Dodd-Frank Act: How regulations and standards influence the global trade – Part 4
by Rolf Zimmer
Last week I gave you an overview about sanction control. With today’s blog entry our four-part article series concerning the Business Breakfast with our partners EcoVadis und POOL4TOOL comes to an end. The event revolved around the integration of risk and sustainability management and its impact on business relations and purchasing processes. Today I would like to share my latest findings about the Dodd-Frank Act, a topic we already addressed in a previous blog post.
The Dodd-Frank Act was installed by the congress to prevent the Democratic US Republic of the Congo and 9 surrounding countries to finance conflicts characterized by extreme levels of violence. All public listed U.S. enterprises are forced to improve supply chain visibility and further to prove that their products do not contain tin, tungsten, tantalum and gold (“3TG”) from non-compliant sources. The 3TG are so-called conflict minerals, thus money from selling such materials is not only used for personal profit but also to fund further violence.
Progress of supply chain visibility efforts
Hence every company dealing with U.S. customers has to provide reviews about the progress of the supply chain visibility efforts on annual basis. The problem is that in the majority of cases companies only has limited information concerning sub-tier suppliers. This problem should be solved step by step. Gradually the transparency shall be extended to sub-tier levels back to the very origin of the raw materials. Special certification systems will simplify the identification of reliable material sources. As a result the law ensures that companies must monitor their entire supply chain to avoid using or buying from non-compliant sources.
Dodd-Frank Act and reputation
For now violations of the Dodd-Frank Act are not punished with fines or imprisonment. There’s another simple but effective instrument: the “name & shame” principle. The U.S. Securities and Exchange Commission bets on reputation damage when announcing non-compliant enterprises.
In total, supply chain visibility against the background of legal regulations becomes an ever more important topic. Companies are forced to become acquainted with their supply chains and being unaware does not protect any more.
If you are interested to learn more about the other topics which were discussed at this event, please have a look at the blog entries concerning the new EU sustainability directive and the ISO Standard 9001:2015. I would also appreciate to learn about your experiences and thoughts about the novelties in this sector.