Procter & Gamble (P&G) is the number-one household and personal products company in the world, with annual sales of roughly $22 billion, operating in 180 countries. It is #11 on Forbes' list of largest U.S. companies and #29 globally. Among its iconic consumer brands are Tide, Pampers, Crest, Duracell, Oral B and Gillette.
In 2007, P&G set a goal of selling $50 billion in sustainable products by 2012, 11 percent of its projected revenues. This sustainability initiative has three primary focus areas: product innovation, largely within existing brands; operations; and supply chain and stakeholder relations.
In April 2010, P&G launched 'Future Friendly' in the U.S. 'Future Friendly' is a multi-brand and multi-platform effort to encourage consumers to reduce the environmental impact of their daily lives.
GreenBiz.com's Heather King talked with Len Sauers, P&G's Vice President of Global Sustainability about the company's 9,000-member innovation team, the company's impact on Dow and Dupont, and what it takes for CEO Bob McDonald and team to get consumers to wash their clothes in cold water.
Consumer research indicates consumers are brand loyal and unwilling to make price or performance tradeoffs to capture environmental benefits. Yet, P&G increasingly encounters upstart green brands like Method and Seventh Generation. And, major retailers like Walmart have introduced sustainability mandates to suppliers like P&G. Given these factors, are consumers, competitors or retailers the more significant force behind P&G's environmental sustainability effort?
Within the past couple of years, we've noticed increased consumer interest in sustainability. The majority of the market -- 70-80 percent -- is now eco-aware. That means they want to do the right thing but they're not willing to accept tradeoffs. We have chosen to target this "sustainable mainstream."
The key is to develop products that enable this mainstream market to be sustainable without any inherent tradeoffs. There can be no decrease in performance or increase in price. With this approach, we view sustainability as an opportunity to drive top-line growth and cut costs.
Are there certain brands or market sectors that offer greater opportunity for P&G to materially change the environmental impact of its products?
All of our brands have a potential to be more sustainable. Some offer easier, faster wins. P&G is a science-based organization. We use life-cycle assessment to evaluate the environmental impact of a product or operation. The assessment showed that initially we could make the greatest improvements in our laundry and homecare lines: Ariel, Tide, and Pampers. Ultimately, to sell $50 billion in sustainable innovation products by 2012, all P&G products must get greener in their formulation and packaging.
So, P&G is reinventing all of its brand name products to deliver sustainability without asking consumers to adopt new brands or accept tradeoffs. Is this reinvention a challenge for the company?
We see sustainability as an opportunity more than a constraint. P&G has an R&D team of 9,000. They are actively developing new technologies to be sure our brands or new products deliver consumers the same benefits -- more sustainably. Innovation is central to our sustainability effort and our company growth.
An example of an R&D innovation that has significant implications across brands is compaction. Compaction lowers water requirements in the manufacture process. It reduces packaging requirements and means that consumers need less product and water in its application.
We are actively using compaction in our products. Last year, we launched Ariel Excel Gel product in Europe; it uses 50 percent less water. We use a similar technology for our Downy Single Rinse product, which is marketed to developing countries where laundry is done by hand. It enables women to rinse in one rather than three pails of water. It saves water and effort.
We are also working on material reduction technologies for other applications. For instance, we have developed a reduced weight diaper to lessen what ultimately ends up in landfill.
What then do you and CEO Bob McDonald see as the greatest challenges in advancing sustainability?
CEO Bob McDonald is the executive sponsor of sustainability within P&G. The approach we've taken as a company is to integrate sustainability into the rhythm of our business.
Our biggest challenge is shifting consumer behavior. Certain products require a change in consumer habits -- such as moving from hot water to cold water washing for laundry. Our research shows that heating water accounts for 80 percent of the energy consumed per load. To encourage cold water washing, we as a company need to take a few extra steps.
That's where a campaign like Future Friendly comes into play. Future Friendly is multi-media marketing effort that promotes environmental responsibility under the guise of consumer education. We also work with NGOs to help in the education of consumers.
For example, in the U.K., our cold water program began with three or four percent of consumers. Following a focused education program in which we partnered with Alliance for Energy, Waste Watch and Water Wise, our cold water program is now up to 25 percent. In the Netherlands, we began at 6 percent of our consumer base and we are now up to over 50 percent.
Given P&G's leadership role in the consumer products industry and among leading international companies, how are you influencing other corporate leaders to transform their businesses?
We are engaged with various trade associations, retail partners, and suppliers. Our overall goal is to improve the environmental profile of our product and operation across the entire chain, from the creation of raw materials to consumer use.
Over the past year, we worked with 20 top suppliers to develop a supply chain scorecard. Many major corporations, such as Dow and Dupont, are involved. We introduced this scorecard to 400 top suppliers in May 2010. The universe of supply chain companies that could be impacted is vast: 75,000 businesses and $42 billion in annual purchases.
We have always taken our role as a global player seriously. Our brands have such scale and international reach; we can make a great stride for sustainability. Ultimately, the best way Procter & Gamble can make a meaningful difference is to market products that consumers will buy and that enable them to reduce their environmental impact.
Heather King is a producer, writer, strategist and executive-in-residence. Her primary focus is on clean technology, corporate sustainability, and new media. She writes the "View from the C-Suite" column for GreenBiz.com.