The ethical sourcing of materials from conflict-free regions is a responsibility that most of us in the global EMS industry take very seriously, and not just when emerging legislation tells us it must be so.
Prior to joining Creation, I was president of a company manufacturing bare printed circuit boards, and so I understand first-hand the impact of responsible commodity sourcing upstream in the supply chain.
The ultimate responsibility to comply with the Conflict Minerals legislation in the Dodd-Frank Act falls on the US’s Securities and Exchange Commission’s publically traded companies, many of which are Creation Technologies OEM customers. At Creation we do our best to guide our partners through the process and implement systems to help them comply with formal regulations.
In the third and final installment of our first Conflict Minerals Effect video series, I discuss the direct impact – cost, resources, and opportunities – that the Dodd-Frank Conflict Minerals legislation has on our company and customers.
The role that the electronics industry can play in leading change is complex. In our view, no matter the legislation or challenge, it is most effective for all partners throughout an OEM’s supply chain to have an open dialogue, as much end-to-end visibility as possible, and a plan to work together to do what’s right, as well as what’s necessary.
Supply chain awareness is critical for OEMs. Especially when the raw materials used to make their electronic products might have ties to terrorist groups and human rights abuses in Central Africa.
I recently had an opportunity to talk about this complicated social and economic issue, and am excited to announce a new three-part video series on the effect of conflict minerals on the EMS industry.
In the first installment, I talk about the controversy surrounding conflict minerals and the legislation put in place that aims to address it.
The Conflict Minerals Effect: Part 1 – The Origin
Understanding the origin of raw materials is not only important from a corporate responsibility standpoint, but for all publically traded companies in the United States, it is actually required by law. Under the Dodd-Frank Act, companies filing with the Securities and Exchange Commission (SEC) are required to determine whether the minerals used came from the DRC or nine adjoining countries.
And the topic of Conflict Minerals continues to make headlines.
When you picture your business trips, does this sound familiar? A 72-hour sprint, dominated by airport terminals, rental cars, hotel lobbies, and continental breakfasts. If you are lucky, you can squeeze in time to go to that restaurant you read all about in the airplane’s magazine.
But sometimes on these trips, you are able to do something memorable, fulfilling and out-of-the-box. Fortunately enough for us, we were able to have one of those awesome experiences recently.
Earlier this month, members of our Central Business Development and Finance teams met in Minnesota (where I live and work) for training, sales process discussions, account reviews and discussion around how best to serve our customers. I loved the chance to host my Creation team. We took advantage of the beautiful Minnesota summer and enjoyed some outdoor meals together in downtown St. Paul and along the river in historic Stillwater.
While our meetings were productive, the highlight of our trip was spending a morning volunteering at Feed My Starving Children (FMSC). FMSC is a non-profit organization empowering volunteers to pack meals for the malnourished in 70 countries.
We had done some research on the organization and were impressed with their efficiency and ability to make an impact. At FMSC, 92% of the funds raised go towards meals, and in 30 years of operation, over 99% of meals have been received by the intended recipients – many of whom are located in extremely remote areas across the globe.
When you look at FMSC’s stats, it is easy to appreciate this extraordinary, organized organization.
The day was also an opportunity to meet remarkable people like Christy, who helped coordinate the 80 of us who volunteered that morning, and Christy (a happy coincidence!) who manages mobile packing events around the country. She told us a heartwarming story about an exchange student she met at an event in Washington, DC, the week prior.
The young woman grew up in Haiti and attended a large FMSC event to pack meals with her host family and hundreds of others. The student was emotional as she told Christy that as a girl in Haiti, she grew up eating the meals provided by FMSC, but never knew who supplied them or that they were packed manually by the loving hands of volunteers. She was surprised when she recognized the familiar FMSC labels on the meals and felt blessed to be able to pack them herself to help feed others around the world.
Hearing stories like this one, I guarantee this won’t be the last time we partner with FMSC.
I love every chance I get to spend quality time with my Creation team. I really enjoyed this week of getting to know each other better, finding new ways to delight our customers, and having the chance to end on such an amazing note with FMSC.
In the middle of a normal work day, nearly 30 of our people left work to take an afternoon ride around a park in one giant red tandem bike.
While at first glance this might sound like a scene straight out of Ferris Bueller’s Day Off, the bikers had a legitimate excuse to momentarily ditch their desks.
For the first time, Creation Vancouver and HQ participated in Big Bike, a team event geared towards companies to raise funds for the Heart and Stroke Foundation. In the week leading up to the May 24th event, our Creation Vancouver Making a Difference (MAD) team held a bake sale and created an online donation page, raising close to $2000 that will go towards heart disease and stroke research.
Their reward? Taking the 30-seat, 2000 pound bike around a nearby business park for a 15-minute, 2 km ride.
“It was an exciting experience for such a worthy cause,” said Amy Lee, product engineer in the Vancouver business unit. “The weather was just right to do an outdoor activity like this.”
Prior to the ride, the organizers played a quick five minutes warm-up game with the Creation riders to educate them about the foundation and awareness of heart disease, as well as what to do when someone is having a stroke – CPR (i.e. call, push, restart). They also learned that there is an app for CPR. During the 2 km ride, the driver taught the riders the basic cycling hand signals.
“Some members put up the wrong hand when we made a turn and it would confuse the car behind us,” said Amy. “It was hilarious. It was a good team building event as we got to ride, chat and laugh together.”
But just as important as the fun and education, the event served a higher purpose for our company.
“Your health is one of the most important things in your life,” Amy said. “We’re happy that participating in events like this will raise awareness and funds for charities that help prevent and treat heart attacks.”
Big Bike was just one of several recent Making a Difference initiatives across Creation, with Making a Difference Day a key part of our 25th Anniversary celebrations. In June, for example, our team in BC raised funds through a food sale and raffle to benefit the Fort McMurray (Alberta) fire relief efforts. There was also a food drive and a glasses drive, where people donated old glasses frames to third world counties.
Confusion arose when the SEC allowed the April 2016 deadline to challenge the previous ruling of the Court of Appeals to pass.
The issue at hand was a specific phrase of the conflict minerals rule’s disclosure requirements, specifically, that disclosing that a product has “not been found to be DRC Conflict Free” violated the First Amendment.
Ultimately, the court found that requiring a company to make this statement in their SEC filing, which is posted on the company website, was unconstitutional.
Now that the SEC has decided not to challenge the ruling to the US Supreme Court, what does this mean for us?
Nothing should change for the upcoming May 31st 2016 reporting period. We forge ahead continuing to use the April 2014 SEC statement for guidance. Companies are not required to describe their products as “not found to be ‘DRC Conflict Free’”. They may choose to voluntarily describe products as “DRC Conflict free” if they have had the independent audit passed, however the requirement for independent private sector audits (IPSAs) had previously been removed for the 2014 and 2015 reporting year.
As we wait for the court of appeals decision to go back to the district court for further proceedings, we begin a new reporting period using the newly released CMRT version 4.10 released by CFSI.
In the latest issue of Supply Chain Navigator, an Avnet publication, supply chain and business leaders were asked whether they believe CSR should be legally enforced in all regions.
Creation’s President and CEO, Bhawnesh Mathur, weighed in on the issue, in favor of government playing a role in CSR alongside companies and individuals. Here is what he told the publication:
“Sustainable practices are proven to benefit our customers, associates and environment, yet aren’t widely adopted. Until sustainability is as inherent as cash flow management to product development and business practices, I believe government has a role in guiding corporations to safeguard its citizens and environment.
However, mandates only take a company, an industry, or a society so far. To make a meaningful progress, companies need to have a core belief in any initiative and its ultimate value. As consumers, designers, manufacturers, and business leaders, we have to be out front leading change is we believe in sustainability as part of our ethos.”
A commitment to CSR has long been a priority for Creation and our customers. As part of the business ecosystem and the global electronics supply chain, we believe making a lasting positive impact on our communities and environment.
What role do you believe government should play in defining corporate CSR policy?
Empowering people and communities through employment has long been the mission for Goodwill Industries of Southeastern Wisconsin. For nearly a century, the non-profit organization has helped people with disabilities and disadvantages find paths to long-lasting, meaningful careers through education, training and job seeking services.
Recently, Creation’s Chicago and Milwaukee business units were jointly honored by Goodwill Industries of Southeastern Wisconsin as their 2015 Power Partner. This week, the award was announced in a Goodwill Industries ad in the Chicago Tribune and the Milwaukee Business Journal.
Heather Ohlinger and Gloria Grampo, part of Creation’s People & Culture (HR) team and based out of Milwaukee and Chicago respectively, are involved with the Goodwill program on a regular basis. I had the chance to talk to them about what this means to Creation.
“We are so proud to receive this prestigious award and to be associated with an organization like Goodwill,” said Heather, who is Creation’s People & Culture Leader – U.S. “Focus on relationships and our communities is core to Creation. Being able to partner with Goodwill Industries of Southeastern Wisconsin has enabled us to further our community initiatives and connect with some pretty incredible people.”
The award recognizes companies in the Midwestern United States that demonstrate the highest level of corporate social responsibility, and commitment to the Goodwill mission by providing substantial, ongoing work opportunities for people with disabilities and disadvantages. Past recipients of the award include the Milwaukee Public Schools, Cree Inc., MillerCoors, and Northwestern Mutual, so we’re in some great company.
In 2015, Creation used TalentBridge, a Goodwill Industries company that helped us recruit and hire. Through the service, Creation was able to add new people to the team who bring the right skills and enthusiasm to our Milwaukee and Chicago business units.
“We have seen so many people from the Goodwill program excel and continue to learn and contribute daily.” said Gloria, Creation’s People & Culture Leader in Chicago. “Creating jobs and providing training for everybody has been our greatest investment.”
How well do you know your supply chain? Does your supply chain have Conflict Minerals?
These are the questions manufacturers around the globe are being forced to answer as part of the Conflict Minerals legislation.
The aim of the law is to dissuade companies from engaging in trade that supports regional conflicts and human rights abuses.
A worthy cause, but many electronics companies – even global giants like Apple and Intel – are discovering that complying is no easy matter.
Under Section 1502 of the 2010 Dodd-Frank Act, companies filing with the Securities and Exchange Commission (SEC) are required to determine whether their products contain conflict minerals (tin, tantalum, tungsten and gold) that are necessary to the functionality of the product.
If so, they must determine whether the minerals originated from the legislation’s Covered Countries, like the Democratic Republic of the Congo, known to have associations with terrorist groups.
And unless the materials are from a recycled or scrap source, companies must also conduct due diligence on the origin and chain of custody.
The Cost of Compliance
The time, resources and capital necessary to identify the origin of these raw minerals has been challenging for companies, if not impossible.
“90% of the 1,262 companies that filed conflict-mineral reports with U.S. securities regulators last year said they couldn’t determine whether their products are conflict-free.”
As commodities, a good portion of these minerals are bought on the open market, making the paper trail for some raw materials almost untraceable.
So what’s a company to do?
At Creation, we’ve seen many of our OEM customers face this challenge head on by outsourcing this process to leaders in the compliance reporting field. These providers, like Creation partner GreenSoft Technology, help by gathering intelligence and maintaining product and component data.
We’ve even seen some OEMs adopt a very proactive Design for Environment / Design for Supply Chain strategy in order to describe their products as “DRC conflict-free.”
Despite all of the challenges and the approach a company takes, most organizations are on side with the legislation. After all, it’s intended to eradicate the exploitation of people, terrorist-funded operations, and human rights abuses.
The business challenge remains how to navigate the reporting requirements as the legislation continues to evolve.
A few weeks ago, the U.S. Court of Appeals reaffirmed its previous ruling that requiring companies to declare a Conflict Minerals compliance status is “compelled free speech” and violates the First Amendment. But that doesn’t let companies off the hook as the rest of the legislation remains in effect.
Although Affected companies will still be required to report or disclose their conflict mineral data, the provision requiring companies to state whether their products are “DRC conflict free,” “not been found to be DRC conflict free” or “DRC conflict undeterminable” has been struck down.
Every year, the electronics manufacturing industry in the greater Vancouver area comes together for an afternoon in the sun to golf, and more importantly, to raise money for the MS Society of Canada.
The Electronics Charity Open golf tournament is the only one of its kind for our industry in British Columbia. I’ve had the pleasure of attending with the Creation Technologies team for over 5 years now.
This year, the tournament’s 10th anniversary, was the best to date. And I’m not just saying that because Creation had a big part in the planning!
According to the main organizer and host, Kuldip (Cub) Parmar from Avnet Electronics Marketing, this year’s event broke records! It drew in roughly 100 golfers and raised over $7,000 for Multiple Sclerosis research.
The tournament always presents plenty of opportunities to mix business and pleasure throughout the day, and it was great seeing a nice mix of our suppliers, customers, competitors, and potential customers. I especially enjoyed being able to talk with many of our key suppliers face-to-face, whether it was on the greens or in the clubhouse.
As for the golf, it was another beautiful BC day. This year’s tournament was hosted at the gorgeous Redwoods Golf Course in Langley, British Columbia. My foursome probably could have putted a little better, but we were lights-out off the tee (We all know that driving is for show, and putting is for dough!). Although nobody from Creation won (the winning foursome was from Link2 Manufacturing), I did, however, win one of the hole prizes, which was the longest two-putt.
Cub did an excellent job hosting as well as making sure that the 10th anniversary was memorable, including the prizes! There were many drivers given out, golf apparel, rounds of golf at some nice courses around town, a night at the Delta hotel in Burnaby, a signed Canucks jersey and many other things.
Creation was honored to be one of the Open’s primary sponsors, assisting with providing volunteers, setting up the website, and promoting the tournament. We were also able to provide a trip for two anywhere in Canada and continental US, along with 2 pairs of concert tickets (from our AMEX partner), and a foursome at the Furry Creek golf course. We also sponsored a “Beat the Pro” hole.
Full disclosure… I did not beat the pro.
A great addition this year was the TapSnap photo booth, with props that made the pictures hilarious and awkward. I’m very proud to have talked our executive contact at one of our largest suppliers into putting on a shell ‘bikini’ top!
It was, all in all, a great day and a lot of fun. We raised money for an incredible cause, and I can’t wait for next year!