Safer products for everyone

renovation furniture - removing blue painting with spatula

Have you ever noticed that most reusable water bottles are labeled BPA-free? BPA is an endocrine disrupter that can negatively impact human health, including the development of reproductive organs. According to the Mayo Clinic, there is concern about BPA exposure, because it could impact the “brain, behavior and prostate gland of fetuses, infants and children. There is also research suggesting a link between BPA and increased blood pressure.”[i] Given the risks, it might seem obvious that a reusable water bottle would be BPA-free, so why do companies go out of their way to include the BPA-free label on the bottles? It may stem from a high-stakes slip-up made by Sigg USA several years ago. When consumers first got concerned about BPA in baby bottles and water bottles, many flocked to the seemingly safer metal water bottles offered by Sigg USA. (This was before stainless steel bottles flooded the market.) While Sigg USA’s products were not labeled BPA-free, many consumers mistakenly assumed they were safer because they were not plastic. Sigg USA’s reckoning came when it was discovered that, in fact, its metal water bottles were lined with a BPA coating on the inside. Apparently, the company had known this for some time but did not disclose it to consumers.[ii] In a swift shift to damage control, the CEO apologized and the company offered to refund customers. Ultimately, the refunds proved too costly for the company, and Sigg USA declared bankruptcy because of the BPA kerfuffle.[iii]
Clean Yield believes there is a compelling business case for companies to proactively manage their toxic chemical risk. With our friends in the Investor Environmental Health Network (IEHN), we have been engaging with companies on safer chemicals for some time, including Walgreens, Costco, and Tractor Supply. In the last year, Walgreens has committed to rolling out a chemicals policy, Costco has disclosed a new chemicals policy, and Tractor Supply has committed to keeping certain types of pesticides off its shelves. With our recent investment focus on consumer staples companies, we expect to build on this work and engage more companies on this important issue in the next year.
Our EPA: Making Asbestos Great Again
The Sigg USA case makes clear that consumer demands for safer products and transparency can drive companies out of business. Perhaps not surprisingly, the current EPA seems out of sync with consumer preference for safer chemicals. In 2016, the bill to reform the Toxic Substance Control Act (TSCA) was passed with bipartisan support. The new bill provided EPA the authority to evaluate the health (and environmental) risks of existing chemicals on a set timeline. This reform was intended to address gaps in the original TSCA passed in the 1970s, which succeeded in banning only five chemicals and hampered the EPA from banning dangerous chemicals such as asbestos, a known carcinogen.[iv] With the arrival of the Trump administration, however, oversight of chemical safety has actually been scaled back.
The much-anticipated risk evaluations initiated under the new law have become largely irrelevant exercises. In the case of asbestos, EPA has refused to consider the risks of the many asbestos products installed in homes, schools, businesses and factories. At the same time, it has passed up the opportunity to ban future sale and distribution of these products, instead issuing a “Significant New Use Rule” (SNUR) that opens the door to many discontinued asbestos products returning to commerce. In addition, while the new law was intended to require comprehensive life-cycle assessments of chemical risk, EPA has decided to exclude exposure to chemicals through the environment, i.e. their presence in the air, ground, or water. In practice, this means that the EPA will likely evaluate only limited pathways of exposure, looking, for example, at skin contact with a chemical through a consumer product but not at ingestion of the chemical through contaminated drinking water or inhalation due to emissions from nearby industrial facilities.[v] We wonder how the residents of Flint, Michigan feel about that. As any environmentalist could imagine, by removing environmental exposure from the risk equation, EPA’s evaluations will make chemicals look safer than they really are, a big win for chemical companies.
Despite this effective regulation rollback, we still see signs that the market is shifting toward safer chemicals, some companies more proactively than others.
Companies are leading in the face of lagging regulation
In recent years, some of the country’s biggest retailers – Walmart, CVS, and Target – have made game-changing commitments to clean up the products on their shelves. Walmart, which has already made good progress toward eliminating the worst chemicals from products on its shelves, announced a goal of reducing chemicals in its consumable products by 10% by 2022.[vi] Consumables include personal care products, infant products, and household cleaners. Target has committed to removing phthalates, parabens, formaldehyde (and formaldehyde donors), and NPEs (a family of hormone disruptors) from its beauty, baby, personal care, and household cleaners by 2020.[vii] CVS has committed to removing parabens, phthalates, and formaldehyde donors from its store-brand products by the end of 2019.[viii] In addition, all three companies have disclosed their lists of restricted chemicals or have committed to ingredient transparency. This means that consumers will now be able to consider the safety of products when shopping and will have more safe options. Even if the EPA considers a chemical to be safe, customers will have the information to make their own decisions.
These announcements mean big changes are in the wings for a huge number of companies. Most of the products on Walmart’s shelves are produced by other companies – a vast web of suppliers. For many of these suppliers, Walmart represents their largest customer, which means that they have to get on board with Walmart’s agenda. If Walmart asks its suppliers to eliminate certain high-priority chemicals from sunscreen, the sunscreen supplier is going to try to comply to maintain good standing with its largest customer. And you know what else? Since this sunscreen maker has to reformulate for Walmart, it will probably go ahead and reformulate the product for all of its customers, because it’s likely that similar requests are coming from its other big customers too.
And in this process of reformulating to comply with Walmart’s requests, something else might happen: Companies could start to build their reformulating capabilities in a new direction. Reformulation is no longer focused just on cost and efficacy; it is now also considering ingredient safety. Perhaps the reformulators will start to proactively identify opportunities to swap out the bad in exchange for good.
Everyone gets access to cleaner products
There is another benefit, too, of all of this reformulation (and this is perhaps the most exciting to the environmentally justice-minded among us): Those lower-price-point products begin to get cleaner and healthier too, which will make safer products accessible to everyone. Everyone shopping at Walmart will automatically get access to cleaner products, at all price points. Cleaner products and low prices!
Some companies still need a little nudge
Of course, some companies require a bit more coaxing but are coming around on product safety issues nonetheless. As anyone with a nose who has stripped paint before knows, stripping paint is a stinky task. It can also be a toxic one. According to news reports, paint strippers containing two toxic chemicals, methylene chloride and N-Methyl pyrrolidone or NMP, have been linked to more than 50 deaths in the U.S.[ix] and have also been linked to stillbirths. An environmental advocacy group called “Safer Chemicals, Healthy Families” targeted Lowe’s, urging it to remove paint strippers from its shelves. When the protests failed to yield results, Safer Chemicals, Healthy Families partnered with shareholders, including Clean Yield, to bring the families of those who died to the annual meeting to confront management. With the threat of publicly facing grieving families looming, Lowe’s announced that it would remove these products from its shelves. Home Depot, Sherwin Williams, and Walmart followed suit. This is important, because it highlights how companies (with the nudging of shareholders and activists) are stepping up to address product safety issues when regulation falls short. Hey, Ace Hardware: It’s your turn next.
First green shoots
We think this is just the beginning. There is good money going into developing the ingredients that will enable this shift. Target has announced that it will invest $5 million into “green chemistry innovation” by 2022.[x] Patagonia has made investments into companies that are developing alternatives to traditional chemicals by using natural raw materials.[xi] Heck, there is a whole fund dedicated to innovating safer chemicals and products – Safer Made. Safer Made is a private equity fund that invests in technologies and products that deliver superior performance without using harmful materials (full disclosure: Clean Yield clients have made investments into this fund). While each of these data points alone may seem small, together they highlight the breadth of players directing capital to develop safer chemicals.
Chemical collaboration
And while we can’t thank the EPA for these developments, we can thank our friends in the advocacy community. For years, the Investor Environmental Health Network (IEHN) has been engaging with some of the largest U.S. companies to encourage them to end the use of toxic chemicals. The Chemical Footprint Project has developed a framework for companies to inventory their toxic chemicals so that they can identify the worst and begin removing them. The Mind the Store project of Safer Chemicals, Healthy families has been instrumental in benchmarking retailers on their approaches to safer chemicals and pushing for improvement. While these initiatives don’t tend to catch big headlines, their work is having outsized impact, as evidenced by the Walmart and CVS announcements mentioned above.
Sure, we’re a long way from seeing companies embrace the precautionary principles when formulating personal care products, but we think these developments point to progress. We, as investors, are ready to step up and do our part to help companies realize the importance of shifting to safer chemicals across the spectrum of products and price points. Besides, if companies don’t do it for regulators, they will surely end up doing it for Walmart.
 
 
[i] https://www.mayoclinic.org/healthy-lifestyle/nutrition-and-healthy-eating/expert-answers/bpa/faq-20058331
[ii] https://www.huffingtonpost.com/simran-sethi/hot-water-how-sigg-lost-m_b_275651.html
[iii] https://sgbonline.com/sigg-switzerland-usa-attributes-bankruptcy-to-bpa-issue/
[iv] https://blog.epa.gov/blog/2016/06/tsca-reform-a-bipartisan-milestone-to-protect-our-health-from-dangerous-chemicals/
[v] https://www.vox.com/2018/6/9/17441484/scott-pruitt-epa-chemicals-cost-benefit-analysis
[vi] https://news.walmart.com/2017/09/27/walmart-strengthens-sustainable-chemistry-commitment-reports-progress-in-safer-product-formulation
[vii] https://corporate.target.com/article/2017/01/chemical-policy-and-goals
[viii] https://cvshealth.com/newsroom/press-releases/cvs-health-takes-major-step-to-address-chemicals-of-consumer-concern
[ix] http://fortune.com/2018/05/30/lowes-drops-paint-strippers-methylene-chloride/
[x] https://corporate.target.com/_media/TargetCorp/csr/pdf/2018_Target-Chemical-Innovation-RFP.pdf
[xi] http://www.patagoniaworks.com/press/2015/4/1/patagonia-invests-in-the-business-of-science-to-help-solve-the-environmental-crisis