CVS Health and WBA race to Rx for safer chemicals
Environmental health advocates and investors have been prodding CVS Health and Walgreens Boots Alliance to adopt comprehensive safer chemicals policies for products to reduce customers’ exposures to worrisome chemicals.
Both companies’ products comply with federal safety standards. But because federal regulations badly lag growing scientific understanding of chemicals’ toxic impacts, CVS Health, Walgreens Boots Alliance (WBA) and other merchants are increasingly being called upon to serve as “retail regulators.” Growing numbers are implementing tougher standards than those established by government regulations.
In the competition to sell safer products, CVS seems far ahead of WBA, at least as measured by adoption of concrete policies for promoting safer alternatives and progress in removing suspect chemicals. However, the late 2014 acquisition by Walgreens of Alliance Boots, a product manufacturer and the largest drug chain in the United Kingdom, offers the new WBA the opportunity to catch up with or even leapfrog CVS.
Giving the boot to bad chemicals
Little-known in the U.S. until recently, the Boots unit of Alliance Boots has been a leader in safer chemicals in Europe (and one of the strongest worldwide).
For about 10 years, the Boots unit of Alliance Boots has had one of the strongest safer chemicals policy of any retailer on the planet, so if WBA opts to adopt Boots’s policies across all its stores, it will position itself very well in the growing competition for customers concerned about chemicals in personal care, cleaning and other products.
In 2002, Friends of the Earth UK launched a Safer Chemicals Campaign that included a “retailers’ pledge.” FOE secured pledges (PDF) from major retailers throughout the U.K. to work from government lists to identify bioaccumulative chemicals and those that interfere with the hormone, immune or nervous system; produce a strategy to identify which private label and national brands contain these chemicals; produce a timeline to phase out these chemicals from private label brands and pressure national brands to remove them; and report publicly on progress.
Shortly thereafter, Boots (later merged with Alliance Unichem to form Alliance Boots) developed a publicly available Priority Substances List, updated periodically and available on its website, which details chemicals, actions and targets. For example, the March 2004 priority substances list (PDF) targeted certain uses of Bisphenol-A (BPA) for elimination by mid-2004.
Boots’s May 2014 Priority Substances List (PDF) not only lists outstanding targets, but also chemicals where actions have been completed. For instance, Boots has not used triclosan in new product development since 2005, and began phasing it out of cosmetic and toiletry products in 2008.
Similarly, Boots began phasing out polyvinylchloride (PVC) plastic from its cosmetic and toiletry products in 2008. Boots’s actions implement the precautionary chemicals approach it adopted in 2003 (PDF): “Where there are reasonable grounds for concern that a chemical used in our product could be harmful to human health or the environment, we will always take appropriate precautionary measures.”
CVS and chemicals of concern
CVS shareholders have demanded fewer toxic chemicals, and the company is responding.
In 2007 Boston Common Asset Management and other investors filed a shareholder resolution at CVS, asking the company to report on how its product lines might by affected by growing public and regulatory concern about chemical safety. The resolution cited European and California cosmetics legislation, commitments by L’Oreal and Revlon to implement European standards globally, and adoption by Boots (by then a supplier of personal care products to CVS) of a safer chemicals policy.
CVS, after having unsuccessfully challenged a similar shareholder resolution the year before, responded to the second resolution by publishing its Cosmetic Safety Policy in its inaugural 2007 corporate social responsibility report (PDF). The company noted the various products it sold that met European standards or were from companies that had signed the Compact for Safe Cosmetics promoted by the Campaign for Safe Cosmetics; committed “to developing action plans to replace ingredients of concern in our branded and private label products when safer alternatives are available”; and said it would dialogue with proponents of safe cosmetics about their concerns.
CVS’s actions were applauded both by investors and the Campaign for Safe Cosmetics.
CVS Health has continued to report progress in addressing chemicals of concern. In its 2012 corporate social responsibility report (PDF), the company noted its phaseout of parabens and formaldehyde-releasers in all its CVS brand baby care products and noted that they did not contain other chemicals of concern. CVS points out that in the Campaign for Safe Cosmetics’ Retailer Therapy report published in December 2012, CVS ranks second behind Whole Foods Market for its commitment to safer personal care products. In its 2013 CSR report (PDF), the company added additional details on its safer alternatives actions.
Pressure from advocates and customers
The Campaign for Safe Cosmetics’s Retailer Therapy report had the clear purpose of promoting a race among retailers to develop and implement safer chemicals policies. The report ranked eight prominent retailers, with Whole Foods Market leading with nine out of 10 possible “kisses.” CVS received five kisses, WBA four and Macy’s was last with one. In its assessment of WBA, the campaign applauded WBA’s newly announced “Ology” line of products, which does not contain parabens, phthalates or four other named chemicals of concern. But the campaign was unsuccessful in finding any public statement by WBA of a broad safer chemicals policy and the company did not provide one when requested.
In 2013, environmental health advocates in the Safer Chemicals, Healthy Families coalition launched their “Mind the Store” campaign directed at the 10 biggest retailers, including CVS and WBA. The campaign’s “ask” was for retailers to examine their product offerings for over 100 chemicals of concern listed in various official chemical lists and to develop comprehensive chemical policies to reduce, eliminate or safely substitute for the “Hazardous 100+” chemicals.
Although CVS responded quickly to the campaign in writing, Walgreens was slow to respond, so advocates stepped up their pressure with store protests, tests of products for chemicals of concern and online petitions that have generated over 150,000 signatures.
Investors also have weighed in with WBA through the years. Investors initially filed a shareholder resolution at WBA on safer chemicals in 2006, but the company, unlike CVS, was successful in persuading the Securities and Exchange Commission it could keep the shareholder resolution off its proxy ballot.
Will Walgreens stick to the same path, or will the company embrace Boots Alliance's safer-chemical outlook?
In 2013, on the heels of the launch of the Mind the Store Campaign, investors led by Green Century Capital Management sent letters to the targeted retailers encouraging them to address the chemical concerns raised by advocates. In a follow-up meeting with WBA, investors noted Walgreen’s then-45 percent ownership stake in Alliance Boots en route to the complete merger in late 2014, and encouraged the company to consider company-wide adoption of Boots’ safer chemicals policy and practices.
Companies merge with other companies for myriad reasons. According to the Wall Street Journal, Walgreens's mid-2012 agreement to acquire Alliance Boots was motivated by a desire to gain purchasing power with generic drug manufacturers and generate $1 billion in cost savings by 2016. The merged companies would become the largest purchaser of generic drugs in the world.
The road ahead
The due diligence process in which acquiring companies engage can help identify previously undisclosed risks but also can reveal some hidden gems. When Walgreens launched its merger with Alliance Boots, whether the company realized it or not, Walgreens inherited a successful safer chemicals policy that can give it a leg up competitively if it rolls the policy out company-wide. Walmart and Target, two prime competitors of CVS and WBA, already have launched their own safer chemicals programs.
WBA needs to catch up with its competitors in this rapidly evolving space. Boots has provided the means. Now WBA needs to embrace it.