Tennant (TNC) SDConflict minerals disclosure

Tennant Company

Conflict Minerals Report

For the Year Ended December 31, 2023

Introduction

This report for the year ended December 31, 2023 is presented to comply with Rule 13p-1 under the Securities Exchange Act of 1934, as amended (the “Rule”). The Rule was adopted by the Securities and Exchange Commission (“SEC”) to implement reporting and disclosure requirements related to conflict minerals as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). The Rule imposes certain reporting obligations on SEC registrants whose manufactured products contain conflict minerals that are necessary to the functionality or production of their products. Conflict minerals are defined as cassiterite, columbite-tantalite, gold, wolframite or their derivatives, which are limited to tin, tantalum and tungsten (together with gold, “3TG”). These requirements apply to registrants whatever the geographic origin of the 3TG and whether they fund armed conflict.

Company Overview

This report has been prepared by management of Tennant Company, a Minnesota corporation (herein referred to as “Tennant,” the “Company,” “we,” “us” or “our”). The information includes the activities of all subsidiaries that are required to be consolidated.

The Company offers products and solutions consisting of manual and mechanized cleaning equipment for both industrial and commercial use, detergent-free and other sustainable cleaning technologies, aftermarket parts and consumables, equipment maintenance and repair services, and business solutions such as financing, rental and leasing programs, and machine-to-machine asset management solutions. The Company is committed to developing cleaning technologies, including autonomous solutions, which increase cleaning productivity. We have strong brand presence in the global markets we serve, offering both premium and mid-tier products for each region to meet customer needs.

The Company's products are used in many types of environments including: factories and warehouses, distribution centers, office buildings, public venues such as arenas and stadiums, office buildings, schools and universities, hospitals and clinics, and more. The Company markets its offerings under the following brands: Tennant®, Nobles®, Alfa Uma Empresa Tennant™, IPC, Gaomei and Rongen brands as well as private label brands. The Company has a portfolio of differentiated technology solutions that includes IRIS® as an asset management solution, ec-H2O NanoClean® as a detergent-free cleaning solution, and ReadySpace® as a rapid-drying carpet cleaning technology. The Company's more than 40,000 customers include contract cleaners to whom organizations outsource facilities maintenance, as well as businesses that perform facilities maintenance themselves. The Company reaches these customers through the industry's largest direct sales and service organization and through a strong and well-supported network of authorized distributors worldwide.

Because of our size, the complexity of our products and the dynamic depth and breadth of our supply chain, it is difficult to identify companies upstream from our direct suppliers. Accordingly, we participate in several industry-wide initiatives, as described below.

In accordance with the Organization for Economic Co-operation and Development (“OECD”) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, Second Edition, and the related Supplements on Tin, Tantalum and Tungsten and on Gold (“OECD Guidance”) and the Rule, this report is available on our website https://investors.tennantco.com/overview/default.aspx under SEC Filings.

Tennant’s Conflict Minerals Policy is located in the Sustainability section of our website https://www.tennantco.com/en_us/about-us/sustainability.html.

Reasonable Country of Origin Inquiry

To determine whether the Company’s products contained 3TG that originated in the Democratic Republic of the Congo or an adjoining country, Tennant retained Assent Inc. (“Assent”), a third-party service provider, to assist us in reviewing the supply chain and identifying risks. The Company provided to Assent a list of potential 3TG suppliers and parts associated with the products covered by the Rule for upload to the Assent Compliance Manager (the “ACM”).  

To trace materials and demonstrate transparency procured by the supply chain, Tennant utilized the Conflict Minerals Reporting Template (“CMRT”) Version 6.31 or higher to conduct a survey of all in-scope suppliers. Assent sent to the Company’s suppliers the CMRT and requested that each supplier upload to its platform a completed copy of the CMRT.

The Company’s program continues to include automated data validation on all submitted CMRTs. The goal of data validation is to increase the accuracy of submissions and identify any contradictory answers in the CMRTs. This data validation is based on questions within the declaration tab of the CMRTs, which helps identify areas that require further classification or risk assessment, as well as understand the due diligence efforts of direct suppliers. The results of this data validation contribute to the program’s health assessment and are shared with the suppliers to ensure they understand areas that require clarification or improvement. Since some suppliers may remain unresponsive to feedback, the Company tracks program gaps to account for future improvement opportunities.  

Due Diligence

Tennant designed its due diligence measures to conform, in all material respects, with the framework in the OECD Guidance and the related supplements. These measures align with the five steps for due diligence that are described by the OECD Guidance, and the Company continues to evaluate market expectations for data collection and reporting to achieve continuous improvement opportunities. 

Due diligence requires the Company’s necessary reliance on data provided by direct suppliers and third-party audit programs. There is a risk of incomplete or inaccurate data as the process cannot be fully owned by the Company. However, through active risk identification and risk assessment, as well as continued outreach and process validation, risk gaps can be mitigated. This aligns with industry standards and market expectations for downstream companies’ due diligence.

Tennant has established a management system for 3TG. Our management system includes an Oversight Committee sponsored by the General Counsel, as well as management-level representatives. This group meets as needed to gauge progress, approve extraordinary spending and to coordinate communication to the Audit Committee of our Board of Directors (as applicable). Additionally, a Core Team consisting of subject matter experts, as required, meets to execute our Conflict Minerals Program. The Core Team is led by the Product Regulatory Department, which is part of the Legal Department.

The Company expects all suppliers to have policies and procedures in place to ensure that 3TG used in the production of the products sold to Tennant are “conflict free or responsibly sourced.” This means that the products should not contain minerals (3TG) sourced from areas that have been identified to be in the presence of widespread human rights abuses and violations of law either directly or indirectly. The Company expects direct suppliers to provide information on the origin of the 3TG contained in components and materials supplied, including sources of 3TG that is supplied to them from indirect suppliers.

Additionally, we are a member of the Responsible Minerals Initiative (“RMI”) and, as a result, we have up-to-date information and access to developments in industry-wide initiatives.

Tennant has a strong relationship with its direct suppliers. As an extremely important part of the supply chain, Tennant has leveraged processes and educational opportunities in order to ensure non-English speaking suppliers have access to a free platform to upload their CMRTs, help desk support, and other multilingual resources. Tennant's suppliers are able to leverage Assent’s team of supplier support specialists to ensure they receive appropriate support and understand how to properly complete a CMRT. Suppliers are provided guidance in their native language, if needed. 

The Company believes that the combination of the Supplier Code of Conduct, Conflict Minerals Policy, and direct engagement with suppliers for conflict minerals training and support constitute a strong supplier engagement program.

We have internal reporting options, and a third-party administered Ethics Hotline whereby employees, suppliers, and other stakeholders can report alleged violations of our policies. Anonymous reporting is available, where allowed by law.

Violations or grievances at the industry level can be reported to RMI directly as well. This can be done at http://www.responsiblemineralsinitiative.org/responsible-minerals-assurance-process/grievance-mechanism/.

Tennant has a document retention schedule, and the records generated because of the Conflict Minerals Program will adhere to applicable standards.

Risks associated with direct suppliers’ due diligence processes are assessed by their declaration responses on a CMRT, which the ACM identifies automatically based on established criteria. These risks are addressed by Assent staff and members of the Company’s internal Conflict Minerals Team, who engage with suppliers to gather pertinent data and ask for corrective actions if needed, performing an overall assessment of the supplier’s conformity status, which is referred to as “conflict minerals status.”

Risks at the supplier level may include non-responsive suppliers or incomplete CMRTs. In cases where a company-level CMRT is submitted, Tennant is unable to determine if all the specified smelters/refiners were used for 3TG in the products supplied to the Company. 

Risks were identified by assessing the due diligence practices and status of smelters/refiners identified in the supply chain by upstream suppliers that listed mineral processing facilities on their CMRT declarations. These lists were compared to the list of smelters/refiners consolidated by the RMI to ensure that the facilities met the recognized definition of a 3TG processing facility that was operational during the 2023 calendar year.

Via the ACM, we determined if the smelter/refiner had been audited against a standard conformant with the OECD Guidance, such as the Responsible Minerals Assurance Process (“RMAP”). Tennant does not have a direct relationship with smelters/refiners and does not perform direct audits of these entities within their pre-supply chain. Smelters/refiners that are conformant to RMAP audit standards are considered to have their sourcing validated as “conflict free or responsibly sourced.” In cases where the smelter/refiner’s due diligence practices have not been audited against the RMAP standard or they are considered non-conformant by RMAP, further due diligence steps are followed to notify suppliers reporting these facilities. Smelters/refiners are actively monitored to proactively identify other risks pertaining to conflict minerals.

Each facility that meets the definition of a smelter or refiner of a 3TG mineral is assessed according to red-flag indicators defined in the OECD Guidance. Numerous factors were used to determine the level of risk that each smelter/refiner poses to the supply chain by identifying red flags. These factors include:

Risk mitigation activities are initiated whenever a supplier’s CMRT reports facilities of concern. Through Assent, suppliers with submissions that included any smelters/refiners of concern were immediately provided with feedback instructing them to take their own independent risk mitigation actions. Examples include the submission of a product-specific CMRT to better identify the connection to products that they supply to Tennant. Suppliers are given clear performance objectives within reasonable timeframes with the goal of progressive elimination of these smelters/refiners of concern from the supply chain.  

In addition, suppliers are guided to the educational materials on mitigating the risks identified through the data collection process.

Suppliers are also evaluated on program strength, which assists in making key risk mitigation decisions as the program progresses. The criteria used to evaluate the strength of the program is based on certain questions in the CMRT related to the suppliers’ conflict minerals practices and policies.

Together with Assent, Tennant developed processes to assess and respond to the risks identified in the supply chain. Tennant has a risk management plan, through which the Conflict Minerals program is implemented, managed and monitored. As the program progresses, escalations are sent to non-responsive suppliers to outline the importance of a response via CMRTs and to outline the required cooperation for compliance to the conflict minerals rules and Tennant’s expectations.

Feedback on supplier submissions is given directly to suppliers and educational resources are provided to assist suppliers in corrective action methods or to improve their internal programs. Tennant engages suppliers believed to be supplying 3TG from sources that may support conflict in the countries to establish an alternative source of 3TG that does not support such conflict, as provided in the OECD Guidance. Assent also communicates directly with smelters/refiners that have not yet been determined to be conformant with the RMAP in order to request sourcing information and encourage their involvement with the RMI program. Tennant is a signatory of this communication in accordance with the requirements of downstream companies detailed in the OECD Guidance.

Tennant does not typically have a direct relationship with 3TG smelters/refiners and does not perform or direct audits of these entities within our supply chain. As described above, we participate in, or have direct visibility to the several industry-wide initiatives to disclose upstream companies in the supply chain.

We rely on third-party audits of smelters/refiners conducted as part of the RMAP. The RMAP uses independent private-sector auditors, and audits the source, including the mines of origin, and the chain of custody of the conflict minerals used by smelters/refiners that agree to participate in the program. Through Tennant’s membership with the RMI, smelters/refiners have been encouraged to participate in the RMAP.

We prepared this Conflict Minerals Report as Exhibit 1.01 to our Form SD.

Due Diligence Results

Supply chain outreach is required to identify the upstream sources of origin of 3TG. Following the industry standard process, CMRTs are sent to and requested from direct suppliers, who are expected to follow this process until the smelter/refiner sources are identified. The following is the result of the outreach conducted by Tennant for the 2023 reporting year.

Appendix A includes all smelters/refiners that suppliers listed in completed CMRTs that met the recognized definition of a 3TG processing facility and were operational during the 2023 calendar year. As is a common practice when requests are sent upstream in the supply chain, those who purchase materials from smelters/refiners may not be able to discern exactly which company’s product lines the materials may end up in. As a result, those providing the smelters/refiners have the practice to list all smelters/refiners they may purchase from within the reporting period. Therefore, the smelters/refiners (as sources) listed in Appendix A are likely to be more comprehensive than the list of smelters/refiners which processed the 3TG contained in Tennant’s products.

Suppliers that identified these specific smelters/refiners of concern on their CMRT were contacted in accordance with the OECD Guidance, as stipulated in the previous sections.

As part of our review, we noted that certain of our suppliers reported the presence of an entity, African Gold Refinery, that was sanctioned by the United States Department of Treasury, Office of Foreign Assets Control. As noted above, because the list of smelters/refiners on Appendix A likely includes facilities that have not actually processed the 3TG contained in Tennant’s products due to the CMRT information collection process, and the general nature of the supply chains and goods, we are unable to confirm whether this, or any, smelter or refiner is or was active in our supply chain. Tennant expects all of its suppliers to comply with sanctions law and is following-up with the suppliers that reported this refinery to have it removed from their supply chain.

Appendix B includes an aggregated list of countries of origin from which the reported facilities collectively source 3TG, based on reasonable identification of country of origin data obtained via Assent’s supply chain database (or other RCOI data, in the scenario that Tennant decides to use alternative data sources). As mentioned in the above section, it is understood that overreporting might occur which could result in Appendix B having more countries than those strictly relevant to the Company’s products.

Appendix A: Smelter/Refiner List