The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Monday, September 22, 2014

Strategic CSR - Conflict minerals (I)

As part of the Dodd-Frank Law that was passed in 2010, firms were required to report on the presence of "conflict minerals" in their supply chain. The first deadline for reports was in early June. In the aftermath of that deadline, a number of issues have become apparent. As a result, all three CSR Newsletters this week will focus on some of these issues. Today, we will start with some of the information that was unearthed by companies as they began to learn more about their supply chains, as reported in the article in the url below:
"As companies scrambled to meet a deadline to report whether their suppliers used minerals from mines controlled by armed groups in the Congo region, they stumbled on something even more troubling: Many of their products may contain North Korean gold. Dozens of companies disclosed over the past week that their suppliers used gold refined by North Korea's central bank. These companies include Hewlett-Packard Co., Ralph Lauren Corp., International Business Machines Corp., Rockwell Automation Corp., and Williams-Sonoma Inc."
The Dodd-Frank conflict minerals clause was specifically drafted to identify whether any of four materials (gold, tungsten, tantalum, or tin) that appeared in any firm's products or production processes (anywhere in the supply chain) were sourced from mines controlled by armed groups in the Congo or used to fund wars in that region. As part of the process of better understanding their supply chains, however, the companies identified the North Korean connection. The U.S., of course, currently imposes sanctions on North Korea, which prevents any U.S. company from doing business with any North Korean entity:
"U.S. sanctions law bars importing materials from North Korea even if they come from deep within a supply chain and are in a completely different form by the time they reach the end user, sanctions experts said. 'It's a problem even if the raw materials are coming very indirectly through suppliers,' said Alexandra Lopez-Casero, an attorney at Nixon Peabody LLP who specializes in sanctions."
To the companies' credit, they have declared this potential issue, even though, for many, they cannot be sure whether North Korean gold was used, or not. What this reporting process is revealing, however, is how little many firms know about their own supply chains. They are having difficulty identifying the source of many raw materials primarily because they have never bothered to find out up until now.
Chalk one up for regulation that has prompted firms to discover information in an area of operations about which it is in their interest to know as much as possible!
Take care
David Chandler & Bill Werther
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Gold From North Korea Stymies U.S. Firms
By Joel Schectman
June 5, 2014
The Wall Street Journal
Late Edition – Final