regulations
requiring certain companies to submit annually a description of measures taken
to exercise due diligence on the source and chain of custody of Conflict
Minerals. SEC issued final Conflict Minerals reporting rules on August 22, 2012.
Overview of Conflict Minerals
Conflict Minerals Implementation Timeline
July 21, 2010
• The Act signed into law
• Mandated that the SEC promulgate final Section 1502 implementation rules by April 15, 2011
December 15, 2010
• The SEC issues proposed implementation rules
• Public comment period opens
August –December 2011
• The SEC extends date for issuing final rules
• The SEC holds a Roundtable: October 18, 2011
• The SEC defers final rules until
August 22, 2012
• SEC approved final rules requiring public companies to report on their use of “Conflict Minerals”
7
Exchange Act Section 13(p)(1)(A), Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ―Act‖) amends the
Exchange Act by adding new Section 13(p).
15, 2011 final rules until 2012
Disclosure requirement:
� All issuers will file Form SD and Conflict Minerals report for the calendar year
from January 1 to December 31 regardless of the issuer’s fiscal year-end.
� First Form SD disclosure report by 31 May 2014 (for the 2013 calendar year)
� Annually by May 31 for each calendar year thereafter.
Overview of Conflict Minerals
SEC Disclosure Rule
SEC‘s Proposed* Steps for Section 1502 Disclosure
Determine whether compliance is required
Determine origin of conflict material and resulting
disclosureReport conflict minerals
Company must comply with
Section 1502 if:
•It files reports with SEC under the
Exchange Act and;
•Conflict minerals are ―necessary to the functionality or production‖ of a product
If Section 1502 applies, company
must perform a ―reasonable country of origin inquiry to
determine whether conflict minerals
originated in DRC countries
If conflict minerals did not originate from DRC or are DRC-
If company meets requirements in
previous column, it must:
1.Conduct supply chain due diligence,
Organisation for Economic Co-
operation and Development’s (OECD) standards considered good starting
point by SEC
8
(*) SEC Proposed Rule Release No. 34-63547, Conflict Minerals. (**) That is, products containing conflict minerals that do not ―directly or indirectly finance or benefit‖ armed groups in the DRC countries.
production‖ of a product
manufactured or contracted to be manufactured by the
company/issuer
−Provision applies even if the
mineral is not present in the end
product
originate from DRC or are DRC-
conflict free:**
•Disclose conclusion and how
determined in annual report
•Post disclosure on Web site,
provide Web address in annual
report
If conflict minerals originated from DRC countries or issuer is unable to determine if minerals
are DRC-conflict free:
•Disclose conclusion in annual
report and Web site.
point by SEC
2.Create and post on its Web site a
Conflict Minerals Report , includes:
•Description of due diligence performed
•Description of the products
manufactured and facilities where DRC
materials used
•Certified independent private sector
audit report
2.Obtain an independent private sector audit (part of due diligence).
3.Furnish report as exhibit to annual
report on Form 10-K
4.Disclose auditor‘s conclusion in
annual report
Overview of Conflict Minerals
What are conflict minerals?
�Cassiterite (tin ore), wolframite (tungsten ore), coltan (tantalum ore) and gold
�Often refer as 3TG (Tin, Tantalum, Tungsten and Gold)
�Originated from the Democratic Republic of Congo or an adjoining country
�The Chart below shows the percentage of Conflict Minerals Supplied from
DRC:
9
Overview of Conflict Minerals
Columbite-tantalite (coltan) � refined into Tantalum (Ta) :
First conflict mineral – spiked by growth in cell phone industry
Used in :
Electronic components, including mobile telephones, computers, videogame consoles, digital cameras, as alloy for making carbide tools and jet engine components.
Cassiterite � refined into Tin (Sn) :
Primary funding source of rebel groups
Used in :
Alloys, tin plating and solders for joining pipes and electronic circuits
10
Wolframite � refined into Tungsten (W) :
DRC is worlds 5th largest producer for this mineral.
Used in :
Metal wires, electrodes, and contacts in lighting, electronic, electrical, heating and welding applications
Gold (Au) :
Used in :
Making jewelry, due to its superior electric conductivity and corrosion resistance, is also used in electronic, communications and aerospace equipment.
Complexity of Minerals Supply Chain
11
Complexity of Minerals Supply Chain
The number of sources for metals used in a given product can vary over the life
of a product. This is a simplistic view of a supply chain where material flows
downstream to the retailer. More entities typically exist from mine to retailer.
Upstream2 - Mineral supply
chain from Mine to Smelter
Downstream2 - Mineral supply chain from
Smelter to Retailer
12
chain from Mine to Smelter Smelter to Retailer
Notes:1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive2Upstream and downstream as defined by the OECD guidance.
Complexity of Minerals Supply Chain
Conflict Minerals Due diligence mechanisms approach
In-Region Sourcing Conflict Free Smelter Program Due Diligence
MINE SMELTER/REFINERY OEMS
Upstream Due Diligence Downstream Due Diligence
13
Notes:1CM – Contract Manufacturer, PCB – Printed Circuit board assembler, Semi Con – Semiconductor fabricator, ODD – optical disk drive
Multi-Stakeholder collaboration
to verify DRC conflict-free
smelters
•Conflict Free Smelter (CFS) assessment•In-Region Sourcing program
ICGLR’s mineral tracking & certification BGR’s certification & mineral fingerprinting
Companies can ensure CFS smelters
are used in their supply chain
Company Due Diligence: •Establish Management System•Conduct supply chain risk assessment•Report results
Leading Industry Initiatives
14
Leading Industry Initiatives
Responsible Supplier Chain Management
International multi-stakeholder efforts are converging to put an end to conflicts in
the DRC. Many in civil society, nongovernmental organizations (NGO’s),
governments and industry are calling for companies to respect human rights
and ensure they do not contribute to the conflict.
In December 2010, the international
‘Organization for Economic Co-Operation and
Development’ (OECD1), produced a document:
15
“Due Diligence Guidance for
Responsible Supply Chains of
Minerals from Conflict-Affected
and High-Risk Areas and the
Supplement on Tin, Tantalum
and Tungsten2”, through its 3working group on due
diligence in the mining and
minerals sector.
The purpose of the
guidance is to help
companies avoid fuelling,
facilitating or exacerbating
conflict through their
sourcing practices or
contributing or being
associated with serious
human rights abuses.
1OECD: Organization for Economic Co-operation and Development (www.oecd.org); 2www.oecd.org/dataoecd/13/18/46068574.pdf; 3 www.oecd.org/daf/investment/mining
Leading Industry Initiatives
1. Establish Strong
Management Systems
2. Identify & Assess Risks
3. Design & Implement
4. Conduct Independent Third-Party
Audit
5. Monitor & Report
Strong Company Management System: •Adopt a company policy for the supply chain of minerals originating from
Identify and assess supply chain risks: •Identify risks in supply chain through supplier analysis to determine source of 3TG metals, down to smelter and mining
Design and implement strategy to respond to risks: •Report findings of supply chain risk assessment •Adopt risk
Conduct audit: •Conduct audit of due diligence practices
Monitor and Report Findings: •Publish results of supplier due diligence in annual report and on corporate website (end of first fiscal
OECD Due Diligence Guidance for Responsible Supply ChainsGuidance : 5-Step Framework for Implementation
16
conflict-affected and high-risk areas. •Structure internal management to support supply chain due diligence •Establish a system of controls and transparency over the mineral supply chain •Strengthen company engagement with suppliers
region •It is expected that companies engage with industry led efforts leveraging relationships in order to identify smelters/refiners in supply chain and assess due diligence practices or identify through industry validation schemes. •Assess risk of adverse impacts in light of supply chain policy
management plan, including risk mitigation efforts such as suspending trade with certain suppliers. •Monitor track performance of risk mitigation efforts
(end of first fiscal year after date of SEC final ruling) •Consider also expanding scope of sustainability or corporate social responsibility report.
Leading Industry Initiatives
�The *EICC and *GeSI are committed to improving conditions in the electronics
supply chain, and mining activities that fuel conflict are unacceptable.
� The EICC and GeSI joint working group aims to enable companies to source
conflict-free minerals through actions including:- Implementing Conflict-Free Smelter and Due Diligence programs to verify
Electronics Industry Citizenship Coalition (EICC) and
Global eSustainability Initiative (GeSI)
17
- Implementing Conflict-Free Smelter and Due Diligence programs to verify
conflict-free minerals down the supply chain to OEMs
- Supporting in-region sourcing schemes to enable future legitimate trade from
DRC and surrounding countries
- Supporting OECD due diligence guidance and pilot
- Engaging with stakeholders for collaboration and efficiency
- Supporting individual company’s assurance processes through information sharing,
standard tools and templates.*EICC: Electronics Industry Citizenship Coalition (www.eicc.info)
*GeSI: Global e-Sustainability Initiative (www.gesi.org)
Leading Industry Initiatives
The EICC/GeSI extractives workgroup will provide updated information, tools
and resources as needed to the website: http://www.eicc.info/extractives.htm
EICC - GeSI commitment on conflict minerals
18
Flextronics’ Conflict Minerals Policy
19
Flextronics’ Conflict Minerals Policy
� This is Flextronics Corporate Policy supporting Electronic Industry Citizenship Coalition (EICC)/Global e-Sustainability Initiative (GeSI) Initiatives to avoid the usage of conflict minerals mined from the DRC and adjoining countries.
�This Conflict Minerals policy is in line with the Global Business Initiatives on Human Rights, of which Flextronics is a member, and the framework of the
20
a member, and the framework of the United Nations Principles of Human Rights encouraging governments and businesses to respect, protect and remedy human rights
� Flextronics Conflict Minerals Policy is developed and stored on the Supplier Information Page. Below is the web link:
http://www.flextronics.com/supplier/supplierq
uality/Files/Conflict%20Minerals%20Policy_Re
v3.pdf
Flextronics’s Conflict Minerals Due Diligence Procedure
21
Flextronics’s Conflict Minerals Due Diligence Procedure
With this goal, Flextronics expect suppliers to adhere to the following:• To source materials only from
environmentally and socially
responsible suppliers.
• To comply with the Dodd-Frank
regulation and provide all
necessary declarations.
• Flextronics is an active member of the
Electronics Industry Citizens Coalition (EICC)
supporting the Conflict Minerals Due Diligence
activities.
• Flextronics adopted the common EICC Conflict Minerals Due Diligence Reporting Templateand Dashboard as a standard questionnaire
for conducting inquiries into Flextronics
supplier’s sources of metals.
22
necessary declarations.
• Must pass this requirement up
the supply chain and determine
the source of specified
minerals.
supplier’s sources of metals.
• Flextronics’ maintain the transparency of supply
chain Conflict Minerals records in internal
database.
Flextronics’ Conflict Minerals Overall Process Flow
Flextronics adopted the common EICC Conflict Minerals Due Diligence reporting tool
Request sent to
Supplier
Supplier Working
On the Reporting
Template
Conflict Minerals
Processing Team
Validate the report
Store in the Sharenet
Supplier are required to:• Understand the Conflict Minerals (3TG) information from their lower tier
Supplier required to return a signed copy of reporting template once they had completed the form.
All Suppliers’ completed form will be stored in Flextronics Conflict Minerals Share net database.
Flextronics’s Conflict Minerals Due Diligence Procedure
23
Documents attached when request sent: • Conflict Minerals
Reporting Template• Supplier Letter
from their lower tier level suppliers
• Determine whether their products or components contain 3TG
• Determine the smelter or mine origin
form.Completed template need to send for review: [email protected]
• Conflict Minerals processing Team will check and review on the template.
database.
All Conflict Minerals project related document are able to find in Flextronics Intranet.
Explanation and Preparation of Conflict Minerals Reporting Template
24
Explanation and Preparation of Conflict Minerals Reporting Template
� This Conflict Minerals reporting template was created by the Electronic Industry
Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) as a
common means for the collection of sourcing information related to “Conflict Minerals”.
� Flextronics has adopt this template as a Conflict Minerals due diligence procedure to
verify the responsible sourcing of materials and to support compliance to new legislation.
� This template is consistent with EICC and GeSI’s related activities including the Conflict
Free Smelter (CFS) Program. The Conflict Free program details refer to
http://www.conflictfreesmelter.org
� The instruction on how to complete the Conflict Minerals Reporting Template is
available at YouTube: http://youtu.be/Enyu_V5Kd1k
25
With this provided Conflict Minerals Reporting Template, supplier is require to completethe following sections (Tabs):a) Company Information
- Specific information about the supplier being assessed
b) Completing 6 Due Diligence Questions (Declaration Tab)- These 6 questions define the usage, origination and sourcing identification for each of the metals.
c) Completing Questions A-J (Declaration Tab)- Questions A-J are designed to access your company’s DRC conflict-free minerals sourcing due diligence activities.
d) Completing Smelter and Mine List Tab- Name and location of the source of the ore/ or smelters from which the minerals was obtained.
Explanation and Preparation of Conflict Minerals Reporting Template
Instructions Tab Screen
Before supplier begin to fill in the “Declaration” tab and “Smelter List” tab,
supplier is required to read through the “Instructions” Tab. The instruction will
help to have more understanding on how to complete the reporting template.
26
This common reporting template is supported
in multiple language for supplier preference.
Explanation and Preparation of Conflict Minerals Reporting Template
Declaration Tab Screen
Three section that need to be fill out:a) Company Information
b) Used of 3TG questionnaire
c) Company Level Conflict Minerals due diligence questionnaire
Language preference
selection box
27
• All Columns with (*) are mandatory field to complete
• Supplier are allowed to provide the information in English ONLY
Explanation and Preparation of Conflict Minerals Reporting Template
a) Declaration Tab Screen – Company Information
Suppliers are required to fill out the company information.
28
a) Suppliers should enter company's
Legal Name. Do not use abbreviations.
b) For Declaration scope, we
encourage suppliers to fill in the
template by company level.
c) Suppliers are required to fill in the
address, representative title and
phone number although there is
no (*) mark.
Explanation and Preparation of Conflict Minerals Reporting Template
b) Declaration Tab Screen – Used of 3TG questionnaire
Note:
For question 1, if supplier select
the option as “NO” for all the 4
metals, subsequent questions
( 2 – 6) fields will changed to
black color indicating empty
field not required to be
answered.
All the 6 questions have to be fill out.
29
answered.
Therefore the declaration is
completed for this section.
Explanation and Preparation of Conflict Minerals Reporting Templatec) Declaration Tab Screen – Company level Conflict Minerals
due diligence questionnaire
All the 10 (A-J) questions have to be fill out. Declaration based on company level.
30
Explanation and Preparation of Conflict Minerals Reporting Template
Smelter List Tab Screen
Suppliers are able to view the latest version of the Conflict-Free Smelter (CFS) List published in EICC and GeSI website by clicking on this link.
31
GeSI website by clicking on this link. www.conflictfreesmelter.org/
� When supplier declared any present of 3TG minerals, all the mandatory fields are
required to complete.
� Supplier is required to provide the Metal, Smelter, Facility Location, Contact Name
and Email.
Supplier must provide the declaration in English.
The declaration is rejected if supplier provide the information in other language.
Example 1
Explanation and Preparation of Conflict Minerals Reporting Template
Rejected
32
Accepted
When supplier select declaration scope as “Product Level”, they must complete
the product list information.
Example 2
Explanation and Preparation of Conflict Minerals Reporting Template
33
AcceptedRejected
All the mandatory fields MUST be completed.
The yellow rows indicated that mandatory information is missing.
AcceptedRejected
Example 3
Explanation and Preparation of Conflict Minerals Reporting Template
34
Explanation and Preparation of Conflict Minerals Reporting Template
Example 4
� If supplier declared any present of 3TG minerals, all the mandatory fields at
“Smelter List” tab are required to complete accordingly.
� Supplier need to make sure they fill in the correct smelter information for the
metal used in their product.
35
Example above shows the supplier declare only Tin at the “Declaration” tab.
Continue next page
Supplier declared the used of Tin at the “Declaration” Tab
Explanation and Preparation of Conflict Minerals Reporting Template
Example 4 – Validating (continue)
1. The metal declared at “smelter list” tab is not tally with metal declared at declaration tab.
Rejected
2. Smelter list declaredis not Tin smelter
Rejected
Accepted
36
1. The metal declared is tally with the “Declaration” tab
2. Smelter list is declared correctly for the particular metal
Accepted
Explanation and Preparation of Conflict Minerals Reporting Template
Example 5 – Validating
� Template will be rejected if supplier filled smelter information in Chinese.
� Template will be rejected if supplier provided invalid smelter information.
(Example: Broker, distributor, solder maker, plating company, agent and etc.)
1. Supplier fill in the information in Chinese.
2. Supplier fill in invalid smelter information.
Rejected
37
Example of broker/ distributor/ agent are declared wrongly as smelter: 1. Shanghai Gold exchange
2. LMBA
3. Kester
4. Indium Corporation
information.
Glossary
38
Glossary
EICC® and GeSI Due Diligence Reporting Template
PROBLEM STATEMENT
August 2010: Downstream electronics industry suppliers reported survey
fatigue and requested a moratorium on due diligence surveys from their
customers until a universal reporting template was available
EICC & GeSI PHILOSOPHY
EICC and GeSI define a common industry approach to support the due
39
EICC and GeSI define a common industry approach to support the due
diligence requirements of the SEC
EICC and GeSI develop a universal reporting template for downstream
suppliers that enables companies to work with their supply chains through a
common interface
OBJECTIVE
Glossary
REPORTING TEMPLATE FUNCTIONALITY
• Aligns with SEC due diligence requirements for downstream companies
• Enables downstream suppliers to utilize one universal reporting template for
managing data requests, analysis, aggregation, and reporting to customers
using one universal reporting template in an XML-backed form
• Contains instructions, definitions and an educational packet• Will be freely available for multi-industry use
• EICC and GeSI maintain revision control
40
• EICC and GeSI maintain revision control
IMPLEMENTATION OF REPORTING TEMPLATE
• March 2011: Piloted with 60+ electronics industry suppliers. 98% supported and
requested a reporting template to be completed one time per year for their customers.
• April 2011: Finalize the reporting template based on the pilot feedback.
• May – June 2011: Develop an XML-backed form and dashboard tool to provide data
aggregation and reporting. Translate the template into Chinese and Japanese.
• August 2011: Publish the reporting template on EICC and GeSI websites.
• Ongoing: Template revisions as needed (i.e. once SEC final rules are released).
Glossary
WHY?
EICC and GeSI are spearheading development of a multi-stakeholder assessment process to determine if smelters/refiners are sourcing conflict-free minerals.
Provide a mechanism that enables and encourages
responsible sourcing of tantalum, tin, gold, tungsten
•Addressing each metal separately, but concurrently,• Order of priority is (1) tantalum, (2) tin, (3) tungsten, (4) gold
41
SCHEDULE• Order of priority is (1) tantalum, (2) tin, (3) tungsten, (4) gold
•Tantalum assessments are underway; tin, tungsten, and gold
smelter assessments are planned to begin in 2011.
RESULT
•A list of smelters/refiners who are compliant with the CFS
assessment protocol will be posted on a public website.• Date to be determined
• Link: www.conflictfreesmelter.org
Glossary
EICC and GeSI Conflict Free Smelter Tools & Resources can be found in this website: http://www.conflictfreesmelter.org/cfshome.htm
• Compliant Tantalum Smelter List and Due Diligence Tool are available.
• Compliant Smelter List for Tin, Tungsten and Gold are in developing progress.
42
Glossary
• General Items• Name and location of passing smelter.
• Smelters’ conflict policy.
• Materials originating from Level 1 Countries• Country of Origin
• Materials originating from Level 2 countries• Country of origin
• Mine of origin or region of origin (for artisanal miners)
43
• Mine of origin or region of origin (for artisanal miners)
• All points of import and export along the supply chain
• For nine surrounding countries and Kenya• For mine sources: amount of material (weight Ta) delivered to smelter from each mine and the mine capacity
• For artisanal sources: amount of material (weight Ta) delivered to smelter and the countrycapacity
• Materials originating from Level 3 countries• Output from credible internationally recognized DRC conflict-free mineral traceability
scheme
Glossary
Level 1 countries:• All countries excepting the Democratic Republic of Congo and Level 2 countries.
Level 2 countries:• Algeria, Angola, Belgium, Benin, Botswana, Burkina Faso, Burundi, Cameroon,
Canary Islands, Cape Verde, Central African Republic, Ceuta, Chad, Comoros,
Côte d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon,
Gambia, Germany, Ghana, Guinea, Guinea-Bissau, Hong Kong, Japan, Kenya,
Lesotho, Liberia, Libya, Madagascar, Madeira, Malawi, Mali, Mauritania, Mauritius,
Mayotte, Melilla, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Republic
44
Mayotte, Melilla, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Republic
of the Congo, Reunion, Rwanda, Saint Helena, São Tomé and Príncipe, Senegal,
Seychelles, Sierra Leone, Singapore, Somalia, South Africa, Sudan, Swaziland,
Tanzania, Togo, Tunisia, Uganda, United Arab Emirates, United Kingdom, United
States of America, Western Sahara, Zambia, Zimbabwe.
Level 3 country: • Democratic Republic of Congo
Glossary
SEC flowchart summary of the final ruleThe SEC final rule provides a flowchart to summarize its application to issuers:
45
Thank You!
46