Conflict minerals assessment in the Supply chain

[Javier Dom_nech]

What Are Conflict Minerals?

"Conflict minerals" refer to specific natural resources whose extraction and trade contribute to armed conflict, human rights abuses, and environmental degradation. The four key minerals typically classified under this term are:

• Tantalum (from coltan)

• Tin (from cassiterite)

• Tungsten (from wolframite)

• Gold

Collectively known as the 3TG minerals, they are widely used in electronics, automotive, aerospace, and jewelry industries. Armed groups have historically profited from mining these minerals, financing violence and perpetuating instability in conflict-affected regions.

Consumers are aimed to get rid of sourcing from Suppliers whose products come from these practices, as part of their social responsibility programs.

 

Regulatory Framework

But Conflict Minerals assessment, is not only a social responsiblity for companies, in some regions there is also a regulation about it, and therefore companies must adhere to the policies and laws established.

Some examples can be found in United States and the European Union: 

- United States: Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)

• Mandates that publicly traded companies under the U.S. Securities and Exchange Commission (SEC) disclose the use of 3TG minerals if they originate from the DRC or adjoining countries.

• Requires supply chain due diligence to determine mineral origin and whether their sourcing finances armed groups.

• Companies must submit a Form SD and, if applicable, a Conflict Minerals Report (CMR) annually.

- European Union: Regulation (EU) 2017/821

• Entered into force in January 2021.

• Applies to EU-based importers of 3TG minerals above certain thresholds.

• Requires companies to implement OECD-aligned due diligence measures, including risk assessment, supplier audits, and public reporting.

• Aims to break the link between mineral trade and conflict financing while promoting responsible sourcing globally.

 

Importance for Companies in Global Supply Chains

Apart from the social responsibility and the regulation, there are some other reasons why companies consider Conflict Minerals a key topic in their supply chain:

• Reputation Management: Involvement in unethical sourcing practices can severely damage a brand's public image.

• Investor and Consumer Expectations: Increasing demand for ethical and sustainable supply chains places pressure on companies to ensure transparency.

• Operational Resilience: Improved supply chain visibility helps mitigate risks related to disruptions, fraud, and illicit practices.

 

Corporate Actions for Enhanced Social Responsibility

Companies might need to adopt some or all of the following practices to ensure responsible sourcing and compliance with conflict minerals regulations:

1. Conduct Supply Chain Mapping: Identify smelters, refiners, and the origin of minerals.

2. Implement OECD Due Diligence Guidance: Follow the five-step framework outlined by the Organisation for Economic Co-operation and Development.

3. Engage in Industry Initiatives: Participate in programs like the Responsible Minerals Initiative (RMI) or the London Bullion Market Association (LBMA) Responsible Sourcing Program.

4. Establish Conflict Minerals Policies: Communicate ethical sourcing standards to suppliers and stakeholders.

5. Publicly Report Findings and Measures: Increase transparency by publishing conflict mineral reports or sustainability disclosures.

6. Train Suppliers and Internal Teams: Ensure that everyone involved understands compliance expectations and ethical obligations.

Depending on each company, some of the regulatory aspects might be mandatory for them. However, this article is more focused on downstream companies, who are expected to use reporting and other tools to make their due diligence more transparent, including, for many large companies, those in the non-financial reporting directive.

ServiceNow Implementation (Xanadu+)

How can ServiceNow help their customers with this and some other similar topics?
For that, in Xanadu version, 'Supplier Relationship and Performance Management' (SRPM) was launched.
For more information about SRPM, please visit the official ServiceNow document site: https://www.servicenow.com/docs/csh?topicname=supplier-performance-management-overview.html&version=....

So, the steps to configure SRPM to include Conflict Minerals (or any other similar topic related to supplier relationship and performance management) are:

- Install Supplier Relationship and Performance Management (com.snc.sn_slm_perf) plugin (more details in the link above).
- Access to the 'Source-To-Pay' Workspace, navigate to the 'Lists' page, and click on 'KPI templates' under 'Performance management' category.
- Click on 'New' to create a new 'Conflict Minerals' KPI template, and fill in all the required details, such as 'Recommended weight', 'Collection frequency', etc.

It's important to note that, if we want our Suppliers to provide us with details about how they operate on this matter, we should select 'Supplier' on 'Collection source type', otherwise, we can internally gather the required data to complete the assessment.

In case Suppliers are in charge of providing the required details, it's important to complete the 'Instructions' field in the 'KPI template' definition, so that they know how to proceed.
One example for a europen company could be:

If you do not use conflict minerals in the products you supply to our company, please complete this task as Compliant.

If you use conflict minerals in the products you supply to our company, then please: 
- Sign and attach the 3TG letter included in the following article: {{article link to be included for declarative statements}}
- Attach the CRMT/RCOI to ensure you have the recommended practices in place.
- Select 'Compliant' for this task outcome.
Otherwise, please select 'Non-compliant'.

- Once saved, click on 'Tresholds' tab, and create the required tresholds to measure its achievement. In this case, we could set up two: 'Compliant', and 'Non-Compliant'.

- Then, we should click on the 'Suppliers' tab, and select the Suppliers which are entitled to be assessed by this Conflict Minerals template, and the system will automatically generate the required KPIs for each Supplier.

If we access to one of the KPIs, we can see details about the 'Next run date', the 'Tasks' that have been created in order to collect the 'KPI data', etc.

At execution time, and depending on the 'Collection frequency' selected, the system will automatically generate a Supplier task for the person specified in the 'Collection source type' field.

For Supplier Contacts, they will be able to access the Supplier Collaboration Portal, and see a Task assigned to them to complete. Once they entered all the details, and submit it, they system automatically processes the data and updates the information in the system, including the available reports, so that relevant stakeholders can make the proper decisions when awarding Suppliers, considering this KPI, as well as any other considered relevant.

ServiceNow Implementation (Pre-Xanadu)

For customers not being in Xanadu or a later version, SRPM is not available, and therefore a different solution should be implemented. It is always recommended to upgrade and use SRPM, which makes the process much easier, as just a configuration instead of a much more complex customization. But in this article we are also including a high-level overview for an alternate solution by using 'Supplier Case Management' capability instead.

To do it, the following steps should be implemented in the instance:
- Create a new 'Conflict minerals assessment request' case type.

The creation of a case of this case type, could be either triggered as part of the 'Supplier onboarding' process, or periodically scheduled, every year at a specific date for example.

- Create the required fields in the Supplier table/form. In this case it could be the following ones:
1) 'In scope of Conflict minerals assessment?' (checkbox - if we want to periodically assessed the Supplier)
2) 'Conflict minerals status' (choice: Pending, Compliant, Non-compliant - to track the result)

- With this, we could implement the proper flow or subflow, by which we could anually (or periodically based on our requirements) or ad-hoc as part of the onboarding process for example:
- Create a new Supplier case of this type, for all the Suppliers whose checkbox in field 1 above is marked.
- Create a 'Complete a form' Supplier task for the relevant person to complete the required details, which could be similar to this:
1) 'Sign and attach the 3TG letter' (attachment - ideally it should contain a link to the knowledge article where that template letter can be downloaded)
2) 'Do you use conflict minerals in the products you supply to our company?' (Yes/No)
3) If 2 is Yes, 'Attach CMRT/RCOI' (attachment)
- If the previous task is for a Supplier to provide the required details, create a 'Mark as complete' supplier task for an internal stakeholder to validate the information provided by the stakeholder, and be able to overwrite the Supplier profile if needed.
- Once the validations are done, the Supplier profile is correctly updated, and the tasks completed, the Case can be automatically closed as completed as well.

References

• U.S. Securities and Exchange Commission (SEC). (2012). Final Rule: Conflict Minerals. https://www.sec.gov/rules/final/2012/34-67716.pdf

• European Commission. (2021). Conflict Minerals Regulation. https://ec.europa.eu/trade/policy/in-focus/conflict-minerals-regulation/

• OECD. (2016). OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (3rd ed). https://www.oecd.org/daf/inv/mne/mining.htm

• Responsible Minerals Initiative (RMI). (2024). Standards and Resources. https://www.responsiblemineralsinitiative.org