Catherine Early reports on how Unilever and P&G are both pursuing bold sustainability agendas
As two of the biggest food and consumer goods companies in the world, Unilever and P&G (formerly Procter & Gamble) have gargantuan environmental footprints.
But the sheer size of these companies also means that if they really carry through their sustainability visions, they have the power to bring about significant changes – from their own supply chain to consumer behaviour.
Both companies have upped the ante on their sustainability ambitions in the past few months, seeing it as a central issue in growth plans. In November 2010, Unilever – which owns brands such as Dove, Walls and Hellmans – announced that it was to halve the water, waste and carbon impacts of its products and ensure all its agricultural raw materials are sustainably sourced by 2020.
This came hot on the heels of the release of a sustainability “vision” by P&G – whose brands include Ariel, Gillette and Pringles – in September 2010. The company pledged to use only renewable or recycled materials in products and packaging, and stop all manufacturing and consumer waste going to landfill.
Two views of sustainability
Peter White, P&G’s director for global sustainability, explains that the company has had a sustainability strategy since 1999, but this was boosted in 2007 when it added a specific principle incorporating sustainability into its products, packaging and operations to its mission statement.
“Up until then it had always been the concept of doing the right thing, but in 2007 we used the ‘s’ word and put it specifically into the purpose, value and principles of the company,” he says.
P&G sees sustainability in terms of business opportunity, not just responsibility to the environment. Sustainability can protect the business and save money, but can also help build the business through new products that save consumers money too, such as concentrated washing liquid, he explains.
Karen Hamilton, vice-president of sustainability at Unilever, says that the company’s priority is growth, but that it believes this is not possible with a business-as-usual approach.
With the global population expected to grow to nine billion by 2050 and the corresponding rise in resource demand, the company needs to look for a new way to respond, she explains. “We’ve set ourselves a vision to decouple business growth from our environmental impact and really use sustainability as a key driver for our business growth.”
Hamilton believes that Unilever’s plan is different to those of other corporations as it does not distinguish between various parts of the business or geographical locations, but covers all 400 of its brands in the 170 countries where it operates.
Both P&G and Unilever have already made significant progress on previous targets. P&G said in 2007 that it would reduce energy, waste and CO2 by 20% by 2012. So far, White reports that energy and CO2 are down 14% and 11% respectively, while waste has been slashed by 50% and water reduced by 16%.
Although the 20% target refers to each unit of production, rather than “absolute” or overall figures, P&G’s sustainability report reveals that it has achieved an absolute cut in all these areas.
Unilever, meanwhile, claims that it has cut its absolute carbon emissions by 40%, water by 66% and waste by 75% in the past 15 years.
The strategies of both companies are bursting with new targets. Unilever’s latest plan tightens up one originally published in 2009. The stated aim of that plan was to “reduce our overall environmental impact while doubling the size of our business”.
However, there was no timescale for this strategy, and neither was there any clarity on how progress would be measured. The updated plan now gives a deadline of 2020 for its aims.
These include the ambitious goal of halving the carbon, waste and water impacts of its goods across their life cycle. The company wants to double its sales over that period, so in effect its overall environmental footprint would remain at its current level.
Nevertheless, a target that involves decoupling business growth from environmental impacts is extraordinarily ambitious. Unilever has measured the impact of 1,600 products, which represents 70% of its sales volume.
This has revealed what Unilever admits is its biggest challenge. Manufacturing accounts for 3% of the total greenhouse-gas (GHG) emissions of the average Unilever product, while raw materials are responsible for 26%. By far the biggest impact comes from consumer use, at 68%.
Similarly, White says: “P&G’s biggest energy footprint over the life cycle of a product is heating water to wash clothes. It’s very clear that the energy use in P&G plants is very small compared to that used in people’s homes.”
In an effort to reduce their own environmental footprints, both companies are therefore targeting one of the most tricky issues of all – that of consumer behaviour. P&G has developed Ariel Cool-Clean, while Unilever has Persil Small and Mighty, which allow consumers to wash clothes at temperatures as low as 15°C.
Unilever estimates that Persil Small and Mighty not only uses half the water and half the packaging in its creation, but also reduces emissions by 10–50% per washing load. Hamilton says: “Unilever laundry products are used by one in three people globally, so that’s 1.25 billion washes a year. If we can make small changes like this, we can start to save significant amounts of carbon.”
Of course, the difficulty with targeting consumer behaviour change is how to measure progress. Government bodies and NGOs have also had campaigns to wash at lower temperatures, so it will be hard for either Unilever or P&G to claim that their product or campaign has had a significant effect.
White admits that this is tricky, but that there are ways of sampling consumer behaviour. “This is an area we can influence, but it’s also where we need to work with other partners in industry and stakeholders such as NGOs and government agencies.”
P&G’s own data show that, in 2002, only 2% of the UK population were washing at 30°C or less, but by 2007, it was up to 27%. White is adamant that P&G can decouple growth from environmental impact despite the reliance of this particular ambition on changing consumer behaviour.
It has plans to run plants on renewable energy, ensuring the water that leaves its plants is as clean, if not cleaner, than that entering them and wants to see zero manufacturing waste going to landfill.
P&G has more than 140 manufacturing plants globally so it will take some time to see these standards at all of them, but it has made a start. Last year it built its Milenio facility in Mexico, with more than one million square feet of manufacturing space.
The water from this plant is 100% recycled, with wastewater and rooftop rainwater collected and treated by an on-site water-treatment plant. It is building 19 new plants over the next four years, all of which will use a 77-point tool that assesses siting, transport, water and energy sources.
Renewable-energy technology has been installed at several plants, including solar panels on a plant in Oxnard, California and a wind turbine at Coervorden in the Netherlands.
P&G has also come up with ways of reusing waste substances produced in the manufacturing of its products. This has enabled it to achieve a 50% reduction in solid waste from manufacturing, against a target set in 2007 to reduce it by 20% by 2020.
White says that P&G has achieved this through a very systematic approach. It has identified all waste material from each plant and worked out ways to use it. For example, the waste oil that comes from cooking Pringles is now sold to make biodiesel. Sludge and fibres left over from making paper are sold to a local construction company that makes low-cost roofing tiles.
This makes business sense too, as previously the company had to pay for these waste products to be taken away. “This is industrial ecology essentially, you’re taking the negative away and providing a second value,” White says.
Supply chain transparency
Another huge challenge for both companies is how to really know what is going on in such vast supply chains. Unilever wants to source 100% of its agricultural products sustainably by 2020.
The company has been a leader in the development of sustainable sourcing, being a founder member of the Marine Stewardship Council and the Roundtable on Sustainable Palm Oil, and one of the first companies to ask its suppliers to report their carbon emissions through the Carbon Disclosure Project.
Nevertheless, hitting the target will be no mean feat as it has 10,000 raw materials and packaging suppliers and a staggering 150,000 indirect suppliers. Around half of all its raw materials are agricultural and this covers some 250 different types of crop.
After 10 years of work on this issue, Unilever estimates that only 10% of its raw materials are sustainably sourced. In order to improve its record on supply chain issues, Unilever uses a combination of third-party certification – such as the Forest Certification Scheme and Rainforest Alliance – and self-certification.
This involves farmers answering questions on a series of indicators including water and fertiliser use and labour standards. Unilever then tracks if they are achieving what they set out to do. It is also planning random annual checks on a specified number of farmers.
P&G introduced a supplier scorecard in May 2010, which covered 400 of its main suppliers. The scheme is additional to the company’s existing sustainability guidelines for suppliers, which set out sourcing standards and expected performance.
The scorecard measures suppliers against P&G’s own target to sell $50 billion of “sustainable innovation products” (SIP) by 2012, and is intended to reward suppliers for innovative ideas.
To qualify, the product must have at least a 10% improvement in one environmental aspect over the product’s life cycle, and be no worse in any other aspect.
The aspects considered are energy consumption, water consumption, total amount of material used in either product or packaging, transportation and use of renewable materials. P&G developed the SIP definition and criteria with input from external stakeholders.
One example is Ariel Excel Gel, which can produce energy savings of 20–50% per wash when used at 15°C. The compact product also uses up to 45% less packaging, and up to 57% fewer trucks for transport.
This year, the SIP scheme is being expanded to 600 suppliers. But it will take some time to ramp up to cover all 75,000 in P&G’s supply chain.
The company also uses third-party audits and supplier-sustainability guidelines. Buyers visit suppliers at least once a year and some environmental demands are written into contracts.
Despite their company’s respective efforts, both White and Hamilton admit that it is impossible to know every issue in the supply chain. The potential effects of this on a company’s reputation were demonstrated when, in 2009, Greenpeace named and shamed Unilever as one of a number of companies trading with Indonesia’s Sinar Mas Group.
The NGO accused the palm-oil supplier of breaking Indonesian law by clearing forests without undertaking environmental impact assessments. It also said it had cleared peatland near a site protected by the wetlands protection treaty, the Ramsar Convention.
The story hit the headlines globally and Unilever promptly suspended trade with Sinar Mas Group. This was the second time Unilever had been targeted by the NGO over palm oil – in 2008, Greenpeace activists occupied production lines and protested at the company’s headquarters while dressed as orang-utans.
Unilever’s products consume 3% of the global total amount of palm oil and it has now pledged to buy only certified oil by 2015. By the end of 2010, 15% of the palm oil it uses came from certified oil, although this was below its target of 30%.
Role of the environment professional
A huge part of making a company sustainable is making sure all employees understand the aims of the strategy and work the principles into their job.
P&G has environment professionals employed mainly in two areas of its business. A team of more than 700 employees works to ensure that products are safe for human beings and the environment, while site environment leaders head up sustainability programmes at its manufacturing sites. A global sustainability department leads overall development of its strategy.
P&G also aims to spread the word throughout the company so that those employees whose job is not specifically related to the environment are on board. It publishes articles about sustainability on its intranet and has a sustainable ambassadors’ network.
All employees who either work in sustainability, or have an interest in it, can link together virtually to share best practice and ideas of what solutions can be applied at site or project levels. There are around 500 ambassadors globally, White reports.
The company marks annual Earth Day by asking all employees to make a personal pledge on how they are going to incorporate sustainability into their work, and has volunteer events where employees can get involved in local environmental projects.
P&G also has a three-year partnership with WWF to increase awareness and training on sustainability. Some employees, such as plant managers, have sustainability goals integrated into their incentive programme.
Unilever has a small core team of just seven environment professionals. “We see this as something we want to drive into the heart of our business so it’s counter-productive to have a big team,” Hamilton says.
This team’s main role is to work directly with the brand and research and development teams, so it primarily consists of people from marketing. It also has a group of environment professionals who are experts on life-cycle analysis. In the past three years, this team has measured the GHG, waste and water footprints of 1,600 of its products.
Unilever has developed a tool whereby product managers have to consider if a new product is better, worse or the same as what preceded it and that is reviewed alongside the business case. Another tool allows product teams to assess the impact of changing aspects of the product, such as formulation or packaging, on waste, water and GHGs.
“I think this is quite radical actually because we’re asking for an analysis on a quantitative level which gives us a view on whether people are moving innovations in the right direction,” Hamilton says.
Outside those main teams of environment professionals, it has focused on the employees it considers most important in furthering the company’s sustainability vision. These are the scientists involved in research and development, the marketing team and the procurement managers who buy the raw materials.
Each of the company’s 10 product categories has a sustainability champion and it has a specialist team of agronomists who assist the procurement team. Environment professionals will be central to the companies’ focus on sustainability in years to come.
With global population soaring, most companies’ business plans are aiming to expand to meet increased demand, and Unilever and P&G are no exception, despite warm words and ambitious targets.
While White acknowledges that the anticipation of more environmental regulation in the future is a driver for P&G’s sustainability plans, he stresses that regulation merely sets the minimum acceptable standard. There are huge opportunities in going beyond the minimum, he believes.
“By 2050 there will be nine billion people on the planet and we want to reach all of them,” White says. “We can only do that if we take a sustainable approach.”
Unilever similarly sees sustainability as an essential part of its business model for the future and one that is increasingly being rewarded by the financial community.
But going further than that, Hamilton says that there is no choice but to focus on sustainability if the business wants to survive in an era of massive pressure on resources.
She says: “We’re trying to shift from sustainability being put in some brands and not others, from it being sometimes a philanthropic effort to being part of how we do business in the 21st century.”