green products and supply chain disruption: conflict minerals in the supply chain
DESCRIPTION
Join IHS and GreenBiz Group on this live webcast as they unveil the results of an exclusive survey that gauged awareness, sentiment, concern, and preparedness of the supply chain in response to conflict minerals traceability and accountability. They will share findings from the study and share practitioner insight. Original event date: 1-20-11TRANSCRIPT
Green Products and Supply Chain DisruptionConflict Minerals in the Supply ChainPresented by GreenBiz.com, Moderated by John Davies
John DaviesVP, Senior Analyst, GreenBiz Group
Andrew K. ReeseEditor, Supply & Demand Chain Executive
Scott WilsonContent Solution Strategist, IHS
Rory KingDirector, Global Product Marketing, IHS
Visit booth #103 to speak with IHS and obtain valuable resources.
Topics We’ll Cover
• U.S. Conflict Minerals Law
• Original Research on Conflict Minerals
• Supply Chain Sustainability – Risk and Reward
• Sustainability Tools Best Practices
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Copyright © 2010 IHS Inc. All Rights Reserved.
Disclaimer
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• The information contained in this presentation addresses complicated and fact-specific issues. In no way is any of this intended to convey legal or regulatory advice on matters discussed or implied. You should seek professional legal, regulatory or supply chain advice regarding any applicability of these matters and with respect to your company's specific circumstances.
© 2010 Supply & Demand Chain Executive
Visit booth #103 to speak with IHS and obtain valuable resources.
Conflict Minerals
Andy Reese
Editor, Supply & Demand
Chain Executive magazine
5Copyright © 2010 IHS Inc. All Rights Reserved.
Visit booth #103 to speak with IHS and obtain valuable resources.
Supply & Demand Chain Executive
6
The executive’s user manual for
successful supply and demand chain
transformation, providing analysis,
viewpoints and case studies to steer
executives and supply management
professionals through the world of
supply and demand chain enablement
to gain competitive advantage.
www.linkedin.com/in/andrewkreese
twitter.com/SDCExec
www.SDCExec.com
© 2010 Supply & Demand Chain Executive
Visit booth #103 to speak with IHS and obtain valuable resources.
Green Supply Chain Awards –
2010 Winners4flow AG D.W. Morgan Company Image Microsystems Penske Logistics
ADTRAN Damco International INSIGHT, Inc. PUMA
Aspen Logistics, Inc. DHL Express JDA Software Group, Inc. Ryder System, Inc.
Basware DSC Logistics Kaiser Permanente Saddle Creek Corporation
Black Diamond Equipment Ltd. e-LYNXX Corporation LeanLogistics SciQuest
Brightpoint EcoVadis LOG-NET, Inc. Source4Style
Brightstar Evergreen Line Maersk Line Spinnaker
Cargill eZCom Software Inc. ModusLink Global Solutions Strive Logistics, LLC
CaseStack Firefly Technology Corp. Murphy Warehouse Company SYSPRO
Cass Information Systems, Inc. Geodis Wilson National Retail Systems, Inc. The Timberland Company
Cathay Pacific Airways Limited Global eProcure Norfolk Southern Corporation Total Logistic Control
Celestica Global4PL Supply Chain Services Novartis Animal Health Trade Wings
CHEP Equipment Pooling Systems Half Price Books Novation Transplace
Cisco Systems Horizon Lines, Inc. OB10 Unisource Worldwide
Container and Pooling Solutions ID Label, Inc. OfficeMax Wallenius Wilhelmsen Logistics
Converge IHS Inc. Omnify Software Watson Land Company
YRC Worldwide
© 2010 Supply & Demand Chain Executive 7
The Country
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Democratic Republic of
the Congo (DRC)
12th largest country in size
71 million people (18th largest)
GDP: $22 billion
The Country
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Democratic Republic of
the Congo (DRC)
12th largest country in size
71 million people (18th largest)
GDP: $22 billion
Rich in natural resources
The Conflict
1996-1997 - First Congo War
1998-(2003) - Second Congo War
Eight African nations
25 armed groups
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The Impact
5.4 million people dead
>1,000 people still dying daily
Forced labor
Child labor
Widespread sexual violence
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The Law – History in Brief
Bills on conflict minerals
introduced in 2009
Dodd-Frank Wall Street Reform
and Consumer Protection Act of
2010
Signed into law on July 21, 2010
Section 1502: Conflict Minerals
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The Law – Provisions in Brief
Does not ban the minerals
Imposes new reporting
requirements
Annual disclosures to the SEC
Due diligence requirements
Audit / certification
requirements
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The Minerals
Cassiterite (tin)
Columbite-tantalite
(coltan, tantalum)
Wolframite (tungsten)
Gold
Or their derivatives
“And other minerals ...
financing conflict in
the DRC.”
14© 2010 Supply & Demand Chain Executive
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Our Research Study
Objectives:
Understand awareness of Conflict Minerals issue and Dodd-Frank
legislation, and benchmark preparedness to meet law’s requirements
Assess supply chain exposure to pending legal requirements
Identify strategies for dealing with Dodd-Frank across the supply chain
Research Period:
Conducted: July – September 2010
Practitioner Peer Review and Report Preparation: October 2010
Survey Methodology:
Online surveys
Interviews and peer review
Participants:
190 Global Manufacturing & Non-Manufacturing Organizations
77% US, 23% Non-US
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Key Findings of Original Research on Conflict Minerals
Scott Wilson
Content Solution Strategist,
IHS Inc.
16Copyright © 2010 IHS Inc. All Rights Reserved.
“Innovation, Security, & Risk” by IHS Inc, featuring Supply & Demand Chain Executive
Visit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved.
IHS – A leading information provider
Energy &
Power
Design &
Supply Chain
EHS &
Sustainability
Defense, Risk &
Security
Country & Industry
ForecastsCommodities,
Pricing & Cost
• Employs 4,400 colleagues in 30 countries who
speak 50 different languages
• IHS customers include nearly 70% of the US
Fortune1000 and 80% of the Global Fortune 500
• Tens of thousands of customers and hundreds
of thousands of end-users in over 100 countries
Founded in 1959, IHS is a leading source of
information and expert analysis in pivotal areas
shaping today’s global businesses
• Public (2005), NYSE IHS
• FY10 revenue: $ 1,075 million
Copyright © 2010 IHS Inc. All Rights Reserved.
Yes –Aware
No – Not aware
45%
55%
Modest Awareness of the Bill Passing
Only slightly more than half of those surveyed were aware of this conflict minerals law.
Q: Were you aware that Conflict Minerals were signed into this law?
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Copyright © 2010 IHS Inc. All Rights Reserved.
Coltan (tantalum)
Cassiterite (tin)
Wolframite (tungsten)
Gold
Coltan (tantalum)
Cassiterite (tin)
Wolframite (tungsten)
Gold
Coltan (tantalum)
Cassiterite (tin)
Wolframite (tungsten)
Gold
Coltan (tantalum)
Cassiterite (tin)
Wolframite (tungsten) Gold
More than one third of respondents use a significant amount of tin and gold today (42% tin and 34% gold, respectively).
Extent of Each Mineral or Derivative Used
None Used (35%)
Don’t know (11%)
Minimal Use (26%)
Moderate + Extensive Use (29%)
55%
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Difficulty Identifying Minerals and Source
42% 29%
22%7%
Simple to Very Simple
Very Difficult
Moderately Difficult
Somewhat Difficult
93% of respondents believe that identifying these minerals and their origins will not be easy.
Q: Your Company will find indentifying these minerals and their origin as:
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Supply Chain Impact vs. RoHS/REACH
Lower
33%
Higher
16%
About the same
21%
Unsure
30%
Compared with EU RoHS /
REACH Environmental
Compliance, what Impact will
Conflict Minerals have on the
Supply Chain?
“Requirement to report
annually to the SEC
and to submit a due
diligence plan (audited
and certified by an
independent 3rd party)
will generate more
high level attention
compared to
RoHS/REACH issues.”
- Supply Chain Professional
Opinions are almost equally divided on how Conflict Minerals compares with the impact of RoHS/REACH on the supply chain. A combined 37% say it will have the same or higher impact, 33%
say it will have less of an impact, and almost a third are unsure.
Q: Compared to RoHS/REACH, what impact will Conflict Minerals have?
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Gap: Supply Chain Visibility and Control
Consider hazardous substances (e.g. lead in paint, EU REACH, EU ROHS), security and IP issues (e.g. ITAR/EAR and counterfeit parts), or issues like conflict minerals.
Q: What % of your materials are fully controlled and traceable to their origin today?
3.9%
11.7%
5.2%
0.0%
3.9% 3.9% 2.6%5.2% 3.9%
10.4% 9.1%
5.2%
35.1%
0%
(none)
1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-99 100% (all
of it)
Don't
know / couldn't
tell~ 1 of 4 surveyed have visibility
to < 40%
~ 1 in 4 surveyed have
visibility to 80%+
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13%
3%
37%
28%
24%
9%
11%
Doubts of enforcement or regulation
Disbelief that this will achieve the intended …
Technical feasibility of compliance (practicality …
Cost of compliance (complexity, time, …
Lack of tools/third parties/services to …
None of the above
Other (please specify)
Q: What two (2) are most likely to PREVENT your company from acting immediately on this regulation?
Barriers to Action Today
Technical feasibility to track and trace these materials, followed by cost of compliance and lack of third party enablers, are top obstacles to immediate preparation by companies surveyed.
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42.5%
5.8%
10.8%
10.0%
38.3%
3.3%
9.2%
2.5%
2.5%
Need to comply
Fear of market share loss to Conflict Free peers
Risk to brand from negative exposure
Continuity of supply risk / assurances
Customer requirements or requests for …
Opportunity for competitive advantage
Positive brand exposure of responsible …
None of the above
Other (please specify)
Drivers for Action Today
Q: What two (2) needs, risks, or benefits will likely INITIATE ACTION at your company?
At 42.5% and 38.3% respectively, regulatory compliance and customer requests largely outpace any other business needs, risks, or benefits to initiate action among companies surveyed.
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Copyright © 2010 IHS Inc. All Rights Reserved.
Key Findings -
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Conflict Minerals in the Supply Chain
• Moderate but growing level of awareness
• Mineral use extensive and critical among companies
• Difficulty for companies to identify use and exposure
• Preparedness low; disclosure requests materializing
• Cost and technical feasibility prevent action
• Compliance and customers will drive action
Copyright © 2010 IHS Inc. All Rights Reserved.
Taking Action – Get Started
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Conflict Minerals in the Supply Chain
1. Get an understanding of the issue
2. Get involved in industry
3. Assemble and engage the organization
4. Assess your IT landscape
5. Simulate your response
Visit booth #103 to speak with IHS and obtain valuable resources.
Environmental Sustainability Tools –Best Practices
Rory King
Director, Global Product Marketing
IHS Inc.
27Copyright © 2010 IHS Inc. All Rights Reserved.
Copyright © 2010 IHS Inc. All Rights Reserved. 28
EU RoHS Recast
EU REACH & SVHCSIN List - Substitute It Now!
US California Proposition 65
EU Battery DirectiveENERGY STAR
ISO 14064 GHG Standards Norway PoHS
Carbon Disclosure Project (CDP)
Electronic Product Environmental
Assessment Tool (EPEAT)
Japan Green
Priority Declarable Substances List
(ASD PDSL)
Environmentally Preferred Products (EPP)
Regional Greenhouse Gas Initiative (RGGI)
PCF - Product Carbon Footprint
UN Stockholm Persistent
Organic Pollutants (POPS)
US FDA
China RoHS
Thailand’s “RoHS”
US EPA Executive Orders
Toxic Substances Control Act (TSCA)Health Canada / Canada’s Chemical
Management Plan
Customer RFP
Full Material Disclosure
Product Content Disclosure
Lifecycle Assessment (LCA)Water
Hazardous
Substances
Energy
Waste
DEHP-Free
Bisphenol-A “BPA Free”
Volatile Organic Compounds
Air Safety
Health
Security
Natural Resources
Argentina RoHS
EU RoHS and WEEE
Directives
Greenpeace
EU Medical Device Directive
EU RoHS and WEEE
Directives
Every Green Issue has a Discontinuous EffectDisruptive ripple effect throughout global supply and demand balance
Conflict Minerals
Copyright © 2010 IHS Inc. All Rights Reserved. 29
Market Shift
to EU RoHS
Our Insight Shows Lifecycle Impact of EU RoHS2M+ new parts. Major part changes. Cause of over 20% EOL in „06-07.
2003 2004 2005 2006 2007 2008 2009
End of Life (EOL)
Specific to RoHS/Pb-free Environmental Compliance
2003 2004 2005 2006 2007 2008 2009
New Product Introductions (NPI)
Specific to RoHS/Pb-free Environmental Compliance
2003 2004 2005 2006 2007 2008 2009
Product Change Notices (PCN)
Specific to RoHS/Pb-free Environmental Compliance
NPI
EOL
PCN
RoHS in Force July 1, 2006
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Past: 6 Substances Were Very “Costly”Discontinued parts lead to shortages which lead to counterfeit parts
Tin Whisker Images Courtesy of the NASA
COMPLIANCE (explicit)
Fines, Penalties, Recalls, Data, IT, Supplier Evaluation….
SUPPLY CHAIN & DESIGN COSTS
Obsolescence, Supplier Viability, Material Shortages, Continuity
PRODUCT PROFITABILITY COSTS
Price Variance, Manufacturing Processes, Inventory/LTB…
SAFETY & SECURITY COSTS
Reliability, Tin Whiskers, Counterfeits…
Japanese Electronics OEMRecall
Regulatory event = $160M+ government seizure of 1M+ product units due to high cadmium concentration levels found in system cables suspected to violate EU law.
US Consumer Products OEM
Recall
Design reliability = $1B+ recall logistics, warranty extensions, excessive rework/repair, while customer loyalty dipped to resolve reliability issues causing hardware failure.
Counterfeits and Inferior Grade Components
Source: UK MOD
Copyright © 2010 IHS Inc. All Rights Reserved. 31
Present: EU REACH is a Huge DealEuropean Commission roadmap includes 106 priority SVHC by 2012
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Source: “EU and industry REACH different conclusions”, Jane’s, September 2009
“Airbus UK’s director of operations and compliance, said the cost of REACH had been evaluated at several million Euro over three
years, with provisions up to hundreds of millions of Euro over five years”…
“…*He+ said there is a level of ambiguity because it will depend ‘on the substances that will finally be added to the candidate list and
in Annex XIV’. Airbus UK has set its 2009 REACH budget at some EUR12 million.”
Copyright © 2010 IHS Inc. All Rights Reserved. 3232
Future: The Next Shoe(s) Have Dropped…
U.S. Conflict Minerals Law:Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law on July 21, 2010.
Is BPA (Bisphenol-A) Next? Kaiser Permanente’s October 28, 2010 research announcement concluding, “Exposure to BPA Associated with Reduced Semen Quality.”
Copyright © 2010 IHS Inc. All Rights Reserved. 33
Entire Peer Groups Are ConcernedLast October, we held a Webcast called “Redesigning Medical Supply Chains”
… and only 1 did not attend our webcast…
Over $80B in spend among the Fortune 1000…
Sustainability Tools –Best Practices from the Congo’s ICGLR
Lessons Learned from Africa’s International Conference on the Great Lakes
Region (ICGLR) response to Conflict Minerals legislation can illustrate best
practices in approaching supply chain sustainability, specifically risk/reward.
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About the ICGLRMember States: Angola, Burundi, Central African Republic, Republic of Congo, Democratic Republic of Congo, Kenya, Uganda, Rwanda, Sudan, Tanzania, and Zambia.
Mission: To be an effective and dynamic institution which: Coordinates; Facilitates, Monitors and Ensures the implementation of the Pact and other initiatives, in order to attain peace, security, stability and development in the Great Lakes Region.
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SUPPLY SHOCK: “New US legislation regarding “conflict minerals” from the
Democratic Republic of Congo (DRC) is likely to push up the price of tantalum
oxide as it could lead to a supply squeeze, Africa-focused Globe Metals &
Mining…”Mining Weekly, July 2010
DEMAND SHOCK: “Compliance and our reputation as an ethical
company [is our risk exposure]. Our benefit is to make our customers’
lives easier. End consumers shouldn’t be burdened with the task of
discerning which products are ethical.”Supply & Demand Chain Executive, November 2010
Public Pressure Turned ‘Shocking’
#1 Act Immediately: Design Cycles Exceed Regulatory Timelines in Most Scenarios
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#2: Continuity as Supplier to Market, not “Compliance”, is Your Business Case
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#3: A Platform of Transparency is Key in the Sustainable Supply Chain Generation
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#4: Standardizing Supply Chains Lowers Risk and Cost; Improves Time-to-Market
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Copyright © 2010 IHS Inc. All Rights Reserved.
Not merely “Compliance” but…
… a matter of continuity and survival
as a supplier to global markets.
CONCLUSION
Copyright © 2010 IHS Inc. All Rights Reserved. 42
For more resources, visit - http://bit.ly/SDCEconflict1104
John DaviesVP, Senior Analyst, GreenBiz Group
Andrew K. ReeseEditor, Supply & Demand Chain Executive
Scott WilsonContent Solution Strategist, IHS
Rory KingDirector, Global Product Marketing, IHS
www.greenbiz.comwww.ihs.com
www.sdcexec.com