Global Product Supply Officer, Procter & Gamble (retired)
“At the end of the day, it’s really about trust. When a company operates with integrity, it helps the brand and drives profit.”
Yes, a company’s sustainability work can enhance its reputation. The real challenge lies with the audience. What are their expectations and how do they perceive what the company is doing? Another complicating factor is the company’s actual performance. Can they live up to the image they’ve created? The stronger the image, the higher the expectations will be.
In my experience, I have found that transparency is a key aspect of building trust and confidence. If people or organizations know what you're trying to do and how you're trying to do it, this will generate trust, goodwill, and confidence. If, in the course of operating this way, something does go awry, there has been a positive reservoir that can help mitigate reactions.
Most of the data I’ve seen shows that a small, but growing, number of consumers consider a company’s sustainability profile when they decide to buy—or not buy—a particular product. Most consumers are attracted to products that have been produced in a sustainable way, as long as that product also meets their needs from a price and performance standpoint. On the other hand, if a company is getting bad press or bad practices have been exposed, it turns consumers off — and that can tarnish a brand and have a real impact on the bottom line.
At the end of the day, it’s really about trust. When a company operates with integrity, it helps the brand and drives profit. There is a very strong correlation between proactive leadership, sustainable practices, and a heightened corporate image. So, a company’s performance and reputation in the area of sustainability can have a great impact on its brand.
One exciting example is the new factory P&G is building just outside of Shanghai. This is P&G’s first project to be registered under the U.S. Green Building Council's Leadership in Energy and Environmental Design standards—and it’s the most sustainable project P&G has done to date. The new facility will minimize water consumption, maximize water re-use, cut energy consumption, and reduce waste. So, from an energy standpoint, a water standpoint, and a building standpoint, it meets the highest standards of sustainability. The reception in China has been very positive. From the Chinese government to customers and a broad array of other constituents, the project has been supported, recognized, and applauded.
This project is part of P&G’s broader sustainability vision, which includes powering plants with 100% renewable energy and zero manufacturing waste to landfill. Globally, all new Company sites will be LEED certified, including factories, distribution facilities, offices, innovation centers, and other sites. Through efforts like this, it’s certainly possible to translate sustainable work into an enhanced reputation as one works with customers and suppliers across the supply chain—and that can, and does, lead to tangible business benefits.
Sustainability is not something new for P&G. One great example of sustainable water management is P&G’s paper manufacturing plant in Pennsylvania. The plant is very energy and water intensive, but it’s a plant that, for the last forty years, has actually returned water to the Susquehanna River cleaner than it was originally. The Company is continually working to preserve water quality and is committed to sustainable water management, which includes water reduction, use of new technologies, product innovation using a life cycle approach, and taking a watershed approach to resource challenges.
To give you a sense of P&G’s efficiency, over the past five years, energy consumption was down about 20%, waste was down 60%, and water usage was down 20%—across the entire P&G supply chain. Think of all the inputs that come into a manufacturing facility. Most of it goes out as the finished product. Then, you have a waste stream to deal with. Currently, less than 1% of the waste stream goes to a landfill or a water treatment facility. P&G’s goal is to get that down to 0.5%. To that end, P&G has developed a very robust process to repurpose waste into useful raw materials. It takes real creativity to keep waste out of water treatment plants or landfills.
For example, P&G has developed a relationship with a car wash company that will take the shampoo waste stream and reuse it to wash cars. Unused scrap from Pampers diapers becomes stuffing for dolls and other toys. P&G has taken every one of its waste streams, analyzed them, and figured out ways to reuse waste in a beneficial way. To already be below 1% waste globally with 20 factories around the world (with zero waste to landfill) is an accomplishment in and of itself, but, nonetheless, P&G is always trying to uncover new ways to eliminate or reduce waste from the production process and manage waste responsibly.
P&G also developed scorecards for its suppliers to measure performance. Most of the big multinationals are also making progress in this area.
P&G is currently transitioning toward cleaner alternatives, so there’s a lot of activity in this area. Right now, about 7% comes from renewable sources. The goal is to get that up to 30% by 2020. Part of the challenge is that a lot of the Company’s energy demands are concentrated in a few energy-intensive sites. There are a number of sites with solar panels, and a wind turbine is in operation in Holland. There are also a few sites using renewable sources of fuel like waste wood and peanut husks.
Of all the sustainability goals the supply chain has set for itself, making the switch to renewables has proven to be the most challenging. Natural gas, for example, is so cheap that it has made alternatives harder to justify. So far, P&G has been able to handle the entire sustainability program and justify it with the same savings criteria as the rest of the investment criteria for the Company. They have a healthy portfolio and the sustainability program is generating great savings—hundreds of millions of dollars.
There are a number of projects already identified that could get P&G closer to that 30% renewable energy goal, but I suspect it may become increasingly difficult to justify the investment. Unless something happens to the cost of conventional energy, the alternative energy industry is going to struggle with natural gas pricing. On the one hand, it’s a good thing that natural gas is growing and that factories are converting from coal to gas. Gas is less polluting than coal, but that’s not the same as renewable energy. So, the road ahead may not be easy, but, having spent many years working at P&G, I know the organization is deeply committed to finding ways to increase investment in renewable energy.
Transportation is a key variable and it’s become a very important point—not just from a sustainability standpoint, but also from a cost standpoint. As a result, P&G is redesigning its footprint. The Company is building factories closer to its consumers and cutting down the number of miles needed to ship products. P&G has worked to become more efficient in the ways it ships products. It adopted intermodal freight transport (putting a truck trailer on a train) and, in Europe and North America, aimed to make 30% of its shipments intermodal. Shipping via train is a lot more cost-effective and a lot more sustainable. P&G also changed its metric of “full truck” from floor utilization to cube utilization. The Company is now looking to enhance that through stacking. They’ve also set a goal to reduce kilometers of truck traffic by 20% over the next ten years.
Bill McDonough, who authored Cradle to Cradle, is a well-known environmental architect who advocates pragmatic solutions to sustainability challenges. P&G has been actively engaged with Bill on a number of fronts—from building standards to solar panels. P&G wants its efforts to reflect the best thinking from a sustainability perspective. It definitely helps to consult with experts. Another point worth mentioning is that sustainability and good business practices are not contradictory at all. It is possible to do well by doing good. So far, P&G’s cost has been oversubscribed from cost saving projects and that drives sustainability improvement.
The best strategy, whether it be in a business or in a home, starts with conservation. Using less of anything is the best place to start. For organizations, broad employee engagement and passion will lead to big benefits. When I look at what P&G has achieved, I’d say corporate strategy accounts for maybe a third of the success. The change really comes from the broader organization. You can’t just have the leaders doing things; you have to get the broader organization involved. And when these efforts succeed, it builds morale and it builds a company’s reputation. People want to work for you, be part of your culture, be part of something positive. I’m not sure how I would quantify those benefits, but they’re real. As far as talent acquisition is concerned, I think organizations are beginning to see the connection between good business practices and having the ability to recruit good people.
For all of us, so much of this work is about changing habits. That can be tough, but even small changes can have a really big impact. If every load of laundry were washed in cold water, for example, we’d see immense energy savings. In fact, it’s one of the best things all of us could do to have the biggest energy reduction impact. Another example is switching to CFC light bulbs. These are new habits and habit changes take time. So, education and habit change are going to be a big part of this transition.
Click here to read more about P&G’s sustainability efforts.
About Keith Harrison
Keith Harrison spent 41 years with the Procter & Gamble company before retiring in 2011. Over the course of his career, Keith held positions in P&G's marketing organization and was the Vice President and General Manager of P&G’s European Family Care business. For the last 10 years before his retirement, Keith served as P&G’s Global Product Supply Officer, responsible for the organization’s global supply chain. Having retired last September, Keith now serves on several boards in the US, Hong Kong, and Vietnam. He is also the current Chair of the Cincinnati Museum Center Foundation. Keith is a graduate of Duke University with a degree in Mechanical Engineering.