February 09, 2006
Shareowner Action on Product Toxicity Shifts from Isolated Resolutions to Become a Campaign
by Bill Baue
Fueling this development is the increasing visibility of product toxicity in the news, with the
Environmental Protection Agency issuing record fines.
The risks of toxics contained in products (from human health, environmental, and
investment perspectives) are gaining a much higher profile lately, both in mainstream news and in
socially responsible investing (SRI) shareowner activism. In December 2005, the US Environmental
Protection Agency (EPA) levied the largest civil
fine ever ($16.5 million) against DuPont (ticker: DD) for withholding
information for over two decades on the environmental and health risks of perfluorooctanoic acid
(PFOA), a chemical used to make
Teflon. Then on January 25, 2006, the EPA announced its request of eight chemical companies
(including DuPont, the only US maker of PFOA) to voluntarily reduce use of PFOA by 95 percent by
2010 and eliminate it by 2015.
On the shareowner action front, the number of
shareowner resolutions filed on product toxicity and environmental health has increased from
isolated instances to a veritable campaign, with almost a dozen resolutions covering a wide range
of issues filed for the 2006 proxy season.
"Several years ago there were some
chemical-specific shareholder resolutions, for example on mercury thermometers and phthalates,"
said Rich Liroff, a senior fellow in the toxics program at the World Wildlife Fund (WWF), who collaborates with shareowner
activists on this campaign. "So far this season 11 resolutions have been introduced, far more than
"This reflects investors' considerable and growing interest, and the tally
doesn't include inquiry letters that may lead to more resolutions later this year and next proxy
season," Dr. Liroff told SocialFunds.com. "This environmental health campaign, while sometimes
highlighting individual chemicals, essentially provides an overarching logical framework for
addressing toxic chemicals in products and production processes across the board."
|Avon (AVP)||Toxics Policy Report|
|Becton-Dickinson (BDX)||Report on
brominated flame retardants and other toxic chemicals|
|CVS (CVS)|| Product
Safety (cosmetics reformulation)|
(DOW)||Report on pesticides/asthma linkage|
|Dow ||Report on increasing inherent security of chemical
|DuPont ||Report on increasing inherent security of chemical facilities|
|DuPont ||Report on PFOA
(“Teflon chemical”) phase-out|
|Johnson and Johnson (JNJ)||Product
safety (cosmetics reformulation) (resolution withdrawn)|
|ServiceMaster (SVM)||Report on
substituting safer lawncare services|
|Wal-Mart (WMT)||Report on
safer chemicals policies|
on endocrine disruptors and other toxic chemicals|
The campaign borrows
from the playbook of the successful climate change campaign, which has resulted in the withdrawal
of resolutions at a number of companies as they enact the requested actions of reporting on (and
mitigating) climate change risks.
"For example, the safer chemicals benchmarking framework
is derived from a similar benchmark that Doug Cogan of the Investor Responsibility Research Center produced in a report commissioned by Ceres," said Dr. Liroff.
For a report from the Rose Foundation for Communities and the
Environment, Dr. Liroff created a safer chemicals benchmarking framework, a set of corporate
governance best practices for companies to avoid risks and seize opportunities on environmental
health and product toxicity.
The first resolution in this campaign has already gone to
vote at healthcare technology company Becton-Dickson in late January, with 8.7 percent of
shareholders supporting the proposal asking the company report on brominated flame retardants (BFRs) and other toxic chemicals. This
tally is a very impressive showing for a first-year resolution, almost tripling the three percent
threshold required by the Securities and Exchange Commission for re-filing the resolution next
"As toxic chemicals in products are increasingly scrutinized and regulated, those
companies that are slow to respond in eliminating toxics in their products are most likely to lose
market share and shareholder value," said Karen Shapiro of Domini Social Investments, lead filer of the resolution.
"Becton-Dickinson couldn't tell us if their products contain BFRs, while many of Becton-Dickinson's
competitors have already eliminated these chemicals."
Throwing its considerable weight
behind the resolution was the New York City Retirement System (NYCERS), which owns
approximately 1.1 million of the 14.4 million shares voting in favor of the resolution.
Institutional investor support, which is key to shareowner resolution success, often hinges on how
proxy voting services recommend voting.
Institutional Shareholder Services (ISS), which did not have a policy on this issue
until its 2006 update, now recommends voting
"for" resolutions requesting disclosure of policies related to toxic chemicals but "against" those
requiring product reformulation on a specific timeline. ISS develops recommendations of a
case-by-case basis for resolutions asking that companies evaluate and disclose the potential
financial and legal risks associated with certain chemicals.
Another factor impacting
shareowner activism is the degree to which companies negotiate and compromise with resolution
filers. For example, Citizens Funds
withdrew its cosmetics reformulation resolution at Johnson & Johnson after the company agreed to
greater transparency and engagement with stakeholders.
Whole Foods Market recommends
voting "against" a resolution requesting a report on endocrine disruptors such as Bisphenol A (BPA)
and other toxic chemicals in products it sells, but the company does note advances it has made.
"For example, we recently stopped the sale of BPA-containing baby bottles because of
emerging scientific evidence on their risk," states Whole Foods in its proxy statement.
this adequate advancement to satisfy the resolution filers?
"No, not yet," said Andrew
Shalit, director of shareholder advocacy at Green Century Funds, the lead filer of the
resolution. "We're pleased that Whole Foods has phased out kids cups and baby bottles containing
BPA due to our resolution and dialogue with them."
"But they still sell a lot of other
products containing BPA--for example, they sell tomato products in cans that are lined with BPA,
which means pregnant women and babies in utero can still be exposed," Mr. Shalit told
SocialFunds.com. "Now that Whole Foods has acknowledged the risk, they need to move the rest of
the way on BPA and on the larger range of concerns raised in the resolution."