Analyst Insight: Companies have been touting their responsible approaches to corporate ESG practices for the better part of a decade. What’s new is the growing need to produce quantifiable evidence that they’re making good on those promises.
It’s no longer enough for companies to tout topline environmental and sustainability targets, such as achieving net-zero status by 2025, or participating in the United Nations Global Compact. They must address the specific ESG risks enmeshed in every aspect of their business. Increasingly, that includes chemical risks hiding in global supply chains.
At the center of the issue is the idea of extended producer responsibility. This is an environmental policy approach that makes companies responsible for the entire lifecycle of their products, from initial chemical compound formulation to product manufacture, packaging, distribution, recycling and disposal. The concept is a centerpiece of the European Green Deal’s Circular Economy Action Plan, and four U.S. states — California, Colorado, Maine and Oregon — have already adopted extended producer responsibility laws aimed at packaging materials.
This is just the beginning. According to Enhesa research, there are currently more than 1,600 global regulatory initiatives pending for just five widely used chemical families that are found in everything from clothing to cosmetics and home goods. They include perfluoroalkyl and polyfluoroalkyl substances (PFAS), bisphenol A (BPA), ortho phthalates medium-chain chlorinated paraffins (MCCPs) and polyvinyl chloride (PVC).
Examples of recent regulatory action include the U.S. Environmental Protection Agency’s proposal to restrict PFAS, the man-made compounds commonly referred to as “forever chemicals” because they do ’t degrade naturally in the environment. Under the new proposal, U.S. water utilities would be required to remove PFAS from public drinking water supplies, setting limits of no more than 0.004 parts per trillion of perfluorooctanoic acid and 0.02 parts per trillion of perfluorooctanesulfonic acid.
The EPA’s ban is the latest in a surge of new regulatory proposals that are taking aim at these chemicals. To date, roughly 1,200 global regulatory initiatives have been launched to regulate PFAS, with 800 of these emerging over the last three years. In the U.S., in 2022 alone, a total of 145 new bills governing the use of PFAS were proposed, resulting in one new federal law and 16 new laws in 11 U.S. states. Between 2020 and 2021, 38 pieces of new legislation were passed.
The bulk of PFAS legislation has been focused primarily on the use of PFAS in firefighting foams, children's products, furniture and textiles. Recently, however, U.S. state legislatures and state agencies have been preparing to expand that scope to include the use of PFAS in more applications, including cosmetics and personal care products, food packaging materials, ski wax and other consumer products. While California, Maine, New York, Washington and Vermont are leading the charge, at least 15 other states have some form of laws or regulations restricting the use of those chemicals in various products. Colorado and Maine have banned several categories of products containing PFAS altogether.
Unfortunately, while major chemical manufacturers and distributors are no doubt aware of these pending regulations, the brands distributing the end products that use them are often blind to the chemical risks hiding in their global supply chains. Very few standards exist requiring suppliers to provide the detailed chemical composition of each textile used in the manufacture of a sneaker, a pair of blue jeans or a new toy, and the list of hyper-local regulatory requirements and chemical families affected continues to change daily.
While PFAS has received a great deal of media attention recently, chemicals such as BPA, ortho phthalates, MCCPs and PVC — which are ubiquitous in consumer-packaged goods, electronics and children’s products — are currently the subject of over 600 regulatory initiatives around the world, yet receive significantly less airtime. Regardless, businesses are going to need to get serious about them soon.
As the concurrent trends of stricter chemical-focused legislation, extended producer responsibility and detailed ESG reporting continue to expand, businesses are facing a scenario in which their legal, regulatory and reputational risk profiles are being determined by the level of their understanding of sustainable chemistry.
The first step for many companies in navigating this transformation will be awareness. Now is the time to start asking the tough questions, and digging deep into the detailed chemical composition of everything from apparel to packaging, to make sure corporate ESG goals aren’t derailed by hidden risks.
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