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Auto Industry Collaboration Key To Addressing Conflict Minerals Challenge
October 22nd, 2012
Many companies, and entire industries, are still coming to terms with how they will find, and report on, the presence of “conflict minerals” in their products and supply chains. Due to recently finalized rules from the U.S. Securities and Exchange Commission (SEC), hundreds of thousands of companies in numerous industries will need to report on the use of conflict minerals by 2014. The goal is to make sure that these minerals — tantalum, tin, tungsten, and gold (“3TG”) — are not financing conflict in the Democratic Republic of Congo or the surrounding countries.
In the automotive industry, where I’ve worked on corporate responsibility issues for more than 12 years, this task is particularly daunting: tantalum, tin, tungsten and gold are used in numerous automotive components and manufacturing processes, and original equipment manufacturers (OEMs) and Tier-1 suppliers can each have thousands of suppliers. Yet like many industries, these supply chains are overlapping and highly interconnected, with only a few companies sometimes supplying a certain product such as resin to the entire industry. Companies in our industry agree that working together on a complex issue such as conflict minerals can yield efficiencies and make things easier for everyone. The challenge is to align the individual corporate styles of industry companies to take unified action with flexibility for implementation.
The Move from Competition to Collaboration
When I worked as a manager for a major automaker (from 2000-2009), I was conditioned to always seek the competitive advantage — and understandably so. Even I would have been surprised back then if you told me the extent to which auto industry competitors are coming together to work on corporate responsibility issues today. At the Automotive Industry Action Group (AIAG), where I now run our corporate responsibility program, we’re bringing together major automakers, and many of their parts suppliers and service providers, to collectively develop solutions to common corporate responsibility challenges — from improving global working conditions and estimating greenhouse gas emissions, to responsibly sourcing materials throughout the supply chain. By fostering this spirit of collaboration, we were prepared to act as one industry on the conflict minerals issue starting back in 2010, when the Dodd-Frank Act, which led to the recent SEC rules, first became law. Soon after, AIAG formed the Conflict Minerals Work Group with more than two dozen manufacturers, suppliers and service providers representing the global automotive industry, to start examining the impact to our supply chains and assess key points of interaction.
It was also clear that engaging with stakeholders outside the industry would be critical, but not necessarily easy, given the potential risks of collaborating with organizations whose agendas may not be aligned with ours. We identified and began successful collaborations with organizations that enable us to educate and inform ourselves and others on critical factors for success: the Electronic Industry Citizenship Coalition (EICC), the Global e-Sustainability Initiative (GeSI) and the Organization for Economic Cooperation and Development (OECD).
In 2011, AIAG established a formal collaboration with the EICC/GeSI Conflict-Free Smelter Program, an audit and certification program that identifies and publishes a list of certified conflict-free smelters of tin as well as tantalum, tungsten, and gold. AIAG has urged smelters and refiners to actively engage with the program, which can save industries a significant amount of time and confusion.
A New Tool To Accelerate Supply Chain Transparency
Perhaps the most significant product of automotive industry collaboration on the conflict minerals issue is a new tool we think will help everyone achieve greater supply chain transparency: the iPoint Conflict Minerals Platform (iPCMP). Developed with input from more than two dozen AIAG member companies, it’s one of the first web-based data-management tools that will help supply chain participants in all industries to identify whether their products contain conflict minerals and thus meet the due diligence requirements of the Dodd-Frank Act and related rules from the SEC.
To create the iPCMP, the OEMs and suppliers in our working group looked for a common solution that would enable the greatest utilization for our industry and our diverse supply chain. After investigating available solutions and researching their application within automotive, we found the EICC-GeSI reporting template to be the most adaptable to any industry. We then selected iPoint, and worked with them to develop the tool based on this template, with the addition of some key features we deemed critical for success, such as the capability to ‘roll-up’ the data gathered for reporting at a supplier or automaker level. In the end, we have a common tool that’s easy to use, is endorsed across and beyond the automotive industry, and is affordable. We launched the tool soon after the SEC rules were announced, and we hope it will become the standard across the automotive industry and others as companies adopt it. Neither AIAG nor our member companies have a financial interest in the platform — our interest is in achieving the collective benefits that will be achieved as more of the supply chain is using the same tool.
Our hope is that these actions, over the past few years and into the future, will send a clear and consistent message: The auto industry is taking informed and multi-pronged action on the conflict minerals issue. This is noteworthy, in my view, because companies of many sizes and countries of origin are coming together for a common cause. And we think it’s this collaborative, cross-industry approach that will help ensure the continued effectiveness of our collective efforts.