Gold is one of the most commonly used conflict minerals. [Illustration by Yuliia via Adobe Stock]
Materials like gold, tin and tungsten can save lives when used in medical devices, but global manufacturers like Medtronic must take steps to avoid inadvertently funding violence and human rights abuses with these “conflict minerals.”
Medtronic is the largest medical device company in the world, so its conflict minerals program is a good example of how medtech manufacturers look deep into their supply chain to comply with federal disclosure requirements.
“At Medtronic, we’re committed to maintaining good citizenship as a company, which includes obtaining the minerals necessary to manufacture our products only from socially responsible sources,” the company said in a statement to Medical Design & Outsourcing.
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What are conflict minerals?
Conflict minerals include cassiterite, columbite-tantalite (coltan), gold, wolframite and their derivatives, which are commonly extracted to fund violent conflicts. Some of the most commonly used conflict minerals are referred to as 3TG: tantalum, tin and tungsten and gold.
The Dodd-Frank Act of 2010 requires publicly traded companies to disclose their use of conflict minerals and exercise due diligence on sourcing, specifically to identify whether the materials came from facilities in or near the Democratic Republic of Congo, where illicit gold exports financed armed groups as they engaged in the deadliest conflict since WWII.
The DRC and adjoining countries — the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia, and Angola — are collectively defined by the law as the “covered countries,” a term you’ll see often in conflict minerals sourcing.
Medtronic’s conflict minerals program design
Medtronic based its conflict minerals program design on five steps from the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas:
- Establish and maintain strong company management systems (including Medtronic’s conflict minerals policy)
- Identify and assess risks in the supply chain
- Design and implement a strategy to respond to identified risks
- Carry out an independent third-party audit of smelter or refiner due diligence practices
- Report annually on supply chain due diligence
Medtronic’s conflict minerals program has three teams of management: a steering committee that includes the chief procurement officer, a central team — made up of the Responsible Supply Management Program director, a supply chain program manager, a data analyst, and a legal representative — and a third team of global supply management representatives who support the central team and act as liaisons.
“Due to the depth of the company’s supply chain, the company is far removed from the sources of ore from which conflict minerals are produced and the smelters and refiners that process those ores, and the company has limited influence over the behavior of these smelters and refiners,” Medtronic said in its latest conflict minerals report. “Moreover, because of the geographic diversity and ongoing changes in the company’s supply chain, the company often has significant difficulty identifying those suppliers who are further upstream from the company’s direct suppliers. As a result, the company’s program was specifically designed to relate to our position in the minerals supply chain as a ‘downstream’ purchaser.”
Related: Supply Chain EVP Greg Smith sees fewer suppliers in Medtronic’s future
How Medtronic investigates suppliers for conflict mineral compliance
After Medtronic determines it needs particular conflict minerals to make its products, it conducts a reasonable country of origin inquiry (RCOI) to check whether those materials come from the covered countries.
The company uses the Responsible Minerals Initiative (RMI) Conflict Minerals Reporting Template to survey direct suppliers that provide products or components that might contain conflict minerals. Medtronic has been an RMI member since 2015, and uses a third-party software and services provider for its conflict materials program.
Medtronic surveyed 234 direct suppliers last year and received 214 responses. For non-responders, Medtronic sent up to three reminders and had commodity managers personally follow up with high-spend suppliers.
Of the responsive suppliers, 63 confirmed or gave reason to believe that they sourced conflict minerals from the covered countries. Medtronic follows up with those suppliers to compile lists of smelters and refiners for comparison against the RMI’s Responsible Minerals Assurance Process (RMAP) list of facilities.
RMI assesses facilities for conformance to RMAP standards and makes its lists publicly available for manufacturers to verify whether facilities are conformant or active (active means they’re in the pre-assessment, assessment, or corrective-action phases). Medtronic’s 2022 list included 468 potential unique smelters or refiners, of which 221 were on the RMAP conformant list. Nine smelters were on the active list.
For the 112 suppliers who listed facilities that aren’t listed as RMAP conformant or active, Medtronic asked them to encourage their smelters and refiners to become RMAP conformant.
Red flag review of conflict mineral suppliers
Medtronic said it performed an automated red flag review of all supplier responses. Using the RMI definition of a 3TG smelter or refiner, Medtronic assesses each facility according to the OECD’s due diligence guidance. Three factors determine a facility’s level of risk: geographic proximity to the covered countries, RMAP audit status, and credible evidence of unethical or conflict sourcing.
In 2022, this review identified 24 smelting or refining facilities with red-flag risks in their supply chain, including one facility each in Belgium, Sudan, Zimbabwe, UAE, Uganda, and the remaining 19 in Russia.
If a Medtronic supplier reports any of these facilities on a survey, Medtronic’s program immediately emails the supplier with instructions to take their own risk mitigation actions and escalate the issue within the supplier to remove the red flag facilities from their supply chain.
The number of Medtronic suppliers reporting high-risk smelters or refiners grew from 56 in 2021 to 63 in 2022 due to the addition of those 19 non-conformant Russian smelters. RMI suspended new RMAP assessments in Russia last year following the invasion of Ukraine.
Despite that, Medtronic reported “a significant decrease in the number of smelters reported and the number of non-legitimate smelter entities” from 2021 to 2022.
You can read Medtronic’s annual conflict minerals disclosure here, including lists of all identified conflict minerals smelters and refiners in its supply chain, along with the mineral supplier, the facility location and RMAP audit status. The report also lists all known countries of origin, from Afghanistan to Zimbabwe.
Medtronic warns that its program “can provide only reasonable, not absolute, assurance regarding the source and chain of custody of the necessary conflict minerals.”
“The company’s due diligence processes are based on the necessity of seeking data from direct suppliers and those suppliers seeking similar information within their supply chains to identify the original sources of the necessary conflict minerals,” Medtronic said in the report. “The company also relies, to a large extent, on information collected and provided by independent third-party audit programs. Such sources of information may yield inaccurate or incomplete information due to, among other reasons, gaps in supplier or smelter data, errors or omissions in information provided by suppliers or smelters, or misunderstandings by suppliers or smelters regarding the SEC requirements.”
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