On August 4, The Wall Street Journal’s “CFO Report” cited some telling statistics from the 2015 reporting cycle which reflect on the challenge many public companies face in trying to comply with the SEC's Conflict Minerals rules:
- of 1,262 reporting companies that filed conflict mineral reports:
- 90% couldn't determine whether their products are conflict free;
- only 314 (less than 24%) reached full compliance;
- 2/3 failed to describe the country of origin of their metals;
- 43% failed to disclose the diligence framework;
- Microsoft and Apple were among those reporting "conflict undeterminable" despite extensive supply chain examination; and
- aggregate cost of compliance was estimated to be $709 million and 6.5 million staff hours.
The report argued that compliance costs and pressures will increase for the 2016 reporting cycle as the two-year phase-in expires and large companies are required to have outside auditors inspect their reports. See the WSJ article at http://blogs.wsj.com/cfo/2015/08/04/u-s-firms-struggle-to-trace-conflict-minerals/. However, as discussed below, the recent D.C. Circuit decision calls into question the conflict minerals rules audit requirement.