The Democratic Republic of Congo (DRC) is widely considered to be the richest country in the world regarding natural resources. Its untapped deposits of raw minerals are estimated to be worth in excess of US$ 24 trillion. Due to its rich minerals reserves, the eastern Congo is in a state of upheaval due to armed conflict and human rights abuses for extracting minerals – mainly tin, tungsten, tantalum and gold. These minerals are used by various industries like jewelry, industrial manufacturing, aerospace, electronics & communications, automotive, etc.

Understanding Section 1502 of the Dodd–Frank Act and its implications on the companies

The extensive human rights violations and the conditions under which these minerals are extracted and sold via middlemen to companies around the globe, led to ‘section 1502′ of the Dodd-Frank Act. The Act’s intent is to try and curb the violence and exploitation in the DRC and neighboring countries through disclosure and public pressure, by exposing companies that use minerals derived from this region.

The latest development in the Dodd-Frank Act is that, as of May 31, 2014, public companies will have to comply with the SEC’s conflict minerals rule filing.

As per the PWC report “Conflict minerals survey: How companies are preparing”, it is estimated that 6,000 SEC issuers will have to provide new disclosures under the rule and approximately 275,000 private companies that are part of the issuers’ supply chains will also be affected.

The report also states that nearly 900 executives surveyed are still in the initial stages of their compliance efforts, while 16% have not yet begun gathering information, and 32% are still determining if the rule even applies to them.

The single most challenging task for the companies is getting accurate and complete information from their suppliers. This challenge is exacerbated further considering that 13% of respondents said their companies have 5,000 or more suppliers and nearly 14% saying they had over 1,000 but less than 5,000.

Over the next 2 blogs we will explore how organizations can comply with the conflict minerals rule.