Companies are facing accelerating pressures to adopt safer chemicals principles and practices and to cajole, encourage, or force their supply chains to join them. The demands stem both from governments and from leadership companies in the private sector. Corporate strategic planners had better pay attention, lest they get shut out of markets.

Consider the following:

• Europe. In October, the European Parliament's Environmental Committee strongly endorsed tough chemical substitution principles for chemicals of concern under the EU's REACH legislation for chemicals management. If this is sustained by the full parliament and agreed by the EU Council of Ministers, it will give a very big push to safer chemicals initiatives. The US government and the US and European chemical industries have lobbied vigorously against strengthened European chemicals regulation, although progressive downstream companies have argued in support. Even if these provisions are watered down in subsequent legislative processes, this will be just a temporary speed bump on the road to safer chemicals practices. Such practices are driven by compelling business arguments and by myriad other public and private sector initiatives.
• California Safe Cosmetics Law. Inspired by the EU's existing Cosmetics Directive, which outlaws carcinogens, mutagens, and reproductive toxicants in cosmetics and personal care products, California's new law requires fuller disclosure by cosmetics manufacturers of chemicals of concern in their products. If California were a country, it would have the sixth largest national economy in the world, so companies can't ignore this state-level action.
• California's New Biomonitoring Law. In the last several years, the push for safer chemicals has been fueled in part by disclosures about toxic chemicals from consumer products found in consumers' bodies. This new law will generate additional information that will further drive public concern, media attention, and government action.
• Canadian Bans on Cosmetic Lawn Pesticides. Many of Canada's major cities (and the Province of Quebec) have enacted general or chemical-specific bans on lawn chemicals. ServiceMaster, the parent company of ChemLawn, reported last year that its reduced retention of customers in Canada was due partly to "tightened application regulations in certain markets". State and local governments in the U.S. are increasingly adopting integrated pest management and other reduced toxicity approaches for schools and public spaces and, where not preempted by state law, local governments are showing interest in following Canada's example.
• State-level Green Chemistry Initiatives -- Maine, California, and Michigan. In early 2006, Maine's Governor John Baldacci created a "Governor's Task Force to Promote Safer Chemicals in Consumer Products". The task force will develop recommendations for a comprehensive chemicals policy for Maine, requiring safer substitutes for hazardous chemicals found in consumer products and creating incentives to develop safer alternatives on a state and regional basis. There appears to be considerable interest in exploring the potential contribution of Maine agriculture to bio-based alternatives. This is one of several state-level initiatives that serve to remind that safer chemicals policy is a two-edged sword -- it produces losers who manufacture and use older, more toxic chemicals, but it creates winners among those companies producing and using environmentally friendlier alternatives.
  
  On the heels of Maine's action, at the request of California's legislature, the University of California produced a report on Green Chemistry's potential in California as a driver of economic growth and enhanced protection of public health. The report noted that existing federal toxic chemicals control legislation is badly broken. The report suggested that the legislature appoint a task force to consider its recommendations. In late 2006, Michigan's Governor Jennifer Granholm issued an executive directive to drive state-level strategies to promote green chemistry and engineering education. These include efforts to develop and produce bio-materials, chemicals, and catalysts that reduce or eliminate the use or generation of hazardous substances.
• Kid-Safe Chemicals Act. Introduced as "concept" legislation in the US House and Senate by then-in the-minority Democratic legislators, this legislation would toughen US chemicals regulation, to repair what the US General Accountability Office (GAO) and others have documented is a seriously flawed regime. The Democratic Party's capture of both the House and Senate signals that there is likely to be significantly more public airing of this regulatory frailty, even though enactment of new legislation is unlikely in the short term.
  
  Perhaps the most noteworthy private-sector move is Wal-Mart's long-awaited safer chemicals policy emerging from its "Chemical Intensive Products" initiative. Wal-Mart has embarked on a wide-ranging sustainability campaign, directed at energy use, global logistics and procurement, packaging, and such product areas as seafood, textiles, jewelry, forest products, food & agriculture, electronics, and chemical intensive products. Many environmentalists point out that as part of its sustainability strategy the company needs to better address labor issues and the community impacts of its store-siting decisions. Notwithstanding this criticism, Wal-Mart's "Chemical Intensive Products" initiative has the potential to drive extraordinary safer chemical substitution practices around the world. Wal-Mart is not the first retailer to adopt substitution principles and practices (click here for a handy listing of other retailers and manufacturers who have done so, with links to their actions), but its size gives it unparalleled clout in supply chains.
  
  The overarching goal of Wal-Mart's "Preferred Substances Policy" is to:

Provide to our customers affordable and effective products where all chemical ingredients are preferred for Mother, Child and the Environment delivered in the most efficient and effective way. (emphasis added)

This simply-stated goal sends a stunning message -- that Wal-Mart, the retailer renowned for providing low prices for its customers and doing so in large measure by paring costs -- believes that it can provide safer products while also remaining true to its core business strategy. Wal-Mart has elaborated this thinking on a "Smart Products" page on its corporate web-site:

We believe that environmentally sensitive facilities and processes add quality and value to our products... (W)e see real promise in our ability to bring cleaner, more environmentally preferable products within the reach of everyday people around the world. We believe you should not have to pay more for healthy and environmentally preferable products.

Wal-Mart's new safer chemicals policy contains several core components. First, there's an underlying set of principles embracing a precautionary approach, signaling a willingness to act even in the face of scientific uncertainty. The principles identify the classes of chemicals assigned highest priority for attention, including carcinogens, mutagens, and reproductive toxicants, and those persisting and building up in the environment. Second, there's a set of "priority chemicals" targeted for initial action. Three have been identified to date, and Wal-Mart's indicated it will name 17 more over two years. Third, there's a scorecard to be developed for buyers and suppliers. Based on the underlying chemical principles, the scorecard will provide simplified guidance regarding preferred chemical formulations.

Wal-Mart will not be the first company to adopt such a scoring system. SC Johnson and Son, Inc. has pioneered its patented (and licensable at no cost) Greenlist system for ranking chemicals and reducing the environmental footprint of its products. The Nordic construction giant Skanska developed a red-yellow-green product scoring system for the desktops of its site managers. But Wal-Mart's system certainly will have a much broader impact because of the retailer's size.

The impulse of many corporate strategic planners viewing this changing regulatory and marketing landscape may be to assume that safer chemicals are more costly or are not available. They should resist this impulse. Regarding costs, many companies have found changes to be cost-neutral or cost saving. As for alternatives, more and more companies are having the experience of going to their suppliers, asking about safer alternatives, and learning that the alternatives are available but have not been offered because they hadn't been sought.

The new regulatory and marketing environment for safer chemicals is an enormous driver of innovation. Winning companies will prosper by finding chemicals essential to life that don't bear high energy costs, leave piles of waste in their wake, nor burden the health of current and future generations.

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Richard A. Liroff, Ph.D ([email protected]) is founder and director of the Investor Environmental Health Network (IEHN). IEHN is a collaboration of investment managers that advocates for safer corporate chemicals policies to grow long-term shareholder value and reduce financial and reputational risks to companies. The business case for corporate safer chemicals policies, a list of shareholder resolutions on safer chemicals policies, and a roster of participants can be found on the IEHN Web site.