13th CFSI Workshop Presentations - Day 2

The Conflict-Free Sourcing Initiative www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect

Welcome!

8:00 - 9:00 a.m. Registration and Check-In 9:00 - 10:30 a.m. Practical Reporting Guidance: What is expected from companies on reporting? What are companies’ options? How does

participating in the CFSI help downstream companies meet their obligations?

10:30 - 10:45 a.m. Coffee Break 10:45 a.m. - 12:00 p.m.

Conflict-Free Smelter Program Overview and Conflict-Free Sourcing Initiative Governance Overview of how interested companies can join the CFSI, how we engage with stakeholders and how the CFSI is managed. We’ll also provide an update about the CFSP and related smelter outreach, protocol updates and training developments.

12:00 – 1:30 p.m. Lunch 1:30 – 2:30 p.m. Compliance Best Practices

Building on CFSI guidance, various paths to Reasonable Country of Origin Inquiry (RCOI) data, and Independent Private Sector Audit (IPSA) and US Securities and Exchange Commission (SEC) frequently asked questions.

2:30 - 3:00 p.m. Closing Remarks

3:00-3:30 Coffee Break 3:30-4:30 p.m.

EU Regulation Review (Industry attendees only) The EC’s Directorate General for Trade has announced that it will put forth regulation governing conflict minerals in early March. After a prompt review of the regulation, experts will discuss their interpretation of the requirements and explain what this all means for your company.

4:30 - 5:30 p.m.

Benchmarking Companies’ Reporting Progress (Industry attendees only) What is your company doing for this initial reporting period compared against what other companies are doing? What are you including in your report? What are others including? This industry-only session allows companies to compare their reporting plans to their peers and learn further best practices.

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• Chatham House Rule: Participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.

• Respectful participation – Focus on issues, not individuals or organizations –Take a problem-solving orientation – Listen actively (limit side conversations)

• Introduce yourself before speaking • Mobile phones off or silent

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• No still photography or audio/video recording. • Want to live Tweet? Great! #CFSI #cfsiconf14 . However:

ground rules still apply! • Members of the press are allowed in sessions, but must

adhere to all ground rules and wear a name tag to identify themselves.

• Please refer press inquiries to EICC Director of Communications Julie Schindall (available at registration).

• Be mindful that space outside of sessions is considered public to the press.

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• Meetings and programs should be conducted so as to eliminate questions regarding antitrust compliance.

• Under no circumstances shall the meetings of this group be used as a means for competing companies to reach any understanding, expressed or implied, which tends to restrict competition, or in any way to impair the ability of members to exercise independent business judgment regarding matters effecting competition.

• These guidelines apply not only to discussions during a formal meeting, but to all informal discussions as well.

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••••

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• CFSI will not allow solicitation from non-sponsoring companies.

• All CFSI members and other attendees are asked to report solicitation; any companies found not to honor this policy will not be permitted to attend CFSI workshops for one year.

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European Union regulations, in-region traceability initiatives — a lot is going on in the conflict minerals space. Make sure you have the most up-to-date information about best practices on conflict minerals due diligence by attending our 13th Conflict-Free Sourcing Initiative Workshop.

Event Sponsors Event Exhibitors

http://3ecompany.com/

http://www.conflict-minerals.com/

http://fr.ptc.com/topics/conflict-minerals/


3 major bodies of work address conflict minerals reporting: – The United States Dodd-Frank Act of 2010 – The related Securities and Exchange Commission final rule on

compliance with Dodd-Frank (SEC final rule); and

– The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance)

Future – EU Regulation (2014-2015)

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• The CFSI is committed to improving conditions in the supply chain. Mining activities that fuel conflict are unacceptable. • In order to help companies meet reporting obligations and to source conflict-free minerals the following actions are undertaken:

– Supporting in-region sourcing schemes to enable future legitimate trade from DRC and surrounding countries – Implementing Conflict-Free Smelter Program (CFSP) that requires OECD guidance to aid in the identification of smelters and refiners that have sourced conflict-free minerals – Developing the Conflict Minerals Reporting Template (CMRT) to help companies gather due diligence information in a common format – Engaging with multiple industries for collaboration and efficiency

Conflict Free Sourcing Initiative (CFSI) 11

In-Region Schemes

Conflict-Free Smelter Program (CFS)

Company Assurance

Finished Product

MINE SMELTER/REFINERY OEMS

(pinch point)

Conflict Free Sourcing Initiative (CFSI) 12

High-level Compliance Steps 1. Company Conflict Minerals Program Framework 2. Identify and Assess Risk in the Supply Chain 3. Risk Management 4. Smelters or Refiners 5. Report 6. Implement Program Improvements and Repeat

Company Conflict Minerals Program Framework – Build a company management system: • Identify functional areas to support CM program • Adopt a policy and expectations for your suppliers • Implement internal controls – Training – IT Systems – Contracts – Customer Response – Communications

• Collect data on products and suppliers which contribute those necessary conflict minerals to the products

Identify and Assess Risk in the Supply Chain –Collect supplier data • Conduct a supply-chain survey (CMRT) –Review and respond to unreasonable responses

• Assess CFS information for RCOI determination • Potential validation information resources –Other recognized industry approach –Participation in in-region sourcing program(s) – Information attained from industry initiative

program(s) – Information attained directly from a smelter –Other indirect information (smelter location)

• Make Covered Country sourcing conclusions from ‘all’ applicable information sources • Aggregate smelter/refiner data • Determine smelter/refiner’s information

– Country of origin information (CC or non-CC)

– Utilize CFSP or other recognized industry approach

– Solely recycle/scrap

Risk Management – If the smelter or refiner (SoRs) sources

from covered country or unknown implement OECD Due Diligence • Compare smelters to CF independent

audit program reference lists (e.g. CFS, LBMA, RJC) – DRC CF: Listed smelters – DRC conflict undeterminable: smelters not yet ‘listed’

– Identify additional/future activities to improve DD

Goal: identify smelters and rely on industry program

• Identify program improvement to support better data gathering –Strategize how to improve supplier survey response

rate and accuracy – Identify and execute strategies to increase

smelter/refiner participation in independent 3rd party validation audits

–Modify database to meet changing compliance requirements

Smelters or Refiners –Utilize CFSP to determine • Country of origin information for successfully audited SoRs • Conflict-Free status information

– For example: • If a product’s supply chain SoRs are all CFS validated, then

may be reported as conflict-free in CMR

Reporting • If you’ve already determined that the SEC Rule applies,

conducted your RCOI and DD: – Report via Form SD (and CMR as required)

Goal: Transparency of sourcing information • Form SD template provided within the SEC Final Rule. –pg. 344 • Report(s) to be filed “. . .no later than May 31 after the end of the issuer’s most recent calendar year.” – pg. 345

• “Report must be signed by the registrant on behalf of the registrant by an executive officer.” – pg. 346

Form SD Under a separate “Conflict Minerals Disclosure” heading • If you have established that a large majority of CM in your

supply base did not originate in the covered countries or were from scrap or recycled materials – Briefly describe the RCOI

• Otherwise, all substantive content may be contained in the CMR • In either case, the information must be posted in a public

website and a link to the posting must be included on Form SD

CMR Company’s CM Policies conform in all material respects to a nationally or internationally recognized due diligence framework For products “not found to be DRC conflict free”,

1. Provide description of product(s) 2. Smelter/refiner facilities used to process CMs 3. Country of origin of the CMs in those products 4. Efforts to determine mine or location of origin

Likewise for products which are “DRC conflict undeterminable”, 1. Provide description of product(s) 2. Smelter/refiner facilities used to process CMs, if known 3. Country of origin of the CMs in those products, if known 4. Efforts to determine mine or location of origin 5. Steps to mitigate the risk that its CMs benefit armed groups (including steps

to improve due diligence)

Independent Private Sector Audit • 2 separate and independent objectives:

1. The design of the registrant’s due diligence measures as set forth in, and with respect to the period covered by, [the CMR] is in conformity with, in all material respects, the criteria set forth in the nationally or internationally recognized due diligence framework used by the registrant; and

2. The registrant’s description of the due diligence measures it performed as set forth in the [CMR], with respect to the period covered by the report, is consistent with the due diligence process that the registrant undertook.

The Conflict-Free Sourcing Initiative | www.conflictfreesourcinginitiative.org | @EICCoalition | @GeSIConnect 23

Determination by Registrant Scenario Result File

Necessary CMs are from outside the covered countries and/or solely from recycle/scrap

1 DRC conflict free

Form SD

Know (or have reason to believe) necessary CMs originated from a conflict free sources including from within the covered countries

2 DRC conflict free

Form SD & Audited CMR

Know (or has reason to believe) necessary CMs originated from within the covered countries and are not (or may not be) from recycle/scrap sources

3 DRC conflict undeterminable

Form SD & CMR

4 DRC conflict free & DRC conflict undeterminable


Know (or have reason to believe) necessary CMs originated from a conflict source within the covered countries

5 Not found to be DRC conflict free


Do it all again next year And do it better!

Questions? Thank you








• Commitment • New Partner! • 2014 Goals • New look • CFSI Governance

Update • Conflict-Free Smelter

Program • Company Assurance • Due Diligence Practices • Summary

• The CFSI is committed to improving conditions in its supply chain and mining activities that fuel conflict are unacceptable.

• In order to enable participating companies to source conflict-free

minerals, we are taking action by: – Implementing Conflict-Free Smelter and Due Diligence Programs – Supporting in-region sourcing schemes to enable future legitimate trade from

DRC and surrounding countries – Supporting OECD due diligence guidance and pilot – Engaging with stakeholders for collaboration and efficiency

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• Newest CFSI Association Member


1. Continually evolve the Conflict-Free Smelter Program (CFSP) 2. Continue development and implementation of the Conflict-Free

Sourcing Initiative (CFSI) 3. Continually evolve common cross-industry approaches to support

the disclosure and due diligence expectations of the U.S. SEC, OECD, ICGLR and UN; consider and support other models as they are developed

4. Support the implementation of verifiable traceability programs for the Democratic Republic of Congo (DRC) and covered countries for conflict-free minerals

5. Build and maintain strong relationships and increase transparency, communications and efficiency to enhance credibility in the CFSI activities


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• New logo

• New website • Improved

functionality • Improved

navigation • Improved SEO • Improved

aesthetic

The initiative is undergoing continued improvement: • Name change completed, CFSI is the umbrella • Continue work on future structure

• Interim Steering Committee to more permanent body • Cross-industry composition

• Revenue generation options being implemented (membership and royalties)

• CFSP improvements

Overall development and implementation will continue in into 2014 and beyond

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CFSI Steering Committee

EICC Bob Leet

GeSI TBD

At Large Jay Celorie

At Large Carrie George

At Large Jean-Paul

Meutcheho

At Large John Plyler

CFSI Partner Sandy Merber

CFSI Partner Ben Cohen

Chairperson Mike Loch

Program Director Michael Rohwer

Staff Katherine Sullivan

Ex-Officio (nonvoting) Committee Members

Association Partners -AIAG : Michael Wolf

-JEITA -RILA

NGOs


Audit Review Committee •Ensures auditor appropriate execute audit to protocol • Identifies potential corrective actions

CFSI Stakeholder •Provides updates and news from OECD and NGOs

CFSI Workshop Planning •Program development and planning

Extractives Due Diligence •CMRT revision and user-group

Due Diligence Practices •Compliance best practice sharing • Initiative position creation on compliance issues

Smelter ID Team • Smelter validation • Smelter master list • Smelter outreach

• PPA activity support • OECD upstream implementation good practices document • Supporting and integrating with in-region due diligence

mechanisms • ICGLR support • Integrating with closed-pipe systems • Dialogue with covered countries


In-Region Programs

Conflict-Free Smelter Program (CFSP)

Company Assurance

Finished Product

MINE SMELTER/REFINERY OEMS

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Upstream

Smelters / Refiners

Downstream

Conflict-Free Smelter (CFS) Program

Raw Materials

Finished Products 39

Why Here? Conversion of distinguishable starting material

into an indistinguishable product Small Numbers – tantalum, tin, tungsten and

gold smelter/refiners total less than 500 companies globally

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Company Mass Balance - Includes all inventory - Includes all facilities

Ore / Concentrate

Recycled / Scrap

Toll Customer

Finished Products

Toll Supplier

Conflict Free

Policy

Intermediates

Unfinished Products

Company Program Validation - Conflict Free Policy - Conflict Free Sourcing Systems

Sourcing Processes Validation

• Protocol improvements: – Tungsten protocol released! • Collaboration with TI-CMC

– Addressing tin industry concerns (definition, ASM, secondary materials, slags)

– Gold update scheduled for 2014 – Improving standardization, readability and clarity

• CFSP Program-Manual generation in progress – ISO & ISEAL alignment improvements – Competence, impartiality, enforcement, grievance, appeals, and record-

keeping,

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• 6 months ago: 70 active / 45 compliant • Today: 112 active / 79 compliant

Development, integration and maintenance of tools and processes which support a down-stream company’s management system and risk assessment activities: – Policy language included in the EICC Code of Conduct

(http://www.eicc.info/eicc_code.shtml ) – Created; maintaining a tool to collect information about a supplier’s due diligence processes and sourcing: Conflict Minerals Reporting Template

– Establishing resources and processes to support data collection and analysis

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http://www.eicc.info/eicc_code.shtml

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Smelter Smelter

Smelters

Sub-Suppliers Sub-

Suppliers Sub-Suppliers

Template User

Direct Suppliers Direct

Suppliers Direct Suppliers

1. Sends request to direct suppliers

2. Sends request to sub-suppliers

3. Cascades through supply chain until smelters identified. Sub-suppliers return template to suppliers. Direct

Suppliers Direct Suppliers Direct

Suppliers

Original User

Customer

4. Direct suppliers return aggregated roll up template

5. User returns final aggregated roll up template

• NEW Conflict Minerals Reporting Template (CMRT) – Revision 3.0 scheduled for release at end of March

• CMRT 3.0 Noteworthy Improvements – Harmonized with new IPC Standard (CFSI co-developed) • 2 additional due diligence questions • Several new company information fields • Numerous slight modifications to existing (2.03a version) questions

– Additions / edits to companies in the “Standard Smelter List” – Simplification of the assigned CFSI identification numbers – Enhanced instructions and updated definitions

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• Highly recommend use of 3.0 for data collection for 2014 calendar year

• Historical data can be very useful, but exercise due care in comparing 3.0 to 2.xx data – Version (2.xx) has slightly different question set. – CFSI ID numbers have been modified so mapping of historical smelter

information from 2.xx to 3.0 will be required

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• EICC and GeSI collaborating with the IPC (www.ipc.org, “Association Connecting Electronics Industries”) with the objective to: – Develop a standard for exchange of data related to conflict minerals used

in manufactured products to facilitate efficient data exchange across companies, supply chain levels, and industries • Not an actual data collection tool – but a set of due diligence information

requirements and “instructions” to allow different tools to communicate

• IPC facilitating an open ANSI standard process

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http://www.ipc.org/

• Work began in November 2012 and continues: – Standard for Ballot passed in late 2013 – Associations are finalizing approvals as “co-developers” (e.g.,

EICC, JEITA) – In process of “typesetting” for publishing

• Contact: – Stephanie Castorina: [email protected]

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mailto:[email protected]

• Forum for best practice sharing – CMR and SD templates – Cross-industry collaboration – Surveys and polls

• Position papers and FAQs – SEC – AICPA – NGOs

• EU Regulatory scheme 49

• The CFSI continues to drive improvements in its programs to enable companies in their ability to source conflict-free minerals

• Improving governance of the initiative, both in structure and revenue generation are key to sustainability and health

• Company assurance activities of the CFSI are focused on improving company capabilities to validate responsible sourcing of materials by creating common standards, tools and processes

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• EICC or GeSI Membership – Full Membership provides access to CFSI and all EICC/GeSI WG’s

( http://www.eicc.info/Membership_Application.shtml ) ( http://www.gesi.org/Membership/tabid/59/Default.aspx )

• CFSI Partner Company Participation ( http://www.eicc.info/documents/ExternalWGMembers-Companies.pdf ) – $5K fee annually – Voting rights, access to all Work Groups, access to RCOI information

• CFSI Partner Association Participation ( http://www.eicc.info/documents/ExternalWGMembers-Organizations.pdf ) – $20K fee annually – Voting rights (one vote for organization) – Up to two participants to CFSI Meeting or CFSI Work Groups, responsible for

disseminating all information (staff or constituent members welcome)

• White Paper on the Extractives WG (now the CFSI) available (www.conflictfreesmelter.org)

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http://www.eicc.info/Membership_Application.shtml

http://www.gesi.org/Membership/tabid/59/Default.aspx

http://www.eicc.info/documents/ExternalWGMembers-Companies.pdf



http://www.eicc.info/documents/ExternalWGMembers-Organizations.pdf



http://www.conflictfreesmelter.org/






SIGNET RESPONSIBLE SOURCING PROTOCOLS (“SRSP”s) for gold and “3Ts” Brussels, March 2014

Signet is the #1 Specialty Jeweler in the U.S. & U.K.

Note: Sales for Fiscal 2013. Estimated store numbers Fiscal 2014-end.

H.Samuel #1 in U.K. Sales: ~$0.4 billion Stores: 304

Ernest Jones #2 in U.K. Sales: ~$0.3 billion Stores: 179

Kay Jewelers #1 Jewelry store in U.S. Sales: ~$2.0 billion Stores: 1,057 in 50 states

Jared The Galleria Of Jewelry #1 U.S. Off-Mall Specialty Jeweler Sales: ~$1.0 billion Stores: 205 in 39 states

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Context for Supplier Research and Due Diligence • Signet Jewelers Ltd is legally required to comply with US legislation (Wall

Street Reform and Consumer Protection Act, “Dodd-Frank”) relating to “conflict minerals” - gold, tin, tantalum and tungsten (“3Ts”)

• “Dodd-Frank” applies to Signet Jewelers Ltd’s global supply chain, for both U.S. (Sterling) and U.K. (Signet) Divisions

• Signet Jewelers Ltd is also active in the development of harmonized industry guidance and standards (OECD, RJC, LBMA, EICC, DMCC etc.). LBMA’s “Responsible Gold Guidance” is a core reference

• The SRSP for gold can be aligned with the RJC’s new “Provenance Claim” provision

• Signet has produced global guidance for all suppliers of gold and 3Ts , which is aligned with these guidance and standards

• The Signet Responsible Sourcing Protocol (“SRSP”) identifies compliance criteria to ensure Signet’s supply chain is conflict-free

• SRSPs supported by government-backed trade bodies (RJC, LBMA, DMCC, OECD) and Reserve Bank of India

Confidential & Proprietary Information of Signet Jewelers Ltd

Year Key Activities 2011 Research suppliers to understand supply chains

Identify focal points in supply chain (esp. smelters/refiners, banks)

Map Signet’s supply chain

2012 Build database of Signet’s gold & 3Ts supply chain

Development of SRSPs and supplier testing

Harmonization of SRSPs with industry guidance and standards

Implementation of SRSPs, eff. 1/1/13

2013 SRSP compliance reporting (quarterly)

Identify and support any non-compliant suppliers

Establish audit criteria and test

SRSP compliance report for full year 2013

2014 Audit of SRSPs, preparation of Form SD, annual report

Establish ongoing operational procedures

Project Timeline of “SRSP”s


Supply Sources for Gold (simplified)


SRSP Supplier Requirements

• Signet’s suppliers are required to validate, certify and audit supplies of gold from every source used, including subcontractors

• The SRSP is intended as a guide for suppliers to enable this certification.

• Compliance reporting quarterly throughout 2013 via a simple online report.

• Suppliers need to pass on the same Signet Responsible Sourcing Protocol (“SRSP”) requirements to all subcontractors, who will in turn need to assess this SRSP, ensure due diligence is undertaken on their own supply chain, and confirm a capability to certify and audit against the SRSP.

• After reporting compliance, include “The seller warrants that any products containing gold, tin, tungsten or tantalum have been supplied in compliance with the Signet Responsible Sourcing Protocol (‘SRSP’)” on all invoices, delivery notes and any other documentation accompanying future supplies to Signet.

• Some suppliers must provide an independent audit of compliance in Jan/Feb 2014 to validate their 2013 compliance claims


1: Policy documentation in accordance with SRSP guidance, e.g.

- Refineries: LBMA “good delivery” status, RJC member certification, other accredited certification, KYC procedures - Metals Traders: terms of business, confirmation of certified refinery gold, KYC procedures - Banks: terms of business, confirmation of certified refinery gold - Subcontractors: as above, RJC Chain of Custody/Provenance Claims certification

2: Transaction documentation to support above policies, e.g. - Delivery certificates showing certified refinery sources - Delivery/transfer documentation which matches certificates - Invoices with matching details

Documentation should be available for independent audit

Supporting evidence required to validate compliance claims


• Signet have provided a list of accredited auditors and full guidance for auditors and suppliers • Audits done on representative sample basis, completed in January and February 2014 for calendar year 2013. • Auditor list is aligned with RJC, plus some local specialist companies with harmonized standards/audits (e.g. SCS Global Services) • SRSP audit is mutually recognized and harmonized with RJC, SCS, CFSI, LBMA, DMCC etc. audits, to reduce costs and duplication • The SRSP audit can be harmonised in future with the RJC “Provenance Claim” • Suppliers may choose audit company from the accredited list • Suppliers will be responsible for appointing auditors, paying for audits and providing audit reports to Signet. • Audits should be 1-day (possibly desk) audits, depending on quality of documentation and complexity of the supply chain, estimated < $2,000/day.

SRSP Audit Procedures







High-level Compliance Steps 1. Company Conflict Minerals Program Framework 2. Identify and Assess Risk in the Supply Chain 3. Risk Management 4. Smelters or Refiners 5. Report 6. Implement Program Improvements and Repeat

–Collect supplier data • Conduct a supply-chain survey

(CMRT) –Review and respond to

unreasonable responses • Assess CFS information for

RCOI determination



Smelter Smelter

Smelters

Sub-Suppliers Sub-

Suppliers Sub-Suppliers

Template User

Direct Suppliers Direct

Suppliers Direct Suppliers

1. Sends request to direct suppliers

2. Sends request to sub-suppliers

3. Cascades through supply chain until smelters identified. Sub-suppliers return template to suppliers. Direct

Suppliers Direct Suppliers Direct

Suppliers

Original User

Customer

4. Direct suppliers return aggregated roll up template

5. User returns final aggregated roll up template

Check for completeness

Check for reasonableness

Assess ID’s smelters’ risk

Reasonable Country of Origin Inquiry: • Representations from relevant suppliers

could indicate • The names of SORs in that supplier’s

supply chain. • The mine of origin associated with an

SOR, which could indicate whether the facility sources from a CC.

• Whether or not the SOR solely processes recycled or scrap materials.

• On the CFSP compliant list • SOR’s geographic location • Public sourcing information • Company’s direct information


• SEC does not require certainty but rather a reasonable process designed to yield reasonable results.


REASONABLE EAGLE

• Try to get that list of smelters in your supply chain • Depends on the circumstances – Position in the supply chain – Complexity of products – Supply tiers from smelters

• Do you have reason to believe CM in your supply chain are from CC?

• Tell the SEC what you did • Maybe keep it easy to audit?


•Design • Performance

2 Separate Aspects

•Which is the easier audit? • Is it documented?

Qualitative vs.

Quantitative


• Depends on your circumstances


REASONABLE EAGLE






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13th CFSI Workshop Presentations - Day 2

Technology