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Corporate strategic intelligence provider Bart Mongoven says shareholder activism on toxic chemicals in products is “the most effective way of making this an issue for the executives of the corporation.”
The Milwaukee Journal Sentinel (Wisconsin)
Distributed by McClatchy-Tribune Business News
December 10, 2007
INVESTORS TAKE AIM AT PLASTIC PRODUCTS: CORPORATIONS UNDER FIRE FROM WITHIN ABOUT CHEMICAL USE
by Cary Spivak, Milwaukee Journal Sentinel
Dec. 10 — Already under attack from a host of critics, companies that make and sell plastic products are being hammered by a new, unexpected adversary — their shareholders.
In the past two years, more than two dozen shareholder resolutions have taken publicly held corporations to task for their use of potentially toxic chemicals, according to the Investor Environmental Health Network, a nonprofit for money managers and shareholder groups that use investments to pressure corporations on chemical issues. The money managers in the umbrella group oversee $34 billion in assets.
Already, seven resolutions have been filed for 2008 votes, although one was withdrawn when the company said it would consider changes, Investor Environmental Health Network director Richard Liroff said last week. He declined to name the companies because the resolutions have not yet been filed publicly.
In 2005, only three such resolutions were filed.
“It has the potential to dramatically change the industry . . . by placing corporations essentially in the same position that energy companies found themselves in with the climate risk issue,” said Bart Mongoven, vice president for the public policy intelligence group at Stratfor, a national consulting firm. “The use of shareholder resolutions is, I think, the most effective way of making this an issue for the executives of the corporation.”
Corporate response to pressure from shareholders and environmentalists on chemical issues has been modest. A few, such as Whole Foods Market Inc., have yanked a few products from their shelves and say they are looking for ways to replace other items. Wal-Mart Stores Inc. began urging suppliers last year to identify products that are made with a handful of potentially dangerous chemicals and to tell the retailing giant what changes they will make regarding use of the compounds.
Other firms have simply agreed to talk to the shareholder groups, an action money managers see as a victory.
Mongoven explained that resolutions could turn the presence of potentially dangerous chemicals in toys, cosmetics, household items or even packaging into a hot-button issue. If that occurs, retailers and manufacturers will respond by pressuring chemical-makers to come up with alternatives.
There’s been a rash of media attention on the chemical issue, much of which has focused on compounds, such as bisphenol A and phthalates, that mimic hormones. In October, California, following the lead of the European Union, passed legislation banning products designed for young children that contain certain phthalates.
A recent Journal Sentinel investigation chronicled the slow movement by the U.S. government to test suspected endocrine disruptors — despite a law Congress passed in 1996 ordering the Environmental Protection Agency to begin testing.
The newspaper also found that government assurances about the safety of bisphenol A are based on outdated and incomplete science often funded by the chemical industry.
Bisphenol A is in an array of products, including plastic baby bottles, dental sealants and cans, including those used to package infant formula.
Last week, the nonprofit Environmental Working Group said its own tests showed that the chemical, which has been found to cause cancer and a host of other health problems in laboratory animals, was present in liquid baby formula packaged in containers made with bisphenol A.
“It’s an area where the laws are not being developed or they are not being enforced,” Liroff said. “So, in essence, what you have here is market forces coming in to fill the void.”
Though the chemical resolutions have received little media attention, activist shareholders are convinced that will soon change.
“Have you seen the number of recalls lately?” said Lauren Compere, director of shareholder advocacy at Boston Common Asset Management. “We’re saying, ‘Deal with this proactively, it’s a form of risk management . . . We’re talking about risk to your reputation.’ “
Boston Common, which manages $800 million in assets, filed a resolution this year about the safety of cosmetics sold at CVS Caremark but withdrew it when the 6,200-store pharmacy chain agreed to meet with the group, Compere and a CVS spokeswoman said.
Corporate giants such as ServiceMaster Co., Avon Products Inc. and Sears Holdings Corp. have all dealt with shareholder resolutions in the past two years.
Last year almost 45% of Hasbro shareholders backed a resolution that noted the toy giant “sells many toys made out of or packaged in polyvinyl chloride (PVC) plastic, a substance which has come under scrutiny due to health and environmental concerns.” It called on the company to review its policies regarding “social, environmental and economic sustainability,” including the PVC issue.
Liroff explained that the softly worded bureaucratic language in the resolutions is required by law. Even with that, he said, corporations are getting the message, noting that the Hasbro vote was the largest one ever cast favoring a chemical resolution. Generally, winning 10% of the vote on a resolution opposed by management is viewed as a victory.
Wayne Charness, a Hasbro spokesman, said the company responded by posting an expanded and “more robust” corporate social responsibility statement on its Web site.
Even companies that identify with the environmental movement have been targeted.
Shareholders filed a resolution urging Whole Foods Market to consider removing products that contain bisphenol A or other chemicals that mimic hormones.
Whole Foods, like most corporations, opposed the resolution. But the high-end retailer of natural and organic foods agreed to remove baby bottles and related products that contain bisphenol A — an action announced just before 10% of its shareholders voted on the matter last year.
Corporate leaders at Bed Bath & Beyond Inc. agreed to talks about chemical safety after 22% of its shareholders voted in July for a resolution calling on the retailer to study ways to reduce or eliminate potentially toxic chemicals in products, said Catherine Gentile, a company spokeswoman.
The resolution was made by As You Sow, a San Francisco group that uses its stock holdings to pressure firms on environmental and social issues.
RiskMetrics Group, a consulting firm that advises large institutional investors such as pension and mutual funds, frequently recommends that its clients support resolutions that would remove potentially dangerous chemicals from products. Last month it expanded its policy so that it will now also typically advise investors in retail operations to favor the motions.
Jim Letsky, RiskMetrics director of governance research and policy, said a company can damage its reputation or face lawsuits if it sells products that are later found to contain toxic chemicals.
“It’s not a matter of being altruistic,” Letsky said. “It’s a matter of being smart in the long term.”
Susanne Rust and Meg Kissinger of the Journal Sentinel staff contributed to this report.