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?