How can Ecolab (ECL) – a $38B global conglomerate – continue to increase shareholder value while minimizing its impact on the environment?

Delivering shareholder value while minimizing the impact on global water usage – are they mutually exclusive?

Ecolab context

Ecolab’s scale and environmental impact cannot be overstated: today, the food and energy sectors are the two largest consumers of fresh water (e.g., Consumer Packaged Goods companies, Oil & Gas), and Ecolab provides technical solutions to these and other sectors in order to reduce their water consumption. Ecolab operates four business units that provide water, hygiene, and energy solutions to their customers across the globe. With such scale, Ecolab helps manage 1.1 trillion gallons of water annually and the safety of 27% of the world’s processed foods every year [1].

Ecolab operating and geographic units


Management focus

Water management is important for Ecolab’s management for two primary reasons: first, it’s important to their customers. Water efficiency is among the top goals for global multi-nationals. For example, Coca-Cola aspires to reduce its water usage from 2.26 liters per 1 liter of product in 2010 to 1.7 liters of water per 1 liter of product in 2020 [2]

Coca-Cola water usage per liter of product


Exxon Mobil, the world’s 10th largest company by revenue, used a staggering 290 million cubic meters of freshwater to support its global operations [3].

Exxon Mobil total global freshwater consumption


Second, water preservation is important to its broader stakeholders. By 2030, total water usage due to population growth and affluence will require an estimated 40 percent more water relative to today, putting increased pressure on natural resources. Companies have been tasked by their stakeholders to increase their focus on the environment, including suppliers, distributors, communities that firms operate in, and employees. For example, from a Human Resources point of view, 45% of candidates would be willing to work for 15% below market rate to work for a company that has positive social or environmental impact [4]. By continuing to invest and be conscious of its impact on the environment and water use more specifically, Ecolab can continue to attract world-class talent to the great state of Minnesota.

Plan to tackle

Ecolab has historically relied on its strong Research & Development pipeline to build solutions for customers that reduce their overall impact on the environment, while simultaneously supporting these products and customers with a 25,000 person sales-service force. For example, Ecolab was named the Environmental Protection Agency’s 2016 Safer Choice partner of the year due to its innovative disinfectant system that includes a closed-loop dispensing system that reduces packaging waste and simplifies on-site dilution for users in healthcare settings. The active ingredients in the main product breaks down into water and vinegar after use. These and other innovations have historically allowed Ecolab to minimize it and its customers’ overall impact on the environment.  [5]. 

Ecolab has been able to achieve these and similar accolades (e.g., 2016 Global 100 Most Sustainable Companies, 2016 World’s Greenest Companies, etc.) due to top-down commitment to reducing its impact on the climate, including overall water usage. One strategy that has allowed them to achieve this is by dedicating a Vice President role to Corporate Sustainability who oversees, among other responsibilities, Ecolab’s innovation pipeline to ensure that impact on the environment is considered when making investment decisions. Further, Ecolab is regarded as an industry leader by formalizing their point of view on climate change holistically; their position states:

Ecolab is committed to continuous efforts to reduce greenhouse gas emissions in its own operations. Ecolab addresses climate change impact as criteria in its innovation process and actively works with customers on their climate change mitigation strategies by providing products, services and data to support these efforts.[6]

To continue delivering value to its customers who seek to reduce their water usage, Ecolab should further invest in in Research & Development to help drive product innovation to ultimately deliver shareholder value while reducing global water usage. In 2016 Ecolab spent ~1% of revenue on R&D expenses, which is in-line with other Chemical & Energy providers in North America, however European and Japanese counterparts spend ~1.5-2.5% of revenue on R&D [7].

Open questions

As one evaluates Ecolab and other multi-nationals’ position on water use and the climate more broadly, a few questions come to mind:

  1. Do these efforts truly add value to shareholders and uphold management’s fiduciary responsibility to create shareholder value?
  2. How, if at all, should American CEO’s react to the Trump Administration’s decision to leave the Paris Accord?
  3. What role, if any, do global companies have to mitigate climate change?

729 words



[1] (2016). 2016 Annual Report. [online] Available at [Accessed 14 Nov. 2017].

 [2] (2017). Water Stewardship & Replenish Report. [online] Available at: [Accessed 14 Nov. 2017].

[3] (2017). Corporate Citizenship Report. [online] Available at [Accessed 14 Nov. 2017].

[4] Meister, Jeanne (2012). [online] Available at from

[5] (2016) Ecolab Press Release. [online] Available at [Accessed 14 Nov. 2017].

[6] (2016) Ecolab Policy Climate Change. [online] Available at [Accessed 14 Nov. 2017]

[7] (2016) Strategy& Comparison of R&D Expenditures (2005-2015). [online] Available at [Accessed 14 Nov. 2017]



R.I.P.(A) – Can Sierra Nevada lead the charge to give us cool craft IPA in a hotter world?


Diamonds Are Forever…But Their Supply Chains Are Not

Student comments on How can Ecolab (ECL) – a $38B global conglomerate – continue to increase shareholder value while minimizing its impact on the environment?

  1. Your essay clearly outlines that Ecolab is combating climate change on two main fronts: 1) by developing water treatment products which help customers reduce water usage (through less waste) and 2) committing to reduce greenhouse gas emissions in its own operations. The first approach absolutely creates value for shareholders. Ecolab is the largest provider of water treatment products in the world [1]. This is one of the company’s core businesses and is, therefore, integral to how it creates value for shareholders.

    Water treatment has been necessary since long before people were concerned about climate change. There are several demand drivers which Ecolab stands to benefit from. Customers may demand water treatment products for safety/health reasons, to reduce costs through more efficient use of water or to reduce their own environmental impact. Furthermore, if water supply is negatively affected by climate change going forward, water treatment products will likely command an even greater premium. Ecolab should continue to innovate here to create value for shareholders.

    Ecolab’s second approach to combating climate change – reducing its own emissions – is perhaps less compelling for shareholders, or at least does not clearly maximize value for shareholders. That said, for a company which makes products that have sustainability applications, a commitment to sustainable operations is consistent with its own strategic vision. To the extent Ecolab’s customers care about this than Ecolab’s shareholders are forced to, even if they may not be concerned otherwise.

    This all relates to your final question on global companies’ responsibilities to mitigate climate change. A company’s responsibility is to its shareholders. If shareholders demand that a company take action to mitigate climate change, then it should do so. Ecolab’s actions suggest that its shareholders do care about this, and so it should continue to press forward with these efforts.

    [1] NALCO Water, An Ecolab Company, “About NALCO Water,”, accessed November 2017.

  2. I generally agree with AS’s comment above, although I believe that it is not so obvious that Ecolab’s efforts in developing water treatment products helping customers reduce water usage are aligned with shareholder’s interest. Ecolab is in the business of providing water solutions and therefore the more water solutions they sell the more revenues they can generate – this, I presume, would put Ecolab and its management at a difficult situation with a possible conflict of interest. Should management maximize sales today or invest in R&D to provide more efficient solutions that although may require their customers to purchase less but would create a sustainable competitive advantage. This is a very interesting situation and I would love to know more about it – my initial thinking is that the management’s true incentives to innovate depend on the level of competition in the space (i.e. external pressure to innovate) as well as their customer’s sense of urgency in reducing their water consumption.

  3. Great article, Fuad. Determining the stance multi-nationals should take with regards to shareholder value is interesting. . For the past decade, the world has largely looked to government to create policies that force companies to internalize the externality of the impact of their emissions. However, I see two elements driving increased direct engagement from multinationals. First, the efforts of government to form a coordinated response to the climate change have been uneven (as seen most recently in the US withdrawal from the Paris agreement). Second, the scale of multinational companies continues to grow, such that they are larger than some small countries. It follows that climate change presents a direct threat to the continued operations of the multi-national companies themselves. Thus, I feel it is consistent with the fiduciary duty of the board for companies like ECL to take direct actions to mitigate emissions, even at the cost of short-term profitability.

  4. Global companies have a great deal of responsibility to mitigate global climate change. Extracting value for shareholders by stealing from the future just because it’s legal not only puts companies at risk for future litigation and regulatory clamp-down on their excesses (think the Super Fund Act), but it is also immoral. Companies exist for longer time horizons than their managers and it is the duty of today’s management to safe-guard their company’s strategy by considering what risks their successors will face. Climate change will drastically affect supply chains, resource costs, and government policy, and companies need to take steps today to mitigate the worst of these risks.

  5. Question: Do these efforts truly add value to shareholders and uphold management’s fiduciary responsibility to create shareholder value?

    To answer your first question on the impact sustainability efforts have on shareholder value- I absolutely believe they add value and uphold management’s fiduciary responsibilities. These efforts represent an investment in the long term success and sustainability of the business. As stated in the above argument, by 2030 total water usage will be 40% more relative to today [4]. This is a significant increase in water consumption and the company needs to be prepared for the supply shortages that will inevitably take place as we approach 2030 and, as a result, the increase in costs of operations. In order to mitigate against this future risk and maintain shareholder value, it’s imperative for Ecolab to invest in R&D efforts that allow them to minimize water usage and make more sustainable investments.

Leave a comment