Features

Retail Regulations

September 4, 2007

A tour of Wal-Mart’s new requirements for its legions of vendors.

Retail Regulations



A tour of Wal-Mart’s new requirements for its legions of vendors.



By Lambros Kromidas, M.S., Ph.D. and Susan Eberhart
Coty Inc.



When one thinks of cosmetic product regulations the EU Cosmetics Directive, FDA, Califor- nia Proposition 65 and REACH often come to mind. All of them are somehow linked to governmental authority and control. In other words, cosmetic companies that are doing business internationally have to comply with numerous, regional regulations before placing their products in the marketplace. But, of late, cosmetic companies have to overcome another hurdle—retail regulation. Retail giants such as Wal-Mart, Carrefour,1 Boots2 and others now demand that manufacturers comply with a different set of retail regulations before placing their products on their store shelves. However, unlike governmental authorities that have a visible and well-known structured process of developing new regulations over time, “retail giants” can implement requirements impulsively—as knee-jerk reactions to bad publicity—and in vacuum—sometimes blind-siding their partners.

Large retailers understand the need to be more environmentally-conscious as well as comply with government regulations. Using Wal-Mart as an example, their environmental efforts are professed to assist in furthering their environmental sustainability efforts, to enhance their current compliance process,3 and to improve public relations while remaining profitable. What ever the reasons, it results in dictating how manufacturers conduct business and develop products for sale in Wal-Mart. And who does not want to sell their products through Wal-Mart?   Wal-Mart stores are not only in your neighborhood but have crossed national borders and can be found in many countries. In general, “retail giants” influence how cosmetic manufacturers and developers conduct business – the subject matter of this article.

There are several Wal-Mart green initiatives that lead to retail regulations, such as Sustainability 360. This initiative involves transitioning to 100% renewable energy resources for all stores, a 25% reduction in solid waste and improvement of all private brand packaging, and to sell sustainable, environmentally-friendly and, of course, affordable products.4

Global Initiative Project



The Global Innovation Project, another of Wal-Mart’s green initiatives, focuses on minimizing the use of non-renewable energy in the products it sells.5 For example, in the case of home electronics, next year suppliers must complete scorecards to evaluate their products’ energy efficiency, durability, upgradeability and end-of-life solutions.6 The products therefore will be ranked against their competitors on these metrics and cradle-to-grave issues. Scorecard results can be displayed on the packaging at point of sale, influencing the consumer.7

 Wal-Mart CEO H. Lee Scott Jr.
In October 2006, Wal-Mart implemented the Preferred Chemical Principles for chemical intensive products to influence the phase-out of undesirable ingredients. This impacts formulations because it mandates the removal of chemicals that “have been identified as known, likely, or probable human carcinogens, mutagens, or reproductive toxicants” and those chemicals that are referred to as persistent, bioaccumulative, and toxic (PBTs) to the environment.8 Of course this is a good thing— right?  Not if Wal-Mart lists a chemical based on misinformation and incomplete science as it did with nonylphenol ethoxylates (NPEs). These chemicals function as surfactants in detergents and cleaning products. They are high performance ingredients that have been used for over 50 years, and are well-studied, safe, cost-effective, and reliable cleaning ingredients. But, they are toxic to fish and aquatic life. But, what’s the alternative? An evil you know, or one you don’t? All surfactants, including alternatives to NPEs are toxic to aquatic life.9 Anyway, this is a case where a retail giant blind-sided its supply partners and used misinformation to influence their activities. Manufacturers of detergents and cleaning products were struggling to get out of NPEs, but the alternatives were not any better!  It is for this reason that made Wal-Mart eventually deselect NPEs in detergents and cleaning products.9

On Feb. 1, 2008, Wal-Mart’s Packaging Initiative will begin to judge, via the packaging scorecard, if companies improved their packaging processes. The scorecard ranks the efficiency and environmental friendliness of product packaging on metrics like product-to-package ratio, recycled content, innovation, and transportation.10 Wal-Mart’s plan is to eliminate 5% of unnecessary packaging across the supply chain by 2013. An on-line demonstration of the scorecard may be viewed at: www.scorecardlibrary.com. Next year, Wal-Mart buyers will be able to choose suppliers based on scorecard results.11

The Impact of CARP



Wal-Mart has implemented a new way of conducting business—one that is directly influencing the cosmetics industry now. All chemical products sold will undergo a Chemical Assessment Review Process (CARP). Wal-Mart’s definition of a “chemical product” is anything that contains a powder, gel, paste, or liquid that is not intended for human consumption. This definition of a chemical product puts cosmetics on par with household cleaners, and lawn, garden, and car care products. This Wal-Mart initiative is designed to enhance its current compliance process and assist in furthering its environmental sustainability efforts. CARP “provides Wal-Mart consistent Material Safety Data Sheets (MSDS) and accurate safety information at store level for their customers and associates.”3 The CARP assessment requires an Occupational Health and Safety Administration (OSHA) compliant MSDS. This foreseeable change to the European Union format explicitly includes environmental data. Anyway, all manufactured products distributed to Wal-Mart since May 8, 2006, will need to undergo CARP. Products on Wal-Mart’s shelves before that date will be reviewed by Wal-Mart to ensure that the information is complete and up-to-date. If not, they must be processed through CARP. Suppliers who conducted business with Wal-Mart before August 1, 2006 must agree to an amended suppliers agreement. Wal-Mart reserves the right to block your products if they have not been assessed.

The Worldwide Environmental & Regulatory Compliance Systems (WERCS) Professional Services, LLC is the third party authorized by Wal-Mart to conduct this online CARP process. WERCS has specialized tools for MSDS authoring and management. To perform CARP, suppliers must provide company and product information, physico-chemical properties, and safety and transportation information. While not an exhaustive list, the following information may be required for CARP depending on the product type or formula, or whether you choose to have WERCS write your MSDS for you:
 
• Your company information: Wal-Mart supplier number, Wal-Mart buyer contact information, including email address, and supplier corporate contact information and emergency phone number(s).

• Your product information: product name, Universal Product Code numbers, product usage (i.e., fragrance, disinfectant, etc.), product ingredients with Chemical Abstract Service numbers and their percentages, suspected contaminants, and MSDS if available.

• Physicochemical data: odor description and appearance of product, pH, viscosity, specific gravity, auto ignition, minimum ignition, physical state of product (solid, liquid or gas), flashpoint and boiling point of product (if liquid), water solubility of product, coefficient of octanol/water distribution. Further safety data that may be required and may include oral, dermal, and inhalation LD50’s of product; finally if the product is a pesticide or a consumer commodity.

• Transportation information: Lim- ited Quantity Exemption, mode of transportation, United Nations numbers, packaging weight, gross weight, individual inner container weight, packaging type, and Department of Transportation numbers.12

Full disclosure of ingredients is recommended for CARP, but exact percentages are required only for hazardous ingredients—ranges are accepted for non-hazardous ingredients. Hazardous ingredients are so-called listed chemicals—the CARP system will give you the list the chemical appears on; however, they do not take into consideration your whole formulation, product application, etc. They also don’t speak INCI (International Nomenclature of Cosmetic Ingredients), which can be a stumbling block, especially if your data-entry folks are not chemists.

If one sells gift sets, or one’s products are in a pre-pack, the CARP assessment depends if the set has one or multiple UPCs. If the set has a single UPC, then a cumulative set of ingredients for the entire set may be entered along with the most hazardous product information. If the set has multiple UPCs, one should associate the individual UPCs (potentially in different assessments) with the set’s overall UPC.

Of course, the CARP process has a cost for suppliers, payable via PayPal or wire transfer (which in themselves may incur additional costs), and is dependant on whether you provide an OSHA-compliant MSDS, or WERCS writes one for you. Just entering another UPC to an existing assessment—such as for a different size package—is a nominal fee. The table shows the fee structure.

In the CARP assessment process,  suppliers send information via the WERCS website, along with payment, for a CARP assessment. Provided the information submitted is complete, in two business days you are sent an email from WERCS with a seven-digit identifier and an item analysis summary. WERCS simultaneously transmits your chemical assessment and MSDS to Wal-Mart (exact ingredient percentages are not sent, unless required by OSHA). UPCs are now available to Wal-Mart for item creation. Unless there is an item creation one cannot transport a given item for display on Wal-Mart shelves. By the way, the manufacturer is responsible for inaccurate or incomplete data—if the data are insufficient it can be rejected by WERCS and you will have to re-submit and pay again. WERCS is very helpful and would guide you through the process and answer all your questions. One may contact them at: shasupport@thewercs.com.

To get started on the CARP assessment process, you should involve your internal support systems. Your Legal team should review the WERCS website for items such as the suppliers agreement, privacy statements, statement of confidentiality, and full disclosure requirements. Your Information Technology group should check the website security. Finally, one will need to resolve ownership of the overall process. That is, determine who will incur the cost, and sign up as a company and as an individual(s) to the WERCS website. Then, the most important step, identify which products are to be sent to Wal-Mart, ensuring that the products are assessed well before they are shipped.

Does one have to abide with Wal-Mart’s or any retail giant’s “retail regulations”?  Well, the answer is best stated by Wal-Mart’s CEO Lee Scott, who told a Fortune reporter that its suppliers will have no choice but to follow suit or risk Wal-Mart cutting them off.13   The authors believe that it is the responsibility for all companies to always think of the safety of their consumers and the environment. As such we applaud the undertakings of Wal-Mart. But such undertakings should not be done on a whim—just because one can—one needs to involve their partners. Such undertakings should be based on solid information—not on emotion, misinformation, or reactions to bad publicity. To do otherwise, may create a lot of headaches for retailers and their partners.

References



    1. Carrefour. Environment. March 2007. http://www.carrefour.com/cdc/ responsible-commerce/our-commitment-to-the-environment/.
    2. Boots. Corporate Social Responsi-bility, Environment. May 2007. http://www.boots-csr.com/main.asp? pid=627.
    3. WERCS. Chemical Assessment Review Process (CARP) Supplier Frequently Asked Questions. March 2007. https://secure.supplier WERCS. com/default.aspx.
    4. Wal-Mart. Environment. March 2007. http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=345.
    5. Wal-Mart. Facts. March 2007. http://walmartfacts.com/articles/4784.aspx.
    6. PR Newswire. “Wal-Mart Announces Goal to Sell Sustainable Electronics; Retailer to Score Electronics Suppliers on the Sustainability of Their Products,” March 12, 2007.
    7. Wal-Mart. Facts. March 2007. http://walmartfacts.com/articles/4861.aspx.
    8. Wal-Mart. Chemical Intensive Products Preferred Principles Facts Sheet. October 2006 (http://walmartfacts.com/articles/4556. aspx).
    9. APE Research Council Statement on “APERC Statement About Wal-Mart Announcement on NPEs, November 6, 2006.
    10. Cosmetic/Personal Care Packaging, Vol.12(1):12.
    11. Wal-mart. “Wal-Mart Announces Initial Results of Packaging Scorecard,” March 12, 2007.
    12. WERCS. Getting Started. May 2007. https://secure.supplierWERCS.com/public/displayHelp.aspx?lang=EN&topic=getting_ready#
    13. Fortune, The Green Machine, August 7, 2006.
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