Consumer Safety and Corporate Responsibility Report 2012

CORPORATE RESPONSIBILITY
AND CONSUMER PRODUCT
HEALTH AND SAFETY

Best practice and emerging issues

January 2012

AND CONSUMER PRODUCT
HEALTH AND SAFETY

January 2012
© Ethical Corporation

CORPORATE RESPONSIBILITY AND CONSUMER PRODUCT HEALTH AND SAFETY
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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Contents

6 Foreword

7 Executive summary

10 1. Introduction and context
11 1.1 From defensive to strategic
11 1.2 Our survey results
13 Box: Not enough CR focus on product safety
15 Box: The connected consumer

16 2. Methodology
16 2.1 Company selection
17 Box: Our 15 benchmarked brands
18 2.2 Four assessment criteria

19 3. Findings
19 3.1 Fifteen companies in review
19 3.2 R&D leads the way
19 3.3 Processes and Management a top priority
19 3.4 Health and Safety Standards an emerging priority

20 3.5 Communication plays a strong support role

21 4. Deep Dive: R&D
21 4.1 What we reviewed
21 4.2 Findings
22 Box: Consumer trust
23 4.3 Next steps
23 4.4 Emerging themes

24 5. Deep Dive: Health and Safety Processes and Management
24 5.2 Findings
25 Box: Mattel’s corporate responsibility organization
26 5.3 Next steps
26 Box: Linking consumer safety and CR

28 6. Deep Dive: Health and Safety Standards
28 Box: Product health and safety and the ISO 26000 standard
29 6.2 Findings
30 Box: European Road Safety Charter and tire labeling galvanize action
31 6.3 Next steps
32 Box: Brand collaboration – supply chain detox
33 Box: World Health Organization: a decade of road safety to come

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34 7. Deep Dive: External Communications
34 7.2 Findings
35 Box: Communicating with consumers
36 7.3 The message divide
37 Box: Consumers, products and reporting
38 7.4 Next steps

40 8. Conclusions and recommendations
40 8.1 R&D
40 8.2 Systems and processes
41 8.3 Standards
41 8.4 Communications


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Foreword
By Toby Webb, Ethical Corporation

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

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

Clearly product safety is a vital baseline from which companies can become
increasingly more sustainable. Yet as our research has uncovered, there are major
variations in how large companies link up their product safety and sustainability
thinking.

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

We found that whilst 88% of respondents said consumer safety is a core part of
their company’s corporate responsibility concerns, more than half of respondents
(55%) agreed with our qualitative findings that there are major differences between
leader and follower companies in the area. If we consider this alongside the finding

that 86% of those surveyed said they believe consumer product safety is increasing
in importance for responsible companies, these results demonstrate that safety and
sustainability is an area of opportunity and innovation for large companies.

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

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

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Executive summary

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

Why is this important? At its most basic, the responsibility to provide safe and
healthy products is part of the company’s core promise to consumers. It’s also the
subject 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 implementation
of CR strategies, they have increasingly recognized the value of integration across a
variety of issues. This allows better performance across a wide range of topics, and
more reliable identification of risks across the various social, economic and environ-
mental pillars.

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

ABOUT THE RESEARCH This research included:

Development of a simple assessment methodology covering consumer product
health and safety aspects of Research & Development, Processes and
Management, Standards and Communications.

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

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

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

RESULTS AND THEMES The fifteen companies’ results are organized into tertiles (see box) according to
their overall scores.

Our core findings are organized into themes:

R&D
This 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 corporate
responsibility.

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Processes and management
HOW THE COMPANIES
Another big priority for our companies is their approach to internal processes and
STACK UP
systems to ensure product health and safety is integrated into daily practice. Good
practices involve dedicated teams with responsibility for product health and safety;
Our results group the 15
staff empowerment mechanisms to encourage responsibility for potential issues;
companies into tertiles:
and health and safety as a contributor to overall product quality programs. But
these efforts often appear to be isolated to a particular set of risks or issues, while
1st: BMW
in other cases, they are limited to meeting current regulations.
Campbell Soup
Ikea
Standards
Johnson & Johnson
The use of standards to improve product health and safety performance is less
L’Oréal
consistent across our companies, with many differences visible between different
Mattel
sectors. Leading companies are involved in collaborative efforts including
Pirelli
competitors to raise practices across the board. The majority of companies we
Toyota
reviewed are focused more on meeting today’s requirements than on actively
pursuing improved standards in the future, but notable initiatives such as the new
2nd: Motorola
ISO 26000 social responsibility guidance standard and the European Road Safety
Nike
Charter are encouraging a new focus in this direction.
Novo Nordisk

Communications
3rd: 3M
All the companies we reviewed include product health and safety information in
HP

their core corporate sustainability reports and websites, but the nature and quality
McDonald's
of the information varies considerably. We do not feel it is appropriate for all
Philips
companies to communicate and engage in dialogue with stakeholders in the
same way on these is sues, given differences in sectors and the perception of risk
associated with products. The GRI Sustainability Reporting Guidelines provide good
advice to companies on communicating information across the product lifecycle.

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

Our top recommendations and observations include:

• Consider a lifecycle assessment of health and safety aspects as a basic part of
the design process. This helps to identify health and safety aspects at all stages
of 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 clear
responsibilities.

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

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

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

• Use a wide variety of communications tools to convey product health and safety
information, from websites to product labels, to ensure people find the infor-
mation they need when they need it. Encourage feedback from your
consumers, 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 of
sustainability factors through consumption.

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


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1. Introduction and context

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, employees
are generally now much safer. The rates of injury from automotive accidents have
reduced 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 from
environmentalism and gradually embraced wider corporate impacts on society,
today’s corporate responsibility community often overlooks the fundamental
responsibility of a company to ensure its products are safe when users encounter
them.

Why this may be is unclear. It may reflect a general assumption that product safety
is so basic a responsibility as to be assumed rather than highlighted: a “hygiene
factor” rather than a source of excellence or differentiation; a “settled” issue rather

than an “emerging” one.

This view is quickly, if temporarily, overturned in the event of a consumer safety
disaster 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’s
Tylenol (paracetamol/acetaminophen) brand had been the subject of cyanide
poisoning in the US, killing seven people.

The incident sparked a massive product recall, and major company introspection
about the various vulnerabilities their products display. The results included a range
of product and packaging innovations, such as tamper-resistant bottles and boxes,
and the introduction of caplets to replace traditional capsules. Significant in the
company’s ability to emerge with its reputation intact was an open communications
campaign, visibly led by senior management, to ensure information was spread
and 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 car
models. In contrast to Johnson & Johnson, Toyota came under intense criticism for
appearing to deny the existence of a problem, dodging responsibility and resisting
the expensive and difficult measures associated with addressing it.

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

1
See Gardner, Stephen, “Toyota’s recall – Reputation crash”, Ethical Corporation, October 2010.
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1.1 FROM DEFENSIVE TO Corporate responsibility has taken many forms over many years. Experts and
STRATEGIC commentators have attempted to chart its evolution so they can better identify
what CR does and how it works, and what companies should be doing today to
realize its full value.

We will look briefly at this overall history to get a sense of where the issue of
consumer 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 identified
five “stages” of organizational learning for companies as they embed corporate
responsibility in their business practices.

• The Defensive stage is characterized by a denial of the existence of problems
or of a responsibility to address them. Companies do this to defend themselves
against reputational attacks that could damage sales and productivity in the
short term.

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

• At the Managerial stage, companies appoint managers with responsibility for
CR issues and developing responsible business programs that begin to
integrate the agenda into the day-to-day operations. Companies take these
steps to continue to mitigate medium-term value loss, but also to achieve
longer-term gains.

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

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

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

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

1.2 OUR SURVEY RESULTS As a starting point, to find out what the corporate responsibility and sustainable
business community thought about the interaction between CR and consumer
product health and safety, we surveyed a sample of 150 Ethical Corporation
readers in December 2011.

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 specifically
part 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 related
to 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%

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Key results:

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

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

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

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

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

Not enough CR focus on product safety

Bob Langert, corporate vice-president for sustainability at
McDonald’s, believes that the corporate responsibility community
does not focus enough on health and safety issues. “They focus
on human rights and the environment, and hardly ever do you see
product 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 their
products are eaten or drunk by customers, but not by the CR
community. 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 identify
more closely how this is developing and particularly the contrast for brands
operating in different sectors.

3
December 13 2011, email interview with Ethical Corporation.
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And so, in the sections that follow, we explore:

Methodology
How we understand the elements of consumer safety in the context of corporate
responsibility, and how we assessed these in our subject companies.

Findings
Our benchmark results, how the companies we reviewed compare with each other
and the results of an Ethical Corporation survey.

Deep Dive: R&D
A look in depth at how product research and development activities take on the
consumer health and safety agenda.

Deep Dive: Processes and Management
We look at how the companies in our survey are structured to integrate consumer
health and safety in their operational CR strategy.

Deep Dive: Health and Safety Standards
We review the survey companies’ use of internal and external standards to guide
their health and safety performance.

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

Conclusions and Recommendations
We summarize our main observations on best practice in this area with a checklist
for 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 the
context of the broader corporate responsibility agenda, and we therefore offer the
results of this research as a contribution to the wider debate and development of
corporate responsibility thinking and management.

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

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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 innovation
at 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 “Modern
consumers are connected using the internet and, especially, social
media. 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 the
food sector but cautions that too much information can sometimes
mean that consumers find themselves confused. “More and more
companies embrace transparency in products and consumers are
becoming more sophisticated about what they want in their diet.”6

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

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.
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2. Methodology

As a key part of opening this dialogue on consumer safety, we want to be clear
about 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 the
heart of this subject.

Sustainability ratings and rankings are nothing new, and in fact, in some cases, are
so well established they have themselves come in for criticism.7 Ratings are often
accused of rewarding the wrong things (such as systems or processes, or good
reporting, rather than good performance). It can be argued that ratings may be
gamed by providing the right words or the right sort of formats that catch the eye
of the raters. It can also be argued that ratings are insufficiently flexible to take
account of differences between companies, regions, sectors and many other
factors.

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 we
publish 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.

2.1 COMPANY SELECTION We identified a group of 15 companies from leading global brands. The companies
in question range from automotive to electronics, pharmaceuticals to food, toys to
beauty 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. We
also focused on companies experienced in the overall corporate responsibility
agenda, in the belief we may see evidence of how they view the role product
health and safety plays in this agenda.

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.
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Our 15 benchmarked brands

3M – The multinational manufacturer of a vast array of consumer, business and industrial brands and
products. 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, the
BMW Group had turnover of €60bn in 2010, with 95,000 employees.

Campbell Soup Company – A global manufacturer and marketer of foods and simple meals, including
soup, 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 stores
in 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 to
October 2011 was $127bn (€97bn).

Johnson and Johnson – The international healthcare products brand has 116,000 employees at 250
operating 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 66,600
employees.

Mattel – The world’s largest toy company by revenue turned over $5.9bn (€4.5bn) in 2010, with 31,000
employees 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), over
33,000 outlets and 400,000 employees.

Motorola Mobility – Formerly the mobile devices division of Motorola (until a split in January 2011) and
shortly to be acquired by Google, the smartphone and desk-top box manufacturer has 19,000 employees
and 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 €25bn
turnover 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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2.2 FOUR ASSESSMENT Our assessment is based on four simple criteria:
CRITERIA
• R&D
How is consumer safety considered in product development? We looked for
evidence of how the company perceives the risks and issues associated with its
products as well as the specific needs of its customers. We wanted to know how
consumer safety is seen to enhance other attributes of products, and whether it
is linked to environmental or social factors at the design stage.

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

• Health and Safety Standards
Does the company make use of any internal or external standards for consumer
safety? We reviewed whether the company takes part in initiatives with
government or industry to agree higher performance standards over time.

• Communication

What efforts does the company make to communicate with consumers and
engage in dialogue on product safety issues, eg via product labeling, use
instructions, advertising, web forums and corporate communications? We
reviewed whether these communications are targeted for different users or
different purposes, how the issues are positioned in reports and other
corporate-level communications, and whether they are integrated with other
sustainability 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 reports
for each of the nominated companies, and reviewed each criterion based on the
depth of information provided.

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

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

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3. Findings

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

Lots of leaders
Eight out of the 15 companies show very strong results across the board:
BMW
Campbell Soup
Ikea
Johnson & Johnson
L’Oréal
Mattel
Pirelli
Toyota

A strong center
Three of the 15 show solid fundamentals, with a degree of room for improvement:
Motorola
Nike
Novo Nordisk

Along the learning curve

Four of the 15 showed more mixed results, but with many good strengths:
3M
HP
McDonald’s
Philips

3.2 R&D LEADS THE WAY The strongest results overall were achieved in the R&D criterion. This is excellent
news 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.)

3.3 PROCESSES AND We also saw strong results in the Health and Safety Processes and Management
MANAGEMENT A category. This demonstrates the steps companies have taken to integrate the issue
TOP PRIORITY into 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 and
Management.)

3.4 HEALTH AND SAFETY The use of internal and external standards – and how these are developed – to
STANDARDS AN help ground the company’s approach to consumer product safety is certainly
EMERGING PROPERTY established, but shows the lowest marks overall in our survey.

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

3.5 COMMUNICATION Companies’ efforts to communicate and engage with employees, consumers and
PLAYS A STRONG other stakeholders about their consumer safety factors shows a recognition of how
SUPPORT ROLE important this issue is for many audiences.

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

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4. Deep Dive: R&D

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

4.1 WHAT WE REVIEWED We looked for evidence of consumer health and safety playing a role in the
company’s R&D activities broadly. We asked:

• Does the company work to understand consumer needs and hazards associated
with 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 delivering
consumers’ basic needs and expectations, and is understood in the context
of the company’s overall values, commitments and sustainability context.

4.2 FINDINGS 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 highest
scores appear. The majority of companies in our benchmark displayed advanced
levels of understanding in this area, with fully 10 out of the 14 surveyed achieving
top marks on this criterion.

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

Who their customers are
Several 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 developmental
needs of children – as well as their tendency to use products in an unorthodox
fashion.

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

21

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

For instance, Motorola has made a priority of identifying hazardous situations for
mobile phone use – such as driving – and resolving these through the product
design 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 products
Campbell’s Soup is one of a vanguard of food products companies that recognize
the public health impacts associated with processed foods, and view the product
development process as an opportunity to meet these needs for a wide
population.

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

Relatively few companies have made a concrete link between their safety approach
and their understanding of wider social, environmental and sustainability values
and 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 of
fulfilling customer expectations, but this is not elaborated upon in detail.

Consumer trust

Consumers have significant level of trust in their favorite brands, but
this 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 company
that our customers trust, and this motivates us to continually improve
our products as well as provide support for a steady advancement
in regulations. A fundamental development for us are the new
European tire labeling regulations,8 both in terms of transparency
in product performance – which is healthy for competition in our
industry – 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.
22

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, most
companies do it as eco-design, not sustainable product design – that is, integrating
the 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 single
concept. “The concept of health – quite separate from safety – seems to carry a
much more nebulous qualitative feel. Safety does relate to health, but it’s much
more defined around risk.” This qualitative aspect, he argues, makes it that much
more difficult for companies to conceive of the sustainability impacts of products
in the round, or to identify opportunities to build benefits through sustainable
design, in addition to mitigating risks.

Ultimately, it’s a question of recognizing health and safety aspects wherever they
occur, 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.”

4.3 NEXT STEPS Our benchmark shows that for leading companies at least, consumer product
health and safety is clearly on the map in the product design and development
process.

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 the
safety of their products may help or hinder their efforts to reduce environmental
impacts, increase accessibility, or build trust with users and the public.

4.4 EMERGING THEMES • 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 consumer
safety to environment and social outcomes more explicitly.

10
December 21 2011, interview with Ethical Corporation.
23

5 Deep Dive: Health and Safety Processes
and Management

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 ensure
the issues are adequately addressed. The key question: How do companies ensure
product health and safety is part of day-to-day operations?

5.1 WHAT WE REVIEWED 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 product
environmental or social attributes?
Leaders
• Are there specific company commitments or policies with respect to product
BMW safety?
Campbell Soup
Ikea • Are staff rewarded for good product safety performance?

Johnson & Johnson
L’Oréal • How does the company deal with product safety monitoring after sales?
Mattel
Pirelli A robust set of processes and management help ensure that on a day-to-day basis,
Toyota the company pays due attention to product health and safety, reducing the
likelihood of problems and ensuring the right response when problems arise.

5.2 FINDINGS Processes and management make a strong showing in our benchmark, with over
half (eight) of the 15 companies scoring full marks. But there is considerable
variation in the ways companies achieve this.

As companies will be aware, the presence of a policy or procedure is not enough
by itself to ensure it is adequately implemented. The procedures need to be tied
into steps that empower employees to make good decisions, with conscious
monitoring and evaluation.

Some examples:

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

Pirelli’s approach clearly links corporate responsibility with product safety, under
the umbrella of product quality. Sustainability management systems therefore have
a strong product safety component. There are numerous staff awareness initiatives
on product safety.

24

Mattel’s corporate
responsibility CEO
organization


GLOBAL PRODUCT INTEGRITY GLOBAL SUSTAINABILITY

Partners with Government Affairs to Sets strategy for and oversees implementation
analyze pending and new regulations of environmental, health and safety
and to incorporate them into internal regulatory compliance
product standards Drives the development of Mattel’s
Responds to consumer inquiries and sustainability strategy
provides information to them about Oversees implementation of our Global
our products Manufacturing Principles (GMP) and related

Gathers information directly from consumers social compliance initiatives
about existing or emerging issues and Provides specialized training and evaluations
communicates with appropriate Mattel to strengthen competencies and mitigate risk
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 CORPORATE AFFAIRS

Coordinates internal communications to
Mattel employees around the world
Engages with external stakeholders
regarding issues of interest and seeks
CORPORATE RESPONSIBILITY AUDIT to develop mutually agreeable solutions
when appropriate
Verifies compliance with laws, regulations
Monitors and analyzes emerging legislation
and corporate procedures around quality,
and regulations, represents Mattel before
safety, environment and social compliance
governmental bodies around the world
Identifies and proposes solutions to manage
Directs public reporting on corporate
future risks to the business
responsibility matters including ranking
profiles and preparation of this and
similar reports
Directs Mattel’s philanthropic endeavors,
including the Mattel Children’s Foundation

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

25

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