No one knows how many of the 84,000-plus chemicals used in the U.S. are lurking in the goods we purchase, or how safe they are. Federal law hasn't required most of them to be tested or many to even be publicly identified. But the onus is quickly growing for producers and retailers of consumer products to find some answers.
Strengthening legislation in various states and around the globe-plus increasing litigation-is making it important for these companies to monitor, report and replace or reformulate toxic chemicals.
"I think companies owe it to themselves and their investors to know the chemical risks in their products and supply chains and work to eliminate them," says Richard Liroff, executive director of the Investor Environmental Health Network (IEHN) in Falls Church, Va. Its members, who collectively manage $30 billion to $35 billion in assets, encourage companies to adopt policies that reduce and eliminate toxic chemicals from their products and activities.
The toughest law is the European Union's REACH regulation, which controls the registration, evaluation and authorization of chemicals. Now being phased in, it requires companies to meet certain obligations if they use chemicals from a REACH watch list. Called "substances of very high concern" as defined in the regulation, they include things that are carcinogenic, mutagenic or toxic to reproduction.
Under a consumer "right to know" provision, companies must respond within 45 days to customer inquiries about these chemicals in products or packaging. "If you're invested in a company marketing in Europe, you need to be very concerned about REACH," says Liroff, "because REACH will over time generate a list of chemicals that cannot be marketed."
REACH-like regulations are also being prepared in emerging countries such as China and India, though they aren't as stringent, says Amandine Marques, a Paris-based environmental, social and governance (ESG) analyst with MSCI Inc.
Meanwhile, individual states in the U.S. are taking action, in the absence of updates to the Toxic Substances Control Act of 1976 (TSCA). They've passed more than 80 chemical safety laws over the past nine years, and nearly 30 states are considering toxic chemicals legislation in 2012, according to Safer States, a network of environmental health coalitions and organizations.
Companies also face negative publicity and legal risk as consumers press harder for safer ingredients in personal and household items. Case in point, says Liroff, is Sigg Switzerland USA, the U.S. distributor of Swiss-made Sigg aluminum bottles. Company sales plummeted after trace amounts of Bisphenol A (BPA), an endocrine-disrupting chemical that mimics estrogen, were found in the plastic linings of supposedly BPA-free bottles. It filed for Chapter 11 bankruptcy last year.
What about the U.S. Food and Drug Administration's March rejection of a petition calling for the ban of BPA in food packaging? "At least in terms of what moves markets, by this point the FDA is largely irrelevant," says Liroff, who notes there are major efforts to move away from BPA.
In another high-profile case, the maker of the popular Brazilian Blowout hair-straightening product line agreed in March to settle a class-action lawsuit for about $4.5 million, the New York Times reported. GIB LLC, which marketed these products as formaldehyde-free even though some emit a gas form of this known carcinogen, separately agreed to a $600,000 settlement with California's attorney general for deceptive advertising. It must now include warning labels on its products.