EXECUTIVE SUMMARY. Executive summary

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This study was carried out by Mathieu Ryckewaert and Randy Ryder, two MBA students at the Belgium-based Vlerick Leuven Gent Management School, under the responsibility of Anne-Catherine Husson-Traore, Novethic's Managing Director and Dr. Professor Céline Louche, a CSR expert.

Novethic's CSR researches

Novethic analyses companies’ communication practices on specific Environmental, Social or Governance (ESG) issues likely to be of interest to investors because of the impact which they may have on the companies in the medium- and long-term.

The aim is to see whether or not companies’ CSR strategies and communication meet investors’ expectations taking non-financial criteria into account.

These studies relate to issues which are still emerging but which are already sufficiently present in public discussion and likely to affect a significant number of European listed companies belonging to different sectors of activity.

Any full or partial reproduction of the content of this document is subject to Novethic’s authorisation. Any quotation or use of data must indicate the source.

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Executive summary

Nanotechnology is a broad term that encompasses the development of products through the manipulation of matter at nano-scale levels. This science spans across many scientific disciplines such as biology, material sciences and engineering. According to experts, revenues associated to nanotechnologies should reach $1 Trillion by 2015. Offering new opportunities for numerous products, nanotechnologies are nowadays incorporated into a growing number of them without it necessarily being possible to assess the potential risks in using them in the medium- and long-term.

In this study, Novethic proposes to use the prism of Corporate Social Responsibility (CSR) to analyse the quality of the information provided by the large European listed companies affected by this emerging issue. For companies, CSR involves incorporating the environmental and social impacts of their activities into their strategy whilst being as transparent as possible with their stakeholders. In principle, it leads them to reassess their model for analyzing the risks and opportunities of some of their activities. As far as nanotechnologies are concerned, their use is already sufficiently widespread to try to measure what the companies which use them or produce them say about them. The aim is to assess the quality of the information provided in their public documents which are thus accessible to all stakeholders, whether they are employees, consumers, clients, shareholders or even NGOs, who are worried about the consequences of the development of nanotechnologies. In specific terms, where the opportunities that they bring are overestimated and the risks underestimated, their impact can, over time, be very negative on the company’s growth. For some companies, nanotechnologies can be linked to health risks which would greatly compromise the economic benefit from their use, in the event that the producing companies have to assume the legal consequences of them.

For others, nanotechnologies are not necessarily toxic but could be rejected by European consumers in the future, just like GMOs are today and, if so, the companies will have to invest a lot in the guarantees to be provided to the consumers. There as well, the economic cost of such measures may be significant. If the various NGOs who are asking for a moratorium on nanotechnologies obtain it, the cost of such a measure for the companies involved in their production would be extremely high.

Whether the consequences of the spreading of nanotechnologies are positive or negative, financial and non-financial analysts need exhaustive information on the status which the companies give to nanotechnologies in terms of risk strategy and management to be able to best advise investors, in particular those that have a long-term horizon.

Insurers’ viewpoint on the risks associated with nanotechnologies

The public debate organised in France led the FFSA (French Insurance Companies’

Federation) to draw up a document which summarises the vision that insurers have of nanotechnologies. Whilst, for them, they belong to the realm of innovation that they want to encourage, they "note the lack of scientific knowledge on nanotechnologies and the absence of assessment on their risks for health and the environment”. This leads them to classify them in a category known as development risks which are, by nature,

uninsurable because they are impossible to assess.

Specifically, this means that the risks of invoking the liability of the companies involved in the manufacture, the use and the sale of nanomaterials or products including

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nanomaterials and also invoking the liability of an employer vis-à-vis its employees cannot be covered by current civil liability insurance policies.

Considering that "only the reduction of the doubts will allow the creation of conditions favourable to the progressive development of appropriate responses on the insurance market", the FFSA thinks “that, as a first stage, rules of ethics and governance should be implemented to better regulate the use of nanotechnologies”. It also wants research that is "objective, cross-disciplinary and appropriate to the nanoparticulate dimension” to be developed.

It stresses the essential need for transparency and states that "in the context of risk prevention, it is essential that the economic stakeholders provide insurers with relevant information relating to the use, the manufacture and the release to market of nanoparticulate substances, in order to assess the risk.” It also recommends the development of the prevention of professional risks in this area and the need to set up an appropriate analysis model (exposure modes and times, protective equipment, training, etc.) whilst also arranging for the traceability of professional exposures.

Finally, it seems imperative to the FFSA that the regulations should be adapted to the nanotechnologies via the “development of regulations for the sector” or “the adaptation of the national and European regulations, in particular the REACH regulations”. For the association of insurers, this means "listing the nanoparticles and the production networks, with a standardisation of classification and the creation of an exhaustive database.” It also proposes to "initiate close cooperation with an organisation dedicated to nanotechnologies in order to be advised, in real time, of the development of the scientific knowledge and to exchange their management and risk analysis expertise.”

Methodology

This study analyses the transparency of the main European listed companies that produce and use nanotechnologies included in the products which they sell. This purpose of the study is to measure whether the companies talk about this and how they do so, in order to classify their communication into three categories: non-existent, basic or in- depth. It is based on a panel of 92 companies belonging to about a dozen sectors, selected from the CAC 40 index and two German indices (Stoxx® TMI Large and Euro Stoxx® Chemicals).

This study concentrates on the companies that take part in the life cycles of products including these technologies. Consequently, the companies from the banking, insurance, travel and leisure sectors or media belonging to the indices used have been excluded from the scope of the study.

The transparency of the companies can only be measured by analysing their public communication, with the most accessible being that of their Internet site. All of the research has therefore been carried out on the Web sites. The assessment consisted of reviewing a set of rating criteria used to measure the degree of transparency of the companies on their use of nanotechnologies.

The research done was carried out via the search fields present on the majority of the company Web sites.

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A specific study was done in the chemical sector which both produces nanotechnologies and is subject to the European REACH system for assessing the toxicity of chemical products. The six main criteria were as follows:

Does the world nanotechnology of nanomaterial appear on the website of the company?

In its annual reports or sustainable development reports, does the company speak about nanotechnology or nanomaterial?

Does the company give a direct contact in charge of nanotechnologies?

Does the company explain its level of engagement with stakeholders?

Has the company generated a specific document and/or a code of conduct on the use and/or development of nanotechnology or nanomaterial?

Does the company list one or more products it market that incorporate nanotechnology or nanomaterial?

Legislation

The legislative process applicable to nanotechnologies is a complex landscape of interconnectedness between member states and EU directives. Member states are trying to drive the legislative debate, taking advantage of “first-mover” status. Germany and France, for example, has taken significant steps to shape national policies and directives, while spurring innovation through careful investments.

At the European level, the REACH directive is a central player in the control and monitoring of chemical substances. The debate continues whether REACH is all-inclusive and implicitly covers nanomaterials. In fact, there is a lot of European legislation on the protection of workers and the environment that potentially apply to the use of nanotechnologies. Only two sectors are more specifically monitored: the cosmetic and agri-food industries, which are subject to ad hoc directives.

Issues associated with the development of nanotechnologies are referred to European courts, but, for the time being, the Commission and the Parliament hold a different view, in particular regarding the notion of assessment of the associated risks. The Commission thinks that the existing mechanisms are sufficient, while the Parliament thinks that appropriate set of regulations must be created.

Main results

The silence of the companies is deafening: 54% of companies surveyed are silent on nanotechnology, a surprising result considering the scope and size of this nascent market. There are undoubtedly different reasons for this silence:

The regulatory framework is still vague

Nanotechnologies are only exceptionally an integral part of companies’

communication strategy

Some companies are concerned about the potential toxicological and eco- toxicological risks of using such technologies and materials and hence prefer to avoid mentioning this sensitive subject, which goes against an affirmed CSR strategy

Companies do not want to expose themselves in terms of risking their reputation by talking about an area where the status of the scientific knowledge and the regulations are still blurry, while some environmental NGOs are starting to sound the alarm and ask for moratoria

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Less than half of the companies surveyed provide information on their use and development of nanotechnologies.

However, this information is too often limited to one or few catch phrases on the positive impact of nanotechnologies, with very few companies providing a real overview of possible risks and benefits.

Only three companies provide an exemplary communication

All these companies belong to the chemical industry. Two are Germans -BASF and Bayer- and the third one is French: Arkema. These results are coherent. The chemical industry is the first link in the ‘nano’ value-chain, since its produces the materials incorporated in objects that eventually become end products. These companies have transparent communication because they are speaking to their potential clients and they want to convince them. Furthermore, chemical companies are under heavy scrutiny of both national and European safety agencies and of environmental NGOs. While adding some strain on companies, this creates in parallel a positive atmosphere for a constructive dialogue with stakeholders.

Stakeholders

As far as nanotechnologies are concerned, the stakeholders can be classified into two main categories: the public and the industrial players.

Public debate is mainly expressed through NGO and consumer groups. Its focus is mainly on the impact of nanotechnologies to the human body through direct contact, whether that is through skin exposure or ingestion of novel foods. Nanotechnologies crystallise an emerging debate on the technical movement questioning the benefits and highlighting the risks which can be associated with them.

Industry stakeholders include companies, trade unions, and trade groups. Unified representation, such as the European Chemical Industry Council (CEFIC), helps to strengthen the debate and present one voice at the European level. Companies who are at the forefront of such technological innovation are the industry leaders in terms of communication. Trade unions represent an essential voice in this process to ensure that workers are protected and have their concerns addressed.

Except for shareholders of the listed chemical groups, to whom nanotechnologies are presented as a strong developmental strategic focus, investors are still very unfamiliar with this new dimension. As long as it is impossible to put a price on the risks associated with nanotechnologies, it will be difficult to construct assessment models for the creation of economic value that they are likely to bring (see box on insurers’ viewpoint, p3).

Chemicals: a key sector

The results of the study not only present a current view of the European nanotechnology industry, but also where the societal, industry, and governmental trends are influencing this innovative technology.

Except for the chemical sector, these results are consistent across sectors.

Communication is careful and calculated, so as to strike a balance between a risky communication and the obvious dangers of not communicating on the subject. One of the key factors is the issue of the potential immediate effects of nanotechnologies on the

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organism. Applications such as novel foods and nano-cosmetics deserve and do get much more governmental and third party oversight than the automotive or construction &

materials, which does not necessarily have the consequence of making the relevant companies more transparent on the subject matter. It is also noted that manufacturers do not communicate in the same way depending on their “nationality”, probably because of the cultural difference in perception of new technologies.

It must finally be stressed that the manufacturers in the various sectors where these types of elements are found differentiate nanomaterials and nanotechnologies because not all nanomaterials come from nanotechnologies and not all nanotechnologies are used to make nanomaterials. Specifically, the "everyday" nanomaterials (such as silica, in food or in paints which has been added for many decades for textural properties) should be excluded from any specific mechanism, since they do not use nanotechnologies.

The chemical industry is the main industrial actor of the various nanotechnologies. Most of the materials currently produced begin their product lifecycle with this industry. This places the chemical industry at the centre of the nano debate. This multi-billion euro industry is associated to the bulk of legislative action, governmental lobbying, and NGOs efforts. While nanotechnologies are still by and large not known about, materials such as carbon nanotubes, nano zinc and aluminium oxides are initial raw materials transformed for example into car paints, sun creams, new foods and water filtration systems. This therefore means any type of consumer should potentially be interested in the subject matter.

I. Analysis of companies' communication

1. CSR and transparency

The transparency of a firm does not simply mean informing consumers on one of its activities, it is rather to ensure that the consumers can have access to a large and deep understanding of the different activities of the business. Assessing the transparency of companies on nanotechnologies is a formidable entry point to see whether or not the company is open to discuss a difficult issue that poses many challenges for the company, the consumers and the society at large.

The impact of a company on society changes with the transformation of social standards and scientific progress. Being transparent and communicating with the different stakeholders on difficult subjects can be a guarantee of companies’ long-term survival.

The representatives of two companies questioned in the study - Carrefour and Arkema – confirmed that they listened attentively to the NGOs, especially those with whom they do not agree because they provide them with essential information. This listening and this debate constitute, for example, for Arkema the best way of avoiding a moratorium on all products linked to nanotechnologies.

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On the other hand, companies are faced with a scientific obstacle which considerably limits their ability to be transparent: the toxicological and eco-toxicological protocols currently approved by the OECD are not yet capable of fully determining the degree of danger of certain nanomaterials. This is why these companies are working, in France and in Europe, to draw up a nano-responsible standard (see interviews with Carrefour on page 21 and Arkema on page 30).

Nanotechnologies: a new manufacturing method

The definition of nanotechnologies cannot be limited to the size of a particle, even if it is an important aspect. The Centre for Responsible Nanotechnology defines nanotechnologies as "the engineering of the functional systems on a molecular scale”.

The infinitesimal size that characterises these processes gives them particular properties which differ from the properties of individual atoms and molecules and from “bulk”

matter. A few nanometres in size, the difference in the effects produced can greatly affect the optical, electrical and magnetic behaviour of the materials. The chemical and physical properties of the nanomaterials are often fundamentally different from those of micro- or macromaterials, and the new or modified properties recorded on a nanometric scale can be used in a targeted manner and offer a myriad of possibilities.

The number of products and applications using nanomaterials or nanotechnologies is rapidly growing, which shows the fact that they are not only a technology but rather a

“new manufacturing method”.

Some examples of applications of nanotechnologies:

There are carbon nanotubes in the composite materials used in sports equipment, aerospace engineering or defence, and also in drug administration systems

Semi-conducting nanocrystals are used in biotechnologies, the marking of products as an alternative to barcodes or the LED lighting systems which can also have a silicone nanowire component

Titanium oxide nanocrystals are included in the solar filters or the solar cells of photovoltaic panels

Nano argile particles appear in food packaging or unsinkable wood Source: Oddo Securities study 2006

Some examples of products containing nanomaterials:

Cosmetic and body care products, paints and coatings, catalysts and lubricants, textiles, medical and health products, food and nutritional ingredients, agrichemical chemistry, veterinary drugs, construction materials, weapons and explosives, consumer electronics.

2. Company sample

Although the bulk of companies dealing with nanotechnologies are either start-ups or middle-sized companies, the study focuses on listed large cap companies, for three main reasons:

Firstly, the regulatory obligations specific to them force them, in principle, to provide exhaustive public information regarding their activity, their results and their financial

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operations. In addition, almost all of them today have official communication on sustainability.

Secondly, the level of scrutiny those companies are facing from investors, national authorities and consumer implies that these companies are more exposed than others to any negative effect on their reputation.

Thirdly, these companies invest heavily in Research and Development (R&D). As an example, BASF invested in 2008 about 1.35 billion Euros in R&D projects and L'Oréal about 609 million Euros in 2009.

An initial general panel

The analysis firstly concerns a general panel of 83 companies, selected from the CAC 40 index (29) and a German stock exchange index, the Stoxx® TMI Large (54).

The companies operating in the Banking, Insurance, Travel and Leisure, and Media sectors have been excluded from the analysis given the nature of their operations.

A second analysis was then carried out on a representative sample of about fifteen chemical companies belonging, on the one hand, to the general panel and, on the other hand, to a German index, the Stoxx® Euro Chemicals (see page 28).

Sector breakdown of selected companies

Sectors Number of companies

Oil and gas 8

Chemical products 15

Commodities 2

Construction and materials 5

Industrial products and services 14

Automobiles & Parts 7

Food & Beverage 5

Personal & Households Goods 8

Health Care 3

Retail 6

Utilities 14

Technology 6

3. Analysis of the quality of the communication

The first stage involved analysing the companies’ Web sites, which are the main communication tool on their identity and their activity, to ascertain whether they spoke about nanotechnologies and, if so, how they did so. The aim was to assess the quality of that communication to their stakeholders and not the relevance of their strategy on nanotechnologies or even the technical dimensions of their use.

The analysis of publicly available information has been done from May to June 2010.

Assessment criteria

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Questions Objectives

Does the world nanotechnology of nanomaterial appears on the website of the company ?

Identify the companies which have a public disclosure policy on

nanotechnologies.

1 point

Does the company provide available reports that speaks about nanotechnology or nanomaterial ?

See if the company commits to be

transparent around the subject. 2 points

Does the company give a direct contact in charge of nanotechnologies ?

Evaluate the willingness of a company to be active in its communication with stakeholders.

2 points

Does the company provide information on its engagement with stakeholders ?

See if the company is positioning itself as active actor, particularly with governments and NGOs.

3 points

Has the company generated a specific

document and/or a code of conduct on the use and/or development of nanotechnology or nanomaterial ?

Identify the willingness of a company to adopt an exemplary communication on the subject.

4 points

Does the company list one or more products it market that incorporate nanotechnology or nanomaterial ?

Prove that the company moves towards

a very high level of transparency. 6 points

Methodology of the analysis

The number of points assigned to each question was determined based on the relative importance of a positive response to it.

Question 1

Since most corporate websites contain a search tab, it was used to search for any instances of “nano” that might occur. In the rare instance that a website does not offer a search tab, direct search methods were used to gather information, through the analysis of their sustainability or annual reports of the last three years. For companies with active sustainability departments, we have searched in the corresponding sections for any documents relating to nanotechnology. If after a best-effort search, nothing was found, the company is marked as non-communicative on the subject.

Question 2

This is used to assess whether the company considers that monitoring has to appear in the information that it publishes in its official documents. If it does, it can thus develop its use of “nanos” with shareholders by including them in its annual report.

It should be noted that a positive response to this question means that the firm mentions

“nano” in a report, not necessarily in every annual report.

Question 3

This means that the website has a specific link where staff or a department is reachable to address specific questions on the firm’s use of nanotechnology. It is, of course, understood that only firms whose use of nanotechnology is part of their core business are

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likely to provide such specific contact information. For this question to be marked as

“yes”, it is not sufficient for a firm to simply have a sustainability unit that lists its contact information, but it must also specifically designate a structure in charge of the subject matter.

Question 4

Only the companies that have opted for exacting communication on the subject are likely to answer it and the following questions positively. Very few companies are proactively engaged with stakeholders on this topic, which means that these companies are contributing to, or even driving, the discussion and influencing policy decisions at governmental levels.

Question 5

Very few companies provide documents establishing a set of guiding principles on its usage of such technology. Since such a document is voluntary, the company willing to be held publicly accountable to a set of standards clearly indicates its willingness to be leader in its industry.

Question 6

Regarding the provision of a list one or more of the products that contain nanotechnology, one can consider that the subject may be associated to the discussions at the EU level about mandatory labelling of products that contain nanomaterials.

Today, it is far from being in force and is undoubtedly very difficult to put into practice.

The companies that henceforth publish lists of products have the greatest degree of transparency, showing that they are confident in the safety of their products and that they assume full responsibility for them. They receive the highest grade. Only three firms qualified positively for this question. While in some cases, companies stated that a product contained nanomaterials for commercial purposes on brochures, that did not have the same significance. For example, a car manufacturer mentions that some of its models are painted with a product that contains nanomaterials to better preserve the body of the car. In this instance, this would not qualify as listing a nanotech product.

4. Very predominantly silent companies

Of the 83 companies in the general analysis (constituents of the CAC 40 and STOXX TMI Large indexes), 38 speak about the nano issue, while 45 remain silent. The quality of their communication is divided into three broad categories: Transparent, Basic communication, Silent.

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Classification of the companies by level of communication

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Silent companies

The companies appearing in this category are those for whom no mention of nanotechnologies has been found in their official communication. This means that they say nothing about the subject. While it is by nature difficult to analyse a lack of communication, some explanations can be offered.

Firstly, their exposure to nanotechnologies is extremely variable. Whilst chemical companies mention them more naturally, less than 20% of companies from the construction and materials are in this category.

Secondly, the image conveyed by nanotechnology is rather negative in some contexts.

Whilst German motor manufacturer make a sales argument out of their use of nanomaterials explaining, for example, that their tyres last longer and cause less environmental damage, the cosmetic sector is not in the same situation. We identified at, least one mascara, produced by the German company Beiersdorf, called “Mascara Volume Nano”, but these words appear exceptionally on the product sold to the consumer. However, nanotechnologies are very present in some products such as sun creams. Cosmetics manufacturers still need to convince the general public that nanomaterials in cosmetics are not harmful to the body, and won’t enter through the epidermis. Distributors and the agri-food industry are in a similar situation in terms of the packaging containing the nanoparticles of the products that they distribute or make.

In fact, a sizeable number of companies prefer to opt for a neutral position on the subject, in the current state of play with research, especially if they only use nanotechnologies and do not produce them. It also all depends on the nature of their activity. Public communication is a lot more sensitive for large consumer companies than for those who only deal with professionals.

To better understand the factors of this silence, the study offers a detailed analysis of Danone’s communication and an interview with the motor manufacturer PSA, both of whom have adopted this position.

An analysis of Danone’s web site, which includes a search engine, shows that sustainability is one of the seven major subjects displayed on the home page. This attempts to show the company’s commitment on consumers’ health, the protection of the environment, of water resources and of biodiversity or even the limitation of packaging.

It all contributes to showing that Danone is a responsible company.

Danone states that it has set up its own centre for food safety, the role of which is “to anticipate and prevent biological, chemical, physical and allergenic risks from the food”

that it make.

The word nano does not appear at any time in its reports. It can be considered that it alludes to it in its 2009 sustainability report, regarding a programme aimed at reducing the weight and the quantity of the packaging. It explains: "using a technology which injects air into the plastics to reduce their density and the volume of CO2 that they contain and confirms that 40 production lines already us it and that more than 110 will use it in 2011.” It makes clear that these benefits do not in any way aversely affect the packaging’s essential functions and the food safety of the product contained in it.

Whilst it is very simple to find the contact details for access to communication, investor relations and the people in charge of sustainability, it is extremely difficult to find a contact on health and safety issues.

The analysis: Danone

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In conclusion Danone’s method of communication, centred on sustainability and health through food, does not allow it to be known whether it uses nanotechnologies or not and, if it does use them, up to what point it voluntarily chooses not to speak about them.

Positioning itself as a responsible and transparent company should, in principle, mean that it should explain what its strategy is in this area.

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The interview: PSA Peugeot-Citroën

It was held with Sandrine Raphanaud, in charge of PSA’s corporate communication

The French automobile group made it clear that if they were silent about the topic it was not because they were not dealing with nano, nor because nano had a negative image, but rather because they had still a neutral position on the topic.

PSA confirmed that they were manipulating materials containing nanomaterials, and more specifically carbon nanotubes, and that PSA workers were manipulating this kind of materials on a rather experimental basis. Late 2009, the firm initiated a Hygiene, Safety and Environment study with independent industry medical experts to analyze some potential risks that could be associated with the handling of nanomaterials. This study led PSA to draft an internal scorecard, which describes specific toxicological tests to perform and proposes specific safety recommendation for its workers. PSA also developed an internal document that organizes the way the firm engage itself with nanomaterials.

Finally the group has integrated nanomaterials as a specific axis in its 2010 R&D plan.

PSA does not communicate on these aspects because it would not be consistent with the external communication of PSA, which emphasizes technology and environmental concerns and its ability to create the car of the future, "one that enables responsible drivers to be in motion while being safe and responsible from an environmental point of view".

PSA confirmed that the group has never been solicited by an NGO on the issue.

According to the group this is most certainly because, contrary to the Food and Beverages and the Cosmetics industries, PSA products are not in direct human contact, i.e. ingested or put on the skin.

Novethic : Does the company look at the issue from a transparency, a sustainable development or a risk assessment perspective?

PSA : PSA could look at the issue from a sustainable perspective if using nanomaterials would mean gaining 200 kg on a car. But PSA looks more at the issue from a Risk assessment perspective : i.e. check the the added value of any new technology or material.

Is it a sensitive subject in terms of relations with your stakeholders?

No, we are not questioned by the environment NGOs on this subject. While PSA does not communicate of the topic, there are at least 3 entities that can be considered as point of contacts within the company concerning nanotechnologies. They are, to some extent, involved with various stakeholders. These entities are: the medical staff that are looking at health considerations of workers and consumers; the legal teams that are following the regulation and homologations at the European and national levels; and the material R&D team working upstream in the development of new products.

What safety policy do you have on nanotechnologies?

PSA looks also at the possible risk that could potentially emerge for the use of certain kinds of materials (i.e. lifecycle of some plastics) under two dimensions : Worker’s protection and Consumer’s safety (in the short and long term).

Late 2009, the firm has launched a HSE study with independent industry medical experts to analyze some potential risks that are associated with manipulating this kind of materials. The result of this internal study is that PSA has now drafted a monitoring sheet, which describes specific toxicological tests and proposes specific safety recommendation for its workers.

Interestingly, the results of the study are the one the firm was expecting: i.e. that the risks are relatively limited since PSA is indeed not directly manipulating nanomaterials.

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Do you think that the use of this type of materials is going to be extended?

First, it is necessary to assess the real potential of this kind of technology. What can it really bring? What is it really changing in our industry ? Is the nano industry capable to produce large bulks of nanomaterials ? This question is particularly relevant for PSA since we are producing and selling millions cars a year and working in real-time all over Europe. Any break in the chain would cost millions to the company. Lastly, what is the technical and financial assessment (bilan technico-éco) of nanomaterials ? The position of PSA can be explained with one example : if adding some nanocoatings in our painting is not counterbalanced by some measurable savings or added value, then why should it be interesting for PSA to adopt this kind of technology?

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Basic communication

Industry split of the companies who mention nanotechnologies

36 companies analysed have basic communication on nanotechnologies. Most of the time, they communicate on them for marketing reasons, but it is interesting to see whether they include that using the principle of sustainability. Only 14 firms mentioned nanotechnology in their sustainability reports.

The Dutch retailer Ahold implicitly admits that its products could contain nanotechnology, based on company literature on its website. Ahold also makes it clear that it complies with all rules and regulations in the country of operation, which means that since the products containing nanotechnology have been produced in accordance with all applicable laws, Ahold is not legally responsible of what’s in the products they distribute.

Another interesting example is that of the Austrian electricity provider, Verbund. While it does not mention nanotechnology in its annual reports, the company discussed in a recent publication the societal implications of using nanotechnology.

Due to the nature of their business, some companies have to disclose their usage of nanotechnology. While for these companies, there is some risk involved in the method of communication, the fact is that this poses a delicate public relation challenge. Companies that fall into this realm are usually dealing with products that have direct human contact though ingestion or topical applications. One example of such a company is L’Oreal.

L’Oreal uses nanoparticles in some of its skin care products. While the company realizes that the discussion of nanoparticles in skin care products is of a sensitive nature, it also understands that being silent is not an option. One of L’Oreal’s prior sustainability reports

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mentions the use of nanoparticles, preferring however, to use the term ultra-fine particles.

To better understand the factors of this introductory communication, the study offers a detailed analysis of L’Oréal’s site in its English version and an interview with Carrefour.

In the 2008 & 2009 Sustainability Reports, we found documents contain information on L’Oreal’s position and use of nanotechnology. But older reports also mention the usage of nanotechnology.

L'Oréal is a stakeholder or takes part in dialogue with various organisations regarding nanotechnologies. The company was a founding member of the International Council on Nanotechnology (ICON). ICON was founded through the Center for Biological and Environmental Nanotechnology, at Rice University in Houston, Texas. The aim of this organization is to create a global stage to bring various stakeholders together and encourage further dialogue on the development of nanotechnology. ICON aims to promote effective nanotechnology stewardship through risk assessment, research and communication.

The firm is also engaged with the European NanoInteract Program, through which L’Oreal has delivered an experimental ecotoxicity model that has been officially recognized by the OECD. The company is heavily engaged with the International Standards Organization (ISO) to establish international standards and guidelines for defining lists of products that would be defined as nano-products.

No specific code of conduct, or similar document, can be found on the firm’s website.

However, a 2006 Sustainability Report indicates the company’s adherence to the EU’s Precautionary Principle when dealing with nanotechnologies. Through ICON, it has also helped to develop a global best practices framework.

The company does not list specific products which contain nanomaterials. However, both the 2008 & 2009 Sustainability Reports do mention the use of certain types of generic nanomaterials, like titanium dioxide. The 2009 report mentions the limited use of nanoemulsions and nanopigments. Nanoemulsions are formed from water and oil droplets containing active ingredients that are released on contact with the skin at the time of application. They are reduced to nanometric sizeto increase the quality and efficacy of the formula. Mineral nanopigments are present in our natural environment.

Titanium dioxide, an inert, non-toxic material, is the best known for its capacity to reflect UV light and to protect human skin against the adverse effects of the sun. These nanopigments are nowadays a very effective complement in helping to provide high protection factors. The European NanoInteract programme has confirmed that titanium dioxide nanopigments are not present at the time of application as separated nanoparticles, but as larger aggregates, often in the order of several microns in size.

L’Oreal reports its use of nanomaterials in its annual sustainability reports. The firm is trying to provide a balanced viewpoint of the benefits of these types of ingredients, while at the same time addressing current scientific concerns.

A 2008 estimate valued L’Oreal’s investment in nanotechnology at $600 million. At this time, the company was estimated to have about 192 nano-patents, making it the 6th largest within the U.S. Among the other companies, we found, for example, Estée Lauder ou Procter & Gamble.

The analysis: L’Oréal

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The interview: Carrefour

It was held with Christophe Legraverend, Carrefour’s PPH (Pharmacy, Perfumery and Health) Quality Manager

Carrefour is a very good example of a company that openly communicates, although cautiously, on the topic. For the leading European retailer the main challenge is to ensure that the group communicates appropriately on their distribution brands. Communication on nanotechnologies is a top priority for the group, which it associates to its societal responsibility policy.

Even if Carrefour ads that although they are very open to discuss the topic with consumer’s representatives, it considers that communicating on nanotechnologies with end consumer is extremely difficult given the complexity of the topic, and especially that it cannot start without a common definition of nanomaterials. This is the reason why Carrefour is involved since the beginning in the development of a nano-responsible norm.

The aim of this norm is to create a central tool that will enable traceability between the different actors of the supply chain. For Carrefour, the nano-responsible norm (currently developed by the French Normalisation Agency under the leadership of the Ministry of Health) is one of the tools that will force transparency.

Novethic: Does the company look at the issue from a transparency, a sustainable development or a risk assessment perspective?

Carrefour: From all 3 perspectives. In a risk assessment perspective, as we are speaking about a topic that covers hundreds of end products and hundreds of nanomaterials. This is the reason why Carrefour is involved in the development of the nano-responsible norm. The nano-responsible norm is a way for a company like Carrefour to assess the risks vs. the benefits of using one type of material in one of our end products.

In a transparency perspective, while we cannot control the communication of industrial groups, we as owner of our own brands can show the way and ensure that this transparency creates confidence with our final clients. The nano-responsible norm is one of the tools that will enable this transparency and a sustainable development of nanotechnologies.

Are you taking part in the discussion on the definitions?

We want to ensure that a definition and a characterization are available as soon as possible since the lack of definition is the bottleneck that currently blocks the whole process. Without a coherent and internationally agreed definition, we think that it is impossible to move forward and to ensure transparency and a dully-informed choice for consumers. It is not about a particular size, or a particular characterization, it is rather about being understandable by end consumers.

What is your level of engagement on the subject with your stakeholders?

Carrefour is involved at different levels with different kind of actors. In France, we are members of the nanotechnology-working group of the French Normalisation Agency. We are also pushing for a dialogue through the French Retail and Distribution Federation (FCD - Fédération des Entreprises du Commerce et de la Distribution) and the National Consumption’s Council (CNC - Conseil National de la Consommation). At Carrefour we consider that the National Consumption’s Council is a very important body in terms of the governance of the issue at the French level. This is indeed a place where consumers,

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industrials, independent scientists and the public authorities can meet and permanently debate on the topic. This Council makes some recommendations to the Government as per the market authorisation of some products. At the European level, we also have exchanges but our involvement is not a direct one given our positioning on the supply chain.

What is your point of view on the legislative approach?

In 2009, both the national and the European trade representative’s offices generated a position paper on the topic of nanotechnologies in order to specify their requests. They ask for a Clear and coherent EU framework on the topic, more scientific data, more public funding and more transparency. For us the regulation needs to be at minima a European one since Carrefour operates mainly in Europe and buys in many other countries. It also needs to be coherent and efficient. As an example, what is it that we do now, without a specific regulation on the topic, when we import non-food products from China? Since there is no definition available, it is difficult to control the products that are imported.

With is your point of view on the assessment of ecotoxicity?

With nanomaterials, it is really the 1st time that our world is confronted with a set of products already available on the market while the scientific community is not yet capable to define the entire toxicological and eco-toxicological effects.

On Workers’ safety, to a very large extent we are in contact with an end product, already packaged with the supplier’s brand or with our brand. Our workers have no direct contact with the product, only with the packaging, and in fact are not very concerned today about the issue. But an updated "nano" safety document would enable to be aware of the potential risks.

What is your point of view about the perceived risks associated with nanotechnologies?

Based on our experience, we consider that the risk is a possible moratorium on all the products containing nanomaterials, as may be asked by some European consumer groups.

The only thing we can do to avoid such an extreme decision is to help the SMEs that are producing our distribution brand products to be more transparent and responsible on the topic. This is the reason why we support the nano-responsible standard project, after having supported the work of the CNC – Conseil National de la Consommation (National Consumer Council).

What are the main challenges of your company with its communication about the topic?

The main challenge for us is to ensure that we communicate appropriately on our Carrefour brands. It is not that we are not willing to communicate with end consumers it is just that we cannot really communicate on it without any commonly agreed definition of what are nanomaterials. Interestingly, we have never been asked to communicate on the topic by consumers.

What is your view of the development framework for nanotechnologies?

It seems that the European institutions are finally taking care of the issue seriously. And it is good news since it will help the companies by having clear and consistent “nano”

legislation.

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Transparent communication

The only two companies from the general panel that fall within this category are the German chemists Bayer and BASF, which also appear in the specific analysis of the chemical sector (see page 28).

This is explained firstly because nanotechnologies form an integral part of their core business and represent a strategic focus of their commercial policy. Efficient communication thus enables the status of nanotechnologies to be better enhanced and they will then be considered an asset.

Nano lifecycle

The organisation of the life cycle appearing in this diagram shows that producers of nanotechnologies quite logically have the means of having controlled communication on the subject since they develop them. The Transformers cycle can have multiple stages.

An example of this would be carbon nanotubes, which are produced and transformed several times before being incorporated in a product such as a car body where it’s finally consumed. The Recyclers cycle represents the end of the lifecycle for these products.

Recyclers can represent a range of industries, such as solid waste disposal systems or water treatment plants.

The status of Bayer and BASF as producers does not, by itself, explain their policy of transparency. The study found that technology companies, specifically semiconductor manufacturers, do not easily communicate on nanotechnology. Semiconductor manufacturers certainly are at the beginning of the nano-electronics value chain.

The chemical sector therefore plays a pioneering role in terms of communication on nanotechnologies - a policy which is limited to the dissemination of information to those that handle them or use them, i.e. the industries which it supplies

Experts consider, for example, that it would be legitimate for all of the toxicological data to be included in the Safety Data Sheets for the products sent to clients of chemical companies, which is not at all the case at the moment. Nothing encourages the stakeholders in the chemical industry to do it, because, on the one hand, no regulation forces them to do it and, on the other hand, no nanotechnology producer wants to be the first one to do it so as not to be the one that will create concern in the whole industrial chain.

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This multinational company, based in Germany, employs over 100,000 employees worlwide and generated a turnover of € 50.7 billion in 2009.

The analysis of publicly available documents shows that BASF has adopted a transparent communication on the issues raised by nanotechnologies. The information provided on the use and production of nanotechnologies and the associated risks is very full.

If you search for the term "nano" on BASF’s Internet site, you find more than 1,300 possible hits and this is the subject displayed in the sustainable development section concerning the dialogue with the stakeholders. The subject matters dealt with concern employee safety, research or even the code of conduct regarding the use of nanotechnologies.

Nanotechnologies also appear in a good place in the 2009 annual report and the company classifies them as one of the main vectors of growth. It values this market at 750 billion by 2015. Bayer thinks that it is necessary to have public discussion on these technologies and that it is its responsibility to combat the potential scepticism of public opinion by engaging in dialogue. The report mentions the company’s work with the German governement on the NanoCare programme which involves bringing various stakeholders together to develop the tools for measuring the biological impact of nanotechnologies. BASF also takes part in the German Forum for dialogue on nanos which organises a discussion between consumers, those protecting the environment and the churches on ethical aspects.

BASF’s code of conduct, which is published on its site, highlights 4 principles:

1. The protection of human life and of safety at work and the refusal to create artificial nano-organisms.

2. The commitment to manage, at the same time, the risks associated with nanotechnologies, emerging techniques, and their development.

3. The commitment to only release to the market products that comply with the guidelines for respecting safety and the environment, as adopted by scientists, and to give priority to issues of public health and environmental protection over the financial benefits.

4. A continuous dialogue with the stakeholders to encourage transparency in respect of nanotechnologies.

BASF is also one of the rare companies to list its products which contain or are based on nanotechnologies on its Internet site.

The analysis: BASF

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The interview: Bayer

The interview was held in Leverküsen, at the group’s registered office, with Dr Jacques Ragot and Markus Grünewald, who belong to Bayer’s scientific centre on the environment and sustainability, “Global Product Stewardship”.

Bayer Corporation is a global company with over 100,000 employees, with operations on every continent. The company generated 2010 sales in excess of €30 billion. Bayer’s work on nanomaterials is an integral component of its overall business strategy.

Bayer acknowledges that is that this topic is a very complex subject and needs to be carefully and accurately communicated.

Even though Bayer deals in the main with professionals, it engages with consumers through its periodic publications and other marketing documentation it produces (mainly in the health care sector).

For the chemical group, sustainability is part of the company’s core strategy, not just a peripheral issue. Bayer considers that the development of nanotechnologies contributes greatly to it since, as well as the economic benefits that they bring to the company, they allow the environmental impacts to be minimised by reducing the needs for natural resources, by increasing the resistance of the products in which they are included and by allowing the weight of them to be reduced. In the specific examples given by Bayer, you have for example Baytubes carbon nanotubes, sold in Japan in an innovative heating system. Bayer stresses the conductive properties of its technology which allows large surface area heating systems to be produced that are the slimmest, the most compact and the most resistant. It is integrated with an external "giant radiator" which allows the trains to be heated when the temperature drops to -20 degrees.

As for BASF, Bayer is involved in NanoCare, a public debate sponsored by the German Federal Environment Ministry aimed at discussing opportunities and risks of nanomaterials. It brings together representatives from the scientific community, specialist federal authorities, trade and industry and environmental and consumer associations.

Novethic: Does the company look at the issue from a transparency, a sustainable development or a risk assessment perspective?

Bayer: Sustainability is part of the company’s core strategy. Bayer focuses its efforts in improving the planet and to benefit people. The work on nanotechnologies is designed to improve on modern societal issues, providing high quality food, and on issues of climate change.

Products are designed as to feed down the value-chain, with the end result of addressing sustainability issues (i.e. green energy).

What is your point of view on the legislative approach?

Bayer’s main concern is obtaining a neutral definition of nanotechnologies. In other words, the definition should not unfairly stereotype nanomaterials as hazardous simply for being nano-size. The definition should be based on the particulate substances and their engineered aspects. A distinction must also be made for intentionally versus unintentionally manufactured particles.

Ultimately, the company feels that the REACH legislation full and inclusively covers all nanomaterials being currently produced. As such, a new legislation is unuseful.