Keurig Dr Pepper : 2020 Conflict Minerals Report

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EX-1.01 2 a2020conflictmineralsreport.htm EX-1.01

Exhibit 1.01

Keurig Dr Pepper Inc.

Conflict Minerals Report

For the reporting period from January 1, 2020 to December 31, 2020

Introduction

Keurig Dr Pepper, Inc. (the "Company," "KDP," "we," "us" or "our") is committed to sourcing products, components and materials from companies that share our values regarding respect for human rights, ethics and environmental responsibility. To that end, we are committed to the ethical sourcing of minerals including tin, tantalum, tungsten and gold. There is concern that these "Conflict Minerals" could originate from certain mines in the Democratic Republic of the Congo ("DRC") which are controlled by armed militias who use the proceeds from the sale of these minerals to fund ongoing conflict in the region.

KDP has prepared this Conflict Minerals Report (this "Report") pursuant to Rule 13p-1 (the "Rule") under the Securities Exchange Act of 1934, as amended, for the reporting period from January 1, 2020 to December 31, 2020 (the "Reporting Period").

This Report describes KDP's due diligence process and compliance with the Rule's requirements. The Rule requires disclosure of certain information when a reporting company manufactures, or contracts to manufacture, products which contain the minerals specified in the Rule, if those minerals are necessary to the functionality or production of such products. The specified minerals, which the Company collectively refers to in this Report as "3TG," are gold, columbite-tantalite (coltan), cassiterite and wolframite and their derivatives, which are limited to tantalum, tin and tungsten. The "Covered Countries" for the purposes of the Rule and this Report are the Democratic Republic of the Congo, the Republic of the Congo, the Central African Republic, South Sudan, Uganda, Rwanda, Burundi, Tanzania, Zambia and Angola.

Reporting Scope

As described in this Report, certain 3TG are necessary to the functionality or production of products that the Company contracted to manufacture, or manufactured, during the Reporting Period. These products are the Company's Keurig brewers and milk frother products, as well as coffee brewer products manufactured and sold by Keurig Canada Inc., an indirect wholly-owned subsidiary of KDP (such in-scope products, collectively, the "Covered Products"). There are no additional products that KDP contracted to manufacture, or manufactured, during the Reporting Period which are considered in-scope products according to the Rule.

Our Approach

KDP uses components and materials containing 3TG in its Covered Products but does not purchase 3TG directly from mines, smelters, or refiners. Therefore, we must collaborate with suppliers, industry peers, and other stakeholders as described in this Report to conduct appropriate due diligence on our upstream supply chains.

KDP is a member of the Responsible Minerals Initiative ("RMI"), a multi-industry initiative addressing Conflict Minerals issues in the supply chain (unique member code KEUR). The RMI's Conflict Minerals Reporting Template ("CMRT") is a widely-used standard form to collect

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information from the supply chain, including the names of 3TG smelters or refiners ("SORs"). RMI also manages the Responsible Minerals Assurance Process ("RMAP"), which uses independent third-party audits to assess whether 3TG SORs have systems in place to source 3TG in conformance 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 Third Edition ("OECD Guidance")1. We use the CMRT to survey our suppliers and identify SORs in our supply chain, and the RMAP to determine the country of origin and conformance status of minerals.

In accordance with the Rule, KDP has in good faith conducted a reasonable country of origin inquiry ("RCOI") regarding 3TG. This country of origin inquiry was designed to determine whether any of the 3TG used in the Covered Products originated in the Covered Countries and whether any of such 3TG may be from recycled or scrap sources. The Company also performed due diligence on the source and chain of custody of such 3TG based on the OECD Guidance and as described in more detail below.

Reasonable Country of Origin Inquiry

In 2020, KDP identified its direct suppliers believed or known to have provided materials, components or products which may contain Conflict Minerals, as well as one indirect component supplier with whom KDP engages directly (such direct suppliers and indirect supplier, collectively, the "Suppliers"). KDP requested that each Supplier submit information to KDP using the CMRT.

The information submitted by KDP's Suppliers in their CMRTs included information gathered by those Suppliers about the smelters and refiners identified in their own supply chains which KDP utilized to conduct further due diligence. As described in more detail below, KDP's Responsible Sourcing team reviewed and analyzed each CMRT received.

KDP compared the list of SORs reported by Suppliers against the RMI's Smelter Database2 to first determine which of the reported entities are known to be true SORs of 3TG ("Eligible SORs"). The list of Eligible SORs that our Suppliers reported as being in their supply chains is set forth in Annex I. The list of countries from which KDP believes the 3TG in its Covered Products may have originated is set forth in Annex II. This information was obtained through KDP's membership in the RMI, using the RCOI report dated March 23, 2021. Note that the RMI RCOI report only includes information for SORs that are "Conformant" according to RMAP. Through our RCOI, we found that:

• Some 3TG is sourced through SORs that are not yet RMAP-Conformant and therefore we have not yet determined the country of origin of those minerals;
• Some 3TG is sourced from RMAP-Conformant SORs, including SORs that source responsibly from the Covered Countries; and
• Some 3TG also may have originated from recycled or scrap sources.

1. OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas Third Edition, 2016; https://www.oecd.org/daf/inv/mne/OECD-Due-Diligence-Guidance-Minerals-Edition3.pdf
2. The RMI Smelter Database was exported and referenced as of our cutoff date of April 23,2021: http://www.responsiblemineralsinitiative.org/members/smelter-database/

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In addition to the RMI RCOI data available to KDP, select Suppliers reported to KDP that they source from the Covered Countries in their CMRTs:

• 17% of the SORs reported by suppliers potentially source from Covered Countries. KDP referenced the RMI Smelter Database and confirmed that all the SOR names provided are RMAP Conformant.

Ultimately, KDP relies on the RMI RCOI data as the most accurate information for our RCOI.

The information obtained from our Suppliers indicated that there was reason to believe that a portion of 3TG used in the Covered Products may have originated in the Covered Countries and were not exclusively from recycled or scrap sources, triggering the due diligence steps described in the following sections.

Due Diligence

Design of Due Diligence

KDP designed its due diligence measures in accordance with the OECD Guidance.

The OECD Guidance utilizes a five-step process for due diligence:

Step 1: Establish Strong Company Management Systems

Step 2: Identify and Assess Risks in the Supply Chain

Step 3: Design and Implement a Strategy to Respond to Identified Risks

Step 4: Carry Out Independent Third-Party Audit of Smelters' and Refiners' Due Diligence Practices

Step 5: Report Annually on Supply Chain Due Diligence

Below is a description of KDP's due diligence measures performed for the Reporting Period.

Due Diligence Measures Performed

Step 1: Establish Strong Company Management Systems:

The Company has adopted a policy relating to 3TG incorporating the standards set forth in the OECD Guidance (the "Conflict Minerals Policy"). The Conflict Minerals Policy is available on KDP's website at https://www.keurigdrpepper.com/en/our-company/ethics-and-compliance.

KDP's Conflict Minerals Policy states in part that KDP is committed to: (1) supporting the aims and objectives of the U.S. legislation on the disclosure of 3TG; (2) not knowingly procuring 3TG that originates from facilities in the Covered Countries that are not considered conflict free; and (3) ensuring compliance with the KDP Conflict Minerals Policy.

Members from the Company's Supply Chain, Legal, and Sustainability Teams were involved in the due diligence process, which was led by the Company's Responsible Sourcing Team. Members of our Executive Leadership Team were briefed on the Company's due diligence procedures and results, and reviewed and approved this Report.

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Requirements related to Conflict Minerals and related due diligence activities are generally included in our most significant supplier contracts relating to Covered Products.

KDP has established a system of controls and transparency to determine the SORs in its 3TG supply chain by creating a process to engage Suppliers. KDP uses a third party software platform to collect, store, analyze and aggregate Supplier data for reporting purposes. It is also used to send automated reminders to Suppliers throughout the due diligence process.

KDP provided Suppliers with links to the RMI e-learning academy and other resources. Throughout the due diligence process, KDP also engaged in ongoing communication and provided support to its Suppliers to facilitate the completion of their CMRTs.

Suppliers and employees are encouraged to report any ethical concerns or violations by any KDP employee or agent acting on behalf of the supplier or KDP. Concerns or violations may be reported in the following ways:

• Call: 800-349-4248 (U.S. & Canada) or 001-888-243-8076 (Mexico).
• Mail: Attn: General Counsel | Keurig Dr Pepper | 5301 Legacy Drive | Plano, TX 75024.
• Web: www.integrity-helpline.com/kdp.jsp

KDP retains Conflict Minerals documentation materials for five years after receipt.

Step 2: Identify and Assess Risks in the Supply Chain:

As described above, as part of its due diligence process KDP identified in scope Suppliers and requested that the Suppliers submit a completed CMRT.

Via our software platform, KDP then reviewed Suppliers' completed CMRTs against a set of internally developed criteria for completeness and consistency.

For Suppliers that indicated in their responses that they or a supplier in their supply chain did use 3TG in their part(s) and/or product(s) during the Reporting Period and provided the applicable smelter or refiner information, the Company reconciled the reported SORs against the RMI Smelter Database, which contains RMAP SOR Conformance status. (Available to RMI members at http://www.responsiblemineralsinitiative.org/members/smelter-database/)

Step 3: Design and Implement a Strategy to Respond to Identified Risks:

Where SORs were reported that are not RMAP-Conformant or Active (engaged in the RMAP program but not yet audited), KDP sent a notice via the platform asking applicable Suppliers to either work with their supply-chain to request the smelter to participate in the RMAP audit program, and/or work to transition away from the smelter, depending on level of identified risk. There were also instances where inaccurate or outdated SOR information was reported to us, for example: smelters no longer in operation, or entities that could not be identified as known SORs. In these cases, we sent a notification to Suppliers asking them to work with their supply chain to obtain accurate smelter information. Our smelter action requests specified that we expect to see continuous improvement year over year in the reported smelter information.

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In addition to the above, we also review our Suppliers' CMRTs for due diligence activities, such as whether they have their own Conflict Minerals Policy. See the Due Diligence Results section below where we report on the number of Suppliers who provided a policy that indicates a commitment to reasonably ensuring that only conflict-freematerials and components are used in products/parts that are sold to KDP.

Further, several Suppliers indicated in their responses that they have not received complete information from their suppliers. When this happened, we requested that they work to improve their response rate.

Lastly, recognizing that the complexity of this issue requires a collaborative and cross-industry approach, we actively participate in the RMI's China Smelter Engagement Team (the "China SET"). China SET's purpose is to conduct coordinated outreach to SORs to encourage them to participate in RMAP or other equivalent third-party validation schemes. As a member of China SET, we work as the Single Point of Contact for three smelters to facilitate their engagement with RMI, including to communicate RMAP requirements to them, and to encourage them to maintain their status on the Conformant Smelter List.

Step 4: Carry Out Independent Third-Party Audit of Smelters' and Refiners' Due Diligence Practices

As a member of the RMI, KDP leverages information from the independent third party audits of the SORs facilitated by initiatives such as the RMI's RMAP and the London Bullion Market Association (LBMA), or Responsible Jewelry Council (RJC).

Step 5: Report Annually on Supply Chain Due Diligence:

As discussed above, KDP is reporting on supply chain due diligence by publishing a Conflict Minerals Report for the Reporting Period on KDP's corporate website (https://www.keurigdrpepper.com/en/our-company/ethics-and- compliance).

Due Diligence Results

Many of our Supplier responses represented their supply chain at a company level rather than being product specific. Therefore, the list of SORs contained in this Report may contain more SORs than those that actually process the conflict minerals contained in our products.

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The total number of unique entities reported as SORs by the KDP supply base as a result of the 2020 survey was 357. Of these:

• 287 have been confirmed as being Eligible SORs by the RMI
• 69 were known to not be Eligible SORs, and
• 1 reported entities' status could not be confirmed as of our cutoff date of April 23, 2021. This is compared to 4 entities in the prior year.

Of the 287 Eligible SORs reported by KDP Suppliers (for detail by mineral, please refer to Figure 1, below):

• 228, or 80% had been validated by the RMI RMAP program as Conformant to an RMI recognized audit protocol (RMAP, LBMA, or RJC).
• 16 were in process or communication with RMAP, but had not achieved Conformant status as of April 23, 2021.
• The remaining 43 have not been validated by the RMAP program as Conformant.

A list of all 228 of the Eligible SORs identified during the due diligence process is included in Annex Ito this Report.

Figure 1: Conformance Status of Eligible SORs Reported by KDP Suppliers:

The 69 entities reported by our Suppliers that are not currently considered Eligible SORs fell into two categories:

• 6 companies that had been reclassified by RMI due to better understanding of their business (group company or did not meet the definition of a smelter), and
• 63 Eligible SORs that had either temporarily or permanently suspended operations.

We also requested Suppliers provide a policy indicating their commitment to reasonably ensuring that only conflict free materials and components are used in products/parts sold to KDP. 80% of Suppliers provided a policy that meets this criterion, up from 58% in the prior year.

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