An early review of conflict minerals filings for the 2014 reporting period shows improvement in “detail, clarity and quality,” according to this article in BNA. As reported by Elm Sustainability Partners, a conflict minerals consulting firm, there were 1,272 filers for the 2014 reporting period, compared to 1,328 for 2013. In addition, Elm reported that there were six independent private sector audits (IPSAs). In the article, commentators remarked that “the submissions this year are more clearly written, align better with the Organization for Economic Cooperation and Development framework and list more smelters.”  Having access to the reports filed by other issuers probably provided helpful guidance and added some measure of consistency to the reports. BNA also found that a number of companies reported sourcing gold from North Korea, which is on the Treasury Department’s sanctions list.

Responsible Sourcing Network, an NGO, reported an increase in the percentage of companies that filed conflict minerals reports (not just the more abbreviated Form SD), relative to the prior year. An RSN representative also agreed that this year saw improved disclosure: “Overall there are more detailed filings, with a higher ratio of filers submitting a full report on their due diligence process.”  According to the article, RSN intends to advise investors on the level of performance by companies in “high-exposure industries,” based on RSN’s performance metrics. (See the 2015 list of indicators.)

Global Witness, which, with Amnesty International, gave companies a scathing review for last year’s filings (as discussed in this PubCo post), had quite a different take on the most recent crop of filings.  In the view of its representative, companies are not doing enough to address risks in their supply chains: “‘A majority of companies’ conflict minerals reports leave important questions unanswered about the quality and thoroughness of the due diligence they have undertaken’…. [F]or example, …the majority of companies’ due diligence efforts appear focused on their immediate suppliers and ‘only a very few are engaging with their smelters and refiners to learn about their minerals’ journey from the mine.’” (For a different view on this point, see, e.g.,  “Five Practical Steps to Support SEC Conflict Minerals Disclosure” prepared by the Conflict-Free Sourcing Initiative for downstream issuers, discussed in this PubCo post.) The Global Witness representative also advocated that more companies obtain IPSAs, even if they are not yet required under the SEC’s rules, because audits are “a critical part of risk-based due diligence, [and] will help ensure that the reports submitted to the U.S. regulator are accurate and credible.”

We may well see a lot more IPSAs next year.  As it now stands, no IPSA is required if products are described as “conflict undeterminable.” However, the ability to categorize products as “conflict undeterminable” was a transitional accommodation and, under the SEC rules, will not be available next year (other than for companies categorized as “smaller reporting companies”). In addition, pending the outcome of the conflict minerals case currently on appeal before the D.C. Circuit, Corp Fin has announced that companies have to obtain and file an IPSA only if they voluntarily describe their products as DRC conflict-free, but otherwise are not required to do so. (See this PubCo post.) You may recall that, in April 2014, a three-judge panel of the D.C. Circuit struck down a portion of the SEC’s conflict minerals rule on First Amendment grounds. In that case, the Court decided that the requirement to disclose whether companies’ products were “not found to be DRC conflict free” amounted to “compelled speech” in violation of companies’ First Amendment rights.  In November, the D.C. Circuit granted the petitions of the SEC and Amnesty International for panel rehearing, as discussed here.  If the case remains on appeal when the next round of filings approaches or if the decision striking down the requirement to disclose the conflict-free status of products is ultimately upheld, it remains to be seen how or whether the SEC will modify its current requirements.