Exhibit 1.01

 

CONFLICT MINERALS REPORT OF 3M COMPANY

FOR THE YEAR ENDED DECEMBER 31, 2016

 

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, 2016.

 

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 (RCOI) for the period January 1 to December 31, 2016 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, 2016 and December 31, 2016 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 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, using the following due diligence management system:

 

 

DUE DILIGENCE MEASURES

 

A.            Design of Our Due Diligence Measures

 

Our CMR Conflict Minerals due diligence management system 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 (the “OECD Guidance”), as applicable for 3TG and downstream companies (as the term ‘downstream companies’ is defined in the OECD Guidance).

 

 

B.            Due Diligence Performed

 

1.              Establish Strong Company Management Systems

 

Conflict Minerals Policy

 

3M adopted a Conflict Minerals Policy in 2011, which is posted on our conflict minerals website at: http://www.3m.com/3M/en_US/suppliers-direct/supplier-requirements/supplier-responsibility-expectations/

 

Internal Management System

 

3M’s management system for conflict minerals includes an executive sponsor, 3M’s Senior Vice President, Supply Chain.  In addition, the Company designated a cross-functional Conflict Minerals Steering Team, comprised of representatives from Sourcing Operations, 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, effectiveness and continual improvement of the program going forward.  The Steering Team is led by a Conflict Minerals Program Manager from 3M Sourcing Operations.  Senior Sourcing, EHS and Sustainability, Finance and Audit leadership were briefed bi-annually 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 Survey Tool 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 followed up with those in the Supplier Group that were unresponsive using 3M’s Supplier Corrective Action and Response (SCAR) process.  3M also sent an educational bulletin to aid in capacity building with those in the Supplier Group that indicated they did not have key aspects of a conflict minerals program.

 

3M distributed its expectations for suppliers in connection with our inquiry for the 2016 reporting year in the Survey Tool e-mail that included a link to the CFSI website to download the CMRT.  The Survey Tool e-mail also included links to 3M’s Conflict Minerals website, which includes our Conflict Minerals Policy and 3M training on how to attach the CMRT in the Survey Tool.  In addition, the website 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 relevant agreement 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) compliant to recognized audit programs including the CFSI, LBMA, and RJC.

 

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 2016, 3M used a web-enabled Survey Tool to collect the CMRT from the Supplier Group in order to identify SORs and gather information on our supply chain.

 

The Survey Tool 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 escalated 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 works with the Company’s Conflict Minerals Steering Team and its executive sponsor, providing 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 or may source 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 after failed attempts at mitigation or remediation.  For the year 2016, 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 utilizes information provided by the CFSI’s Conflict-Free Smelter Program (CFSP) and similar gold refining industry auditing programs (LBMA and RJC) to perform independent third-party audits of SORs.  We determine whether any 3TG sourced from the Covered Countries is validated as conflict-free by utilizing information provided by our Supplier Group, by the CFSI and gold refining programs through the CFSI RCOI data.

 

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://www.3m.com/3M/en_US/suppliers-direct/supplier-requirements/supplier-responsibility-expectations/ 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 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 “mmmco”.

 

Information on Smelters or Refiners

 

The CMRT requested the Supplier Group and its suppliers provide 3M with information on the SORs providing 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 by the Supplier Group included over 8,000 individual mentions of SOR names or SOR identification numbers.  We verified 306 unique SOR names among these mentions, based on information listed on the CFSI website.  Of these unique SORs, 12 are reported as active by CFSI, meaning they are engaged in the program but not yet compliant, and 245 are validated as compliant to CFSP protocols as of May 25, 2017. These SORs validated as compliant to CFSP protocols are listed in Annex I below.  3M’s Supplier Group identified 99% of the total number of compliant SORs listed on CFSI’s website in their supply chain.  3M saw a 14% increase from 2015 in the number of SORs compliant to the CFSP protocols reported to us by our suppliers. Based on our involvement in the CFSI Due Diligence practices team and the CFSI SET (Smelter Engagement Team) team as well as resources available to us through our

 

 

membership in CFSI, this increase in SORs compliant to CFSP protocols is attributable in part to industry collaborative efforts through CFSI and other third party validation programs.

 

 

Efforts to Determine the Country of Origin or Mine of Origin

 

In order to determine country or mine of origin, 3M: (a) seeks information about 3TG SORs in our supply chains through use of the CMRT questions; and (b) utilizes information from the CFSP and its independent audits of SORs, as well as information from that effort made available by CFSI publicly and to its members.  3M’s Supplier Group did not provide information on mines of origin for Necessary 3TG used in 3M products manufactured during 2016.  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 in Annex II are Covered Countries, 3M was able to validate that 24 SORs identified as sourcing from those Covered Countries are compliant to CFSP protocols.

 

Additional Due Diligence

 

For the SORs identified to 3M by the Supplier Group that are not yet engaged in the CFSI program as active or validated as compliant to CFSP protocols or by any other independent third-party programs, 3M conducted further due diligence to confirm whether those SORs processed Necessary 3TG used in products provided to 3M.  In addition, 3M conducted due diligence through other means using a variety of information sources from CFSI and others.  For example, the CFSI 3TG Production Summary was used to determine estimated production volumes by metal and country. 3M also searched for reasonable evidence of SORs sourcing from the Covered Countries or potentially contributing to conflict in the Covered Countries through Public Wire Watch, UN reports and NGO reports. 3M also contacted certain SORs to encourage their participation in and compliance to CFSP protocols.  This is consistent with other work we had done as a member of the CFSI SET in 2016, reaching out to SORs to encourage participation in CFSP consistent with recommendations from the SET.  We contacted

 

 

relevant suppliers to notify them of discrepancies in their Smelter List as compared to CFSI’s Smelter Reference List contained in the CMRT or SOR status changes as noted by CFSI.

 

3M will consider taking mitigating action if we learn of credible information that identified SORs are potentially financing armed groups in the Covered Countries.

 

In an analysis of unresponsive suppliers and incomplete responses, 3M identified distributors as a significant source of this missing information.  3M requested that CFSI open a discussion among its members on how best to engage distributors and encourage them to be responsive to industry requests for chain of custody/SOR information.  The CFSI Distributors Project was launched in late 2016, and a survey sent to CFSI members.  Survey results led CFSI to decide, in 2017, to create a guide for industry on how best to engage and evaluate distributors in their supply chain.

 

STEPS TO IMPROVE DUE DILIGENCE

 

3M is alert for facts and circumstances that may require SOR-related risk mitigation.  In addition, 3M also expects that more SORs will become validated as “CFSP compliant” through the CFSP 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 2016 (including through use of practices identified by the new CFSI guide on distributors mentioned above), 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 2016 inquiry that they did not have certain key aspects of a conflict minerals program, to educate and obtain updated information.

 

·                  Continue our supplier engagement and capacity building efforts through our supplier inquiry and outreach 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, which provides independent third party audits of SOR’s due diligence practices including engagement in Due Diligence Practices Team, Smelter Engagement Team, and participating in monthly Plenary calls.

 

·                  Encourage supplier and other company membership and participation in CFSI, which will strengthen industry collaboration to increase leverage on SORs to participate in independent third-party audits and become compliant to CFSP, LBMA, or RJC protocols.

 

·                  Contact smelters and/or refiners to undergo an audit of the SORs’ due diligence practices through and become compliant to the CFSP, LBMA, or RJC protocols.

 

 

·                  Encourage responsible sourcing by suppliers of 3TG in the Covered Countries through use of smelters or refiners validated compliant to CFSP protocols.

 

·                  Update our Conflict Minerals Policy to include an expectation that suppliers will supply materials that are “Conflict-Free,” including 3TGs that do not directly or indirectly finance armed groups through mining or mineral trading in any high risk area of the world as determined by regulatory bodies and as applied by CFSI (“high-risk areas”) (Policy update completed Spring 2017—see the 3M Conflict Minerals website at: http://www.3m.com/3M/en_US/suppliers-direct/supplier-requirements/supplier-responsibility-expectations/).

 

·                  Continue our Conflict Minerals program and process to support future compliance to the new European Union regulation on supply chain due diligence by importers of minerals and metals originating in conflict-affected and high-risk areas.

 

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

 

As of May 25, 2017

 

The below list of Smelters or Refiners (SORs) identified to 3M by the 3M Supplier Group are validated as compliant with CFSP protocols as of May 25, 2017.  3M is typically many tiers in the supply chain removed from SORs, and our direct suppliers have not traced materials supplied to 3M back to individual SORs.  Many of our suppliers provided information to 3M on all SORs identified to them by their suppliers, and have not been able to confirm that 3TG processed by these SORs have been used in the products they have supplied us because they did not provide their CMRT at the product level.  Therefore, it is possible that the list contains SORs not used to process 3TG contained in our products.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANNEX II

 

Countries (A-L)		Countries (M-Z)
Angola*		Madagascar
Argentina		Malaysia
Australia		Mali
Austria		Mexico
Benin		Mongolia
Bolivia (Plurinational State of)		Mozambique
Brazil		Myanmar
Burkina Faso		Namibia
Burundi*		Nicaragua
Cambodia		Nigeria
Canada		Panama
Central African Republic*		Peru
Chile		Portugal
China		Russian Federation
Colombia		Rwanda*
Ecuador		Senegal
Eritrea		Sierra Leone
Ethiopia		South Africa
France		South Sudan*
Ghana		Spain
Guatemala		Tanzania*
Guinea		Thailand
Guyana		The Democratic Republic of the Congo*
Honduras		Togo
India		Uganda*
Indonesia		United Kingdom of Great Britain and Northern Ireland
Japan		United States of America
Laos		Uzbekistan
		Viet Nam
		Zambia*
		Zimbabwe

 

 

*Covered Countries