Tuesday, January 13, 2015

New Report Makes Strong Business Case for Using Safer Chemicals in Products and Supply Chains

Product Recalls Cost Companies Millions; While Companies Responding to Market Demand for Safer Products Are Seeing Growth in Sales
... A new report, The Business Case for Knowing Chemicals in Products and Supply Chains, highlights the benefits to companies when they invest in an "Active Strategy" for chemicals management, one in which they proactively manage the chemicals in their products and supply chains to stay ahead of regulatory and market demands.

The United Nations Environment Programme (UNEP) report, prepared in collaboration with the environmental NGO Clean Production Action, was released [on December 15, 2014] at the Strategic Approach to International Chemicals Management (SAICM) Open-ended Working Group's meeting in Geneva, Switzerland.

The report speaks directly to the emerging chemicals policy issue of Chemicals in Products, which will be discussed in-depth at the SAICM meeting, along with five other emerging policy issues of high priority to the international chemicals policy community.
The report compares companies with differing chemicals management strategies, concluding that those with Active Strategies reduce their risk to damaging chemicals "surprises" and generate long-term value through increased sales, enhanced brand reputation, and well-managed supply chains.
The report demonstrates how companies with "Passive Strategies" can face big fines, loss of market share and value, and tarnished reputations if an unknown "hidden liability" of hazardous chemicals in their products comes to public light. The report notes that over a three-year period Walmart, Target, Walgreen Co., CVS Pharmacy and Costco Warehouse paid a total of US $138 million in fines because of chemicals of concern found in their products.

Product recall costs can also be significant: Sony's recall of its PlayStation in 2011 due to illegally high cadmium levels cost the company more than US $150 million in lost sales and product reformulation costs; Mattel's recall of more than nine million toys in 2007 due to lead in their paint cost the company US $110 million in recall expenses and its stock price tumbled 18 per cent; and RC2 Corporations 2007 recall of toy trains, also due to lead paint, cost US $48 million and halved its stock price.

The marketplace is also swift to punish: in China in 2009, tens of thousands of consumers stopped buying, and thousands of stores stopped selling, Johnson & Johnson's baby products after formaldehyde and 1,4-dioxane were found in some of these products in the United States. Johnson & Johnson saw its market share in China for baby products decline by almost 10 per cent.

Conversely, the report says, proactive businesses that adopt an Active Strategy reap the rewards of their efforts: they avoid fines and product recalls, are well-prepared for new government regulations and respond quickly to ever-growing market demands to know and control the chemicals in their products.

The examples are striking:

Coastwide Laboratories, a division of Staples, designed and invested in a new product line - The Sustainable Earth brand - based on safer chemicals. This became a primary driver of Coastwide Laboratories' sales and market share growth in the early 2000s. "We seek to offer our customer's products that are inherently safer for human and environmental health and that address environmental impacts throughout their lifecycle. Listening and responding to our customers has clearly paid off over the years," said Roger McFadden, Vice President and Senior Scientist at Staples. "With increasing regulatory changes and a growing awareness about how chemicals impact health, avoiding harmful chemicals in consumer products is no longer an ideological nice-to-have, but a must-have moving forward. This new report reveals information and evidence that can be valuable to any business."

Shaw Industries' investment in safe chemicals for carpet backings netted the company substantial benefits. Shaw replaced its polyvinyl chloride carpet backing with a safer alternative, reducing weight by 40 per cent, and quickly captured market attention - production capacity tripled in 2000 and by the end of 2002, sales of its EcoWorx products exceeded those of its PVC-backed carpets. "Shaw has had a long-standing holistic approach to sustainability. "Our aim is that every chemical, every material, every process, and every action is designed for a better future," said Paul Murray, Vice President of Sustainability and Environmental Affairs at Shaw. "The Cradle to Cradle Certified TM Product Standard guides our focus on chemical and material health, material reutilization, energy, water, and social fairness. This requires continued investment in innovation, but the long-term rewards are reaped not only in profits, but also in regard to people and the planet."

Seagate Technology PLC, a manufacturer of data storage devices, put in place a chemicals information management database which tracks the chemicals that go into its products. This means that each time a new chemical of concern is noted, staff simply search the company's database to see if it is present in its products. This enables the company to respond to new substance restrictions with existing resources, avoid the "saw-tooth effect" (where the costs of data collection vary widely, as the company responds to unpredictable new requests for data), and gives Seagate a better understanding of both the chemistry of its products and its suppliers' performance. "By requiring full disclosure from suppliers and maintaining a comprehensive database, Seagate is positioned to quickly respond not only to new regulations, but also to customers' product sustainability and environmental data requirements," said Brian Martin, Product Environmental Compliance Director at Seagate Technologies. "Given the benefits from design through sales, once more businesses are aware of the implications of full supply chain chemicals management, it should quickly become the status quo."

The report notes that many sectors - apparel, footwear, outdoor industry, automotive, electronics, cleaning, personal care, building and retail - have leaders advocating and building active chemicals management strategies, and the necessary complementing information systems. But progress is not uniform, and many sectors do not have sufficient systems in place to enable reliable exchange of the chemical content information that is needed to meet current and future regulatory and customer demands.
SIGG USA (a subsidiary of SIGGSwitzerland) filed for bankruptcy in 2011 with $13 million in liabilities due to failure to disclose Bisphenol A (BPA) in its water bottles (SNEWS, 201). 
It is much cheaper to remove chemicals of concern during the design phase—designing for the environment—as compared to trying to remove chemicals of concern from products that are already being mass produced and sold globally. For example, the U.S.-based conglomerate, 3M, “saved more than $500 million inlower raw material, compliance, disposal, and liability costs” from 1975-1990 by investing in pollution prevention initiatives (Hart, 2005).
The Consumer Electronics Association found that average company costs of compliance with the EU RoHS directive are: initially $2.6 million with annual maintenance costs of $0.48 million per company (note initial costs can include product reformulation)(HKTDC,2008). Similarly, the Toy Industry Association in the U.S. estimates the costs of compliance with Washington State’s Children’s Safe Products Act at up to “$27.6 million in the first year, followed by $2.8 million annually in subsequent years just for testing data needed to comply with the program” (Hackman, 2013). While industry associations may inflate the costs of compliance, the trend line is clear: the costs of ensuring products do not contain chemicals of concern are rising.

The full report "The Business Case for Knowing Chemicals in Products and Supply Chains" is available free of charge at http://www.unep.org/chemicalsandwaste/Portals/9/CiP/Documents/CiPBusinessCase_Advance.pdf

United Nations Environment Program (UNEP) www.UNEP.org
Press Release dated December 15, 2014

No comments:

Post a Comment