spheres of influence - Seventh Generation

spheres of influence

Seventh Generation 2007 Corporate Consciousness Report

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Our ideas spread organically through our products, our website, this report….. They take root and regenerate themselves in the larger community and the cycle begins anew – each time extending and transforming the spheres of influence.

spheres of influence

Contents 2 5 6 7

40 Towards Systems Thinking 43 Educating Others

Letter from Jeffrey Hollender Our Company Our Global Imperatives This Report

Making a Difference

9

10 Achievements and Goals

Highlights of 2007 Corporate Consciousness Goals Corporate Consciousness 2007 Progress towards our 2010 Goals Change it, 2007

10 12 12 13

14 Our Products

New Products Collaboration with WAGES The Science Behind Our Product Improvements Labeling Label Us Responsible Collaboration with MBDC Reviewing Our Labels and Claims Reviewing Product Safety

16 18 19 19 19 20 20 20

25 26 28 31 31 31 32 32 33 33

43 43 44 44 44 45 46 46

47 Our Advocacy Climate Change

22 Our New Scents 24 Creating a Regenerative System Sustainable Ingredient Sourcing Traceability Study Manufacturing Partners Annual Report (MPAR) Our Warehousing Partners Product Transportation Our Supply Chain Strategy Materials and Packaging Packaging Our Materials Recycled and Renewable Materials

Our Website Web Redesign Educating Consumers: Home Healthy Home Our Chief Inspired Protagonist on Tour New Ways of Reaching Out Educating Retailers: The GIVE Program Wee Generation Tampontification

57 Awards and Memberships

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49 Soap and Detergent Association 50 Economic Performance and Giving

Economic Performance Giving Our Giving Philosophy Our double digit sales growth Planting Trees in New Orleans

50 50 50 50 51

53 Our Community

Growth Diversity Our Work Life Building Connections Our Benefits Governance Our Workplace Environmental Stewardship in Our Burlington Office Our Recycling Efforts Our Purchasing Criteria

53 53 54 54 55 55 55

2007 Awards Fast Company Social Capitalist Award Memberships B Corporations Partial List of Other Memberships

57 57 57 57 57

58 Stakeholder Consultation Reviewer Comments Reviewer Comments Positives Key Improvements Suggested Points for Uniqueness

58 58 58 59 59

60 International Reporting Standards

GRI—C Standard Elements Profile Disclosures Standard Disclosures Organizational Profile Report Profile, Scope, Boundary, and Global Reporting Initiative Index Economic Performance Indicators Environmental Performance Indicators Labor Practices and Decent Work Performance Indicators Society Performance Indicators Product Responsibility Performance Indicators and Marketing Report Assurance

60 60 60 61 61 61 61 61 61 61 61

62 Appendix A—Report Glossary

55 55 55

35 2X Concentrate Laundry Detergent

37 C42: Reducing Our

Environmental Footprint

Carbon Reduction Greenhouse Gas Accounting

38 38

Easy Links! All web links in the report appear as “go links”. To read about Oprah’s coverage of our products, for example, the simplified link is http://www.seventhgeneration.com/go/oprah but appears in the text as go/oprah.

Letter from Jeffrey Hollender

Jeffrey Hollender, President & Chief Inspired Protagonist, Seventh Generation

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Seventh Generation, Inc. | Corporate Consciousness Report for 2007


In the pages that follow, you will read of our progress and setbacks

over the past year in making Seventh Generation as responsible and sustainable as it can possibly be. Our 2007 corporate consciousness report, Spheres of Influence, also documents our efforts—some successful, some less so—to inspire our partners, our industry, and the wider business community to embrace a model of deeper business purpose, where economic growth is merged with social justice. This report reflects our belief that to be a good corporate citizen, Seventh Generation should publicly bare, for all to see, both its positive and its negative impacts on society and the environment. Only then can we engage our consumers and stakeholders in an open and honest discussion on how to improve. While this report underlines our missteps as well as our breakthroughs in 2007, because of the printing deadline it mentions (p. 20), but doesn’t detail, one of the most difficult challenges in our 20-year history. Allow me to add to the record. One morning in mid-March, I awoke to headlines bearing the type of story you hope lives only in a bad dream. “Seventh Generation Battles Carcinogenic Chemical Controversy” “‘Organic’ and ‘Natural’ Consumer Products Found Contaminated with Cancer-Causing Chemical” The Organic Consumers Association (OCA), a public interest nonprofit, had released a report showing that 47 organic and natural consumer products contained detectable levels of the contaminate 1,4-dioxane. Seventh Generation’s dish liquid was one of the brands named in the study. This revelation challenged our honesty and threatened one of our most valuable assets: our reputation. Of course, we would not intentionally add 1,4-dioxane to our dish liquid. As the Los Angeles Times noted, the compound is a byproduct of a process used to improve the degreasing agent in detergents. Our manufacturers vacuum strip the dioxane to minute levels. The OCA report shows that in terms of 1,4-dioxane, our dish liquid was the safest of all the dish liquids tested. In fact, our levels were fifty times lower than another so-called “natural” brand. That said, we do not argue with the OCA’s core assertion. We agree that 1,4-dioxane doesn’t belong in our products—the byproduct is not consistent with who we are and what we stand for.

we are working with our supplier to eliminate it entirely, and to do that, we will create a whole new surfactant that is currently not available on the commercial market. (This initiative has spurred many in our industry to do the same.) Our real mistake was to exclude consumers and key stakeholders from our conversations about dioxane. The problem wasn’t highlighted on our website or detailed in our earlier corporate responsibility report. And so, we failed. And therein lies the larger lesson about what it takes to be a transparent company. We had hundreds of meetings and conversations about how to purge dioxane from our products. We ran many of our own tests and worked closely with suppliers and manufacturers. But we didn’t take that one essential step: to share our trials and tribulations with everyone who wanted to weigh in, express concerns, ask questions, and challenge our progress.

Read Jeffrey’s letter to BusinessWeek on companies choosing to go green while staying in the black. go/gogreen

Five or six years ago, the expectations around transparency were somewhat more relaxed than they are today. I suppose a part of me hoped that by the time 1,4-dioxane became a public issue, we would have found a way to completely vanquish it (exactly the wrong approach to the conundrum). But dioxane endured, and in the rush to confront an unceasing array of new challenges and opportunities, we never took a hard look at whether to publicly discuss the problem. In a sense, our dioxane dilemma got “grandfathered in” under a new set of transparency rules. Predictably and painfully, it was soon revealed to the outside world. The breathless headlines quickly followed.

Having worked to remove dioxane from our dish products as well as our laundry products, it was sad to see our incomplete progress characterized as a dishonest act. But the truth is that our effort was simply not good enough. Not because we haven’t yet succeeded in getting rid of dioxane— seventhgeneration.com

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I’ve spent my entire career working to avoid just such an experience. But viewed another way, dioxane presented us with a rather extreme opportunity to absorb the new rules around transparency. By exposing problems, transparency begins to solve them. When a company begins to make itself transparent, it essentially conducts an unblinking audit of all its activities. The process is analogous to the lifecycle analysis of a product. Just as a product-development team puts a spotlight on all the impacts of a new offering, from cradle to grave, the company casts a bright light on itself, by measuring the systemic effects of its operations. The result is a three-dimensional picture of the organization’s successes, but more importantly, its flaws and vulnerabilities. By calculating and mapping its greatest negative effects, a company can then develop strategies and policies for mitigating them. This process, while sounding straightforward, runs against the grain of conventional business wisdom. It is scary, discomforting, and not what most businesspeople are prepared for.

We rely on our community and you, our readers, to extend the influence of the ideas in this report to the many spheres of your daily lives.

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Soon after the dioxane story broke, we launched a companywide effort to uncover any additional issue that consumers should know about, but don’t. One such challenge involves our effort, which is still a work in progress, to find naturally derived pigments for the dyes in our diaper products. This past April, we used the forum section of our website to engage consumers on the diaper story. More stories will undoubtedly follow. Achieving greater transparency is a revolutionary goal, but it’s an iterative process. It starts with bringing inside-the-company conversations outside to the wider community. A company can’t be truly transparent if its community—its suppliers, manufacturers, and


even its competitors—remains opaque. Increasingly, companies are finding themselves enmeshed in larger ecosystems, where the actions of one entity reflect on the larger whole. Some big brands in the U.S. apparel industry learned this firsthand when, a decade ago, revelations of child labor violations in distant factories damaged their reputations and, for a time, their performance. That’s why we’ve chosen “spheres of influence” as the theme for this year’s report. As you will see in the following pages, we are attempting to exert a gravitational pull on companies in our orbit (and beyond) to help them become fully conscious corporate citizens, for whom making profits is a means to the higher end of contributing to the well-being of society and the environment. Greater transparency is just the first step towards taking greater responsibility for the future that all of us are creating. As companies become more transparent, demands increase for greater transparency. With more and more employees, CEOs, activist groups, and citizen stakeholders taking to blogging, the impulse and the pressure to air company business grows stronger every day. For any organization that aspires to create value by competing on values, it’s doubly incumbent to let the sun shine not only on the company’s accomplishments, but also on its less-than-flattering secrets and even its failures. Stakeholders expect “good” companies to be open, candid, and engaged. Those expectations will grow, whether we like it or not. (I like it.) Up until several years ago, no U.S. company would dream of listing on its website its subcontracting factories in developing countries. But when Nike and Gap broke that taboo, it became an issue that every company with a global supply chain needed to think about. Seventh Generation does not disclose the names of its shareholders or the salaries of its employees, but will we never reveal that information? I don’t know. I do know that the digital world’s accelerating influence will upend every organization’s ability to manage its message. The rules are changing by the week, and as Seventh Generation has learned from our dioxane experience, it would behoove any values-driven company to continually reassess its position relative to transparency.

Seventh Generation is the nation’s leading brand of household and personal care products that help protect human health and the environment. We are a small, rapidly growing, privately held company based in Burlington, Vt. Established in 1988, we distribute our products to thousands of natural food stores, supermarkets, and retailers across the United States and Canada. Seventh Generation products include 100% recycled fiber paper towels, napkins, bathroom, and facial tissues; natural cleaning and laundry products; natural lotion baby wipes; diapers; training pants; organic cotton feminine hygiene products; and trash bags made from 55−80% recycled plastic. Transparency is a process, not a prophecy. Seventh Generation has for many years pushed to make itself more of a “see-through” organization, particularly with regard to labeling. While complete ingredient disclosure is not required for cleaning products, we believe it’s expected, and we voluntarily disclose both our ingredients and their health effects. Other brands are beginning to follow our lead. Still, I don’t know whether the company will ever be sufficiently transparent. It may be an unattainable goal, because society’s expectations of what it means to be transparent are constantly changing. The moment you think you have “arrived,” you have failed. Transparency is not a state of being; it’s an endless process of becoming. No company lives entirely in a glass house, meeting the transparency challenge at every level of the organization. Some secrets—Coke’s formula, Apple’s design process, Cisco’s acquisitions strategy—will probably remain unrevealed. And yet, in a world where revelations of a company’s business only fuel stakeholders’ hunger for more, transparency is unquestionably a business imperative. But it’s not for the faint-of-heart. No matter how committed you are to being open and accountable, there will always be issues that are difficult to discuss. I can assure you that as painful as it is to disclose a misstep or mistake, it hurts far more when an outside agent does it for you. What’s true of transparency is likewise true of Seventh Generation’s effort to not only succeed in the marketplace and contribute to society, but to influence others to contribute as well. It’s a challenging, sometimes even bewildering odyssey that tests the spirit and will of each and every one of us. Over all, I am pleased with our progress to date. But never satisfied. The journey continues…

As a pioneer in corporate responsibility, Seventh Generation is committed to moving the world towards a more sustainable and just future. Our business practices focus on offering people varied avenues to express their idealism, passion, and commitment to causes larger than themselves at every point along our supply chain from suppliers and partners to shareholders, customers, and our own employees. Follow this link to a 20-year history of our company: go/20years

Click and Get Involved. Too many corporate responsibility reports end up gathering dust on a shelf. We hope this 2007 report will motivate readers to learn, act and engage. We hope it inspires you to learn about environmental issues, volunteer in your community, reduce your own carbon footprint, buy green, and take whatever steps you can to make our world a better place and your business a more conscious one.

seventhgeneration.com

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Our Company

About this Report

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We are committed to creating a business where all our products, raw materials, byproducts, and the processes by which they are W bu rs o em l pe w l made are not just sustainable, but a o th h restorative — enhancing the r w o f potential of all of life’s systems, both human e and ecological. Systems at s t e ng i r n m Perspective: re k to c yste tand . e s rs ew f r We are committed to approaching l i if l wo cia nde of v D everything we do from a systems perspective, g wil d so or u nts n a perspective that allows us to see the i We an y f oi d : e p t larger whole, not a fragmented, l an ves nanc paci and a t compartmentalized world, not just our r s ti er ca ves tu r e v a i own reality, but a world that is e ec go th ct n nd at d t e a e p e h endlessly interconnected, in which ha ed e t Un rs rat reas ersp t s r everything we do affects re e u rat ei . Peorpo inc ng p u n h everything else. s r a t f o c at ri en es a at ow e o eti h e t ff st rc ed el at pl u di u w b r de e m so ene is W re r

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Our Global Imperatives

Our Global Imperatives 6


This is our Corporate Consciousness Report for 2007. We use the word “consciousness” intentionally. This is not a report focused solely on our achievements, but upon our efforts to be conscious corporate citizens according to the values that define and the imperatives that guide our company. This awareness feeds our inner drive to create change—changes to our products, changes in our industry, and more broadly, changes to society. Consciousness also reflects a deeper sense of knowing not only our strengths, but the challenges, pitfalls, and successes we experience as we seek to integrate our environmental and social beliefs into our work. Our achievements in 2007 were extraordinary and the mood in our little company was gleeful at times. We grew tremendously—increasing sales 45%, adding new products, hiring new employees, almost doubling our corporate giving, and raising our brand recognition. We are also proud to share the results of our first ever traceability study for our Natural Dish Liquid (p. 26) and our most comprehensive effort to date to quantify and reduce our greenhouse gas (GHG) emissions, considering the contributions of our suppliers, transportation, packaging, corporate headquarters, and our employees’ own lifestyles (p. 38). You can also read stories about some of our most fulfilling moments, which paint a more vibrant picture than charts and graphs ever will, such as our collaboration with Women’s Action to Gain Economic Security (WAGES) to empower Latina women in eco-friendly, housecleaning cooperatives. (p. 18).

We are a company that believes strongly in the value of transparency and providing this Corporate Consciousness Report is one of the many ways we meet our commitment to be honest and open about both our successes and failures. We must acknowledge that alongside our triumphs, we have experienced setbacks as well. We still have synthetic ingredients in our products, we discovered that some of our labeling did not meet our own standards of completeness, and we are still working on increasing the diversity of our staff.

It is our good fortune to be making natural household products at a time when consumer interest in safe and healthy products is high, and the industry itself is becoming greener [p. 49 on the Soap and Detergent Association’s (SDA’s) interest in sustainability]. We were guided in our work this year by our collaborations with some extraordinary entities such as McDonough Braungart Design Chemistry (MBDC), the These global imperatives, or guiding cradle-to-cradle environmental design firm (p. principles for our company, were 20) and Greenpeace (see articulated two years ago by an internal Change It about inspiring student activists, team that worked to define our company p. 13). We also want to essence and our company direction. These acknowledge the creativ-

aspirational imperatives represent the evolutionary path our company has chosen. This report is one step on that journey.

ity and enthusiasm of our talented employees. We hope we do justice in this report to the positive influence these and others have had on our collective work. We do not own the manufacturing facilities that produce our products. We partner with manufacturers across the United States and Canada, including one in Germany. We sell our products in natural food and grocery stores, through the internet and, more recently, in mass merchandising stores. The fact that our business relies on our partnerships with suppliers, manufacturers, warehouses, and retailers over which we do not have full control creates both challenges and opportunities. Our Manufacturing Partner Annual Report (MPAR) proved to be an exciting, tangible vehicle for us to encourage our partners to become more conscious in their business practices (p. 28). Our lack of control over production also creates challenges for us in trying to report on the environmental impact of our products. We had some difficulty, for example, reaching back into the supply chain to gather complete carbon footprint data from our manufacturing partners.


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About this Report

This Report

About this Report

The theme of this report is “spheres of influence.” At Seventh Generation, we don’t just make products; we seek to engage others in conversations and collaborations about changing our world in positive and regenerative ways. We cannot do this work alone. To be more conscious citizens, we must work with others to share our vision of a more sustainable and just future. In short, we need to inspire others and be inspired by them in turn. This report is on paper and on-line. This report is provided in both paper and online versions in an effort to reach as many readers as possible. As befitting an organization that uses its lively blogs to create a community interested in corporate responsibility, healthy lifestyles, and environmental issues, the on-line version is rich with links to everything from a copy of our MPAR master form, to our blogs and videos, to the websites of some of the charities we have supported, and to many of the groups we have worked with. Simplified links to the many websites mentioned are shown in the text. To read about Oprah’s coverage of our products, for example, the simplified link is http://www.seventhgeneration.com/ go/oprah. These “go” links will allow us to keep readers connected to any web addresses that may change in the future. Read about international reporting standards. For information on stakeholder involvement, report assurance, how this report follows the Global Reporting Initiative (GRI) guidelines (p. 60), and how it supports Ceres’ efforts to integrate sustainability into capital markets, see p. 58.

We want your feedback! What do you like? What needs improvement? How can we be clearer about our work? Please relay your comments, suggestions, and any feedback at all to us at: [email protected].

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Previous years’ reports are available at: go/reports


Jeffrey Hollender

is among a very small circle of business leaders who thinks and speaks unflinchingly about transformative change in corporations. And, as importantly, his words are matched by his actions. Companies large and small should pay careful attention to Hollender’s vision of the future.” —Alan White, Tellus Institute, Corporation 2020

go links: add the link to http://www.seventhgeneration.com/

In 2007, the sale of Seventh Generation products helped save: 118,000 trees (about 1,180 football fields filled with trees)

42,000,000 gallons of water (enough to supply 335 families with water for a year)

29 billion BTUs of energy (a year’s worth of energy for 291 households)

213,000 gallons of petroleum (enough for 399 cars to drive for a year) Making a Difference Every time a consumer chooses a Seventh Generation product, he or she is making a positive difference for this and future generations. To quantify the positive impact Seventh Generation’s products have on the environment, we work with an independent group to track the amount of petroleum, trees, landfill space, water, and pollution saved as a result of the purchase of our natural household products.

Win $5,000! Tell us what idea in this report inspired you and how you

would use $5,000 to take that idea and make a difference. For information on how to apply, go to: go/contest. Deadline: December 31, 2008

Achievements and Goals

Achievements and Goals Highlights of 2007

Sales • Grew by 45%. • Are the brand leader in every category in which we compete.

Collaboration • Partnered with WAGES to foster eco-friendly housecleaning cooperatives in California. • Joined with Healthy Child Healthy World on Wee Generation initiative.

Products • Launched new scent strategy with eight blended scents. • Introduced new and improved products. • Partnered with MBDC to look at safety of ingredients and review health and environmental claims. • Introduced on-line store.

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Corporate Consciousness

Reaching Out • Launched Generate Inspiration via Education (GIVE), our retailer education program.

• Continued to integrate systems thinking into our company. • Adopted strategy to move towards a regenerative system.

• Expanded reach of blogs and newsletter.

Supply Chain • Audited eight of ten manufacturing partners on the sustainability of their companies leading to improvements in corporate consciousness practices. • Completed first ever traceability study for all cleaning products (traced 95% of all cleaning ingredients).

Environment

Social • Added 16 staff, a 31% increase.

• Introduced Natural 2X Concentrate Laundry Liquid using 22% less plastic packaging than the full-strength version.

• Fostered sense of community with internal newsletter Inner Piece.

• Established GHG emission reduction goal of 80% by 2050. • Decreased normalized GHG emissions by 34% since 2005. • Launched employee 20/20 by 2010 carbon reduction program.

Donations • Increased by 91%. • Established corporate giving program to donate 10% of pretax profits annually. • Donated 675,000 feminine care product packages to shelters through our Tampontification program.


Corporate Consciousness Goals Our strategic long-term goals are a direct response to our global imperatives. The goals include the following: • to improve the sustainability of our products and our industry • to become a more regenerative business (p. 24) • to continue to grow and maintain our position as brand leader • to be a leading voice on corporate responsibility • to fully integrate systems thinking into our business practices A more immediate objective for the coming year is to sharpen our internal thinking about our goals and to develop a set of strong performance indices to guide and track our progress from a holistic point of view.

Corporate Consciousness 2007 Progress towards our 2010 Goals Key Performance Indicator

2010 Goal

Progress in 2007

Sales Growth

Increase sales by 250% from a 2006 baseline

Increased by 45% from 2006–2007

Improve Product Safety

Replace surfactant in wipes

Research completed in April, 2008

Eliminate traces of 1,4-dioxane from cleaning products by 2009

Identified possible alternative surfactants; began work on reformulation

Product Authenticity

Address product claim issues to eliminate inconsistencies by 2008

Conducted third party review of claims

Revise product guidelines and ensure conformance

Will initiate in 2008

Traceability

Trace 95% of all materials, ingredients and packaging components by 2008

Traced 95% of all cleaning ingredients and 70% of all product ingredients

Sustainable Sourcing

Source palm oil from certified sustainable sources

Will initiate in 2008

Manufacturing Partners

100% of manufacturing partners complete their carbon footprints and begin reduction programs

45% completed footprints in 2007

Audit all manufacturing partners annually

Audited 80% (8 of 10)

Improve partner corporate responsibility scores by 25% per year from the 2007 baseline

Completed baseline for seven partners. Average score is 1.7 out of 3

Carbon Reduction

Packaging

Social

Reaching Out

Green Workplace

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Reduce employee carbon footprints 20% by 2010

65% of employees engaged in the program

Reduce GHG 80% by 2050 (2% per year from a 2005 baseline)

Reduced 34% from 2005–2007

Reduce transportation related GHGs by 2% per year

No progress

Achieve 100% postconsumer recycled content for corrugated use

Grew to 41%

Reduce the use of virgin materials in our plastic bottles by 50%

Successfully tested several designs with high recycled content

Reduce the use of virgin materials in our flexible polyethylene wrap by 50%

Tested recycled wrap on several paper products

Develop 2X Concentrate Baby Laundry Liquid Detergent and Delicate Care Laundry Liquid Detergent by 2009.

Research begun

Increase cultural and ethnic diversity to at least 6% of workforce

We continue to work on this

Expand volunteer program

Initiate in 2008.

Redesign website

Launched March 2008

Continue to find new ways of reaching out to the larger community

Initiated GIVE (for retailers), Wee Generation, and Home Healthy Home programs.

Obtain Leadership in Energy and Environmental Design gold certification.

Phase I construction: 2008 Phase II construction: 2009




Change It, 2007 2007 was the second year of our successful collaboration with Greenpeace to inspire the next generation of student activists through Change It, a week-long, intensive training in techniques of political activism held in Washington, D.C. This past year, we received three times the number of applicants and decided to double our participation to 200 students. We also added a unique web component to both the application process and the program as a whole. Applicants posted profiles on our website answering the question, “How will I change it?” Our previously static website was filled with vibrant student blogs, videos, and messages of support. We made a huge effort to engage students, thereby increasing our site traffic sevenfold. But the real success story is the tremendous legacy of student empowerment the program engendered —a story which is best told in the participants’ own words. Lara Petersen (Seventh Generation Change It coordinator). “Participating in Change It was the proudest moment of my professional career. I’ve never witnessed such empowerment before. It’s a moving, humbling thing to give someone the tools to pursue their passions. I’m so proud of the students and of us at Seventh Generation for doing this. In 2008 we’ll be providing funding for the program, and Greenpeace will be running it in two cities. We’ve put enough love and support into Change It that now it has developed a life of its own.” Alicia Kowsky (Change It 2007), president of her campus Student Environmental Organization at SUNY Geneseo, has initiated an energy saving contest between residence halls. “Change It really helped me develop my leadership skills. I used to be really shy, but I like facilitating because even though I don’t like being in the spotlight, I can give everyone else a chance to be heard.” Nicole Fillion-Robin (Change It 2007) is working to pass a clean energy initiative at Texas A&M University. “Change It has made me much more confident in my organizational skills and has inspired me to take a more proactive approach to change on my campus.” Laura White (Change It 2007) is running the Project Hot Seat climate change campaign at Tulane University. “Change It educated me about how to work within the political system. It also motivated me to take a stronger leadership role on my campus.”

You can find more information at: www.changeit08.org

Please view our video at: go/changeit seventhgeneration.com

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Our Products

Oprah!* Our products were featured on Oprah!

Our Products Seventh Generation offers a complete line of non-toxic household cleaning, paper products, and trash bags. We also offer healthy baby care and feminine hygiene products. All of our products are safe for people, pets, and the environment and are designed to work as well as their traditional counterparts. *April 20, 2008. So there it was, we were on Oprah! But far more importantly, the environment was on Oprah and there can be no doubt that that’s a huge win for a healthier world. Read more about it at go/oprah. 14



Our goal is to create Seventh Generation cleaning products that have the following characteristics:1 Plant-derived. Ingredients should be plant-based unless a plant-based ingredient that provides acceptable performance is not available.

biked, ran, or hiked through that incredible landscape. (I’ve included a few pictures.) At some point we needed some supplies View This is Green’s video about laundry detergent go/laundryvideo

Chlorine-free. Chlorine, hypochlorites, cyanuric chloride, and other materials that release chlorine, hypochlorite, or similar substances are not permitted in Seventh Generation products. Not acutely toxic as used in the cleaning formulation. Not acutely toxic is defined by the Consumer Product Safety Commission for oral, dermal, and inhalation routes of exposure. Not chronically toxic, including noncarcinogenic and nonteratogenic. Ingredients should not be on the Environmental Protection Agency or International Agency for Research lists of known human carcinogens, probable human carcinogens, or suspected human carcinogens. Hypoallergenic. Ingredients should be hypoallergenic as used in the cleaning formulation.

Not derived from animals. Ingredients used in Seventh Generation products may not be derived from animals. Not tested on animals.

1. For more information, see the Materials Safety Data Sheets for our products on our website: go/material

Holiday in Death Valley. The was “WOW!” as we drove,

Biodegradable. To avoid accumulation in the environment, ingredients should be readily biodegradable.

Minimal use of volatile organic compounds (VOCs). VOCs should not be used in Seventh Generation products unless no alternatives are available to achieve a specific performance objective. When used, the VOCs should be present only in the minimum concentration necessary to achieve their specific performance objective. Petrochemically derived solvents should not be used.

from 2 weeks of incredible most common word we uttered

Nonhazardous to the environment. Ingredients should not contribute to any known environmental hazard, such as global warming, ozone layer depletion, resource depletion, hormone-mimickery, aquatic toxicity, etc.

Phosphate-free. Because of their contribution to eutrophication in sensitive rivers, lakes, estuaries, and other freshwater bodies, phosphates are not permitted in Seventh Generation products.

My partner and I just returned

so we reluctantly stopped in at the only Stovepipe Wells gas & tiny grocery. There on the shelf, to our excited incredulity, were a number of Seventh Generation items!! We were absolutely thrilled to find them there. What a godsend! Thank you to Seventh Generation for bringing a piece of salvation to the teeny tiny community of Death Valley Stovepipe Wells!

— Cathy

Why does Seventh Generation offer recycled paper products? Recycled paper products are made from other paper products, not from trees. It takes less energy and water to produce recycled paper, which saves energy, water, landfill space, and trees, and helps prevent air and water pollution. Recycled paper helps close the loop by providing an end use for paper that is recycled in our communities. There are two types of recycled paper: • Post-industrial paper is scrap paper produced at the mill. Mills have been recycling their scrap for years because it is easy and improves mill efficiency. • Post-consumer paper has been used by a consumer and returned to the recycling stream. Recovering post-consumer material is the real key to resource and energy savings and creating a more sustainable world.

All Seventh Generation paper products are made from 100% recycled paper with at least 80% post-consumer recycled content!

Our Products

New Products

At Seventh Generation, we know that natural household products are better for all living things. We

also know that if natural household products don’t work, our customers won’t use them. That’s why we continuously research new ingredients and technologies. We develop, test, and retest new formulas using state-of-the-art methodologies. We require our suppliers to meet rigorous quality assurance standards. We’re happy to report that in 2007 we successfully improved several products and unveiled an exciting new scent strategy. Many of the items below are available in a variety of sizes, fragrances, and concentrations, making a total of 114 new products added to our line in 2007.

Free & Clear, Living Home, and Natural Baby Starter Kits are available from our on-line Gift Shop. 16


Our Products

Tub & Tile Cleaner replaced our Bathroom Cleaner, and is now significantly more effective at removing soap scum and lime scale. We added lactic acid and a low-foaming, coconut-derived surfactant to help disperse these soils so they can be wiped or washed away.

We added Newborn-size diapers and a full line of Training Pants. We launched a wide array of our cleaning products scented with 100% whole and natural essential oils, with scents designed for specific areas of the home.

Three varieties of our Laundry Liquid Detergent are now available in a 2X Concentrate formula, lowering the packaging and transportation impacts on the environment ( See p. 35)

Our Toilet Bowl Cleaner has a new formula using natural lactic acid and is free of dyes.

Laundry Liquid1 and Powdered Detergent formulas are now formulated for use in both high-efficiency and standard machines, and have been carefully designed to be highly effective in cold water.

Our Natural Fabric Softener is now available Free & Clear of dyes and perfumes.

1. Except Baby and Delicate Care varieties


17

Our Products

Collaboration with WAGES Hilary Abell, executive director of WAGES (Women’s Action to Gain Economic Security, www.wagescooperatives.org), comments on the ongoing collaboration between Seventh Generation and her nonprofit organization, which fosters eco-friendly cleaning cooperatives in the San Francisco Bay Area. WAGES builds cooperative businesses that provide good jobs, health insurance, and leadership opportunities for low-income women.

Last May, Seventh Generation asked four members of the Natural Home Cleaning cooperative, a WAGES affiliate, to test the company’s new cleaning products and provide feedback. Since these women clean every day with eco-friendly products, they know more than almost anyone about how to use cleaning tools and natural products to make homes spotless. Miriam, Erica, Kerima, and Lupe were thrilled to meet with Seventh Generation’s chemists and environmental scientists to share their expertise. And WAGES was proud to help facilitate this opportunity for our co-op members. As Miriam said afterwards, “We put a lot of effort into testing the products and giving thorough feedback, and it was a wonderful experience.” We were all impressed with the respect and enthusiasm that Seventh Generation’s staff brought to this joint endeavor. They took time to get to know the women who clean houses with their products every day and even tried their hand at cleaning alongside the professionals. In fact, seeing a chemist pick up a scrub brush was a real highlight for these women whose hard work and professionalism often go unrecognized! WAGES and the members of our cooperatives were honored to work alongside and to learn from the product developers from Seventh Generation.

Meet Hilary in the video at go/wagesvideo

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After the product testing, Seventh Generation led a workshop on the chemistry of clean-

ing for women from all three cooperatives in the WAGES network: Emma’s Eco-Clean, EcoCare Professional Housecleaning, and Natural Home Cleaning. By WAGES’ conservative estimates, these three eco-friendly cleaning businesses prevented more than 7,000 pounds of toxic pollutants from entering the air and water of the San Francisco Bay Area last year. Seventh Generation’s workshop helped co-op members understand on a deeper level why using natural cleaning products is so important. And to thank Lupe, Kerima, Miriam, Erica, and all the co-op members for their noble work as green cleaning professionals, Seventh Generation threw a big party for all of the women and their families.


In the summer of 2007, these women had the opportunity to share their knowledge about environmental health with others. Seventh Generation made a donation to WAGES that helped us organize a series of public workshops in Spanish on environmental health and eco-friendly cleaning. During these workshops, co-op members made presentations to other Latinas about the health effects of cleaning chemicals used at home and at work. Our thanks go out to Seventh Generation for helping us spread the word about healthful alternatives.

More

on our partnership with WAGES: go/wages


Labeling

—Martin Wolf, director of Product and Environmental Technology on the science behind some of our product changes

At Seventh Generation, we believe consumers should know what ingredients are in the products they use in their homes and the potential health effects of those chemicals. While complete ingredient disclosure go/vanity is not required for cleaning products, we voluntarily disclose both ingredients and health effects information and hope we will inspire the rest of the industry to do the same. The year 2007 was very active for us in terms of labeling. We were embarrassed by a labeling issue (below) but that mistake led us to seek a full third-party review of our labels (p. 20). The results of that study preceded our website redesign in early 2008, providing us an opportunity to upgrade the way we provide consumer information on claims and ingredients.

We wanted to eliminate the synthetic polymer we had been using in our Automatic Dishwasher Powder, so it would be 100% natural, using only plant-derived or mineral ingredients. We had been using the polymer to reduce spotting on glasses and prevent dirt redepositing on dishes. It was a vital part of the product’s functioning, and though it was safe, we weren’t satisfied with its synthetic source. After looking around the natural world for years, we found a natural polymer called inulin to replace the synthetic polymer we had been using. Inulin is derived from chicory roots and is safe and natural, and it works even better than our previous ingredient. We were also able to improve the solubility of our dishwashing powder by reducing the amount of washing soda in the formula and will be introducing this improved product soon. We also improved our Natural Powdered Laundry formula by replacing the washing soda with zeolite (a porous clay) and inulin. This new formulation works well in cold water and retains fabric color better than our old product did.

Label Us Responsible Adapted from Geoff Davis, aka the Inkslinger, in the June 2007 Non-Toxic Times You have to love Consumer Reports. Their vigilance when it comes to looking out for consumers is as boundless as their enthusiasm for the job, and, as we learned this year, no detail gets overlooked along the way. We wish we could say the same for things here, but details occasionally do get overlooked on our end. And Consumer Reports was there to point it out, and rightly so. At issue was the label for our Automatic Dishwasher Gel. One of the words that appeared on the front was “biodegradable,” an implicit message that our formula breaks down in the environment. And all of it will except for one polymer-based cleaning agent. (There is another

We have instituted a two-tier system of disclosure, using consumer-friendly descriptions on our packaging (for example, “coconut oil-derived cleaning agent”), and specific chemical or International Nomenclature of Cosmetic Ingredients names on our material safety data sheets (MSDS), which are available in English and Spanish on our website. We will add information in French in 2008. In addition to ingredient disclosure on our labels and the

cleaning agent in the formula that does biodegrade, and both are needed for the product to work.) In accordance with our belief in full ingredient disclosure, this important information appears on the back of every bottle. Still, without an asterisk or some kind of immediate notation on the front, “biodegradable” really shouldn’t have been there. But it was. And Consumer Reports correctly wondered why. Here’s what happened.

biodegradable In the early days of our history, we relied on our manufacturing partners to create formulas that we then purchased the rights to. In the case of our dishwasher gel, our partner said the formula was biodegradable, so we said so, too. In 2004, while replacing the formulas created by our manufacturing partners with our own, we found

out this wasn’t true. We meant to change the label, but we were growing rapidly at the time, and as other issues emerged, the problem of the revised label on the dishwasher gel got lost in the mix. The truth is, we simply forgot about it. We’re not happy about that, but it’s the truth, and as a transparent company, that’s what we tell. So no excuses. It wasn’t the first such occasion, and we’re fairly certain it won’t be the last. The good news is that now we’re a bigger, more solid company, so our rediscovery of this issue was something we dealt with swiftly and surely. We acted promptly to take the word “biodegradable” off the front label on our existing formula. So when it comes to properly labeling our products, there isn’t a single person here who isn’t completely committed to doing whatever it takes to get it right. In the meantime, to all our friends and customers, we’d just like to say you have our sincere apologies.


19

Our Products

Our products were featured in Vanity Fair:

The Science Behind Our Product Improvements

Our Products

Dear Seventh Generation: My heart has been overflowing with gratitude since Saturday night. I was emptying the dishwasher, and hadn’t realized that it had malfunctioned (all of the dishwashing powder was still in there). My daughter had opened the little detergent door when I wasn’t paying attention. I looked down to see her with two handfuls and a mouthful of your dishwasher powder. Frantic, I called Poison Control. “My daughter ate dishwasher powder.” They asked what brand it was. “Seventh Generation.” “Oh, it’s fine then. Just wash it off her hands, and give her a glass of water.” Thank you, thank you, thank you! — Gabrielle

MSDS information on our website, consumers are able to call our toll-free number (800-456-1191) for ingredient lists, or for additional information about each ingredient. For example, here is a link to the MSDS for our Free & Clear Natural All Purpose Cleaner: go/msds.

Collaboration with MBDC Reviewing Our Labels and Claims

James Ewell, Seventh Generation project manager at MBDC, commented, “Seventh Generation’s approach to product design and product evaluation is exemplary. This is how all companies should do it. There have been hiccups along the way, but they’ve been incredibly honest about it. Even for a company as careful as Seventh Generation, a word like “biodegradable” can slip through. Their response was to go to MBDC to have a third party examine their product chemistry and their explanations for accuracy and completeness. This showed a level of due diligence that is very unusual.”

As a result of the labeling issues with our Automatic Dishwasher Gel, we launched a new partnership with MBDC (www.mbdc.com), the cradleto-cradle environmental design firm, founded by architect William McDonough and chemist Dr. Michael Braungart. With guidance from legal counsel, we conducted a complete review of all of our product ingredients to make sure that we are using the safest materials possible and that our claims accurately reflect the reality of our products.

Reviewing Product Safety

The findings concerning our labeling surprised us. MBDC found many ways in which our claims were confusing, inconsistent, or incomplete. They pointed out that we use nine different ways to say “chlorine-free,” for example. Our whole brand is built on trust and authenticity, and we take these values very seriously. The MBDC findings illustrated that we need to be more mindful and intentional in our descriptions.

We have successfully turned from synthetic oils to natural coconut, palm kernel, and other plant oils in most of our cleaning products. But, as mentioned in the CEO letter, we modify these oils with ethylene oxide, a petrochemical that allows the plant-based oils to work as surfactants. This process is called ethoxylation. The ethylene oxide, in turn, may react to form 1,4- dioxane, a possible human carcinogen, during the modification

As our labels are changed, we will be clarifying our wording. But, we need to do more than that. We plan to add explanations of terms like “natural” and “non-toxic,” and “chlorine-free” on our website—explanations that go beyond the ingredient-specific information contained on the MSDS mentioned above. We also plan to develop a comprehensive system for assigning claims to each product. We haven’t had a chance to complete this project yet, but you can look for more explanatory information on our website sometime in 2008. 20


In addition to focusing on our labels and claims, MBDC also worked with us to evaluate our ingredients using a chemical-screening tool. Their findings confirmed that we have made great strides in formulating products that promote healthy living and are safe for the environment, but there is still room for improvement. We strongly support the precautionary principle that advises against any use of substances that might cause harm to public health or the environment until scientific evidence of their safety has been established. We apply this principle in the evaluation of all materials and processes used to make our products. For more information about the precautionary principle, please visit www.sehn.org/precaution. html or read about it on our website at: go/precautionary


Finding plant-based preservatives is also an ongoing objective for us. In selecting our current preservative, we evaluated the effectiveness, human toxicity, irritancy, aquatic toxicity, and biodegradability of nearly two dozen preservatives. We chose our current preservative because it had the best human health and environmental health profile while still being effective. However, it is a formaldehyde donor. As James Ewell of MBDC notes, “despite best intentions, ecologically intelligent design involves trade-offs. Preservatives are a great example of the challenges of green chemistry. Inherently, they’re designed to kill microorganisms, so there are going to be issues with aquatic toxicity. Trying to use more readily biodegradable surfactants may also increase the need for using preservatives. For every action, there is a reaction.” Based on published toxicity data, we believe in the safety of the preservative we chose. Our efforts to develop a better preservative are being conducted in two phases. First, we are working to replace our current preservative with a preservative that is not a formaldehyde donor. Then we will work to find a plant- or mineral-based preservative that meets our toxicity and environmental standards. We are on track to complete the first phase sometime in 2008.

Changing Formulations— Changing an Industry: When we change ingredients in our products we find that our partners often institute these changes not only in our products, but in all the products they manufacture. The switch from petroleum to plant-based surfactants in our laundry powder is a great example. After we made the switch back in 2002, our supplier subsequently switched all of its purchasing to these environmentally preferable, plant-based ingredients.

James Ewell also had this to say about collaborating with us on our efforts to find safer ingredients that are also effective. “One of the great things about Seventh Generation is that if they succeed in finding a solution, they are more than willing to share their findings with their competitors because they truly want the whole industry to be designing better products. That’s pretty rare. I was very surprised.”


21

Our Products

Read The Inkslinger’s take on Green Chemistry’s 12 principles: go/inkslinger

process. We require our manufacturers to vacuum strip this chemical to less than 5 ppm, thereby significantly reducing the health risk from this byproduct, while comparable commercial surfactants typically contain 20 to 100 ppm. However, we would like to eliminate all petroleumbased substances and all traces of this byproduct in our products. In 2008, we will be eliminating polysorbate 20, a surfactant used in our baby wipes and are continuing to explore replacements for ethoxylates in our household cleaners and laundry products.

Our Products

Our New Scents Reed Doyle, product development specialist, on launching our new scent strategy We introduced eight exciting blended scents into our products in 2007. These blends use a total of 33 fragrant essential oils. Our dish liquid, for example, now comes in Lavender Floral & Mint, which is an aroma created from lime, lavender, ylang ylang blossom, peppermint, and spearmint. This new approach to blended scents involved a major effort for us, and we’ve made a big investment in getting this right. Of course, we continue to offer a full line of Free & Clear products, which are free of fragrances and dyes. We wanted to look at the home as an ecosystem and to create scents that fit each room. In the bedroom, we want a piney scent while in the kitchen a spicy feel is more enlivening. The laundry room, by contrast, should be fresh and refreshing with notes of evergreen and sweet wood. To create these scents, we partnered with natural scent expert Eva-Marie Lind, an aromatologist with over 30 years of experience developing natural scents and flavors for the natural products industry (www.evamarielind.com).

Watch our scent strategy video at go/scent

To produce these scent blends, we purchase 33 steam-distilled, cold-pressed, or expressed 100% essential oils from all over the world. We decided to source from growers aligned with our values, a formidable task in the midst of the notoriously volatile global essential oil market. For example, we found a source of wild orange essential oil that contains no pesticides from a former plantation in the Dominican Republic. Our pettigrain blossoms, leaves, and twigs are distilled for us in places as diverse as Egypt and France. We found a company in southern Italy that uses a thin film evaporator to separate out pesticide residues and to remove allergens such as bergaptenes from bergamot oil.

Along the way, we discovered that when we added our essential oil blends to our hydrogen peroxide-based cleaners, the available hydrogen peroxide decreased over time. We succeeded in working with a new partner to find a more stable peroxide product. We haven’t been successful with every product. Automatic Dishwasher Gel remains a challenge. The essential oils don’t hold up well in a pH of 10.5, but we are working on ways to overcome this obstacle. In 2008 we will focus on reducing the cost and complexity of our essential oil supply chain. We also plan to go directly to producers developing longer-term agreements that will allow adequate planning for harvesting and processing as well as fair and secure price agreements that reflect true production cost rather than market speculation.

“Seventh Generation scents have been designed around people and nature. They create statements of space, while bringing nature indoors in subtle ways… Beyond the health and environmental benefits, utilizing whole natural scents affords an aroma-display that is suggestive and effervescent, offering a sense of movement and uplift, as opposed to synthetic perfumes, which can smell heavy, flat, or cloying.” —Eva-Marie Lind, quoted in Non-Toxic Times, August 2007

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Our Products


23

Creating a Regenerative System

The Eight Dimensions of Our Regenerative Work

1

2

3

Find sustainable sources for our ingredients.

Redesign our products and our packaging.

Engage our manufacturing and warehousing partners.

Sustainable Sourcing (p. 25)

New Products (p. 16)

Traceability Study (p. 26)

Reviewing Product Safety (p. 20)

Manufacturing Partner Annual Report (p. 28)

Materials and Packaging (p. 32)

Our Warehousing Partners (p. 31)

Especially see Natural 2X Concentrate Laundry Liquid story (p. 35)

Creating a Regenerative System Guided by the philosophy imbued in our company name, we want to foster a larger corporate philosophy of regeneration. It is not enough for us to use natural ingredients; we want to participate in a broader effort to use natural resources at a rate below that at which the natural system sustains itself. The Earth’s many rich and varied ecosystems have withstood generations of damage, the effects of which we must humbly admit we cannot fathom. We want to balance use of the Earth’s natural gifts with opportunities for ecosystem replenishment. This shift in thinking from doing things in the least harmful way to becoming agents for positive, life-giving change affects our mission to uplift both environmental and human resources.

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5

Improve our distribution system.

Engage our employees at home and at work.

Product Transportation (p. 31)

C42—Reducing Our Environmental Footprint (p. 37)

6 Educate the larger community. Educating Others (p. 43)

Environmental Stewardship in Our Burlington Office (p. 55)

As a company, we are philosophically aligned with the urgent necessity of this work and will focus in 2008 on defining concrete ways to pursue this fundamental goal. In 2007, much of our work to reduce our environmental footprint was more narrowly focused on carbon reductions and changes in packaging. We are struggling to articulate meaningful ways to broaden this scope and track our achievements in this area.

Sustainable Ingredient Sourcing While we strive to use natural-based, instead of synthetic ingredients, in our products, we are aware that the manner in which natural substances are grown and harvested may have a harmful effect on the environment. Simply stated, sourcing natural ingredients is only part of the solution. That’s why we want to make sure that the plant-based ingredients used in our products are grown in a sustainable way that will contribute to a regenerative natural system. Under this banner, we have two important initiatives—one concerning the wood used in our diapers and feminine care products and a second concerning palm oil used to make surfacBusiness Evolution tants in our cleaners. Jeffrey was recently on a panel We reported on our with Peter Senge from the Society efforts concerning palm of Organizational Learning and oil sourcing in our 2006 the Massachusetts Institute of report (go/palm), but Technology talking about the have no real progress evolution a company like Seventh to report on this issue Generations needs to go through in 2007. We believe we to meet the dynamic changes that will succeed in sourcing are going on in the whole world. sustainable palm oil in Visit the following link to listen to 2008. Jeffrey: go/evolution

7

8


4

Track environmental footprint reduction.

Upgrade our processes to reach our global imperatives.

Carbon Reduction (p. 38)

Our Global Imperatives (p. 6)

Environmental Stewardship in Our Burlington Office (p. 55)

Towards Systems Thinking (p. 40)

Forest Ethics. While we pride ourselves on the fact that our paper products use 100% recycled paper, our diapers and feminine care products must be made from virgin pulp. Our diapers are manufactured for us using wood pulp from Finland. We partnered with ForestEthics (www.forestethics.org), an independent forestry and conservation organization, to ensure that the pulp we use is sustainably and responsibly harvested. We completed a report in 2007, which concluded that over 95% of the wood used to produce our absorbent products was obtained from sustainably managed forests. However, two minor sources of wood were uncontrolled and might contain wood from forests that were not sustainably managed. The first was scrap wood from a sawmill in Finland. Although the sawmill submitted a certificate assuring the wood was from legal sources, there was no way to associate the scraps of wood with their original source due to the lack of a chain of custody. The second problem involved scrap wood purchased through Estonia. Again, the scrap wood was accompanied by a certificate of assurance, but lacked a chain of custody as to the source of the wood. Further, forestry practices by one of the suppliers to the pulp mill used by Seventh Generation were less robust than those at the other, and the resulting forests were clearly less biodiverse. Objectives for 2008 include developing a program to secure the two minor sources of wood to the mill so that chain of custody is maintained back to the wood source, and working to improve the forestry practices of one of our suppliers.


25


Traceability Study Our quality assurance group carefully approves the formulation chemistry of our products, and our research and development group has direct relationships with many of our suppliers as well. But the exact nature of the global supply chain that feeds our tier 1 suppliers and manufacturing partners is largely opaque. In 2007 we set out to change that and traced the origins of the various materials used in Seventh Generation cleaning products. To trace our raw materials, we used our Materials, Ingredients and Packaging (MIPs) database to determine the materials, chemicals, or packaging components that constitute 95% of our total materials use. With this list in hand, we began by tracing the ingredients used in our cleaning products (70% of our total ingredients). Our goals were twofold—first to trace these ingredients back to their origins and second to assess whether these suppliers were engaged in corporate responsibility efforts. Sourcing Across the Globe: Going several tiers back in our supply chain, we found that our cleaning product suppliers comprise 55 companies. Fifty-one of these have manufacturing locations in North America with three in China and one in Denmark. Six of these companies are just distributors, and we did not evaluate corporate responsibility information for them. The actual ingredients originate largely in North America, but include some ingredients from six additional countries. In general, the materials sourced in Asia are very basic, commonly used ingredients, such as our palm oil from the Philippines. The diversity of locations would increase further if we had included the countries where our 33 essential oils are harvested. We were only able to address essential oil sources in our case study, below, but will address the remaining sources in our ongoing traceability work.

A few examples illustrate both the challenges of this work as well as just how global manufacturing has become. • Soda ash: 95% of the soda ash used in the United States comes from the Green River Valley in Wyoming. Ours is processed there and then sent to a Midwestern manufacturer for formulation. • Sodium chloride (salt): One of our manufacturers obtains this ingredient from a Canadian company that uses a deep well dissolution process to obtain the salt from an underground salt deposit before sending it to a distributor in the Midwest. From there it travels to our Midwestern manufacturing partner. • Boric acid: One source of this is mined, processed, and dried in Turkey; imported to Virginia; and then transported to a Midwestern manufacturer. Another source is mined in California and transported elsewhere in California for use in the manufacturing process. • Sodium percarbonate: Soda ash and hydrogen peroxide of unknown provenance are combined at a processing facility in Jiangxi Province in southeastern China, then shipped to a distributor in Canada, and then transported to our Canadian manufacturing partner. • Corrugated boxes: A Georgian (U.S.) manufacturing facility produces the flutes (interior sections) and liner boards from recycled stock from various brokers and from virgin pulp from five different mills. These flutes and liner boards are glued and laminated to form corrugated board stock at a Midwestern facility. Another Midwestern processor then die-cuts and forms the boxes and prints labeling information. These boxes are then transported to our Midwestern manufacturer. Consumers rarely see this corrugated material as it is only used to ship product to the stores and is removed before goods are placed on the shelves. • Surfactant: A Midwestern manufacturer obtains surfactant that begins as Malaysian palm oil. It is shipped to Texas where it is processed into a surfactant before finally being transported to the Midwest for formulation.

“Lemongrass and Clementine Zest was designed as a refrain to summon the essence of the warm glow of a midsummer’s day, cheering and comforting, while offering a sense of adventure and intrigue through its hints of exotic spices.” —Eva-Marie Lind 26


Case Study:

Take a peek at the sourcing of our 25 oz. Lemongrass & Clementine Zest Natural Dish Liquid. Our team traced 99% of the ingredients in this product and all of the packaging materials. The bulk of these materials originated in North America, in places ranging from Texas to Ontario, and Ohio to Illinois. Our supply chain also imports several key inputs, including Filipino and Malaysian palm oil used to make our plant-based surfactants, and natural fragrances from India, the Philippines, Guatemala, and Italy.

100% virgin polypropylene screw cap Ontario, CA Sodium Chloride (salt) Ontario, CA Aqua (water) Lake Michigan cocamidopropyl betaine, cocamide MEA and coceth-7 (plant-derived cleaning agents), Ohio

Alcohol Ethoxylate (plantderived cleaning agent), Texas

Sodium Laureth Sulfate (plantderived cleaning agent), Illinois

Blood orange (Citrus sinensis), best known for its crimson blood-colored flesh, is a distinctive hybrid of tangerine and pomelo. We use the Sanguinello orange, which offers a much heavier, sweeter, and more robust aroma than most marketplace blood orange essences. It is grown on either side of the Straits of Messina, in southern Italy and produced by the same family who produce our bergamot essential oils.

Additional Ingredients Citric Acid not traced Magnesium Chloride not traced

hexahydro-1,3,5-tris (2-hydroxyethyl)-striazine (preservative) New Jersey 25% post consumer content plastic bottle, Georgia

Palm oil from Malaysia and the Philippines is used to make surfactants

Lemongrass (Cymbopogon citratus) comes from a Guatemalan producer who specializes in this crop — dedicating nearly 90% of his growing lands to lemongrass plants with a heartier, warmer resonance than those grown in India.

Our Italian bergamot (Citrus aurantium bergamia) comes to us from a family-owned business in Calabria with five generations of dedication to consistent quality. Bergamot oil is obtained by rasping the peel of the unripened fruit, collecting its oil under a spray of water, and then centrifugally separating the oil from the water.

Our elemi essential oils are harvested in the Philippines and produced in Manila from the unusual Canarium luzonicum, also know as “Kenari,” or “Living Man”. This tree is valued not for its nuts or fruit, but for its oily resin.

Clementine (Citrus clementina), a cross between sweet orange and mandarin, is gathered in northern India just south of the Himalayas. After drying, it is transported to the production facility south of Mumbai. Our producer specializes in a unique extraction process using pressurized carbon dioxide that eliminates impurities and allows the extract to retain a robust fragrance profile.


Corporate Responsibility in the Supply Chain: Our study found that the suppliers back in our In addition to tracing our ingredients back to value chain who communicate about sustainthe source, our team examined the supplier’s ability and corporate responsibility are typically corporate responsibility efforts, sustainability larger and closer to the consumer. The smaller programs, labor and environmental compliance and frequently family-owned businesses back in records, and community relations performance. our value chain—providing everything from minWe investigated supplier performance through erals to corrugated and plastics—were far less web searches and government and corporate likely to address these topics on their websites document review, scoring them from zero or in public documents. The paucity of sustain(lowest score) to two (highest score) in these ability information in our supply chain reflects four areas. Firms with a score of seven or eight the household cleaning supply chain as a whole. earned a green or best score, firms scoring four Simply put, corporate responsibility has simply through six earned a yellow score, and firms with not reached very far back into our industry. three points or fewer earned a red or poor score. One difficult decision was how to rate firms with Uncharted Waters: Faced with the lack of supno information on sustainability or corporate ply chain corporate consciousness, we’ve been responsibility on their website or in the trade press. We used the most conservaSupply Chain Scoreboard tive assumption and gave those with no information a zero. Scoring this way led to many low scores since we found no information on sustainability or corporate social responsibility for many companies. In fact, of the 49 companies we rated, 11 (22%) published formal corporate social responsibility reports and others included sustainability in their annual reports. Thirty-two (65%) had no corporate responsibility information on their websites. None of the suppliers in our supply chain had major environmental compliance problems. One tier 2 supplier had a death at their facility in 2005. In total, 10 facilities rated green, 12 yellow, and 27 red. On the positive side, we did identify several packaging suppliers that have examined their carbon footprint or are using Forest Stewardship Council-certified fibers. We also identified opportunities to leverage our ingredient purchasing power—something that could reduce ingredient costs for our products.

Green

Yellow

Suppliers

Suppliers

Low risk, no action

Medium Risk, reassess

kind of change to happen. In this case (supply chain sustainability), inspiration will truly be 99% perspiration!

Manufacturing Partners Annual Report (MPAR)

We know we must reduce our energy and environmental impacts, but we also know that the largest part of our footprint comes not from our Burlington office, but from the manufacturing of our products. In many cases, our relatively small production volumes limit our ability to foster change in those operations. Nevertheless, we have both a business and a moral obligation to steer our manufacturing partners down the sustainability path. A key part of this effort lies in the MPAR, first introduced in 2006. The report evaluates our partners in five critical areas: quality assurance, manufacturing, corporate responsibilRED ity, purchasing/logistics, and research and development. Integrating corporate responsibility with other core business functions makes the MPAR an excellent Suppliers vehicle for articulating what is important to us as a company and what we look for Higher risk, in our partners. investigate In 2007 we conducted day-long, on-site audits of eight1 of our ten manufacturing partners to assist them in completing the lengthy report. The MPAR represents the most formal partner audit program we have ever attempted, although we have evaluated manufacturability, research and development, and other programs at our partners for years. The scores cover seven of the eight partners we audited—one firm’s scores were incomplete due to the challenges they faced pulling the audit information together.

asking ourselves whether to switch to more enlightened suppliers (if we can find them) or work with our existing tier 1, 2, and 3 suppliers to improve their performance. We’ve just begun exploring this question, but one thing is clear: changing the entire industry is not something we can do alone. It will take the collective efforts of some of the very large companies and customers in our The graph on the next page shows industry to motivate the the average scores for the mineral-extraction and five report areas. ManuVideo on MIPS database and surfactant-processing facturing capability and traceability goals: go/mips companies deep in the research and developcleaning supply chain to ment scored highest, change. We are working while corporate responsi1. One partner was busy moving to a new facility and will be first in line for a to provide leverage for that 2008 audit. Another is in Germany and has not been scheduled for an audit.

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Scoring: We set the bar very high in the corporate responsibility section as is evident in our scoring: 0 Unsatisfactory/No information 1 Marginal/Basic 2 Satisfactory/Active program 3 Preferred/Shows work with their suppliers To achieve the highest rating in an area such as energy or water use, our partners not only have to show evidence of a program in place and results over several years, they must also show that they are working with their suppliers (our tier 2 suppliers) in these areas. In this way, we want to encourage exponential change in our supply chain, affecting not only our partners, but their suppliers as well. Annual Report Average Scores

Manufacturing Capability Research and Development Quality Assurance Purchasing/Logistics Corporate Responsibility 0

1

n=7 partners

2

3

Our partner companies are used to complying with worker safety requirements, so it is no surprise that category scored the highest of our corporate consciousness categories. But voluntary program areas devoid of regulatory requirements, such as diversity and greenhouse gas accounting, were new territory for them. We’ve been told by several of our partners that the guidance we provide in our audit protocol will help them make meaningful strides in these important areas.


bility scored lowest. While we are not pleased with these results, we are not surprised with the outcome. For many of our privately-held, family-owned partners, corporate responsibility is relatively new. That means there is plenty of room for improvement—a point we’ve made to our partners as we plan our 2008 audits.

Daron Byerly, mastermind of the 2007 Manufacturing Partner Audits: The most personally rewarding experience for me involved an audit of one of our cleaning manufacturers who quantified for the first time the number of metric tons of waste generated per ton of product produced. The process marked a turning point for the company’s vice president of operations who became incredibly concerned about this impact. This personal awakening and commitment should help the company to find ways to reduce waste in the future. In fact, we’ve already seen these types of changes. As a result of an audit, one of our paper suppliers located in the Arizona desert became aware of and corrected a water use problem. This manufacturer is very committed environmentally, using roughly 80% reclaimed water at their mill. But the firm had never looked at water use at their converting facility where parent rolls are formed into our paper products. They were surprised to find three major avenues for water loss at this facility. In preparing for the audit, they discovered they could recirculate the water they use for fire sprinkler testing and introduce several other measures to reduce water use by 60%! These actions saved the company 440,000 gallons of water per year and reduced their costs. Many companies we visited didn’t know if they were exempt from certain air and water standards; without knowing the thresholds, they just assumed they weren’t covered. After our audit, our trash bag manufacturer scheduled a review with their regulatory agency to verify their environmental compliance. The audit also inspired one of our wipes manufacturers to start a company sustainability program and send a delegation to our 20/20 by 2010 information session. They also retained a consulting firm in early 2008 to evaluate their company’s sustainability strategy. One issue that was eye-opening for all of us was that of undocumented workers. When we realized some of our manufacturers might be getting referrals of undocumented workers from temporary agencies, our first reaction was that we couldn’t work with such companies. We came to realize we did not have a very deep understanding of this issue and its effect on workforce, family, and community. Our country as a whole has not resolved this complex issue. We will continue to focus our questions on ensuring that all workers, whether hired through a temporary agency or not, are treated fairly and provided appropriate Watch our video at: go/beyerly compensation and benefits.


29


Jim Flanagan, President of Nuance Solutions, on participating in the Manufacturing Partners Annual Report Audit for his company There’s a certain amount of anxiety initially in being graded during these audits. But I try to look at the whole perspective. This makes us look in the mirror and see where we can make improvements internally. We’ll be better prepared next time than we were before, and we’ll have made progress. There’s no downside for us in going though this process because all it’s going to do is improve our organization. That’s a good thing. The fact that Seventh Generation has taken an active approach, not only with the audits, but in partnering with companies with the same values is important. We’ve definitely done some things internally that we would not have done without the audit. We’ve tightened up our recycling program and a number of our standard operating procedures and are doing a better job of documentation. It has helped us decide to go for our International Organization for Standardization certification since we’ve pulled together so much information already. We also know that we need to do a better job monitoring our energy usage, so we can show savings there. They asked a question about community involvement that really got us thinking. We have given money on an ad hoc basis, but haven’t really done anything as a company. In 2008 we are going to have a companywide-sponsored event to give back to the community. This is definitely an outgrowth of the audit, and it shows you can do some really neat things to improve as a company.

Scores for 14 Corporate Consciousness Categories Worker Health and Safety Benefits for Non-exempt Employees Employee Turnover Temporary Staff Training Air Pollutants Local Community Environmental Compliance Waste Water Pollutants Water Consumption Energy Usage Diversity and Inclusion Greenhouse Gas Emissions 0

1

n=7 partners

2

3

On the whole, our fiber partners scored better than our cleaning manufacturing partners. We expected this as our fiber partners tend to be larger companies with multiple facilities and more developed infrastructure to support sustainability initiatives. We plan to keep the reporting questions largely the same so that we can track improvement in coming years. Corporate Consciousness Partner Scores Cleaning Partner A Cleaning Partner B Fiber Partner C Fiber Partner D Fiber Partner E Fiber Partner F Other Partner G 0

1

Average of All 2 3

Average of responses to 14 Corporate Consciousness questions

30


40

120

30

90

20

60

10

30

To develop sourcing, manufacturing, service, distribution and quality capacity and capabilities in a way that optimizes the efficiency and effectiveness of our resources and relationships so that we can support the growth of our customers and manufacturing partners while minimizing our collective environmental footprint.

0

0

02 GHG (100 MT)

Our Supply Chain Strategy

03

04

05

06

07

18

28

27

25

28

43

GHG (KG/MT) 120

150

150

80

80

80 Transportation

From 2004 through 2006, we made several important changes to reduce transportation costs and environmental impacts. First, we increased the number of shipments we made from our supplier factories directly to our customers. These direct shipments bypass our warehouses and eliminate a link in our shipping chain. Second, we increased our use of rail transportation. Lastly, we moved our warehouses to new locations to reduce travel distances and time. We had more limited opportunities in 2007 to improve in these ways. In fact, our logistics team worked overtime last year just to arrange the distribution of our

n tio bu

rs nte Ce

Di st rib

Our Earth-to-Earth Value Adding Process Our company seeks to minimize impacts and create regenerative forces in all the entities we touch — from material extraction, through production and customer use and back to the earth.

Retailers

Seventh Generation’s basic philosophy is to locate our manufacturing and warehousing facilities as close to our customers as possible. This reduces GHG emissions and gets our products

CO2 Emissions per Ton Shipped 160

C o ns um er

Product Transportation

Total CO2 Emissions 50

s or ut

Then in 2007, we opened a new warehouse in Atlanta and we put a recycling requirement in the contract. It turns out they were already doing recycling of both their corrugated and their office paper. Recycling requirements are going to be part of any new warehousing contract we initiate. At Seventh Generation, we always look for opportunities to encourage others to do the right thing. It’s exciting to work with a company and see them change their attitude and to be part of making that happen.

Greenhouse Gas Emissions from Product Distribution

Di st ri

This warehouse company chose us for their “customer appreciation day.” They introduced Seventh Generation to their other divisions and spread the word about our website. Jeffrey did a video message, and we provided T-shirts and products for all of their offices.

Ear th seventhgeneration.com

31


Several new initiatives are on tap for 2008. We’ve established key new positions in our logistics group and have partnered with new manufacturers located closer to several of our major markets. We will also employ several strategies that maximize direct shipments to customers rather than using warehouse facilities. Through these and other approaches, our logistics team hopes to achieve a 2% reduction in GHG emissions per ton of product in 2008.

w Ra

Our fast sales growth gives us a chance to leverage recycling each time we bring new warehouses on-line. In a new contract we initiated with a warehouse in New York State in 2006, we required that they recycle their corrugated and their office paper. They didn’t want to because their trash hauler said it would be too expensive. I told them, “If you want to do business with Seventh Generation, you’ve got to recycle.” That’s our new mantra. They turned out to be happy with the recycling experience, and it even saved them money—conservatively, at least $100 each month for their recycled corrugated. They expanded the program by adding blue office paper recycling bins to their 38 offices nationwide.

increasing product sales. We found ourselves reacting quickly to increasing sales throughout the country by arranging for quick and convenient truck transport of product—a practice we’d like to avoid.

In 2007 our transport-related GHG emissions increased dramatically from 2,834 MT in 2006 to 4,296 in 2007, a 52% increase. But due to our growth, emissions per ton of product shipped were essentially unchanged over this period (80 KG per MT of product shipped).

Manufactur ers

Peter Swaine, Director of Materials Management, on requiring recycling in our warehouses:

ls ria ate M

Our Warehousing Partners

out more efficiently. In 2007 to better serve our customers in the southeastern states, we added a distribution center and a manufacturing facility in that region. As our sales continue to increase, we are continually looking at where our customers are based, what they’re buying, and how we can improve the efficiency of our distribution.

s

Plans for 2008: We are planning a two-day summit in the fall of 2008 with all of our partners to discuss the annual reporting process, to share successes, and to recommend improvements.


Total Materials Use

Materials and Packaging Packaging

Metric tons 30,000

No virgin materials in packaging. That’s our long-range goal. Recycled materials conserve scarce natural resources and have lower carbon footprints. Plus using recycled materials just makes sense. To solve the environmental crisis, we need to change the linear “take-make-waste” approach that puts valuable materials in landfills or burns them in incinerators and replace it with a cyclical flow, where waste products become inputs again and again.

In working with recycled materials, we prefer post-consumer recycled (PCR) inputs over post-industrial recycled (PIR) content. The latter contains materials left over from the manufacturing process that have not yet been used by consumers. Beyond our recycling strategy, we’re looking to redesign our products to minimize our packaging and thus our impact. In 2007 our researchers investigated the benefits of redesigning package type or shape, light-weighting packages (using less plastic to make a bottle, for example), and concentrating product to reduce packaging size. In fact, our greatest achievement in packaging in 2007 was the introduction of our double concentrate laundry formula, which uses 22% less plastic than our previous product. (See 2X Concentrate Laundry Liquid story, p. 35.) We are also concerned with the consumer’s disposition of our packages and take care to ensure that any innovations maintain the recyclability of our packages. A longer-term outcome will be reusable packaging. We’re hopeful the day will come when our consumers can refill their bottles of cleaning product or purchase refillable cartridges.

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20,000

10,000

0

02 Other 2,621 Plastic 388 Cardboard 501 Surfactants & Polymers 802 Organic Cotton – Paper 3,187 Water 2,523 Total 10,022

Improving the sustainability of our packaging in any one of these ways involves assessing trade-offs between improved materials, efficacy, and manufacturer location. Once we find an improved material that works as well or better than our previous packaging and conduct prototype testing, we face the logistical exercise of finding somewhere near our manufacturing or warehouse facilities to produce the packaging to our specifications. We must weigh the benefits of an improved material against the fact that the nearest manufacturer might be far away, raising our transportation-related GHG emissions. While we successfully researched and tested several improved products in 2007, we are still searching for appropriately located manufacturers to produce some of our improved materials. Whenever we find manufacturers willing to make higher recycled content packaging, we encourage them to provide the same beneficial materials for the rest of their customers, thus widening the reach of the environmental benefit. • Bottles: Currently our bottles are made with at least 25% recycled content. It is easier to get a higher post-consumer resin content for smaller bottles, but it is more difficult with some of our larger bottles. We have succeeded in working with a bottle manufacturer to produce 75% post-consumer resin, high-density


03 04 3,658 4,088 621 1,039 691 971 1,044 1,521 – 8 3,715 4,564 2,823 4,595 12,552 16,786

05 3,968 935 1,434 948 33 5,871 7,072 20,261

06 3923 1,080 1,362 1,020 11 5,781 8,544 21,721

07 6,950 1,919 2,084 1,899 20 6,930 15,225 35,027

polyethylene (HDPE) fabric softener bottles as well as 75% post-consumer resin HDPE bottles for most of our chlorine-free bleach bottles. We also successfully tested a large HDPE bottle with 88% recycled content. Look for additional new bottles to be introduced at the end of 2008 or in 2009. • Corrugated Cardboard: Our goal is 100% PCR (as opposed to PIR) recycled content. Currently we generally have 30−40% PCR content. In 2007 we switched to 100% PCR at a California plant without increasing costs and will work with a Midwestern supplier to switch in 2008. Boxing for our Amazon.com customers will be 100% PCR in 2008, and we are developing a symbol to indicate this on the boxes. • Low-Density Polyethylene Wrap: We use virgin polyethylene now. In 2007 we tested 50% recycled wrap for the thinner polyethylene bags we use for our paper towels and tissue paper. We will look for ways to get this manufactured in 2008 and to expand the 50% recycled polyethylene to the thicker bags that wrap our diapers and feminine care products as well.

Recycled Materials Metric tons 6,000

Metric tons 12,000

4,000

8,000

2,0000

4,0000

0

Cardboard PIR Plastic PIR Plastic PCR Paper PIR Cardboard PCR Paper PCR Total


Renewable Materials (excluding water)

02 44 95 38 556 205 2,532 3,470

03 65 100 39 629 322 2,864 4,019

04 85 112 131 733 560 3,341 4,962

05 227 – 241 1,008 676 3,851 6,016

06 231 12 235 971 523 3,674 5,646

07 351 33 414 847 856 3,915 6,416

0

02 657 – — 501 3,187 4,345

Other Tons Organic Cotton Surfactants Cardboard Paper Total

03 851 – — 691 3,715 5,257

04 1,250 8 — 971 4,564 6,793

05 777 33 548 1,434 5,871 8,719

06 07 947 1,687 11 20 589 1,112 1,362 2,084 5,781 6,930 8,697 11,844

Note: PIR: post-industrial recycled; PCR: post-consumer recycled; MT: metric tons

Our Materials As part of our effort to improve the sustainability of our materials, we track selected performance measures on our total materials use, recycled materials use, and use of renewable materials. As our sales have grown, so has our use of all of these materials. Calendar year 2007 continued this trend, with overall materials use increasing by 60% from 2006. Much of this increase is due to proportionally greater growth in our cleaning and diaper products compared with our paper products.

Recycled and Renewable Materials From 2002 to 2007, our growing sales resulted in an increased use of recycled materials from 3,470 to 6,416 metric tons — an increase of 85%. Most of our paper products are made from 80% post-consumer and 20% pre-consumer recycled paper. Our trash bags, packaging, and products also contain recycled materials.

We are committed to making products from renewable resources whenever possible. The renewable materials we use include paper, cardboard, palm oil, and other plant-based surfactants. Though we use far fewer quantities of non-renewable materials in our products than our mainstream competitors do, we haven’t found natural sources for every ingredient. Nevertheless, were working hard to identify alternatives that would allow us to reach the 100% mark. Plant-derived ingredients can be sustainably harvested and are far less damaging to the environment than are compounds derived from petroleum, a material whose extraction, refining, and transport creates many hazards. As you can see, our use of renewable materials continues to increase with our growth climbing roughly 170% since 2002.

While our total use of recycled and renewable materials has grown, the percent recycled and percent renewable has contracted in the past few years. From 2006 to 2007, the percentage of recycled materials in all of our products on a weight basis shrank from 66% to 60%. The percent of renewable materials also shrank, from 43% to 33%. We attribute these changes to changes in our product mix. Sales of our cleaning products continue to grow and proportionally contain less renewable and recycled materials than our paper products. We aim to turn this trend around in the next few years by increasing recycled content in our bottles and corrugated shipping boxes and by eliminating the few remaining synthetics in our cleaning products.

Recycled and Renewable Materials percentage 80%

60%

40%

20%

0

% Renewable (excluding water) %Recyced (excluding water)

02 70% 56%

03 67% 51%

04 67% 49%

05 66% 46%

06 66% 43%

07 60% 33%


33

47% less transportation

35% less packaging

and a lot less lugging round.

introducing Seventh Generation’s New 2x Concentrates.

[] Smaller is Better.

See our video about 2x detergent go/2x

2X Concentrate Laundry Detergent In 2007, Seventh Generation launched its Natural 2X Concentrate L aundry Liquid. Here is the story of that product. Imagine a 13,250-ton pile of trash. About one-quarter of it is plastic, and the rest is corrugated cardboard.1 Overhead, more than 41,000 tons of Greenhouse Gases contaminate the air, the same amount emitted by 6,900 cars in a year. It’s not a pretty picture. Now, what if we could make all that waste disappear? Not just this year, but every year. That’s what we could save if every U.S. household replaced their conventional 100-oz. bottle of laundry detergent with a 50 oz. 2X concentrated liquid laundry product. It’s a simple idea. We concentrated our laundry detergent to double strength. We give customers the same amount of cleaning power with the same excellent results they’ve come to expect, but in a concentrated formulation. All we did was remove water from our product and adjust the formula a bit. Now our 32-load container of 2X Concentrated Laundry Liquid contains roughly half the amount of water and 22% less plastic compared to our old product. Not only that, but because we can fit more product in each box and truckload, we reduced both our corrugated cardboard use and our transportation emissions for deliveries from factory to store. We launched our concentrates in August 2007 and haven’t turned back. 1. By purchasing a 2X laundry detergent, consumers would avoid shipping 27 million gallons of water (enough for 55 Olympic swimming pools). However, this water will usually be added later by the washing machine and so has not been included here as a “savings.”

The product has other benefits too. Retailers are happy because the laundry detergent takes up less shelf space, and they have less packaging waste to recycle. Customers like the smaller packages of detergent because they’re easier to carry and pour. It’s a win all around. Despite the obvious benefits of concentrated detergent, shoppers buy by size and price. It’s simple. If two bottles of detergent sit next to each other on the shelf, most customers instinctively buy the cheaper item, even if that product washes only half the number of loads. Let’s face it; most of us just grab and go! It’s important that we educate consumers about the benefits of concentrated detergents, and we need our industry to convert more products to concentrates too. In fact, we see a lot of progress on this front. Our hats off to big retailers like Wal-Mart, working through Procter & Gamble, for pushing the industry in this direction and to our fellow laundry detergent makers who have released 2X, and in Unilever’s, Method’s, and Mountain Green’s cases, 3X detergents. We see positive signs that the industry as a whole is moving toward concentrated detergents, which will make shopping for laundry products easier for us all. Look for 2X concentrated versions of our Baby Laundry Liquid Detergent and Delicate Care Laundry Liquid in 2009.


One metric ton of CO2 fits in a cube with 27 foot sides. Source for our per capita CO2 emissions: go/cube (June 30, 2008)

36



Gregor Barnum, Director of Corporate Consciousness, on our C42 Program

Let’s start with why we call our efforts to reduce our environmental footprint C42. A Hitchhiker’s Guide to the Galaxy by Douglas Adams gave me the idea. In that book, 42 is the meaning of life. The big question is if we’re going to have upwards of 6 billion people on Earth, and we’re going to continue to add carbon and generate other waste in a big way, how do we come up with a regenerative systems solution? How do we strike a balance? We’re on a quest to uncover that mystery. It’s also the meaning of how we need to be on the Earth right now. So, we have a suitably epic name for a program dealing with one of the most troubling unknowns of the present day. We need to reach beyond current science and transform our whole society. Within our company, we need to change our whole system: our sourcing, manufacturing, packaging, transportation, building, and employees’ lifestyles. There’s been a lot of talk about carbon offsets lately. We don’t really believe in offsets. It doesn’t make sense to build wind turbines in North Dakota, while we’re still building coal plants in Kansas. A systems approach forces businesses to take more responsibility for their own greenhouse gas emissions. We decided to take $90,000, half the amount we could have given to an offset program, and use it to make a difference in just one of the areas of our C42 program, helping our employees reduce their carbon footprints. Each of us has committed to reducing our personal energy use by 20% and getting 20% of our energy from renewable sources by 2010. Our employee 20/20 by 2010 team offers technical guidance to help each and every employee achieve that goal. We started by giving everyone $500 for a home energy audit. Our carbon tracker database, developed in 2007, now has 65% of our employees’ information. The company gives interest-free loans to help employees

take steps to make meaningful change in their own carbon-reduction efforts. These forgivable loans become grants at the end of five years if the employee stays with the company. Everyone can get $5,000 towards the purchase of a fuel-efficient (at least 35 mpg) car and $5,000 for home improvements, such as solar panels. Employees also get a $500 award for each Energy Star (or comparable) home purchase they make. Almost 20% of our employees took advantage of this program in 2007. We want to demonstrate that working at the local level is an effective approach to changing our country’s infrastructure. In 2008 we will encourage our employees to work with local community and religious groups to help them achieve carbon footprint reductions. We want to help people to help people to change and extend our influence in ever widening circles of transformation.

For more on A Hitchhiker’s Guide to the Galaxy, visit go/hitchhiker

Gregor recommends: Low Carbon Diet: A 30 Day Program to Lose 5000 Pounds by David Gershon.


37


C42: Reducing Our Environmental Footprint


Seventh Generation Carbon Footprint Boundary, Burlington & Beyond

Our C42 goal:

Reduce our company’s greenhouse gas emissions 80% by 2050. Using 2005 as our baseline year, we’re looking for reductions of 2% per year. We were motivated to adopt this target by the growing numbers of scientists advocating that developed nations adopt a similar goal. As we are growing more than 30% per year, we are normalizing our goal to our growth.

Carbon Reduction Working to upgrade our carbon reduction strategy in 2007, our Carbon 42 team designed an approach touching nearly every point in our product life cycle—from raw material extraction and product design, through manufacturing, distribution and consumer use. Why cut emissions 80% by 2050? Read Step It Up’s explanation here: go/802050

Burlington

and beyond…

Chart Key:

business travel

employee commuting

Unknown values

MIPs estimate

SGV Tier 1 suppliers

Seventh Generation office

Greenhouse Gas Accounting For several years, we’ve been tracking GHG emissions from our offices, business travel, employee commuting, and product transportation using an internationally accepted GHG protocol developed by the World Resources Institute and World Business Council for Sustainable Development (www.ghgprotocol.org). This year, we provide updated data on the same aspects of our business to allow annual comparisons. We’ve also developed measures for approximately 85% of the CO2 intensity of our materials, ingredients, and packaging (from our MIPs database) using component-specific GHG emission factors from industry sources and published reports. While we’d prefer to use more precise factors, they are currently unavailable. Nevertheless, we believe these more generic indices are an effective compass for directing research to eliminate the most GHG-intensive materials from our products.


distribution to customers

distribution to warehouses

As the chart below shows, our carbon footprint continues to increase as our sales grow. Our total GHG emissions have grown from an estimated 29,989 MT to 43,261 MT—a 44% increase since 2005. Our material, ingredients, and packaging emissions compose roughly 88% of this total. Normalized to sales, our 38

Seventh Generation GHG estimates in this report.

contractor warehouses

consumers, product use & end of life

distribution to customers

emissions have decreased 34% over the same time period. This reduction is largely due to the strong growth in our cleaning products, which have a lower CO2 intensity per pound of product. Our switch to 2X concentrates and increased recycled content in our packaging should lead to more reductions in 2008. For several years, we’ve been tracking greenhouse gas emissions from our offices, business travel, employee commuting, and product transportation using an internationally accepted greenhouse gas protocol developed by the World Resources Institute and World Business Council on Sustainable Development. (www. ghgprotocol.org) This year, we provide updated data on the same aspects of our business to allow comparison from year to year. We’ve also developed measures for approximately 85% of the CO2 intensity of our materials, ingredients and packaging (from our MIPs database) using component-specific greenhouse gas emission factors from industry sources and published reports. While we’d prefer to use more precise factors, this data is currently unavailable. Nevertheless, we believe these more generic indices provides a good compass for directing research and development and product design efforts to eliminate the most greenhouse intensive materials from our products.


Engage employees at home and at work.

Educate consumers.

Redesign our products.

Engage our manufacturing partners.

2007 Cradle-to-Gate Carbon Footprint MIPs Category

Scope

Facility energy usage Product transport 1 & 2

2005

Engage our retailers.

2006

2007

Improve our distribution system.

2 year change

52

80

85

63%

Employee commuting

3

117

99

110

-6%

Business travel Business travel

3

140

218

375

167%

Product transport

3

2,520

2,834

4,296

70%

Employee commuting3

31,371

31,180

36,922

18%

34,200

34,411

41,788

22%*

MIPs Total


The six aspects of our carbon strategy are:

Normalized to sales, our CO2 emissions have shrunk 34% per dollar of product sold!

The World ResourcesFacilty Institute and World Business Council for Sustainable Development Protocol define three different types of emissions categories: Scope 1: Direct emissions from company controlled buildings and vehicles. For our company, this means our office building in Burlington, Vt. Scope 2: Indirect emissions from the consumption of purchased electricity, steam or heat produced by another organization. Our energy use in our offices comprises our Scope 2 emissions. Scope 3: Other indirect GHG emissions from transportation of purchased material or goods, employee business travel; employee commuting to and from work; and estimates of materials, ingredient, and packaging GHG burdens. * Percent change applies only to each category and this column cannot be added due to the differences in magnitude in each row.

As the chart above shows, our carbon footprint continues to increase as our sales grow. Our total greenhouse gas emissions have grown from an estimated 39,989 metric tons to 43,261 metric tons — a 44% increase since 2005. Our material, ingredients and packaging emission estimate comprises roughly 88% of this total. Normalized to sales, our emissions have decreased 22% over the same time period. This reduction is largely due to the strong growth in our cleaning products, which have a lower CO2 intensity per pound of product. Our switch to 2x concentrates and increased recycled content in our packaging should lead to even more reductions in 2008.

Next year, we expect to start seeing the effect from changes that have occurred in 2007: • Our 20/20 by 2010 program will have led to reductions in employee footprints. • Packaging changes, included our Natural 2X Concentrate Laundry Liquid, should lead to GHG reductions. • New manufacturers closer to our markets and new warehouses closer to our customers, as well as significant behind-the-scenes logistical work, will lead to reduced transportation-related emissions.

As the mindset of reducing carbon emissions is integrated into our business thinking, even seemingly unrelated changes become opportunities for achieving reductions in our environmental footprint. We anticipate being able to document an impressive decline in our emissions in coming years.


39

Core Purp ose

Towards Systems Thinking

Co re

Core Purpose: Enlightened Justice and Equality

Core Process: Exposing Systemic Dissonance or exposing things that are harmful in a way that allows people to strive for change.

Pr oc es s e

essenc

e u l a V Core

Core Value: Live Authentically

Towards Systems Thinking Defining our corporate essence is important to us. Our essence is the heart and soul of the company, its guiding light. Over the past two and a half years, consultant Carol Sanford has helped broaden and focus our systems thinking abilities and helped us articulate our core purpose, value, and process. This report is one way we try to be true to our core value, to live authentically. This involves being honest and transparent and doing what we say we’re doing. The values articulated here help us determine how we approach the global imperatives that guide our work (p. 6). 40


Towards Systems Thinking

One of our global imperatives states, “We are committed to approaching everything we do from a systems perspective, a perspective that allows us to see the larger whole, not a fragmented, compartmentalized world… but a world that is endlessly interconnected, in which everything we do affects everything else.” That’s all well and good, but what does that mean and how do we know when we’re doing it? Systems Thinking in Our ERP Management System Design When it came time for us to design our Enterprise Resource Planning (ERP) management system, we took a completely different approach, thanks to our work with Carol. This is a system, planned in 2007 and debuting in 2008, that will dynamically track our sales, product development, ingredient sourcing, packaging, logistics, sales, customer service, financial, and corporate consciousness needs. That’s a lot to ask of a database! With the different frameworks Carol had provided us to help us think holistically, we started on the outside and looked in. We asked ourselves what our customers needed and then backed our way through the value chain to see how we could add value to the whole process.

Nancy Stoddard, vice president of Information Technology notes that, “Previously, everyone would have had their functional hats on when it came time to select our ERP software. We might have ended up with a solution that was strong in tracking sales, for example, but weak on logistics. But we used Carol’s systems-thinking frameworks and were able to look at the bigger picture and at the entire process. The dialogue switched from “what my department needs,” to thinking as a business owner. When we finally chose a system, everyone was aligned to what was best for the whole company.”

This new thinking also affected the way we evaluated our insurance partners this year. The process resulted in selecting a new insurance partner who was far more aligned with our corporate direction and global imperatives. We ended up with a true business partner, who is anxious to work with us on more than just insurance; they would like to collaborate on sustainability initiatives and education. Even better, we ended up saving money on our premiums. We will continue to use this process when we collaborate with others, always seeking partners aligned with our values.”

The way in which our business information had been housed in the past was very fragmented, and it has been difficult to integrate different aspects of the business without significant manual work. The new system will be more efficient, flexible, and accommodating to growth.

Systems Thinking and Global Climate Change In May of 2007 we worked with Ceres to convene a meeting of nongovernmental organizations and like-minded companies, including socially responsible investment firms, to see how we could use systems thinking frameworks to challenge ourselves to be more responsible organizations. Participants came to a consensus that we could demonstrate leadership and foster change on carbon reduction, an area that demands both urgent action and new ways of thinking. We are still working to determine the most effective vehicle for furthering our collective goals in that area.

“We believe that business tools and business solutions can be used in more sustainable ways, and we want to be catalysts for making that happen,” comments Julie Atwood, executive vice president of Finance & Administration. “When this new design is executed in 2008, we will begin to see some insights into important metrics. Traditional business systems might look at inventory and sales; we need to look for efficiencies that will help us reduce costs, while at the same time reducing our GHG emissions. It has been exciting to see us integrate systems thinking tools into our ERP scoping and design work.


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Educating Others

In an age when despairing doom and global gloom rule the wires and extinguish those inspired fires that could ignite the needed change, the Inspired Protagonist seeks to cut the cords of negativity that bind us and replace them with hopeful strands of thought and deed that weave new worlds of possibility. This is the home of the voice of Seventh Generation and of all our friends and kindred spirits. It’s the place for different thinking, dynamic action, deeper traction, and daring dialogue that move people to move our culture forward. Let us together reboot the present and reinvent the future through alternative 42 Seventh Generation, Inc. | Corporate Consciousness Report for 2007 patterns of being and sharing, doing and caring. —The Inspired Protagonist

Educating Others

Educating Others Our Website

All of us at Seventh Generation are “inspired protagonists,” using every means at our disposal to convey our vision of a sustainable future to others within our spheres of influence. We try to lead by example, we collaborate, we engage, we argue, we cajole, we use humor, we employ the power of the market, and we use science. There is one protagonist that is more inspired than the rest, as it combines the strengths of each one of us — our cyber voice. Embodied in Jeffrey’s blog, the Inspired Protagonist and, new in 2008, the 7Gen Blog (www.seventhgeneration.com), these blogs represent us at our most impassioned.

Web Redesign Our website received a dramatic new look in early 2008, allowing us to connect more deeply with our cyber community. It is the result of a communitywide, year-long effort to take advantage of new technology, broaden the reach of our blogs, create an on-line store, and strengthen the educational component of our site. Staff from across our departments and a dozen external experts from places such as the magazine industry, Second Life, and Meetup joined together for a freewheeling, two-day charrette.

We were honored in 2007 to have been nominated for a Bloggers Choice Award for Best Corporate Blog. bloggerschoiceawards.com

The results? We encourage you to see for yourself. Check out these highlights: • The Seventh Generation Nation: In the first month alone, more than 7,000 individuals joined the nation. Consumer loyalty features, such as coupons and product news, are coupled with opportunities to learn and engage on environmental and health issues. • Learn: This is where we seek to inspire and educate consumers. You can “Ask the Scienceman,” visit our blogs, and read our 7Gen newsletter. • 7Gen Blog and Forums: We encourage postings and hope to broaden and facilitate consumer-to-consumer conversations about green living and environmental issues. • The Inspired Protagonist Blog: Formerly the blog for our whole community, this is now the place where our president, Jeffrey Hollender, can share his perspective on corporate responsibility and sustainability. • Act: This is where we encourage people to get involved and make a difference. • Our Products: We provide ingredient and health effects information. • Gift Shop: We now connect people directly to our products through our on-line Gift Shop. • Corporate Responsibility: This report and the reports of past years are posted.

Feel free to roam through our site; watch the videos; read the postings; and contribute to the discussions. Let us know your thoughts or concerns. Comment on this report; make suggestions. We welcome your feedback and your engagement, and we thank you.


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Educating Others

Our Chief Inspired Protagonist on Tour While many of us are fortunate to have the opportunity to attend conferences or other forums where we can both learn from and inspire others working in the same field, our CEO, Jeffrey Hollender, is a respected, widely sought speaker on sustainability and corporate responsibility. Through the combined reach of his blog, his books, and his speaking engagements, Jeffrey engages a large and varied audience with his message that businesses can be positive agents for social and environmental change. Some of our CEO’s major speaking engagements in 2007 included: • Sol Forum on Business Innovation for Sustainability, Atlanta, March 29, attendance: ~350 • Green Business Conference, Chicago, April 19, attendance: ~200 • National Association for Child Care Professionals, Boston, April 26, attendance: ~300 • PRWeek “The Greening of Corporate America,” San Francisco, May 10, attendance: ~300 • VBSR Spring Conference, Burlington, May 17, attendance: ~200 • Amazon, Seattle, July13, attendance: ~100 • Natural Leaders Annual Event, P2AD Partnership Program Georgia Department of Natural Resources, Atlanta, October 16, attendance: ~200 • Ad Age Idea Conference, New York, November 15, attendance: ~500

“Jeffrey Hollender is one of the heroes of sustainable business, and his Inspired Protagonist blog offers a clear and compelling commentary on news and trends in the field. Mr. Hollender highlights important happenings in the fast-moving field of sustainable business with a wise, relevant and witty perspective. If you are interested in staying on top of how business is changing to improve the world, make this site required reading.” Liz Maw, Executive Director, Net Impact

New Ways of Reaching Out Our continued growth as a company allows us to focus on connecting with a larger community in deeper, more meaningful ways. We embarked on new efforts to reach consumers indirectly through our retailers and directly by changing shoppers’ in-store experience. We also sought to engage parents in thinking about healthy homes for their children, and we traveled the country talking with women about the taboo topic of feminine care products. 44


Educating Consumers: Home Healthy Home Courtney Loveman, brandmother of Seventh Generation, talking about the Home Healthy Home initiative

As the category leader in our sales to natural food stores, it is important—both to us and to our key trading partners—that we remain at the forefront of category-level education and growth. A significant percentage of our Natural Channel sales are at Whole Foods Market, yet household products only account for 1% of their total store sales. This statistic clearly indicates that consumers have been slow to connect the dots between the products that we make and the natural/ organic foods they have readily embraced. Our Home Healthy Home collaboration with Whole Foods Market is designed to change that by enhancing the retail experience in order to help consumers understand that natural household and personal care products are a crucial part of a holistically healthy lifestyle. While improved signage is one obvious approach, we aimed to go deeper by assembling a team at Seventh Generation to envision a shift in the experience of cleaning, from that of a dreaded chore to a life-enhancing pursuit. By extending Whole Foods Market’s expertise at providing distinct shopping experiences into our aisle, we aspire to bring the feel of “home as sanctuary” into the retail environment. With help from Burlington-based Jager DiPaola Kemp Design (www.jdk.com), we put together a dynamic, multi-sensorial concept to attract, engage, and capture Whole Foods Market consumers. The company has been thrilled with our work. We launched our Home Healthy Home initiative at the end of 2007 in the Midwest, helping that region to earn an “Innovation in Grocery” award at the Whole Foods Market corporate level. Please look for an update on the success of this initiative in next year’s report. go links: add the link to http://www.seventhgeneration.com/

Educating Others

Educating Retailers: The GIVE Program Susan Johnson, director of education, on educating retailers through the GIVE program

The sales people in the stores are the ones with the most direct contact with consumers. If they understand our products, they can explain their benefits to the shoppers they see every day. We started the GIVE program last year to inform our retail partners about the importance of healthy products so that they could educate consumers. GIVE stands for Generate Inspiration via Education. We’re givers of knowledge. We have some incredible stories from consumers about the positive impact our products have had on their lives. Many of these consumers are allergy sufferers, have developed chemical sensitivities, or have had a close call because of poisoning accidents that occurred with conventional cleaning products. We use these stories to engage in a dialogue about the importance of bringing safe, natural products into the home. As no one in our industry was conducting this kind of education, we drew on the experience of benchmark partners in other industries. We interviewed companies like Starbucks, Nike, Aveda, Patagonia, Wegmans, and Google to understand how they have designed educational programs. Our sales broker advisory group shared their expertise and advised us to make our training short and exciting by using anecdotes and sharing stories. They recommended modular trainings so that specific topics could be added or removed based on the audience. With input from Walter Robb, president of Whole Foods Market, we decided to design trainings to be held right in the store aisle with sales staff huddled around a handheld video. Initially, we developed two modules: 7 Truths about Seventh Generation (see back cover) and Taking Good Care of the Next Generation. ( go/birth). There are also short modules on topics such as allergies that can be added as needed. We conducted rigorous testing in every sales region in natural food and specialty stores. Participants completed surveys to help us gauge the effectiveness of the training and make changes. We were pleased to see more than three-quarters of trainees retained key information about the importance of using natural products in the home. One viewer named Jessica commented, “the story about the toilet bowl cleaner made me gasp, thinking about my own little kids. It could happen so easily. It reinforced my reasons for buying Seventh Generation, which have always been primarily environmental. I’m already a loyal customer.” One hundred ten people went through our Train the Trainer program in 2007, and we plan to train another one hundred fifty, including grocery brokers, in 2008. More than that, we hope thousands of interested people will go through our portal (go/education) and view our videos and other educational information. Through our on-site survey, we hope to see that we’re reaching exponentially increasing numbers of people, who are leaving the training with a richer understanding of what we mean by a healthy home. seventhgeneration.com

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Educating Others

Seventh Generation and Health Child Health World have come together to help moms and dads raise healthier, happier babies. Wee Generation

Wee Generation is the result of our partnership with Healthy Child Healthy World, the nation’s leading children’s health and eco-advocacy group (www.healthychild.org). We launched this initiative to educate parents about environmental safety so that they can be empowered to make smart choices to protect their children. To support this program, our new micro-site (www.weegeneration. com) facilitates dialogue with We helped throw new and expectant parents about caring for their children a baby shower so that we can work together to for Sheryl Crow’s create healthy homes.

baby! Read InStyle’s story at:

go/sheryl

An all-star team of experts; including innovative design firm IDEO (www.ideo.com); green designer William McDonough (www.mcdonough.com); Rickshaw Bagworks, a new company specializing in messenger bags, computer cases, and other lifestyle bags; and the real experts (parents) advised us in designing the first truly eco-friendly baby bag. This bag is completely PVC-free and the exterior fabric is Cradle-to-Cradle certified Designtex fabric, made from 100% recycled plastic beverage bottles. The first 500 bags sold will come loaded with Seventh Generation non-toxic cleaning products, environmentally safe parenting advice from Healthy Child Healthy World, and Jeffrey’s Naturally Clean book. The bag will be available at Rickshaw’s on-line shop (www.rickshawbags.com) in May 2008, and all profits will support Healthy Child Healthy World’s important educational mission.

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Look for more information on this initiative and our Wee Generation Green Nursery Makeover sweepstakes next year.

Tampontification Tampontification is a program we developed in 2005 when we realized two important things: 1. It’s difficult to get women talking about healthier alternatives to conventional feminine care products when they hardly want to talk about feminine care products at all.

The statistics speak volumes. Our website, www. tampontification.com, logged 131,181 visitors in a single day. That’s more visitors in one day than we were getting in two months on www. seventhgeneration.com at that time. By March 13, 2007, donations had skyrocketed to 675,000 forcing us to suspend the DONATE function while a cross-departmental team considered how best to distribute product and leverage interest in the initiative. We did, in fact, meet our donation goals, doling out 675,000+ packages to shelters in all 50 states by September 2007. The shelters were very grateful, and we hope to be able to reinstate the donation portion of the initiative in an evolved format by 2009. In the time since we began this program, we’ve learned a tremendous amount about the importance of an authentic social mission that empowers consumers to help effect simple change and of the incredible power of the internet to spread a vital message that resonates with consumers. We hope to effectively leverage both of these insights in our 2008 marketing and educational efforts.

2. Feminine care products are in extremely short supply in women’s shelters around the country. Women’s shelters in the United States go through thousands of tampons and pads monthly, and while agencies generally assist with everyday necessities such as toilet paper, diapers, and clothing, this most basic need is often overlooked. Many of us take our monthly trips down the feminine care aisle for granted, but for women in shelters, a box of tampons is five dollars they can’t spare. Our solution was virtual donations on our website that we matched with real donations of our eco-friendly, chlorine-free, organic cotton feminine care products to local shelters. Dubbed the mission fairies, two of our employees hit the road in 2006, delivering product and our message from Seattle to San Francisco. Read their on-road posts (and learn how you can volunteer at a shelter) at go/tampon. Our message


struck a chord with women across the nation that, months later, spread like wildfire!

The Great Diaper Givaway Read here about the Great Diaper Giveaway: go/diaper


Our Advocacy

Our Advocacy Climate Change

There are times when taking a stand requires more than writing letters to elected officials and changing a few light bulbs. We’re proud of our president Jeffrey Hollender, the only company CEO to join in a Greenpeace demonstration against President Bush’s September 2007 Meeting on Energy Security and Climate Change. He stood up for what he believed in, got arrested, and hopefully gave more than a few people the courage to find a way they could make a difference too. Read what he has to say about it at: go/arrest. This blog also contains a relevant discussion on the disconnect many of us experience between the lifestyle changes we are willing to make as part of a commitment to carbon reduction and our reluctance to make other sacrifices, such as giving up car and plane travel.


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Soap and Detergent Association Martin Wolf, Director, Product and Environmental Technology, on Working with the Soap and Detergent Association

The challenge for us at Seventh Generation is to maintain our position of leadership, moving ourselves and others toward our vision of a world where we truly consider the impact of our actions on the next seven generations.

Ernie Rosenberg, president of the Soap and Detergent Association (SDA) “Martin personally has had tremendous influence. His ability to advance sustainability in the cleaning products industry in a positive way, without resorting to disparagement, has made our entire board receptive to his ideas. He has been instrumental in raising sustainability to the top of SDA’s priorities. Seventh Generation has created sustainabilitybased competition that is evident in the increasing flow of “green” cleaning products to the consumer and commercial cleaning product markets.”

n!

I so u a o

S

Ingredient Disclosure: Seventh Generation has always listed the ingredients used in its household cleaning products. A “consumer friendly” list is included on every bottle, and a list including standard names is posted on the Seventh Generation website. For many years the SDA opposed such disclosure of ingredients. That changed in 2007.

Currently, there is no requirement to disclose ingredients unless they present a known hazard. The world of cleaning products will likely follow the path the cosmetics industry has taken with websites being developed listing products and hazard ratings. This will create a powerful impetus for safer product substitutions.

KIS

As a member of SDA’s Strategic Advisory Committee, I helped develop SDA’s “Principles for Sustainable Development,” which the association membership has now embraced. These principles include commitments to market products that are safe for humans and the environment; promote transparency; and support research to resolve uncertainties concerning the safety of various ingredients. They also address economic and social sustainability principles. It is a far cry from the days when just obeying the law seemed good enough. Seventh Generation was later elected vice-chair of the Strategic Advisory Committee.

In 2006, after hearing testimony from both sides of the issue, the State of Washington enacted a ban on phosphates in automatic dishwashing detergents, effective in three counties, beginning in 2008. Soon thereafter, the SDA stopped opposing the passage of phosphate bans and has even drafted model legislation to ban phosphates in automatic dishwashing detergents. The legislation has been adopted by 11 states and is pending in several more.

That year, an SDA Task Force developing member guidelines accepted three of the four tenets we espoused: to list every ingredient; to use the International Nomenclature of Cosmetic Ingredients names; and to list ingredients in descending order of predominance. They did not agree to list every ingredient in fragrances or preservatives. Nevertheless, this is a huge change affecting almost every cleaning product sold in North America.

Tha

We first joined the SDA (www. cleaning101.com) in 2003. SDA is a venerable organization that has been around for decades and is dominated by the large cleaning product companies. We were the new kid on the block, and, initially, there was definite resistance to some of our ideas. But the speed and the depth of SDA’s transformation have been striking.

Phosphates: For several years, I testified at state legislative hearings about banning phosphates from use in automatic dishwasher detergents. Limiting the input of phosphates is critical for maintaining the health and beauty of our rivers and lakes. My testimony was that Seventh Generation automatic dishwashing detergents worked as well as conventional brands, and were always made without phosphates. Usually, other members of the SDA and the SDA itself provided testimony opposing a phosphate ban.

C o m nk you, C A N e h e Mar g i v r e ti e y

Our mission at Seventh Generation is not only to make the safest, most effective household products we can, but to inspire others to approach product development with the same goals. Working with others through the SDA, our achievements in the past two years have been truly impressive.

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Economic Performance and Giving

Economic Performance and Giving Economic Performance

Giving

In 2007 our sales increased by 45%. Over the past five years, the company has experienced significant improvements in its financial performance as a result of increased sales growth and greater operating efficiencies. We have achieved a compounded annual growth rate of almost 38%. Gross sales continued to hit double-digit growth in all major channels and our operating income set a company historical record. The company projects sales growth of 39% in 2008 and 35% in both 2009 and 2010.

Our company’s continued growth has allowed us to dramatically increase our charitable donations. Our 2007 combined cash ($170,650) and product ($72,864) giving totaled $243,514. This represents an impressive 91% increase over the previous year’s total. More importantly, we established an official corporate giving program with a policy of giving 10% of our pretax profits annually to community, environmental, health, and responsible business not-forprofits. We wanted to be as generous as possible in establishing this goal. This 10% target is at the top end of the corporate donation policies of which we are aware. We also hired a dedicated person to run our donations program.

For our sales in natural food stores, we are the brand leader in almost every category in which we compete. Our market share, as measured by SPINS for the 52-week period ending December 2007, (excluding private label products, which SPINS does not track), grew by one share point from last year, which represents 53% of the total natural foods, cleaning, paper, and personal care categories combined. In 2007, our share of the cleaning products category was 47%, our paper category share was 71%, and our personal care (feminine hygiene, diapers, and wipes) category share was 65%. In addition to these milestones, our company’s growth has contributed substantially to the growth of the categories in which we compete. See www.spins.com.

Our sales in grocery stores continued their strong performance in 2007, exceeding 2006 revenue by over 70%. This growth was driven by a combination of new accounts and new item growth within our existing customer base. Internet sales grew by over 90% as new key on-line customers opted to carry our baby care products. The International Channel also had an amazing year with growth over 80% from the prior year as a result of expanded product sales primarily in Canada. Given this impressive growth and increasing brand awareness, we anticipate exceeding $100 million in sales in 2008.

Our Giving Philosophy We truly believe that business is one of the most powerful instruments for meaningful change on our planet. We have chosen three points of focus for our advocacy, which include:

Our double digit sales growth +

+

19

+

%

’02 50

25

43

+

%

%

’03

’04

+

39% ’05


45% +

28% ’06

’07

• Vermont-based community groups and organizations • Global cooling. We support stewardship, education, and regenerative solutions to the most pressing environmental issue of our time—global warming. • Children’s environmental health and wellness. We support programs that directly and positively influence environmental health issues that affect children and provide them with a better quality of life.


New Orleans,” said Hillary Strobel, executive director of Replant New Orleans. “Because of extensive, prolonged flooding in the wake of Hurricane Katrina, elevated levels of toxins have been found in New Orleans’ soil on a citywide level and the One Ton Tree program will raise awareness of and take positive action toward rebuilding our ecosystem here, an ecosystem that lost 50,000 trees to the storm.”

$250,000

$187,500

$125,000

$62,500

$0

02 Product Cash

$0 $15,000

03 $5,000 $25,000

04 $6,000 $38,000

December is always a difficult time for organizations serving the needy. Funding often runs out yet the need seems even greater than at other times of the year. This year, in addition to our year-long giving, we were proud to provide important year-end assistance to three worthy local organizations highlighted here as an example of our commitment to Vermont-based organizations. • Recycle North: This organization reclaims and refurbishes materials that would otherwise end up in landfills while providing job-skills training to disadvantaged individuals. Their emphasis on reducing both material waste and the waste of untapped human potential are strongly aligned with our company’s beliefs (www.recyclenorth.org) • The Chittenden Emergency Food Shelf (go/foodshelf) • COTS (The Committee on Temporary Shelter) (go/cots) Future Plans: In 2008 we will be embarking on a new collaboration with the Whole Planet Foundation, a microcredit lending organization supporting the self-employed poor in Latin America, Africa, and Asia. We are excited by this opportunity to sustain innovative entrepreneurship in emerging economies with a $150,000 donation over three years (wholeplanetfoundation.org).

05 $6,000 $49,924

06 $20,523 $107,243

07 $72,864 $170,650

Nonprofit Discount Program: We have historically offered nonprofit organizations Seventh Generation products at a 20% discount below distributor costs. In 2007, 38 nonprofits purchased approximately $40,000 of product at a discounted rate. We discontinued this program in December due to shipping and in-house costs and the fact that on-line companies such as Amazon (www.amazon.com) offer excellent prices and free shipping on orders of $50 or more. Sharing our Office Space: Since 2006, we have provided free office space and office support for the six employees of Vermont Businesses for Social Responsibility (www.vbsr.org).

Planting Trees in New Orleans One tree really can make a ton of difference. For Earth Day, 2007, we partnered with the Seed Collective (www.seedcollective.org) and Replant New Orleans (www.replantneworleans.org) to plant trees in a New Orleans neighborhood ravaged by Hurricane Katrina. Referred to as the One Ton Tree project, the initiative involved more than just planting trees, but also included a systemic approach to bringing green space to a devastated neighborhood.

Visitors to our blog used a combination of their cell phones and computer key pads to create virtual trees. Visitors planted seeds, selected a tree type, changed its color and texture, and grew a tree, creating unique, vibrant contributions to our virtual forest. We matched every cyber-tree with a contribution to the cause. On Earth Day, Replant New Orleans volunteers, residents, and our own “gardeners,” Lara Petersen and Sarah Thompson, planted fruit and aromatic trees, grass, shrubs, flowers, and vegetables in a Peace Park and other areas in a Making a difference Central City neighis important to all of us at Seventh borhood. Sarah Generation. See go/giving. noted that the “spirit and energy of the entire volunteer force was amazing. Together, this crew turned a hardpan dirt lot into something beautiful that will thrive for the neighborhood.” Lara found the people in the neighborhood to be “hospitable, grateful and engaging. Some young kids helped who had never seen a garden before. Everyone thanked us so much for bringing hope to their neighborhood.”

“With the help of organizations like Seventh Generation and the Seed Collective, we’re making strides… toward our goals of bringing healthy, sustainable soils and lush, urban forests back to


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Community Donations


“ReCycle North’s strength comes in connecting the three parts of our mission: environmental stewardship, educational training, and economic opportunities. These connections plus tremendous community support, especially from forward thinking corporations like Seventh Generation, allow us to accomplish a huge amount.” Tom Longstreth, Executive Director, Recycle North

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Seventh Generation Employment Employees 80

Payroll ($M) 10

60

7.5

40

5

20

2.5

0

Diversity Gender is the only indicator of diversity that our human resources department formally tracks. We made progress in improving the representation of women in decision making in 2007 at the management level, but lost one female vice president. While only two of eight vice presidents are female, 16 of 34 company managers (47%) are female. The composition of our community remains approximately the same as in the past two years, 41% male and 59% female.

0

02 — 19 $2.1

Part Time Full Time Payroll

03 — 25 $2.6

04 4 31 $3.3

05 4 39 $5.1

06 2 50 $6.5

07 1 67 $9.1

Growth Last year we continued our extraordinary growth, adding 16 people (20 new hires minus four departures) to our community—a 31% increase. This brings our total population to 68. In addition to our 67 full-time and one part-time staff, we employed seven interns. Three of our staff work on an hourly basis. Total payroll (total compensation, taxes, and benefits) increased over the past year from $6.5 million to $9.1 million While we lost four employees in both this past year and in 2006, our turnover rate, in light of our double-digit growth, continued to drop. This reflects the fact that we are working hard to improve our hiring practices, and we are losing proportionally fewer people each year. In 2007, four employees left the company, each for very different reasons. As part of our commitment to provide an enjoyable, productive work setting, we offer flexible work arrangements. While only ten employees have formalized flex-time arrangements, many others take advantage of the opportunity to rearrange their schedules at some point for a variety of reasons. Managers are also empowered to allow employees to work at home some days; this practice helps our employees with personal arrangements and also helps reduce their carbon footprints.

Our company’s excellent reputation has resulted in a huge increase in unsolicited resumes as well as applications for all positions. This large applicant pool and our strong annual hiring numbers create an opportunity for us to increase the diversity of our workforce. Only one of our 68 employees identifies themselves as a person of color. In 2008, we will be developing recruiting relationships with various colleges and will be more aggressively seeking a diversity of applicants.

Employee Gender Diversity

Senior Management Gender Diversity

100% 75% 50% 25% 0%

Male Female

03 14 11

04 17 14

05 21 22

06 21 31

07 28 40

03 3 1

04 4 —

05 4 2

06 5 3

07 8 2

Seventh Generation Employment Employees 80

Turnover Rate 36%

60

27%

40

18%

20

9%

0

00 01 02 Employees 13 16 18 Turnover Rate 31% 25% 11%

0%

03 23 4%

04 05 32 43 6% 23%

06 52 8%

07 68 6% seventhgeneration.com

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Our Community


Our Work Life The high level of growth we’ve experienced continually since 2002 brings with it changes to the culture of our organization. We have had to be creative in finding ways to ensure that our structure does not become too hierarchical and that our employees continue to feel connected to all aspects of the company and empowered to speak out on business decisions. All new employees receive a rigorous, twoday training on our company’s values, our operating principles, our organizational structure, and health and environmental issues related to our products. In 2007, consultant and systems thinking muse Carol Sanford expanded her work with us to include monthly daylong workshops for the whole company. She introduces us to different frameworks that can help us think less reactively and more consciously in our daily work life. Nancy Stoddard our vice president of Information Technology, observed, “I’ve been seeing people working together crossfunctionally—people from sales and customer service and logistics and finance working together more closely and understanding each other’s world much better. When there’s someone who feels really strongly about something, I see people using “the Law of Three,” one of the frameworks Carol taught us for shifting from a place of conflict to being able to reconcile to a higher purpose.” Another way employees can participate across departmental and hierarchical boundaries is through one of our many committees. In 2007, the Senior Leadership Team set up three new managing teams to help guide our organization. 1. The Strategy Team integrates corporate consciousness perspectives into the development of an overarching strategic roadmap for the company. 2. The Operating Team is responsible for the successful execution of the 2008 operating plan and the creation of the 2009 operating plan and budget. The team focuses on performance and risks and opportunities to the business. 3. The Steering Committee serves as the liaison between the board of directors and the company and also focuses on ongoing business opportunities and decisions. To help build individual capabilities, we periodically change the membership of all teams. Other teams include the ERP Team, product review team (PRT), product implementation team (PIT), Cyclops Team (cross-functional inventory/sales clearinghouse), Extension & Evolution Team, Compensation Team, and several hiring teams. Others are mentioned elsewhere in this report. 54


Building Connections Sarah Alberghini, community cultivation specialist on building connections in the community View a video of Sarah How do we help a small company grow big and talking about her work at still feel small? Our close-knit workplace has Seventh Generation: go/sarah grown an amazing 74% in the last two years. With such fantastic growth, we have to work hard to maintain a strong sense of community. My job involves finding innovative ways to nurture and enhance our relationships.

This past year we started our internal newsletter, Inner Piece, as one way to build community. When we were smaller, we had weekly staff meetings which included a check-in time when everyone could let others know their news. Our weekly newsletter serves the same purpose. There’s a main article and then a number of smaller, even random contributions, as well as Jeffrey’s weekly schedule. Everyone’s favorite part is the personal profile in “A Deeper Shade of Soul.” In 2008, we’re bringing our newsletter on-line where it will be similar to a homepage. I’ll be able to track which articles people read and change the focus to give all employees more of what they want to see. We also have an employee Vibe Team that engages in soul-searching on ways to keep us connected. This team comes up with fun internal events and sets up volunteer projects such as Vermont’s Green-Up Day and a food drive for needy families. This past summer, for our community volunteer effort, we partnered with the Dream Program (www.dreamprogram.org), a nonprofit organization pairing college students and low-income children in Vermont in mutually beneficial mentoring relationships. About half of our community participated in a day of maintenance work at the Dream Program’s 50-acre camp in Fletcher, Vt. We worked all day weeding the garden or trail clearing next to others whom we might not normally spend time with during the work week. It was a great way to create space for interactions with each other while serving our belief in helping the larger community. People crave these opportunities for meaningful connections, and in 2008 we will be formalizing and expanding our volunteer program.

Our goal as a company is to enhance the well-being of each member of our team. In addition to providing training and professional development opportunities, we offer a robust benefits package. In 2007, we conducted our first benefits survey. With 92% of employees participating, we found that we had as many new ideas and requests as people responding to the survey. We will be evaluating the survey results and making modifications to our suite of benefits offerings in 2008.

Governance We are committed to operating with transparency, integrity, and accountability. Our board of directors has provided unwavering support to the management team to focus on sound management systems and internal controls throughout our operations. Our board of directors promotes a culture that calls for employees to behave legally, ethically, and authentically. As a company, we continually strive to infuse principles of corporate responsibility into all the business decisions we make. Our board of directors supports and is fully aligned with these principles. Seventh Generation is supported by a five-member board that holds itself accountable for the management and fiduciary responsibilities for the company and its stakeholders. This is facilitated through our Corporate Governance Guidelines and through the four committees of the board: Audit Committee, Compensation Committee, Executive Committee, and Investment Committee. Seventh Generation has been successful in having a board that supports our work in ways that are consistent with our purpose and our values. In 2007, our board consisted of five total members, one female and four male, including our president and CEO, Jeffrey Hollender and two independent members. As our company continues to grow, we will evaluate opportunities to broaden the viewpoints and diversity of our board.

Our Workplace We love our wonderful office space on Lake Street in downtown Burlington and, by the end of 2007, given our growth, we find ourselves again needing more room. We have planned a 12,000 square foot expansion into the second floor and mezzanine of the building where we currently occupy the third and fourth floors. The expansion features a laboratory that will have washing machines and dishwashers for product testing, as well as equipment and space for work on product formulation. William Maclay Architects and Planners (www.wmap-aia.com) have succeeded in bringing nature into the building design by redoing the entry to add light and plants and by designing an exciting green roof for us. It will

have native plantings, paths of local granite, and benches of local wood. We will occupy this new space in September 2008 and hope to gain our Leadership in Energy and Environmental Design gold certification at that time as well.

Environmental Stewardship in Our Burlington Office

View our soon-to-be completed space by visiting: go/space

Our employees have shown both the depth of their environmental commitment and the height of their creativity in addressing ways to reduce our office footprint. The table below shows the results of some of our efforts. We hope to provide a better accounting in future years.

Our Recycling Efforts Activity

Item

Quantity

Composting

Food waste

3,000 gallons/year

Recycling

Cardboard

3,120 lbs/year

All other recycling (paper, glass, plastic, metal)

108,108 gallons/year

Reuse

Search for Reusable Materials

Copier toner

Collecting for 2008

Glass bottles are returned to manufacturer.

Collecting for 2008

Glass vases are returned to florists.

Collecting for 2008

Packing materials from local businesses

Collecting for 2008

Our Purchasing Criteria We look for: • • • • •

The highest content of recycled material Soy-based inks Chlorine-free materials Ways to support the local community Ways to support companies aligned with our mission

We are now upgrading our process to include consideration of the type of fuel used for deliveries as well as ways to minimize transportation distances and frequency.


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Our Benefits

Awards and Memberships

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2007 Awards

Memberships

Partial List of Other Memberships

Fast Company Social Capitalist Award

B Corporations

Seventh Generation also belongs to these excellent organizations: • Balle (Better Alliance for Local Living Economies) (www.livingeconomies.org) • Ceres (www.ceres.org) • Global Reporting Initiative (www.globalreporting.org) • Soap and Detergent Association (www.cleaning101.com) • Social Venture Network (www.svn.org) • Society for Organizational Learning (www.solonline.org) • Vermont Businesses for Social Responsibility (www.vbsr.org)

We were honored to receive a 2008 Fast Company Social Capitalist Award, announced in December 2007. Sponsored by Fast Company Magazine and global-consulting firm the Monitor Group, the awards honor leading businesses and nonprofit organizations that harness the tools of the marketplace to help solve some of society’s most urgent challenges (go/fastcompany). Seventh Generation was honored for successfully integrating a wide range of social and environmental concerns into both its business model and bottom line. We’re living proof that a company can be a powerful force for positive change in the world and still make a profit. This award helps us encourage others to do the same. “It was a great honor to be up there alongside Seventh Generation at the 2008 Fast Company ‘Social Capitalist’ Awards, when our companies were both celebrated in the first-ever for-profit category of the Awards… Now, as the field opens out dramatically, with everyone—including Wal-Mart—racing to claim sustainability, I see Seventh Generation as an even more crucial navigational reference point in an increasingly fluid situation.” —John Elkington, co-founder, Environmental Data Services (ENDS) Ltd; co-founder and director, SustainAbility Ltd; founding partner and director, Volans Ventures The Grist list of 15 green business founders to watch included our president, Jeffrey Hollender. Read about these influential and visionary business people at the Grist site: go/grist Seventh Generation also made the Marketing 50 in Advertising Age. Read this article at: go/adage

In June 2007, we were proud to become a founding B Corporation member to support this new effort to develop trust in the marketplace through greater transparency and independent evaluation. B Corporations are unlike traditional responsible businesses because they meet comprehensive and transparent social and environmental performance standards and are building a collective voice though the power of a unifying brand. For more information visit: www.bcorporation.net



Our CEO serves on the board of directors of Greenpeace USA, Healthy Child Healthy World (formerly Children’s Health Environmental Coalition), Vermont Businesses for Social Responsibility, and Alloy, Inc., a publicly traded company.

See our video about B Corporation go/bcorp

“Seventh Generation was one of the first companies to meet the high standards of social and environmental performance required to be certified as a B Corporation. With Seventh Generation’s leadership, the B Corporation community has grown to over 80 companies in dozens of industries, together building trust in the marketplace through the unifying B Corporation brand, making it easier for consumers or investors to tell the difference between a “good” company and just good marketing.” Seventh Generation not only has helped inform the B Corporation standards, but also has become a champion, helping recruit other leaders in the sustainable business community to become B Corporations. This not only increases the collective market presence of B Corporations, but also creates a clear path for others to follow, whether they be the next generation of entrepreneurs or the next generation of business leaders in large corporations who are trying to move their companies down the path to sustainability.”

Jay Coen Gilbert, cofounder, B Labs, the nonprofit that supports B Corporations, on our role in the birth of B Corporations seventhgeneration.com

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Stakeholder Consultation

Stakeholder Consultation We strongly support Ceres in its efforts to foster meaningful dialogue about corporate responsibility and the integration of sustainability into capital markets, and we endorse the Ceres principles. We value the unique forum Ceres provides for constructive exchanges between corporations, activists, and socially responsible investors, and recommend that readers of this report visit www.ceres.org to learn more about the organization’s work. Our annual reporting process benefited greatly from two stakeholder reviews convened by Ceres. A review session held on January 31, 2008, focused on our 2006 Corporate Consciousness Report and provided valuable insights for our 2007 efforts. A different review team evaluated this year’s report, in a session on April 9, 2008. The 12 stakeholder voices we heard from represented other companies, nonprofits, academia, the legal perspective, and Ceres. Because we were particularly interested in feedback relating to what it means to be a sustainable company, review team members represented organizations that have contributed to larger societal discussions on this topic. As a further level of review, an internal cross-disciplinary team evaluated the document. While we did not address every comment, the input was invaluable in making this a richer, more comprehensive

document and in challenging us to find new ways to articulate what it means to be a valuesdriven company. Additionally, some comments will require a significant lead time to address and, while we were not able to incorporate them here, they will guide our thinking as we approach our 2008 report. We hope to widen our stakeholder review team next year to include voices such as those of our manufacturing or retail partners with a material, financial interest in our company.

Reviewer Comments Reviewer Comments Positives

Reviewers liked the report’s format with its cutting-edge use of blogs, videos, and web links. Reviewers also responded favorably to the candid tone and transparency, the SDA story, the global imperatives, and the wide breadth of the report. They were also impressed with the 10% pretax profit corporate giving goal.

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Carbon Footprint: The company’s carbon reduction goal is impressive, and reviewers wanted more detail on its adoption and an explanation of whether the goal is normalized or absolute. The team also challenged the company to focus on its broader environmental footprint, to track other impact areas such as water, and to detail environmental efforts such as recycling in the Burlington office. We added suggested information to our carbon goals and widened the scope of our environmental footprint reduction efforts. We will continue to improve our environmental assessment abilities in coming years. We also added a section on environmental efforts in our Burlington office. Regenerative System: The team challenged the idea that everything can be regenerative and wanted a clearer explanation of this complex idea earlier in the document. We removed some of the absolute language that was in the first draft and clarified that defining what it means to work towards a regenerative system is still an ongoing process for us. We are working in 2008 to define this further. Goals: Reviewers suggested consistent formatting of goals in one central location with a 2010 target, progress to date, and 2008 commitment. The team also recommended providing goals for more program areas and providing management goals. This presentation was improved. Management goals will be added next year. Manufacturing Partners: The team wanted a discussion of when Seventh Generation is able to leverage change, how it helps partners who score poorly, forward-looking goals, a better explanation of report scores, as well as a manufacturing quote. A quote from a manufacturer was added, scores were explained, and the section was significantly expanded.

Undocumented Workers: More discussion and explicit plans for further investigation of this issue are needed. Seventh Generation did not expand this topic out of concern for manufacturer privacy. Report Title: Draft title was removed in favor of “Spheres of Influence,” suggested by one of the reviewers. Global Imperatives: Seventh Generation should do a better job echoing these imperatives throughout the report and discuss how the goals were developed. Discussion of development was added. Scent Story: Discussion of global versus local sourcing should be added to the scent section. Significant additions were made to the traceability section, which expand the reader’s understanding of scent sourcing, but do not explicitly address the inconsistency alluded to by the reviewers. Local scent sourcing is a much longer-term goal for the company due to the current limitations of the essential oil market in the United States. Materials: Use graphics to explain the Earthto-Earth concept. Add more specifics to the packaging discussion and provide information about percent recycled and renewable materials used and trend data. Information was added.

Home Healthy Home: The team was intrigued by this section and wanted more detail. This will be in the 2008 report. Logistics: The team wanted more details on tracking lead times, warehouse costs, transportation costs, and carbon footprint impacts of this part of its business. Carbon footprint information was added, but detailed cost information was not. We will consider adding this next year. Reaching Out: Team suggested listing website features and providing more information on consumer education and links to the labeling section. Features were listed, and discussion was expanded. Employee Teams/Benefits Survey: Information on how employees are selected, team structure, membership rotation, as well as the results of the benefits survey were not added, as reviewers suggested, due to space considerations.

Points for Uniqueness Everyone is interested in the $5,000 award!

WAGES Story: Reviewers liked this and wanted more context to be provided. Links to additional information were added.


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Stakeholder Consultation

Key Improvements Suggested

International Reporting Standards

International Reporting Standards This report, like our 2005 and 2006 web updates and 2004 printed report, is based on the GRI standards (version G3, published in 2006). GRI develops globally applicable Sustainability Reporting Guidelines for voluntary use by organizations worldwide. (www.globalreporting.org) As a member of GRI, we support this effort to foster corporate accountability, comparability, and transparence. We have employed GRI-recognized performance indicator protocols for preparing the data for this report. As a small company, we have not reported comprehensively on every one of the GRI standards, but have been guided by the fundamental GRI reporting principles: materiality, stakeholder inclusiveness, sustainability context, completeness, balance, comparability, accuracy, timeliness, clarity, and reliability. In addition to our goal of creating a report that is true to these GRI principles, we want to tell a readable, accessible story about our company that will be read by our primary stakeholders as well as by more casually interested parties. We have tried to strike a balance between reporting relevant data and conveying a sense of what it means to be part of Seventh Generation. In 2006, GRI revised their standards to develop a “C” applicability level that is appropriate for smaller companies. We have tried to meet this standard this year and would like to meet the B+ standard next year. The following information indicates how we have met the required Profile Disclosure elements. The GRI standards also include topic-related performance indicators. To meet the C application level, companies must address at least ten of these performance indicators, including a minimum of one each from the social, economic, and environmental categories. Both the required Profile Disclosure elements and the core performance indicators we have met are listed below with either a page number indicating where they are addressed in the report or with additional explanatory information provided here. GRI has verified that we have met the “C” application level.

GRI—C Standard Elements Profile Disclosures Standard Disclosures

Medium-Term: I foresee a Seventh Generation with a more

Seventh Generation’s employees have the talent and the

diverse workforce employing cutting-edge innovations to

commitment to get us there.

1.1 CEO Letter: A few more words from Seventh Generation’s president, Jeffrey Hollender, p. 3.

make improvements in educational outreach; environmental

While the theme of the CEO letter (p. 3) is transparency,

footprint reduction; and sustainability within our supply

this report’s major focus is on sustainability. This is fitting

chain, all while raising the profile of our brand as an

for a company that seeks to live up to its name in all that

authentic, trustworthy source of healthy products.

it does. The imperative to “consider the impact of our

Longer-Term: Our global imperatives truly guide the

cover this comprehensively. Our labeling issue (“Label Us

company’s direction. But we can’t make a significant

Responsible”) is the kind of situation no CEO ever wants

difference by acting alone. In the coming years, I expect us

to face. Nevertheless, the experience made us stronger

to inspire other organizations to shift from a “for-profit”

and steeled our resolve to do better. I want to highlight

Short-Term: We plan to replace our products’ synthetic

to a “for-purpose” business model, where generating

our detailed MPAR; our first-ever traceability study; our

preservatives with those that are plant-based; improve the

profits is a means to the greater goal of responding to

embrace of new, essential-oil scents; our record growth; and

sustainability of our forest-product sourcing; and reduce

social and environmental needs. I expect us to continue to

the adoption of our corporate-giving goal as achievements

our employees’ environmental footprint as well as the

build profitability by selling natural products, even as we

of which I am particularly proud. My deep thanks go out to

impacts of our packaging and logistics operations. We

remember that profits are the score, not the game. And I

everyone at Seventh Generation for making 2007 such an

intend to achieve these environmental and social goals

expect us to raise the bar on sustainability for our entire

impressive year.

while maintaining significant growth, despite the economy’s

industry by pushing our partners and even our competitors to

downturn and increasing competition.

pivot to a regenerative philosophy. Business must embrace a

decisions on the next seven generations” underpins both the sustainability goals we’ve discussed in this report as well as our strategic priorities for the months and years to come.

whole new mindset that moves from thinking incrementally about doing less harm to thinking expansively about leaving things better than we found them. That’s a tall order, but as this report demonstrates,

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Regarding our achievements and setbacks—as well as my view on our 2007 performance with respect to our targets— the tables and text in “Achievements and Goals,” “Our Community,” and “Economic Performance,” and “Giving”

—Jeffrey Hollender, president and founder, Seventh Generation

were also mindful of space considerations and keeping the

minimum wage rate of $5.85/hour. All full-time employees

2.1 Organization name, p. 5.

report readable.

are also eligible to participate in the company’s incentive

2.2 Brands, products, services, p. 5. p. 7. p. 14. p. 16.

We began by reviewing calendar year 2007 and considering our report audience. We considered the G3 guidelines a

2.3 Operational structure, p. 5. p. 7. p. 54.

2.4 Location of Headquarters, p. 5.

2.5 Countries where company operates, p. 5. p. 7.

2.6 Ownership and legal form, p. 5.

2.7 Markets served, p. 5. p. 50.

merely recognizes that they will be critical to a more limited

2.8 Scale of reporting organization:

audience.

Number of employees: p. 53.

little late in the process, a mistake we will remedy next year with a more stream-lined approach. To keep our report

Child Healthy World (see “Wee Generation”). We developed this initiative in 2007; the first sales will occur in 2008, and all Seventh Generation profits will be given to Healthy Child Healthy World to support its educational mission. We have no other joint ventures, subsidiaries, or outsourced

serve our customers there. There were no other significant changes. 2.10 Awards received, p. 57.

Report Profile, Scope, Boundary, and Global Reporting Initiative Index

3.1 Reporting Period, p. 7.

3.2 Date of previous report, p. 7.

3.3 Reporting cycle, p. 7.

3.8 Basis for reporting on joint ventures, subsidiaries, leased only relevant item here is our partnership with Healthy

manufacturing facility in the southeastern states to better

3.4 Contact point for questions, p. 7.

3.5 Process for defining report content, p. 58. p. 60.

3.6 Report boundary, see 3.7 below.

3.7 Report boundary limitations In determining report content, we were guided by our own corporate priorities, achievements, goals, and shortcomings; by considerations

This is not relevant this year. 3.11 Significant changes from previous reporting periods There were no significant changes other than the fact that the Traceability Study involves a new effort for us, and our approach is covered in the text. 3.12 GRI table Governance, Commitments, Engagement

4.1 Governance structure, p. 55.

4.2 Governance chair Peter Graham is the chairman of the board.

4.3 Independent members, p. 55.

4.4 Employee input to board, p. 55. p. 54. Our employee

4.14 List of stakeholders, p. 58. 4.15 Stakeholder selection process, p. 58.

award for the implementation of an idea inspired by

Economic Performance Indicators

something in this report. We hope the report (or at least

EC1 Direct economic value Donations are covered in “Giving.”

parts of it) will be read by our employees; our manufacturing

Total payroll is addressed in “Our Community.” Data

and retail partners and other businesses; our customers and

on direct economic value, revenue, operating costs,

members of the Seventh Generation Nation (our on-line

retained earnings, and payments to capital providers and

community); and anyone else interested in issues pertaining

governments are proprietary information.

This is not just a report about our Burlington office operations. We have also been conscious of the sustainability practices back in our supply chain (see the MPAR, “Our Warehousing Partners,” and “Traceability Study”) as well as the impact and use of our products.

emissions and reductions achieved, p. 38. (Additional Standard) EN 18 Initiatives to reduce GHG emissions and reductions achieved. The entire section “Creating a Regenerative System”, p. 24. details our efforts to reduce GHG emissions and our achievements. EN26 Initiatives to mitigate environmental impacts . The following environmental impacts: Achievements and Goals, p. 10; Our

3.10 Explanation of restatements of earlier information

do something different with our report this year to reach a

to corporate responsibility.

(Additional Standard) EN 18 Initiatives to reduce GHG

entire sections detail our many initiatives to mitigate our

have access to our governing board.

to blogs, videos, and websites; and are offering a monetary

materials, p. 32. p. 33. EN16 Total direct and indirect GHG emissions by weight

Workplace”, p. 54).

steering committee is the vehicle through which employees

as a paper document and as a web report; provided links

EN2 Percentage of materials used that are recycled input

operations. We lease our Burlington office (see “Our

of stakeholder interest; and by GRI guidelines. We tried to wider audience. We created a report that is available both

operating plan targets. EN1 Materials used by weight or volume, p. 33.

facilities, outsourced operations, and other entities. The

Transportation that we opened a distribution center and a

also offers unlimited upside potential based on exceeding

we are covering some additional GRI items here, at the end

provided: We are a privately held corporation and choose 2.9 Significant changes We mentioned in Product

annual earnings as the target incentive rate. The plan

Environmental Performance Indicators

Net sales, total capitalization, quantity of products not to reveal this financial and strategic data.

plan. This plan allocates 7.5% of an entry level employee’s

accessible for a wide and possibly nontechnical audience, of the report. This does not diminish their importance but

EC4 Significant financial assistance received from government None was received. EC5 Ratio of standard entry level wage compared to local minimum wage Seventh Generation firmly believes in creating wealth and financial prosperity throughout all levels of the organization. All full-time employees receive a variety

We tried to cover as much territory as we possibly could.

of benefits including 100% paid medical plan benefits; an

Where we have not addressed particular GRI guidelines, it

employee stock grant plan; and participation in other value-

has generally been because they were not relevant to our

building benefits, such as a 401(k). In addition, the company

business, they dealt with proprietary information (such as

currently pays a minimum starting base rate of $14.71/hour

some of the financial parameters), or they involved a larger

which is 92% higher than the current Vermont minimum

data-gathering effort than we are capable of at this time. We

wage of $7.68/hour and is 151% higher than the federal

International Reporting Standards

Organizational Profile

Products, p. 14; Creating a Regenerative System, p. 24; Our Advocacy, p. 47; Our Workplace, p. 55. EN27 Percentage of products sold and their packaging materials that are reclaimed by Category, p. 32. p. 33. EN28 Fines and Noncompliance. We believe we were in material compliance with applicable laws and regulations.

Labor Practices and Decent Work Performance Indicators LA1 Total workforce, p. 53.

Society Performance Indicators SO5 Public policy positions and lobbying, p. 47. p. 49. SO8 Fines and sanctions for noncompliance with laws and regulations. We believe we were in material compliance with applicable laws and regulations.

Product Responsibility Performance Indicators and Marketing PR9 Fines concerning the provision and use of products and services, none.

Report Assurance

Many of our environmental indicator performance metrics take advantage of the company’s improved MIPs database, which provides us with accurate information on the materials used in our products. We have chosen not to independently assure our report, and have relied instead on our corporate consciousness team to review and substantiate the report’s accuracy and authenticity. We also engaged a third-party organization, MBDC, (p. 20) to examine our claims and ingredients. We have also benefited from our outside reviewers’ comments. A consultant assisting in the reporting process provided an independent evaluation of our assumptions and conducted our environmental footprint related calculations. We submitted our report to GRI upon completion for review. They verified that we have met the “C” application level.


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Appendix A — Report Glossary

Appendix A—Report Glossary Carbon dioxide The major gas produced when organic materials (see Organic), such as fossil fuels are burned. Carbon dioxide is the most significant greenhouse gas. (See Greenhouse gases.) Ceres Coalition for Environmentally Responsible Economies Channels (grocery/natural) Channels are the markets we sell product to. For example, “grocery channel” means grocery stores and “natural channel” represents natural food stores. Chlorine A highly reactive chemical element. Chlorine is an effective disinfectant, but reacts with organic materials (see Organic) to form substances that persist in the environment and concentrate in animal and human tissue. CO2 See Carbon dioxide. CR Corporate responsibility ForestEthics An independent forestry and conservation organization GHG Greenhouse gas. See Greenhouse gases. GIVE Generate Inspiration via Education Greenhouse Gases A gas that is transparent to sunlight, but traps heat in the Earth’s atmosphere, in the same way glass traps heat in a greenhouse. Greenhouse gases are typically expressed in carbon dioxide equivalents (CO2e). Emissions of gases other than CO2 are converted into CO2 equivalents using global warming potentials. GRI Global Reporting Initiative is an international, multi-stakeholder governed institution collaborating to provide global standards in sustainability reporting. HDPE High density polyethylene, a common plastic used for milk, cleaner, and cosmetic containers. Plastic recycling symbol “2” Hypoallergenic Being unlikely to cause an allergic reaction or irritation

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Life cycle analysis An evaluation of the environmental burdens associated with each stage of a product’s life from creation and transportation to use and disposal.

SDA Soap and Detergent Association

MIPs Our Materials, Ingredients and Packaging database

Surfactant A substance that alters the surface properties of water so that the water can combine with grease and oil. Surfactants are the key ingredient in most cleaning products.

MPAR Manufacturing Partner Annual Report

Synthetic Of artificial, man-made origin

MSDS material safety data sheet

VOCs See Volatile organic compounds.

MT Metric ton

Volatile organic compounds Compounds of carbon (see Organic) that readily evaporate, and therefore can pollute the atmosphere. Ethyl alcohol (ethanol) is an example of a volatile organic compound.

Natural Derived directly from nature. Seventh Generation uses this term to mean plant-derived substances, even after they have been modified in a way that is not found in nature. Organic Chemicals based on the element carbon. Organic chemicals may be natural or synthetic (derived from petroleum). Not to be confused with certified organic agriculture. OCA Organic Consumers Association PCR Post-consumer recycled Phosphates A nutrient (required by living things to grow), phosphates are also used in detergents to counter the effects of minerals in water (hard water). When phosphate-containing wastewater is discharged into lakes and streams, rapid algae growth occurs, turning the water green, depriving fish of oxygen, and diminishing the utility and recreational value of the lake. PIR Post-industrial recycled Polymer A natural or synthetic compound with large molecules made up of repeating units of small molecules of the same kind ppm Parts per million Precautionary principle An approach to risk management of chemicals that presumes a chemical may cause harm unless tested and shown otherwise


WAGES Women’s Action to Gain Economic Security

Global Reporting Initiative Compliance

Third Party Checked GRI Checked

C+

B

B+

A

A+ Repot Externally Assured

Self Declared

C

Repot Externally Assured

Optional

Mandatory

In Accordance

Repot Externally Assured

2002

We rely on our community and you, our readers, to extend the influence of the ideas in this report to the many spheres of your daily lives.

7 Truths

About Seventh Generation

We Believe in a Living Home Our Products Are a Natural Alternative You Can Trust Our Products Are Effective Our Products Are Safe for the Environment and for People Nature Is our Inspiration We Believe Simple Changes Can Make a Big Difference We Are the Nation’s Leading Brand of Natural Household Products

Watch our video: 7 Truths about Seventh Generation at: go/truth

TM

60 Lake street Burlington, Vermont 05401 seventhgeneration.com