Posts filed under ‘Emerging Issues’
Adapted from a post that originally appeared on the Fleishman-Hillard CSR & Sustainability practice group blog.
Some phrases take on a momentum all their own. Such was the case at NAEM’s recent 20th annual Forum, as Deputy Director Virginia Hoekenga introduced Paul Hawken, eco-visionary and best-selling author of“Natural Capitalism: Creating the Next Industrial Revolution.”
“His book changed my life,” she said.
It’s a sentiment I can well appreciate, having emerged from the Forum with a new perspective – at least with regard to two conditions that are necessary for reaching the “sustainability tipping point” that MIT-Sloan Management Review claims we are now approaching.
The first is a sense of complicity. While the conference offered keen insights on what corporations, governments and non-governmental organizations can do, and are doing, to promote a more sustainable future, the fate of our planet is – to paraphrase The Rolling Stones – after all, up to you and me.
Until we as individuals resolve to waste less, recycle more and make and demand greener choices, a tipping point in the right direction is likely to remain elusive. According to a study cited during a session on green marketing, 95 percent of consumers entering grocery stores said they would consider buying “green” products. Only 22 percent actually did.
In a session on life cycle analysis, we were told that nearly one-third of mankind’s global carbon footprint results from food production. Yet about that same percentage of household food purchases end up in the garbage. Add to that the fact that residential recycling rates remain stubbornly modest, and hybrid vehicle sales make up only three percent of the automotive marketplace, and it’s easy to see a lot of low-hanging fruit still on our own vines.
Sure, inadequate infrastructure, artificially high pricing, partisan politics and market confusion create barriers. But it will take individual accountability, not just corporate responsibility, to get us over the hump.
A second condition that would accelerate our journey toward sustainability is greater savings for greener choices. According to the 2012 GfK Roper Green Gauge Report, consumers’ overall willingness to pay more for greener goods has declined in recent years. But depending on the product category, 40 to 60 percent are still willing to do so. This is what researchers and marketers call the “green premium”. It’s related to the common refrain among green marketers that “all things being equal” (i.e., price and performance), more people are apt to buy greener products.
What? A green premium? All things being equal? How about a green discount? What about lower prices for environmentally preferable products and services? If driving carbon, risk, materials and waste from the value chain is truly worth something, why not let that be reflected in the asking price?
Of course, not all greener choices command a premium, but many do. And yes, some green products or services cost more to bring to market, but others cost less. Or would, if the economies of scale were there.
I’m not suggesting that companies subsidize greener products. But charging more for these choices simply because under certain conditions they can, may be short-sighted. Wouldn’t it be better to build brands, increase sales and ultimately create healthier, more sustainable bottom lines by sharing the value of greener products with the people who purchase them?
In reflecting upon my experience at the 2012 EHS Management Forum, I’m a more discerning and informed person for having attended. I have a better understanding of how nongovernmental organizations help companies with limited resources engage with stakeholders around the world; how EHS skills transfer to the broader discipline of sustainability/CSR; and how a coating used in toilets can be applied on buildings to proactively remove nitrogen oxide from the air.
If we are what we think, then the conference did indeed change my life.
In October the Federal Trade Commission (FTC) issued an update to the “Green Guides,” a set of rules that govern how marketers marketers communicate a product’s environmental attributes. To learn more about how the new guidelines could impact NAEM member companies, we spoke with Mark Duvall, an attorney with Beveridge & Diamond P.C. and an expert on product regulations.
Q: What are the Green Guides and why do you think we are seeing an update now?
MD: The Green Guides were first adopted in 1992 to provide guidance to marketers with respect to their environmental marketing claims. The intent was to help them avoid making deceptive statements that could put them in a liability. They were revised in 1996, 1998 and again this year.
It was time for an update because the nature of the environmental marketing claims changed since 1990s. Today there is more of a focus on carbon emissions and the idea that products are non-toxic, or free of particular chemicals, such as Bisphenol A or formaldehyde. Plus, over the past 15 years the FTC has brought a number of enforcement cases. It selects its enforcement cases with the eye of setting a message and this update is a way for the FTC to send that message more broadly then just through the enforcement.
Q: Can you give me an example of a potentially deceptive claim?
MD: An example that the FTC sometimes uses is “contains no CFCs”. (CFCs are Chlorofluorocarbons.) That sounds like it is a good thing because Chlorofluorocarbons are the things that work on the ozone layer and consumers might be inclined to buy a product because it contains no CFCs. But they have been prohibited in all products for years. There is nothing special about a product that has no CFCs.
Q: What are some of the key changes?
MD: It really depends on the type of claims they make. One of the things the guidelines did was to carry over most of the guidance from the previous 1990s version. The FTC clarified that the Green Guides apply to business-to-business communications. There is a common perception that the Green Guides only apply to marketing directed at individual consumers, but there is a lot of marketing directed at other businesses.
There are also new sections on certifications and fields of approval. There is also new guidance on claims of renewable energy or renewable materials, or carbon offsets, as well as “free of” claims and non-toxic claims.
Q: What do the Green Guides say about “free of” claims?
MD: There is an interesting aspect in the “free of” claims that you can make a claim when a chemical is still present, but at a diminished amount. A good example is “formaldehyde-free”. Think of wood products that are sometimes glued together using urea formaldehyde resins. There is also formaldehyde given off from the wood itself because the wood naturally generates formaldehyde at low levels. The FTC says that you can make a “formaldehyde-free” claim if you are not using formaldehyde resins, even though there may be a small amount of formaldehyde being naturally given off by the wood.
Q: There are so many different kinds of certifications and seals of approval out there these days, what do the Green Guides say about those?
MD: Unqualified seals and certifications are regarded as general environmental benefit claims, which are almost impossible to substantiate and therefore are considered deceptive. That makes it important to qualify appropriately the certifications to limit them to particular environmental attributes.
Q: What is an ‘unqualified certification’?
MD: Let’s say that you get a certification that says you are ‘eco-friendly’, without any qualification that explains in what way you are eco-friendly. What that does is suggest there are no environmental drawbacks for your product and that is probably not going to be the case. If you have received an award for being eco-friendly, it is because of a particular attribute or combination of attributes. The FTC is saying it can be deceptive if you don’t limit that certification to the particular attributes for which you are receiving credit. So in other words, the FTC wants greater specificity for the particular attributes that the third party is recognizing your product.
Q: Does that inherently endorse certain certifications and discredit others because some certifications may be more general?
MD: Not automatically. It may be that some certifications are specific in the certification itself. If not, it is up the marketer to qualify that broad certification as saying we were awarded this eco-friendly certification because our product is made with renewable materials. So if the certification itself doesn’t narrow it down to the specific attributes, then the marketer may have to qualify that claim by identifying what the specific attributed are.
Q: Does the fact that these certifications often cost money have any impact on their credibility?
MD: The FTC says that the fact that you pay a fee for the services of an independent, third party to conclude the certification does not need to be disclosed because consumers expect that to happen. On the other hand, if there is an exchange of money and the third party doesn’t do any evaluation but just hand over a certification (which happened in a recent enforcement case) that is deceptive. However if the award is coming from a trade association of which you are a member, your membership has to be disclosed. The impression the consumer has is that the awarding agency is an independent third party; there is a material connection between the two it needs to be disclosed.
Q: What about claims a company makes based on its own research?
MD: In most cases, companies will develop their own substantiation for their own marketing claims and there will not be a third party. In that case FTC has concluded that claims such as biodegradable are deceptive if the product is unlikely to biodegrade in the real world because it is disposed of a manner which precludes that. So before companies make a product claim, they need to understand what the likely use of that product will be in the market and are responsible for making a claim based on that use.
Q: How widespread do you think this impact is going to be?
MD: I think it is going to be significant. This is nation-wide guidance. It is unlikely to be updated again for several years. The guidance had been proposed in 2012 and some companies responded to the proposal but others waited for the final. Now that the final is out there is no reason not to go ahead and review marketing claims in light of the green guides.
For more information on the FTC’s updated Green Guides, please visit: http://www.ftc.gov/opa/2012/10/greenguides.shtm.
Why do companies have to focus on developing a robust product stewardship program?
According to a report by the consulting firm McKinsey’s November 2011 “Resource Revolution” report, there is going to be resource scarcity that will affect product development. Consider that there will be 3 billion more middle class consumers by 2030; the global car fleet is predicted to double to 1.7 billion by 2030; China is anticipated to annually add two and a half times the floor space (the size of Chicago); the cost of an oil well has doubled over past decade, and new mining discoveries has flattened despite quadrupling exploration spending.
All this leads to the conclusion that we need to make products differently than ever before. All those middle class consumers will want to have the same products as we have in the West, but where will all those raw materials come from? The cost of raw materials will no doubt increase and become scarcer.
Addtionally, governments have been developing new regulations to force greener products to be designed. Regulations like REACH, RoHS, WEEE and packaging design and ‘take-back’ requirements have been increasing in all regions of the world. I know for my company, Johnson & Johnson, we have initiated a governance process to insure we are in compliance with these growing types of regulations. This is more complicated than typical EHS regulations because there are groups involved with compliance that we are not typically interfacing with, e.g. sales and marketing, packaging design, research and development (R&D). And the regulations are not facility-specific. Compliance with the European Union’s REACH regulation, for example, can cover several different sites and R&D organizations. When environmental regulations can affect product sales, you have to pay attention.
All these are really good reasons to have a robust product stewardship program and design greener products. However, to me the biggest driver for upping your product stewardship program is customers demand for greener products. When your biggest customer in the world, Wal-Mart, starts asking you for greener products, you have to respond. This demand doesn’t only apply to the retail customer, but it is getting bigger with business-to-business customers, too. My company has a significant amount of our sales to hospitals; and they are asking for more sustainable products. In fact in research we recently commissioned a global survey of hospitals determined that 54% of hospitals said that green attributes are very important in their purchasing decisions. So we are seeing that the demand for greener products is much broader than just retail consumers.
Making the business case for having a product stewardship program becomes so much easier when you can show management that the market demands greener products. Having seen this trend coming, I was fortunate to be able to convince management to take our design for the environment program up a notch and develop a branded greener product development program. Partnering with a third party consultant, Five Winds International, we performed benchmarking and voice of the customer interviews to come up with a process we call Earthwards®.
Having a branded program is helpful for our customers to easily identify our greener product offerings and it also helps internally to get momentum and focus on greener products. If EHS professionals want to make a difference with their work, it becomes really exciting when you can help your business by increasing sales while making significant environmental improvements to your products.
Al Iannuzzi is a Senior Director in the Worldwide Environment, Health & Safety department at Johnson & Johnson, where he directs the global product stewardship and green marketing programs. He is the author of the books, “Greener Products: the Making & Marketing of Sustainable Brands” (CRC Press 2011) and “Industry Self-Regulation and Voluntary Environmental Compliance” (CRC Press, 2002), and has written numerous articles on product stewardship and environmental compliance.
In a business, change presents an opportunity to eliminate environment, health and safety (EHS) risks, and learning how to initiate and drive necessary change is an important skill for EHS leaders to cultivate.
Here are a few observations on how to reduce EHS risks by taking advantage of change:
- Identify the relevant opportunities: One of the key challenges is to explain which opportunities merit your involvement and why. While this may seem obvious to you, it may not be to your leadership or to the project managers who are under pressure to deliver results on schedule, under budget. There are the big opportunities such as a facility move, consolidation, or expansion, and new or modified equipment. These offer excellent opportunities to implement fire protection systems, machine guarding, electrical safety devices and ergonomic principles. New or reformulated chemicals or materials and changes in chemical use offer a more subtle opportunity to reduce EHS risk by substitution, improved control and more efficient use. New product introduction can be an opportunity to address long-term, regulatory-driven challenges such the European Union Restriction on Hazardous Substances (RoHS) directive or the Waste Electronic and Electrical Equipment (WEEE) directive. New customers, contracts and suppliers may be game-changers where EHS requirements are concerned.
Business leaders need to understand the EHS risks and opportunities that come with these new relationships.
- Get a seat at the table during the initial planning phase: This requires networking upfront with key process leaders as well as infusing EHS into the policies and procedures of the engineering, manufacturing and procurement departments. It also means engaging in strategic planning and product development processes. These relationship-building investments will pay dividends in the long-term. I have experienced missed opportunities due to lack of upfront involvement, such as failing to conduct a Phase I ESA prior to leasing a manufacturing facility and not specifying fireproof ceiling materials when renovating a building. Typically, trade-offs in material and equipment selection and capital investments are much more palatable when considered as part of a change.
- Make the business case in broad, but tangible terms: When conducting the traditional return on investment analysis that we are all familiar with, consider the financial benefits of EHS- driven investments that improve quality, improve productivity (e.g., more efficient material flow, reduced labor, and shorter cycle time associated with ergonomic improvements), reduce insurance premiums and avoid the cost of regulatory compliance administrative tasks (e.g., regulatory reviews, operating permits, and compliance training). Lastly, customer and employee satisfaction and retention are highly persuasive aspects of making a business case, if you can do it in credible, concrete terms.
- Reinforce the value of your involvement by measuring and reporting results: This is often forgotten in the swirl of the work day and the pressure to move on to new challenges. Once the change has been made and you are operating at steady state, do the analysis and demonstrate that the change has delivered what was promised. It will make people more receptive to your input the next time a change is contemplated.
What advice do you have for ensuring EHS is included in the management of change process? What lessons and success stories can you share?
Stephen Evanoff is Vice President of Environment, Health and Safety for Danaher Corp., a Fortune 250 global science and technology company. To learn more about the habits of effective change agents, tune in for NAEM’s Emerging Leaders webinar on “Strategic Influencing: How to Drive and Manage Change” on Sept. 20.
Perhaps you can relate to this situation: Just as our client’s sales force was poised to ship a hot new product to a dozen market countries, one of the process chemists happened to mention to the environmental manager that the product contained a “nano” component. Suddenly these small particles became a very big deal to the environmental manager, who needed to determine the relevant regulatory restrictions on a tight schedule.
Although the use of nanomaterials dates back centuries, commercial use has increased dramatically over the last decade as manufacturers have used their unique properties to create competitive advantage. In response to this increased use, environmental managers now must navigate an ever-evolving suite of regulations and health and safety precautions for those employees working with nanomaterials.
Nanomaterials can offer increased strength, conductivity, or reactivity, but particle size can also affect certain physicochemical properties, and even the toxicological effects of the substance. These may include:
- Decreasing the size of a particle increases the relative proportion of atoms on the surface. Consequently, the dissolution rate and the relative rate of reactivity can increase, for example.
- Each atom on the particle surface has fewer bonds than it would have if it were located in the middle of the particle. As a result, the energy associated with those atoms, known as the “surface free energy” differs from the free energy associated with atoms in the center of the particle. The surface free energy can affect such physical properties as the melting point, equilibrium solubility, and reactivity. The latter explains why nanoscale catalysts can be so effective.
- When the diameter of the particle is of the same magnitude as the wavelength of the electron wave function, so-called “quantum effects” occur. At this point the electrical and optical properties of the particle may change, allowing for carbon nanotubes to conduct electricity, or silver particles to appear blue, for example.
Managing the potential risks of nanomaterials can be a daunting challenge for environmental managers. One of the most difficult issues to solve is that regulators around the world define “nanomaterial” differently, with the size cutoff ranging up to 2000 nanometers (nm) and some definitions including other parameters. An environmental manager concerned with product registration must carefully parse the regulatory definitions and their application to nanomaterials, to determine if their products are regulated differently than bulk materials. Other environment, health and safety (EHS) risks associated with nano-scale materials include:
- Evolving product registration requirements;
- Appropriate health and safety precautions for workers;
- Waste management;
- Perceptions and misperceptions by customers; and
- Other life cycle concerns.
The scenario described at the beginning of this blog ended with a twist. Although the raw material supplier characterized their product as a nanomaterial, perhaps for the “cool factor” associated with the name, it did not actually meet the regulatory definition of a nanomaterial in any of the market countries. No special registration, classification, or labelling provisions applied to the material, and our client’s product could be shipped without delay.
Kate Sellers is Principal Environmental Engineer with Arcadis and co-author of the book, “Nanotechnology and the Environment”. She will continue the discussion about managing nano-scale materials during NAEM’s upcoming webinar “Understanding the EHS Opportunities and Challenges of Nanotechnology” on August 16.
With product sustainability and stewardship issues becoming more important and complex in the marketplace it’s still unclear to many organizations what is the best approach in finding ways to create business value and manage risk associated with product sustainability and stewardship.
More than 100 EHS and sustainability leaders attended NAEM’s Product Stewardship Conference last week in Framingham,Mass. to discuss product sustainability and stewardship issues. It’s rare when you get that many people together to discuss these topics so there was a lot of great information and insights shared between the attendees.
The topics varied and included the challenging global product regulatory landscape, leveraging life cycle management to create business value within an organization, managing supply chain transparency and reporting issues, and the different ways to design and implement product sustainability programs.
The thing that really caught my attention was how greatly companies differ in their approaches to creating value and managing risk from a transparency and performance improvement perspective, both key pillars to any product sustainability and stewardship program. The following are a few examples of the strategies companies are taking.
Intel shared the approach they were taking to address the pending conflict minerals reporting requirements in section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Conflict minerals such as tantalum, tungsten, tin and gold are an increasingly challenging issue within the supply chain, from the mining and extractive industry to downstream manufacturing companies in the electronics industry. Intel’s serious approach to providing transparency about the sourcing of conflict minerals, was quite admirable and isn’t something you see every day. The company believes transparency is “foundational to fostering understanding and acceptance in order to move suppliers along the sustainability maturity curve.” Since transparency is a critical part to any sustainability program so I’d suggest taking a look at a video Intel has created which explains how they are establishing a conflict free supply chain.
It was also very interesting to hear how APC Schneider Electric and WESCO International Inc. are using product sustainability programs to address customer requirements and create differentiation in the marketplace. These represent very good examples of the challenges of balancing transparency and environmental performance as part of a product sustainability program.
APC Schneider Electric has developed a ‘green premium’ program that focuses on the transparency and reporting of the environmental performance on a selected group of its products. These products must meet international standards and regulations such as RoHS, REACH and End of Life in addition to having a published and third-party-verified life cycle assessment. Because there isn’t an environmental performance threshold to the program per se (other than meeting international standards and regulations) their definition of ‘green premium’ revolves around transparency and less on improved environmental performance of the product. It will be interesting to see how their program evolves over time as they’ll likely need to answer more questions about the environmental performance of their products as this information is made available to customers and stakeholders.
Wesco has a fabric-based solution for laying cable in duct work called MaxCell. Across its life cycle, this product has superior performance related to carbon emissions, but the company struggled to communicate an effective ‘sustainability story’ to their customers. Ultimately Wesco chose to work with Carbon Trust, a third-party certification body, to verify their product carbon footprint. Although the company chose not to use the Carbon Trust certification logo, it still went through the verification process to confirm its environmental performance claims and as a demonstration to customers that the product would continue to reduce carbon emissions over time.
It’s clear that companies are challenged in finding ways to create business value and manage risk with product sustainability and stewardship. The level of transparency a company chooses to provide depends on the overall strategy, and each decision brings its own benefits and risks.
What are the elements that shape your product stewardship strategy? How is your company adapting to the demands of product stewardship?
Chris Nelson is a Partner with ERM, a leading global provider of environmental, health, safety, risk, and sustainability consulting services. He leads ERM’s Global Product Sustainability Services Practice which is focused on helping ERM’s clients design and implement product sustainability and stewardship programs that create business value from preferential environmental and social outcomes.