Sourcing

The challenges of authenticity

Our commitment to using renewable materials in our products presented challenges in 2010 as the prices for palm oil and other plant-based sources of fatty acids skyrocketed. Palm oil is increasingly being used as a renewable biofuel for transportation, and has also become the “go-to” non-hydrogenated oil for the food industry. As more people world-wide consume processed food, global use of palm oil has increased tremendously – leading to a doubling in price in 2010. Our options for sourcing the renewable oleochemicals (derived from biological oils or fats) which are the key ingredients in our cleaning products are limited primarily to palm, coconut or corn oils. Our sourcing team is pursuing several strategies to improve the sustainability of our materials while keeping costs down.

• Using less: Product reformulations that involve a switch to a more effective ingredient sometimes reduce the amount of raw material needed to maintain or improve efficacy and authenticity. (See Product Improvements related to 2X Liquid Laundry and Diapers.)
• Closer relationships with our suppliers: Longer-term contracts are bringing us better prices, closer relationships with our suppliers and a deeper understanding of the path our materials take from soil to bottle. This provides greater opportunities for collaboration on sustainability initiatives as well as benefitting the suppliers by ensuring a secure market for their goods. In 2010, we also switched our fragrance purchases to a company that will allow us to make the communities where we source our fragrances more visible to our consumers. We plan to share some stories of these communities with our consumers in 2011.
• Enhanced documentation:Our improved documentation process gives us greater control over our raw material purchases and clearer support for the claims we make on our products. The new checklist covers many elements including:
• Adherence to our standards concerning human and environmental health;
• Compliance with relevant regulations and external certifications such as Kosher standards and Leaping Bunny (no animal testing);
• Percentage of renewable carbon (allowing us to track improvements in this area); and
• Country of origin which will improve our ability to trace our materials back in the supply chain.

Sustainable Palm Oil

The huge increase in global demand for palm oil has spawned the clear-cutting and burning of vast swaths of old-growth rainforest and peat land into monoculture palm oil plantations. This has had a devastating impact on species habitat and biodiversity and the indigenous forest communities that rely on these ecosystems - while increasing the harmful greenhouse gas emissions associated with land conversion. Seventh Generation has committed to sourcing segregated, certified sustainable palm oil by 2012 and joined the Roundtable on Sustainable Palm oil (RSPO) to support efforts to address this pressing challenge. In 2009, we were the first U.S. household products company to offset company- wide use of palm kernel oil by purchasing certified sustainable palm kernel oil credits and we continued this commitment in 2010.

While we currently purchase sustainable palm oil credits, we know that the palm kernel oil that is used in our products is unlikely to be certified sustainable as oils from different sources are mixed in the global market. By 2012, we aim to purchase what RSPO refers to as "identity-preserved" sustainable palm oil for all of our palm oil needs. This will ensure that the palm oil in our products is certified to meet RSPO's standards and will support global demand for sustainable palm oil. This is a very aggressive goal, and we are still building a strategy to meet it. There is some risk that without a larger industry commitment to move towards plant- derived surfactants, we will not be able to achieve our goal in 2012. However, we remain strongly committed to our palm oil work, which will be a priority focus in 2011.

Manufacturing

Our manufacturing partners are just that – important partners in our efforts to bring our sustainable product designs and principles to life. It is important that we convey our expectations clearly, conduct periodic facility audits to both verify and mentor our partners, and receive documentation covering a range of critical manufacturing, quality, and sustainability issues.

In 2010, we upgraded the Manufacturing Partners Annual Report (MPAR) our suppliers complete every year. Launched in 2006, this supplier assessment tool is much more than just a report. It is a comprehensive approach to deepening collaboration and driving improvement. By meeting on-site with each supplier and by sharing best practices among our suppliers, we are able to support their sustainability efforts. By scoring them against key parameters, we can incentivize and track their improvements from year-to-year. A comprehensive discussion of the program can be found in our 2008 report .

In 2010, we expanded the scope of the reporting program. The sustainability section, in particular, is more comprehensive and addresses all of the key questions that third parties ask us about our products. It allows our suppliers to report information to us – often in the same format they've already used to report their data elsewhere.

For the first time, we are asking our partners to discuss their sustainability plans and strategies and to describe how they push sustainability with their own suppliers. We also cover environmental topics including water and energy consumption, materials and waste management, air pollution, and greenhouse gas emissions. On the social side, we request information about community engagement, fair labor and workplace practices and recommend conformance with the decent workplace standards of SA 8000.

With a position vacant, we were only able to conduct audits of three of our 13 manufacturing partners in 2010. We have ten audits scheduled for 2011 when we expect to be fully staffed. We will also work in 2011 on incorporating the water and energy data into our own environmental footprinting calculations.