Safer cosmetics for women of color start with transparency about chemical footprints

Investors are increasingly scrutinizing companies for environmental, social and ethical considerations. In addition to closer scrutiny of companies’ carbon and water footprints, a third mark of consideration is emerging: their chemical footprint.

In recent years, consumer demand for the responsible use of chemicals in products has grown exponentially. This is evidenced by consumer pressure for ingredient transparency, calls to remove hazardous chemicals from personal care products, and lawsuits against cosmetic companies for making and selling products containing ingredients with known harms to human health. And then 2020 happened.

Last year marked rapidly growing awareness of issues facing women of color, who are disproportionately exposed to toxic chemicals present in the cosmetics and personal care products applied to their bodies daily. The revelations included growing concern from public health experts that hazardous industrial chemicals, including harmful chemicals in beauty and personal care products, can exacerbate chronic health conditions associated with severe COVID-19 symptoms. Some chemicals were even increasing an individual’s susceptibility to COVID. This underscored the message for investors, companies and nonprofit leaders that safer chemical management is a matter of prioritizing and protecting public health.

All of this only heightened investors’ interest in companies adopting holistic chemical management approaches that enable them to take proactive steps beyond regulatory compliance and provide transparent proof that those plans and practices are truly taking effect. What’s more, investors are interested in how companies are demonstrating commitments to racial justice and equity through their product development and marketing strategies to ensure that all consumers have access to products free from harmful chemicals.

Transparency as a best practice builds business value and protects the safety of all consumers, especially the people most vulnerable to chemical exposure.

Health and beauty companies that voluntarily report plans to phase out harmful chemicals are demonstrating not only a commitment to consumer safety and gender and racial equity, but also a sound strategy to mitigate regulatory and reputation risks that may affect long-term financial performance. Simply put, transparency as a best practice builds business value and protects the safety of all consumers, especially the people most vulnerable to chemical exposure, whereas a lack of disclosure in chemical management creates business risk and perpetuates disproportionate harm on women and people of color. As such, investors are outlining the following expectations on best practices for chemical disclosure:

1. Disclose all intentionally added chemicals in products and nonfunctional constituents identified on lists of chemicals of concern, such as GreenScreen List Translator or California Department of Toxic Substances Control Candidate Chemicals List.

2. Be transparent about progress. Provide quantitative metrics on a product’s environmental, health and safety performance in accordance with best practices established in the Chemical Footprint Project (CFP) Survey and the Sustainability Accounting Standards Board’s (SASB) Household & Personal Products Standard. The CFP Survey evaluates companies’ chemical management programs against best practices to measure and reduce the use of chemicals known to cause harm to human health and environment. SASB creates financially material disclosure standards based on decision-useful metrics. Metrics include revenue from products that contain substances of very high concern (as designated by the Registration, Evaluation, Authorization and Restriction of Chemicals regulation, or REACH); substances on the California Department of Toxic Substances Control Candidate Chemical List; and revenue from products designed with green chemistry principles.

3. Be transparent about supplier engagement and compliance. Disclose the process used by the company and suppliers to identify and evaluate safer alternative chemicals, and how suppliers share their chemical ingredient information with the company. Also disclose the company’s process for ensuring that suppliers implement and comply with company policies specifying safer chemical use in products and the consequences for non-compliance.

4. Disclose testing and third-party certification efforts and/or independent review of chemical management programs. Identify any third-party providers used to evaluate the company’s progress in removing chemicals of concern and high concern from its products.

Look to these organizations for ideas

Companies that value and integrate health equity into product development have demonstrated that transparency is good business. Notable examples include:

Beautycounter, a privately held cosmetics manufacturer, sets some of the highest standards in the industry including its ingredient transparency, comprehensive restricted substances list of banned chemical ingredients, rigorous testing, legislative advocacy and proactive reporting. The company’s public response to the annual Chemical Footprint Project Survey consistently earns Beautycounter front-runner status and is perhaps one of the most detailed examples of voluntary reporting in the health and beauty space.

A number of publicly traded companies have shown commendable leadership in chemical disclosure and equity, too.

Procter & Gamble was one of the first multinational companies to voluntarily disclose fragrance ingredients in its beauty, cleaning and feminine hygiene products in response to consumer demand for transparency. In March, the company participated with Breast Cancer Prevention Partners, the American Sustainable Business Council and members of the scientific research and Black women’s health advocacy communities in a congressional staff briefing underscoring the link between fragrance chemical exposure and breast cancer, especially in products marketed to women and girls of color. This included a push for regulatory reform requiring greater fragrance ingredient disclosure in personal care products.

Procter & Gamble was one of the first multinational companies to voluntarily disclose fragrance ingredients in its beauty, cleaning and feminine hygiene products in response to consumer demand for transparency.

Rite Aid, a signatory of the Chemical Footprint Project, announced in March that it plans to improve chemical management and product safety, and to expand its restricted substance list to include toxic chemicals in beauty products marketed to women of color. The brand reports that it already has achieved 98 percent compliance on its 2016 commitment to remove certain harmful chemicals from its private-label products and has instituted more stringent supplier disclosure requirements for generic ingredients used in its brand-owned formulated products.

Target, a signatory and responder of the Chemical Footprint Project, was one of the first U.S. retailers to introduce a chemical strategy that addresses its entire value chain, operation and product line, including its expansive health and beauty aisle. The strategy includes comprehensive product ingredient disclosures, supplier accountability policies and investment in chemical innovation and the commercialization of safer alternatives.

Learn from these missteps

Contrast these industry leaders with companies such as Johnson & Johnson (J&J) and L’Oreal Paris, both of which are being scrutinized for chemical management practices. J&J, for example, has reformulated chemicals of concern out of many products, increased areas of voluntary disclosure and recently ended its sale of talc-based powders in North America. However, these efforts do not sufficiently address the potential risks to J&J and its customers.

Amidst mounting litigation surrounding its talc-based powders’ link to ovarian cancer, the company continues to market the product to women of color outside the United States and Canada — despite a stated commitment to address racial and social injustices and to eliminate health inequities for communities of color. Representing over 200 organizations from across the globe, Black Women for Wellness publicly asked the company to honor its stated morals and ethics and valuing the lives of women, Black women and women of color.

The company has resisted consumer demands to end all sales of talc-based products and already has incurred $3.9 billion in judgments and litigation expense for talc-related reserves and settlements. J&J still faces more than 27,100 lawsuits for its talcum powder alone, as of February, because of talc-asbestos-cancer concerns. Investors are focused on the company’s limited disclosure of its chemical management efforts and progress in ensuring compliance with its chemical policy; the ongoing litigation concerning its talc-based powder; and the company's non-participation in the 2020 Chemical Footprint Project Survey.

L’Oreal Paris, a leading producer of at-home permanent hair dye kits, also faces reputational risks for its silence following studies that showed a correlation between the use of hair color products and increased breast cancer risk, particularly in Black women. L’Oreal continues to use two chemicals of concern outlined in the studies, demonstrating a need for a review of the racial impacts of its products and services.

The value of using best practice standards in chemical management throughout the cosmetic and personal care industry far outweighs the costs incurred from reactionary policies which may not keep pace with shifting consumer demand.

When companies guide their business by adopting best practices in chemical management, they are inherently protecting their most vulnerable customers by providing products that are safer for everyone. Chemical footprint transparency and accountability as a means to reduce both health and business risk is a financial and ethical obligation that investors should continue to seek with growing urgency. The positive impacts such disclosures will have on the health and safety of women and people of color as a result are priceless.

Important disclosure: This is not a recommendation to buy or sell any securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. The specific securities were selected on an objective basis and do not represent all securities purchased, sold or recommended for advisory clients.