Leaders in the Clean-Tech Economy
Sustainability is more than just a fad— but that doesn’t make it easy.
October 7 2013 by Dale Buss
P&G also has undertaken showier sustainability initiatives, such as inventing and distributing a chemical that purifies drinking water in emerging markets. Detergents have been a bellwether for green efforts, as well, including boosting liquid concentrates to reduce shipping volumes and costs, promoting use of detergents that work well in cold water and launching Tide Pods, which are heavily concentrated and control load portions that diminish rampant detergent overdosing worldwide. Tide Pods became a $500-million product globally in their first year in 2012.
A Consumer-Created Push
A recent question posed to former P&G CEO Bob McDonald by an audience member at a green conference illustrated why, even with such accomplishments, changed social expectations are driving corporate leaders to keep pushing the envelope on sustainability. “As a mother of almost-two-year-old twins, I think there’s probably a special place in hell for me [for using hard-to-decompose disposable diapers],” Wendy Rosen, a media-relations executive with DuPont Industrial Biosciences told McDonald by way of introducing the query: “What kind of technology innovation are you bringing to that particular product?” McDonald was happy to be able to respond that P&G already has taken 40 percent of the material out of Pampers over the last decade, while improving performance—but he also felt obliged to pledge that P&G is “working hard” to do even better.
The incessant drumbeat of new and improved sustainability gambits continues. General Mills is pushing to boost raw-materials sustainability across its product lines, including buying one million eggs from cage-free hens for its U.S. retail operations last year. Nike has released a new mobile app called “Making” with the lofty goal of helping the fashion industry—and consumers—decide what source materials are the most environmentally responsible. Sodexo is working with college-campus food-service managers to meet growing student expectations for “local” sourcing of produce as well as cutting fuel consumption by ordering supplies just once a week instead of two or three times. Novartis has cut the unit cost of its Lamisil Gel by more than 55 percent simply by replacing plastic packaging with recyclable paperboard.
At the Waldorf-Astoria hotel in New York, a sustainability push has produced a 12-percent decrease in waste since the start of implementing true eco-friendly practices in mid-2012. The effort has included installing high-tech kitchen composters, changes in room recycling and an annual waste audit.
“We want to be able to say we’re the iconic, sustainable hotel in New York City,” says Flann Harris, the hotel’s purchasing manager. “We’re not there yet, but it positions us in the marketplace positively on something that our customer base does care about.”
Yet Chris Nassetta, CEO of Hilton Worldwide, is one-upping that effort with a comprehensive sustainability program for the chain aiming at cutting waste, carbon and energy use by 20 percent and water use by 10 percent, which he says Hilton is nearing at the end of a five-year window announced in 2009.
“Our sustainability success has only complemented our business success,” Nassetta says, citing more than $147 million in cumulative cost savings across the system—even while Hilton opened 1,148 new hotels and more than 170,000 rooms around the world over a three-year period. So “sustainability and the achievement of our corporate goals” are “one in the same,” he asserts.
Indeed, the gamut of corporate sustainability efforts runs as wide as the variety of business itself. But while many companies have initiated one-off “green” efforts for decades, the emphasis for CEOs now is to approach sustainability goals systematically and for the long term, keeping a “triple bottom line” of environmental benefits, financial return on investment and overall social-responsibility goals in mind. That strategy requires making sustainability as fundamental a concern as the stock price, executive succession, company culture and other primary responsibilities of the CEO.
“If you want to reduce the amount of waste from packaging that goes to landfills, you can move incrementally,” Nieland explains. “But now you need to actually optimize things at a higher level. Like, why do you need packaging at all? Do you just need it to protect the product or is it a marketing consideration for distinguishing your products from those of your competitors? Maybe you can achieve these marketing goals with a different technique. Sustainability requires you to look at things with a different kind of lens.”
At the same time, even as they might grasp the significance of sustainability to modern corporate governance, CEOs also must “cascade the sustainability message to their organizations in a disciplined way,” says Clinton Moloney, the managing director of PwC’s Sustainable Business Solutions. “There’s still quite a bit of work to do to get middle managers to have that viewpoint. Any time you make a philosophical shift in business, there’s always work to be done to enroll the rest of the company in that strategy.”
The latest wrinkle for CEOs in “sustainability” thinking is that the very term has become amoeba-like, often bulging and stretching to cover a variety of corporate attitudes and policies that have nothing to do with strictly environmental outcomes.
Launched by activists and endorsed by some CEOs, this amorphousness often is aimed at getting companies to embrace or go along with other progressive agenda items. Collectively, these tropes used to be known as “corporate social responsibility,” but—now—by shoving them into what has become the nearly sacrosanct arena of sustainability, these additional goals can be promoted and protected as part of a nearly untouchable package whose separate components may or may not stand up to individual scrutiny as a CEO’s priorities.
For example, Novartis CEO Joseph Jiminez includes as non-environmental “sustainability” goals “making a long-lasting impact on health, the economy and global health-care infrastructures in underserved communities.” Likewise, Hilton Worldwide CEO Christopher Nassetta believes that sustainability goals “are just one component of a web of challenges driven by broader global development trends, so we could not solve for sustainability in a vacuum.” And Nestlé CEO Paul Bulcke has come to include improving nutrition labeling as a sustainability imperative.
“The environmental area is where a lot of this stuff grew out of, but the social arena now is just as important,” says College of the Atlantic business professor Jay Friedlander.
The rising sway of activist, non-governmental organizations has played a huge role in warping the definition of sustainability. Oxfam International, for example, recently conflated environmental policies and workers’ rights in condemning the “sustainability” records of the “Big 10” of global food companies. Thus, it was no surprise that Cargill CEO Greg Page recently acknowledged he has come to define sustainability broadly as meeting “today’s needs without impairing the world’s capacity to serve future generations,” as the grain-processing giant struggles with NGO demands over child labor on cocoa farms in Africa.