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Procter & Gamble - how far does the sustainable product revolution go?

Date: 24 Mar 2009

Two years ago, Procter & Gamble made an interesting announcement - they were setting a sales target for "sustainable innovation products". $20bn by 2012, which sounds a lot. According to the company, they are on track to meet this. The story behind the figures is one of how a major products company grapples with the dilemmas inherent in the challenge of sustainability.

P&G's approach was interesting because in so many ways it became about the dialogue between company and consumer. For a range of products to be more sustainable, customers often had to be sold to differently and educated as to why the appearance or nature of products was changing.

The biggest success story on the products front comes through the compaction of liquid laundry ingredients. More concentrated formulas mean smaller quantities need to be used to achieve the same results, less transportation required to ship the product to the point of sale, and less energy and water embedded in the product. In Europe, the focus has included the 'Turn to 30' message that accompanied the company's 'Cool Clean' technology - reflecting the fact that more energy is consumed in the use of the product than in the making of it.

It has been the growth in sales in this area that has made up a significant part of the $2bn of sales achieved so far.

Is it such a big deal? The net sales for the group in the last year were $83bn. So a ten percent environmental saving for $2bn of that figure would be minuscule in terms of actual impact - a fraction of a percent. It is likely to be something like 0.5 percent for the total period to 2012 if the target is met.

The question itself raises interesting problems. How is improvement defined, and against what base?

To qualify under the company's target, the products have to have been launched in market since July 1st, 2007, and have a greater than ten percent reduction in one or more of the following: energy; water; transportation; material use. Energy use can also mean substituted by renewable sources as well as reduced overall.

That is a good, honest, forward-looking measure. It also begs the question as to what progress has been made, and who decides what is good.

Take toilet tissues, for instance. P&G's Charmin product has been an important part of the product range delivering best financial performance in the last year. Recently, Greenpeace and others have attacked soft toilet rolls like Charmin for using a high percentage of virgin paper pulp. Everybody can understand, can't they, that we should be using recycled fibre for something as basic as toilet tissue.

But is it so straightforward? P&G has had a longstanding commitment to use pulp from sustainably managed forests, and details the sourcing of its pulp in its sustainability report. Wood is, after all, a renewable resource. It is when it is produced in an unsustainable way, particularly through the use of unreplaced hardwoods, that the damage is done.

Who said that sustainability has to mean that consumers can't have soft toilet paper? I mean, really.

So is Charmin an eco-product or not? What would make it qualify? And should we celebrate its success in the marketplace, or despair?

And in any case, since its sales won't be part of that $20bn eco-target, it is obvious that the figure is not the full measure of the product story - as if all the other products other than those are 'bad' products.

Given the range of issues across the product range, P&G's approach to setting targets for sales of improved product looks worthwhile. What it measures is not environmental impact per se - but how the company is using its key focus on innovation to continue to drive improvement. If one could balance the target out with an ongoing tally of the eco-efficiency of the whole product range - to ensure that the $20bn of sales by 2012 isn't balanced out by a similar increase in more damaging products, you have a pretty robust approach.

It would be interesting to disentangle it further, though. Wal-Mart has a policy now of only selling concentrated liquid detergent - which could on its own be a significant percentage of that performance to date. It would be interesting to know how big a contribution that has made.

The company's commitment to the sustainable sales target has been led by P&G's President of Global Business Units, Susan Arnold. Arnold's reign as an effective advocate within the company is, however, coming to an end. Just weeks ago, her retirement from the company was announced and the sustainability brief has moved as a result to Chief Operating Officer Bob McDonald.

McDonald is widely thought to be the most likely successor to current CEO A.G. Lafley, so a time leading the charge on sustainability would seem a good grounding for ensuring that the leadership of P&G remains committed to its progress in this area. Particularly since McDonald has already had some profile in the field, giving courses in sustainability and stressing in interviews the central role of values-based leadership in the company.

Nevertheless, commentaters will be watching keenly to see if the 'impending CEO' status, matched with the difficult times for the company through the recession, will lead McDonald to play down the sustainability brief to persuade the hard-nosed hacks that his are a safe pair of hands for the company's future.

Those hard-nosed hacks had already begun to sniff out that it would be McDonald not Arnold that would be in the running for the CEO job. Because at the recent analysts' briefing, he had been the one to lead in giving an overview of the company's growth plans. Whereas she - you guessed it - gave a presentation on sustainability.

Those hacks have a lot to answer for.

Current CEO Lafley has plenty of licence, of course. When he took the company over in 2000 it was struggling big time, and his stewardship over the last 9 years has been one of the big turnaround successes. That this period has been accompanied by P&G consistently doing well in the social responsibility rankings and applying sustainability to its innovation approach is all to the good. But sentiments can easily change, and a new pair of hands following that act will be thought to have a lot to prove.

If the company decides that Lafley should stay in post for the next couple of years whilst it rides out the storm, it might be no bad thing. He at least carries the turn-around credibility to keep P&G on the sustainability track.

The P&G 2008 Sustainability report is available on the company's website


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