On February 6th, Elm Sustainability Partners, an independent advisory firm, published detailed information demonstrating that implementation costs related to federal conflict minerals reporting requirements for businesses have been substantially lower than expected and U.S. companies have in fact seen “tangible business benefits.” The Securities and Exchange Commission (SEC) is currently accepting comments relating to Dodd-Frank 1502 and the corresponding Conflict Minerals Rule. The analysis is significant because some industry lobby groups have claimed that the law is too expensive for U.S. companies to implement.
According to Elm, compliance costs are 74-85% less than the initial SEC estimate. While the SEC projected $3-4 billion for total company costs, Elm estimates costs at $600-800 million for all companies. Additionally, these costs have dropped significantly as new tools and processes have been developed which streamline compliance. This is due mainly to the number of companies implementing Dodd-Frank 1502 has been only 20% of the SEC estimate, and also the fact that there have been very few independent audits conducted during compliance.
*Data courtesy Elm Sustainability Partners
Additionally, Elm notes several tangible benefits to U.S. companies:
Spurring development of leading supply chain expertise and traceability systems that formed the basis of new international supply chain due diligence frameworks
Identifying supply chain risk mitigation opportunities unrelated to conflict minerals
Significantly improving visibility into U.S Treasury Office of Foreign Asset Control (OFAC) compliance
Establishing new permanent jobs for U.S. small businesses
Elm concludes, “In the end, the total realized cost savings to U.S. companies if the Rule was eliminated would be only a portion of the total costs currently incurred by issuers and others while also impacting jobs…Significant changes to the Rule are likely to result in the loss of skilled and permanent small business jobs in the U.S. as well as reduce the need for certain in-house corporate staff at regulated companies.”
Congolese civil society groups, the Enough Project, corporations such as Kemet, and others have extensively documented the positive impact this law has had both in reducing conflict financing in eastern Democratic Republic of Congo and in strengthening supply chain transparency. While much work remains to be done in reducing the conflict gold trade, the tin, tantalum, and tungsten trades have improved significantly, with 79% of miners in those mines now working in conflict-free conditions.
Read the full submission here.