Executive Summary

2009 was a year of change, challenge and accomplishment for Seventh Generation. The biggest change was the midyear arrival of Chuck Maniscalco as our new CEO, taking the helm from our co-founder, Jeffrey Hollender. The economic climate proved to be our biggest challenge; after averaging double-digit annual growth for the past ten years, our gross sales declined by 2.8%. This economic uncertainty forced us to put our successful manufacturing partners audit program on hold while we focused our constrained resources on an impressive set of product-related achievements. We launched a new line of botanical disinfecting cleaners and wipes; reformulated several products to eliminate synthetic ingredients and improve effectiveness; and developed industry-leading 90% postconsumer recycled (PCR) bottles for three of our cleaners.

The changes in our products were not all positive. We reduced the number of Baby Wipes in our packages without reducing the size of the package, decreasing the sustainability of the product (by increasing the packaging-to-product ratio 12%). Unacceptably, we did not adequately inform our consumers of this change, a serious departure from the authenticity we aspire to.

Our concern about climate change drives many of our efforts. A new, decentralized network of manufacturing and distribution centers reduced greenhouse gas (GHG) emissions per case of product shipped by 32 percent. Our logistics changes are a critical piece of our work to reduce normalized greenhouse gas emissions 80% by 2050. Our GHG emissions have dropped 49%, normalized to sales, from our 2005 baseline, with a normalized reduction of 7% in the past year. Our sustainability work is only a secondary factor in this change, as the relative decrease in paper sales and increase in sales of our cleaners since 2005 explain the largest part of that decline.

Honoring our goal to seek “influence beyond our size,” we expanded our efforts to engage on many stages. We boosted our efforts to advocate for progressive policy change — particularly regarding toxic chemicals policy and climate change. Jeffrey Hollender, our former CEO, remains with the company as chief inspired protagonist and spearheads a number of initiatives, such as our partnership with online learning experts Kaplan EduNeering to create the Seventh Generation Sustainability Institute aimed at teaching businesses about sustainability from a systems perspective. We’re pursuing those ideas in a tangible way through our partnership with Women’s Action to Gain Economic Security (WAGES), a collaborative of residential cleaning cooperatives that lift their Latina owners out of poverty. Finally, we developed bold, company-wide goals to ensure that we continue to aggressively push our business toward sustainability. Chief among those are commitments to source 100% sustainable palm oil by the end of 2012 and to make our products entirely from renewable materials by 2015.

Our New President and CEO

Chuck Maniscalco2009 marked many milestones at Seventh Generation, but none was bigger than the arrival of the first new president and CEO in the company’s history.

After more than 20 years at the helm, our co-founder, Jeffrey Hollender, decided the time was right to step aside and let someone with solid brand growth experience take the wheel.

A lengthy, nationwide search led us to Chuck Maniscalco, former CEO of Quaker, Tropicana, Gatorade, a $10 billion division of PepsiCo. Chuck started his career in market research and moved up the ranks to become president of Quaker Oats Convenience Foods. He also served as president of Gatorade, where he delivered 200% growth over four years while pioneering the enhanced-water beverage category with the introduction of Propel, which became a $500 million brand in its first four years.

That gave Chuck the experience we were looking for, but what set him apart was his philosophy about the role a company should play in the 21st century. “I believe in what Seventh Generation believes in,” he wrote in an early message to our community. “I believe that there is a better way to do business and that the world desperately needs the corporate community to adopt it. I also believe that we need to build a healthier, more sustainable world for our kids and that fulfilling that vision is the most important legacy any one of us could ever hope to leave.”

In Chuck, we were able to find the strong strategic-planning experience we require to lead our company through an increasingly competitive landscape. His arrival cements a management team that rivals those found at our larger competitors, and his unique skills will help our community thrive in the face of the new challenges and opportunities we will confront as our growth continues. Just as importantly, Chuck is a kindred spirit who shares our values and our passions, and will make sure that we stay on the path to revolutionary responsibility every step of the way.

Read a Letter from CEO Chuck Maniscalco

Jeffrey remains very much a part of the Seventh Generation family in his new role as chief inspired protagonist and executive chairperson. “In the end, I am moving on, yet have no intention of going anywhere at all,” he said in announcing the change. “Indeed my own future echoes Seventh Generation’s: There is no road map for what we’re building here, and the adventure is really just beginning.”

To learn more about the change, you can read Jeffrey’s blog post on his decision at www.seventhgeneration.com/learn/blog/big-changes-seventh-generation and follow a link to a Harvard Business Review article he penned on the topic. To read Chuck’s thoughts on the transition, visit www.seventhgeneration.com/learn/blog/taking-wheel-and-riding.

A letter from one of our consumers:

Dear Seventh Generation,

Just a quick “thank you.” We are mostly a cloth diaper family and substituted your diapers when needed for our little guy. He is now 3 and while he’s been potty trained for over a year, he still needs something at night.

About a week ago, he told us he was “too big” for diapers, so we (against our better judgment) bought him a more popular pull on type of “diaper.” Well, he broke out in an awful rash after just 2 nights of using this other brand.

So, thank you for making the product that you make that is safe for our son’s skin… it’s why we bought them in the first place… we never should have switched.

— Beth

Our New Sustainability Goals
and Our Key Performance Indicators

Sustainability Goals

Seventh Generation is a values-driven company with a strong sense of mission, yet we have been operating without a defined set of sustainability targets to guide our way forward. In 2009, a cross-departmental, a team established our first set of comprehensive, company-wide sustainability goals. These new goals touch all of the areas that are important to our enterprise and will drive the company’s business strategy over the next decade. For some goals, such as sourcing sustainable palm oil or harnessing solar energy for our corporate headquarters, work is under way or well defined. For other commitments, such as our goal of sustainable water use, we have no plan in place and the first order of business will be developing a strategy on how to proceed. While it may seem risky to set goals without a clear idea of how we will meet them, the environmental needs of our planet demand that we act. We are challenging ourselves to harness our collective creativity to commit to these new standards.

As at many companies, employees are incentivized to meet financial targets through a bonus program, but we don’t yet have a clear way to reward attainment of these new sustainability goals. We are evaluating approaches taken at other companies for their applicability to Seventh Generation as well as examining the Ceres report The 21st Century Corporation: The Ceres Roadmap to Sustainability. This report lays out a framework for how companies might hold managers accountable for meeting sustainability goals.

This 2009 report describes key performance indicators we have been tracking for several years, covering topics such as our sales performance and product design. We will continue to report on these to provide a fuller picture of our work and to show historical trends, but our future sustainability focus will guided by our new goals.

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Key Performance Indicators and New Goals by Topic Area

Baseline for new goals is 2009 unless otherwise indicated.

Area 2010 GOALS 2009 2008 2007

SALES ↓

20% growth ↓ 2.8% ↑ 51% ↑ 45%

GIVING ↑

Give 10% of pre tax profits $435,600
↑ 6%
$409,600
↑ 68%
$243,514
↑ 91%

EMPLOYEES ↑

Seek employees aligned with company mission; improve diversity 106 employees
↑ 10%
96
↑ 41%
68
↑ 31%

PACKAGING ↑

Bottles Bring laundry bottles up to >75% postconsumer resin (PCR) content 3 bottles (hand dishwashing liquid, fabric softener and nonchlorine bleach) are 90% PCR, an industry first 2 bottles (18%) are 75% PCR; remainder are 25% All bottles are 25% PCR
New Packaging Goal for Plastic
  • 80% reduction in virgin plastic use by 2014
    While we continue to reduce virgin plastic use in our packaging, about half of Seventh Generation virgin plastic is used in our diapers and baby wipes. Meeting this goal will involve a major design effort.

MANUFACTURING PARTNERS ↓

Audit 3 of our manufacturing partners; track supplier greenhouse gas (GHG) emissions Budget uncertainty postponed planned audits; sustainability audit forms updated Completed audits of all manufacturing partners; audited 5 of 12 partners and our own company; hosted Sustainability Summit Audited 8 of 10 manufacturing partners

SOURCING ↑

Palm Oil Directly source 100% of our sustainable palm oil by 2012 Purchased sustainable palm oil credits equivalent to the amount of palm oil in our products Changed to controlled sourcing strategy; joined Roundtable on Sustainable Palm Oil Conducted traceability study of 95% of cleaning ingredients
New Sourcing Goal for Wood Pulp
  • Virgin pulp will be FSC certified by 2015
    The wood for almost all of our virgin pulp production is currently FSC certified however we have not certified the chain of custody.

PRODUCT DESIGN ↑

  Increase renewable carbon content of products; improve effectiveness Launched line of botanical disinfecting cleaners; eliminated 1,4-dioxane byproduct in hand dish and laundry detergents Introduced rinse aid, dryer sheets and auto dish pacs; eliminated synthetics in all fragrances Launched 2X concentrate laundry detergent

New Product Design Goals
New Health Goals

  • All products will be 100% from renewable plant and mineral sources and will be backyard compostable and/or biodegradable in the marine environment by 2015
  • Set benchmarks for human health on the product scorecard in 2010; meet these benchmarks for cleaners by 2014.
  • Identify and eliminate all persistent and/or chronically toxic chemicals used in the manufacture of our products and eliminate these chemicals in our products and ingredients by 2012

ENERGY & CLIMATE ↑

Overarching Goal

GHG emissions normalized to sales
Reduce GHG emissions 80% by 2050 from a 2005 baseline; to reach this, reduce GHG emissions 2% per year (normalized to sales) ↓ 7% ↓ 33% ↑ 4%
Employee Energy Use Goal ↔ For employees: reduce average personal energy use 20% by 2010 13% reduction achieved Internal team and carbon-tracking database support employee efforts Baseline year; incentive programs established
New GHG Emission Goals
  • 15% reduction in life cycle GHG emissions in our products from 2007 baseline by 2015
    We conducted a life cycle assessment of our baby wipes in 2009 and will assess two more product lines in 2010. This goal has been added to provide a more specific mid-term target to help us reach our long-term 2050 GHG goal.
  • 100% renewable electricity at HQ
    Install solar PV equivalent to HQ use on site or as roof exchange.

ENVIRONMENT

New Goals
  • 25% reduction in solid waste from products and packaging by 2015
  • 100% of value chain water use is sustainable by 2020
    We will assess agricultural-, manufacturing- and consumer-phase water use and discharge as a first step.

INFLUENCE

New Goals (by 2012)
  • 1,000 hours of community volunteer time focused on creating a just and equitable world
  • 100 additional WAGES workers/owners as a result of our partnership
  • 1,000 businesses directly influenced through Seventh Generation sustainability mentoring

How did the sale of our products
in 2009 help the environment?

The sale of Seventh Generation products saved:

117,000 trees
(970 acres filled with trees)

42 million gallons
of water
(enough to supply 330 families for a year)

167 billion
BTUs of energy
(a year’s worth of energy for 1,700 households)

1.2 million gallons
of petroleum
(equivalent to taking 2,100 cars off the road for a year)

 

Our 2009 product sales also prevented these chemicals from being released to the environment:

37,000 pounds of chlorine

160,000 pounds of VOCs (such as solvents and glycol ethers)

1.5 million pounds of phosphates

5,300 pounds of chlorinated hydrocarbons

 

To learn more about the ingredients in our products, see our product labels or the ingredient information on our website.

Awards

  1. Computerworld Top Green-IT Departments. Ranked number 8 out of 12
  2. Designated one of the top small businesses to work for in America by the Society for Human Resource Management and the Great Places to Work Institute.
  3. Greenpeace’s Recycled Tissue and Toilet Paper Guide ranked Seventh Generation as a top recommended brand, a rating due to the 100% recycled/80% postconsumer content of the company’s paper towels, bath and facial tissues, and paper napkins, and our use of special chlorine-free manufacturing processes that prevent the release of toxic paper-mill pollutants like dioxins.
  4. Best Small and Medium-Sized Enterprise (SME) Sustainability Report awarded by Ceres and the Association of Chartered Certified Accountants. Seventh Generation’s 2008 report takes a look into the company’s vision for “Reinventing the Purpose and Possibility of Business” with an in-depth discussion of Seventh Generation’s engagement with its manufacturing partners to improve sustainability performance. Ceres noted, “The report provides transparent discussion of the increasingly competitive industry and describes how Seventh Generation is working to change its industry through collaboration for improved disclosure.”
  5. 5x5x5 Growth Award sponsored by Vermont Business Magazine. Seventh Generation placed Number 1 in the Wholesale category with a five-year overall sales increase of 452%.
  6. Included on the 2009 WorldBlu List of Most Democratic Workplaces.
  7. Finalist for the Deane C. Davis Outstanding Vermont Business of the Year Award.
 
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