Nearly two years after the adoption of a widely debated disclosure rule, Charlotte-area companies are reporting they’re unable to determine whether their products include metals from the war-torn Democratic Republic of Congo.
The new requirement, part of the Dodd-Frank financial reform act, directs companies to examine their supply chains for so-called “conflict minerals” – tin, tungsten, tantalum and gold – to determine whether they came from Africa’s Congolese region, where some mining operations help fund armed militias.
Activist groups have called for U.S. companies to divest from the Congo region, where anywhere from 3 million to 6 million have died in a conflict that dates to 1996.
But in the first round of regulatory filings supplied to the Securities and Exchange Commission this month, companies are saying it’s impossible to narrow down where exactly these minerals in their products are coming from. Complex products such as electronics may pass through lengthy supply chains.
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Companies that manufacture – or directly contract with others to manufacture – products containing these minerals were required to file the disclosure. That includes eight companies based in the Charlotte area. Five said they had insufficient information to determine where their materials originated: SPX Corp., Carlisle Cos., Babcock & Wilcox, Curtiss-Wright Corp. and Speedway Motorsports Inc.
Mooresville-based Lowe’s Inc. identified in its filing 21,000 products that could include conflict minerals and said the company would continue to seek information from suppliers, but it provided little additional detail. In a statement, company spokeswoman Amanda Manna said the company requires its suppliers to provide proper verification of their sources and expects them to be “socially responsible.”
Results in Charlotte mirror what companies have found nationwide: an inability to pinpoint minerals’ origins. Given the difficulties companies have faced in getting information from suppliers, it’s difficult to tell how reliable the reports are, said Dynda Thomas, leader of the conflict minerals team at Squire Patton Boggs law firm that helps companies comply with the rule.
“There’s a lot more information out there now than there was two years ago, but it’s not necessarily specific or verifiable,” Thomas said. “The company is not in control of the entire information-gathering process, so it’s very difficult and frustrating for those who have spent a lot of time and money and effort.”
The process has been expensive: The SEC estimated compliance would cost companies between $3 billion and $4 billion in the first year. The agency initially said costs would decrease in subsequent years – to somewhere between $206 million and $609 million – but Thomas said she thought the process would remain expensive as companies had a lot of work left to do.
Carly Oboth, a campaigner with nonprofit organization Global Witness, which supported the requirement, said the organization was “deeply disappointed” in the level of detail they’d seen in responses from companies so far.
“They’ve just checked the box without providing any details,” she said. “In future years, we want to see them following through with their commitments laid out in their reports.”