Doug presented at an industry forum on “Applying Conflict Minerals Lessons to Modern Day Slavery & Human Trafficking (MDSHT).” Conflict minerals and MDSHT are two social issues that have led to laws and regulations, with MDSHT following the SEC’s conflict minerals rule by a couple years. Regulations require policy statements. Both issues now require reporting or disclosures, to regulatory agencies and/or the public. Both include risks in the supply chain.

Conflict minerals and MDSHT are different in several ways. The SEC conflict minerals rule covers companies that are publicly-traded in the U.S.; it affects global companies in their supply chains. MDSHT regulations affect companies headquartered in California, and companies that sell into the UK – but different kinds of companies, and different sizes. The SEC conflict minerals rule applies to the Democratic Republic of Congo and adjoining countries, whereas MDSHT has been reported in over 160 countries. There is one framework for due diligence on conflict minerals, but no single framework for MDSHT. The SEC conflict minerals rule provides for one enterprise-wide audit, the Independent Private Sector Audit. MDSHT has no single enterprise-wide audit.

At a tech industry work group, Doug encouraged conflict minerals professionals to recognize the value of their experience, and how it can help companies develop and implement MDSHT programs that are efficient, effective, and help manage risk – not to mention, benefit humanity! The tips include:

• Cross-functional teams: These teams worked well in getting different functional groups out of their silos, and understanding how an emerging issue posed an enterprise risk. Quality, Operations, Sales, Contracts, Legal, IT, and Investor Relations all had something to add. Many teams engaged external resources to provide regulatory or technical expertise, manage data, or to make sure the company used reasonable/ best practices, and stayed on track.
• Process flow diagrams: Conflict minerals is not simply a social issue; it is an issue that poses risks to company reputation, compliance, and [via customer requirements] operations and sales. Many companies achieved value from creating business process flow diagrams with swim lanes – just like the business processes that are subject to internal audit or that support financial reporting. Every group knows – at a glance – where they fit.
• Risk Matrix: Companies must identify and mitigate risk as part of conflict minerals due diligence. The big question: risk of what? One leading company applied standard enterprise risk management thinking, and identified over 20 risks related to conflict minerals. They could assess risks, and make informed decisions on whether to invest more resources to further reduce risks, or accept risks at current levels.

So are conflict minerals and MDSHT the same or different? The answer: yes, and yes. When MDSHT requirements or risks hit a critical mass, company management may be tempted to add it to the responsibilities of a conflict minerals team, and assume they can do the same thing. Savvy conflict minerals professionals may note many differences, and avoid contributing to company compliance or risk management programs.

Contact doug@douglashileman.com for more information on MDSHT, and how lessons learned from conflict minerals can be adapted for more effective, efficient programs and risk management.