Exhibit 1.01

 

CONFLICT MINERALS REPORT OF 3M COMPANY

FOR THE YEAR ENDED DECEMBER 31, 2015

 

INTRODUCTION

 

This Conflict Minerals Report for 3M Company (“3M,” “Company,” “we,” “our”) is provided in accordance with Rule 13p-1 under the Securities Exchange Act of 1934 (“Rule 13p-1”) for the reporting period from January 1 to December 31, 2015.

 

Conflict Minerals are defined by the Securities and Exchange Commission (SEC) as cassiterite, columbite-tantalite, wolframite and gold, and their derivatives, which are limited to tin, tantalum and tungsten (collectively “3TG”).  As a result of the Company’s reasonable country of origin inquiry for the period January 1 to December 31, 2015 described in the attached Form SD, 3M has reason to believe that a portion of the 3TG necessary to the functionality or production of products (“Necessary 3TG”) that we manufactured or contracted to manufacture during the period between January 1, 2015 and December 31, 2015 may have originated in the Democratic Republic of Congo (DRC), the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola (together, the “Covered Countries”) and has reason to believe that those Necessary 3TG may not be from recycled or scrap sources.

 

The Company therefore conducted due diligence on the source and chain of custody of Necessary 3TG as described below.

 

DUE DILIGENCE MEASURES

 

A.            Design of Our Due Diligence Measures

 

Our CMR Conflict Minerals due diligence process has been designed to conform in all material respects with the Organization for Economic Co-operation and Development Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, Second Edition (2013) (the “OECD Guidance”), as applicable for 3TG and downstream companies (as the term ‘downstream companies’ is defined in the OECD Guidance).  Our due diligence measures included:

 

1.              Establish strong Company management systems;

2.              Identify and assess risks in the supply chain;

3.              Design and implement a strategy to respond to identified risks;

4.              Carry out independent third-party audit of the supply chain due diligence at identified points in the supply chain;  and

5.              Report on supply chain due diligence.

 

 

B.            Due Diligence Performed

 

1.              Establish Strong Company Management Systems

 

Conflict Minerals Policy

 

3M adopted a Conflict Minerals Policy, which is posted on our conflict minerals website at http://solutions.3m.com/wps/portal/3M/en_US/SD/Supplier/Requirements/SREE/ConflictMinerals/.

 

Internal Management System

 

3M’s management system for conflict minerals includes an executive sponsor who is 3M’s Senior Vice President, Supply Chain.  In addition, the Company designated a Conflict Minerals Steering Team, comprised of representatives from Sourcing Operations, Medical Department Regulatory Services, EHS and Sustainability Operations, and 3M Legal Affairs.  The Conflict Minerals Steering Team has responsibility for developing and implementing 3M’s conflict minerals compliance strategy, as well as for reviewing the progress and effectiveness of the program going forward.  The Steering Team is led by a Conflict Minerals Program Manager from 3M Sourcing Operations.  Senior Sourcing, Finance and Audit management were briefed about the results of our due diligence efforts.

 

Control System and Supply Chain Transparency

 

3M gathers information using the Conflict Free Sourcing Initiative (CFSI) Conflict Minerals Reporting Template (CMRT) sent to the Supplier Group via our web-enabled Supplier Regulatory eEnablement (SREE) system to determine the chain of custody of the Necessary 3TG included in our products.

 

Supplier Engagement

 

After our supplier inquiry for the previous reporting year, 3M e-mailed those in the Supplier Group that were unresponsive using 3M’s Supplier Corrective Action and Response (SCAR) process.  3M also e-mailed those in the Supplier Group that indicated they did not have key aspects of a conflict minerals program by sending an educational bulletin.

 

3M distributed its expectations for suppliers in connection with our inquiry for the 2015 reporting year in the SREE e-mail that included the CMRT.  The SREE e-mail included links to 3M’s Conflict Minerals website, which includes our Conflict Minerals Policy and 3M training on how to respond to the CMRT.  This website also directs suppliers to training resources available through the CFSI.  3M also sent educational bulletins if suppliers’ CMRT responses indicated a need for additional training.

 

3M’s Sourcing contract templates and U.S. purchase order terms & conditions require suppliers to provide upon request, information on the smelters and refiners in relevant supply chains, and other information 3M might require.

 

3M’s Conflict Minerals website states that 3M encourages our suppliers to responsibly source 3TG from the Covered Countries through smelters or refiners (SORs) validated as DRC Conflict Free.

 

 

Grievance Mechanism

 

We have a grievance mechanism whereby employees and suppliers can report concerns regarding 3M’s business conduct and other matters, at 3M-ethics.com.  We have procedures in place for follow-up in the event any conflict minerals issues are raised through our grievance mechanism.

 

Maintain Records

 

We have a record retention policy applicable to conflict minerals-related documentation that provides for retention for a minimum of ten years.

 

2.              Identify and Assess Risk in the Supply Chain

 

In 2015, 3M used a web-based system to distribute the Conflict Minerals Reporting Template (CMRT) to the Supplier Group in order to identify SORs and gather information on our supply chain.

 

The SREE system issued three automatic follow-up reminders to those in the Supplier Group who had not responded to the information request.  Additional e-mail reminders were sent to those in the Supplier Group who did not respond, and follow-up phone calls were made with some suppliers.  Supplier responses were reviewed by 3M Sourcing Operations and some responses were also reviewed by employees identified as Conflict Minerals Advisors.  If supplier responses indicated that Necessary 3TG contained in products provided to 3M may have originated from the Covered Countries or may have been processed by SORs that have not been validated as using DRC conflict-free sourcing practices, then such responses were sent to the Conflict Minerals Steering Team for further review and determination of follow-up steps.

 

3.              Design and Implement a Strategy to Respond to Risks

 

3M designed a strategy to respond to risks.  The Conflict Minerals Program Manager will report to the Company’s Conflict Minerals Steering Team and its executive sponsor and provide periodic updates to relevant executives of any findings where a supplier in the Supplier Group identifies a SOR processing Necessary 3TG for 3M products that sources from the Covered Countries. The 3M Conflict Minerals Steering Team and executive sponsor or other relevant executives will determine appropriate follow-up actions, if any, to mitigate risks.  Follow-up actions may include the Company’s Supplier Corrective Action and Response (SCAR) process.  As part of the SCAR process the Company may decide to find alternate sources of supply or terminate existing supplier relationships, as appropriate.  For the year 2015, 3M found no instances where it was necessary to find replacement sources of supply or terminate a supplier relationship.

 

4.              Carry out Independent Third Party Audit of Supply Chain Due Diligence at Identified Points in the Supply Chain

 

3M relies on the CFSI’s Conflict-Free Smelter (CFS) Program and similar gold refining industry auditing programs (Gold Refining Programs) to perform third-party audits of SORs.  We will validate whether any 3TG sourced from the Covered Countries is conflict-free based on the

 

 

information provided by our Supplier Group and on the information provided by the CFSI and Gold Refining Programs through the CFSI website.

 

5.              Report on Supply Chain Due Diligence

 

This Report and our Form SD will be filed with the SEC and be publicly available at 3M’s conflict minerals website at http://solutions.3m.com/wps/portal/3M/en_US/SD/Supplier/Requirements/SREE/ConflictMinerals/.  The reference to 3M’s website is provided for convenience only, and its contents are not incorporated by reference into this Report and Form SD nor deemed filed with the SEC.

 

RESULTS OF DUE DILIGENCE

 

Based on our Reasonable Country of Origin Inquiry (RCOI) described in our Form SD and the other aspects of our due diligence program described above, 3M evaluated the Supplier Group responses to the CMRT-based supplier inquiry.  Based on its RCOI, 3M has reason to believe that a portion of its Necessary 3TG may have originated in the Covered Countries and has reason to believe that those Necessary 3TG may not be from recycled or scrap sources.

 

As outlined in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, the internationally recognized standard on which our company’s system is based, we support the CFSI Conflict Free Smelter Program that audits smelters’ and refiners’ due diligence activities. The source of information for certain statements in this declaration was obtained through our membership in the CFSI, using the Reasonable Country of Origin Inquiry report for member “mmco.”

 

Following our Year 2015 inquiry and identification of SORs, we contacted SORs within our supply chain not yet validated as DRC Conflict Free and not actively pursuing validation, and encouraged them to join the CFS Program and become validated as DRC Conflict Free.  During our Year 2015 inquiry we learned through our membership in CFSI that a SOR (identified as sourcing from locations other than the Covered Countries) had temporarily lost its validated status under the CFS Program.  We contacted the SOR and requested that it re-establish validation under the CFS Program.  The SOR later re-established its validation under the CFS Program.

 

Information on Smelters or Refiners

 

The CMRT requested that the Supplier Group provide 3M with information on the SORs that the Supplier Group and its suppliers use to supply Necessary 3TG to 3M.  Because 3M typically does not have a direct relationship with the facilities used to process 3TG, we must rely on information provided by the Supplier Group. Some responses from the Supplier Group indicated that they were unable to provide SOR information at this time.  Other suppliers in the Supplier Group provided information on all SORs used by the supplier but could not provide information linking specific SORs used to process Necessary 3TG with products provided to 3M.  The CMRT responses provided to us by the Supplier Group resulted in the collective identification of approximately 5,000 SORs.  Based on smelter identification numbers set forth in the Supplier Group responses or provided on the CFSI website, we verified 316 unique SORs from among those SORs identified to us by the Supplier Group that may have been used to process Necessary 3TG in 3M products, and these unique SORs

 

 

are listed in Annex I below.  Of these unique SORs, 214 were validated as using DRC conflict-free sourcing practices under the CFS program protocols as of March 7, 2016.

 

Efforts to Determine the Country of Origin or Mine of Origin

 

In order to determine country or mine of origin, 3M must: (a) seek information about 3TG SORs in our supply chains through use of the CMRT questions; and (b) rely on the CFS Program and its independent audits of SORs, as well as information from that effort made available by CFSI to its members.  3M’s Supplier Group did not provide information on mines of origin for Necessary 3TG used in 3M products manufactured during 2015.  3M does not have sufficient information to conclusively determine the mines or the countries of origin of the Necessary 3TG in its products or whether the Necessary 3TG are from recycled or scrap sources.  However, based on SOR information provided by the Supplier Group through the CMRT responses, as well as CFSI information available to its members, the countries of origin of 3TG associated with SORs identified to 3M by the Supplier Group are believed to include the countries listed in Annex II below. While some countries listed on Annex II are Covered Countries, the SORs identified as sourcing from those Covered Countries have all been validated as using DRC conflict-free sourcing practices under the Conflict Free Smelter Program protocols.

 

For the identified SORs that are not yet validated, we conducted further review to better understand whether they may be sourcing from the Covered Countries.  We first searched for reasonable evidence (such as SOR location and presence and availability of the mined mineral in proximity to the SOR) that they were not sourcing ore from the Covered Countries.  We found such reasonable evidence for 94 identified SORs.  For the 8 remaining identified SORs where this evidence was not found, we searched for information from public references citing the SOR as financing armed groups in the Covered Countries.  No such information was found as of the end of the reporting period for this Report.  3M will consider taking mitigating action if we learn of credible information that identified SORs are potentially financing armed groups in the Covered Countries.

 

STEPS TO IMPROVE DUE DILIGENCE

 

3M will be alert for facts and circumstances that may require SOR-related risk mitigation.  In addition, 3M also expects that more SORs will become validated as “DRC Conflict Free” through the CFS Program and similar programs which will increase overall transparency and accessibility to information on geographic location of SOR mines of origin.

 

3M expects to improve its due diligence to further mitigate the risk that Necessary 3TG benefit armed groups in the DRC or any of its adjoining countries by taking the following steps:

 

·                  Follow-up with those in the Supplier Group that were unresponsive or did not provide sufficient information in 2015, thereby improving both supplier response rates and the quality of supply chain information available to 3M.

 

·                  Follow-up with those in the Supplier Group that indicated in their response to our 2015 inquiry that they did not have certain key aspects of a conflict minerals program, to obtain updated information.

 

 

·                  Continue our supplier engagement and capacity building efforts through our supplier inquiry and by directing suppliers to training resources available through industry associations and the CFSI, in order to improve response rates and information quality.

 

·                  Continue our company membership in CFSI.

 

·                  Encourage supplier and other company membership and participation in CFSI, which will strengthen industry collaboration to increase leverage on smelters and refiners to join the CFS program and thereby become validated as DRC Conflict Free.

 

·                  Contact smelters and/or refiners to join the CFS program and become validated or re-establish validation as DRC Conflict Free.

 

·                  Encourage responsible sourcing by suppliers of 3TG in the Covered Countries through use of smelters or refiners validated as DRC Conflict Free.

 

Cautionary Statement about Forward-Looking Statements

 

Certain statements in this report may be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” and “estimates,” “targets,” “anticipates,” and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include statements relating to our future plans, and any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially from these forward-looking statements. As a result, these statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement, except as required by federal securities laws.

 

 

ANNEX I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNEX II

 

Countries (A-K)		Countries (L-Z)
Angola*		Laos
Argentina		Luxembourg
Australia		Madagascar
Austria		Malaysia
Belgium		Mongolia
Bolivia		Mozambique
Brazil		Myanmar
Burundi*		Namibia
Cambodia		Netherlands
Canada		Nigeria
Central African Republic*		Peru
Chile		Portugal
China		Republic of Congo*
Colombia		Russia
Côte D’Ivoire		Rwanda*
Czech Republic		Sierra Leone
Democratic Republic of the Congo*		Singapore
Djibouti		Slovakia
Ecuador		South Africa
Egypt		South Korea
Estonia		South Sudan*
Ethiopia		Spain
France		Suriname
Germany		Switzerland
Guyana		Taiwan
Hungary		Tanzania*
India		Thailand
Indonesia		Uganda*
Ireland		United Kingdom
Israel		United States
Japan		Vietnam
Kazakhstan		Zambia*
Kenya		Zimbabwe

 

*Covered Countries