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Trend Watching: A Toxic Problem for Business?

by Marc GuntherGreenBiz
June 1st, 2007

The risks -- and even the potential risks -- of toxic chemicals in products that we encounter every day has quickly become one of the biggest, most complex and controversial issues facing businesses today.

If you're the parent of a pre-teen boy, you probably paid attention the news that a manufacturer of Thomas the Tank Engine trains recalled more than two dozen toys because the red and green paint used to decorate more than 1.5 million of them contains lead which, if ingested by kids, can cause long-term health problems.

California, meanwhile, passed legislation recently that aims to ban chemical compounds known as phthalates -- they make plastic more plastic, or softer -- from children's toys.

And environmental advocacy groups are bringing pressure on Target to replace packaging, toys and shower curtains made with PVC -- commonly called vinyl, though it stands for polyvinyl chloride -with safer alternatives.

Yes, toxic -- or alleged toxics -- are making news. The risk that products we consume every day contain toxic chemicals is a big, emerging issue for business. It's complex. It's enormously controversial. And a lot of money is at stake.

Last week, I met with Richard Liroff, executive director of the Investor Environmental Health Network, a shareholder coalition. His organization, he told me, has been encouraging companies to adopt "safer chemicals" policies for all their products, in part to avoid unexpected risks or liabilities.

During the 2007 proxy season, the IEHN and its allies filed 13 shareholder resolutions with such brand-name firms as Apple, CVS, Dow, DuPont, Sears and ServiceMaster. The group says it is getting results, including the following:

* 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 device.

* Johnson & Johnson agreed to initiate a stakeholder dialogue with one of the cosmetics industry's harshest critics, the Campaign for Safe Cosmetics.

Cosmetics is a key industry to watch when it comes to toxics. The Campaign for Safe Cosmetics is a coalition of public health, educational, religious, labor, women's, environmental and consumer groups, formed in 2002. Its goal is to push the health and beauty industry to phase out the use of chemicals linked to cancer, birth defects and other health problems, and replace them with safer alternatives.

In January, a report on chemical risks by the respected research firm Innovest Strategic Value Advisors, which analyzes the environmental and social practices of public companies, found that some companies are much better prepared than others to deal with potential risks. The leaders? The Body Shop, Unilever and Procter & Gamble. The laggards? Elizabeth Arden, Estee Lauder and Revlon. (You can download the report from Innovest's website.)

Since cosmetics firms are so dependent on their brands, and since they make products that are (dare I say it) not exactly essential, those that are unprepared to defend everything they put in their products could find themselves with worse problems than a lipstick smear.

Liroff's a smart guy. A fifty-something PhD (in political science), he started IEHN after working for more than two decades at the World Wildlife Fund. Money managers who have been active in IEHN include the Green Century Funds, Domini Social Investments, Trillium Asset Management and Boston Common Asset Management.

He wants to be business-friendly. The IEHN's resolutions typically ask companies to take a close look at what chemicals they use and the potential risks, and some are even more general, seeking sustainability reports.

"We don't dictate outcomes," Liroff says. "We want to stimulate inquiry, to push companies beyond conventional thinking, beyond standard operating procedure."

Shrewdly, he is focusing on retailers like Wal-Mart, CVS and Target, rather that chemical companies, because they can be persuaded, or pressured, to "green" their supply chain. Liroff's been invited to join in a chemicals task force as part of Wal-Mart's sustainability drive; a resolution filed with CVS was withdrawn after the company agreed to engage in dialog with investors over safe cosmetics issues; and he has not made progress with Target.

Predictably, arguments rage over the safety of a range of chemicals. Sorting through the science is more a full-time job. I haven't even begun to look myself.

But Liroff, who is not at alarmist, said something that has stuck in my head since we met. Certain cancer rates, he said, are rising in the U.S., and the medical establishment, led by the American Cancer Society, has focused on finding a cure. But other cancer activists want to take a look at the potential -- yes, potential -- causes of cancer, including toxics in the products we buy and in the environment.

What if it turns out that prevention is the cure?