Based on the report The Business Case for Knowing Chemicals in Products and Supply Chains
Key messages from the report
Regulatory requirements, customer demands, media attention, non-governmental organization advocacy, product recalls, and market opportunities are driving companies to know more about the chemicals in their products and supply chains. This has led to an increasing demand for higher transparency. The use of Chemicals in Products information systems clearly demonstrate the value of knowing about chemicals that products contain. They continue to enable and stimulate companies and entire product sectors to realize benefits, from achieving product safety to leading product innovation. Unfortunately, most product sectors do not have sufficient information systems in place to enable the reliable exchange of chemical content information that is needed to meet current and future regulatory and customer demands.
In order to fill this gap, a shift from passive strategies to active strategies is required. While companies that employ a passive strategy save costs in the short term by not investing in systems, staff or third parties for chemicals management, they are vulnerable to hidden liabilities of chemicals of concern in their products when compelled to react to crises or regulations. In the past costs from these liabilities has run to the tens or hundreds of millions of dollars, has tarnished brand reputation, and resulted in loss of market share and valuation. On the other hand, companies that engage in active strategies to know and act upon information on chemicals in products generate long-term value for companies, their shareholders, public and the planet.From governments and consumers to retailers and brands, access to information and awareness of chemicals in products is driving companies and customers to prefer and select inherently safer alternatives, selections that make possible achieving the goal of the Strategic Approach to Integrated Chemicals Management (SAICM). The Chemicals in Products (CiP) project is a UNEP-led project in support of this SAICM emerging issue. It is an ongoing activity on the policy and practical facets of access to information on the chemicals contained in everyday products. The activities focus on increasing the availability and access to the information actors need – throughout the life-cycle of products – so that they can properly manage those products and the chemicals in them.
Sustainability Pays Off
With a modest beginning in 1937, a small manufacturer of commercial cleaning maintenance products in the Pacific Northwest, Coastwide evolved into a comprehensive solutions provider to customers amidst rising concern about regulations and health implications of chemicals of concern in cleaning products. Coastwide Laboratories (now a subsidiary of Staples, Inc.), saw an increase in sales due to a decision to integrate sustainability into corporate strategy. Coastwide’s Sustainable Earth™ line of products began in 2002 as an experimental line apart from its main business, but was so successful that sustainability was integrated into corporate strategy. The Sustainable Earth line not only led to a profit increase, but also performed as well as other leaders from the same category or sector, lowered customers’ costs, protected users’ health and reduced waste. The net operating income averaged between two to three times that of the industry norm, sales rose 8%, market share grew to about 16% of the regional market, and new customers increased by 35%. It enabled Coastwide to lower its customers’ costs for maintenance by offering system solutions. Higher dilution rates for chemicals, dispensing units that eliminated overuse, improved safety for the end user, and less lost work time because of health problems associated with chemical exposure were reported.
"Full disclosure pays in the long term. We have more data, at higher quality, at lower cost. Our cost is flat, not ratcheting up." says Brian Martin, Senior Director, Product Environmental Compliance.*
Costs of Changing Market Demands and Growing Transparency
- Target, Walmart, and Whole Foods Market, U.S.-based retailers are all driving suppliers to provide more chemical ingredient information on packaging and websites of formulated products,(for example in cleaning, beauty, and personal care products
- Major apparel and footwear brands and retailers like Adidas, H&M, Inditex, Levi Strauss, Li-Ning, Nike, and Puma have made a shared commitment to lead the industry towards zero discharge of hazardous chemicals (ZDHC) by 2020.
- Google in 2014, concerned with chemicals in its office environment, required suppliers of building products to provide it with chemical ingredient disclosure using the Health Production Declaration form.
Cost of Non Compliance
- In 2001,Sony lost $150 million worth of sales and product reformulation due to illegally high cadmium levels in their cables.
- In 2010,McDonald’s recalled 13.4 million Happy Meal glasses because of cadmium in the paint. The estimated costs was up to tens of millions of dollars due to lost sales, refunds, costs of collecting the glasses, and internal crisis management.
- In 2010,Unilever paid $1.3 million for selling a deodorant body spray that failed to meet California’s Clean Air Standards for VOCs in aerosol deodorants .
- In 2011,SIGG Switzerland’s distributor in the U.S. filed for bankruptcy with $13 million in liabilities after failing to disclose the presence of Bisphenol A in its aluminum water bottles.
- In 2012,Bed Bath and Beyond recalled tissue holders made in lndia that were contaminated with radioactive cobalt-60 and shipped to 200 stores in 20 states.
- In 2012,Companies incurred $22.6 million in legal costs for failure to comply with California’s Proposition 65 labeling requirements on carcinogens and reproductive toxicants in products.
- In 2013,Walmart paid $81.6 million in fines for the mishandling of products sold in its stores that became damaged or were returned, thus becoming hazardous waste, and for failure to properly train its employees with respect to the required handling of pesticides.
Saving Money by Knowing Chemicals in Products
- Seagate, a manufacturer of data storage devices benefitted from reduced costs when more chemicals of concern emerge. The data collection costs remain relatively stable instead of fluctuating between the increasing costs of new data requests and decreasing costs when there are no new data requests. Their chemical management data system provides them increased supplier reliability by being able to identify quickly when changes are being made to the materials in its components.
- 3M, “saved more than $500 million in lower raw material, compliance, disposal, and liability costs” from 1975-1990 by investing in pollution prevention initiatives as it is much cheaper to remove chemicals of concern during the design phases compared to trying to remove chemicals of concern from products that are already being mass produced and sold globally.
Creating Value by Using Safer Chemicals
- Shaw Industries investment in safer chemicals, replacing polyvinyl chloride (PVC) plastic and its phthalate plasticizer with safer alternatives, for carpet backings netted the company substantial benefits, including reducing the weight of carpet backing by 40%, and quickly capturing market attention. Production capacity tripled by 2000 and by 2002, sales of its new EcoWorx products exceeded PVC-backed carpets.
- Coastwide Laboratories (manufacturer of cleaning products) invested in a new product line based on safer chemicals which drove the company’s rapid growth in early 2000s: net operating income average doubled to tripled the industry norm, sales rose by 8%, market share grew to about 16% of the regional market, and new customers increased by 35%.