Conflict Minerals

Conflict Minerals

In 2013, IBM and other members of the Electronic Industry Citizenship Coalition (EICC), in conjunction with the Global e-Sustainability Initiative (GeSI) Supply Chain Work Group and companies from other sectors outside electronics, continued working to achieve a supply chain free of Democratic Republic of Congo (DRC) conflict region-originated minerals. Together, EICC and GeSI have formed the Conflict Free Sourcing Initiative (CFSI) to consolidate our joint efforts and to welcome other participants with an interest in working to resolve challenges associated with this issue.

By convention, four minerals (tin, tantalum, tungsten, and gold) are considered conflict minerals, although these materials are often found in other parts of the world and from legitimate sources within the DRC that are not conflict related. This adds to the complexity of the task at hand, as care needs to be taken to allow legitimate sources of supply from within the DRC are to participate in the compliant supply chain. IBM itself is not a direct purchaser of conflict minerals and is several tiers downstream from the smelters or refiners of such minerals. As a result, we rely on processes developed by the CFSI and on information received from our suppliers relating to sources of supply.

The following products designed and manufactured by our Systems and Technology Group are within the scope of our conflict minerals work:

In 2013, our efforts focused on harnessing the work of the past three years preparing the reporting documentation required to be filed by June 2, 2014, for the US Security and Exchange Commission’s Dodd-Frank Wall Street Reform and Consumer Protection Act, section 1502; specifically, the Specialized Declaration Form (Form SD) and related Conflict Minerals Report (CMR).

The highlights of our work to date can be summarized into four categories: Establishing a supply chain standard for conflict minerals; performing a Reasonable Country of Origin Inquiry (RCOI) regarding the potential sources of conflict minerals in our products; surveying our direct suppliers using the CFSI Conflict Mineral Reporting Template to ascertain the smelters or refiners present in the supply chain, and working with those smelters and refiners to gain their engagement in the Conflict Free Smelter Program (CFSP).

IBM’s conflict minerals standard outlines our recognition of the importance of this issue and our plans to take definitive steps to keep these materials out of our extended supply chain. This standard is posted on our Global Procurement website and has been brought to the attention of our upstream suppliers.

We conducted an RCOI regarding potential sources of conflict minerals and concluded that, in the absence of complete visibility to the sources of these materials within our extended supply chain, IBM would need to conduct due diligence of the supply chain to better understand the sources of these four materials.

To perform due diligence, IBM has used the CFSI Conflict Minerals Reporting Template and dashboard. This survey and consolidation software was developed to provide companies with a common format for their upstream suppliers to identify the use of the four materials, the smelters used in the extended supply chain and—where possible—the country of origin of the four minerals. IBM deployed this survey to 40 direct suppliers to our Microelectronics group and 290 suppliers to our Systems and Storage products, representing 90 percent of our total supply chain expenditures for these three product groups. From this work, we learned the identities of 189 upstream tantalum, tin, and tungsten smelters and gold refiners, located in 34 countries, currently used by our direct suppliers. Within our CMR, we have provided the entire list of upstream smelters and refiners identified by our due diligence work. IBM has shared a consolidated report of our due diligence results with more than 70 customers of our Systems Technology Group in support of their work on this topic.

IBM and members of CFSI are extending various actions to identify, vet, engage with, and lead the entire portfolio of member identified-smelters and refiners to participate in the CFSP. The CFSP was created for smelters and refiners that play a crucial role in the extended supply chain, as they are the point at which concentrated ores are refined into the higher level materials that cascade into technology products. During 2013, CFSI updated its web-based list of certified smelters and at the end of the year included 40 gold refiners, 25 tantalum smelters, and 10 tin smelters in total. The CFSP is a growing list, so interested parties are encouraged to access this website on a frequent basis for the latest information.

By comparing the IBM-identified smelters and refiners to the CFSP list, we determined at the end of 2013 that 33 percent of all the smelters and refiners identified by our upstream suppliers are conflict free, with 88 percent of the tantalum smelters, 42 percent of the gold refiners, and 17 percent of the tin smelters in IBM’s supply chain conflict free. While we are encouraged by these results, we believe we have much further to go and thus plan to increase the engagement of smelters and refiners in 2014.

One means of expanding engagement is by direct interaction with smelters and trade groups that are associated with the processing of these materials. In December 2013, IBM and three other member companies of CFSI met in Indonesia for a multi-day engagement to discuss aspects of our conflict free work. This included government officials, trade representatives, and tin smelters. As a result of this session and the concerted work of the CFSI, smelters in Indonesia agreed to participate in the CFSP. We look forward to similar interactions in China in 2014.

For more details on our overall conflict minerals work and plans to further our efforts, please see our Conflict Minerals report.