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Behind Procter & Gamble's Sustainability Vision
Procter & Gamble's announcement today of a new "sustainability vision" is a noteworthy moment — not just for the world's largest consumer packaged goods company, but for the world of sustainable business.
It represents another yardstick of how major corporate players view their place on the sustainability landscape: being "socially responsible," of course, but also seizing the global business opportunities that can inure to companies taking leadership roles in environmental and social well-being.
P&G's CEO Bob McDonald and VP of Global Sustainability Len Sauers announced the goals today on a webcast that I had the honor of hosting. (My participation was part of a business relationship between P&G and GreenBiz.com, though neither I nor any of my GreenBiz colleagues played any role in the substance of the announcement.)
"We don't treat environmental sustainability as something separate from our base business," said McDonald, who also holds the title of Executive Sponsor of Sustainability at P&G, a rarity among CEOs. "When we operate sustainably, we earn gratitude, admiration and trust that lead to opportunity, partnerships and growth." He explained that among P&G's goals is to reach five billion consumers over the next five years. "This is roughly a billion more consumers than we're reaching today. But, we must reach and serve these consumers responsibly. It does us no good to grow our business today at the expense of tomorrow."
At first glance, P&G's four new commitments — powering its plants with 100% renewable energy, using 100% renewable or recycled materials for all products and packaging, having zero consumer and manufacturing waste go to landfills, and designing products "that delight consumers while maximizing the conservation of resources" — closely resemble the three broad environmental goals set by Walmart in 2005 ("to be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustain people and the environment.")
But there are big differences. For starters, unlike Walmart's goals, which have no specific timeline, Procter & Gamble — which makes everything from Pampers to Pringles to Pepto-Bismol to Prilosec — seems to have mapped out milestones. Today it announced several, including committing by 2020 to replace 25 percent of petroleum-based materials with "sustainably sourced renewable materials," reduce consumer packaging by 20 percent, reduce manufacturing waste to less than one-half of 1 percent, use 30 percent renewable power for its manufacturing plants, and reduce truck transportation 20 percent. The company says it will report progress on these goals annually.
It's also significant that unlike Walmart's unveiling of its goals in 2005 (or GE's ecomagination announcement that same year), P&G's announcement wasn't a bolt from the blue — that is, an audacious goal from a company that had previously been largely silent on sustainability issues. Today's announcement seems the logical extension of a series of steps the company has been taking. For example, in just the past six months, P&G:
- introduced to the U.S. its Future Friendly campaign, born in Europe, a multi-brand and multi-platform effort to raise awareness about greener products and greener practices;
- created a high-profile panel of sustainability experts to advise on its Future Friendly efforts;
- launched a scorecard to measure the environmental impacts of hundreds of suppliers;
- reformulated a bestselling shampoo to reduce toxins;
- announced concentrated versions of powder laundry detergents that significantly reduce packaging and energy use; and
- introduced sugarcane packaging to three of its shampoo and makeup brands.
All of which follow the company's 2009 commitment to sell $50 billion in "sustainability driven" products by 2012, a goal that the company says it is on target to meet.
Just last week, at the Clinton Global Initiative, P&G launched a Children's Safe Drinking Water program with the intent "to provide enough clean water to save a life every hour." It plans to do this by delivering more than 2 billion liters of clean drinking water a year by 2020, which it says will help save an estimated 10,000 lives and preventing 80 million days of diarrheal illness annually. Clearly, this is not window dressing.
Indeed, it's that link between the developing world and the developed that is becoming a key source of business value and growth for the company. As P&G aims to ramp up its customer base by a cool billion people, it is turning to its culture of innovation to create products that benefit those not just at the base of the pyramid, but also the rest of us.
Consider something called Downy Single Rinse. "Normally, in the developing world a woman would need maybe four buckets of water in order to wash her clothes -one for washing and then several rinses," Len Sauers explained to me recently. "Through technology that we've put in Downy Single Rinse, she only needs to do one rinse, not three." The result: saving water, perhaps enough to pay for P&G's product in the first place. In fact, its marketing pitch for the product included "Downy for free!" The company used a similar approach with its Tide Coldwater (and, in Europe, Ariel Cool Clean), which claims to save consumers enough in their hot water bills to pay for the detergent.
This isn't just clever marketing, it's a solid green value proposition — a money-saving product that has an environmental benefit. We simply haven't seen enough of those.
"I have a firm belief that all issues of sustainability will be solved by innovation, says Sauers. "And at P&G, one of our core strengths is innovation, so as we go down this path to tackle these issues that the world is facing, I believe it'll be our innovative solutions that are very helpful there. I see this as business opportunity for the company."
(Sauers will be discussing the company's approach to product creation as one of the featured speakers at our upcoming GreenBiz Innovation Forum.)
It's encouraging to see a big company that understands that success in sustainability comes from actually improving lives, not simply selling people more stuff.
Of course, P&G's business is decidedly about "stuff." And not all of it is universally beloved. For example, reasonable voices will disagree on whether introducing disposable diapers in emerging economies like China promotes hygiene (and, according to one study, extends babies' sleep an extra 30 minutes per night) or promotes wastefulness in a world of limited resources. Business case studies are built of such debates.
And so time will tell whether and how much P&G's self-described "purpose-inspired growth strategy" — of "touching and improving more consumers' lives in more parts of the world... more completely" — actually changes lives. But it's pretty clear that the company is going to try.
Either way, P&G's "sustainability vision" represents the culmination of a major turnaround. It doesn't seem that long ago that P&G wasn't held in high regard in sustainability circles. Suddenly, it seems like the newest corporate good guy.
I asked Sauers, who's been with the company for nearly 24 years, how he sensed the shift. "I think it's a wonderful and exciting time for the company because I really do believe we can make a meaningful difference in environmental sustainability," he responded. "We have so many smart people in our R&D organization who I know are going to come up with these great innovations that enable consumers to be sustainable. I have the good fortune of having a full commitment from our CEO, which enables things to happen so much more easily within the company."
Sauers concluded: "It's just a great time to be in the company. It's going to be very interesting over the next few years here at P&G."
September 27, 2010 in Business Practices, Green Marketing | Permalink | Comments (1)
The Dairy Industry and the 2 Percent Solution
What's the carbon footprint of a glass of milk? It's more than a mere trivia question. Calculating, managing, and reducing the emissions of everyday products is a growing quest for companies across the business spectrum. But most products are multi-company affairs. So, it's one thing for a company to do this. It's altogether another thing to address climate change across an entire industry.
That's what's happening in the dairy industry, where a vast and complex web of players has come together to address their individual and collective climate — um, hoofprint.
This week, the industry announced it has completed a carbon footprint study that measured the life-cycle greenhouse gas emissions associated with producing milk in the United States. Researchers followed the journey of a gallon of milk across its entire life-cycle: growing crops to feed cows; producing milk and delivering it to processors; processing, packaging and distributing it to retailers; and consumer use and waste.
That's a big task, made bigger by the fact that milk is produced in all 50 U.S. states by hundreds of large and small dairy farmers. Putting the information together was no doubt a gargantuan task. Figuring out what to do about it is even harder.
But the exercise underscores both the complexity of industrial systems and the need for collaboration to measure environmental impacts, share best practices, and optimize the entire process.
The milk study was conducted by the Applied Sustainability Center at the University of Arkansas on behalf of the Innovation Center for U.S. Dairy, a two-year-old trade group, and is being presented this week at the International Food LCA Conference. It involved 540 farms, more than 210,000 roundtrips of transportation, and 54 processing plants — about one-fifth of the U.S. total.
It concluded that the U.S. dairy industry's greenhouse gas production is about 2 percent of total U.S. emissions. That's far less than others had estimated (a 2006 Food and Agriculture Organization study put the number at 18 percent), but it's still a significant contribution to global climate change — roughly equal to that of the airline industry. The airline industry, for its part, has pledged to halve its emissions over the coming years, and other sectors are being pressed to account for and reduce their emissions. The milk industry has its own plans to squeeze carbon emissions out of its value chain — 25 percent by 2020.
It's not simply a feel-good thing. The dairy industry has been feeling the heat. "Our customers — - major retailers and food channels — want us to do better," Erin Fitzgerald, vice president of sustainability for the innovation center, told me recently. "Our consumers are demanding this." Other players in the beverage industry, like Coca-Cola and Pepsico, are making their own moves to address their carbon emissions. "Even the financial community is asking, 'Are you able to measure your impact and quantify it for the future?'" Beyond that, says Fitzgerald, "It makes good business sense. It's better to be self-directed than directed by others."
The study also underscores how much climate emissions depend on the practices and efficiency of every member of the complex industry web. For example, it found that regardless of a dairy operation's size, region, or other factors, management practices were the biggest factors affecting carbon emissions. There's a dairy farm's "feed conversion efficiency" — based on how, how often, and what cows are fed — that affects their yield of milk and production of manure. The more efficient you can feed the animals, the lower the enteric emissions — that is, methane gas emitted from both ends of the cow (belching and farting, in plain speak), which represents 25 percent of the industry's emissions. The types of fertilizers used to grow feed crops like corn and alfalfa are another factor, 19 percent total emissions. Then there's manure management — when and how it is applied to the land as a fertilizer, which affects methane emissions — another 24 percent.
All told, nearly three-fourths of total emissions occur by the time the milk leaves the farm, before it goes to processing, packaging and distribution.
Consumers aren't left out of the equation. It turns out that fully 20 percent of milk is wasted by consumers — presumably, disposed of after exceeding its "sell-by" date. Retailers, too, cry over spilled milk — about 12 percent of milk waste occurs within store operations. Together, those account for 5 percent of industry emissions.
(You can download the executive summary of the report here - PDF.)
Why bother with all this trivia? "In the political environment, we're entering a period of radical transparency," explains Fitzgerald. "We thought it was very important to measure our impacts and chart a path for our industry to follow."
The good news is that there's a lot that can be done at every step of the process: changing livestock feeds, reducing or optimizing crop fertilizers, adopting no-till farming methods, switching from annual to perennial crops, installing energy-producing digesters to capture methane produced during manure storage, making boilers (for pasteurizing) and refrigeration more efficient, optimizing delivery routes, and many others. Not to mention growing feedstocks for biofuels and installing solar panels and wind turbines on their land.
It's a seemingly endless list of solutions. Fitzgerald's group has compiled a portfolio of 12 projects with names like "Cow of the Future" (practices and technologies to reduce enteric emissions) and "Next Generation Clean in Place" (reduced-temperature milk processing).
There are policy implications, too. The federal government is considering offering carbon offsets and incentive payments to encourage rural landowners to pursue climate-friendly activities. State governments and others may also include ag as part of their efforts to reduce climate emissions.
There's great potential here for farmers. "There is a move to look at ecosystems services — carbon trading, water trading, biodiversity trading," says Fitzgerald. All of which will require the industry to closely account for its climate impacts and benefits. "Take green spaces, for example. We have no idea of how much farms contribute to the value of green spaces. What would happen if farms were converted to urban landscapes? We're starting to quantify those environmental attributes."
Understanding those values could allow farmers some day to bottle up and sell not just milk, but also credits that result from being model climate citizens.
September 23, 2010 in Business Practices, Climate Change, State of the Art | Permalink | Comments (1)
Innovation, Sustainable Consumption, and 'The Mesh'
I've just glimpsed a world in which the elusive notion of "sustainable consumption" is both possible and profitable. It's a world where products are built to last, shared among both friends and strangers, made more affordable to all, support local communities, and are recycled back into more useful stuff. Best of all, it's a world that's already here, and is growing and thriving.
You may be wondering what I've been smoking. The better question is what I've been reading.
The answer: an engaging and inspiring new book called The Mesh: Why the Future of Business Is Sharing.
The book, published this month, is by my friend and mentor Lisa Gansky, a self-described "marketect" who's a master at spotting and capitalizing on consumer trends. Gansky is behind a succession of breakout companies, starting in the 1990s with GNN, the first commercial website, which sold to AOL, and more recently Ofoto, the photo-sharing company, sold to Kodak. In between, Gansky has worked with the founders of Yahoo!, AOL, Google, PayPal, and Mozilla, among others. (I last wrote about Gansky four years ago, about the ecotourism nonprofit she co-founded that is transforming lives in Chile.)
Her new book zeroes in on an emerging market transformation, a revolution taking place that even its participants don't yet see. Mesh businesses, says Gansky, are those that offer something that can be shared within a community, market, or value chain, including products, services, and raw materials. They harness advanced Web and mobile data networks to track goods and aggregate usage, customer, and product information. Because they focus on shareable physical goods, including the materials used, they make local delivery of services and products — and their recovery — valuable and relevant. And their offers, news, and recommendations are transmitted largely through word of mouth, augmented by social network services.
Why call this new wave of businesses "The Mesh"? In her book, Gansky explains:
A Mesh describes a type of network that allows any node to link in any direction with any other nodes in the system. Every part is connected to every other part, and they move in tandem. ... Mesh businesses are knotted to each other, and to the world, in myriad ways. Some connections are formed directly, such as an agreement among companies to identify a market and make coordinated offers. ... Other connections are formed indirectly through third parties, such as aggregated consumer data or via customers' social networks.
Mesh businesses exist thanks to hundreds of billions of dollars in available information infrastructure — telecommunications, mobile technology, enhanced data collection, large and growing social networks, mobile SMS aggregators, and of course the Web itself. They efficiently employ horizontal B-to-B services, such as FedEx, UPS, Amazon Web Services, PayPal, and an ever-increasing number of cloud computing services.
Zipcar and other car-sharing services are the prototypical Mesh businesses. As Gansky points out, they don't make, sell, or repair cars; they share them. That turns a pricey asset, a vehicle, that might otherwise sit idle 95 percent of the day, into a highly leveraged service delivery system, made possible by members connected through smart phones and websites to an ever-growing network of vehicles. In some respects, it's not unlike the "load management" airlines use to keep their flights full and profitable.
"It takes the friction, the pain, and the annoyance out of needing to do a carshare or a ride share or find some product or service that I'm in need of as I stand at some street corner in some city," Gansky explained to me recently. One result: people abandon their second — and sometimes their first — cars in favor of car sharing.
But it's not just cars. Mesh businesses are sprouting across a wide range of sectors: homes, fashion, energy cooperatives, office space, music studios, tool libraries, food and wine coops, and many more. Gansky has cataloged hundreds of Mesh organizations — both for-profit and nonprofit — on her website, from tiny cooperatives to Netflix, a billion-dollar share platform that transformed the video and film distribution industry.
A sampling: A Box Life (keeps shippable cardboard boxes in use longer); GoLoco (ride-sharing system that notifies users when their friends or interest groups are going places they want to go); Instant Offices (matches businesses with available office space); Kopernik (connects tools and people where they are most needed); Local Dirt (helps consumers buy, sell, and find local food); Sourcemap (helps consumers find and share stories about where products come from and what they are made of); YouNoodle (users discover and support early-stage companies); and Zopa (helps people lend and borrow money with each other while sidestepping banks).
As you'll see, some of these are pretty homegrown, a few are slick — but all seem to be garnering engaged and enthusiastic audiences.
"Some of this is driven by the recession and an increasing concern for waste," Gansky told me. "From a business perspective, waste is starting to show up on balance sheets in a way that it hasn't before. What we've normally considered to be waste can have a lot of hidden value. And if we squeeze on what we used to call waste, there's a lot of goodies that will come out, which will make the actual cost of waste much less."
That's fundamental to The Mesh, she says, and entire institutions will need to change along with the shifting business models. For example, secondary services — mortgages and insurance and such — have been organized to support owning homes and cars and other items. But a recent piece of legislation passed in California supports insurance covering car-sharing services.
One of the things I find fascinating about Mesh companies is that few are marketed as environmental or sustainable companies, yet that's exactly what they are. They dematerialize commerce by turning products into services, value access over ownership, optimize resource use, and generally improve efficiencies. Much like iTunes and the myriad other services that have transformed the book, music, and movie industries, Mesh businesses catch on not because they're greener, but because they're better — a point I've been making for some time.
But the Mesh is a sustainability play in several ways. One, as I said, is the fundamental notion of getting more value out of existing resources and assets. Second is that there's a premium on the social connectivity that typically takes place within Mesh businesses, "getting us out of our chairs and into the streets to interact with one another in a way that many people haven't in their own communities for a long time," as Gansky puts it.
Third, Mesh companies tend to take a systems approach to managing "stuff," something traditional companies and value chains haven't done, or done well. That drives companies to look beyond their products to the larger system within which they operate, including where things come from and where they go when no longer needed. Inevitably, they look for ways to optimize that value chain, cutting out waste and inefficiency.
All of which affects product design — material choices, of course, but also how products are made: more durable, flexible, reparable, and sustainable. A shared bicycle not only needs to last longer to get higher utilization, but must accommodate a broad range of customers, from tall skinny people to short portly ones, not to mention a variety of terrains and climate. "If you're interacting with your car on a regular basis the way you interact with, say, iTunes, it's an entirely different relationship," says Gansky. "That informs design, that informs waste, that informs sustainability."
"Earth," she likes to say, "is the ultimate share platform."
The potential here goes well beyond simply reinventing existing systems of commerce. Gansky envisions developing economies leapfrogging directly to Mesh models of sharing, without first experiencing the ownership society, much the way they have gone directly to mobile phones without ever building landlines.
There's a lot more to the Mesh, and I strongly encourage you to read the book, as I think there is something extraordinary going on here for both startup and incumbent players. The Mesh represents a brave new marketplace where consumers rule and business models are turned topsy-turvy. Where innovation and inspiration collide to create greener, cooler products and services that are high in value and values. And where disparate communities form, if only for an instant, to ignite companies and markets.
Learn more about innovative products, services, and business models at the upcoming GreenBiz Innovation Forum.
September 13, 2010 | Permalink | Comments (4)
