Chemicals in Products Can Pose Big Risk to Companies
The number of shareholder resolutions about the use of potentially hazardous chemicals in the manufacturing of products -- from cosmetics to pesticides -- climbed more than 600 percent between 2005 and 2007.
In the wake of costly litigation, product sales bans, and reputational damage arising from asbestos, toxic materials in cosmetics and toys, and Teflon-related chemicals, U.S. investors are becoming increasingly wary of toxic chemical risks - in products, in supply chains, and in their own portfolios.
The number of companies facing resolutions dealing with toxic product risks jumped from three in 2004-2005 to 17 in 2006-2007. There are currently 13 resolutions introduced for the '07 proxy season, aimed at leading U.S. corporations, including Apple, CVS, Dow, DuPont, Sears, and ServiceMaster.
In response, the Investor Environmental Health Network, which represents 20 investment organizations with $22 billion in assets under management, today released the 52-page "Fiduciary Guide to Toxic Chemical Risk." The guide offers an examination of the financial aspects of toxic chemical resk to institutional investors. It helps investors understand how to quantify that risk, the theory behind the danger posed by toxic chemicals to the wealth of shareholders, and a comprehensive set of steps that can be taken by investors to protect their portfolios against the long-term threats and opportunities associated with toxic chemical issues.
"Researchers are increasingly detecting scores of these substances in human blood, breast milk, and amniotic fluid, and scientists are increasingly recognizing the particular vulnerability of fetuses and young children to them," the report concludes. "These and related findings are contributing to rising awareness that the strategic choices businesses make about managing toxic chemicals in their products can have major financial consequences."
The report cites DuPont's experience with PFOA, a chemical used to produce Teflon and stain and grease repellants, as an example. DuPont learned the hard way that consumers and industrial customers may abandon product lines over fears about their toxicity. And that's not even taking in to account the possible damage to reputations and the bottom line from lawsuits and government regulation.
Report co-author and Rose Foundation Executive Director Tim Little said: "Companies' strategic choices have serious implications for government pension funds. Our report estimates the combined annual costs of environmentally related childhood asthma, cancers and neurobehavioral disorders in California, Connecticut and New York States as on the order of $15 billion dollars. Government employee pension funds, in particular, should take heed and take action - the funds, state treasuries and fund members are shouldering the resulting health care and special education costs."
"Poor corporate management of toxic hazards can increase risks for investors," Richard Liroff, the executive director of IEHN, added. "Regulatory controls are tightening around the globe, not only in Europe but also in U.S. states such as California, and in developing markets such as Korea and China. The failure to address safer materials is causing products to be locked out of markets. By contrast, corporate efforts to minimize or avoid exposures, or to offer safer alternatives, can benefit corporate bottom lines and reward investors."
In last year's proxy voting season, there was no shortage of positive steps taken by companies in response to shareholder resolutions:
The full IEHN report is available online at IEHN.org
The number of companies facing resolutions dealing with toxic product risks jumped from three in 2004-2005 to 17 in 2006-2007. There are currently 13 resolutions introduced for the '07 proxy season, aimed at leading U.S. corporations, including Apple, CVS, Dow, DuPont, Sears, and ServiceMaster.
In response, the Investor Environmental Health Network, which represents 20 investment organizations with $22 billion in assets under management, today released the 52-page "Fiduciary Guide to Toxic Chemical Risk." The guide offers an examination of the financial aspects of toxic chemical resk to institutional investors. It helps investors understand how to quantify that risk, the theory behind the danger posed by toxic chemicals to the wealth of shareholders, and a comprehensive set of steps that can be taken by investors to protect their portfolios against the long-term threats and opportunities associated with toxic chemical issues.
"Researchers are increasingly detecting scores of these substances in human blood, breast milk, and amniotic fluid, and scientists are increasingly recognizing the particular vulnerability of fetuses and young children to them," the report concludes. "These and related findings are contributing to rising awareness that the strategic choices businesses make about managing toxic chemicals in their products can have major financial consequences."
The report cites DuPont's experience with PFOA, a chemical used to produce Teflon and stain and grease repellants, as an example. DuPont learned the hard way that consumers and industrial customers may abandon product lines over fears about their toxicity. And that's not even taking in to account the possible damage to reputations and the bottom line from lawsuits and government regulation.
Report co-author and Rose Foundation Executive Director Tim Little said: "Companies' strategic choices have serious implications for government pension funds. Our report estimates the combined annual costs of environmentally related childhood asthma, cancers and neurobehavioral disorders in California, Connecticut and New York States as on the order of $15 billion dollars. Government employee pension funds, in particular, should take heed and take action - the funds, state treasuries and fund members are shouldering the resulting health care and special education costs."
"Poor corporate management of toxic hazards can increase risks for investors," Richard Liroff, the executive director of IEHN, added. "Regulatory controls are tightening around the globe, not only in Europe but also in U.S. states such as California, and in developing markets such as Korea and China. The failure to address safer materials is causing products to be locked out of markets. By contrast, corporate efforts to minimize or avoid exposures, or to offer safer alternatives, can benefit corporate bottom lines and reward investors."
In last year's proxy voting season, there was no shortage of positive steps taken by companies in response to shareholder resolutions:
- Whole Foods Markets announced that it would remove baby bottles and other products that contain certain toxics from its shelves as part of a new corporate policy initiative to reduce customers' exposure to hormone-disrupting chemicals.
- Wal-Mart announced a new "preferred substances policy" that incorporates a precautionary, hazards-based approach to chemicals management, initially focusing on persistent bioaccumulative toxics and carcinogens.
- ConAgra agreed to analyze and report on alternatives to PFOA in food packaging.
- Becton, Dickinson agreed to survey its suppliers regarding brominated flame retardants in its medical devices.
- Johnson & Johnson agreed to initiate a stakeholder dialogue with one of the cosmetics industry's harshest critics, the Campaign for Safe Cosmetics.
The full IEHN report is available online at IEHN.org
