An Upstart Innovator in an Industry of Giants

The US market for soaps and cleaning products did not seem a likely industry for innovation and environmental consciousness. It was dominated by corporate giants, many of which were integral to its founding. Although the soap and cleaning product industry was fragmented around the edges, with a typical supermarket stocking up to forty brands, market share was dominated by companies such as SC Johnson, Procter & Gamble (P&G), Unilever, and Colgate-Palmolive.

To put Method’s position in perspective, its total annual sales were approximately 10 percent of Procter & Gamble’s sales in dish detergent alone ($317.6 million) (2006). P&G’s total annual sales in the category were more than $1 billion. Furthermore, the market for cleaning products was under steady cost pressure from private-label brands, increasing raw materials prices and consumers’ view of these products as commodities. Companies that reported positive numbers in the segment between 2000 and 2006 did so by cutting costs and consolidating operations. Startups such as Seventh Generation and others attempted to penetrate the mass market with “natural” products, but those products were largely relegated to health food stores and chains such as Whole Foods. For Method to have obtained any foothold in this heavily consolidated segment dominated by market giants seemed improbable at best. But for Method founders Lowry and Ryan, the massive scale and cost focus of their competitors offered an opportunity.

Method to Their Madness

“You have all your domestic experiences in that house or wherever you live,” Ryan explained. And so, “from the furniture you buy to your kitchenware, you put a lot of thought and emotion into what you put in that space. Yet the commodity products that you use to maintain this very important space tend to be uninteresting, ugly, and toxic—and you hide them away.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007). Lowry and Ryan didn’t understand why it had to be that way.

They decided to take the opposite approach; if they could create products that were harmless to humans and the natural environment and were attractively designed with interesting colors and aromas, they could disrupt an industry populated with dinosaurs. By differentiating themselves from the competition in a significant and meaningful way, Lowry and Ryan hoped to offer an attractive alternative that also reduced the company’s ecological footprint and had a positive environmental impact. “It’s green clean for the mainstream,” said Lowry, “which wouldn’t happen if it wasn’t cool.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007).

To make green cool, Method took a two-pronged approach. First, it formulated new product mixtures that performed as well as leading brands while minimizing environmental and health impacts. Cleaning product manufacturers had been the target of environmental complaints since the 1950s, when the federal government enacted the Federal Water Pollution Control Act in part to address the foaming of streams due to the use of surfactants, chemicals used in soaps and detergents to increase cleaning power. In addition to surfactants, household cleaners often contained phosphates, chemicals used as water softeners and that also acted as plant nutrients, providing an abundant food source for algae. Fast-growing algae resulted in algal blooms, which depleted oxygen levels and starved aquatic life. Water sources contaminated with phosphates were also toxic for animals to drink. Another environmentally problematic compound in cleaning products was chlorine bleach, which when released into the environment could react with other substances to create toxic compounds. According to the Method website, “A major problem with most household cleaners is that they biodegrade slowly, leading to an accumulation of toxins in the environment. The higher the concentration of toxins, the more dangerous they are to humans, animals, and plant life. The key is to create products that biodegrade into their natural components quickly and safely.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007).

With a degree in chemical engineering from Stanford University, experience researching “green” plastics, and a stint at a climate-change think tank, Lowry saw these issues as opportunities.

Method counted on the competition’s seeing environmental and health issues as “problems.” Doing so allowed Method to seize competitive advantage through designing out human health threats and ecological impacts from the start, while their larger competitors struggled to deal with increasing legislative and public image pressures. Method products sold at a slight premium to compensate for the extra effort. “I knew as a chemical engineer that there was no reason we couldn’t design products that were nontoxic and used natural ingredients,” Lowry said. “It would be more expensive to do it that way. But that was okay as long as we created a brand that had a ‘premiumness’ about it, where our margins would support our extra investments in product development and high-quality ingredients.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007).

The second prong of Method’s attack on the entrenched cleaning products industry was to utilize design and brand to appeal to consumers tired of the same old products. In an industry rife with destructive price competition, Method realized it would have to be different. The founders believed that their competition was so focused on price that “they weren’t able to invest in fragrance or interesting packaging or design.” Lowry explained, “Our idea was to turn that reality on its head and come up with products that absolutely could connect with the emotion of the home. We wanted to make these products more like ‘home accessories.’ We believed there was an opportunity to really reinvent, and in the end, change the competitive landscape.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007).

By focusing their marketing and packaging as the solution “against dirty,” they tapped into consumers’ disquiet with the ingredients in their household cleaners. Through packaging that stood out from the rest, they created the opportunity to deliver the environmental and health message of the products’ ingredients.

Design of packaging to deliver that message was integral to Method’s success from its first sale. Method’s home-brewed cleaning formulas for kitchen, shower, bath, and glass surfaces were originally packaged in clear bottles that stood out on a shelf. “The manager of the store just liked the way the packaging looked,” said David Bennett, the co-owner of Mollie Stones, a San Francisco Bay–area grocer that was Method’s first retail customer. “It looked like an upscale product that would meet our consumer demands, so we went with it.”Andrea Larson, Method: Entrepreneurial Innovation, Health, Environment, and Sustainable Business Design, UVA-ENT-0099 (Charlottesville: Darden Business Publishing, University of Virginia, March 26, 2007).

As design continued to be a key element of Method’s appeal, the company recruited Karim Rashid, a renowned industrial designer who had worked with Prada and Armani. Rashid was responsible for bringing a heightened sense of style to Method’s packaging while continuing to focus on environmental impact. This led to the use of easily recycled number one and number two plastics (the types of plastic most commonly accepted by municipal recycling centers). Method’s approach seemed to represent a younger generation’s more holistic mental model. This small firm seemed to provide a window into a future where health, environmental, and what were increasingly called “sustainability issues” would be assumed as part of business strategy and product design.

Wipes, the O-mop, and PLA Material

PLA was an innovative and relatively new plastic material derived from plants such as corn, rice, beets, and other starch-based agricultural crops. PLA biodegraded at the high temperatures and humidity levels found in most composting processes. NatureWorks was the first large-scale plant in the United States to produce PLA in resin (pellet) form, based on milled material made from farm-supplied corn and corn waste. The resin pellets went to a fiber manufacturer who made bales; those bales of PLA material went next to the nonwoven cloth manufacturer, which converted it into giant rolls of nonwoven cloth. Next, a converter took the bulk nonwoven cloth, cut it into shapes, and packaged it according to the specifications of a customer such as Method. When NatureWorks first began operations, demand was limited. That picture changed quickly between 2004 and 2006, and by 2007 the plant could not produce its PLA feedstock resins fast enough to meet worldwide demand. PLA came out of the facility in pellet form and was melted, extruded, spun, and otherwise manipulated by converters at different steps of the supply chain into a virtually endless spectrum of materials for different applications across a wide range of product categories.

As a replacement for ubiquitous oil-based plastic feedstock, PLA promised a departure from the petroleum-based plastic materials that had come to dominate since synthetic plastics were first developed in volume after World War II. PLA had proved itself a particularly high-performing and cost-effective raw material that was well suited as a substitute for polyethylene terephthalate (PET) in many applications. PET was the oil-based polymer known generically as polyester and used extensively in packaging, films, and fibers for textiles and clothing.

The competition’s wipes and mop heads were made of petroleum-based nonbiodegradable plastic material, typically polyester or polypropylene. Although microfiber was quickly becoming commonplace, microfiber and the denier unit of measurement were first associated with material in women’s hosiery. Technology advances permitted polyester microfiber production for very fine fiber applications, and just as microfiber had become common in clothing lines, it was also used as a more effective wiping and cleaning product. Microfiber was fiber with strands measured at less than one denier, a unit of weight used to describe extremely fine filaments and equal to a yarn weighing one gram per nine thousand meters. Whether made from corn or oil, microfiber material, used by most companies selling residential cleaning wipes by 2006, made an excellent cleaning cloth. Its structure enabled the fiber surface to more effectively pick up dirt and dust compared with conventional materials and methods. The microfiber wipes could be washed and reused, providing greater durability than alternative products that were typically thrown away immediately after use.

Consistent with Method’s environmental and sustainability philosophy, Lowry wanted to use bio-based materials, specifically PLA nonwoven cloth, for the dry floor dusting product. Ultimately he wanted PLA to be the basis for all fibers used, both nonwoven disposable cloth and reusable woven microfiber. If customers weren’t grabbed by the marketing message that the mop was sexy and hip (a message consistent with Method’s playful tone), they might be pulled in by the ergonomic O-mop’s more effective, biotech-based, and nontoxic floor cleaning.

Lowry knew most disposable wipes ended up in landfills, not compost piles, even with their extended life. So the company supported municipal recycling and composting infrastructure development in an effort to encourage cradle-to-cradleCradle-to-cradle was an increasingly popular term that referred to a product cycle in which materials could be manufactured, used, then broken down and used again with no loss of quality; for more information on this concept, see William McDonough and Michael Braungart, Cradle to Cradle: Remaking the Way We Make Things (New York: North Point Press, 2002). resource use, or at least raise awareness and encourage behavior in that direction. Method estimated that eighty-three thousand tons of “wipe” material made of polyester or polypropylene plastic was ending up in landfills annually, enough to fill nine thousand tractor-trailers. If using PLA could reduce oil feedstock use even a little, he reasoned, it was an improvement. Even if the PLA fiber went to landfills, where temperature and humidity never reached the ideal composting levels that would quickly and thoroughly break it down, it would still decompose safely, perhaps after one to two months, unlike oil-based fibers, which could remain in landfill disposal sites in the same condition for thousands of years.

The market for bio-based plastic materials had taken off by 2007, but Lowry had had no luck finding a US manufacturer to create a PLA-based fabric suitable for the white, nonwoven, dry-floor duster cloth used with the O-mop. He had just talked with the last on his list of PLA manufacturers, and the answer was no. They had all told him it couldn’t be done. The material was too brittle, they couldn’t process it, it wouldn’t run on their machines, and the strands were too weak. In short, PLA nonwoven cloth for this application was technologically impossible.

Lowry picked up the phone and placed a call to a company he knew in China—a departure from business as usual given that 90 percent of Method’s inputs were sourced in the United States. Chinese suppliers often were excellent, but domestic sourcing was preferable to avoid the high transportation costs of moving product long distances. Typically the farther the transport requirement, the greater the fossil fuel use, so the choice seemed inconsistent with the firm’s sustainability approach. But Lowry was sure the dry-floor dusting cloth could be made with PLA resins, and the Chinese manufacturer confirmed it. Lowry placed the order. A Taiwanese fiber manufacturer would make the bales and send them to the Chinese nonwoven cloth manufacturer that would pass on the cloth to a nearby converter that would in turn cut and package it to meet Method’s needs. Lowry knew the suppliers were good and reliable and that the product would arrive promptly. Perhaps all Method’s PLA products would need to come from China. But was sourcing from the other side of the world “sustainable” in the sense that he and Ryan tried to apply sustainability principles to the company’s operations?

The other issue on Lowry’s mind was that Method’s products could be deemed unacceptable in certain distribution channels that would not tolerate any GMOs in their products. PLA was produced from agricultural material (often corn or cornfield waste material) that was brought by farmers to a centrally located milling plant that converted it and separated out the components from which PLA was made. There was no monitoring of the corn coming into the milling facility; thus there was no guarantee that all inputs to the PLA resin-producing process were free of GMOs. If Lowry used PLA, it meant certain large and reputable buyers would refuse to put Method products on their shelves. Even so, to Lowry, it seemed preferable to substitute PLA for petroleum-derived products and compromise on the GMO issue for the time being. After a particularly discouraging conversation with a company that declined to do business with Method until it agreed to stop using GMO agricultural inputs, he decided to write out his thoughts in an essay, both to sort them out for himself and to draft a position paper that he could later post on the Method website.

As our knowledge base grows regarding exposure to toxins, we become more informed and better equipped to find solutions. We are capable of learning and absorbing feedback from the environment and our bodies. Lead was removed from gasoline in the United States and extensive efforts made to remove lead-based paint from older homes, thereby significantly reducing exposure to lead (a neurotoxin), particularly for children. Chlorofluorocarbons (CFCs), known to break down upper atmosphere ozone, were banned enabling recovery of the ozone layer and over time reducing the ozone hole that formed every year over parts of the Southern Hemisphere. As a species, we act, we receive feedback, we adjust and adapt. We are beginning to learn and adapt with respect to toxic chemicals exposure. However, materials toxicity and contamination is just starting to receive attention and still remains secondary in the media’s attention due to the current focus on climate and energy issues (topics that also require attention to materials and toxic inputs/outputs). Nevertheless, materials issues will be acknowledged and addressed. The pattern will be similar to other arenas that challenge human ingenuity: most people will be overwhelmed by the problem scale, while others, the entrepreneurial individuals (and ventures they create), will drive innovation to create benign alternatives.See http://www.warnerbabcock.com for an example of a company committed to change

The next two sections provide additional background information on toxic substances. They are followed by a second case on Method that demonstrates how forward-thinking companies work on an ongoing basis to eliminate questionable chemical compounds from their products through innovative processes that lead to breakthrough designs and safer products in the marketplace.

Toxic Chemicals: Responding to Challenges and Opportunities

In the early 1960s, US scientist and writer Rachel Carson spoke about the risks of toxic chemicals: “We are subjecting whole populations to exposure to chemicals which animal experiments have proved to be extremely poisonous and in many cases cumulative in their effect. These exposures now begin at or before birth and—unless we change our methods—continue through the lifetime of those now living. No one knows what the results will be, because we have no previous experience to guide us.”Rachel Carson, Silent Spring (New York: Houghton Mifflin, 1962).

We have made progress in the face of the abundant evidence that increases in cancer and other disease rates are the result of exposure to chemicals. The US Environmental Protection Agency (EPA) was established in 1970 partly in response to Carson and others who foresaw the dangers of society’s ill-informed experimentation with toxic chemicals. Similar agencies now exist in most countries and the United Nations. Environmental and health nongovernmental organizations (NGOs) have become powerful change agents. Federal and state laws and international agreements have been passed banning or severely restricting the manufacture and use of certain exceptionally dangerous and persistent chemicals. However, progress is slow and public awareness insufficient. We remain vulnerable to both existing chemicals and hundreds of new ones that are invented and introduced into commerce daily.Andrea Larson, Darden Business School technical note, Toxic Chemicals: Responding to Challenges and Opportunities, UVA-ENT-0043 (Charlottesville: Darden Business Publishing, University of Virginia, 2004). Information presented in this section comes from this study.

More than thirty years after Carson’s book Silent Spring was published, scientists Theo Colborn and John Peterson Myers and a coauthor renewed the warning about widespread molecular toxins in the book Our Stolen Future (1996):

The 20th century marks a true watershed in the relationship between humans and the earth. The unprecedented and awesome power of science and technology, combined with the sheer number of people living on the planet, has transformed the scale of our impact from local and regional to global. With that transformation, we have been altering the fundamental systems that support life. These alterations amount to a great global experiment—with humanity and all life on earth as the unwitting subjects. Synthetic chemicals have been a major force in these alterations. Through the creation and release of billions of pounds of man-made chemicals over the past half-century, we have been making broad-scale changes to the earth’s atmosphere and even in the chemistry of our own bodies.…The global scale of the experiment makes it extremely difficult to assess the effects. Over the past fifty years, synthetic chemicals have become so pervasive in the environment and in our bodies that it is no longer possible to define a normal, unaltered human physiology. There is no clean, uncontaminated place, nor any human being who hasn’t acquired a considerable load of persistent hormone-disrupting chemicals. In this experiment, we are all guinea pigs and, to make matters worse, we have no controls to help us understand what these chemicals are doing.Theo Colborn, Dianne Dumanoski, and John Peterson Myers, Our Stolen Future (New York: Penguin Group, 1996), 239–40.

Synthetic chemicals are everywhere—in the plastics used in packaging, cars, toys, clothing, and electronics and in glues, coatings, fertilizers, lubricants, fuels, and pesticides. We make or “synthesize” chemicals from elements present in nature. Many “organic”“Organic” chemicals are chemicals that have a carbon backbone. Some occur naturally and some are synthetic. There is no connection between the term organic as it is used in chemistry and the use of the word in phrases such as organic food or organic farming. or carbon-based chemicals are derived from petroleum. We use synthetics to serve many purposes that natural materials cannot serve as well, and industry and consumers often save money in the process. Without synthetics, we wouldn’t have computers, television, and most drugs and medical equipment. Synthetic chemicals, however, have dangers as well as benefits. Those dangers are often unknown or even unsuspected when a chemical is first introduced. They may become evident only after thousands or even millions of pounds of that chemical have been released into the environment through industrial and agricultural processes and energy generation, or as products, emissions, or other wastes.

Synthetic chemicals’ detrimental environmental and health consequences are unintentional. The pesticide dichloro-diphenyl-trichloroethane (DDT), for example, was never intended to kill bald eagles or robins.Rachel Carson, Silent Spring (New York: Houghton Mifflin, 1962), 118–22. The chlorine bleaching process used in paper mills wasn’t meant to disrupt the endocrine systems of fish downstream.Ann Platt McGinn, Why Poison Ourselves? A Precautionary Approach to Synthetic Chemicals, Worldwatch Paper #153 (Washington, DC: Worldwatch Institute, November 2000), 22. Polychlorinated biphenols (PCBs) and pesticide residues weren’t supposed to end up in human breast milk, nor were they supposed to affect the immune and endocrine systems or possibly cause sperm decline and even infertility in men.Theo Colborn, Dianne Dumanoski, and John Peterson Myers, Our Stolen Future (New York: Penguin Group, 1996), 178.

A Reason for Environmental Health Concerns: Chemicals in Breast Milk

Breast-feeding advocates often refer to breast milk as “liquid gold.” Besides its direct benefit of feeding a growing baby, breast milk contains antibodies to protect infants from disease, nutrients to support organ development, and enzymes to aid digestion. Research has shown that the unique composition of human milk enhances brain development and lowers the risk and severity of a variety of serious childhood illnesses and chronic diseases, including diarrhea, lower respiratory infection, bacterial meningitis, urinary tract infections, lymphoma, and digestive diseases.Andrea Larson, Darden Business School technical note, Environmental Health: Chemicals in Breast Milk, UVA-ENT-0078 (Charlottesville: Darden Business Publishing, University of Virginia, 2004). All information in this section by author. There are also significant benefits to women who breast-feed, such as reduced risk of breast and ovarian cancer and osteoporosis.US Department of Health and Human Services, “The Surgeon General’s Call to Action to Support Breastfeeding, 2011,” accessed January 30, 2011, http://www.surgeongeneral.gov/topics/breastfeeding/calltoactiontosupport breastfeeding.pdf.

Although breast milk is recognized by doctors, public health officials, and scientists as the best first food for an infant, it is not pure. Many synthetic chemicals released into the environment, intentionally or not, can be found in breast milk. Chemicals such as famous “bad actors” like DDT and PCBs, as well as less well-known substances such as flame retardants (polybrominated diphenyl ethers, or PBDEs), have been detected in human breast milk around the world. Many of those synthetic chemicals are known or suspected causes of cancer, and they have been linked to other health problems such as diabetes, reproductive disorders, and impaired brain development. The health benefits of breast-feeding far outweigh the possible negative effects of chemical contaminants in breast milk, but the presence of those chemicals remains a cause for concern.

Many of the synthetic chemicals that have been found in breast milk have some general properties in common. They can be described as bioaccumulative and persistent. A substance that bioaccumulates is one that, once introduced into the environment, collects in living organisms that are exposed by breathing air, eating plants that have taken up the chemical from the soil, or drinking water that is contaminated with the substance. Thus bioaccumulating chemicals find their way into and up the food chain. Many such chemicals are not soluble in water but rather are soluble in fat. That means that instead of being expelled, they bind to fatty tissue and remain in the body. A chemical that is termed “persistent” is just that: it stays around. Chemicals that are persistent take a long time to be broken down and expelled, if they ever are. Many such synthetic chemicals resemble natural hormones and chemicals in the human body, which is why they are not easily broken down and expelled by the body.

Breast milk has a high fat content, which means it draws certain synthetic chemicals to it. To produce milk, a mother’s body utilizes stored fat, thus some of the synthetic chemicals that have accumulated in body fat over a woman’s lifetime are released in the production of breast milk and passed on to nursing infants. In many cases, human milk contains chemical residues in excess of limits established for commercially marketed food.Sandra Steingraber, Living Downstream: An Ecologist Looks at Cancer and the Environment (New York: Addison-Wesley, 1997), 168.

Few countries regularly track contaminants in breast milk, but recent studies from around the world show that synthetic chemicals can be found in breast milk in both industrialized and developing countries. From the Artic to Africa, in Europe, in the Americas, and in Asia, those chemicals have taken up residence in the environment and in human bodies.

The chemicals found in breast milk are of concern not simply because they demonstrate the global dispersal and persistence of some chemicals but also because exposure to them has been linked to negative health effects. It may be true that no study has ever shown that a child exposed to a specific chemical from breast milk will develop a specific disease, but a growing body of science tells us that there are links between human health and exposure to toxic chemicals in the environment.

The primary chemicals of concern that scientists have found in breast milk include dioxin, furans, and PCBs, as well as pesticide residues such as DDT, chlordane, aldrin, dieldrin, endrin, heptachlor, hexachlorobenzine, mirex, and toxaphene. Those chemicals, nine of which are pesticides, are recognized as highly toxic by the international health community and are scheduled for phaseout worldwide as part of the International Treaty on Persistent Organic Pollutants. Other chemicals found in breast milk include PBDEs, brominated flame retardants, solvents such as tetrachloroethylene, and metals such as lead, mercury, and cadmium.Natural Resources Defense Council, “Healthy Milk, Healthy Baby: Chemical Pollution and Mother’s Milk,” accessed January 30, 2011, http://www.nrdc.org/breastmilk/chems.asp. Metals and solvents do not bind to fat, so they are not stored in the body for long; however, they do pass from the mother’s blood into her breast milk and to her baby. Exposure to heavy metals and solvents, like exposure to POPs, has been linked to health effects.

To further explore the issue of synthetic chemicals in breast milk, let’s look at three examples: dioxins, PBDEs, and dieldrin.