A leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products, takes pride in improving lives by driving innovation to deliver the best solutions for customers and accelerating the growth of its businesses around the world. As part of this ongoing commitment, the company has always focused on responsible sourcing for its products and compliance with relevant industry standards such as Restriction of Hazardous Substances (RoHS) and Registration, Evaluation, Authorization and Restriction of Chemicals (REACH).
In late 2013, this medical technology provider began digging deeper into the source of materials used in its products in response to the United States' Dodd-Frank Act. The Dodd-Frank Act is landmark financial regulatory reform legislation that includes provisions intended to reduce the widespread violence and human rights abuses associated with mining "conflict minerals" in the Democratic Republic of the Congo (DRC). With the first reporting deadline in May 2014, the Dodd-Frank Act directed the U.S. Securities and Exchange Commission to implement rules that require U.S. companies to disclose whether or not they and/or their suppliers use minerals originating from DRC and what efforts have been made to ensure that their mineral purchases do not contribute to regional violence.
Dodd-Frank Act: A Daunting Task
Conflict minerals compliance immediately became a top priority for the entire organization, led by the company's senior executives. The scope of the endeavor made it challenging to know where to begin. The company works with more than 800 global suppliers for more than 100,000 parts. Decision makers knew that many of their company's products contained at least one of the four conflict minerals, but were unsure whether any originated from the DRC.
"When the Dodd-Frank Act was announced, it seemed like a daunting task," said a Senior Project Manager and leader of the company's conflict minerals compliance project. "It looked like a huge work load to pile on top of the supply chain team, who are already busy with daily responsibilities. We needed to ensure compliance but we didn't have staff available to take on this extra project alone and ask all our suppliers about conflict minerals. It would have taken a couple FTEs many months to complete this type of task."
With only months to go before the first reporting deadline, the company needed not only manpower but also the expertise to ask the right questions as well as the right tools and the skillset to manage critical communications and reporting processes.
When we started receiving bundles of GeSI templates completed by suppliers, we realized that we could successfully comply with this scary new regulation. We found a trusted partner to help us get it all done and make our lives a lot easier.
'An Easy Choice'
A Conflict Minerals Committee, representing multiple departments across the company, was established with support from the company's General Counsel and responsibility for reporting conflict minerals matters directly to the Chief Financial Officer. To address Dodd-Frank compliance, the committee evaluated five companies. All were experienced in helping companies with RoHS and REACH compliance, but most lacked a process and plan for conflict minerals.
"Far and away, IHS Markit had the most comprehensive response to our quote request for conflict minerals compliance," said the Senior Project Manager who chairs the committee. "When IHS Markit came back to us with their proposal, all the infrastructure was there: the GeSI (Global E-Sustainability Initiative) template, the staff to reach out to suppliers, the methodology for engaging the suppliers, and the tools to track responses and escalations, as well as the dashboard to keep us notified of the status. It was such an easy choice to say, 'IHS Markit, you've got the job.'"
The medical technology company already had a comfort level with IHS Markit based on its prior use of subscription services and support for RoHS and REACH. In addition, the company received a free audit report – prior to engaging IHS Markit officially – that indicated what percent of the company's suppliers were already covered within IHS Markit information resources.
Conflict Minerals Infrastructure
The company's leadership team authorized a number of measures to exercise due diligence on the source and chain of custody of conflict minerals in its products. A new management system provided an organizational structure and communication process to improve supply chain transparency. Company managers also sent communications materials to suppliers (in some cases translated into native languages) to make them aware of Dodd-Frank requirements, as well as its new corporate policy regarding conflict minerals in its supply chain.
To identify and assess risk in its supply chain, a dedicated team searched the company's procurement and engineering systems, with help from IHS Markit. Immediate suppliers were asked to identify the smelters/refiners of any conflict minerals in its supply chain during the reporting period. As suppliers returned the GeSI templates, they automatically went right into the product data management system, eliminating the need for duplicate entry. From there, it designed and implemented a strategy in collaboration with IHS Markit to respond to identified risks, using a scoring system or risk level. Throughout the process, the committee kept abreast of progress via dashboards and received monthly reporting statistics from IHS Markit regarding supplier responses.
Smoother than Expected
The medical technology company completed the first year of conflict minerals compliance reporting well ahead of the deadline, and did so without the anticipated strain on staff. The Senior Project Manager estimates that his company would have needed at least two additional full-time staff members during the nine-month period working solely on the project if done internally.
"When we started receiving bundles of GeSI templates completed by suppliers, we realized that we could successfully comply with this scary new regulation. We found a trusted partner to help us get it all done and make our lives a lot easier," he said. "I never lost sleep over the IHS Markit side of the project."
Successfully managing conflict minerals compliance has strengthened this company's competitive position. The company has now assured investors that its strategic environmental/health policies address Dodd-Frank as well as RoHS and REACH. In addition, as it expands globally, the company is now well prepared if other regions, such as the European Union, enact similar conflict minerals reporting requirements.
"Today, our supply chain team is educated about how they should monitor supplier responses and respond to escalations for conflict minerals," the Senior Project Manager concluded. "We know better how to manage the conflict minerals information we receive and how to compile a report. And we know we're going to use IHS Markit again."