In 2014, we continued working to achieve a supply chain free of minerals originating in conflict regions of the Democratic Republic of the Congo.
In 2014, IBM and other members of the Electronic Industry Citizenship Coalition (EICC), in conjunction with companies from other sectors outside electronics, continued working to achieve a supply chain free of conflict-originated Democratic Republic of the Congo (DRC) minerals. IBM participates in the Conflict-Free Sourcing Initiative (CFSI) industry group, where interested companies participate in working to resolve challenges associated with this issue.
By popular definition, four minerals (tantalum, tin, tungsten and gold) are considered conflict minerals, even though these materials are mined from other parts of the world and increasingly from legitimate sources within the DRC that are not conflict-related. Care needs to be taken to allow market access for legitimate sources of supply from within the DRC to participate in a compliant supply chain. Like the majority of companies using these four materials, IBM 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 in-scope direct suppliers relating to sources of supply.
IBM’s conflict minerals program is run by a full-time, dedicated team of experienced supply chain professionals within the IBM Global Procurement organization. The Conflict Minerals Program team reports to IBM’s vice president and chief procurement officer. Relative to IBM’s use of conflict minerals, the following products designed and manufactured by our Systems and Technology Group are within the scope of our conflict minerals work:
- Systems — A range of general-purpose and integrated servers designed and optimized for business, public, and scientific computing needs: System z, Power Systems and System x
- Storage — Disk, tape and flash storage systems and software
- Microelectronics — Semiconductors designed and manufactured primarily for use in IBM systems and storage products, and for external clients
In 2014, our efforts collectively harnessed the work of the past four years in preparing for the second round of reporting documentation required to be filed by June 1, 2015, with the US Securities and Exchange Commission under the Dodd-Frank Wall Street Reform and Consumer Protection Act, section 1502; specifically, the Specialized Declaration Form (Form SD) and related Conflict Minerals Report.
IBM’s due diligence measures for conflict minerals conform to the framework set forth in the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance for Responsible Supply Chain of Minerals from Conflict-Affected and High-Risk Areas. 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 in-scope direct suppliers using the CFSI Conflict Mineral Reporting Template (CMRT) 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 in good faith 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 regarding its supply chain to better understand the sources of these four materials.
To determine information about its upstream sources of the four materials, IBM has used in multiple iterations the CFSI CMRT with its in-scope direct suppliers. The CMRT was developed to provide companies with a common format for their upstream suppliers to identify the use of the four materials, the smelters or refiners used in the extended supply chain, and — where possible — the country of origin of the four minerals. In 2014 IBM deployed the CMRT to 324 in-scope suppliers for our systems, storage and microelectronics products, representing greater than 85 percent of our total supply chain expenditures for these three product groups. From these CMRTs we learned the identities of 264 upstream tantalum, tin and tungsten smelters, and gold refiners, located in 35 countries, used by our direct suppliers. The specific names and locations of these smelters or refiners can be found in IBM’s 2014 Conflict Minerals Report. Illustrating the interest that companies have in conflict minerals, during 2014 IBM shared its own consolidated CMRT with 135 customers in support of their work on this topic.
IBM and members of CFSI have deployed 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 2014, CFSP updated its web-based list of conflict-free smelters and refiners, and as of June 2015 had identified 35 tantalum smelters, 44 tin smelters, 19 tungsten smelters and 75 gold refiners. The CFSP list is periodically updated, so interested parties are encouraged to access the CFSP 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 2014 that 49 percent of the smelters and refiners identified by our upstream suppliers were conflict free, with 96 percent of the tantalum smelters, 32 percent of the tin smelters, 23 of the tungsten smelters, and 50 percent of the gold refiners in IBM’s supply chain conflict free. While 2014’s results yielded a significant increase in conflict-free status, we know we have further to go and have plans to increase the engagement of smelters and refiners in the CFSP during 2015.
One means of expanding engagement is by direct interaction with smelters and trade groups that are associated with the processing of these materials. In 2014, IBM and other member companies of CFSI met in Indonesia for a multi-day engagement to discuss aspects of our work on conflict-free minerals. 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. IBM also attended the 2014 China Gold Conference in Beijing to establish channels for direct contact with gold smelters in China that are not engaged in the CFSP. Additionally, IBM contributed to the CFSP Initial Audit Fund, which provides a financial incentive to encourage CFSP-eligible smelters to participate in a first-time assessment.
For more details on our overall conflict minerals work and plans to further our efforts, please see our 2014 Conflict Minerals Report.