There’s one rule tucked into Dodd-Frank that is having a huge effect on thousands of publicly traded companies that many financial advisors invest in.

The conflict-minerals rule, article 1502 in the Dodd-Frank act, requires U.S. companies listed on the New York Stock Exchange and Nasdaq to disclose whether they are using any of four minerals -- gold and the ores refined into tin, tungsten and tantalum  -- that come from the war-torn Democratic Republic of the Congo (DRC) or eight surrounding regions. About 4,500 public companies will need to file the audited reports with the Securities and Exchange Commission.

In their reports companies must show that their purchases of the minerals are not supporting rebels that have taken control of mines and have violently abused residents. The companies must reports beginning next May and show steps they’ve taken in 2013 to verify their supply chains are conflict free.

Verity Chegar, an environmental, social and governance (ESG) analyst who follows the technology sector for Allianz Global Investors, which offers many global mutual funds among its products, is excited about the new regulation because it spells out how companies can develop a strong supply chain that helps protect human rights. If companies can’t verify that their products are “DRC conflict-free” then they must say so and discuss what other steps they plan to take to meet the rule.

The new reports are very important because they “bring social issues and ESG issues into the realm of materiality," Chegar said in a recent interview.

Chegar thinks that improved supply chains may make it easier for companies to implement other improvements to help local populations. She adds the SEC reports will help analysts like herself see which companies are leaders and which are laggards when it comes to their supply chains. That fact might get more publicly traded companies to comply with the new rule.

“Companies do not want to be associated with human rights violations. It’s not good for business,” she says.

Chegar notes that technology companies have already been taking steps to verify their supply chains, while jewelry and industrial companies have been slow to act.

She acknowledged that it’s no easy task to document these supply chains, such as each step tantalum takes from a rock in an African mine before ending up in a capacitor for a laptop computer. But what’s put the technology industry in the forefront of meeting the rule has been its program to certify smelters through the Conflict Free Smelter Program. About 16 tantalum and 12 gold smelters have been certified, but there are only a few certified tin smelters and no tungsten smelters, Chegar said.

Intel is one of the “most ready” companies in meeting the rule’s requirements, but is not yet 100 percent ready, she says. One criticism of the conflict minerals rule is that rather than comply, U.S. companies might pull operations from the DRC. “The implication is that for human rights if you pull commerce you are doubly punishing the innocent people in this region,” she says.

Technology companies have recognized the work they must do to verify their supply chain is complex, but they have worked together to figure out how they can meet the requirements. “One very important lesson from company responses to date is that social supply chain oversight is achievable and can be done within a relatively short time frame without damage to competitive positioning,” Chegar said in a recent Allianz Global Investors report. You can read more of her analysis by clicking here.