1. Conflict Minerals: Procurement Stress? Experience from Philips
Jan-Willem Scheijgrond, Philips
24 October, Bern

2. What minerals? What sector?
Tantalum (Ta)
Tin (Sn)
Tungsten (W)
Gold (Au)
In iedere auto zit 15 kg tin. In een PC een paar gram...
Electronics includes not just ICT, but any electronic device such as automotive, household, etc
Data sources from:
1 US Geological survey
2 GeSI report:
3 MakeITfair reports:
4 Enough:
5 GHGm report:
Electrical Non-electrical 2

3. Contract manufacturer / assembly
Simplified supply chain for electronics
Finished Product
Mine
Trader
Smelter
Component producer
Contract manufacturer / assembly
End-user
Typically 7+ tiers between mine and end-user

4. Smelter is at key point in supply chain to enforce responsible purchasing

5. Illustration of global tantalum supply chain
Ten thousands of 1st tier suppliers globally
Tens of Ta smelters globally

6. Actions that need to be taken by US Stock-listed Companies for DF1502
Step 1: Do your manufactured products contain conflict minerals?
Step 2: Do the conflict minerals originate in the Covered Countries?
Step 3: If “yes”, then conduct due diligence, and potentially provide a Conflict Minerals Report

7. EICC and GeSI Approach to Conflict-Free Sourcing
Finished Product
MINE SMELTER/REFINERY OEMS
‘bagging & tagging’
Conflict Free
Smelter Program
Due Diligence

8. Philips’ Responsible Sourcing of Minerals
Responsible sourcing of Minerals Program
Due Diligence (OECD compliant)
Risk based approach  360 risk suppliers
EICC/GeSI template
ID CFSP compliance
Smelter list online
Conflict Resolution
Conflict Free Tin Initiative
Indonesia Conflict
Supply chain investigations with priority suppliers:
Focus is on top 80% of purchasing spend, covering ~350 suppliers
Suppliers requested to
Investigate their supply chain for 3TG metals;
Determine the country of origin (cascade request down to next tier suppliers if needed);
Identify all smelters used in the supply chain to process these materials (cascade request down to next tier suppliers if needed);
Fill in the results in the “EICC-GeSI Reporting Template” and send it back to Philips within 2 months (work with industry organizations EICC and GeSI to standardize approach);
Philips uses responses from suppliers to answer customer request and for SEC disclosures.
Prepare for Conflict Minerals Report and Audit
3rd party audit
SEC Conflict Minerals Report

9. Due diligence at Philips – results Summer 2013
>300,000 products
10,000 suppliers
360 risk suppliers
158 smelters
40 CFS smelters
ZERO conflict mines

10. Conflict Free Smelters in Philips supply chain number of identified smelters per region (yes/no CFS compliant, total: 231)

11. The Conflict Free Tin Initiative with support of Dutch Government
Finished Product
Mine in Congo
Exporter
Smelter
MSC
(Malaysia Smelting Corp.)
Solder manufacturer
AIM
Alpha
End users
Philips,
Tata, Blackberry, Intel,
Motorola Solutions
Upstream:
implement traceability mechanism
Downstream:
create a market with industry partners

12. CFTI: Travelling to the mine site

13. At the mine site 800 workers are working at the mine site
Children and pregnant women are not allowed at the mine site.

14. ‘bagging & tagging’ Minerals are weighed and tagged at the mine site
ID tags, quantities, prices, miner, trader, date, etc. are administered
Data is entered in a database to enable traceability.
Minerals without a tag cannot be sold

15. Bags are sold to traders (negociants), who further filter the minerals

16. The ‘comptoir’ further processes and exports the minerals to the smelter

17. What should EU do? Follow De Gucht’s six principles and…
Philips’ position
Comprehensive approach
EU should function as neutral broker bringing all relevant stakeholders together
Compatibility with existing approaches
Only compatible with OECD guidelines, don’t repeat mistakes of DFA
Do no harm
Incentivize conflict resolution, such as CFTI
Broad geographical scope
Include all resource related conflicts
Targeted approach
Focus on smelters not on individual products
No unintended consequences
6. EU to convince non-EU governments to adopt similar approach
EU should function as neutral broker on “resource related conflicts”
Bring together relevant parties / Analyze root causes of the conflict / Design roadmap toward resolution / Give each players their respective responsibilities
Be compatible with OECD guidelines, don’t copy DFA mistakes
Incentivize schemes as CFTI
e.g. authorities stimulate via public procurement programs iso asking for certificates of guarantees of non-conflict
Agree: include all conflicts
DRC is not the only region where industry can have a positive impact
Focus on smelters not on individual products
approaches must be risk based, go beyond due diligence, and allow companies to focus there where they can have most impact
EU to convince non-EU governments to adopt similar approach