Scotts Company (SMG)

 

The Board of Directors has considered the Shareholder Proposal set forth above requesting the Company to report on efforts to oppose local environmental health policies and opposes such a report. In the opinion of the proponents noted in the Shareholder Proposal, the claim that the Company’s opposition to local environmental health policies on pesticides may be an unduly costly activity that may cause reputational damage to the Company’s brands and compromise its retail relationships is unfounded. In preparation of this response, the Company reviewed amounts spent by the Company in fiscal 2006 including contributions to RISE, Project EverGreen and other trade associations, business organizations, and individuals that may be directed towards lobbying against local legislation or in favor of state preemption of local legislation. This review included expenditures for attorneys’ fees, expert fees, lobbying, and public relations/media expenses, relating to efforts to oppose local policies to limit lawn care product use. The Company determined that in total, this figure constituted less than one one-hundredth of one percent of the Company’s total sales and less than one tenth of one percent of the Company’s income from operations for fiscal 2006, an immaterial amount by either measurement. The Company does not anticipate that this percentage will materially change on a going-forward basis, therefore, calculating and reporting amounts for the Company’s annual expenditures by category for each year from 1993 to 2005 would itself be a waste of Company resources.

 

As stated by the proponents noted in the Shareholder Proposal, the Company established an Environmental Stewardship Program in 2000 to drive stewardship and sustainability principles throughout the Company on a strategic and proactive basis. This program is intended to enhance consumer success through innovation and continuous improvement and provide the industry and retail community with leadership in identifying and resolving stewardship issues. The Company has engaged a variety of external stakeholders including non-government organizations, legislators, regulators, universities and others, to identify stewardship issues and provide marketplace information. This program has already resulted in the addition of new stewardship language to all lawn product labels, a partnership with Keep America Beautiful to create community greenspace and distribute brochures (over 2 million to date) on best practices for environmentally sound lawn and garden care, and collaboration with the Chesapeake Bay Executive Council on a voluntary 50% reduction in phosphorus in lawn fertilizers which will be rolled out nationally in 2007. A number of external stakeholders have described the program as a model for industry-government cooperation. The Company will be recognized at the Company’s Annual Meeting by the Chesapeake Bay Executive Council.

 

We have many reasons to be proud of our environmental stewardship efforts across our brands. We are particularly proud of our position as a global leader in recycling waste materials in the formulation of our products that in turn create a more beautiful environment. Annually, we recycle over 3 billion pounds of waste materials to produce consumer-preferred high quality soils, fertilizers and mulch. In conclusion, the Company has and continues to make progress in its environmental stewardship efforts. For this reason and the other reasons stated above, YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE SHAREHOLDER PROPOSAL.

 

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE SHAREHOLDER
PROPOSAL.