2008 marked a dramatic shift in the way we source our raw ingredients. In our 2007 Spheres of Influence Annual Report, we reported on our efforts to go back several layers in our supply chain to trace the origins of 95% of the ingredients in our cleaning products (go/2007sourcing). As we indicated in the 07 report, we were planning to continue tracing the origins of the rest of our ingredients. But as we dug deeper into our traceability work, we realized we needed to take action to gain greater control over our supply chain and the process of selecting our raw ingredient suppliers as the most effective way to make a difference in the traceability of our raw materials and packaging components.

To improve authenticity, we are moving away from distributors to consolidate our purchases and contract directly with ingredient manufacturers. Not only does this give us a lower price, it allows us to develop closer supplier relationships so we can ensure that our strategic raw material and packaging suppliers understand the level of sustainability we’re seeking and partner with us in our efforts and standard setting. By controlling this sourcing function, we reduce the risk of poorly screened ingredients finding their way into our products while also gaining a better view of the full supply chain. Moreover, we are able to award business to suppliers who share our values around transparency, disclosure and traceability.

This approach proved highly successful. Our direct sourcing strategy in 2008 deepened our supplier relationships; reduced our costs; and improved our traceability and our ability to control the specifications for our raw materials. Our revised sourcing strategy includes:

• Upgraded standards: We upgraded the environmental standards and requirements for our ingredients, products and packaging. We also improved our ability to ensure compliance with those standards and to implement change faster and more effectively.
• New Supplier Criteria: In awarding contracts, we select the supplier with the best overall offering taking performance, sustainability considerations, cost, geographic location, upstream suppliers in the value chain (whom we previously had little exposure to) and our own future innovation needs into consideration.
• Innovation and High Quality: Taking greater control of sourcing allows us to tap into the innovation pipeline to work with those companies capable of delivering to the highest standards.
• Values-aligned companies: We seek relationships with companies that have similar values and a strong commitment to sustainability and we nurture that commitment with significant mentoring.

Fragrance Standards

As part of our efforts to build up our repertoire of natural scents, we reviewed the current international standards for aromatics (ISO 9235) and established a set of upgraded guidelines that provide a more sustainable approach to fragrance development. Our efforts caught the attention of the three largest fragrance houses and we partnered with one of them to create our new water blossom scent for the laundry detergent we sell at Target. Despite the fragrance industry’s penchant for secrecy, they agreed to a full disclosure of ingredients.

“We were able to pioneer some important upgrades to standards. Fragrance houses used to working with much larger companies showed significant interest in partnering with us. This gives us a short-term competitive advantage that we know won’t last, so we want to open up the process and let the whole industry benefit while we move on to the next area we’re focused on transforming,” comments VP of Global Strategic Sourcing Garry Embleton. “It’s important, as we enter these longer-term scent partnerships, that we push the envelope of what’s possible and strive to raise the industry to a higher level. Ultimately, our goal is to have the most relevant, safest, natural scents in our categories. It’s what our consumers and customers expect from us.”

Our Pulp Supplier Partners

Martin Wolf’s and Reed Doyle’s trip to Finland to visit the pulp suppliers who provide the pulp for our diapers and feminine care products was a mixed bag. We were pleased to see that the deficiencies we had identified in a 2007 report had been addressed. Both of our pulp suppliers have sustainable forestry practices and chain-of-custody protocols to ensure that they do not use wood from high conservation value forests. One of our suppliers maintains forests that are rich in biodiversity, exceeding requirements. Our other supplier, a cooperative of 130,000 private woodland owners, meets basic biodiversity requirements. However, we are disappointed that our pulp is now produced using a totally chlorine-free (TCF) process at an elemental chlorine-free (ECF) mill instead of at a mill dedicated to TCF pulp production, as had been the case in the past.

Why do we care? Aren’t TCF and ECF about the same? Unfortunately they’re not. TCF production does not involve the use of chlorine chemistry in the bleaching process. ECF mills use chlorine dioxide in the whitening procedure, resulting in the formation of chlorinated hydrocarbons, including dioxins. We find it distressing that global demand for TCF pulp is decreasing as the industry in general has moved to ECF. While we’re meeting our goal of not adding chlorinated hydrocarbons to the aquatic environment, we’re disappointed to be selling products that may have extremely low levels of absorbable organic halides (AOX), partly due to cross-contamination from piping and equipment that also processes ECF-bleached pulp.

Gregor Barnum thanks for your thoughts - we are only focusing on our major customers in the coming months and will definitely keep you in mind as we grow this program. Gregor 17 August 2009

stephanie schlecht Susan, Sounds like you are creating change agents through the GIVE program. Is Seventh Generation planning on rolling out a similar program for the independent office supply channel? If you are, you have a partner in Give Something Back Business Products. There are many opportunities for behavior change through education in this channel. We see it with our customers. Folks want to bring their values to work. There is nothing more disturbing than the smell of harsh cleaning chemicals all over one's cubical. Stephanie Schlecht Director of Sustainability http://jm.ly/xNob3F 14 August 2009