Why investors should care about chemicals

As financial investors have a huge impact on the strategic decisions of companies, they can, along with governments, companies, NGOs and the scientific community, play a crucial role in striving for a less toxic and contaminated world. The pressure on companies to substitute hazardous chemicals increases when, besides regulatory requirements and consumer demands, financial investors also require change towards safer alternatives.

Examples of financial risks associated with hazardous chemicals

Litigation fines

  • In Italy in February 2012 the former owner and a manager of the asbestos conglomerate Eternit were found guilty of involuntary manslaughter, and they were sentenced to 16 years in jail and up to €120 million in compensation. The settlement of the trial has been finalised 26 years after Eternit went bankrupt in 1986 and seven years after the final asbestos ban was imposed in Europe in 2005. The inhalation of asbestos fibres can cause lung inflammation and cancer, and symptoms can take decades to manifest after exposure. In 2014 the highest court in Italy dismissed the case, on grounds that the crimes committed could not be prosecuted because the 10-year statute of limitations had run after the Casale plant closed in 1986.
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  • In October 2010 almost two million cubic metres of a toxic by-product from the production of alumina burst from a storage reservoir near Ajka, Hungary. 10 people were killed and 120 injured by the toxic sludge spill. The residue has covered an area of 40 sq km and the contamination has spread into the region’s waterways. MAL Hungarian Aluminium, the metal company responsible, received a €472 million fine.
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  • DuPont, which manufactures the chemical PFOA, has been fined $10.25 million for withholding substantial risk information from the US Environmental Protection Agency, plus a $100 million private settlement for contamination charges in 2005. PFOA is used in consumer products such as carpets, textiles, and food packaging, also in the manufacture of ‘Teflon’. Studies have linked PFOA with a wide range of health concerns, including liver damage, birth defects, and cancer.
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Recalls

  • In 2007 toy-maker Mattel was forced into large-scale recalls following the discovery of lead in its products. Nearly two million toys were recalled. As a result Mattel’s share price underperformed the sector by approximately 35 per cent in the second half of the year.
  • At the end of 2001, in the middle of Christmas sales, Dutch authorities halted the shipment of 1.3 million Sony PlayStation game machines because their cables contained illegally high cadmium levels. Sony lost sales and increased costs to rework their product totalled about $150 million.
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Costs of regulation

  • Within the European chemicals regulation REACH, Substances of Very High Concern listed on an Authorisation list cannot be produced for or used in the European market after a ‘sunset date’, unless an authorisation has been granted for a specific use. The base fee for an authorisation of a Substance of Very High Concern in Europe costs €50,000 with no guarantee that an approval will be granted. The sunset dates for defined chemicals started to appear from 2014 and onwards.

Costs of waste management
Costs of waste management can minimize profits, whereby the treatment for hazardous waste is most expensive. Following example shows savings due to reduced waste:

  • Interface implemented mission Zero goals of having zero environmental impact and zero footprint by 2020. In November 2010 its founder Ray Anderson reported a reduction in landfill waste of 80 percent and savings of $433 million in avoided waste costs since 1994.
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