Consumer Safety and Corporate Responsibility Report 2012

CORPORATE RESPONSIBILITYAND CONSUMER PRODUCTHEALTH AND SAFETY

Best practice and emerging issues

January 2012

CORPORATE RESPONSIBILITYAND CONSUMER PRODUCTHEALTH AND SAFETY

January 2012

© Ethical Corporation

ACKNOWLEDGEMENTS

This report has been researched and written by Ian Welsh and Judy Kuszewski, with assistance from Jean-Philippe Renaut and Mariane Jang, for Ethical Corporation, the independent provider of business intelligence for sustainability. It has been supported financially by Pirelli.

The writers would like to thank the following for their time and input: Filippo Bettini, Pirelli; Martin Charter, Center for Sustainable Design; John Elkington, Volans Ventures; Hannah Jones, Nike; Bob Langert, McDonald’s;and, Dave Stangis, Campbell Soup.

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CORPORATE RESPONSIBILITY AND CONSUMER PRODUCT HEALTH AND SAFETY

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Foreword

Executive summary

1. Introduction and context1.1 From defensive to strategic1.2 Our survey results Box: Not enough CR focus on product safetyBox: The connected consumer

2. Methodology2.1 Company selectionBox: Our 15 benchmarked brands2.2 Four assessment criteria

3. Findings3.1 Fifteen companies in review3.2 R&D leads the way 3.3 Processes and Management a top priority3.4 Health and Safety Standards an emerging priority3.5 Communication plays a strong support role

4. Deep Dive: R&D4.1 What we reviewed4.2 FindingsBox: Consumer trust4.3 Next steps4.4 Emerging themes

5. Deep Dive: Health and Safety Processes and Management 5.1 What we reviewed 5.2 FindingsBox: Mattel’s corporate responsibility organization5.3 Next stepsBox: Linking consumer safety and CR5.4 Emerging themes

6. Deep Dive: Health and Safety StandardsBox: Product health and safety and the ISO 26000 standard6.1 What we reviewed6.2 FindingsBox: European Road Safety Charter and tire labeling galvanize action 6.3 Next stepsBox: Brand collaboration – supply chain detox6.4 Emerging themesBox: World Health Organization: a decade of road safety to come

Contents

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7. Deep Dive: External Communications 7.1 What we reviewed7.2 FindingsBox: Communicating with consumers 7.3 The message divide Box: Consumers, products and reporting7.4 Next steps7.5 Emerging themes

8. Conclusions and recommendations8.1 R&D8.2 Systems and processes 8.3 Standards8.4 Communications

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Ethical Corporation is delighted to present to you this, our latest research, on thelinks between corporate sustainability and consumer product safety.

At first it appears obvious that there is a clear link between corporate sustainabilityand product safety. Without safe and reliable products no company can retain alicense to operate and market share. Manufacturing safe products is a fundamentalof business success and continuity.

Clearly product safety is a vital baseline from which companies can becomeincreasingly more sustainable. Yet as our research has uncovered, there are majorvariations in how large companies link up their product safety and sustainabilitythinking.

As part of our in-depth research, alongside interviews with major internationalconsumer brands, we surveyed more than 150 of our readers. The results maysurprise you.

We found that whilst 88% of respondents said consumer safety is a core part oftheir company’s corporate responsibility concerns, more than half of respondents(55%) agreed with our qualitative findings that there are major differences betweenleader and follower companies in the area. If we consider this alongside the findingthat 86% of those surveyed said they believe consumer product safety is increasingin importance for responsible companies, these results demonstrate that safety andsustainability is an area of opportunity and innovation for large companies.

This report highlights the practices of some leading companies. It also clearlyshows that there are immense opportunities for companies to improve practices,link up sustainability and product safety, and build customer trust and corporatereputation whilst reducing risk.

Toby Webb is founder and chair of Ethical Corporation, and co-founder of Stakeholder Intelligence.

ForewordBy Toby Webb, Ethical Corporation

This report is the product of a research study into consumer product health andsafety as part of the corporate responsibility (CR) agenda. While companies havebeen introduced to environmentally and socially responsible ways of doingbusiness, it is not clear whether and how the safety and health aspects of theirproducts are evident in this agenda.

Why is this important? At its most basic, the responsibility to provide safe andhealthy products is part of the company’s core promise to consumers. It’s also thesubject of a great deal of regulation and legislation in many countries.

So, why does it need to be an explicit element of a company’s corporate responsi-bility strategy? As companies have advanced and matured in their implementationof CR strategies, they have increasingly recognized the value of integration across avariety of issues. This allows better performance across a wide range of topics, andmore reliable identification of risks across the various social, economic and environ-mental pillars.

Product health and safety is no different – corporate responsibility is simply doinggood business. Bringing the social and environmental elements into the core ofbusiness practice reduces risks and increases opportunities broadly.

This research included:

Development of a simple assessment methodology covering consumer producthealth and safety aspects of Research & Development, Processes andManagement, Standards and Communications.

Review of 15 global companies’ websites and reports and assessment against ourmethodology.

A survey of 150 Ethical Corporation readers on their attitudes to consumerproduct health and safety issues.

Interviews with a selection of companies and experts on the relevant issues.

The fifteen companies’ results are organized into tertiles (see box) according totheir overall scores.

Our core findings are organized into themes:

R&DThis area appears to be the best-developed for the companies represented.Leading practices include product design and development for special groups of users, and paying attention to consumers’ use habits and context as well as the products themselves. But there is little evidence that this activity is linked to the broader social and environmental aspects of sustainability and corporateresponsibility.

Executive summary

ABOUT THE RESEARCH

RESULTS AND THEMES

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Processes and managementAnother big priority for our companies is their approach to internal processes andsystems to ensure product health and safety is integrated into daily practice. Goodpractices involve dedicated teams with responsibility for product health and safety;staff empowerment mechanisms to encourage responsibility for potential issues;and health and safety as a contributor to overall product quality programs. Butthese efforts often appear to be isolated to a particular set of risks or issues, whilein other cases, they are limited to meeting current regulations.

StandardsThe use of standards to improve product health and safety performance is lessconsistent across our companies, with many differences visible between differentsectors. Leading companies are involved in collaborative efforts includingcompetitors to raise practices across the board. The majority of companies wereviewed are focused more on meeting today’s requirements than on activelypursuing improved standards in the future, but notable initiatives such as the newISO 26000 social responsibility guidance standard and the European Road SafetyCharter are encouraging a new focus in this direction.

CommunicationsAll the companies we reviewed include product health and safety information intheir core corporate sustainability reports and websites, but the nature and quality of the information varies considerably. We do not feel it is appropriate for allcompanies to communicate and engage in dialogue with stakeholders in the same way on these is sues, given differences in sectors and the perception of riskassociated with products. The GRI Sustainability Reporting Guidelines provide goodadvice to companies on communicating information across the product lifecycle.

There are many opportunities for companies to realize value to stakeholders and tothe business from a more integrated approach to product health and safety as partof their corporate responsibility strategy.

Our top recommendations and observations include:

• Consider a lifecycle assessment of health and safety aspects as a basic part ofthe design process. This helps to identify health and safety aspects at all stagesof the product lifecycle.

• Analyze the health and safety profile of products in conjunction with environ-mental, accessibility or other social factors – not in isolation.

• Make sure product health and safety has an explicit internal approach with clearresponsibilities.

• Ensure your processes for follow-up – especially after-sales monitoring – arerobust and part of your ongoing internal communications.

• Look for opportunities to collaborate with competitors or across supply chainsto build standards that address product health and safety issues consistently,effectively and reliably.

RECOMMENDATIONS

HOW THE COMPANIES STACK UP

Our results group the 15companies into tertiles:

1st: BMWCampbell SoupIkeaJohnson & JohnsonL’OréalMattelPirelliToyota

2nd: MotorolaNikeNovo Nordisk

3rd: 3M HPMcDonald's Philips

• Advocate for higher standards and regulations – ie both voluntary andmandatory – as a means of improving your own ability to meet expectations.

• Use a wide variety of communications tools to convey product health and safetyinformation, from websites to product labels, to ensure people find the infor-mation they need when they need it. Encourage feedback from yourconsumers, and take note of it.

• Consider reporting on the entire process of product design and development,including lifecycle analysis, to empower users to understand and take control ofsustainability factors through consumption.

As among the first research of its kind, this report introduces a new way of thinkingabout a long-established agenda. We welcome your thoughts and comments.

JOIN THE DEBATE

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Health and safety is a long-established basic element of corporate responsibility.Thanks to decades of campaigning, awareness-raising and responsible action,accidents in the workplace, home and community are thankfully much lower than in the past.

Even in high-risk heavy industries such as mining and manufacturing, employeesare generally now much safer. The rates of injury from automotive accidents havereduced around the world thanks to improved product design and user awareness.Consumers themselves are much more aware of safety issues in their own lives,from baby toys to use of electrical appliances.

Yet we don’t tend to think of consumer product safety as part of the formal“corporate responsibility” agenda. The result of a movement that emerged fromenvironmentalism and gradually embraced wider corporate impacts on society,today’s corporate responsibility community often overlooks the fundamentalresponsibility of a company to ensure its products are safe when users encounterthem.

Why this may be is unclear. It may reflect a general assumption that product safetyis so basic a responsibility as to be assumed rather than highlighted: a “hygienefactor” rather than a source of excellence or differentiation; a “settled” issue ratherthan an “emerging” one.

This view is quickly, if temporarily, overturned in the event of a consumer safetydisaster of some sort.

Consider the case of Johnson & Johnson, whose McNeil Healthcare division was at the center of a major product-tampering scandal in the 1980s. The company’sTylenol (paracetamol/acetaminophen) brand had been the subject of cyanidepoisoning in the US, killing seven people.

The incident sparked a massive product recall, and major company introspectionabout the various vulnerabilities their products display. The results included a rangeof product and packaging innovations, such as tamper-resistant bottles and boxes,and the introduction of caplets to replace traditional capsules. Significant in thecompany’s ability to emerge with its reputation intact was an open communicationscampaign, visibly led by senior management, to ensure information was spreadand trust re-established with the public.

Similarly, Toyota was forced to recall a range of products in 2009 and 2010 due to a possible design fault related to operation of the brakes in some ranges of carmodels. In contrast to Johnson & Johnson, Toyota came under intense criticism forappearing to deny the existence of a problem, dodging responsibility and resistingthe expensive and difficult measures associated with addressing it.

The result was a seriously damaged public reputation, even when the company hadbegun the episode on a high note, in light of their strong sales and high levels ofperceived product quality.1

1. Introduction and context

1 See Gardner, Stephen, “Toyota’s recall – Reputation crash”, Ethical Corporation, October 2010.

Corporate responsibility has taken many forms over many years. Experts andcommentators have attempted to chart its evolution so they can better identifywhat CR does and how it works, and what companies should be doing today torealize its full value.

We will look briefly at this overall history to get a sense of where the issue ofconsumer safety falls in the CR canon, and where its future evolution may lead.

CR expert Simon Zadek, writing in the Harvard Business Review in 2004,2 identifiedfive “stages” of organizational learning for companies as they embed corporateresponsibility in their business practices.

• The Defensive stage is characterized by a denial of the existence of problemsor of a responsibility to address them. Companies do this to defend themselvesagainst reputational attacks that could damage sales and productivity in theshort term.

• Companies at the Compliant stage adopt a policy of complying with legislationand rules, and regard this as a cost of doing business. This is to mitigate lossesin economic value in the medium term from reputation and litigation risks.

• At the Managerial stage, companies appoint managers with responsibility forCR issues and developing responsible business programs that begin tointegrate the agenda into the day-to-day operations. Companies take thesesteps to continue to mitigate medium-term value loss, but also to achievelonger-term gains.

• The Strategic stage sees companies integrating CR into core businessstrategies that enhances economic value in the long term and gives thecompany first mover advantages over its rivals.

• The final Civil stage is when the company promotes broad industry participationin CR to enhance the long-term economic gains of all.

In truth, most companies’ CR efforts are likely to display elements at all of thesevarious stages, so that, while they do build on one another, the different stagesnevertheless coexist, in order to meet a variety of needs and expectations.

So how does health and safety fit into this larger picture? Do leading companiesregard the health and safety aspects of their products as a risk to be managed anddownplayed, or an opportunity to be exploited? That’s what we set out to studythrough this report.

As a starting point, to find out what the corporate responsibility and sustainablebusiness community thought about the interaction between CR and consumerproduct health and safety, we surveyed a sample of 150 Ethical Corporationreaders in December 2011.

1.1 FROM DEFENSIVE TOSTRATEGIC

1.2 OUR SURVEY RESULTS

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2 Zadek, Simon, The Path to Corporate Responsibility, Harvard Business Review, December 2004.

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1. Do you consider the consumer safety aspects of products to be specificallypart of a company's corporate responsibility concerns?n Yes, a core concern 88%n Yes, a minor concern 7%n No, it's a separate issue 5%n No, it's not an issue 0%Total 100%

2. What do you consider to be the main corporate responsibility aims relatedto consumer safety?n Ensuring compliance with laws and regulations 13%n Identifying and limiting risks associated with products 42%n Identifying opportunities for product development or innovation 9%n Improving or maintaining consumer confidence in products 9%n Ensuring a coherent management approach across all relevant issues 27%Total 100%

3. Which of these areas do you believe it is most important for companies to focus their efforts in this regard?n Research and development: recognizing and addressing safety aspects

in product design and development 34%n Processes and management: working to ensure internal clarity and

alignment inside the company to produce good outcomes 18%n Standards: developing and applying credible minimum standards

for product safety 29%n Communications: working to ensure product users have sufficient

information and understanding of product safety risks and best use 19%Total 100%

4. Do you believe consumer safety is an area of best practice in corporate responsibility?n Yes, most companies attend to this issue thoroughly 16%n Yes, but there are clear differences between leaders and followers

on this issue 55%n No, there is little best practice to be found 13%n No, most companies do not recognise product health and safety

in the context of CR 16%Total 100%

5. Do you think consumer product safety is increasing in importance on the CR agenda?n Yes, it's increasing significantly 32%n Yes, it's increasing a little 54%n No, it will remain where it is today 14%n No, it's not a CR issue 0%Total 100%

Key results:

• Unsurprisingly perhaps, our survey respondents said overwhelmingly thatconsumer safety is a core corporate responsibility concern.

• They picked out “identifying and limiting risks” and “ensuring a coherentmanagement approach” as the principal CR aims relating to consumer safety.

• Developing standards and R&D are the areas where companies should focusefforts, our survey said.

• A majority of respondents said that consumer safety is an area of best practicefor CR, but that there are clear differences between the companies that performbest and the rest.

• 86% said that consumer product safety is increasing in importance on the CRagenda, with around a third saying this is a significant increase and just over ahalf saying this increase is only a little.

Not enough CR focus on product safety

Bob Langert, corporate vice-president for sustainability atMcDonald’s, believes that the corporate responsibility communitydoes not focus enough on health and safety issues. “They focus on human rights and the environment, and hardly ever do you seeproduct safety mentioned. It is a largely ignored issue.”3

Langert contrasts the CR community in general with companies in the food and beverage sector. “The importance and priority of product safety is well understood by companies where theirproducts are eaten or drunk by customers, but not by the CRcommunity. I think these issues are dismissed.”

The survey results indicate that the interplay between consumer safety and brands’developing corporate responsibility agenda is in flux, and we wanted to identifymore closely how this is developing and particularly the contrast for brandsoperating in different sectors.

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3 December 13 2011, email interview with Ethical Corporation.

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And so, in the sections that follow, we explore:

MethodologyHow we understand the elements of consumer safety in the context of corporateresponsibility, and how we assessed these in our subject companies.

FindingsOur benchmark results, how the companies we reviewed compare with each otherand the results of an Ethical Corporation survey.

Deep Dive: R&DA look in depth at how product research and development activities take on theconsumer health and safety agenda.

Deep Dive: Processes and ManagementWe look at how the companies in our survey are structured to integrate consumerhealth and safety in their operational CR strategy.

Deep Dive: Health and Safety StandardsWe review the survey companies’ use of internal and external standards to guidetheir health and safety performance.

Deep Dive: CommunicationsWe look at the most effective tools the surveyed companies use for communi-cating, engaging and reporting on the relevant safety issues with a variety ofaudiences.

Conclusions and RecommendationsWe summarize our main observations on best practice in this area with a checklistfor managers, and a view on where we believe the agenda is headed.

We are unaware of any other such surveys of consumer health and safety in thecontext of the broader corporate responsibility agenda, and we therefore offer theresults of this research as a contribution to the wider debate and development ofcorporate responsibility thinking and management.

You may agree or disagree with our methods or findings; or you may have thoughtson how this effort should best evolve in the future. We welcome any thoughts,challenge and feedback.

The connected consumer

All aspects of how brands interact with their consumers are dramatically changing. The internet and, more recently, the explosion in use of social media, have combined to create a new breed of more informed and connected consumer.

In its Smarter Commerce4 report, IBM describes these consumers as “empowered by technology, transparency and an abundance of information”. They “expect to engage with companies when and how they want, through physical, digital and mobile means”.

Hannah Jones, vice-president for sustainable business and innovationat Nike, agrees. Nike regularly researches what their consumers –who are typically young – want. “They don’t talk in terms of‘corporate responsibility’ or ‘sustainability’ but they do know that they want to live in a better world,” Jones says.5 “Modernconsumers are connected using the internet and, especially, socialmedia. They are much more informed and critical, and require and expect transparency in ways that past consumers didn’t.”

Dave Stangis, vice-president for corporate social responsibility and sustainability at Campbell Soup, welcomes transparency in thefood sector but cautions that too much information can sometimesmean that consumers find themselves confused. “More and morecompanies embrace transparency in products and consumers arebecoming more sophisticated about what they want in their diet.”6

This is an opportunity for a company to help its consumers use itsproducts better. Campbell’s Kitchen – which Stangis describes as “an online community where hundreds of thousands of people lookfor recipes and how to use products while making healthy choices”– is a good example.

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4 Smarter Commerce: Redefining commerce in the age of the customer, IBM 2011.5 September 23 2011, interview with Ethical Corporation.6 November 11 2011, interview with Ethical Corporation.

2. Methodology

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As a key part of opening this dialogue on consumer safety, we want to be clearabout just what we reviewed and how we arrived at our conclusions. Our method-ology is simple and straightforward, focused on a few factors we believe are at theheart of this subject.

Sustainability ratings and rankings are nothing new, and in fact, in some cases, areso well established they have themselves come in for criticism.7 Ratings are oftenaccused of rewarding the wrong things (such as systems or processes, or goodreporting, rather than good performance). It can be argued that ratings may begamed by providing the right words or the right sort of formats that catch the eyeof the raters. It can also be argued that ratings are insufficiently flexible to takeaccount of differences between companies, regions, sectors and many otherfactors.

We view this as an initial exercise, and therefore, we don’t propose our rating to be used to make judgments or differentiations between companies; nor do wepublish detailed scores. We do, however, want to encourage greater discussion of consumer safety in the corporate responsibility agenda, and leave it to others to determine how best to use this rating in the future.

We identified a group of 15 companies from leading global brands. The companiesin question range from automotive to electronics, pharmaceuticals to food, toys tobeauty products and others.

We chose the companies to provide a spread of information across a wide range of industries and geographies, to help identify best practices at a high level. Wealso focused on companies experienced in the overall corporate responsibilityagenda, in the belief we may see evidence of how they view the role producthealth and safety plays in this agenda.

2.1 COMPANY SELECTION

7 See for example the Rate the Raters research program at www.sustainability.com/library/rate-the-raters-phase-one for a review of strengths, weaknesses

and future options for sustainability ratings and rankings.

Our 15 benchmarked brands

3M – The multinational manufacturer of a vast array of consumer, business and industrial brands andproducts. Global turnover in 2010 was $27bn (€21bn), with 80,000 employees.

BMW – A manufacturer of premium cars and motorbikes, and incorporating Mini and Rolls-Royce, theBMW Group had turnover of €60bn in 2010, with 95,000 employees.

Campbell Soup Company – A global manufacturer and marketer of foods and simple meals, includingsoup, baked snacks and beverages, with turnover of $7.7bn (€5.9bn) in the year to July 31 2011.

Ikea – The Sweden-based international furniture brand had turnover of €23.1bn in 2010, with 280 storesin 28 countries and 127,000 employees.

HP – One of the world’s largest IT companies with 325,000 employees, and which includes printing,personal computing, software, services and IT infrastructure in its portfolio. HP’s turnover in the year toOctober 2011 was $127bn (€97bn).

Johnson and Johnson – The international healthcare products brand has 116,000 employees at 250operating companies in 60 countries worldwide, and turnover of $62bn (€47bn) in 2010.

L’Oréal – The cosmetics company had €19.5bn turnover in 2010, operating in 130 countries with 66,600employees.

Mattel – The world’s largest toy company by revenue turned over $5.9bn (€4.5bn) in 2010, with 31,000employees based in 43 countries. Mattel has sales in over 150 countries worldwide.

McDonald’s – The fastfood chain is the biggest in the world, with 2010 turnover of $24bn (€18bn), over33,000 outlets and 400,000 employees.

Motorola Mobility – Formerly the mobile devices division of Motorola (until a split in January 2011) andshortly to be acquired by Google, the smartphone and desk-top box manufacturer has 19,000 employeesand turnover of $11.5bn (€8.8bn) in 2010.

Nike – The global sportswear clothing and equipment manufacturer’s array of brands turned over $19bn(€15bn) in 2010 and has 34,400 employees.

Novo Nordisk – Danish pharmaceutical giant that specializes in diabetes care, with 61bn kroner (€8.2bn)turnover in 2010 and 32,000 employees.

Philips – Netherlands-based, the multinational electronics company has 119,000 employees and €25bnturnover in 2010.

Pirelli – One of the leading premium tire manufacturers, the company had turnover of €5.8bn in 2011,and 30,000 employees.

Toyota – The one-time leading car maker by units manufactured, the company had turnover of $236bn(€181bn) in 2010, and 318,000 employees worldwide.

Note: Company turnover figures are most recently available as at mid-December 2011.

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Our assessment is based on four simple criteria:

• R&DHow is consumer safety considered in product development? We looked forevidence of how the company perceives the risks and issues associated with itsproducts as well as the specific needs of its customers. We wanted to know howconsumer safety is seen to enhance other attributes of products, and whether itis linked to environmental or social factors at the design stage.

• Health and Safety Processes and ManagementWhat steps does the company take internally to ensure product safety is under-stood and integrated into operations? We looked for evidence that these stepsare integrated into other business processes, to deliver on company commit-ments.

• Health and Safety StandardsDoes the company make use of any internal or external standards for consumersafety? We reviewed whether the company takes part in initiatives withgovernment or industry to agree higher performance standards over time.

• CommunicationWhat efforts does the company make to communicate with consumers andengage in dialogue on product safety issues, eg via product labeling, useinstructions, advertising, web forums and corporate communications? Wereviewed whether these communications are targeted for different users ordifferent purposes, how the issues are positioned in reports and othercorporate-level communications, and whether they are integrated with othersustainability issues.

You can learn more about how we understood the issues in detail, and our findings,in each of the Deep Dive sections that follow in this report.

To make this assessment, we reviewed company websites and sustainability reportsfor each of the nominated companies, and reviewed each criterion based on thedepth of information provided.

Our assessment included not only making a determination against our criteria, butalso identifying examples of good practices. We recognize that some companiesmay have much more activity taking place than is visible in their reports and ontheir websites, but felt this to be an appropriate boundary for this exercise. Analysiswas cross-checked by multiple team members to ensure consistency across thegroup of companies.

We followed up with a set of interviews with some of the good-practice companiesthat appear in this survey. Quotes from those interviews appear throughout thisreport.

2.2 FOUR ASSESSMENTCRITERIA

As an early exercise in assessing corporate responsibility and consumer safety,we’ve grouped our results into three batches:

Lots of leadersEight out of the 15 companies show very strong results across the board:BMWCampbell SoupIkeaJohnson & JohnsonL’OréalMattelPirelliToyota

A strong centerThree of the 15 show solid fundamentals, with a degree of room for improvement:MotorolaNikeNovo Nordisk

Along the learning curveFour of the 15 showed more mixed results, but with many good strengths:3M HPMcDonald’s Philips

The strongest results overall were achieved in the R&D criterion. This is excellentnews as it indicates that consumer safety occupies a strong position in companies’earliest efforts to design and develop their products.

Leaders: BMW, Campbell Soup, Ikea, Johnson & Johnson, L’Oréal, Mattel,Motorola, Novo Nordisk, Pirelli and Toyota each scored a full four points. (See Deep Dive: R&D.)

We also saw strong results in the Health and Safety Processes and Managementcategory. This demonstrates the steps companies have taken to integrate the issueinto their operations and into their day-to-day corporate responsibility activities.

Leaders: BMW, Campbell Soup, Ikea, Johnson & Johnson, L’Oréal, Mattel,Pirelli and Toyota all achieved full marks. (See Deep Dive: Processes andManagement.)

The use of internal and external standards – and how these are developed – tohelp ground the company’s approach to consumer product safety is certainly established, but shows the lowest marks overall in our survey.

3. Findings

3.1 FIFTEEN COMPANIESIN REVIEW

3.2 R&D LEADS THE WAY

3.3 PROCESSES ANDMANAGEMENT A

TOP PRIORITY

3.4 HEALTH AND SAFETYSTANDARDS AN

EMERGING PROPERTY

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Leaders: BMW and Toyota lead the pack with four points, while a further eightcompanies score three. (See Deep Dive: Product Health and Safety Standards.)

Companies’ efforts to communicate and engage with employees, consumers andother stakeholders about their consumer safety factors shows a recognition of howimportant this issue is for many audiences.

Leaders: Campbell Soup, Ikea, Johnson & Johnson, L’Oréal, Mattel, NovoNordisk and Pirelli all achieved a full four points. (See Deep Dive: ExternalCommunications.)

3.5 COMMUNICATIONPLAYS A STRONGSUPPORT ROLE

We looked first of all at how the companies in our benchmark considered consumersafety issues right from the start, through their research and product developmentactivities. We wanted to know: what role does product safety play in the company’sbasic thinking about their products – and how does this reflect a wider corporateresponsibility agenda – before they’re off the drawing board?

We looked for evidence of consumer health and safety playing a role in thecompany’s R&D activities broadly. We asked:

• Does the company work to understand consumer needs and hazards associatedwith products?

• Does the company consider the needs of specific groups of consumers?

• Is product health and safety considered a pathway for better product development and enhanced user experience?

• Is product safety considered alongside environmental and social considerations?

At its highest level, this means product safety is closely linked to deliveringconsumers’ basic needs and expectations, and is understood in the context of the company’s overall values, commitments and sustainability context.

The R&D side of consumer health and safety is one of the best-developed dimen-sions of the issues as shown in our benchmark. It is also where some of the highestscores appear. The majority of companies in our benchmark displayed advancedlevels of understanding in this area, with fully 10 out of the 14 surveyed achievingtop marks on this criterion.

Key to this criterion is looking well beyond the products themselves, to achieve adeep understanding of how customers and consumers actually use the company’sproducts – regardless of their intended use. The companies that do best show areal appreciation for:

Who their customers areSeveral companies give particular consideration to the special needs of children or other groups who use their products.

Both Ikea and Nike dedicate special attention to the growth and developmentalneeds of children – as well as their tendency to use products in an unorthodoxfashion.

Novo Nordisk is focused on patient habits pertaining to medication and lifestyle.This demonstrates that, in considering how they design their products, thecompanies understand the user as much as the function their products seek to fill, and are thus better able to anticipate and avoid hazards.

4. Deep Dive: R&D

4.1 WHAT WE REVIEWED

4.2 FINDINGS

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The particular use environment of the company’s productsThe circumstances in which how a company’s products are used can have a greatimpact on their safety.

For instance, Motorola has made a priority of identifying hazardous situations formobile phone use – such as driving – and resolving these through the productdesign process.

Similarly, Toyota has identified the circumstances in which users may encounter the most urgent safety problems – such as parking, pre-crash and rescue situations– and adapted their product design accordingly.

The bodily and cultural dimensions of their productsCampbell’s Soup is one of a vanguard of food products companies that recognizethe public health impacts associated with processed foods, and view the productdevelopment process as an opportunity to meet these needs for a widepopulation.

Similarly, Johnson & Johnson and L’Oréal work to identify opportunities to linksafety to innovation, creativity and value in product development.

Relatively few companies have made a concrete link between their safety approachand their understanding of wider social, environmental and sustainability valuesand commitments.

Exceptions to this include Pirelli, which clearly links product safety with increased fuel efficiency and with their fundamental product offering to consumers (see box).Similarly, Mattel demonstrates a recognition of product safety at the heart offulfilling customer expectations, but this is not elaborated upon in detail.

Consumer trust

Consumers have significant level of trust in their favorite brands, butthis comes with responsibility, especially regarding product safety.

Filippo Bettini, sustainability and risk governance director at Pirelli,says this is something his company recognizes. “We are a companythat our customers trust, and this motivates us to continually improveour products as well as provide support for a steady advancement in regulations. A fundamental development for us are the newEuropean tire labeling regulations,8 both in terms of transparency in product performance – which is healthy for competition in ourindustry – and the good benefits for end consumers.”

Bettini argues that Pirelli’s customers “expect more proactive information about what it means to have a safe tire on their car”.9

8 For more on the new European tire regulations see box on p31. 9 October 27 2011, interview with Ethical Corporation.

According to Martin Charter, director of the Center for Sustainable Design,University of the Creative Arts (Surrey, UK), this link is lacking for most companies,even those who take sustainable design seriously. “In my experience, mostcompanies do it as eco-design, not sustainable product design – that is, integratingthe social pillar, including health and safety – in the product context,” he says. “The social element of sustainable design is still weakly addressed in most cases.”10

Charter believes companies don’t in fact address ‘health and safety’ as a singleconcept. “The concept of health – quite separate from safety – seems to carry amuch more nebulous qualitative feel. Safety does relate to health, but it’s muchmore defined around risk.” This qualitative aspect, he argues, makes it that muchmore difficult for companies to conceive of the sustainability impacts of products in the round, or to identify opportunities to build benefits through sustainabledesign, in addition to mitigating risks.

Ultimately, it’s a question of recognizing health and safety aspects wherever theyoccur, not just in the consumer-use phase. “If you’re thinking about the lifecycle,there are often a great many questions of health and safety in the supply chain. It’s not just about the use phase.”

Our benchmark shows that for leading companies at least, consumer producthealth and safety is clearly on the map in the product design and developmentprocess.

What seems most lacking is a link to the company’s broader corporate responsi-bility impacts and strategy. We would encourage companies to consider how thesafety of their products may help or hinder their efforts to reduce environmentalimpacts, increase accessibility, or build trust with users and the public.

• R&D is the opportunity to design out risks and design in social and environ-mental benefits for users.

• R&D is not just about the product, but about the use and its context as well.Who uses it and how?

• There is an opportunity for improved outcomes if companies link consumersafety to environment and social outcomes more explicitly.

4.3 NEXT STEPS

4.4 EMERGING THEMES

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10 December 21 2011, interview with Ethical Corporation.

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We examined companies’ approaches to managing consumer health and safety in their many internal systems and processes.

As with environmental and social impacts, this management is essential to ensurethe issues are adequately addressed. The key question: How do companies ensureproduct health and safety is part of day-to-day operations?

We looked at companies’ descriptions of their internal management processes for evidence that product health and safety plays a role. We asked:

• What steps does the company take internally to ensure product safety is understood and integrated into operations?

• Are these steps linked to any other processes to ensure positive productenvironmental or social attributes?

• Are there specific company commitments or policies with respect to productsafety?

• Are staff rewarded for good product safety performance?

• How does the company deal with product safety monitoring after sales?

A robust set of processes and management help ensure that on a day-to-day basis,the company pays due attention to product health and safety, reducing thelikelihood of problems and ensuring the right response when problems arise.

Processes and management make a strong showing in our benchmark, with overhalf (eight) of the 15 companies scoring full marks. But there is considerablevariation in the ways companies achieve this.

As companies will be aware, the presence of a policy or procedure is not enoughby itself to ensure it is adequately implemented. The procedures need to be tiedinto steps that empower employees to make good decisions, with consciousmonitoring and evaluation.

Some examples:

L’Oréal has a dedicated International Safety Evaluation Division to assess productsagainst medical and scientific research. This includes safety evaluations of bothingredients and finished products, as well as long-term use monitoring afterproducts are introduced to the market. Internal communications mechanisms allowreports of adverse reactions to be reported quickly for evaluation and response.

Pirelli’s approach clearly links corporate responsibility with product safety, underthe umbrella of product quality. Sustainability management systems therefore havea strong product safety component. There are numerous staff awareness initiativeson product safety.

5 Deep Dive: Health and Safety Processesand Management


5.2 FINDINGS

Leaders

BMWCampbell SoupIkeaJohnson & JohnsonL’OréalMattelPirelliToyota

Mattel’s corporateresponsibility organization

CEO

CORPORATE RESPONSIBILITY

GLOBAL PRODUCT INTEGRITY

Partners with Government Affairs toanalyze pending and new regulations and to incorporate them into internal product standards

Responds to consumer inquiries and provides information to them about our products

Gathers information directly from consumers about existing or emerging issues and communicates with appropriate Mattel departments so that product and process improvements can be made

Oversees implementation and compliance with laws, regulations, and corporate policies and procedures in the areas of product safety and quality

GLOBAL SUSTAINABILITY

Sets strategy for and oversees implementation of environmental, health and safety regulatory compliance

Drives the development of Mattel’s sustainability strategy

Oversees implementation of our Global Manufacturing Principles (GMP) and related social compliance initiatives

Provides specialized training and evaluations to strengthen competencies and mitigate risk

CORPORATE RESPONSIBILITY AUDIT

Verifies compliance with laws, regulations and corporate procedures around quality, safety, environment and social compliance

Identifies and proposes solutions to manage future risks to the business

CORPORATE AFFAIRS

Coordinates internal communications to Mattel employees around the world

Engages with external stakeholdersregarding issues of interest and seeks to develop mutually agreeable solutions when appropriate

Monitors and analyzes emerging legislation and regulations, represents Mattel before governmental bodies around the world

Directs public reporting on corporate responsibility matters including ranking profiles and preparation of this and similar reports

Directs Mattel’s philanthropic endeavors, including the Mattel Children’s Foundation

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Source: Playing Responsibly, Mattel’s 2009 Global Citizenship Report

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Mattel’s corporate responsibility management structure explicitly incorporatesproduct safety under the Global Product Integrity banner, with numerous infor-mation, monitoring and evaluation mechanisms (see box on previous page).

Ikea has a rigorous set of internal procedures to empower staff to raise the alarmon potential safety issues. These include detailed internal reporting on reasons forproduct returns and a Safety Alarm Procedure with a deliberately low threshold,actively encouraging over-reporting of potential problems, rather than under-reporting. Ikea’s Children’s School includes training in safety for children.

Companies such as Campbell Soup and Novo Nordisk also highlight the expertisethey maintain in-house to evaluate, monitor and make decisions about products,both in development and in after-market use. Experts such as toxicologists, micro-biologists, forensic analysts and others have a central role to play, as does awell-structured risk management process and governance mechanism.

While many companies in our benchmark have the means to track and meet theexpectations of emerging regulation, few discuss any approaches to going beyondregulation in their product safety processes.

Other companies make substantial efforts to monitor and control environmentalrisks – due, for example, to chemical use – without any concomitant recognition of their impact on consumer health and safety.

We would encourage a more explicit connection between these elements inpractice, thus putting product safety and other sustainability risks and issues on an equal footing in their implementation.

Linking consumer safety and CR

Campbell Soup’s vice-president for corporate social responsibilityand sustainability Dave Stangis says that for a company in the foodsector, consumer safety is paramount, but where brands can make a difference is advancing on nutrition, something that he identifies as one of the company’s core corporate responsibility priorities.11

Stangis argues: “Consumers must have rock-solid trust in theproduct. It should never cross a consumer’s mind that there is anysafety issue.” Campbell products are, the company says, in 90% of US homes. Stangis highlights this as a significant factor in why the company has identified the importance of providing theseconsumers with tools to help them make healthier food choices.

Things do sometimes go wrong, of course. As the head of Campbell’scorporate responsibility function, Stangis is kept fully informed of anyconsumer concerns relating to Campbell products, including recalls.

5.3 NEXT STEPS

11 November 11 2011, interview with Ethical Corporation.

“If there’s a recall because of safety concern then I know about it.”

Sourcing and design of packaging materials is an area in which thereis a cross-over between typical corporate responsibility concerns –making sure the packaging is as sustainable in terms of supply andtransportation as possible, for example – and also consumer health.“In the food sector, products must arrive with consumers in a freshand fit state. And the consumer must be confident in the product’sfreshness,” Stangis says.

Stangis is also closely involved in development of packaging atCampbell and stresses that while there is a lot of innovation, “we arealways looking at the safety of packaging innovation”.

The use of recycled packaging for consumer products has, ingeneral, been welcomed. But food brands have to be careful – andinnovation has to be closely monitored.

In early spring 2011, a number of food brands – including Jordans,Kellogg’s and Weetabix – were reported to be changing how theysourced packaging materials when research uncovered potentiallydangerous levels of mineral oils in foodstuffs packed in recycledcardboard cartons.12 The mineral oils came from printing inks used inthe newspaper industry and were found to pass through inner bagsused to keep the food products dry and fresh.

While Campbell Soup was not involved in this health scare, Stangisargues that the food sector is one where a presumed sustainableinnovation can potentially become a consumer concern. “Once aconsumer has in his or her mind that a recycled product is potentiallydangerous then clearly we have to think closely about using it,” hesays. “It is a core food safety issue for them.”

• Leading companies are explicit about where responsibility for consumer safetylies within senior management structures.

• Innovation should be closely monitored and companies need to be aware ofthe laws of unintended consequences.

• Health and safety for consumers is a major focus for after-sales monitoring, andmaintaining reputation and consumer confidence in products.

5.4 EMERGING THEMES

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12 See, for example, www.bbc.co.uk/news/uk-12663183

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We looked at the companies in our benchmark to find out what sort of standardsthey implement – and contribute to – that are designed to improve product healthand safety outcomes and how these impact the consumer.

When we speak of standards, we are thinking of rigorously defined commitmentsto attain a level of performance, which may carry a formal monitoring or certifi-cation element (but need not), and are often the product of cross-company or-industry collaboration.

Standards add credibility and rigor to a company’s commitments. They also play animportant role more broadly in the corporate responsibility area, with initiativessuch as the ISO 26000 social responsibility standards and the Global ReportingInitiative leading the way for thousands of companies.

Product health and safety and the ISO 26000 standard

Those familiar with the corporate responsibility debate may be aware of the latest offering from the International Organization for Standardization (ISO), the International Standard ISO 26000:Guidance on social responsibility, released in November of 2010.The product of some ten years’ worth of deliberations among organi-zations worldwide, this guidance is expected to help business gain abetter understanding of many issues of social responsibility and howto integrate them into business practice.

ISO 26000 is explicit on the subject of product health and safetyissues, as part of its wider approach to product responsibility. In thecontext of ISO 26000:

• Firms have an explicit responsibility to protect consumers’ healthand safety in the products they make.

• Products should not carry an unacceptable risk of harm whenused, both as intended and as reasonably foreseeable.

• Users need clear information about how best to use products toreduce the risk of harm.

• These steps should be taken regardless of whether legal safetyrequirements are in place.

While it is recognized that it is impossible to eliminate all risks, oreven to foresee them, ISO 26000 clearly places on companies theexpectation to work to minimize risks. Companies, it says, should gobeyond minimum legal requirements if it would achieve significantlybetter safety for consumers. They should be prepared to withdrawproducts from the market where necessary to protect consumers,

6 Deep Dive: Health and Safety Standards

using value chain traceability mechanisms where possible. Theyshould take into account the needs of users, especially of vulnerableusers such as children or pregnant women, when making risk assess-ments and designing products for safe use. And they should provideclear and adequate information to users about hazards – harmfulsubstances contained in products, safe use recommendations –necessary to minimize harm in practice.

Implementation of the ISO 26000 guidance standard is different,however, from many other standards, in that conformity cannot becertified. So how can companies, customers and consumers feelconfident that the right steps have been taken to secure theirproducts’ health and safety performance?

Paul Hohnen, a corporate sustainability expert and longtime partic-ipant in the ISO working group on social responsibility, says that theprocess itself is what will lead to better results. Hohnen says: “The art [of using ISO 26000 correctly] is in the careful assessment of each company’s unique situation and the making of sound strategicchoices that enable it to make the most of the changes andchallenges occurring around the world.”13 In other words, thecompany’s own diligent efforts to understand the risks and opportu-nities and to apply the right actions will improve its skills at doing sobetter and better into the future.

Product safety is a widely-regulated affair in most countries and consumer-productsindustries. Standards here refer to efforts to establish new norms and consistentresults on safety performance.

We asked:

• What internal or external standards is the company committed to on productsafety?

• Is the company involved in industry- or country-wide efforts to raise the bar onperformance?

• Does the company have a robust approach to future standards developmentand regulation (eg incorporating the company’s own commitments, such as theprecautionary principle)?

The standards area is the weakest of the four pillars of our benchmark assessment,with only two companies – Toyota and BMW – achieving the top score of four points.

A further eight companies follow with scores of three points.


6.2 FINDINGS

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13 See Chhabara, Rajesh, “Analysis: ISO 26000 – Certification denied”, Ethical Corporation, January 2011.

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For most of the companies in our benchmark, the emphasis is on meetingregulatory requirements (in some cases, such as Nike, this means applying thehighest international standards across the board). But several go further to protectand enhance value through high safety standards:

McDonald’s discusses its involvement in efforts to harmonize food safety standardsand audits within the food industry under the auspices of the Global Food SafetyInitiative. This effort has reduced the need for redundant audits on the part ofsuppliers and allowed a greater focus on improving performance.

L’Oréal is involved in a range of industry initiatives to meet consumer expectationsand improve product safety, including the reduction of animal testing and removalof parabens and other ingredients of concern.

Ikea discusses its effort to meet expectations ahead of the regulatory schedule. Forinstance, its involvement in the “Substitute it Now” initiative of the InternationalChemical Secretariat aims to reduce and eliminate use of chemicals ahead of itsinclusion in the EU’s Reach legislation for chemical registration and assessment.

It is of course interesting to note that the two top-scoring companies in ourbenchmark on this criterion are both from the automotive industry. We wondered if there were any links between Toyota’s and BMW’s efforts.

Both companies emphasize their participation in a range of industry andgovernment initiatives to research and agree safety standards in new car development.

BMW highlights its involvement in a German automotive manufacturers’ collabo-rative to develop standards for safe alternative cars, with the intention of improvingthe acceptability of technologies such as electric batteries and hydrogen amongdrivers, thus improving the future performance of alternative vehicles in the market.

On the other hand, Toyota makes use of the wide range of existing product safetystandards available in the industry to differentiate themselves as the only manufac-turer to install all five industry-standard safety features in all their cars. In both ofthese cases, it is clear that standards play an important role in improving theperceived value of the companies’ products.

European Road Safety Charter and Tire Labelling galvanize action

Launched by the European Commission in 2003, and signed by over1,400 entities across Europe, the European Road Safety Charter(ERSC) is the world’s largest road safety policy and action framework,designed to prevent and mitigate road accidents, the cause of some39,000 deaths and 1.6 million injuries in Europe every year. Signa-tories pledge their support for ten principles designed to improveunderstanding of the root causes of road accidents, to take concrete

Leaders

BMWToyota

action within their spheres of influence to prevent and minimizeaccidents, and to improve transparency and peer-review of results of signatories’ action plans.

The ERSC signatories include local European affiliates of thefollowing companies from our benchmark: 3M, BMW, Ikea, Johnson& Johnson, McDonald’s, Philips, Pirelli and Toyota. Each signatorycreates its own specific pledges to reinforce its commitment to theten principles, which are reviewed and approved by the EuropeanCommission.

The Charter encourages signatories to focus their efforts where theyhave the most influence and greatest potential for improvedoutcomes, which include:

• Vehicle safety: innovation, safety devices, vehicle regulationpolicies.

• Infrastructure safety: safer road infrastructures, road safety impactassessment.

• User behavior: increased understanding, improved skills,strengthened attitudes.

Tire labeling

In a further initiative from the European Union, all tires producedafter June 2012 and on sale in the EU from November 2012 mustbear a newly designed safety sticker, or be accompanied by a point-of-sale label. The label format will be familiar to consumers as it issimilar to those already in use for household appliances such asdishwashers and washing machines.

The tire label includes information about tire performance in terms of fuel efficiency, grip in wet conditions and exterior noise. By giving consumers the relevant information, the labeling program is designed to promote safe and fuel-efficient tires with low noiselevels.

For the majority of the companies in our benchmark, the emphasis on meetingcurrent expectations – especially regulatory requirements – has not given way to a broader effort to raise standards via credible, independent initiatives. As thecase of the automotive companies shows, these raised standards can be good for companies and the attractiveness of their products. We would encouragecompanies to be more explicit about their involvements in these efforts, as part of their broader corporate responsibility implementation efforts.

6.3 NEXT STEPS

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Brand collaboration – supply chain detox

Cooperation between brands – not least in supply chains – canimprove health and safety outcomes for consumers and other stake-holders.

Greenpeace’s Detox campaign, launched in 2011, has encouragedmany of the world’s top clothing and footwear brands to removepollution-causing chemicals from manufacturing facilities. While thisencompasses a wider stakeholder health and safety issue, the resultsare beneficial to consumer safety concerns as well.

Hannah Jones, vice-president for sustainable business and innovationat Nike, predicts the next level of inter-brand cooperation. “We’reentering an era where brands need to decide what is pre-competitiveand what things are competitive. Work around hazardous chemicalsneeds to be pre-competitive.”14

Jones says there is a huge amount of work being done and still to bedone around chemicals in supply chains. “It’s an issue for everyone inthe footwear and apparel industry. To get the system change we areall aspiring to will take more than one brand, more than one NGOand more than one industry. We need a much bigger coalition of thewilling.”

Sustainable business pioneer John Elkington, executive chairman ofVolans Ventures and originator of the “triple bottom line” concept,agrees. “Sustained well-targeted and judicious NGO pressure helpsenormously. Leadership from brands is then critical. Ultimately it iscrucial that there are both individual and collective roadmaps, thatthey include truly stretching targets, that company C-suites ensurethe will and resources are there, and that both push and pullpressures are gradually built up through the supply chain.”15

• Standards can be highly effective, but they must be properly adopted andimplemented.

• Companies should examine the benefits of harmonization across industry andseek out the circumstances where there are benefits from cooperation withcompetitors.

• Where there are complex factors and many actors, joined-up efforts to univer-sally improve outcomes can provide practical benefits.

6.4 EMERGING THEMES

14 September 23 2011, interview with Ethical Corporation.15 December 21 2011, email interview with Ethical Corporation.

World Health Organization: a decade of road safety to come

The United Nations Road Safety Collaboration, established in 2004 by the World Health Organization, kicked off the first Decade of Action for Road Safety 2011-202016 with a global launch in May2011. Among the pillars of activity for the decade are building roadsafety management capacity, improving the safety of road infra-structure and broader transport networks, developing vehicle safety,enhancing road user behavior, and improving post-crash care.

The Decade of Action was developed through multistakeholdercollaboration, including governments, international agencies, civil society organizations and the private sector.

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16 See www.who.int/roadsafety/decade_of_action/en for more information.

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Product health and safety can have a strong role in increasing consumer confidencein a company and its products.

But to be successful, consumers, employees and others need to have adequateinformation in a way they can use it. We wanted to know: how effectively docompanies and brands work to communicate with stakeholders on consumer safetyand other sustainability issues?

There are multitudes of different ways companies can communicate about productattributes and other consumer safety issues, and it is impossible for an exercisesuch as this to review all of them.

But company reports and websites nevertheless contained a wide variety of infor-mation about these communications approaches. In looking at the companies’efforts to communicate with consumers, and engage in dialogue with them, aboutsafety issues, we asked:

• Are product labeling, instructions for use, advertising and corporate communi-cations integrated in terms of their coverage of product safety and othersustainability issues?

• Are communications targeted for different types of consumers and/or differentpurposes? For example, are communications targeted at facilitating productselection, or general awareness of safety issues, or safe use of products?

• How is product safety positioned in corporate-level communications such ascompany reports?

• Do communications favor consumer safety over company reputation (eg in theevent of a recall)?

• Does the company speak constructively about lessons learned?

In general, the companies in our benchmark put in a strong showing on communi-cations, with seven of the 15 companies scoring four points and a further three withthree points.

The issue of product recalls is handled differently by different companies –especially in light of the regulatory requirements in some industries.

For instance, food providers face requirements to publicize recalls in clearlanguage, and Campbell Soup links directly to this information on their website’snews page.

In industries where reputation demands absolute confidence in product safety, suchas products for babies or children, recall information is clearly signposted andprominently displayed – as in the case of both Mattel and Ikea.

7 Deep Dive: External Communications


7.2 FINDINGS

Leaders

Campbell SoupIkeaJohnson & JohnsonL’OréalMattelNovo NordiskPirelli

For Johnson & Johnson, the impact of a recent product recall in the company’sMcNeil Healthcare consumer division is the subject of analysis in the company’sannual report in terms of the impact the incident had on consumer trust.

On the other hand, some companies’ recall information is much more difficult to find, and appears in a more technical format. This is true to some extent ofMcDonald’s, L’Oréal and BMW, all of whose recall information is not very easilyaccessible. Some information on product recalls is available in 3M’s corporatereports, but this is not likely to be where affected consumers look for this infor-mation.

A few companies – especially Motorola and Pirelli – describe a variety of efforts to educate and communicate to consumers about safe use of their products. ForPirelli, this includes safe motoring workshops and skills training, for drivers andmotorcyclists, as well as roadside tire safety checks, where drivers can have theircars checked to ensure the integrity of their tire treads and adequate air pressure,as well as learn more about road safety (see box).

Motorola provides reports and reference tools on health and safety aspects of theirproducts, such as exposure to radio waves, as well as information on safe mobileuse and driving.

Communicating with consumers

Pirelli’s Safe & Go campaign in 2010 saw mobile workshops set up by Pirelli technicians at Italian motorway rest areas to perform freemaintenance checks on motorists’ tires and provide advice on carcare and safe driving. This is part of a conscious effort by thecompany to interact more closely with its customers on health andsafety matters.

Filippo Bettini, Pirelli’s sustainability and risk governance director,says: “We want to engage with our customers. Choosing a safe tireis not enough. When driving you are responsible for the safety ofyour passengers and other road users. So, you need to create a safedriving environment.”17

Choosing the right messages for engaging consumers on safetyissues depends on market maturity, Bettini suggests. “In developingeconomies where the number of car accidents is high, educationabout basic car and driving safety issues is important. In somewherelike Scandinavia, where accident rates are low, a more sophisticatedapproach is required.”

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17 October 27 2011, interview with Ethical Corporation.

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In our assessment, we see the beginnings of a clear distinction between differentcompanies and the strength of their communications on product health and safetyperformance. This divide separates companies into two groups:

• Industries in which there is a recognized inherent danger or risk of harm.Most obvious among our benchmark group are the companies related to theautomotive sector, including Toyota, BMW and Pirelli. For these companies, itis a recognized imperative to communicate clearly and directly with customersabout the safety performance of products.

• Industries not normally associated with health and safety risks for consumers.For companies such as 3M, Philips and HP, there is comparatively littleconsumer focus on product safety issues, as these do not tend to factor indecisions about whether and how to use the companies’ products.

The difference between these two groups seems to be that in the first case, societyhas accepted the view that certain activities – in this example, motoring – are inher-ently dangerous, and these are risks to be reduced and managed. In the centurythat has passed since the first cars hit the roads, tens of millions of people havedied in automotive accidents, while hundreds and hundreds of product features,design improvements and improved user habits have gradually lowered this risk.

But this acceptance of risk does not hold for companies in the second group. To beclear, all sorts of consumer products, from office stationery to personal care devicesand computer hardware, undergo rigorous product safety testing to ensure usersare not exposed to unnecessary risks – but consumers do not think of stationery as inherently risky, or brushing one’s teeth as presenting an innate danger.

This divide seems to be at work in our analysis of product health and safety-relatedcommunications. Companies in the first group can usefully provide information onspecific safety improvements or achievements (for example, a particular product or innovation may be associated with a specific reduction in the likelihood of a caraccident).

However, this information may be uncalled-for or even unnecessarily alarming in the case of the second group (for example, an electronics manufacturer mayproduce an innovation which reduces the likelihood of fire in a product, butcommunicating this may alarm people unnecessarily about a fairly remote risk).

We may add to this a third group – including such companies as Novo Nordisk,McDonald’s, Campbell Soup and Johnson & Johnson – companies whosecustomers assume totally reliable product safety as the bottom line for being inbusiness. For these companies, any suggestion that product health and safety may be compromised in any way would be a major cause for lack of confidence.

As Bob Langert, corporate vice-president for sustainability at McDonald’s, says:“For us consumer safety is at the core of what we do. We are a food servicecompany and it is imperative and priority number one to serve safe foodproducts.”18

7.3 THE MESSAGE DIVIDE

18 December 13 2011, email interview with Ethical Corporation.

While there have been numerous cases of product failure in the healthcare andfood industries, society does not accept these failures as an inherent risk (as withmotoring), but demands complete reliability. For this reason, a company’s ability tocommunicate the health and safety profile of its products clearly and adequately ismuch more complicated – no one wants to know, for instance, that prevalence offood poisoning is down 90% over ten years, if it suggests that food poisoning is apossibility.

For this reason, we feel it is entirely legitimate to draw distinctions betweencompanies and sectors where it comes to this issue. Product health and safetycommunications is a fine balance of risk and perception, and these factors arenever the same for any two companies.

Other notable practicesMattel describe how their communications with consumers are fed back intoimprovements in manufacturing, internal standards and specifications.

L’Oréal provides a variety of safety-related information to consumers pertaining tospecific products (such as hair dyes), ingredients and technologies of concern (suchas nanotechnology).

Campbell Soup’s communications include consumer information on packagingsafety, as well as food safety.

Consumers, products and reporting

The rise of company sustainability reporting over recent decades hasopened up significant amounts of information about many aspects ofsustainability practice and performance, including health and safety.While most company sustainability reports provide clear informationabout internal process safety, or employee-related measures ofhealth and safety performance, health and safety from theconsumer’s perspective may not be covered in quite the same way.

The Global Reporting Initiative (GRI) Guidelines for sustainabilityreporting (version 3.1) cover Product Responsibility under the SocialPerformance indicators section. Where these issues are material, areporter is expected to address:

• Use of lifecycle assessment (LCA) to assess products’ health andsafety performance, and major findings.

• Incidents of non-compliance with product health and safetyregulations and voluntary codes.

• Provision of adequate consumer information on sustainabilityissues and performance of products.

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• Violations of product labeling regulations and codes.

• Efforts to assess and document customer satisfaction.

• Programs to adhere to laws, standards and codes regardingmarketing communications, and incidents of non-compliance.

• Breaches of customer privacy and loss of customer data.

• Fines for non-compliance with product-related laws and regulations.

We believe there is a good degree of overlap between thesereporting elements and our assessment methodology, and therefore,if companies are reporting fully to the GRI Guidelines, our job ofassessing performance is that much easier. GRI’s online database ofcompany sustainability reports is not searchable by indicator, so it isdifficult to say with authority how well these reporting elements arebeing taken up by reporters.

For companies where product responsibility is a significant issue, ourexperience shows that reporting of this information is strong.However, the ways in which reports may demonstrate how thisthinking is integrated into a company’s overall approach to corporateresponsibility are limited. For example, the simple data on violationsof product labeling regulations will, all by itself, provide someindication as to how thoroughly responsibility for product labelinghas been integrated into company practices. But it will not neces-sarily demonstrate how customer communications is used to help thecompany accomplish social or environmental goals, among others.

The goal of good sustainability reporting remains to help companiesintegrate and manage their performance, while enabling readers tohold companies to account. This is as true for product health andsafety as for any other issue. Where companies report well, we mightalso expect better performance.

While general communications on product safety and health issues are common,companies by and large are not emphasizing any further connection with environ-mental or social impacts or responsibilities. In addition, company communicationstend to be fairly narrowly construed on this subject, and do not reflect a wideunderstanding of the companies’ relationships with their customers and consumers.

There is an opportunity for companies and brands to take a lead in this aspect.

7.4 NEXT STEPS

• Consumers must be empowered to make good decisions. Communications is acomplex matter of both the information made available, but also of how peoplereceive it. There is no one-size-fits-all solution.

• Leading companies can communicate with consumers about how to use theirproducts better and more safely. They listen to feedback from consumers anduse it to improve products.

• Stakeholders expect transparency on safety issues – companies should use thereporting guidelines to achieve this.

• There is a gap in communications in terms of tying consumer safety to environ-mental and social issues. Many consumers would benefit from a more completepicture.

7.5 EMERGING THEMES

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We began this exercise by recognizing it as an early examination of an issue that is at once novel and deeply familiar. Companies and their products have beensubject to consumer health and safety considerations for many decades – it is afundamental aspect of any company’s promise to its customers – and yet its placein the corporate responsibility canon is still emerging.

There are many examples of good practice. There are significant differencesbetween sectors. And there are clear steps companies can take to integrateproduct health and safety into their CR strategies, with real benefits.

Here are some of the top lessons and trends from our study.

A wide variety of CR impacts, including health and safety, are determined before a product even becomes a prototype. This is the time to look at health and safetyimpacts all across product lifecycles – from materials sourcing to production, distribution, use and disposal/reuse.

Many health and safety impacts may be linked across all these different lifecyclephases, or may link across social, environmental and economic aspects as well.While improving product safety outcomes for consumers is obviously of greatimportance, there are opportunities to improve the health and safety footprint of products overall, to the benefit of many stakeholders as well as consumers.

• Consider a lifecycle assessment of health and safety aspects as a basic part of the design process.

• Analyze the health and safety profile of products in conjunction with environmental, accessibility or other social factors – not in isolation.

Managing complex operations is a significant challenge for modern companies, nomatter what their objective is. For those concerned with corporate responsibility,both limiting risks and enhancing opportunities, many factors come into play.

Effective implementation of corporate responsibility programs – including producthealth and safety aspects – balances clarity around expectations and commitmentswith empowering employees to take responsibility and make good decisions in reallife. If it’s important to your stakeholders, it’s material to your business, and needsto be managed as such.

• Leave nothing to chance. Product health and safety – like any corporate respon-sibility issue – demands an explicit internal management approach with clearresponsibilities.

• Ensure your processes for follow-up – especially after-sales monitoring – arerobust and part of your ongoing internal communications.

8 Conclusions and recommendations

8.1 R&D

8.2 SYSTEMS &PROCESSES

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The emergence of a wide variety of standards and implementation tools helpscompanies accomplish many goals more efficiently and reliably. They also affordexternal stakeholders – including consumers – a measure of trust in what thecompany has done to meet their expectations. But standards must be more than a paper exercise. They require regular attention to ensure they are implementedeffectively, and any problems addressed as needed.

• Collaboration with competitors or across supply chains is a powerful oppor-tunity to identify and address product health and safety issues consistently,effectively and reliably.

• Find opportunities to advocate for higher standards – whether on a voluntary or mandatory basis – as a means of improving the company’s ability to meetexpectations.

Product responsibility issues are now firmly embedded in our understanding of good communications and reporting. But there are significant differences,especially between sectors, in terms of what information is essential, what is useful, and how people will understand and use the information.

It would be unreasonable to expect all companies – whether they make socks,lawnmowers or pharmaceuticals – to provide the same sort of information toconsumers, as this would likely lead to confusion and even reduce their decision-making capacity. But nearly all stakeholders benefit from a better, more completepicture of the overall sustainability profile of the products they buy, by empoweringthem to choose and use products appropriately to uphold their values.

• Use a wide variety of one and two way communications tools to convey producthealth and safety information, from interactive websites to product labels, toensure people find the information they need when they need it.

• Consider reporting on the entire process of product design and development,including lifecycle analysis, to empower users to understand and take control of sustainability factors through consumption.

We welcome your comments, questions, challenges and personal observations on this report – and on the issues it raises.

8.3 STANDARDS

8.4 COMMUNICATIONS

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Consumer Safety and Corporate Responsibility Report 2012

Business

Transcript of Consumer Safety and Corporate Responsibility Report 2012