Wednesday, July 18, 2012

GAO Report Cites OECD Guidance that Can Help Companies Comply with SEC Conflict Minerals Disclosure Regulations


In a report to Congress under Section 1502 of the Dodd-Frank Act, the Government Accountability Office noted that various stakeholders have developed initiatives that may help companies comply with the anticipated SEC regulations implementing the conflict minerals disclosure provisions of Section 1502. Prominent among the initiatives cited in the report is the OECD’s due diligence guidance for responsible supply chains of minerals from conflict-affected area. The GAO said that this and other  global and in-region sourcing initiatives, which include the development of guidance documents and audit protocols, could support companies’ efforts to conduct due diligence and to identify and responsibly source conflict minerals.The OECD due diligence guidance sets out a five-step framework for detailed risk-based due diligence, including strong management systems and an independent third-party audit of supply chain due diligence.

Section 1502 of Dodd-Frank requires the SEC to issue a conflict minerals disclosure rule requiring companies to disclose whether necessary conflict minerals used in their products originated in designated conflict areas and, if they did, to provide an additional report with certain disclosures. On July 2, 2012, the SEC announced that it will hold an open meeting on August 22, 2012 to consider whether to adopt a final conflict minerals disclosure rule.  


The SEC proposal would require companies to describe the due diligence used to make supply chain determinations. But the Commission did not prescribe any particular guidance for conducting due diligence, reasoning that the conduct undertaken by a reasonably prudent person may vary and evolve over time. The SEC does expect that a company whose conduct conformed to nationally or globally recognized guidance for due diligence regarding conflict minerals supply chains would provide evidence that it used due diligence in making its supply chain determinations. In that context, the proposing Release No. 34-63547 cited the OECD draft due diligence guidance.


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