Exhibit 1.01

 

CONFLICT MINERALS REPORT OF 3M COMPANY

FOR THE YEAR ENDED DECEMBER 31, 2017

 

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 for the reporting period from January 1 to December 31, 2017.

 

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, 2017 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, 2017 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 Organisation for Economic Co-operation and Development (“OECD”) 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 first adopted a Conflict Minerals Policy (“Policy”) in 2011.  It was last updated in 2017 and is available on 3M’s Supplier Direct website along with other information on 3M’s conflict minerals program (https://www.3m.com/3M/en_US/suppliers-direct/supplier-requirements/conflict-minerals/).

 

3M is committed to responsible sourcing of 3TG using the OECD due diligence framework, so as not to support conflict or human rights abuses in the Covered Countries, while avoiding de facto embargoes.  This position is consistent with 3M’s Human Rights Policy and 3M’s respect for human rights in our own operations and our supply chains, as well as with the OECD Due Diligence Guidance and UN Guiding Principles.

 

Internal Management System

 

3M has established a management system to support the effective and efficient execution of our conflict minerals program. 3M’s management system includes an executive sponsor: 3M’s Senior Vice President, Supply Chain.  In addition, the Company has designated a cross-functional Conflict Minerals Steering Team, comprised of representatives from Strategic Sourcing, Environment, Health and Safety (“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 reviewing the progress, effectiveness and continual improvement of the program. The Steering Team is led by a Conflict Minerals Program Manager from 3M Strategic Sourcing.

 

Senior leadership of Strategic Sourcing, EHS and Sustainability, Finance, Audit, Compliance and Business Conduct, Human Resources and Trade Compliance is briefed bi-annually about the results of our due diligence efforts, including evaluation of risks and risk mitigation measures. These briefings also include an evaluation of the progress, effectiveness and execution of our policy and conflict minerals program.

 

Control System and Supply Chain Transparency

 

3M is a member of the Responsible Minerals Initiative (“RMI”), formerly known as the Conflict Free Sourcing Initiative (“CFSI”).  3M gathers information using RMI’s 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, with a focus on identifying Smelters and Refiners (“SORs”) in their respective supply chains.  3M identifies its Supplier Group by prioritizing its review of these products that may contain Necessary 3TG and the corresponding supply chains, accounting for various factors such as estimated content of 3TG, type of mineral, amount of spend, the nature of the supply chain, and supplier location.

 

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.  The Supplier

 

 

educational bulletin included a link to the RMI website to encourage membership in RMI, which provides a resource to assist with their Conflict Minerals Program.

 

3M communicated its expectations for suppliers in connection with our inquiry for the 2017 reporting year in the Survey Tool e-mail that included a link to 3M’s Supplier Direct website, which contains our Conflict Minerals Policy and 3M training on how to attach the CMRT in the Survey Tool.

 

3M established controls and transparency by creating a process to engage relevant first-tier suppliers, as well as some second-tier suppliers, to identify SORs identified in their supply chains.  3M communicated expectations to these relevant suppliers in connection with our inquiry requesting they send a similar request to their direct suppliers to obtain the information successively upstream to the smelter or refiner. A web-based Survey Tool is utilized for the collection of CMRTs.  Suppliers are provided a link to 3M’s Supplier Direct website where we communicate supplier responsibility expectations, have links to our Supplier Learning Academy and encourage all suppliers to have a proactive approach in aligning with 3M’s policy and programs to strengthen our supply chain to ensure conformance to regulations. Because 3M believes in developing strong and sustainable relationships, it is important our business partners understand 3M’s commitment to doing business ethically and in compliance with the law.

 

For suppliers that identified “red-flagged” SORs in their CMRT responses, according to indicators defined in the OECD Guidance, 3M requested additional information on those suppliers’ conflict minerals due diligence standards and processes, including further due diligence about the “red-flag” SORs.  In addition, these suppliers are provided a link to educational courses on smelter risk mitigation through 3M’s third-party service provider.

 

3M’s requirements related to conflict minerals in relevant global contract templates and U.S. purchase order terms and conditions require suppliers to comply with our policies on conflict minerals, including participation in a supply chain survey and related due diligence activities, and to provide upon request, information on SORs in relevant supply chains and other information 3M might require.

 

3M’s Conflict Minerals Policy requires suppliers to responsibly source 3TGs through SORs that comply with recognized assurance programs including RMI, the London Bullion Market Association (“LBMA”), and the Responsible Jewellery Council (“RJC”).  For SORs identified by the Supplier Group not currently engaged in an assurance program, 3M sends letters to those SORs encouraging them to participate and 3M also encourages our Supplier Group and in certain cases customers to do the same.

 

3M also encourages suppliers to draw upon internationally recognized standards to advance social and environmental responsibility and business ethics. All existing and future suppliers are required to conform to 3M’s Supplier Responsibility Code, demonstrating their commitment to share 3M’s values on social and environmental sustainable operations and practices.

 

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.

 

 

SORs and other external stakeholders also may use RMI’s Grievance and Complaints Mechanism. This RMI Mechanism allows stakeholders to raise concerns about the RMI Responsible Minerals Assurance Process (“RMAP”) audit process, protocols, and SOR operations that fall within the scope of the RMAP, audit quality, and auditor competencies, mineral supply chains and upstream/downstream initiatives, as well as mineral sourcing activities and due diligence of RMI member companies.

 

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

 

3M identifies relevant first-tier and priority second-tier suppliers that supply products that may contain 3TG.  3M has determined that a reasonably designed inquiry for identifying and assessing supply chain risks should focus on higher priority suppliers consistent with RMI’s Five Practical Steps to Support SEC Conflict Minerals Disclosure.

 

Once the higher-priority Supplier Group was identified, 3M used a web-enabled Survey Tool to collect completed CMRTs from this Supplier Group to identify SORs and gather information on our supply chain.  3M asked this Supplier Group to gather similar information from their direct suppliers, cascading requests to the SOR level.

 

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 Strategic Sourcing 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.

 

We verify SORs using RMI’s Conformant Smelters and Refiners list.  We also refer to other sources of information, including publications of the LBMA and the RJC, to assess potential risks.

 

3.              Design and Implement a Strategy to Respond to Identified Risks

 

3M has designed and implemented 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 its 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 SCAR process.  As part of the SCAR process the Company may decide to find alternate sources of supply and/or suspend or terminate existing supplier relationships after failed

 

 

attempts at mitigation or remediation.  For the year 2017, 3M found no instances where it was necessary to find replacement sources of supply, or to suspend 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 independent third-party audits of SORs through RMAP, LBMA and the RJC to determine whether any 3TG sourced from the Covered Countries is validated as conflict-free using RMI’s RCOI data.  In addition, members of 3M’s Conflict Minerals Steering Team participate in RMI’s Due Diligence Practices Team, Smelter Engagement Team and Risk Readiness User Group, which keeps 3M informed of new auditing standards, emerging risks, and risk assessment methods.

 

5.              Report on Supply Chain Due Diligence

 

This Report and our Form SD will be filed with the SEC and be publicly available within the conflict minerals section of 3M’s Supplier Direct website, available at:  https://www.3m.com/3M/en_US/suppliers-direct/supplier-requirements/conflict-minerals/.  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 Guidance, the internationally-recognized standard on which our company’s system is based, we support RMI’s RMAP process that audits SORs’ due diligence activities. The source of information for certain statements in this declaration was obtained through our membership in RMI, using the RCOI 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.  In 2017, 3M received SOR information from all respondents submitting CMRTs. Some 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 supplied to 3M.  The CMRT responses provided by the Supplier Group included over 5,000 individual mentions of SOR names or SOR identification numbers.  We verified 314 unique SOR names among these mentions, based on information listed on the RMI website.  Of these unique SORs, 254 (81%) are validated as conformant to the RMAP process as of March 16, 2018, and 8 (2.5%) are reported as

 

 

active by RMI, meaning they are engaged in the RMAP program but not yet conformant as of March 16, 2018.  3M’s Supplier Group identified 95% of the total number of conformant SORs listed on RMI’s website in their supply chains.  Based on our involvement in the RMI Due Diligence practices team and the RMI Smelter Engagement Team as well as resources available to us through our membership in RMI, 3M believes the number of SORs conformant to RMAP process is attributable in part to industry collaborative efforts through RMI and other third-party validation programs.

 

We monitored and tracked SORs that we identified as not having received a ‘Conflict-Free’ designation or not having begun participating in an independent third-party assurance process. During this reporting year, we identified 52 (16.5%) SOR facilities that were not participating in an independent third-party assurance process. These facilities received letters from 3M encouraging their participation.  As of April 24, 2018, a refiner receiving 3M’s encouragement letter is now under active status with RMI.

 

 

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 chain through use of the CMRT questions; and (b) utilizes information from the RMAP and its independent audits of SORs, as well as information from that effort made available by RMI 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 2017.  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 RMI 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 validated that 20 SORs identified as sourcing from those Covered Countries are conformant to RMAP.

 

 

Additional Due Diligence

 

3M compared the overall set of SORs identified by the Supplier Group against RMI’s RCOI list dated March 16, 2018, to identify all names and mineral sourcing for SORs that are conformant with the RMAP protocols and have been validated by a third-party auditor.  The RCOI also identifies SORs participating in other assurance programs where the mineral sourcing of SORs is not disclosed.

 

For the 52 SORs identified to 3M by the Supplier Group in 2017 that are not yet engaged in the RMAP as active or validated as conformant to RMAP 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 RMI and others searching for evidence of SORs sourcing from the Covered Countries or potentially contributing to conflict in the Covered Countries.  Such additional sources of information included news articles, reports published by NGOs, and/or industry association information that may indicate locations from which a SOR sources. For SORs not independently verified, geographic location and mining production by country are reviewed, and specified factors are applied to determine risk levels.

 

3M will consider taking mitigating action if we learn of credible information that identified SORs are potentially financing armed groups in the Covered Countries. We require our suppliers to conduct additional due diligence to confirm the presence of any of these red-flagged SORs in the chain of custody for Necessary 3TG in products supplied to 3M.

 

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 “RMAP-conformant” through the RMAP process and similar programs which will increase overall transparency and accessibility to information on geographic location of SOR mines of origin.

 

3M expects to expand 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 2017, 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 2017 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 RMI, in order to improve response rates and information quality.

 

 

·                  Continue our company membership in RMI, which provides independent third-party audits of SORs 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 RMI, which will strengthen industry collaboration to increase leverage on SORs to participate in independent third-party audits and become conformant to RMAP, LBMA, or RJC protocols.

 

·                  Contact SORs directly to undergo an audit of the SORs’ due diligence practices through and become compliant to the RMAP, LBMA, or RJC protocols.

 

·                  Encourage responsible sourcing by suppliers of 3TG in the Covered Countries through use of smelters or refiners validated conformant to RMAP process.

 

·                  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.

 

·                  Expand our partnership with a third-party service provider to streamline supplier outreach, feedback and due diligence efforts.

 

·                  Consider expanding our conflict minerals assessment and due diligence efforts to include other high-risk areas of the world as determined by regulatory bodies and applied by RMI.

 

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 March 16, 2018

 

The below list of Smelters or Refiners (SORs) identified to 3M by the 3M Supplier Group conformant with RMAP protocols as of March 16, 2018.  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)
Argentina		Madagascar
Australia		Malaysia
Austria		Mali
Benin		Mexico
Bolivia (Plurinational State of)		Mongolia
Brazil		Mozambique
Burkina Faso		Myanmar
Burundi*		Namibia
Cambodia		Nicaragua
Canada		Nigeria
Chile		Panama
China		Peru
Colombia		Portugal
Congo, Democratic Republic of the*		Russian Federation
Ecuador		Rwanda*
Eritrea		Senegal
Ethiopia		Sierra Leone
France		South Africa
Germany		Spain
Ghana		Thailand
Guatemala		Togo
Guinea		Uganda*
Guyana		United Kingdom of Great Britain and Northern Ireland
Honduras		United States of America
India		Uzbekistan
Indonesia		Viet Nam
Japan		Zambia*
Kazakhstan		Zimbabwe
Laos

 

* Covered Country