Authors
Anders Almtoft | Research & Innovation, S&P Global Sustainable1
 


Hazardous substances remain widely used across industries due to performance needs, cost considerations and legacy product designs. However, corporate exposure to these substances poses significant internal and external risks. Negative effects on human health, society and the environment have resulted in severe economic and reputational costs. For example, in recent years, multiple companies have settled lawsuits and been mandated to conduct remediation efforts due to their involvement in producing per- and polyfluoroalkyl substances (PFAS).

Since 2015, 58% of all controversy cases in the chemical industry, identified through the S&P Global Media and Stakeholder Analysis (MSA) framework, have been linked to negative impacts from chemical substances. Beyond regulatory exposure, companies face the risk of market share erosion driven by national bans and growing competition from nonhazardous product alternatives. Therefore, understanding hazardous substance exposure levels and implementing strategies to reduce or phase out their use can influence a company’s future risk profile and competitive outlook.

Within our ESG Scores and Raw Data, underpinned by the S&P Global Corporate Sustainability Assessment (CSA), we evaluate the extent to which companies disclose their exposure to hazardous substances and their process to assess involved risks. We also examine whether companies have committed to phasing out and/or substituting hazardous substances, and whether such commitments apply to all substances or only to a subset.

The CSA is an annual evaluation of sustainability practices covering about 14,000 companies worldwide. As part of the assessment, data on exposure to hazardous substances and phaseout commitments are collected across 20 industries. Our analysis focuses on the 478 companies in 2025 that disclosed their exposure to hazardous substances, as well as the 147 companies that disclosed phaseout or substitution commitments.

Figure 1 categorizes the assessed companies into groups based on levels of hazardous substance exposure: no exposure, low exposure (less than 10%), moderate exposure (10%-60%) and high exposure (over 60%). Exposure refers to the share of revenue from products containing hazardous substances. Although most companies had low or no exposure to hazardous substances, 21% reported moderate or high levels. Across all exposure groups, most companies lacked a commitment to remove hazardous substances from their portfolios. This pattern suggests that business incentives to continue using or producing these substances generally outweigh pressures to eliminate them. Several factors are likely to influence corporate decision-making, including revenue derived from these substances, regional economic and regulatory contexts, toxicity levels, and regulatory scrutiny of specific chemicals.

In addition to their level of revenue exposure, companies also selected the regulatory frameworks they primarily follow. Although Annex XVII of the EU Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Regulation and Substances of Very High Concern (SVHC) were the most frequently selected frameworks, the data shows a geographical pattern in which companies follow regional standards. This variation in governance may result in different classifications of the substances considered hazardous.

Figure 2 shows that companies address hazardous substance exposure through phaseout, substitution or a combination of both strategies. Phaseout commitments, either alone or paired with substitution, were the most common. This preference can be partly explained by the challenges in identifying alternative substances that deliver similar performance. Strategically, the distinction between phaseout and substitution matters because each carries different business implications. Phaseout often implies removing a product line, ingredient or process without a direct replacement, which can lead to a direct reduction in revenue, or, at a minimum, near-term disruption and added cost. Substitution, by contrast, typically maintains a company’s market presence by replacing the targeted input with an alternative, helping to preserve revenue streams while still meeting the commitment.

While communicating commitments shows companies' intent, achieving these targets requires further action. External collaboration and investment in research and development can help companies achieve these commitments. Of the 147 companies with commitments, 33% reported dedicating R&D resources or budget to substitute or phase out hazardous substances, while 36% reported collaborating with industry associations to identify substitutes.

The use of hazardous substances is primarily driven by performance requirements, cost considerations and product design constraints. However, their use entails significant financial, regulatory and reputational risks for companies. Incidents involving hazardous substances — such as PFAS — have resulted in litigation, remediation obligations and material business losses. These cases highlight how the presence of hazardous substances can undermine value creation, increase long‑term liabilities and expose companies to heightened scrutiny from regulators, investors and other stakeholders. CSA data shows that while many companies disclose their exposure and some commit to mitigation strategies, these commitments remain uneven and often limited in scope.


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