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On the Trail of Conflict Minerals

Owned by Berkshire Hathaway, Brooks Sports is delving deep into its supply chain to find out if the tin in its zippers comes from the Congo.

But now we need to make sure that our cut-and-sew providers are getting confirmation from their suppliers about where they’re buying the materials from — that they’re not bringing them in from restricted countries. So on a small piece relative to the total garment, the rule is adding a lot more complexity relative to the actual making of the product.

How much deeper do you have to look into your supply chain than you did before?
In the past we’ve given specifics about the materials we need to have. But we’ve never had to actually go out and ask, “OK, is this coming out of China, India, Malaysia?” We’ve never really gotten to that level of specifics before.  But now we need to understand the origin of all the materials in finished goods to make sure we’re still in compliance.

Why are you making this effort, even though you’re not a public company and thus not, strictly speaking, subject to SEC reporting rules?
Being part of Berkshire, we are public even though we’re not directly reporting. And from a policy standpoint, we’re going to do what the right thing is. We want to make sure that we’re not buying materials from an organization that the government deems illegal.

And, within our compliance and within our company, we’re not in favor of human slavery or human trafficking. Whether it’s an SEC rule or not, we want to make sure we’re not buying things that are harmful to people in other parts of the world.

4 thoughts on “On the Trail of Conflict Minerals

  1. Frankly I think the concentration on this issue is ridiculous.

    As a CFO, despite the fact that I have some left-leaning views, I don’t consistently identify with any particular party…a different issue for another time. In my position I never allow my personal feelings to interfere with my decision making.

    To expect organizations of less than Billion$ status to be able to track down
    the source of every part of their product is not feasible or sustainable. It creates additional unnecessary costs to the organization and ultimately to the consumer. To know how whether workers were paid fairly (subjective), the workers’ personal situation, from their housing to virtually aspect of their welfare is absurdly out of touch with reality.

    A recent article in the LA Times about the Canadian Oil Fields (Tar Sands)
    reflected, in response to some evidence that there was a higher indication of
    pollutants and a higher incidence of cancer in the indigenous population, that
    the respondent give the really honest answer that “we can either die from starvation, or we can take the chance of dying from cancer”. The realistic
    choice is obvious to them. Not good choices, but “real” choices.

    Just as we as a country seem to feel the need to impose our version of democracy on the rest of the world, we also seem compelled to impose our
    notion of human rights into environments in which we don’t have to live. I’ll guarantee you that, were you to be living in some of these other countries, and faced with their daily realities, given the choice between having a job and starving it wouldn’t take an MBA to make the necessary decision.

    So what do we do about countries, from which we need their resources, that have a different set of values? Guess what? You don’t have to go any further than the primary source of our petroleum resources over these many decades.
    We need to stop being so obviously hypocritical.

    We need to stand up – invest back in America by creating jobs. Stop setting on unprecedented cash piles while complaining about uncertainty. That’s ridiculous! There is no certainty in business. To the extent that we sit on the sidelines awaiting certainty, someone (the smart ones) will eat your lunch.
    Our willingness as a nation to be risk-taking and innovative is what got us
    to be one of the most financially powerful nations in the world. This is not the time to abandon that notion, and to the extent that we concentrate on issues such as tracking the ultimate source of materials as indicated in this article, we are taking our eye off of the ball. We’re misusing the human capital and the financial resources that could be better directed into creating jobs and reinvesting in the future.

    If we want to make a socially/humanitarian statement, we should appeal to the major corporations that are hoarding cash to look at things differently. Instead of boasting about “improved efficiency”…translation – cut jobs, and make the remaining employees so afraid for their jobs that they’ll longer and harder and not complain, these corporations should think about investing back into their own communities by creating jobs. More jobs, more purchasing power.

    Instead of “stock buy-backs” – Instead of larger Investor Dividends -
    Instead of higher executive pay – Instead of concern with quarterly earnings and satisfying the analysts, we should concentrate as CFO’s on fighting back
    against the nonsensical social issues (reference the article) and replace it by making a genuine effort to create jobs; get over the boogeyman fear of uncertainty; not pander to the shareholder blocks; and truly invest in our nation’s future.

    hmaterials that go into a relatively small part of your own offering presupposes that someone on high has made that sometimes subjective determination of what is and what is not acceptable.

    All that having been said, the notion that we should have linkage between social issues and business related issues is something that should be challenged on a case-by-case basis.

    I’ve always been about maximizing the utilization of available resources
    As a CFOthis is particularly troubling for me
    because I think that my personal attitudes linkage between social issues and business
    issues
    I concentrate on primary things.

    • Thank you. I could not have said it better. Stop using our Supply Chains as a whipping boy for social causes half a world away!

  2. It’s unlikely that the SEC would concentrate on something (like conflict mineral restriction) without reason or vision. It’s widely believed that the EU and Canada are likely to follow with their own version of conflict mineral rules. Why all the fuss? Because “Africa is the new Asia.” In 10 years, a blooming African middle income consumer base will dominate the global market landscape. Major companies are already establishing manufacturing bases in Africa with that vision in mind. The goal of conflict minerals restriction is: political stability. This is not a humanitarian effort, which is why it’s an SEC law rather than just an activist initiative (although it certainly is that, too, and with good reason). This is a bid for an economic future in the Next Big Industrial & Consumer Region. The SEC is essentially asking companies to invest in their own economic future. Would like to hear whether readers agree or disagree with this view.

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