Product Recalls Cost Companies Millions; While Companies Responding to Market Demand for Safer Products Are Seeing Growth in Sales.
UNDP News Center
Geneva, 15 December 2014 – Chemicals are all around us, present in the products weuse every day. The demand for increased transparency on chemicals up and down the supply chain is growing – we need to understand how and with what chemicals we are interacting.
Consumers, retailers and brands all want to know more, driving companies to disclose information about the hazardous chemicals in their products and to make safer choices.
Now a new report, The Business Case for Knowing Chemicals in Products and Supply Chains, highlights the benefits to companies when they invest in an “Active Strategy” for chemicals management, one in which they proactively manage the chemicals in their products and supply chains to stay ahead of regulatory and market demands.
The United Nations Environment Programme (UNEP) report, prepared in collaboration with the environmental NGO Clean Production Action, was released today at the Strategic Approach to International Chemicals Management (SAICM) Open-ended Working Group’s meeting in Geneva, Switzerland.
The report speaks directly to the emerging chemicals policy issue of Chemicals in Products, which will be discussed in-depth at the SAICM meeting, along with five other emerging policy issues of high priority to the international chemicals policy community.
“A thorough understanding of which chemicals are present in products we use on a daily basis, and any hazards they bring with them, is the first critical step to reducing the risk to these hazards,” said Fatoumata Keita-Ouane, Head of UNEP’s Chemicals Branch. “This business case report underlines how companies that actively seek and act upon this information generate long-term value for themselves, their shareholders, the public and the planet.”
“The fact that chemicals are the foundation of everything around us presents significant management challenges for the vast majority of businesses that do not know the chemicals in their products or supply chains, do not understand the hazards of those chemicals, and do not know the availability of safer alternatives,” said Dr Mark Rossi, Chair & Founder of BizNGO and Co-Director at Clean Production Action. “As the new report details, this massive gap in information leaves companies and communities at risk.”
The report compares companies with differing chemicals management strategies, concluding that those with Active Strategies reduce their risk to damaging chemicals “surprises” and generate long-term value through increased sales, enhanced brand reputation, and well-managed supply chains.
The report demonstrates how companies with “Passive Strategies” can face big fines, loss of market share and value, and tarnished reputations if an unknown “hidden liability” of hazardous chemicals in their products comes to public light. The report notes that over a three-year period Walmart, Target, Walgreen Co., CVS Pharmacy and Costco Warehouse paid a total of US $138 million in fines because of chemicals of concern found in their products.
Product recall costs can also be significant: Sony’s recall of its PlayStation in 2011
due to illegally high cadmium levels cost the company more than US $150 million in lost sales and product reformulation costs; Mattel’s recall of more than nine million toys in 2007
due to lead in their paint cost the company US $110 million in recall expenses and its stock price tumbled 18 per cent; and RC2 Corporations 2007 recall of toy trains, also due to lead paint, cost US $48 million and halved its stock price.
The marketplace is also swift to punish: in China in 2009, tens of thousands of consumers stopped buying, and thousands of stores stopped selling, Johnson & Johnson’s baby products after formaldehyde and 1,4-dioxane were found in some of these products in the United States. Johnson & Johnson saw its market share in China for baby products decline by almost 10 per cent.
Conversely, the report says, proactive businesses that adopt an Active Strategy reap the rewards of their efforts: they avoid fines and product recalls, are well-prepared for new government regulations and respond quickly to ever-growing market demands to know and control the chemicals in their products.
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