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According to a new report from the U.S. Government Accountability Office (GAO), not much has changed on the conflict minerals reporting front over the last six years. The GAO says that while the US has sought to improve security in the Democratic Republic of the Congo (DRC) for more than two decades, conflict has persisted and contributed to severe human rights abuses and the displacement of people. As a result, armed groups continue to profit from the mining and trade of conflict minerals.
Because such groups in the DRC and adjoining countries are known to exploit the minerals tin, tungsten, tantalum and gold to finance conflict in the region, the Securities and Exchange Commission (SEC) requires companies to report on the origin of these “conflict minerals” used in their products. Mined in Africa, finely ground coltan ore (from which tantalum is derived) is widely used in modern technology, such as cell phones and computers, the GAO states.
The SEC’s disclosure rule on conflict minerals requires some companies to submit a filing detailing their efforts to determine the source of their conflict minerals. As part of this process, these companies must conduct a reasonable country-of-origin inquiry (RCOI). “Depending on the determination reached through this inquiry,” the GAO explains, “some companies must then conduct due diligence to further investigate the source of their minerals.”
Key Findings
According to GAO's analysis, companies' RCOI determinations have not changed significantly since 2015. Here are some of the key findings from GAO’s most recent report on the matter:
- In 2020, an estimated 58% of the companies that conducted an RCOI reported preliminary determinations regarding whether the conflict minerals in their products may have come from the Democratic Republic of the Congo (DRC) or adjoining countries (covered countries).
- Of those companies, an estimated 42% reported that they had preliminarily determined that at least some of their minerals may have originated in covered countries.
- About 16% determined that their minerals were not from a covered country.
- In 2020, about 78% of the companies that conducted an RCOI went on to conduct due diligence to further investigate the source of their minerals.
After conducting due diligence, GAO says that an estimated 44% of these companies reported that they could not determine whether their minerals originated in covered countries. “An estimated 38% of the companies reported that their minerals may have originated in covered countries,” it adds, “and the remaining 18% did not clearly report their due diligence determination.”
In 2020, 1,057 companies filed conflict minerals disclosure reports with the SEC. The number of disclosure reports that companies filed in 2020 was fewer than the 1,083 filed in 2019 and the 1,117 filed in 2018. This trend reflects a continued decrease in the number of companies that have filed disclosure reports since 2014, the GAO reports.
Reporting Tools
The GAO says that most companies used standardized tools and programs when determining the source of their minerals, but these methods may present challenges for the companies that are using them. For example, it says that roughly 96% of company filings were based on input from supplier surveys, yet many companies “did not receive responses from all their suppliers, of which there could be hundreds in some companies’ supply chains.”
Some of the key challenges cited include lack of access to suppliers, survey responses that contain incomplete or incorrect information, and the fact that suppliers didn’t respond to survey requests. “An estimated 28% of filings submitted in 2020 stated that not all of the company’s suppliers responded to the company’s survey requests,” the GAO reports.
