LG Electronics’ Statement on Conflict Minerals
Overview of the Conflict Minerals Issue
The Democratic Republic of the Congo (“DRC”) is a Central African country with vast mineral wealth, including reserves of cassiterite (tin), columbite-tantalite (aka coltan – source of tantalum), wolframite (tungsten) and gold. For many years, armed groups have fought to control mines within the DRC; those armed groups have been cited for committing violent crimes against locals, including murder, rape and forced labor. Armed groups controlling mines smuggle minerals out of the DRC and the proceeds are used to further finance conflict and perpetuate criminal behavior; hence, cassiterite, coltan, wolframite and gold are considered conflict minerals.
The elements tantalum, tin, tungsten and gold are metals used in many manufactured goods across many industries, including the aerospace, appliances, automotive, electronics, jewelry, medical and tool & die industries. About 25% of all tantalum1 and about 8% of the gold supply2 is used in electronic and electrical products. Similarly, about 36% of the global tin supply is used in electronic solders3. A small portion of the world’s tungsten supply is used in electronic products as counter weights in cell phone vibrator bobs and in the manufacture of integrated circuits.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed into law in July 2010, contains requirements that U.S. companies report to the Securities and Exchange Commission (“SEC”) on the origin of conflict minerals or their derivatives and show due diligence if conflict minerals are sourced from the DRC or an adjoining country. The goal of the act is to cut direct and indirect funding of armed groups engaged in conflict and human rights abuses.
The SEC published regulations implementing Dodd-Frank Section 1502 on August 22, 2012; the first reports to the SEC are due May 31, 2014 for the calendar year ending December 31, 2013. If a large company cannot be sure of the origin of its conflict mineral derivatives used in its products during the first two reporting years (four years for smaller companies), it may report that the products are DRC conflict undeterminable.
Definitions Related to Conflict Minerals Adopted by LG Electronics
(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or (B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country4. Per the SEC 1502 regulations, conflict minerals are necessary to the functionality or production of a product, but must be contained in the end product in order to be considered a conflict mineral under the rules (so tools used to manufacture parts are not included in the scope of products covered by the SEC regulations).
DRC Conflict Mineral Free
DRC Conflict Mineral Free materials do not contain conflict minerals that directly or indirectly finance or benefit armed groups in the Democratic Republic of the Congo or an adjoining country5. This term also applies to materials determined to be processed from scrap and/or recycled material. Materials that were already incorporated into products or were already within the supply chain as of December 31, 2012 will not be subject to inquiry or reporting rules (The first reporting period covered by the new SEC rules is January 1, 2013 – December 31, 2013).
Armed Group means an armed group that is identified as perpetrators of serious human rights abuses in the annual Country Reports on Human Rights Practices under sections 116(d) and 502B(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2151n(d) and 2304(b)) relating to the Democratic Republic of the Congo or an adjoining country6
LG Electronics’ Approach on Conflict Minerals
Suppliers to LG Electronics must develop policies toward preventing the use of conflict minerals or derivative metals sourced from mines controlled by armed groups in all items to be supplied to LG Electronics. In addition, all suppliers to LG Electronics must document their efforts to determine the source of any conflict minerals or derivatives and provide LG Electronics with evidence of the origin of the metals tantalum, tin, tungsten and gold in products to be supplied to LG Electronics. Any smelters producing tantalum, tin, tungsten or gold metals subsequently used in LG Electronics’ products are requested to seek and obtain certification through the EICC/GeSI Conflict Free Smelter (CFS) program. When there are an adequate number of CFS smelters/refiners available for sourcing, LG Electronics will require sourcing from CFS certified smelters.
LG Electronics encourages its suppliers to responsibly source conflict minerals and derivative metals from the Democratic Republic of Congo (DRC) and neighboring countries in order to prevent an embargo and associated worsening of economic conditions and human suffering.
Status of LG Electronics’ Due Diligence to Prevent Use of Conflict Minerals
(Date of last revision: Feb 5th, 2013)
LG Electronics (“LGE”) has taken the following steps toward determining the sources of 3TG within the supply chains of all its products:
Enter into simple contracts
LGE entered into simple contracts with major contractors7 to not supply illegally mined materials to LG Electronics. At that time (March 2010), the coverage was just focused on tantalum and we have extended the scope to tin, tungsten, and gold. LGE has in place a Global Procurement Policy internally distributed to all procurement members. This policy contains provision of verifying the origin/source information of materials to confirm that they are not obtained through illegal mining.
Join EICC and Extractives Work Group
In August 2010, LGE joined the Electronic Industry Citizenship Coalition (EICC) in an effort to align EICC's CSR strategy to LGE's policy and improve the company’s compliance in this area. Also, LGE actively has been participating EICC Extractives Work Group to adopt the industry consensus approach throughout our supply chain.
Declare Supplier Code of Conduct
Based on EICC Code, LGE established and declared its Supplier Code of Conduct published in 2010. This Code contains the provision that 'Suppliers shall evaluate the origin or source of their materials throughout their supply chains to verify that they have not been obtained through any illegal form of mining (e.g., materials obtained from the Democratic Republic of Congo).' So we think this distribution will contractually bind suppliers to not use conflict minerals.
*LGE’s Supplier Code of Conduct Feed into standard contract. Download PDF
Feed into standard contract
Our standard contract contains a “Seller’s Social Responsibility” provision. This provision binds suppliers not to infringe LG Electronics’ requirements for corporate social responsibility and we have applied these provisions to our procurement contracts.
Identify materials in supply chain
In October 2011, LGE conducted an analysis of all manufacturing parts using our internal substances management system. According to the results, about 25,000 parts contain 3TG (Tantalum, Tin, Tungsten, and Gold) metals. Those parts were produced by over 800 suppliers globally.
Conduct due diligence survey for identified suppliers
To identify smelters used by suppliers of parts containing conflict minerals, LGE has sent the EICC/GeSI Common Reporting Template tool to identified suppliers via our management system. Starting from December 2011, our survey has been completed in July 2012 with overall 60% response rate. The results showed identification of over 300 3TG smelters by name. LGE shared its aggregated smelter information to EICC Extractives Work Group for helping smelter mapping in IT industry. We are verifying the smelter information with EICC and relevant stakeholders to design effective tracking system. As of January 31th 2013, we can reduce the number of smelters down to 161 during validation process with the EICC/GeSI template 2.01 version.
2) World Gold Council; Gold Demand Trends, First Quarter 2011 (2010 data)
3) GHGm; Social and Environmental Responsibility in Metals Supply to the Electronic Industry, June 2008
4) Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502
7) LGE’s procurement team received letters from 8 companies, mainly tantalum capacitor provider - Nichicon corp., Samsung electro-mechanics, AK information communication, Matsuo Shoji Corp., ROHM semiconductor Korea, Cabot, Ningxia, and Vishay.