Procter & Gamble: A Consumer Goods Giant Seizes Sustainability Opportunities

Posted on 06. Oct, 2009 by in Design & Culture, Interviews, Products

LenSauers2

Procter & Gamble, a multi-national giant, is the largest consumer goods company in the world (and was rated one of 2009′s most innovative companies by Businessweek). How did P&G make it to the top? A large part of the magic is in the company’s stellar ability to adapt to changing times. They started out as a candle and soap company in 1837 with the partnership of William Procter and James Gamble, but they certainly didn’t have the motto: “If it ain’t broke, don’t fix it.” Instead of sticking to one formula that worked, the company evolved over time, and began providing people with things they didn’t know they needed. They introduced Ivory soap in the 1880′s, astounding their customers with the first bar of soap that floats. In the hundred years since they’ve come out with a number of game-changing staples like Crest, Pampers, and Tide, which are instantly recognizable to anyone who doesn’t live under a rock thanks to the great job P&G’s marketing team does. Today Procter & Gamble makes pretty much every product you can think of, not including furniture and electronics, that resides in the average American home.

Recently P&G has been winning a lot of awards and recognition for their efforts in sustainable practices, including the 2009 Presidential Award for Green Chemistry Challenge awarded by the Environmental Protection Agency. The winning product is called Sefose and will be used as a low-VOC lubricant in paint.

Grounded by old-fashioned values and propelled forward by a long history of excellent business decisions, P&G is now at the top of its game and turning its attention toward sustainability, conservation, and social responsibility on a global level. In my conversation with Len Sauers, Vice President of Global Sustainability at P&G, we discussed the history of sustainability within the company and where P&G sees itself in the future.

Opportunity Green: We at Opportunity Green want to take this opportunity to honor the shift that P&G has undertaken in terms of the culture around sustainability. I’ve done a lot of research and looked at the history and culture at P&G, and product innovation and social responsibility are two cornerstones that go back many, many decades. My first question has to do with the culture of sustainability itself. It’s an incredibly rich and complex concept, and introducing it into a system of pre-established corporate values (which in P&G’s case have been around for a long time) can present a challenge. I want to know, how did P&G build the culture, the skills and the competency necessary to achieve such a high level of recognition in the field of sustainability? Is this challenge different from other challenges that you’ve faced?

Len Sauers: Well, first off, thank you very much for those kind comments. We feel that we’ve tried to rise to the occasion in this area over the years. I think that it’s important to note is that sustainability is not really something that is new to P&G. I can trace back our work in sustainability for decades. It was probably in the mid-60s to mid-70′s that I think the company began to pay great attention to this area with the establishment of our environmental science department and all the work that we did in developing the methods for evaluating environmental safety and environmental toxicology. These were–even the methods that are used today, essentially were developed by P&G decades ago. So, I think we’ve had this long history of working in the area of, I would say, environmental sustainability, and also in the area of social sustainability with a lot of the company’s philanthropic programs. And I think over the years we had seen sustainability predominantly as a responsibility. As a large, multi-national company, it was our responsibility to be doing things that were right for the environment and doing things that were right socially. We have a comprehensive department that looks at environmental and human safety and then we have our philanthropic programs, which have been around for a long time. That culture of doing the right thing, of being responsible in this area, has been something that’s been part of P&G for a very, very long time. I think what happened more recently, with the great attention that has been placed on sustainability, is we saw that sustainability could be more than just a responsibility, it could also be an opportunity to build the business. There was a lot of call from the point of view of consumers on wanting to be more environmentally sustainable, there’s been a greater call from consumers on companies being more socially responsible, and we saw those as business opportunities. So we began evolve our program to include not only responsibility but opportunity. That’s how we, if think about the changes that have been made with time, I think it has been that focus on opportunity, and for us, that opportunity came in looking to improve the environmental footprint of our products, our operations, to try to deliver to consumer products that enabled them to be more environmentally sustainable in a meaningful way with the intent that it would help build the top line in addition to all this other work we were doing on the bottom line.

OG: Great! Before I go on, I want to ask you about the methods you mentioned that P&G developed in the 60′s and 70′s for measuring environmental impacts. Can you give us a couple specific examples?

LS: Well, there’s a number of things. Back in the 1960′s there was actually an issue that was occurring at the time where surfactants, which are the major that were used in laundry detergent at that time, were not fully biodegradable. So this is 50 years ago, and it created some issues with sudsing of the rivers. As these partially biodegradable materials would enter the rivers you would begin to see suds forming in some rivers. This is back in the 1950′s. P&G began to work to better understand how materials biodegraded in the environmental sector and how one could put materials into waterways or into various environmental compartments safely.

So we pioneered the development of all the methods that looked at biodegradability. One test for example, called the Sturm Test, was developed by Bob Sturm, who was an employee at Procter & Gamble at the time. And it is the method that is still used today to evaluate biodegradability. So having all that basic science understanding and developing all that for the industry in general, it was stuff that we freely shared, we were able to evaluate technologies in a better way, for ensurance of their environmental safety, it allowed us to change some of our ingredients that we were using to materials that were of better environmental quality and it allowed us even today as we look at new technologies to evaluate in a way that assures us that anything we use today will be safe for the environment and safe for people to use them.

OG: Wow, that’s great stuff. The second question I had is about the Sustainable Innovation Product, which P&G defines as reducing its environmental impact by 10% relative to its predecessor. I know that it’s very important to P&G that consumers need not make a choice between sustainability and performance and value. I’m wondering what kinds of technology and innovation is P&G exploring in order to meet both of these criteria. What percentage of P&G’s products are defined as sustainable now or in the next few years? When is that percentage of reduced environmental impact going to jump above 50%?

LS: Good series of questions, let me begin by saying that as we approached anything in sustainability, it is in our intent to provide a meaningful benefit. So whatever we do, it’s going to be meaningful. You’ve probably heard the debates around green-washing and things like that, so whatever we do, it’s going to be science-based, it’s going to be documented, and it will indeed provide a meaningful provide. Now if you think about green products that are on the market today in general, they’ve been around for a very long time. For decades you’ve seen these types of products on the marketplace. Yet very few consumers actually buy those products. Even though there’s been an increased attention to sustainability, the environment, climate, whatever, these products still represent a very minor share of the marketplace. So as we began to look at opportunity in sustainability, we wanted to make a meaningful benefit, and to us, having green products that would end up just being small shares that small niches of consumers would buy, would not be something that we’d want to do, because we’re not sure that that is meaningful. So we wanted to understand why these products ended up being up small niches and why consumers weren’t buying them, and this is where consumer research became very important, and what that research showed is that there is a very small number of consumers, a small percentage (5-10%) who are willing to accept a trade-off. When I say trade-off, I mean a decrease in performance or a higher price, in order to purchase and use a product that claims to be environmentally sustainable. We find that there is a vast mainstream, we call them middle-of-the-road consumers, amounting to 70-75% of the population. These are people are eco-aware, they want to do the right thing, but they are not willing to accept trade-offs in value or performance in order to purchase one of these products. And then we find there is another small group of people at the other end that just aren’t engaged at this time.

So for P&G, with our intent to make a meaningful difference, we wanted to target that mainstream consumer and not those small niche consumers. So we had to develop products which enabled consumers to be environmentally sustainable but for which there were no tradeoffs, and this is where this idea of Sustainable Innovation Products came from, which we define as products that have a reduced environmental footprint and we define that as 10%, but for which there are no trade-offs to the consumer.

So with that definition in mind, you now need to understand where you can make the most meaningful improvement in a product and this is where that chart comes into play. Let me explain to you, we use a tool called Life Cycle Analysis to help us understand where we can make the most meaningful improvement in a product’s environmental footprint. And the way Life Cycle Analysis works is you look at the environmental impact of a product across its entire life cycle, from the creation of the raw materials that are used in the product, to manufacturing, to logistics, to use in the home, to ultimately the disposal of the product. So you quantify that footprint, that impact, across a product’s total life cycle. and if you think about what environmental impacts there could be, it could be energy use, it could be greenhouse gas emissions, it could be solid waste generation, water use, etc.–all those individual environmental metrics. What we sent to you, is P&G’s energy footprint. So what did, is we looked at each of our major product lines, and you’ll see those on the side, laundry detergent, dish detergent, etc, and for each phase in the life cycle of those products, and that’s the other axis, you’ll see manufacturing, use in the home, transport, etc, we quantified the total energy that was used. And hopefully you’ll see there, it’s quite obvious, that across P&G’s total energy footprint, the driving metric, the one area where the most energy was used in the life cycle of all of our products, is use in the home of laundry detergent. You see that? So if we want to make a meaningful improvement in that environmental metric, we would develop–well let me take a step back for a second, you know what drives that number? What all that energy is used for? Is is the heating of water for laundry.

So if I want to make a meaningful improvement in that metric, in such a way that causes a meaningful benefit, so it’s products people will buy, I will develop a laundry detergent that enables consumers to wash their clothes in cold water, but they will see the same performance in cold that they would see in warm or hot, and they won’t pay more for the product. This is where our product Tide Coldwater and Ariel Cool Clean came from. With those data in hand, our R&D people went and developed new cleaning technologies that were focused on cold water washing that increased the performance of these products so consumers saw no trade-offs.

OG: Now I notice the second highest metric is in materials, and there has also been some work done to reduce the amount of materials and packaging that go into laundry detergents.

LS: Exactly. Packaging compaction. Now let me give you some numbers here that tell you the value of this approach that we take. By targeting that mainstream consumer, if I look at cold water washing for example, 3% of the household energy used in the United States today, is used to heat water for laundry. So if we can avoid that, if we can get everybody in the US who uses hot or warm water to now use cold, we would reduce household energy use by 3%, that equates to about 34 million tons of carbon dioxide that’s not released in the environment, which is about 8% of the US’s Kyoto target. As you know, the US did not sign onto the Kyoto target, but I can get 8% of this just from getting people to wash in cold water. So by creating a consumer product that targets mainstream consumers with a meaningful improvement and with no trade-offs, we can make what we believe are great impacts in environmental sustainability.

OG: That’s quite remarkable.

LS: Let’s go back to the compaction you had mentioned. An area on our grid there, which shows a place where we could target for a meaningful improvement, we compacted in the United States, all of our liquid laundry detergents. We compacted them by 50%. That one move, again delivering products which had no decrease in performance, just compacted, we removed about 140 million pounds of materials from the system, which now did not need to be created or transported. And again, huge environmental improvements because of that lack of transportation, huge environmental improvements because of the materials reduction. So that’s why I think, if you talk about, and you were so kind in the beginning to talk about, the success we’ve had. I think that success is based largely on our approach of making meaningful improvements targeted at mainstream consumers.

OG: Sounds like a good formula. I have a follow-up question. It seems like one of the major areas that needs work in order for a product like Tide Coldwater to succeed, is to change the perception of consumers that hot water makes cleaner laundry. Am I right? How do you plan to work with that, and change that perception? Because I feel like a lot of the battle in making sustainable products work is to change the perceptions consumers have of what they actually need.

LS: Yes. And what you find is that it’s the education of the consumer that is most important. We have programs in place to educate consumers on this. In Europe, where all of this went out first, we partnered with a number of NGO’s in the area, and it was the NGO’s, which were environment NGO’s, that were very instrumental in educating the consumers. The Energy Trust, for example, in the UK, had a very significant program in the UK on changing consumer behavior by telling them the value of cold water washing. When we first went into the UK about 2-3% of British consumers used cold water for laundry. We’re approaching 30% today. In the Netherlands, we were at about 5-6% when we started, over 50% of consumers now use cold water. So education by NGO’s is very important. Also, our advertising copy that we used in the area told people about financial savings that they could have by not using hot water. I can give you one statistic for the US, for example, if you look at our liquid Tide Coldwater the 100 oz bottle, if you in your home use hot or warm water and you switch to cold, for each 100 oz bottle you use, you save about $10 on your utility bill, because you’re not heating the water in your home. So the consumer sees a great value to washing in cold water, in addition to the environmental sustainability. Another thing we’re doing, in the United States, is we’ve been partnering with utilities, electrical utilities for example, and every now and then people will see a little flyer within their electric bill talking about the value of cold water washing and how they can save money.

OG: Now let me ask you again, is there a plan in place to reduce the percentage of environmental impact of your products above 10%?

LS: Well, we have set a goal as a corporation that between 2007 and 2012, we will develop and market at least $50 billion in cumulative sales of products like Tide Coldwater. So all across P&G’s businesses, our home care business, family care business, baby care business, etc., products like this have been and will continue to be developed, with the goal of developing $50 billion in sales total by 2012.

OG: But remaining at the 10% mark.

LS: The product will have at least a 10% improvement.

OG: Ok. I’m just wondering about the future. For the next 25 years, or 50 years, is a reduced environmental impact being explored, or not quite yet?

LS: You know, we’ll eventually begin to look more long term, but we are focusing right now on this $50 billion in products, which if you look at P&G’s total sales, we’re looking at about 12-15% of our total sales, will be products that have this reduction in their environmental footprint. So for an $80 billion company, that’s going to be a lot do to over the next couple years.

OG: Absolutely. That’s a huge shift. My next question is about the Global Sustainability department. I’m wondering how it interacts with other organizations. How big is the Global Sustainability department?

LS: Well, the actual corporate department is a relatively small group of people. The way that we set things up here at P&G is, we felt it best for the experts in individual areas of the business to be the ones that led sustainability for their specific business. So, we established what we call Single Points of Contact, or SPOCs, and we’ve established these SPOCs in each business unit, in each function, and in each region around the world. So there are about 20 to 25 of these individuals. They are senior level managers in their respective organizations, and within the corporate group, so within my group, we set the overall company’s principles and goals working with the executive management of the company, then we work with these senior level SPOCs in each of the businesses to operationalize this program. So here are the goals, this is where the company wants to be, how can you best operationalize these goals and principles within your business unit. So you can think, for example, our people in our fabric care division may approach things quite differently than our people in our health care division. Different priorities, different areas for opportunity. Individuals in marketing will look at this quite differently than individuals in manufacturing. So the idea was, to get the operationalization into the hands of the people of who are the experts in particular area. My group works largely across those individuals, helping them when they develop their programs, making sure they are consistent across the entire company with our principles and our goals, and then we become kind of that external face also for sustainability, doing like what I am doing today.

OG: I am curious about the Sustainability Ambassador Network, and I’m wondering how is that going, and are any of those ambassadors going to be joining us at Opportunity Green in November?

LS: Well, actually I’ll give you a few more minutes because this is one of the things we’re very proud of. We have a very focused program on our employees. If you think about all these things that I’ve talked about today, integrating sustainability in the rhythm of the business, having programs across all of our business sectors, goals around operations, goals around products, I mean, you can see probably for yourself that all the great ideas, all the great thinking and insight to make all this successful is going to come from our own people. They are going to be the ones that come up with the ideas. So we want to instill within them a passion for sustainability and a knowledge of sustainability.

OG: And the strong focus on employees has been around since the 1880′s, right?

LS: Oh, we’ve always had a great focus on employees, but now we’re stepping up the focus on education and sustainability. So we are educating our employees on the importance of sustainability, the company’s goals, and we also want them to live a sustainable lifestyle within the workplace. So, we encourage recycling, we encourage energy reduction within the workplace. All those kinds of things to engage the employees with sustainability, so they’re thinking sustainability in the workplace and we hope then that that thinking gets translated into their jobs where they are now looking with a sustainability lens as they develop and produce products. We have a number of employees, we’re probably approaching 500 employees now, that really have a very very strong interest in sustainability, to where they want to be very vocal advocates of sustainability within their organization and within their site. This is our SAMBA network, our sustainability ambassadors. It’s a very selective group of people, they are volunteers to a great extent, they have a great passion for sustainability, and they are really the key in operationalizing this as we go forward. Unfortunately, none of them will be attending the conference, I’ll be coming by myself, but they are a very critical part of our program.

OG: Thanks so much for speaking with us at Opportunity Green today, it’s been a pleasure and we can’t wait to meet you in person!

LS: Thank you.

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One Response to “Procter & Gamble: A Consumer Goods Giant Seizes Sustainability Opportunities”

  1. [...] Green strives to recognize leaders in sustainability and the green movement.  Whether you are Proctor and Gamble or Ecovative Design, the OG team recognizes green greatness through green living–the [...]

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