Marketplace Responsibility Case Study

What makes 3M one of the most sustainable innovators in the world?

Marketplace case studies kindly sponsored by KPMG LLP (UK)

3M 3M is a diversified technology company with a global presence in the following markets: consumer and office; display and graphics; electro and communications; health care; industrial and transportation; and safety, security and protection services. The company employs more than 69,000 people and has operations in some 60 countries. It has more than 55,000 products, which are sold in 200 countries across the world. Its success has been based on technological research leading to constant product innovation. 3M has had a long history of commitment to environmental responsibility. It began its Pollution Prevention Pays (3P) programme in 1975. It has since covered over 6,000 different projects aiming to eliminate pollution at source. This process has also been applied to the design of its products the company has aimed not only to reduce the impact of its own operations, but through its approach to innovation, to provide products that help its customers minimise their own environmental impacts. Current examples of these products include: A brightness enhancing film for LCD displays that effectively recycles light given off by the computer / TV screen that improves light levels whilst enabling the screens to be 20-30% more energy efficient. A non-flammable, non-toxic and biodegradable paint and varnish remover. The product provides an alternative to traditional removers and produces no harmful fumes or strong odours. Granules for home roofs that are up to three times more reflective than comparable typical coloured granules, which can help keep the home cool with less energy consumption and lower energy cost. 3M was one of the earliest companies to reduce solvents in coatings and adhesives. 3Ms approach to innovation 3Ms distinctive approach to innovation goes back to its earliest days. The companys founders faced multiple crises that could have destroyed their fledgling business. Having bought a mine to extract corundum a mineral almost as tough as diamonds and perfect for grinding wheels, 3M was devastated to discover it actually contained a much softer mineral, anorthosite, which was useless for abrasive work. The fact that 3M not only survived, but continues to thrive more than a century on, is in large part down to its culture which can be traced back to the companys beginnings. CEOs have come and gone over the years but each has been deeply conscious of the companys heritage and its reputation for doing business the right way. Even today, the influence of William McKnight, who was CEO between 1949 and 1966, pervades the organisation. McKnight promoted internal variation and innovation to ensure the company had a broader commercial base, and he did this by creating and embedding a culture of innovation.

The company ethos became one that said that any original idea should be encouraged, given a chance to prove its value and developed if it could provide a solution to a genuine need. So committed does the company remain to this ethos that there has been a longstanding mechanism that grants all of the technical community within the company 15% of their time available to work on their own personal research. It was through this process that the ubiquitous Post-It Notes were first invented. The requirement that innovations should address a real human need was one that led the company, ahead of many others, to begin to reflect environmental criteria in its product development as a natural part of its 3P programme. The 3P programme began with some basic measurement criteria. These were that the project would: Prevent pollution by reducing or eliminating a problem pollutant or energy consumption Financially benefit the company Be fully implemented. When it came to products, the technical accomplishment criteria were that they should: Involve innovative technology or design Come with a full understanding of the process and product Improve quality. These extra criteria were revised in 2002 to focus on innovation, new products, reformulation of existing products, toxics, packaging and transportation. Why has 3Ms approach been successful? 3M has an embedded culture of values that has meant that its highly diversified model of encouraging a thousand products to bloom, nevertheless, has an underpinning of solving problems. One of the first things employees learn when they join the company is that 3M never compromises when it comes to ethics. The company has a core set of values, which include the following provisions: Act with uncompromising honesty and integrity in everything we do Respect our social and physical environment around the world Earn the admiration of all those associated with 3M worldwide. These are not simply slogans that sit on the CEOs wall they are driven through the business. All employees, for instance, have to do certain online courses when they join the organisation, which cover such issues as ethical business conduct. The company insists on consistency in this wherever it operates. Where certain rules or standards may be absent in a local business environment, the company will impose its own. If a countrys business environment means that it is impossible to do business there in accordance with 3Ms own values (because of

endemic corruption, for instance) the company will not move into that country. In the product development process, there are a number of areas where options are reviewed. In the initial development, there are discussions around choice of materials that will be used in the product, looking for the best materials and the shortest supply chain. There is a full lifecycle analysis to look at the cradle to grave impact of the product. Each laboratory has a product responsibility liaison as well as a toxicologist. Once the product has entered the marketplace, product engineering teams review its performance and environmental impact. They also review the potential for material changes and safer sources of supply. The company takes a twin track approach to product development. One part is technology driven, with research processes identifying new technology for which applications can be found. The other is customer driven, seeking to identify customer needs both articulated and unarticulated. Members of the technical community aim to work very closely with customers, sometimes stationing an engineer with a customer for several weeks to better understand their business and gain an insight to their pain points. One recent example of this occurred when an engineer, stationed in a car body shop, identified that one of the biggest problems came about because of the need to clean paint reservoirs periodically a process that took around 20-30 minutes to complete and involved the use of cleaning agents with solvents. This observation led to the development of a new paint pot, which had a removable film bag to aid the disposal of waste residues. This solution meant that solvent usage could be reduced by 60-70% and the job could be completed in a fraction of the time. With labour representing body shops single greatest cost, the productivity efficiency gains greatly outstripped the cost of 3Ms new Paint Preparation System. What have been the benefits for 3M? Since the 3P programme started in 1975 the cumulative first year savings from all initiatives undertaken is just under $1bn and this figure does not include subsequent year savings for each of those products. At the same time, the company has prevented over 1 billion tonnes of pollution from entering the environment as a result. Overall, this has helped to retain customers trust and to avoid risk while ensuring that 3Ms distinctive innovation model has continued to provide the company with year on year growth. What challenges had to be overcome? 3Ms approach of multiple small projects has given it enormous strength and dynamism, but this has probably been achieved at the expense of being willing to make overall strategic decisions of broader strategy and direction. Although it has led to lean manufacturing plants and well developed products, interconnecting logistics could become tremendously complicated and inefficient.

In addition, a strongly empowered try it and see culture means that mistakes are made however, an element of failure is built into 3Ms plans and employees are encouraged to take a balanced approach to risk taking, aware that occasional failures are inevitable in the pursuit of multiple successes. One case in point is how the company was faced with problems with a chemical that used to be used in its Scotchgard product. This was a fluorochemical that, as far as is known, is inert and not harmful to life. However, 8 years ago technology had progressed to the point where tests became able to detect very low concentrations of this chemical, and it was found to be present in the blood of animals in different parts of the world. Environmental groups have been raising alarm bells for some time on the issue of highly persistent organic compounds that have been artificially added to the environment. The company states that, when it became aware of the problem, it went to the US Food and Drugs Administration (FDA) with its evidence, and decided that it would develop alternatives and exit the business, even though there was currently no evidence of harm but on a precautionary basis. Some environmentalist critics of the company maintain that it was the other way round, the FDA insisted on action at the threat of legal moves. Whatever was the chain of events that led to the action, the company moved decisively to produce alternatives and to withdraw from the market at some considerable cost and in a way that gave it considerable credit with commentators at the time, helping to support its reputation. Occasionally, as with any large organisation, some individuals will try to buck the system, perhaps seeing the stringent processes in the product development cycle as an obstacle to the development of their great idea for the marketplace. The company has zero tolerance for such behaviours that might potentially open the company up to unmanaged risk, and if individuals cannot accept the no-compromise approach, they will usually find that their future does not lie with 3M. The company has brought in a Six Sigma quality approach to address some of the broader issues and has refocused its strategy to strengthen its corporate direction. This has included a more strategic approach to stakeholder engagement aiming to identify and anticipate issues. This includes: Neighbour meetings Employee meetings and surveys Active participation in local civic groups This has become a required component of 3Ms Environmental, Health and Safety Management System. How did 3Ms business approach support its success? Management approaches at 3M that have supported its successful approach to socially responsible innovation include: Unwavering support from top management in a commitment that the 3M approach will be underpinned by ethics and sustainability

 It is embedded within the culture that innovations must solve real problems this has helped a decentralised process to nevertheless share a basis of responsibility that does not have to be heavily imposed from the top The companys very free creative processes encourage innovation, its much tighter product development processes deliver responsibility The company has a unique collaborative culture, with very strongly reinforced approaches to different divisions sharing whatever technologies they have with each other, and helping each other to resolve problems. For instance, when one department that was producing a new design for product communicated with the organisation that its process produced a certain amount of rubber waste, it was immediately inundated with ideas about how this waste could be incorporated as a raw material in other design processes within the company The company celebrates success. It has internal awards that celebrate technical excellence, and these include environmental health and safety awards. Key learning points A culture of employee empowerment can be a very dynamic tool for innovation and growth, but needs to be underpinned by a basis of values to ensure it produces a consistent approach to responsible outcomes Although the company undertakes a traditional approach to stakeholder engagement, some of its best product successes have come through getting so close to the stakeholder (the customer) that it can identify needs or concerns that the customer has not themselves articulated Mistakes will happen the company will be judged by how it responds to those mistakes Truly embed the processes that will lead to a healthy business 3M has seen a number of CEOs over the last 100 years but its basic values and approach have remained the same and served it well.

This case study accompanies The Marketplace Responsibility Principles, and is one in a series of six. The full series includes: What makes 3M one of the most sustainable innovators in the world? Taking care of vulnerable customers - The Camelot Games Design Protocol. How Marks & Spencer leads the way in customer relationships. How Tata won its reputation for integrity. How Waitrose raised the bar for supply chain. How Fonebak created a market from scrap.

If you would like more information please contact: Joanna Daniels T +44 (0) 20 7566 8695 E marketplace@bitc.org.uk www.bitc.org.uk/marketplace