Stakeholder Trends and Insights
P&G Announces New Sustainability Goals – Will They Meet Shareholder Expectations?

Procter & Gamble just announced expansion of its sustainability goals with ambitious new initiatives for 2020 aimed at water conservation and product packaging. But when you’re a company as big, old and sprawling as the Cincinnati-based consumer packaged goods giant, nothing comes easily — including accomplishment of a huge sustainability agenda. And some in P&G’s diverse body of shareholders are making sure to hold the company’s feet to the fire.

CEO A.G. Lafley was able to boast about P&G’s “promises kept” on sustainability at the company’s recent annual meeting.

“Our objective is no tradeoffs, offer consumer-preferred brands and products while conserving resources, protecting the environment, improving social conditions for consumers who need it most and improving growth and value creation for the company,” he said in his remarks to shareholders.

Lafley also was able to cite specific examples of P&G’s progress on sustainability, including detergent formulas that work with cooler wash temperatures and a new partnership with DuPont to blend cellulosic ethanol made from agricultural waste into the Tide cold-water formulation, which will repurpose more than 7,000 tons of waste each year. He also mentioned the P&G program to deliver 10 billion liters of purified drinking water around the world by 2020.

His testament to sustainability successes added to some new goals that P&G announced almost simultaneously. Adding to its 70 percent reduction in water use per unit of production between 2002 and 2012, the company expanded its commitments to include cutting such water use by an additional 20 percent per unit of output — with a special emphasis on conserving water at facilities in water-stressed regions.

Also, P&G said it was already on track to reduce packaging by 20 percent per unit of production by 2020, so the company raised the bar and committed to doubling the use of recycled resin in plastic packaging and ensuring that 90 percent of product packaging is recyclable — or that programs are in place to recycle it.

But at the annual meeting, such news wasn’t enough for some shareholders. One who said he represented a nonprofit social responsibility group cited his proposal in the proxy for the meeting that P&G assess the environmental impacts of continuing to use non-recyclable brand packaging at all. He said that P&G still uses “a significant amount of packaging that is not recycled or recyclable, especially plastic packaging” — including Crest toothpaste in a laminated tube and Tide Pods in flexible pouch-style packaging.

And apparently believing that the 90 percent recyclable packaging goal announced by P&G just a few days before the meeting wasn’t ambitious enough, the shareholder noted that rival Colgate-Palmolive agreed to phase out most of its non-recyclable packaging by 2020. He wanted P&G to report to shareholders on its commitment to phase out such packaging despite the fact that a company news release had very recently done exactly that.

Lafley could only cite P&G’s progress in that arena and “clearly demonstrated commitment to the issue” and told the shareholder that “we have common cause and a common end objective here.” He denied the shareholder’s request for a new and separate report.

But that didn’t keep another shareholder from asking for special attention for her pet sustainability cause. Kathy Guillermo of People for the Ethical Treatment of Animals (PETA) asked Lafley if P&G would support the new ban on the import of animal-tested personal-care products and cosmetics to India even though a trade association there “has tried to weaken” such bans.

Again citing a “common goal” with the questioner, Lafley said that P&G already has invested nearly $370 million and developed more than 50 alternatives to animal testing and will continue to “work with regulators around the world to ultimately end research involving animals.”

Overall, Lafley did a good job of authenticating P&G’s commitments to sustainability in his exchanges with shareholders at the meeting. Time will tell whether the company’s follow-through on these commitments is enough to keep concerned shareholders happy down the line.

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