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Dodd-Frank Act – what about other sectors?

Under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, U.S. companies were required to disclose their use of conflict minerals from the Democratic Republic of Congo (DRC) and/or adjoining countries in the form of a report to the Securities and Exchange Commission (SEC) by May 31st 2014. Those that didn’t reach this milestone needed to publicly disclose the steps they had taken to identify conflict minerals in their products.

The Dodd Frank Act is far reaching:

  • It covers products containing tin, tantalum, tungsten and gold
  • focuses on the conflict stricken DRC and also the nine countries surrounding via a process of Reasonable Country of Origin Inquiry (RCOI)
  • and directly affects around 6000 companies, and beyond a further 250,000 or so suppliers.

However as these reports for the SEC come through, a question arises: if mineral consuming companies need to consider and disclose their supply chain, why not other industries?

For instance, recent reports suggest that Indonesia’s rate of deforestation is now exceeding Brazil’s (this despite having less than a fifth the forest cover) in spite of efforts such as a moratorium to curtail the rate.

The Dodd Frank reform tackled a very human issue, but could it perhaps pave the way for wider reform and transparency through supply chains? Commodities such as timber represent an enormous source of risk; deforestation’s impact is global, being the second greatest contributor to GHG emissions. Then of course there are the localised issues – the associated biodiversity loss, flood risk – deforestation’s adverse effects are near boundless. There are voluntary measures to stem this problem; membership with the Roundtable on Sustainable Palm Oil is a notable response to the issues described in Indonesia. But given the expansion of deforestation in Indonesia one could argue the response isn’t fast or stringent enough.

Shoppers increasingly want to know the sources of their items. If industries don’t speed up action on their supply chains, identify risk and resolve issues, it is conceivable industry may find a regulatory measure pushed through to force their hand.

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