Technology, industrial products, energy/mining and retail and consumer industries stay ahead of the curve and uncover business opportunities.
Half of survey respondents desire to be conflict free.
NEW YORK, April 9, 2014 – With reporting requirements for the SEC’s Dodd-Frank mandated conflict minerals rule due on May 31, 2014, a significant number of public companies are still in the early stages of compliance and risk falling behind, according to PwC’s Conflict Minerals Survey. The study found that only 4 percent of companies have completed a draft of their filings, and 90 percent haven’t even begun drafting or have only developed initial drafts with significant work still needed, providing a rapidly narrowing window of action before the deadline arrives.
“Time is running out and companies need to move fast. Those that are just beginning to gather information and draft their filing are at risk of not only falling behind, but of missing opportunities in terms of supply chain improvements, competitive advantage and enhanced customer and stakeholder trust,” said Bobby Kipp, partner in PwC’s Risk Assurance practice, and the firm’s conflict minerals leader. “We found that 90 percent of survey respondents see this as a compliance exercise. However, those in the technology, industrial products, manufacturing and retail and consumer industries, while focused on compliance, are uncovering the potential business opportunities that conflict minerals compliance can provide. ”
According to the survey of 700 respondents across 15 industries, organizations continue to find the journey to compliance required by Dodd-Frank Section 1502 to be challenging at nearly every step: scoping, surveying suppliers, performing due diligence and drafting filings. As a result, 62 percent of survey respondents reported needing one to two full-time resources for their conflict minerals compliance efforts, and 21 percent needing three to five full-time resources, a substantial evolution over the last year. It ultimately comes down to performing reasonable due diligence, and according to PwC’s survey, companies in the technology, energy and metals industries appear to be the furthest along.
“As organizations see the clear business opportunities in complying with the rule, they also understand the significant consequences that can result from conflict minerals sourcing,” said Kelvin Harris, a supply chain specialist on PwC’s conflict minerals team. “Our study showed that visibility into a company’s supply chain is becoming an expectation of various stakeholders, demonstrating that conflict-free sourcing is escalating in importance across the board and within different industries.”
Yet the survey also found that most respondents had not yet covered their entire supply base. In fact, only 45 percent had sent a “reasonable country of origin inquiry” to more than three-quarters of their in-scope suppliers, and only 47 percent had received fully-completed responses from more than half of the suppliers queried. Most companies appear to be approaching this as a program of continuous improvement, with further progress anticipated over the coming years.
An extensive conflict minerals compliance process, coupled with significant business risks associated with sourcing products in the covered regions, has influenced companies to push for conflict-free sourcing in the future. PwC’s survey found that 45 percent of respondents would like to be conflict free (and have plans to do so), as they are beginning to see the revenue-impacting consequences that conflict minerals sourcing can have. In addition, should they ultimately find their products not to be conflict-free, organizations are highly concerned with potential loss of customers (36 percent), potential risk to their brand (31 percent), shareholder backlash (19 percent) and even the potential for product boycotts by consumers (8 percent).
Although compliance with the conflict minerals rule has proven to be highly resource-intensive, PwC’s survey found that 67 percent of respondents anticipate not needing an independent private sector audit (IPSA) in the first two years, either because they source their minerals from outside the covered countries or expect them to be Democratic Republic of Congo conflict undeterminable. In fact, only 12 percent expect to require an IPSA for either or both years. After 2014, PwC expects that number to increase.
“The key to success is for companies to make and be able to demonstrate strong, steady progress in their conflict minerals efforts to meet both compliance requirements and audit obligations. It is vital for companies to take advantage, take the next step and begin to drive real tangible business benefits from their compliance efforts,” concluded Kipp.
To download a full copy of the survey, please visit PwC’s conflict minerals website.
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