Gambling with Climate Change: Procter & Gamble
Procter & Gamble, a multinational consumer goods company, lays out an impressive plan to address climate change, but is far too slow to adjust its operating processes.
Climate change and its associated regulation will significantly impact Proctor & Gamble (P&G), a multinational consumer goods company, if it does not work to accelerate its change. P&G is feeling the effects of climate change primarily in the forms of anticipated regulations and social pressure. Despite an impressive plan outlining how to address climate change challenges, P&G has been far too slow to adjust its operating processes.
P&G, the 39th largest public company in the world,[1] has a business model that relies heavily on CO2 emissions. Many of P&G’s supply chain partners provide raw materials that are derived through petroleum-driven processes.[2] Once raw materials are received, hundreds of P&G factories throughout the world burn fossil fuels to produce, package, and deliver goods. Finally, many of the products sold by P&G enable excessive energy use by customers, such as laundry detergents that require only hot water.[3] An operating model heavily reliant on excessive CO2 emissions coupled with the sheer magnitude of the organization leaves P&G exposed to significant risks associated with climate change.
In September 2015, ClimateCounts.org gave P&G a grade of “D” based on climate change goals, policy stance, and measurable impacts — the worst grade given in the “household products” industry. [4] InfluenceMap, a non-profit organization whose goal is to “communicate the extent to which corporations are influencing climate policy”, took it a step further and accused P&G of obstructing climate change legislation (along with 50 of the world’s 100 largest companies). [5] [6] The P&G website, however, paints a much different picture.
P&G’s position statement on climate change outlines how P&G aims to reduce greenhouse gases (GHG) by: (1) creating supply chain partnerships that develop renewable material replacements for petroleum derived materials; (2) developing energy efficiency measures in facilities, transitioning to cleaner alternative fuel sources, and delivering product with energy efficient vehicles; and (3) creating efficient product packaging and educating consumers on energy efficient use of its products.[7] Also, P&G posted “sustainability reports” for every country it operated in dating back to 1999. [8]
Unilever, P&G’s largest competitor, publishes a sustainability strategy that is remarkably similar in concept.[9] This is not surprising, as several organizations publish industry reports that highlight best practices in climate change, encouraging industry learning.[10] In comparing hard numbers, however, Unilever and P&G are quite more different. According to the 2015 sustainability reports posted by each company, P&G’s total GHG production was 5,256 metric tons to Unilever’s 1,770.[11] With P&G’s annual production 41% greater than Unilever’s, this is not necessarily surprising. Looking at the intensity ratio – total GHG production over total overall production – P&G is still over double Unilever at 187kg CO2/ton compared to 89 kg CO2/ton.[12] [13] Both in absolute and relative terms, P&G is lagging severely behind.
Although P&G clearly laid out changes to address climate change, it grossly underestimates the pace at which change is necessary. In 2010, P&G set a goal to reduce absolute GHG emissions by 30% before 2020. Five years into this goal the company had only reduced emissions by a measly 4%.[14] Furthermore, only 40% of the company’s environmental goals have a timeline associated with them.[15] For example, one goal states, “Continued progress on [zero manufacturing waste to landfill].”[16] This weak goal setting and lack of tangible progress is a recipe for disaster.
P&G needs to revise its goals and then hold itself accountable to them. Each goal should be specific, ambitious, measurable, and timeline-oriented. They all require an implementation plan that spans P&G’s worldwide footprint. Second, accountability has been absent. P&G’s website touts an impressive sustainability vision, while in reality the company is on pace to miss its GHG reduction goal by 30 years.[17] [18] Make no mistake, these are not easy challenges to address, but the investment in time, effort and money will far outweigh the costs associated with inaction. (797 Words)
[1] Forbes, “The World’s Biggest Companies.” http://www.forbes.com/companies/procter-gamble/, accessed November 2016.
[2] Proctor & Gamble, “Climate Change.” http://us.pg.com/sustainability/environmental-sustainability/policies-practices/climate-change, accessed November 2016.
[3] Ibid.
[4] Climate Counts, “Climate Scores for Household Products Industry.” http://www.climatecounts.org/scorecard_sectors.php?id=17, accessed November 2016.
[5] InfluenceMap, “About.” http://influencemap.org/page/About, accessed November 2016.
[6] Bloomberg, “Biggest Companies ‘Obstructing’ Climate Policy, Report Finds.” http://www.bloomberg.com/news/articles/2015-09-15/biggest-companies-obstructing-climate-policy-report-finds, accessed November 2016.
[7] Procter & Gamble, “Climate Change Position Statement.” http://us.pg.com/sustainability/environmental-sustainability/policies-practices/climate-change, accessed November 2016.
[8] Procter & Gamble, “Sustainability.” http://us.pg.com/sustainability, accessed November 2016.
[9] Unilever, “The Unilever Sustainable Living Plan.” https://www.unilever.com/sustainable-living/the-sustainable-living-plan/our-strategy/, accessed November 2016.
[10] PricewaterhouseCoopers, “Global Sustainability and Climate Change.” http://www.pwc.com/gx/en/services/sustainability/publications.html, accessed November 2016.
[11] Procter & Gamble, 2015 Annual Sustainability Report (Cincinnati: Procter & Gamble, 2015), p 11.
[12] Procter & Gamble, 2015 Annual Sustainability Report (Cincinnati: Procter & Gamble, 2015), p 11.
[13] Unilever, Annual Report and Accounts 2015 Strategic Report (London: Unilever, 2015), p. 55.
[14] Procter & Gamble, 2015 Annual Sustainability Report (Cincinnati: Procter & Gamble, 2015), p 10.
[15] Ibid.
[16] Ibid.
[17] Procter & Gamble, “Sustainability.” http://us.pg.com/sustainability, accessed November 2016.
[18] Procter & Gamble, 2015 Annual Sustainability Report (Cincinnati: Procter & Gamble, 2015), p 10.
Adam, thank you for flagging P&G’s shortcomings as it relates to adapting its business to climate change. It is disheartening to know that a company that directly touches so many consumers is so far behind. Do you have any guess as to why Unilever is so far ahead of P&G? Does Unilever just have more of a social conscience? Or has Unilever identified some economic incentive to adapting to climate change? I’m curious what might potentially catalyze a change in P&G’s approach. Also, how might we go about quantifying the economic headwinds that climate change presents for P&G? Again, thank you for the post; it raises a lot of interesting questions about the company.
I agree that P&G is surprisingly behind the curve on its adaptation to climate change mitigation. With public concern growing, you would imagine that a company as consumer facing as P&G would be more proactive to reduce its dependency on operations and technology that produce GHG emissions. The big question is what steps should it take? Can P&G shift its energy consumption towards more renewable or more efficient sources? Will a fundamental change in technology be necessary to make a significant impact on its operations? Is P&G in the best position to develop this technology?