Reducing Companies’ Chemical Footprint—An

Investor Perspective

Richard A. Liroff, Ph.D Executive Director

Investor Environmental Health Network www.iehn.org

Outline

• Prominent product chemical episodes • Opportunities for companies • Drivers of risks/opportunities • Company safer chemicals policies • Chemical footprinting • “Sustainable Investment” metrics

LUMBER LIQUIDATORS STOCK HIT

Theme 1: Market Growth

Sector Safer

Chemistry Market

Conv. Market

Time Period

Building Materials

+2000%1

+176%2 2009-

2030

Chemistry

+3200%3 +133%3 2011-2020

Personal Care

+10.12% CAGR (US)4

+4.43% CAGR (global)5

2012-2016

Cleaning Products

+20% CAGR6

+1.5% CAGR7

2007-2011

Growth Rates of Safer Chemistry vs Conventional Market

Sales “Highly Advantaged” by Sustainable Chemistry16

1.7% 1.7% 3.4% 4.3% 4.8%

7.1%

10.0%

0%

2%

4%

6%

8%

10%

2007 2008 2009 2010 2011 2012 2013

“We have seen 6-10% annual growth in the natural products sector, compared to near-zero growth for conventional products.”

–Martin Wolf, Director, Sustainability & Authenticity,

Seventh Generation

Key Findings

Theme 2: Trends in Capital Flow

Sector Investment

Type Investment in Safer Chemistry

Time Period

Chemicals

Safer Chemistry R&D

57% of chemical companies in MSCI World Index invested in green chemistry R&D17

2013

Chemicals

Safer Chemistry R&D

11-15% of average chemistry company’s R&D budget18

2011

Building Materials

Research Grant

$3 million for USGBC research of health hazards, from Google19

2013

Advanced Materials

Investment (Various)

$4.9 billion invested in advanced materials industry; can help drive green chemistry20

2002-2013

Investments in Safer Chemistry

1990-1994

1995-1999

2000-2004

2005-2009

2010-2014

0

200

400

600

800

1000

1 27

139

761

US Patents Issued for Sustainable Chemistry26

“55% of members believe the ROI of green chemistry R&D is greater than for standard investments.”25

– American Chemistry Society (2013 survey)

Key Findings

DRIVERS OF CHANGE

• SCIENCE • PUBLIC CONCERN • MEDIA ATTENTION • REGULATORY CHANGES

(EUROPE/STATES) • CORPORATE SAFER CHEMICALS

POLICIES

STATE ACTION

Strategic Implications for Companies/Investors

• “TOXIC LOCKOUT” • REPUTATIONAL RISK • LITIGATION RISK • GAIN MARKET SHARE FROM INNOVATIVE

PREFERRED PRODUCTS

COMPANY SAFER CHEMICALS POLICIES

• Restricted Substances Lists (RSLs) • Certifications • Increased Disclosure • Benchmarking Progress • Sectoral Collaborations • Public Policy Advocacy

Walmart

• Walmart announces “Sustainable Chemistry Policy” (2014) – Targets 8 chemicals for phase-out (2014) – Commits to public disclosure of progress – Screens chemicals through UL WERCsmart™ – Promotes public disclosures by suppliers

• Walmart announces 95% reduction of “Highest Priority Chemicals”, naming them. (2016)

Target

• Ingredient transparency (including fragrance)—personal care, baby, cleaning products by 2020

• No phthalates, 2 parabens, formaldehyde (incl. donors), NPEs in these categories by 2020

• No PFCs, toxic flame retardants in textiles by 2022

• Invest up to $5 million in green chemistry innovation by 2022

SC JOHNSON GREENLIST PROCESS PROGRESS

SELECTED COMPANY SAFER CHEMICALS POLICIES

BIZNGO PRINCIPLES FOR SAFER CHEMICALS

• Know Chemicals in Products • Assess and Reduce Hazards • Continuous Improvements • Support Public Policies Promoting These Principles

http://www.bizngo.org/safer-chemicals/principles-for-safer-chemicals

Chemical Footprint Concept Evolution

• “Benchmarking Corporate Management of Safer Chemicals in Consumer Products—A Tool for Senior Executives (2005)

• “Don’t Know Your Company’s Toxic Footprint? Ignorance Will Not Be Bliss” (2009)

• “The Benefits of Coming Clean on Your Company’s Toxic Footprint” (2009)

• “Getting a Grip on Your Company’s Toxic Footprint” (2009) • “How Companies are Committing to Reduce Toxic

Footprints” (2009) • “An Updated Benchmark for Corporate Green Chemistry

Practices” (2009)

HOW INVESTORS USE CFP SURVEY DATA

• Insight into chemical management and supply chain management

• Proxy for good corporate governance practice • Engagement – those that do not address the issue

can find themselves a target • Investment decision ideas

CFP Assessment Framework

19

Annual Survey 20 Questions - 100 pts

a project of Clean Production Action

20

a project of Clean Production Action

21

a project of Clean Production Action

22

$2.3 trillion in assets under management

a project of Clean Production Action

23

GOJO 2020 Sustainable Value Strategies and Goals

5 Year Strategy Goals

Innovate to Create Sustainable Value

• Double global sales from products with 3rd party certifications • Establish and maintain an industry-leading sustainable chemistry policy, including

reducing our Chemical Footprint by 50% • Source reduce packaging material by 15%

Elevate Public Health & Well-Being

• BHAG: Bring Well-Being to One Billion People Every Day • Be the most recognized advocate for well-being through hygiene in our

industry

Steward a Thriving Environment

• Recover and reuse or recycle 50% of dispenser materials from the value chain • 90% of GOJO Strategic, Preferred and Collaborative suppliers meet GOJO

Sustainable Value Responsible Sourcing Criteria • GOJO distribution operations powered by renewable energy

Foster a Culture of Sustainable Value

• Core processes are infused with SWOW℠ to create Sustainable Value • All employees are engaged in SWOW℠

Chemicals=“ESG” Sustainability Issue

Environmental Social

Governance

2,000 Study Meta-Analysis

• “Business case for ESG investing is empirically well

founded” • “ESG outperformance opportunities exist in many

areas of the market”

(Journal of Sustainable Investment and Finance, 2015)

Mainstream Finance Responds

• Harvard Business Review Rating of 100 Best-Performing CEOs, 2015: --20 percent weighting for company ESG performance

--80 percent weighting for long-term financial performance. • BlackRock ($4.7 Trillion AUM):

-- ESG “is not about saving the planet or feeling good. We view ESG excellence as a mark of operational and management quality.” -- “Over the long-term, environmental, social and governance (ESG) issues—ranging from climate change to diversity to board effectiveness—have real and quantifiable financial impacts” (BlackRock CEO letter to Fortune 500 CEOs)

ESG data: 700 ESG indicators from companies and third parties on more than 11,000 companies

Sustainability Accounting Standards Board (SASB) mission: set industry-specific

standards for corporate sustainability disclosure—material, comparable, useful

for investors

Aligning SASB and the Chemical Footprint Project

CFP Components Management Strategy (“M”)

Chemical Inventory (“I”) Footprint Measurement (“F”)

Public Disclosure and Verification (“D”)

30

Accounting Metrics (Building Products)

• Describe chemical management processes: • Hazard-based, risk based, other? (M1, M2) • Use RSL Screening Tools? (WHO? IARC? Others?) (I1, I2,

F4) • Life-cycle stage chemicals management: product design

through to marketing? (M3, I3, I4, I5, I6) • Prioritize chemicals for reduction/elimination?

Incorporate alternatives? Material substitution assessments? Greenscreen or DfE? (F1, M2, F5)

• Third-party certification? (D4) • Timeline and progress? (F1, F2, F3)

SASB Categories with Safer Chemicals Metrics

Household and Personal Products Building Products and Furnishings

Apparel, Accessories and Footware Toys and Sporting Goods

32

QUESTIONS?

Richard Liroff rliroff@iehn.org www.iehn.org