IEHN Blog: April 20, 2023

Investors commend corporations for reducing business risk by eliminating over 37 million kilograms of toxic chemicals from products, and call on more companies to adopt best practice and join the 2023 Chemical Footprint Survey

April 20, 2023 Susan Baker, Trillium Asset Management; Caroline Boden, Mercy Investment Service; Karianne Lancee, UBS Asset Management; Alexandra McPherson, Investor Environmental Health Network; Larisa Ruoff, The Sustainability Group of Loring, Wolcott and Coolidge Blogs

Recent scientific studies make clear that we are reaching a tipping point on chemical pollution  and taking “urgent action” is necessary [1]. According to the Chemical Footprint Project (CFP) report, “chemical pollution is one of the three planetary crises confronting humanity along with climate change and biodiversity loss”. Continued dependency on chemicals known to cause harm to human health and the environment exacerbate climate change, biodiversity loss and plastic pollution [2]. Similarly, the rise in environmentally related diseases from exposure to toxic chemicals in our water, air –and waste and their subsequent costs to our economy– raise significant concerns. [3]

At the same time, regulations related to toxic chemicals are increasing rapidly.  In 2023, at least 31 states, including major markets like California and New York,  will consider 260 policies to restrict toxic chemicals [4]. Further, the Chemical Strategy for Sustainability, part of the European Union’s Green Deal, includes a proposed 300% increase in chemicals targeted for restrictions [5].  These regulations are driving market shifts optimized for companies that are proactively reducing their chemical footprint and investing in greener, safer chemistries.

Investors are increasingly paying close attention to the financial risks companies face in a changing chemical management landscape. Just as companies regularly report on carbon, water, waste, and emission reductions, investors are asking companies to report on their chemicals management practices and chemical footprint reductions in their sustainability and ESG reports.

The Chemical Footprint Project fills that gap by providing a leadership framework and platform for standardized disclosure based on best practice. It also seeks to provide investors with performance indicators to evaluate portfolio risk, corporate resiliency and competitiveness in the face of major marketplace changes.

Importantly, companies participating in the CFP Survey are demonstrating significant progress to reduce their harmful chemical footprints and advance human and environmental health. This in turn reduces business risks and financial costs associated with revenue dependency on chemicals of concern. It also strategically positions these companies to compete for customers increasingly looking for sustainable products. Close to 30 companies with over $1 trillion in annual revenue collectively achieved a chemical footprint reduction of 37 million kilograms, as reported in the 6th annual Chemical Footprint Project Survey.

Investors are now asking companies to join the CFP 2023 Survey and disclose results towards key performance indicators including the following:

• Establish a chemical management policy:  Create a governance structure to manage and quantify chemicals-related risks including the percent of revenue dependent on chemicals of concern and clear targets for increased use of safer chemicals.
• Reduce the use of chemicals of concern: Set time-bound goals for products, manufacturing, and packaging to eliminate chemicals of concern and establish restricted substance lists for products (RSL) and manufacturing (MRSL).
• Invest in safer solutions: Define thresholds and criteria for safer chemicals and disclose research and development (R&D) spend on sustainable chemistry solutions.
• Increase transparency and validate results: Use third-party tools, like the Chemical Footprint Project Survey to assess progress and identify areas of improvement. Disclose results publicly and certify products to build trust and competitive positioning in the marketplace.

[1] https://pubs.acs.org/doi/full/10.1021/acs.est.1c04158

[2] https://www.chemicalfootprint.org/resources/entry/6th-cfp-report

[3] https://ehjournal.biomedcentral.com/articles/10.1186/s12940-017-0340-3

[4] https://www.saferstates.org/news/new-analysis-pfas-forever-chemical-policies-will-dominate-in-states-nationwide-in-2023/

[5] Scivera webinar, July 2022