Procter & Gamble’s rigorous goals to minimize its carbon footprint are good for the planet – and for the FMCG giant’s bottom line
Len Sauers, the Vice President for Global Sustainability at Procter & Gamble, has a job on his hands. He leads an organization that has to find ways to: power its manufacturing plants with 100% renewable energy; use 100% renewable materials in its products; ensure no consumer waste goes to landfill; and deliver products that have a smaller carbon footprint.
Procter & Gamble is a US$84 billion business with 140 factories worldwide. It has 25 brands that generate over a billion dollars in annual sales. And it tasks its workforce with innovating and acting to make every day better for people and the planet. “Sustainability investments must deliver the same return as other business units,” Sauers says.
Sustainability is a priority for Procter & Gamble, even in uncertain economic times. Its sustainability program has brought US$1 billion to the bottom line over the past 10 years through smart use of manufacturing waste materials. For example, the company has sold diaper manufacturing waste for use in cement products. Currently, 50 of the multinational’s manufacturing sites send no waste to landfill, while 96% of the raw materials leave in its products. The rest is either recycled (3%) or reused. The roof tiles at some of its sites are made from paper refuse.
Sauers, who has a PhD in toxicology, began his Procter & Gamble career 26 years ago as a toxicologist. He has since taken on roles of increasing responsibility in the areas of biotechnology, human and environmental toxicology, and regulatory affairs. “P&G has always seen value in having someone with a technical background lead our sustainability work,” he says, “so when the job opened up, I had the right skill set to step in.”
Companies that prioritize sustainability understand the challenges and the business benefits. Business leaders like Sauers are accountable for outcomes, whether meeting greenhouse gas reduction targets or managing waste water. “Focusing on sustainability can drive business success because it can inspire companies to devise new solutions,” he says. For instance, reducing its blades and razors packaging saves Proctor & Gamble over US$1 million annually, while making the products easier to open.
Sustainability issues can still be a hard sell at board level, but they are increasingly becoming a core component of doing business. “Sustainability investments must deliver the same return as other business units,” Sauers says. Companies leading the way on sustainability issues seem to have one trait in common: they integrate the financial, social and environmental risks and opportunities around sustainability as they would any other aspect of their business – that is, without special treatment.
Only four years ago, Procter & Gamble faced rising commodity prices and slow growth in some developed markets. Yet sustainability was still seen as a way to build profitability. The company had begun to put a price on waste and greenhouse gas emissions attributable to products, from production to use by consumers. Its environmental vision added value and boosted the bottom line. These goals were incorporated into Procter & Gamble’s annual US$2 billion R&D budget, driving environmental innovation.
“All company leaders are involved in sustainability decisions,” says Sauers, “and there is a directive that sustainability be a part of everyone’s job.”
He doesn’t get a free pass on his ideas. When he sought to replace foam-based packaging with a renewable material, such as haircare brand Pantene’s bio-resin bottle, he met with finance to explain why it made sense to switch to something that cost 20 cents more per pound. The time frame for return on investments is a stumbling block sustainability officers must overcome. “You have to go in with a business case,” he says. “I want us to move from a petroleum product to renewables because they use fewer greenhouse gas emissions in their production.”
As laudable as that goal sounds, it isn’t enough to swing the board. Sauers also has to put numbers on business risk and brand value, something finance people understand. “Renewable materials can give you more flexibility in materials supply,” he says. “It can be this factor that a consumer is responsive to and that drives a purchase decision.”
Procter & Gamble’s sustainability strategy is ambitious. Sometimes fulfilling it is a matter of detail. When managers studied the use of laundry detergent, they found that the environmental impacts differed between the developed and developing economies.
"If I think of the developed world and I look at the laundry sector, energy is the main sustainability theme. Hot water washing of clothes accounts for 4% of the total energy use in the United States,” says Sauers. “If we look at the developing world, under laundry, water drives the footprint.”
This analysis has driven the development of products such as Downy Single Rinse, in which one rinse provides the same performance as the traditional three-stage process. In regions where household water can be several hours’ walk away, the product also saves time and effort.
As Sauers works on attaining Procter & Gamble’s 12 new 2020 goals, he says he has come to realize that long-term partnerships are integral to success. In 2013, the company joined forces with companies including Heinz and Nike in the Plant PET Technology Collaborative to develop plant-based plastics. The aim of the group is to replace conventional plastic made from fossil fuels with plant-based versions, which would significantly reduce the environmental impact of plastics manufacture.
Although businesses such as Alcoa, Google and Procter & Gamble have embraced sustainability through investments and decision-making, many companies in the Standard & Poor’s 500 lag behind on such efforts. Luckily, more firms are moving in the right direction by creating alliances and making sustainability part of everyone’s job. The investments Procter & Gamble has made, on Sauers’ watch, prove that being good for the planet can pay dividends. That’s one win-win CFOs would be foolish to ignore.
1. Make a business case for sustainability
How easy it is to do this depends on the sector and the sustainability issue. For Procter & Gamble, making a business case for saving energy and water wasn’t too difficult, because efficiency measures save resources and money.
There are more complex issues, such as providing healthcare in developing countries. Convincing someone that teaching about cleanliness and health activities is a good investment is a life-changing thing to do.
2. Sustainability can improve a firm's image
Companies and brands that have fallen foul of sustainability issues have had their reputations badly damaged. Undertaking a sustainability program is, therefore, about getting things consistently right, and ensuring your business activities won’t harm your brand’s reputation.
3. Believe in sustainability and your strategy will succeed
Any sustainability program must be driven by your company’s desire to actually do good, not just appear to be doing so. If you believe in sustainability, make it integral to everything you do. Then there’s no risk of you sacrificing sustainability principles when things get tough.
4. Measure the difference you are making
Although it’s easy for companies to measure inputs, activities and outputs, it’s significantly harder to measure what the impact of a sustainability program is on the local community. That really is the Holy Grail of sustainability programs: to measure and understand the positive impact your activities are having.
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