GE and Conflict Minerals: An Introductionstatic.gecitizenship.com.s3.amazonaws.com/wp-content/uploads/20… · 4 GE Conflict Minerals Overview | GE and Conflict Minerals: An Introduction

GE and Conflict Minerals: An Introduction

1 GE Conflict Minerals Overview | GE and Conflict Minerals: An Introduction www.gecitizenship.com

GE and Conflict Minerals: An Introduction Since 1998, conflicts in the Democratic Republic of Congo (DRC) have claimed more than 5.4 million lives1 and continue to contribute to massive human rights abuses such as gender violence, slavery, and child soldiering. Militant groups—local militias, Congolese and Rwandan rebels, and the Congolese army—sometimes control natural resources in the east of the country in order to finance the ongoing conflict. Tin, tungsten, tantalum and gold are among the resources identified as contributing to the conflict.

GE condemns the ongoing violence and associated human rights violations taking place in the DRC, and is working to minimize the risk that the minerals used in our products may originate from “conflict mines” or contribute to the funding of conflict.

A provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012 (“Dodd Frank”) requires publicly-held companies to report on the steps they have taken to mitigate the risk that the tin, tantalum, tungsten, and gold (“conflict minerals” or “3TG”) from the DRC or surrounding countries used in their products may contribute to the conflict. The aim of the law is to expose the link between the minerals used in products and the financing of conflict in the DRC. We support this aim, and as part of a multi-stakeholder group of investors, nongovernmental organizations (NGOs) and companies, provided comments to the Securities and Exchange Commission on how the law could be implemented in an efficient and effective manner.

Unfortunately, since passage of Dodd Frank there have been unintended adverse consequences for the local communities that depend on the minerals trade—primarily a de facto boycott of minerals from the region. The United Nations Group of Experts on the DRC has documented these effects, which include loss of income for miners, increased smuggling of the minerals, and weakening of governance oversight of the minerals by local authorities. GE believes that responsible companies have a role to play in making progress toward conflict-free supply chains that also support legitimate sourcing from the region. For this reason, the GE Foundation supports the Public Private Alliance for Responsible Minerals Trade, which is funding projects to demonstrate that minerals can be sourced from the DRC and surrounding countries in a manner that does not financially support the conflict.

Dodd Frank is a fundamentally new expectation of companies. It requires new systems and processes to establish much greater transparency and control over extended supply chain operations, reaching far beyond a company’s first-tier suppliers. It also requires international coordination among industries, governments, and civil society players to institutionalize tracking minerals from the mine, to processing, to manufacturing, and finally to assembly of the final product. GE will not be able to solve this problem alone. Therefore we have committed to addressing the issue of conflict minerals in our supply chains not only through company-wide commitments and supply chain due diligence, but also through support for broader engagement with institutions and stakeholders that will contribute to greater stability and well-being in the DRC.

1 International Rescue Committee. Mortality in the Democratic Republic of the Congo: An Ongoing Crisis. http://www.rescue.org/sites/default/files/migrated/resources/2007/2006-7_congomortalitysurvey.pdf

GE is also an active participant in the Multi-stakeholder

Group (MSG) on conflict minerals, which works

in collaboration to share information and agreed statements regarding

the U.S. law and diplomatic efforts in

the region.


GE’s Commitment to Conflict-Free Supply ChainsGE’s Conflict Minerals Statement of Principles and our Implementing Guidelines reflect the company’s global commitment to respect human rights through our responsible sourcing practices, as well as our commitment to avoid practices that may contribute to human rights abuses. We believe that, as a company, we must lead by influencing our employees and business partners with consistent policies wherever we do business.

Tungsten, tantalum, tin and gold enter global supply chains from the DRC as well as from numerous other supplying countries. Once minerals are in the supply chain, determining the mine of origin is a challenging process that involves two distinct steps and requires the cooperation of thousands of intermediaries. First, each manufacturing company must identify the smelters and refiners in its supply chain (the “downstream” process). In the case of GE this involves many thousands of first-tier suppliers, each of which must trace the minerals through as many as six or more additional layers in its own supply chain to a smelter or refiner. When smelters or refiners can be identified, a second process must determine whether all ores they use are conflict-free (the “upstream process”), generally through the industry-wide EICC-GeSI Conflict-Free Smelter Program (“CFS,” discussed below).

Virtually all of GE’s products contain one or more of the 3TG minerals. For example, GE uses tungsten to manufacture light bulbs and targets for diagnostic imaging equipment; and tantalum, tin, and gold all are prevalent in the electronic components that we use in a wide range of products. To illustrate what is involved in determining the source of minerals, the graphic below shows some of the relevant statistics for just one of the many thousands of complex products that GE manufactures.

GE has created an internal program to manage risks in our complex supply chains through policies and procedures that help us understand whether the minerals in our products contribute to the ongoing conflict in the DRC.

Because of the complexity of our business, we are realistic about what we can identify and control. The core objective of our Conflict Minerals program is to ensure that smelters and refiners in our supply chain participate in programs such as the Conflict-Free Smelter Program to verify that their ores are conflict free. The more direct our relationship with smelters and refiners, the greater our ability to influence their sourcing decisions. In the few cases where GE buys minerals directly from smelters, we are in a position to exert direct influence to encourage participation in the CFS. Our ability to influence the larger number of smelters further down our supply chain is significantly more limited.

Our Conflict Minerals program is aimed at continuous improvement of our understanding of our supply chain and risk reduction over time. Our expectation is to make progress in the early years of our program in identifying the smelters and refiners in the first few tiers of our supply chain. As transparency improves over time, we expect to identify smelters and refiners deeper in our supply chain. Despite our limited influence over these more distant suppliers, we will work to encourage suppliers at all levels to source 3TG responsibly.

The core objective of our Conflict Minerals program is to ensure

that smelters and refiners in our supply chain participate in

programs such as the Conflict-Free Smelter

Program to verify that their ores are

conflict free.

One of 9 Printed Wiring Assemblies 116 separate components on each PWA 17 components (91 pieces) contain tin and/or gold Totals: .0125 Troy oz. gold; .1262 lbs. Tin

Total CT scan: 1500 purchased part numbers, 119 suppliers


In our Statement of Principles on Conflict Minerals (full statement available here), GE commits to:

• Endeavor to improve, year-over-year, our ability to understand the origin of 3TG in our supply chain, report on our progress, and eliminate those that originate in DRC conflict mines.

• Comply with the requirements of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

• Support industry-wide initiatives to verify smelters and refiners that are Conflict-Free.

• Support initiatives to develop responsible mineral trade in the DRC, such as the PPA.

GE’s Conflict Minerals Due DiligenceFurther to GE’s Statement of Principles on Human Rights and our Statement of Principles on Conflict Minerals, GE’s conflict minerals due diligence program is designed to eliminate over time the use of 3TG that may originate in conflict mines within the Democratic Republic of the Congo. Following the U.S. Securities and Exchange Commission’s publication of a final rule to implement Dodd Frank conflict minerals reporting requirements, GE issued Implementing Guidelines on Conflict Minerals (“Guidelines”) to all of our business units. The Guidelines outline a comprehensive management system to support performance of due diligence throughout our supply chain that is consistent with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (the “OECD Guidance”). GE’s guidelines, along with our Statement of Principles on Conflict Minerals, apply to all GE controlled affiliates globally, and to all GE products globally.

report

Risk

Data

supp

BP

IG

ImplementingGuidelines

Reporting(CSR & DF)

BusinessPrograms

RiskAnalysis

Supplier DueDiligence

Data Collection& Management

1

Policy

2

3

6

7

4

5

Figure 1. GE’s Conflict Minerals efforts are founded in our company policy statements, and include the key elements discussed in this document.

Business SourcingOwners

Operations &Processes

Corporate Senior Level Oversight

Biz Executive Level Ownership

Compliance & Measurement

Policies and Practices


GE Conflict Minerals Program

GE’s supply chain due diligence program for conflict minerals is designed to:

• Establish management systems to monitor the origin of 3TG in GE’s supply chains;

• Evaluate information received from suppliers for completeness and accuracy;

• Identify and assess risks that minerals supporting conflict in the DRC may enter GE’s supply chain;

• Mitigate the risk that 3TG may support conflict in the DRC;

• Report publicly on GE’s conflict minerals program.

The due diligence program supports our strategy to identify smelters in our supply chains, so that we may exert pressure on suppliers to use smelters validated under the Conflict-Free Smelter Program. We expect this to increase incentives for smelters to join the program and obtain conflict-free certification.

In order to implement this, each GE business unit has adopted a business program that details how it will carry out the requirements of the guidelines.

GE Guidelines and Expectations

Determining the origin of 3TG in GE products is a very complex process. In order to focus our program most effectively, we have adopted a two-tiered approach to our supply chain. As described more fully below, we will contractually obligate all of our suppliers whose products contain any amount of 3TG to adopt a policy and implement a program to avoid the use of 3TG that support conflict. For our most significant suppliers of products containing 3TG, we also collect data that includes the identity of the smelters, refiners, and sources of recycled 3TG in their products.

For GE Business Units

Each GE business unit will take the following steps to understand and address its risk of using conflict minerals:

• Examine the supply base to understand which source materials contain 3TG, using methodologies appropriate for its industry and internal systems

• Contractually obligate all suppliers providing GE with products containing 3TG to have a policy to work toward the goal of eliminating from their products 3TG that support conflict in the DRC, and to institute a program to achieve that goal

• Implement contract terms providing for the right to audit and to terminate a relationship with a supplier in the event of material non-compliance

• Identify the most significant suppliers to the Conflict Minerals program, based on volume of 3TG and other factors

• Annually survey significant suppliers of 3TG concerning the smelters and refiners and sources of scrap and recycled 3TG in their supply chain

• For each smelter identified, assess the information available from the CFS or other audits conducted in accordance with the OECD Guidance to determine the country of origin of the tin, tantalum, tungsten, and gold and risk of association with conflict

Concentrating our most intense effort on suppliers over which we have the greatest influence will enable effective engagement, and allow us to better understand and report our progress over time. All of this is focused on accomplishing the underlying goal of the downstream due diligence process: to encourage smelters and refiners in our supply chain to become verified as conflict free.


Expectations for Smelters/Refiners that Directly Supply GE

Each GE business must make reasonable efforts to identify all smelters and refiners of 3TG that are first-tier suppliers to GE, and for the year 2013, use best efforts to ensure that each of their first-tier smelters and refiners:

• Has a policy and procedures to eliminate sourcing of 3TG from conflict mines in the DRC;

• If sourcing from the region has been subject to an audit of the origin of their 3TG supplies conducted in accordance with OECD Guidance or has made a firm commitment to undergo such an audit as soon as it can be scheduled; and

• Passes the audit as being conflict-free or, having failed the audit, has established and put into place a plan to correct process deficiencies by the end of the relevant reporting period.

Starting in 2014, GE businesses must not source 3TG from first-tier smelters and refiners that have not been certified as conflict-free through an audit conducted in accordance with OECD Guidance. Exceptional circumstances may be approved in advance by the vice president, corporate citizenship or the Executive Counsel, International Trade Regulation and Sourcing.

Risk Reporting and Management

As part of GE’s due diligence program, GE implements a risk-based method to evaluate the due diligence data we collect. Our risk management process conforms to the OECD Guidance and utilizes industry approaches, such as the CFS program. Each GE business unit must compile a periodic report of conflict minerals risks identified in its supply chain. These risk reports will be reviewed by the GE business executive-level program owner, together with relevant personnel from the sourcing, legal, and compliance organizations.

Where there is reason to believe that a supplier is not honoring its contractual obligations to adopt a policy and provide the necessary data to GE, the GE business unit should work with the supplier to address the non-compliant conduct. In the event of continued non-compliance the business unit should take appropriate measures, up to and including termination of GE’s relationship with the supplier.

Validation or Assurance

As part of GE’s due diligence process, we have adopted procedures to ensure that the data our suppliers submit meet the requirements of GE’s Guidelines on Conflict Minerals.

Each GE business unit must conduct due diligence to determine the degree of compliance by suppliers with the contractual obligations set out in GE’s Guidelines and the accuracy of information reported by them. The due diligence process may be based on a risk analysis, and includes levels of intensity that depend upon factors including risk of non-compliance and whether the supplier is a significant supplier of relevant sourced materials. These factors are stated in written risk management analysis documented in the business program.

Each GE business unit shall, at a minimum, institute a program of communication to ensure continued awareness of contractual obligations under the Guidelines, be alert to any concerns about supplier non-compliance or inaccurate information, and take appropriate action to resolve any such issues. Other measures may include reviewing supplier responses for completeness, accuracy, and credibility; and confirming the validity of smelter status against the CFS list or other lists of conflict-free smelters certified in accordance with OECD Guidance. In addition, GE business units must adopt an “eyes always open” approach to any indications of non-compliance with GE requirements under these Guidelines.

As part of GE’s due diligence program, GE

implements a risk-based method to evaluate the

due diligence data we collect.


Grievances

GE recognizes that even in our best efforts to manage and mitigate risks in our supply chain, some risks—actual or potential—may go undetected. To address this, GE has established grievance mechanisms to raise concerns within GE’s Integrity Guide, including GE’s expectations of suppliers concerning conflict minerals.

The GE Integrity Guide for Suppliers, Contractors, and Consultants provides four separate methods for suppliers and supplier personnel to raise concerns, including discussion with a relevant GE manager, calling GE’s Integrity Helpline, emailing GE’s ombudsperson, or contacting other compliance resources such as GE legal counsel or auditors. In addition, each GE business unit has a confidential reporting system to allow employees to raise integrity concerns. GE’s systems forbid retaliation against any person reporting an integrity concern.

Each GE business should establish a process to

• Catalog all integrity concerns relating to the Statement of Principles on Conflict Minerals and GE’s expectations of suppliers concerning conflict minerals;

• Ensure that all such concerns are investigated and addressed, as appropriate; and

• Report periodically to the executive-level owner of the conflict minerals GE business unit compliance program.

Support for a Conflict-Free not Congo-Free Supply ChainExperts agree that supply chain traceability alone will not end the conflict in the DRC. Therefore, in addition to GE’s supply chain due diligence program, we are committed to partnering with key stakeholders to contribute to local development and capacity building in the DRC and the region.

Since 2009, GE has supported a multi-stakeholder approach to action—the outcome of which has guided our efforts ever since. In a culmination of several multi-stakeholder efforts by companies and civil society actors, a forum was jointly convened by BSR and the Responsible Sourcing Network and funded by the GE Foundation where stakeholders identified collaborative actions in the following three areas:

• Supply chain responsibility

• Government engagement

• Economic development and capacity-building

Supply Chain Responsibility

Along with our program on conflict minerals due diligence (as described in this report), GE and the GE Foundation support the efforts of the Electronics Industry Citizenship coalition (EICC) and Global e-Sustainability Initiative (GeSI) Conflict-Free Smelter program. The CFS program aims to address responsible material sourcing through the independent third party evaluation of smelter’s conflict-free status.

In addition, GE supports the Conflict-Free Smelter Early Adopters Fund (CFS Early-Adopters Fund), administered by RESOLVE. Recognizing that the costs associated with participating in the CFS program may be significant, particularly for small and medium-sized smelters, the CFS Early-Adopters Fund offers smelters funding to help offset initial verification costs.

GE also recognizes that conflict-free 3TG sources exist in the DRC and surrounding countries, and encourages certified conflict-free sourcing from the region where possible.

The GE Integrity Guide for Suppliers,

Contractors, and Consultants provides

four separate methods for suppliers and supplier

personnel to raise concerns.


Government Engagement

Governments play a critical role in addressing conflict in the DRC, through efforts including diplomacy and peacebuilding, promotion of good local governance, and support for programs to ensure verifiably conflict-free trade. GE’s engagement with governments on this topic has been implemented through multi-stakeholder efforts. We support the Public-Private Alliance for Responsible Minerals Trade (PPA), a joint initiative among governments, companies, and civil society to support supply chain solutions to conflict minerals challenges in the DRC and the Great Lakes Region of Central Africa. The PPA supports projects demonstrating that conflict-free supply chains can be established from mine to smelter in the DRC, in an effort to facilitate in-region conflict-free sourcing. Such efforts are essential to avoid the unintended consequence of Congo-free sourcing that could deprive many Congolese of their livelihoods in the mining sector.

GE actively participated in the DRC pilot implementation of the OECD Guidance and its supplement on tin, tantalum and tungsten, led by the Organization for Economic Cooperation and Development, the International Conference of the Great Lakes Region, and the United Nations Group of Experts. The pilot brought together governments, civil society, industry associations, and over 100 companies along the supply chain from mines to finished goods. Participating companies demonstrated how supply chain due diligence efforts were taking place, and participated in peer learning processes intended to help companies meet reporting obligations and the expectations of managers, customers, regulators and the public. The final report provides learning from this process and aims to help other companies understand how to implement the OECD Guidance in a practical way.

GE is also an active participant in the Multi-stakeholder Group (MSG) on conflict minerals, which works in collaboration to share information and agreed statements regarding the U.S. law and diplomatic efforts in the region. GE’s activities as part of this group have included participation in the development and submission of several consensus recommendations to the SEC together with investors, NGOs and other companies; as well as participation in MSG meetings with the SEC and a public SEC roundtable on the development of conflict minerals rules.

Economic Development and Capacity-Building

In addition to important work on supply chain and government engagement, a stronger civil society and local economic development will be critical to increasing stability and supporting peace. Through the GE Foundation and GE’s government relations organizations, we contribute to long-term change on critical issues such as poverty, child labor, environmental degradation, gender inequality, and human rights. Some of our work specific to the DRC includes financial support for Pact, an international NGO, for the development of a program to combat child labor; and support for BSR to explore opportunities for companies to engage with local development initiatives.

GE works to solve some of the world’s biggest challenges through a commitment to sustainable solutions that benefit the planet, its people and the economy. Addressing conflict minerals is one of those challenges. We are committed to a leadership approach that combines responsible due diligence over our supply chains with collaborative efforts to that contribute to addressing systemic challenges facing the DRC to bring stability, peace, and economic empowerment.

About GE Citizenship

As a 130-year-old technology company, GE’s commitment to citizenship is part of our culture and our strategy. You can see it in the products we make, how we make them, and in the difference we make in communities around the world. We work on things that matter, are mindful of our limited natural resources and believe in a better way. We invest in people, technology and communities to ensure a better future for generations to come. For more information, visit www.gecitizenship.com.

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