WASHINGTON, April 9 (Reuters) - Many public companies are on track to miss a May deadline for complying with new rules that require them to file disclosures that tell investors whether their products contain certain “conflict minerals” from a war-torn part of Africa, a new survey has found.
The survey, conducted by PricewaterhouseCoopers, comes at the same time as a U.S. appeals court continues to weigh whether to strike down the conflict minerals rule after industry groups challenged it.
Despite the pending legal challenge, the U.S. Securities and Exchange Commission has not granted companies a temporary reprieve from complying with the rule, which kicks in on May 31.
Of 700 companies surveyed across 15 industries, Pricewaterhouse said it found that a mere 4 percent of companies have completed a draft of their SEC conflict minerals filings. (PwC survey: r.reuters.com/vux38v)
Another 90 percent are not ready with a substantive draft document, PwC added, noting that conflict minerals compliance “has proven more intensive” than anticipated.
“Time is running out and companies need to move fast,” said Bobby Kipp, a partner with PwC’s risk assurance practice, in a press release announcing the findings.
The SEC’s conflict minerals rule stems from a provision in the 2010 Dodd-Frank Wall Street reform law.
Human rights groups convinced lawmakers to tuck in the provision, in an effort to empower consumers who want to avoid products that encourage mining in areas gripped by rebel violence and humanitarian conflict.
The measure requires companies to determine if certain types of minerals, in products such as laptops and car parts, may have originated from the Democratic Republic of the Congo (DRC) region.
The results of the inquiry into the minerals’ origin also must be disclosed to the SEC and posted on company websites.
The findings in PwC’s survey help bolster some of the complaints made by the business groups that filed a lawsuit against the SEC to challenge the rule.
The U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers contend the rule imposes far too many costs.
They claim it is too difficult for companies to trace the origins of very small amounts of minerals used in manufacturing through the supply chain.
If there is a reason to believe some of the minerals came from the DRC region, then companies must also retain outside auditors and conduct further due diligence.
The survey found that 62 percent of companies that responded to the survey needed to devote one to two full-time staffers to help deal with conflict minerals compliance.
The sectors that have made the most progress so far in performing due diligence checks are technology, energy and metals, PwC said.
At the same time, however, some data in the survey may also back up the arguments of human rights groups that support the rule and say it is needed.
For instance, the extensive amount of compliance and the business risks from the SEC’s rule have led more companies to try and source their minerals elsewhere, the survey said.
Forty-five percent of the respondents told PwC they plan to be conflict-free so their revenue does not take a hit.
In addition, a majority of respondents, or 67 recent, also reported they do not expect to need to hire an outside auditor in the first two years after the rule kicks in, either because the minerals are not from the DRC, or because the origin could not be determined.
PwC said that companies should continue to comply with the rule and meet the deadline, even though uncertainty looms in the appeals court.
“The appeals court has no timetable for their decision and most observers have concluded that a decision before the May filing deadline is unlikely,” the survey says. (Reporting by Sarah N. Lynch; Editing by Lisa Shumaker)