The $1.1 trillion question: What’s your chemical footprint?
Look no further than the financial and reputational travails of Lumber Liquidators for a stark example of the risks companies are exposed to when they have toxic chemicals in their products and supply chains.
From February to May, the stock price of Lumber Liquidators plummeted 70 percent — and its CEO resigned — amid concerns that the company's laminate flooring products contained unacceptably high levels of formaldehyde.
The formaldehyde fiasco highlights a challenging question for investors and purchasers: How can they better understand the chemical risks of the companies they invest in or purchase from?
Frameworks do exist for evaluating individual products on the safety of their chemistry, such as the Environmental Working Group’s Skin Deep database and the U.S. Environmental Protection Agency’s Safer Choice label. There is also anecdotal evidence of successful chemical management initiatives from companies as diverse as Apple and Zara.
But we still lack metrics to assess and compare the chemicals management performance of companies individually or within a sector. While we have ways to measure other sustainability indicators, such as carbon and water footprints, we lack a common metric for measuring a company’s chemical footprint.
That absence of standardized metrics feeds an ongoing accountability problem when it comes to corporate chemical management.
Corporate sustainability reports, to the extent they address chemicals management, often include individual success stories in avoiding specific toxic chemicals and exclude reporting any quantitative metrics of how much they’ve reduced their chemical footprint.
The good news: that may be about to change.
In December, GreenBiz reported on the launch of the Chemical Footprint Project — an effort to create a framework for measuring a company on its overall corporate chemical management programs, including its quantitative chemical footprint.
Now with over $1.1 trillion in assets under management and purchasing power, the Signatories to the Chemical Footprint Project are beginning to ask their stakeholders and suppliers to report on their chemical footprint.
Aviva Investors, BNP Paribas Investment Partners, Boston Common Asset Management, Trillium Asset Management, Dignity Health, Kaiser Permanente and Staples are among the signatories that will ask the companies they invest in or purchase from to participate in the Chemical Footprint Project.
Finding your chemical footprint
The specific request of Signatories to its stakeholders is to use the Assessment Tool, which comprises 20 questions.
It builds from efforts by BizNGO, the Green Chemistry & Commerce Council, the Investor Environmental Health Network and many others to deconstruct how the most successful companies in chemicals management implement programs to substitute toxic chemicals with safer alternatives.
Over the years, GreenBiz has documented many of these success stories across an increasing number of business sectors, including apparel, automotive, building products, consumer packaged goods, electronics, health care and retail. The Assessment Tool combines the learnings across these diverse sectors to create a framework for evaluating and comparing the chemicals management practices of companies with years of experience to those that are just beginning.
The tool documents both current state of performance and improvement over time. Specifically, it assesses companies on their overall performance in managing chemicals beyond regulatory compliance in four areas: management strategy; chemical inventory; footprint measurement; and public disclosure and verification.
The Assessment Tool scores responding companies on a scale of 0 to 100. Companies submit their answers with documentation to the Chemical Footprint Project, which evaluates responses, provides opportunities for further documentation and then supplies companies with their score.
Answers will be review based on consistency with documentation provided and publicly available data. Although third party verification is not a requirement for participation, responders receive additional points if their answers are independently validated.
Companies have the option of publicly reporting their answers and score or keeping that information private. The tool incentivizes public disclosure by giving points to companies that make their answers and scores available to the public.
From pilot project to the big time
The Assessment Tool evolved over the years. It built from the BizNGO Guide to Safer Chemicals into a draft set of questions that were tested with eight companies across four sectors (apparel, electronics, building products and consumer packaged goods).
The revised questions and response options were then piloted with 11 companies, representing a diverse group of small to very large companies across five sectors — electronics, household and personal care, medical devices, toys and building products (specifically interior products and furnishings).
Eight of the 11 participating companies chose to publicly disclose their participation in the pilot: Hewlett-Packard (electronics); Seagate Technology (electronics); Naturepedic (building products-furnishings); Beautycounter (household and personal care products); California Baby (household and personal care products); GOJO Industries (household and personal care products); Humanscale (building products-furnishings); and Seventh Generation (household and personal care).
Participating companies in the pilot of the Assessment Tool provided valuable feedback, including the need for and value of a third party tool that assesses and compares companies on a common platform.
“The Chemical Footprint Project gives companies across all industries tools to evaluate their progress in reducing Chemicals of High Concern and proactively identify opportunities for further action," said Hewlett-Packard's Joyce Taylor. "For HP, the footprint tool uses a standardized scoring methodology that gives our customers another way to engage with us and our products and enables HP to continue to create solutions that reduce environmental impact.”
Annie Schmidt of Seagate Technology emphasized how “we need metrics for reporting and benchmarking overall corporate performance on chemicals management. CFP is a publicly developed standard which could allow us to benchmark, track and report our overall corporate chemical management performance going forward.”
And as Martin Wolf of Seventh Generation perceptively noted, “A company’s chemical footprint is more than just the mass of chemicals used; it is how a company selects the chemicals it uses, protects workers, and communicates with suppliers and customers. The Chemical Footprint Project’s assessment tool systematically explores each of these aspects of a company’s chemical footprint.”
Overall, the Assessment Tool provides companies with a framework for evaluating, measuring, benchmarking and communicating their chemical management practices. It provides a gap analysis and highlights the value of setting goals and tracking progress to those goals.
By enabling overall organizational alignment in the development and implementation of chemical management policies and practices, the project creates opportunities for business growth based on third party recognition of corporate-wide performance.
Filling the data void for investors and purchasers
A key driver for investors and purchasers to be Signatories to the Chemical Footprint Project is that it fills a critical missing gap in sustainability data.
Joining investors as Signatories to the Chemical Footprint Project are purchasers, including those in health care, retail, hospitality and government. The results from the Assessment Tool will enable investors and purchasers to integrate chemicals management into their sustainability metrics.
The results could prove a valuable resource for impact investors looking to back businesses that reduce their chemical risks by using safer chemicals in products and manufacturing operations and require suppliers to do the same.
Jeremy Cote of Trillium Asset Management called the project “a tremendous tool for reducing uncertainty in the marketplace when it comes to sustainable investment.”
He emphasized the self-assessment process as a way to spotlight supply chain risks and allow for thorough and conscientious chemical management.
“Integrating this information into our investment process helps to identify industry leaders and to reduce company specific risk in our portfolios,” Cote added.
For purchasers, the Chemical Footprint Project will identify opportunities for improving supplier performance as well as reward those suppliers who do well.
Roger McFadden of Staples points out the transparency benefits of the project, saying that the initiative “facilitates the exceptional transparency a growing number of businesses and consumers are demanding, helps companies achieve and maintain regulatory compliance, and best of all prompts widespread movement to safer chemicals.”
If successful, the Chemical Footprint Project will elevate chemical footprinting to the level of carbon and water footprinting in corporate sustainability programs and improve human health and the environment by incentivizing companies to reduce the use of toxic chemicals in products and supply chains.
Chemical footprinting is now coming of age in corporate sustainability. As the business adage goes, “You can’t manage what you don’t measure.”