You may also recall U.S. toymaker RC2, which faced $17.6 million in recall costs in 2007 and settled a class-action lawsuit for $30 million in 2008 after lead paint was found in its wooden railway toys. The company was purchased last year by Japanese toymaker Tomy Co.
Marques expects consumer awareness of unsafe chemicals to expand as information is easier to access through product rankings and reviews (from GoodGuide, Campaign for Safe Cosmetics, etc.) and awareness campaigns from Greenpeace and other NGOs.
Liroff also notes that portable X-ray fluorescence (XRF) devices are making it easier to detect chemicals in some products.
Put On Your Safety Goggles
So what's the best way to navigate chemical hazards?
"Understanding how the various regulations work is key to identifying where the risks and opportunities are," says Marques, a frequent speaker on the topic. "Potential upside can be large for a company that would find a safer and economically viable alternative to [the preservatives] parabens, for instance."
It's also important to pay attention to the SIN List (which stands for "Substitute It Now!"), developed by the International Chemical Secretariat (ChemSec) using REACH guidelines. The list now includes 378 substances that can cause cancer, alter DNA, damage reproductive systems, harm the environment or cause other problems-in essence giving companies advance notice about the chemicals likely to be most restricted by the EU, says Liroff.
MSCI ESG Research, with help from scientists and toxicologists, used the SIN List to assess how 16 major business segments might run into trouble with these chemicals. Household chemicals, plastics and rubber (in toys) and textiles and clothing are products at the highest risk, given the number of substances in them that could be regulated by REACH.
Marques expects that companies will see profit margins cut over the next three to seven years as they are increasingly forced to provide more evidence of chemical compliance and safety. But those that proactively anticipate regulatory changes should be able to absorb reformulation costs over a longer time period or be in a better position to find suppliers who can offer safer alternatives in the volumes needed, she says.
Marks & Spencer Group PLC, a major U.K.-based retailer, is among the leaders she has identified. M&S, which gets 100% of its revenues from private-label products, has removed polyvinyl chloride (PVC) and phthalates from all its children's clothing, removed PVC from all its packaging and placed restrictions on other chemicals such as BPA.
Retailers usually have a hard time monitoring the compliance of private labels because they do not own the formulas or make the products, but M&S has worked with suppliers to encourage innovations in green chemistry, says Marques.
The Clorox Co., maker of household and lifestyle products, is another leader identified by Marques. It discloses most of its ingredients and has a transparent chemical phaseout strategy that includes a complete, global ban of parabens, phthalates and phosphates. The company is also involved in various industry and governmental groups on green chemistry.