3M Company (MMM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the 2021 Annual Shareholder Meeting of 3M Company. Now I will turn the meeting over to Mr. Bruce Jermeland of 3M.

Thank you. Good morning, everyone. Welcome to the 2021 Annual Shareholder Meeting of 3M Company, I am Bruce Jermeland, Senior Vice President of Investor Relations. With me today are Mike Roman, 3M's Chairman of the Board and Chief Executive Officer; and Ivan Fong, our General Counsel and Corporate Secretary. Let me begin with a few opening remarks, and then I will turn the meeting over to Mike. First, the polls are now open. Although we do not expect any technical difficulties today, in the unlikely event we lose audio or webcast connection, please stand by and allow us time to resolve the issue and resume the meeting or otherwise provide an update about the meeting. If a technical disruption prevents us from continuing the meeting, and the meeting is not adjourned, the polls will be closed immediately. In that situation, votes received prior to the time the polls were closed will be counted. The meeting will not be reconvened. In any event, the final results will be announced publicly later this week. Next, please note that during today's meeting, we will make certain predictive statements that reflect our current views about 3M's future performance and financial results. These statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Item 1A of our most recent Form 10-Q list the most important risk factors that could cause actual results to differ from our predictions. A note about forward-looking statements also appears in today's meeting agenda shown at the bottom right corner of the webcast screen. [Operator Instructions] Now let me introduce 3M's Chairman of the Board and Chief Executive Officer, Mike Roman, to begin the meeting. Mike?

Thank you, Bruce. Good morning, everyone, and welcome to 3M's annual meeting of shareholders. Ivan Fong, our Corporate Secretary, advises me that a quorum is present and that all shareholders of record have been sent a notice of this meeting. On the record date of March 16, 2021, there were approximately 579 million shares of common stock issued and outstanding, 82% are represented here today, present online or by proxy. Therefore, I call this meeting to order. As noted, the polls on all proposals set forth in our notice and proxy statement are open. To vote, click on the voting button on the bottom right-hand corner of the webcast screen. The polls will remain open until the conclusion of the matters to be voted on portion of this meeting. We have 6 business items on the agenda for today, which Ivan will conduct. Following the business items, I will make some brief remarks, then we will address shareholder questions and comments. It is now my privilege to introduce our Board of Directors. All 12 of them are attending today's meeting through this live webcast, including myself; Tony Brown, retired group Vice President, Global Purchasing, Ford Motor Company; Pam Craig, retired Chief Financial Officer, Accenture Plc; Dave Dillon, retired Chairman of the Board and Chief Executive Officer, The Kroger Company; Mike Eskew, retired Chairman of the Board and Chief Executive Officer, United Parcel Service; Jim Fitterling, Chairman of the Board and Chief Executive Officer, Dow and Corporate Credit; Herb Henkel, retired Chairman of the Board and Chief Executive Officer, Ingersoll Rand; Amy Hood, Executive Vice President and Chief Financial Officer, Microsoft Corporation; Muhtar Kent, retired Chairman of the Board and Chief Executive Officer, The Coca Cola Company; Dambisa Moyo, Founder and CEO, Maelstrom, LLC; Greg Page, retired Chairman of the Board and Chief Executive Officer, Cargill; and Pat Woertz, retired Chairman of the Board and Chief Executive Officer, ADM Company. Thank you, and I will now turn the program over to Ivan. Ivan?

Thank you, Mike. Good morning, everyone, and thank you for joining us. Before discussing the business items, please note that both the meeting agenda and the rules of conduct and procedures are posted at the bottom right-hand corner of the webcast screen under Material. The rules and procedures are summarized on the screen here. They help ensure that we have a fair and orderly meeting. As noted, the polls are now open. If you have not already voted your shares, including by submitting your proxy prior to the meeting, or if you wish to change your vote, you may do so by clicking on the voting button at the bottom right-hand corner of the webcast screen. The polls will remain open until the conclusion of the matters to be voted on portion of the meeting. Our Board appointed Broadridge Financial Solutions to act as the inspector of election to the meeting. PricewaterhouseCoopers, our independent auditors, are also attending today's meeting through this live webcast. We will now review the matters to be voted on. Under the company's bylaws, the only matters properly before our shareholders today are those set forth in the notice of annual meeting and proxy statement. As the agenda indicates, our Board of Directors is presenting 4 proposals and 2 shareholders are presenting 2 proposals, all of which are described in the proxy statement. No other items of business will be considered at the meeting. The first proposal is to elect 12 directors each for a 1-year term that expires at the 2022 annual meeting. The Board's nominees are: Tony Brown, Pam Craig, Dave Dillon, Mike Eskew, jim Fitterling, Herb Henkel, Amy Hood, Muhtar Kent, Dambisa Moyo, Greg Page, Mike Roman and Pat Woertz. All nominees are standing for reelection to the Board, except for Jim Fitterling, who joined our Board in February 2021 and is standing for election for the first time. The second proposal is to ratify the Audit Committee's appointment of PricewaterhouseCoopers as 3M's independent registered public accounting firm for 2021. The third proposal is to approve on an advisory basis our executive compensation as described in the proxy statement. The fourth proposal is to approve the amended and restated 3M Company 2016 long-term incentive plan as described in the proxy statement. The Board recommends a vote for each nominee and for each of these proposals. We will now consider the shareholder proposal on setting target amounts for CEO compensation. Justin Recla will represent the proponent and may make a brief 3-minute statement on the merits of the proposal. Mr. Recla?

Yes. My name is Justin Recla. I work at 3M's Cottage Grove plant in Minnesota as a pipe fitter in the plant engineering department. I repair, replace piping and view maintenance on these site utilities such as steam, water, chemical and solvent lines. I'm the President of the USW local 11-418. On behalf of the United State workers, I hereby move proposal #5, which asks our company to consider the pay grades and salary ranges for all 3M employees when setting target amounts for CEO compensation. The current system of determining compensation has led to glaring in equality between the executives and the essential workers. The company claims, we are essential workers, but the pay disparity shows that the production employees are treated as disposable workers. The 2020 annual total compensation for our CEO was $20,700,347 while our median employee made $67,109. The CEO and a median employee ratio was 308:1. To put that in perspective, the average S&P 500 company CEO-to-worker pay ratio was 264:1 in 2019, and ours was 319:1. Our company pulls meeting employees pay from full-time production employees in the Midwestern United States. From the 2019 to 2020 proxy statements, it would seem that the pay went up by 16.7%. But the reality that is my fellow essential workers at 3M's manufacturing facilities in the Minnesota were getting a wage increase of 2%. During the same period of time, our CEO's total compensation increased 13%. Investing employees beneficial for the company's long-term health, we all know that the knowledge, skill and experience and dedication of workforce are what drive production and innovation, narrowing pay disparity as the first step to improve human capital management that ensures ongoing shareholder value creation. I urge you to vote for proposal #5. Thank you.

Thank you for your views, Mr. Recla. The Board opposes your proposal for the reasons set forth in our proxy statement. The company uses global compensation practices to ensure a fair and reasonable employee compensation. We benchmark pay components to those of other premier companies and adjust them as necessary to attract, retain and motivate employees at all levels throughout the company. In 2020, our advisory say on pay proposal received 93% of votes cast by our shareholders in support of the compensation of our CEO and other named executive officers. Finally, the actions requested in the proposal to "consider the pay grades and salary ranges" of 97,000 employees when setting CEO compensation would impose significant implementation costs and burden company resources without discernible benefit. For these reasons, the Board recommends a vote against this proposal. We will now consider the shareholder proposal on transitioning the company to a public benefit corporation. Sarah Murphy will present the proposal and may make a brief 3-minute statement on the merits of the proposal. Ms. Murphy?

Yes. Can you hear me?

Yes.

Thank you. Shareholders request that our Board take the necessary steps to convert 3M to a public benefit corporation, given its adoption of the business roundtable statement on the purpose of a corporation, which commits 3M to deliver value for all stakeholders. Because 3M is a conventional Delaware corporation, our directors' fiduciary duties emphasize the company and its shareholders, but not stakeholders. Legally, directors may consider stakeholder interests. Only if any decisions made with respect to such stakeholders are in the best interests of the corporation and its stockholders. That contradicts the commitment our company made in this statement. Our Board claims that 3M already consider stakeholder interest in its business decisions, and thus needs no change in corporate form. But 3M's ongoing handling of the serious risks to human health in the environment that have arisen from the presence of toxic per and polyfluoroalkyl substances in its products indicates quite a different orientation of the Board's priorities. So too, does the disparity in employee compensation raised by the proponent -- too, does the disparity in employee compensation raised by the proponent of proposal 5. In contrast, directors of a public benefit corporation must balance the interest of shareholders, stakeholders and a specified benefit, giving legal status to the business roundtable statements otherwise empty promise. A recent study determined that listed companies create annual social and environmental costs of $2.2 trillion, equal to more than 2.5% of global GDP. To be clear, from the point of view of a diversified shareholder, these companies are only half as valuable as their income statements would indicate. These costs have many sources, including pollution, climate change and employee stress. That matters to 3M's shareholders, the majority of whom are beneficial owners with broadly diversified interests. Such shareholders and beneficial owners are unalterably harmed when companies follow Delaware's shareholder promising model and impose costs on the economy that lower GDP, which reduces equity value. In other words, while the 3M may increase its isolated return to shareholders by applying the company first shareholder primacy model and neglecting the costs that it externalizes, its diversified shareholders will ultimately pay these costs. As a public benefit corporation, 3M could prioritize reducing these costs. Shareholders are entitled to vote on a change that would serve their interests and ensure the commitment made to stakeholders is authentic and lasting. At the shareholder comments, we have deep experience in Benefit Corporation law, and we would be happy to help the Board to navigate 3M's conversion. Please vote for item 6.

Thank you for your views, Ms. Murphy. The Board opposes your proposal for the reasons set forth in our proxy statement. A basic principle of Delaware Corporation law is to allow a company to pursue its mission beyond mere shareholder interest, in a manner consistent with Delaware law. Guided by our corporate vision of advancing every company, enhancing every home and improving every life and in collaboration with our employees, customers, partners, governments and communities, we work every day striving to fulfill our commitment to the principles of the business roundtable statement on the purpose of a corporation. These principles are entirely consistent with our purpose-driven mission as we deliver value to our customers, invest in our employees, deal fairly and ethically with our suppliers, support the communities in which we work, and generate long-term value for our shareholders. Our actions show that we already take the interest of all our stakeholders into consideration in our long-term strategies and business operations. And our existing corporate governance structure under the General Corporation law of Delaware is well suited to advance those stakeholder interests. For these reasons, the Board recommends a vote against this proposal. This concludes the review of the matters to be voted on. I understand we have received a few questions specifically related to the proposals to be voted on. I will now turn it to Bruce to facilitate the proposal-specific questions.

Thank you, Ivan. Mike, we have a question from Mr. Tom Nicholson regarding director election. What qualifications does one need to be considered for a 3M Board of Directors position?

Thank you, Mr. Nicholson. As outlined in our 3M's corporate governance guidelines, we seek individuals with distinguished records of leadership and success, who will make substantial contribution to Board operations and effectively represent the interest of all shareholders. Our Board's Nominating and Governance Committee considers a wide range of factors and experiences, including expertise in key areas most critical to 3M's long-term success, such as leadership, manufacturing, supply chain, technology, finance, global experience, risk management and marketing. Our Board also regards diversity as an important factor in selecting Board nominees and actively considers diversity in recruitment and nomination to our Board. I'm pleased to say our nominees standing for election today are distinguished leaders who bring a mix of skills and qualifications to the Board and can represent the interest of all shareholders.

Thank you, Mike. Our next question is also regarding Director election and is from Ms. Sandra Sizer and Mr. Eric Beck. The question is in regards to the size of our Board, and why is it necessary to have a 12-member Board.

Thank you, Ms. Sizer and Mr. Beck. The number of Board members on the 3M Board is very comparable to other public company Boards. Our Board members discharge their fiduciary duties and provide risk and management oversight, both at the full Board level and also at the committee level. We currently have 4 standing committees, 3 of them, Audit, Compensation, and Nominating in Governance, are mandatory for regulatory requirements, and we have one additional committee, the Science, Technology and Sustainability Committee. Each committee has delegated with critical risk oversight responsibilities over important areas. We need an appropriate number of Board members to staff these important committees. Our Board's Nominating and Governance Committee regularly reviews the appropriate size of the Board and its committees. At this time, a 12-member Board is the right size for the company.

Thank you, Mike. We've now addressed questions related to the proposals to be voted on. Now I'm turning the meeting back over to Ivan.

Thank you, Bruce. As I noted earlier, if you've not already voted your shares, including by submitting your proxy prior to the meeting or if you wish to change your vote, you may do so by clicking on the vote-here button at the bottom right-hand corner of the webcast screen. The polls are now closed. I will now turn the meeting back to our Chairman.

Thank you, Ivan. I've been advised that the ballots have been counted and subject to a final tabulation, I can give you the preliminary results provided by the Inspector of Election. Our shareholders have elected all Board nominees for a 1-year term with at least 90% support. You have ratified PricewaterhouseCoopers as 3M's independent public accounting firm for 2021, with 94% support. You have approved the compensation of our executives with 90% support. You have approved the amended and restated 2016 long-term incentive plan with 89% support. And the shareholder proposal on setting CEO pay target was not approved with 11% support. The shareholder proposal on transitioning to a public benefit corporation was not approved with 3% support. The final voting results will become part of the record of the meeting and will be reported in a Form 8-K to be filed in connection with the matters voted upon at this meeting. All business items have been completed, and the meeting is now adjourned. Before Q&A, I will make some brief comments about 3M's 2020 performance and our priorities moving forward. I am proud of how 3M has stepped up to help meet the extraordinary challenges facing the world. Our response throughout COVID-19 has been shaped by 3 priorities: protecting the safety of our employees, fighting the pandemic from every angle, and delivering for our customers and shareholders. Last year, we made more respirators than ever before, while continuing to innovate for customers, invest for the future and advance our values. With respect to financial results, the impact of COVID-19 varied across 3M. Some areas of our portfolio, such as personal safety, biopharma filtration and semiconductor fabrication experienced high demand, while others, such as health care and oral care elective procedures and office supplies faced substantial declines. Company-wide organic growth declined 2% with adjusted earnings of $8.74 per share. We delivered strong free cash flow of $6.7 billion with a conversion rate of 132%, demonstrating our ability to perform across economic cycles. We posted a return on invested capital of 18% and expanded adjusted EBITDA margins to 27%. We returned $3.8 billion to our shareholders through dividends and share repurchases. And we've already increased our first quarter dividend in 2021, marking our 63rd straight year of increases. Beyond the numbers, 3M stepped up when we were needed the most. Last year, we produced and delivered 2 billion N-95 respirators globally with approximately half in the United States, to help protect nurses, doctors and first responders. We are now at an annual run rate of 2.5 billion respirators, a fourfold increase versus 2019. At the same time, we worked with government and retailers to aggressively fight fraud and abuse. Our biopharma filtration solutions helped enable the development of vaccines and therapeutics. Today, we continue to provide personal protective equipment and other solutions to help economies recover, schools reopen and businesses get employees back to work. As we thought COVID-19, we continue to serve customers across our industry-leading businesses while positioning 3M for long-term success. Last year, we invested $3.4 billion in the combination of research and development and CapEx. We also advanced our new global operating model which has helped us maintain business continuity and respond to the pandemic with agility. At the center of 3M's 2020 performance was our people, and I thank our entire team for their tremendous contributions. 3M is well positioned to build on our progress and deliver a successful 2021. Our first quarter performance was strong with broad-based organic growth of 8%, robust cash flow and a double-digit increase in earnings per share. We are confident in our business as we navigate COVID-19 uncertainty, and we'll continue to prioritize investments in growth, productivity and sustainability. The pandemic is rapidly changing the global economy, creating opportunities for 3M science to drive growth. We are increasing investments to capitalize on favorable market trends. Such as health care, electronics, home improvement and personal safety. We are accelerating our digital capabilities to better serve customers while strengthening our commitment to the values that are core to 3M. We are enhancing our leadership in sustainability with new goals to bend the curves on carbon emissions, water use and improving water quality. 3M plans to become carbon neutral by 2050, with a 50% reduction in emissions by 2030, and we expect to reduce water use by 25% over the next decade. This week, we are releasing 3M sustainability report with more details on our actions. We are also implementing an ambitious plan to advance diversity, equity and inclusion. We launched new STEM education programs to strengthen opportunities for people of color, with initial efforts focused in the twin cities. We've also established new goals to support underrepresented groups at 3M, building on recent progress. At 3M, we are guided by a common purpose, which is applying science to improve lives. Every day, we are making a difference around the world. And our deep competitive advantages, namely, unique technology platforms, advanced manufacturing, global capabilities and leading brands position us to win into the future. Moving forward, we will stay relentlessly focused on building an even stronger 3M and delivering extraordinary value for our stakeholders, including you, our shareholders. That wraps up my remarks, and I will now turn it over to Bruce to facilitate the Q&A.

Thank you, Mike. We will now address shareholder questions and comments received in advance of the meeting and during the meeting. As noted in our procedural rules where we've received multiple questions on the same topic, we've grouped them together and provided one answer. Mike, our first question comes from a shareholder regarding revenue growth. What is the plan for the company to improve its long-term revenue growth?

As I mentioned earlier, our top investment priorities are R&D and CapEx to drive long-term organic growth. We have been aggressively prioritizing these investments throughout the pandemic, and we'll accelerate our efforts through 2021 and beyond. We plan to increase investments in areas with strong growth opportunities, such as personal safety, home improvement and health care, with a continued emphasis on our priority growth platforms. The pandemic also created a rapid movement to an even more digital-first world. This opens additional opportunities for 3M, such as enabling semiconductor fabrication and leveraging e-commerce, data and digital technologies to better serve our customers. We also continue to advance priority growth platforms, which grew 7% organically in 2020 and 10% in Q1 of 2021. This includes new fill treat room air purifiers to improve indoor air quality, along with biopharma filtration solutions for COVID vaccines and therapeutics, and automotive electrification. For example, we have introduced new battery cushioning solutions to improve the performance of electric car batteries. Ultimately, we have opportunities to drive sustainable long-term growth. And are prioritizing investments that our teams have the resources to capitalize on these growth opportunities.

Thank you, Mike. Our next question, we have several questions regarding capital allocation, including from Mr. Stuart Elafant, Mr. Christopher Castello and Mr. James Ek. When should 3M scale back on R&D and position its cash to acquire established companies who are launching new-to-the-world products and technologies? Will the company increase dividends anytime soon? Is the dividend safe? How committed it is management to dividend growth? And what does the company's crystal ball indicate for acquisitions, mergers, divestments in the upcoming year?

Well, first, the strength of the 3M business model enables the company to generate strong cash flow to invest in our business, return cash to shareholders, pursue strategic opportunities to augment our organic growth strategies, and, well, maintaining a strong capital structure. Relative to capital allocation, our first priority remains investing organically in the business, including, as I mentioned, R&D and CapEx, particularly taking advantage of new opportunities emerging from the pandemic, along with our priority growth platforms. Our second priority is the dividend. Paying dividends is and always has been a high priority for 3M. In February, we announced our 63rd consecutive year of increases. Regarding M&A, our strategy is focused on finding good businesses that can benefit from being part of 3M, leveraging our fundamental strengths in innovation, manufacturing, global presence and brand to create even greater value. While we continue to have an active pipeline, we currently do not anticipate any sizable acquisitions over the near term. And finally, on the divestiture front, we continually assess our business portfolio to determine whether we are creating the greatest value for our customers and shareholders. If not, as we have done, we will take action, as we did with the divestiture of the majority of our drug delivery business in May of last year.

Thank you, Mike. We have a question from Mr. Neil Mason regarding the Acelity acquisition. Is the Board satisfied with the Acelity acquisition, its integration and future EPS prospects that Acelity can contribute?

Acelity has been a great fit within our health care portfolio, complementing our existing wound care business and further accelerating 3M as a leader in Advanced Wound Care, which is a significant in growing market. There are a number of reasons why Acelity is a good fit for 3M, including it is in a large growing space due to health care trends and demographics. It provides us a more meaningful and differentiated relevance to health care providers. It provides 3M access to the post-acute space, which is a growing area, something accelerated by COVID-19. And our 3M capabilities will help create significant synergies in the integrated business. Last year and through Q1, Acelity's revenue was down. This is in line with our Medical Solutions business as both were impacted by the pandemic and the reduction in elective procedures year-on-year. Overall, I'm pleased with how the business has performed since we've acquired it.

Our next question is from Mr. David Ddos and it reads in regards to Director compensation. Why do we give shares to our directors?

We have 3 principles that guide our Board compensation decisions: First, pay directors fairly for 3M Board work and contributions; second, have a simple and transparent compensation structure; and third, have a compensation structure where a significant portion, more than 50% of director compensation is paid in stock. It is important that our directors' compensation is strongly aligned with the long-term interest of our shareholders. In addition to this, a majority of their compensation being paid in stock, our Board members are restricted from selling stock compensation until after they leave the 3M Board. This is competitive with peer companies and validated by independent consultants.

Mike, our next question comes from several shareholders and it's in regards to Board diversity. How will 3M ensure diversity on its Board? What specific steps are you taking to have the 3M Board better reflect the U.S. population? Will you be adding more women to your Board?

Thank you for the question. Diversity is a core value for the company. For 3M, being a global company, diversity and inclusion is also fundamental to our innovation and performance. It is something that is vitally important to our stakeholders. It is also an important factor in selecting Board nominees to serve on the Board. When selecting nominees, we actively consider diversity and recruitment and nomination of directors, such as backgrounds, experiences, skills, along with gender, race, ethnicity, sexual orientation and national origin. We continue to work to identify diverse nominees, including women who currently make up 1/3 of our Board.

Thank you, Mike. We got several questions regarding respirator demand and production, including from Mr. David Bateman, Mr. Dave Amar, Mr. Larry Martin and Ms. Laura Harris. The questions include, when are you going to produce enough N-95 masks? Why don't you make enough masks? Why can't -- why can we not produce N-95 in other medical supplies here in the U.S.A.? Has 3M thought of bringing respirator manufacturing back to the U.S.?

Thank you. The answers to these questions have been a vital part of 3M's response to COVID-19. We continue to fight the pandemic from every angle to ensure the safety of our employees, health care workers, first responders and the public. We are producing more respirators than ever, 2 billion last year, with approximately half distributed in the United States, primarily to health care workers and FEMA. We distributed 630 million respirators in Q1 of this year and have a global run rate of 2.5 billion annually produced, a fourfold increase versus 2019. Consistent with our global business model, we manufacture across the globe. This is also true with respirators. Regarding production in the United States, we produced roughly half of all our products in the U.S., including respirators. We continue to collaborate with governments around the world through public-private partnerships to help address not only their current respirator demand but also stockpiling for future pandemic readiness. Over time, how much of the product goes to health care, industrial and consumer end markets will ultimately depend on how COVID evolves, the success of vaccine deployment and adoption and long-term consumer behavior. Thank you.

Thank you, Mike. Our next -- we got several questions regarding our supply chain strategy, including from Mr. James Ryan, Mr. Larry Holtzman and Mr. James Daley. How is 3M managing its global supply chain, particularly in the face of potential geopolitical risks related to countries such as China?

This question focuses on one of our fundamental strengths, our manufacturing and distribution supply chain strategy. An important part of our model is building our capabilities close to customers and markets, either in country or the region to serve them the best we can. That strategy has served us well over time, particularly important in uncertain times such as over the past year as we rapidly responded to the impact of the pandemic to supply respirators to frontline health care workers and first responders, along with other markets and customers around the world. The U.S. is where we have our greatest capability, including more than half of our global manufacturing capacity. We are an exporter of approximately $5 billion in revenue to the rest of the world from the U.S. relative to China, the second largest economy in the world, we entered in 1984 to serve local customers, not to export. In fact, more than 90% of our revenue in China is to customers located in China. For 3M, we don't anticipate much change in how we operate around the world. We invest close to markets and customers. We're prepared to adjust as appropriate over time to better serve those customers.

Thank you, Mike. Our next question is from several shareholders that are asking about our pension. Will retirees get an increase in pension payouts?

Well, first, I would like to thank all of our retirees. We are a great company today due to the leadership, contributions and hard work of the many people who have worked at 3M throughout our history. Overall, our global pension plans continue to be well funded. Over the last 5 years, 3M has contributed more than $2 billion to pension funds globally. We continue to prudently manage our global retirement obligations. We're not planning any discretionary pension increases at this time.

Thanks, Mike. We received several questions from shareholders, including from Mr. Joseph Nuscale, Mr. David Potts, Ms. Elizabeth Ellis on the topic of PFAS. What steps are you taking to mitigate the backlog of ever-growing list of lawsuits related to the PFAS contamination issues? Do you have an idea of 3M's liability from PFOS and PFOA contamination of groundwater? What is 3M doing to clean these chemicals from the environment and to ensure 3M never again produces products that create long-live hazards to humans, water and air quality and the food web?

Thank you for raising this topic. This is an ongoing and important discussion with all of our stakeholders. First, as a reminder, we are proactively managing PFAS, guided by 3 principles: sound science, corporate responsibility and providing transparency. We continue to work with the EPA and other state authorities to fulfill our ongoing commitment to compliance and environmental stewardship in our manufacturing operations. We support regulation rooted in sound science and believe appropriate federal regulation will help prevent a patchwork of state standards that could increase confusion and uncertainty for communities. We remain committed to sustainability which includes using science to proactively manage PFAS and to enable success in our ongoing work with communities and governments to advance our environmental stewardship. Sustainability is also embedded in our R&D process, our brands and our partnerships with suppliers and customers. As we said, our PFAS litigation includes different kinds of cases based on different theories, including cases stemming from 3M's historical manufacturing and disposal of PFAS in a limited number of locations and what we've previously referred to as product cases, which typically stem from other manufacturers allegedly using PFAS in their own products and the use of aqueous film forming foam. The claims across these cases vary, and they include allegations of environmental or natural resource harm, personal injury, property damage, and other alleged damages. From a potential liability perspective, we work closely with our auditors and other advisers, and we accrue for the liability, which, in our estimation, is both probable and reasonably estimable. We also provide disclosure about the nature and status of the PFAS-related litigations in our SEC filings. As we've also said, we continually monitor and assess the litigations. And we'll come back to you as the cases continue and as we learn information that may impact our estimation of whether any additional liability is both probable and reasonably estimable. It is important to note that no PFAS-related case has yet resulted in an adverse verdict or judgment against 3M. We will continue to engage in these cases, reevaluate them as they continue to be mediated and litigated, and update you as appropriate. We expect this process will play out over the next number of years as we continue to defend the claims and engage in resolution discussions.

Thank you, Mike. Our next question is in regards to 3M's environmental impact. And it comes from Ms. Marketta Anderson, Ms. Pamela Eternal, Mr. Steve Japs and Mr. Marcos Garcia Costa. What is your company doing to address climate impact? What steps is 3M taking to achieve compliance with the Paris accords, eliminate CO2 emissions? When can we expect 3M to be carbon-neutral? And what are your plans to reduce the use of plastics?

We are a purpose-driven enterprise, applying science to improve lives, including advancing sustainability as we serve our markets, customers and the communities in which we operate. Over the last 2 decades, 3M has reduced emissions by 70% while doubling revenues. Our headquarters is fully powered by renewable electricity, and 40% of 3M's global electricity use is now renewable, on our way to 100%. As you may have seen, in February, we announced expanded sustainability goals. We plan to commit approximately $1 billion over the next 20 years through both capital and operating investments to make our operations more efficient and effective with a focus on air, water and waste. First, we are committing to become carbon-neutral across our global operations. We expect to rapidly bend our curve of emissions. A 50% reduction by 2030, 80% by 2040 and 100% by 2050. Second, 3M plans to reduce water at our facilities by 25% over the next decade, 10% by 2022, 20% by 2025. Third, at our largest locations, we are taking action, installing advanced filtration technology that will return an even higher quality water to the environment after its use in our operations. These goals are driven by science and a clearly defined path. In April, we also committed to reduce our use of new plastic made from petroleum by 125 million pounds by 2025 through new packaging and innovative product design in our consumer business. We recognize the urgency of the world's climate and environmental challenges and are focused on making a difference both today and for future generations. I encourage you to read our 2021 sustainability report released this week for more details on our progress and priorities.

Thank you, Mike. Our next question is from Ms. Elizabeth Ellis, and it's in regards to sustainable products. How does 3M implement sustainability policies when deciding which products to create and market?

At 3M, we believe innovation isn't innovation without advancements in sustainability. We look for every opportunity to use our innovation to solve both business and societal challenges. As I mentioned earlier, sustainability is embedded into our R&D process, our brands and our partnerships with suppliers and customers. Our sustainability value commitment stands behind our requirement that every new product demonstrate how it will drive positive societal impact. For example, we are making products with post-consumer recycled content and leading plant-based material innovation in iconic everyday products like scotch tape, posted notes and scotch-brite sponges. In automobiles, our materials for assembly and relate weighting, like glass bubbles, are powering the next generation of vehicles and battery technologies, helping shed pounds per vehicle and enabling better overall fuel economy and battery range. And lastly, our films, tapes and adhesive technologies help solar panels capture more light, increasing efficiency and help protect wind turbine blades against weathering and harsh environments, ultimately enhancing their reliability, extending life and improving performance. These are all great examples of our innovation helps our customers operate more sustainably, too.

Thank you, Mike. And our last question, several regarding our approach to political donations, including from Ms. Sally Chapman, Mr. David WoodRuf and Ms. Theresa Ororc. Does 3M have an update to its approach to political contributions following its announcement in the first quarter?

This question is top of mind for our company leadership and our Board of Directors, and it's something we have discussed with the Board. We paused all political contributions in the first quarter, and they remain paused while we review how and when to resume our activities. More information about our political activities, governance and principles can be found in the governance section of the 3M Investor Relations website and in our proxy on Page 32. Thank you.

That concludes the question-and-answer portion of our meeting and today's webcast thank you very much, everyone, for joining us, and have a good day.

Thank you, ladies and gentlemen. This concludes the 2021 Annual Shareholder Meeting of 3M Company. Goodbye.