Dodd-Frank Section 1502 » Academia

Duke University Adopts Investment Guidelines on Conflict Minerals (Duke Today)

David Schatsky — Tue, 19 Jun 2012 16:00:33 +0000

On Friday, the board’s Executive Committee approved a resolution that authorizes DUMAC, Duke’s investment arm, to adopt a proxy voting guideline for investments in which the university has direct ownership. The guideline stipulates that Duke vote in favor of “well-written and reasonable shareholder resolutions that ask companies for reports on their policies and efforts regarding their avoidance of conflict minerals and conflict mineral derivatives.”

(Full article.)

A Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a 3rd Model (Tulane Univ.)

David Schatsky — Mon, 17 Oct 2011 16:00:53 +0000

The Democratic Republic of Congo (DRC) holds vast resources of minerals, and many of the mines are controlled by parties that have perpetrated severe human rights abuses in the region. In an effort to enhance transparency in the minerals supply chain, Section 1502 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act mandates company disclosure of the mineral origin contained in their products. Pursuant to the charge of formulating specific regulation, the Securities and Exchange Commission (SEC) is in the process of drafting rules for this provision. A realistic economic impact estimate is important as the careful consideration of the most salient cost drivers informs the precise formulation of rules, which in turn enables implementation.

Our analysis shows that the published figure of $71.2 million by the SEC underestimates the implementation cost, in part because it does not take into account the range of actors affected by the statutory law. In light of Section 1502, substantial traceability reforms would need to be implemented throughout the supply chain – from the mine to final product manufacturing – in order for disclosure to work.

On the other hand, the NAM estimate of $9-16 billion overstates these costs by inflating the supplier number and not taking into account significant overlap in supplier/customer relationships, as well as cost efficiencies from existing (and developing) information exchange platforms.

We present a third model focusing on the burden to the affected issuers and their 1st tier suppliers estimating that the actual cost to and of implementing the law is $7.93 billion. Almost half of the total cost – $3.4 billion – would be met with in-house company personnel time, and the rest – $4.5 billion – would comprise outflows to 3rd parties for consulting, IT systems and audits. Comparing the costs to the issuers vs. the suppliers, the bulk of the total costs – $5.1 billion or 65% – would be incurred by the suppliers (the group not included in SEC‟s analysis), while the smaller portion of the total – $2.8 billion or 35% – would be carried by the issuers.

The implementation costs would however be borne by thousands of individual firms in lucrative industries such as the industrial, aerospace, healthcare, automotive, chemicals, electronics/high tech, retail and jewelry industries. Nevertheless, we regard Section 1502 as a “major” rule as its effect on the economy will exceed $100 million per year.

(Read full economic analysis.)

Sourcemap Crowdsources Product Supply Chains, Carbon Footprints (MIT)

David Schatsky — Fri, 02 Sep 2011 16:00:07 +0000

Sourcemap is an initiative to make information on the source of products and their supply chains public, so that we can make informed choices about their social and environmental impact. Developed by the MIT Center for Civic Media and the MIT Media Lab’s Tangible Media Group, Sourcemap has grown over the past few years.

We created Sourcemap to allow anyone — businesses, consumers, journalists and researchers — to share the stories of global supply chains and their impacts on the world. Since our site became publicly accessible, we’ve been fortunate enough to have some wonderful individuals and organizations contribute to our work. We have more than 3,000 published maps and over 6,000 mapmakers, some of which you can see at the new Sourcemap.com. (Read full article.)