P&G -- Where Revenue, Savings and Sustainability Go Hand-in-Hand (Part 1)

With a hat tip to my friend and colleague, Bob Ferrari, I came across P&G's "Designed to Matter" annual report, which, in Bob's words, provides "an excellent reference for how sustainability goals can be established and tracked across the extended supply chain." To summarize the findings from the report, sustainability has become a core component of doing business at P&G vs. simply reporting on policing the function. The venerable CPG leader has institutionalized an approach to not only account for CSR metrics in its product design, procurement and supply chain operations, but to use sustainability initiatives in a not-so-stealth way to drive significant cost savings. Consider how, as Bob sites, "Internal supply chain and other initiatives have led to a cumulative 53 percent reduction in waste disposal, along with a 52 percent reduction in water and energy usage". But what are some of P&G's specific initiatives? Let's dig into the report and see. In this post and a couple to follow, I'll highlight a few of the specific initiatives that P&G is pursuing to drive CSR results and savings, highlighting how they can serve as a model for other companies.

As one who is especially circumspect regarding the "green police", I often find the corporate nods and winks to sustainability an utter waste of time. They remind me of how too many supplier diversity programs are run with an eye to meeting a number for reporting purposes vs. effecting useful and real change. But P&G truly believes in strongly driving CSR change -- and savings at the same time. Before getting into some of the actual case studies that they highlight in their annual sustainability report, it's worth first examining P&G's overall goals for the program. The first ties directly to product strategy. Here, P&G's goal is to "develop and market at least $50 billion in cumulative sales of 'sustainable innovation products,' which are products that have an improved environmental profile". To date since the program began in 2007, P&G has achieved $13.1 billion toward this goal.

Another major goal of the program is to deliver significant operations improvements through an "additional 20% reduction (per unit production) in CO2 emissions, energy consumption, water consumption and disposed waste from P&G plants, leading to a total reduction over the decade of at least 50%. Their progress toward these goals are impressive. So far, they've reduced energy usage 48% since 2002 (11% since 2007), C02 emissions by 52% (10%), waste disposal by 53% (30%) and water usage by 52% (13%). But many of the real changes P&G is making are taking place in the supply chain vs. within their own facilities. Consider how in one effort to reduce waste, P&G "is incorporating sustainability criteria into the design of customized products and display units". The result? P&G's suppliers are "now often able to eliminate redundant freight and packaging waste within displays," improving by 12-30% the number of units that can fit on a pallet, "reducing truck mileage and C02 emissions," not to mention saving money in the process!

Stay tuned for additional details on how P&G is engaging their suppliers to improve their overall CSR profile while driving cost out of their overall supply chain equation.

- Jason Busch