3M to Cease Production and Utilization of 'Forever Chemicals'

Shares of 3M Company (MMM) have decreased by 0.34%.

The manufacturing conglomerate announced that it would cease production of chemicals known as "forever chemicals" and work to eliminate their use in all of its products by the end of 2025.

PFAS, also known as "forever chemicals", are compounds that are highly resistant to heat and can repel water, grease, and stains. These substances take a long time to break down in the environment, making them highly sought after by manufacturers.

In recent years, the Environmental Protection Agency has found a correlation between exposure to certain chemicals and health issues such as kidney and testicular cancers, thyroid disease, and high cholesterol. As a result, regulators and environmental organizations have taken action against these chemicals, and thousands of lawsuits have been filed against 3M and other manufacturers for alleged contamination and illness.

3M announced that they are taking action due to the increasing attention from regulators to remove certain chemicals and the shift in expectations from stakeholders.

Mike Roman, the CEO of 3M, declared that although PFAS can be produced and utilized safely, they also have the chance to take the lead in a quickly changing external regulatory and business environment to have the most significant effect on those they serve.

In the early 2000s, 3M ceased production of certain PFAS chemicals, yet still manufactures other varieties. On Tuesday, the company estimated that their yearly sales of PFAS-related products amount to around $1.3 billion. 3M has declared that they will discontinue the production of all fluoropolymers, fluorinated fluids, and PFAS-based additive products by the end of 2025.

The business announced that it will no longer utilize PFAS in its products by 2025, noting that it has already decreased its use of the substances in the last three years.

At midday, 3M's shares had dropped by approximately 0.7%. This year, the company's stock has dropped by 32%, which is more than the 21% decrease in the S&P 500 stock index.

PFAS are a type of synthetic compound that can be found in a variety of everyday items, such as food-packaging materials, personal-care products, cleaning products, nonstick cookware, and other household products. Unfortunately, these compounds have been detected in drinking water sources, including municipal systems and private wells, as well as in rainwater around the globe.

The Environmental Protection Agency (EPA) has estimated that there are around 600 PFAS chemicals in use for commercial purposes. The American Chemistry Council, which is a representative of chemical manufacturers, has stated that these chemicals are necessary for the production of items such as cellphones, semiconductors, and medical devices.

Environmental groups that have been warning about the presence of PFAS in drinking water and consumer products celebrated 3M's decision to leave the industry.

Scott Faber, the senior vice president of government affairs at the Environmental Working Group, expressed his opinion that 3M will not be completely held responsible for the chemicals they produced. However, he noted that their decision to leave the market has sent a strong message to other polluters that it is not financially feasible to contaminate the environment.

RBC Capital Markets conducted research which revealed that 3M's net sales of PFAS chemicals account for approximately 4% of the company's total annual sales. The analysts at RBC commented in a note to investors on Tuesday that this is a positive move for 3M in light of the regulatory attention that PFAS chemicals have been receiving.

3M has announced that it will be exiting the business of manufacturing chemicals, and that it anticipates incurring pretax charges of between $1.3 billion and $2.3 billion, with a charge of $700 million to $1 billion in the current quarter. The company, based in St. Paul, Minnesota, has stated that it will honor all current contractual obligations during the transition period.

In August, the Environmental Protection Agency (EPA) proposed to classify two types of PFAS chemicals as hazardous substances under the Superfund law. This decision was met with opposition from the American Chemistry Council and companies such as 3M, who argued that the EPA's decision was not based on the most up-to-date scientific evidence and would not expedite the process of cleaning up contaminated sites.

Industry experts have predicted that the expenses associated with plant clean-up will go up as the Environmental Protection Agency (EPA) has the authority to set the terms of the clean-up under the Superfund designation. Additionally, they have suggested that the hazardous substance designation may impede the sales growth of PFAS chemicals that 3M continues to manufacture, as customers may seek out other options.

In the late 1940s, 3M was the first to develop PFAS chemicals, which were based on atomic research that used fluorine gas. By combining fluorine with carbon, 3M was able to create strong compounds that could be used in both consumer and industrial products.3M's manufacturing facilities, which produce PFAS chemicals, have been subject to heightened regulatory scrutiny due to soil and water contamination. The company has devoted billions of dollars to remediate their plant sites, including a $850 million agreement with the state of Minnesota concerning a plant in Cottage Grove. Additionally, 3M recently agreed to provide approximately $600 million to clean up contamination linked to a plant in Belgium that manufactures PFAS chemicals.

3M manufactures PFAS chemicals at their facilities located in Alabama, Illinois, and Germany.

In the early 2000s, 3M discontinued the production of two PFAS chemicals, PFOA and PFOS. These two forms of PFAS have been the focus of numerous lawsuits against 3M and other manufacturers.