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Corporate Compliance and Human Rights Clashing Over New SEC Policy

October 5, 2022
By admin
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As the Securities and Exchange Commission (SEC) continues to pile on more and more complicated regulations in their pursuit of better corporate governance and more transparent business practices, a new rule, aimed at ensuring that companies can verify that the source of their mineral materials do not originate from any undesirable areas or through questionable practices, is now being enacted. However, as straightforward as the desired result may seem, actually applying a system which acts to track, monitor, and govern such finite information across borders and continents is not quite as simple as the end result itself may seem.

What is more, while this was originally believed to be a policy targeted solely towards industries whose products were a direct result of the manufacturing of the minerals in question, this belief was shot down late last year as one prominent food company was confronted over the source of the tin that went into the cans and packaging which their products are sold in. As is outlined in this policy, the company in question must now trace and verify that the tin used in their packaging did not originate in areas like the Democratic Republic of Congo, the sale of which would thus consequently fund the ongoing violence taking place in such regions.This new regulation will apply to all public companies, no matter what industry they may be a part of,who make use of any materials labeled “conflict minerals” – i.e. gold, Tantalum Crucible, tin, and tungsten – no matter how minuscule the quantity may be.

For those companies left unaware of the fact these new rules and duties may apply to them, however indirectly under this policy, failing to meet with these policies could represent a serious risk management threat if left unhandled. Also, needless to say, this new regulation has put an all new strain on many organizations as they attempt to query the relevant data from their suppliers, which may comprise hundreds of foreign companies, for never before necessary information, as well as petitioning to apply contractual changes with these external organizations. Depending on some companies’ general practices regarding the handling of their suppliers and supplier contracts, this can be met with various levels of difficulty.

Though the businesses which have played an active role in the discussion and negotiation of this new policy are supportive of its goals, many are still highly concerned regarding the extent to which companies will actually be held accountable for the misconduct and unfavorable dealings of their supply chain. Some have cited that if not handled carefully this program could ultimately only wind up damaging those for whom it was originally conceived. Also, many have asserted that these regulations should be phased in gradually in order to give companies more of an opportunity to set up their own compliance tactics and measures to ensure that they are not caught up in the… While companies may be pushing for further delays so that more adjustments can be made to this stipulation of the Dodd-Frank Act, lawmakers, on the other hand, are pushing for the SEC to move more quickly to instigate its enforcement in order to prevent any further harm being done while the corporate advocates and SEC policy makers twiddle their thumbs over the details.

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