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Review of 2012 Sustainability Report from Procter & Gamble Inc.

Procter & Gamble: Almost spotless

By William D Alessandro on December 31, 2012 at 2:29pm.

Content:
 

Imagine how many rings of hell Procter & Gamble had to pass through to reach their 175th birthday in 2012.   Powerful, global economic forces continuously challenge the largest consumer packaged goods company in the world.   P&G must even beat back recurring, slanderous rumours that the famous old trademark “moon and stars” was a demonic symbol and that the company tithes the church of Satan.  
 

If it is to prosper for the next 25 years and beyond, P&G has to continue to dazzle investors and delight customers from head to toe with iconic billion-dollar brands as it has in the past with Tide and Ariel, Bounty, Crest, Febreze, Pampers, Pantene, Vicks and many others.
 

Rest assured, P&G has polluted the environment and done bad things since the English candle maker William Procter and the Irish soap maker James Gamble joined forces near Cincinnati in 1837.  But Corporate Knights, the Canadian-based investment company, ranks P&G #66 on its 2012 list of 100 most sustainable corporations in the world.  (Only seven other U.S. corporations make the cut.)  P&G has held down a spot on the Dow Jones Sustainability Index for fourteen consecutive years.
 

This is the fourteenth sustainability report for P&G’s worldwide operations.  It’s a beauty.  
 
The report has three main parts.  They focus on P&G’s products, the company’s operations, and socially responsible activities.  Each chapter starts with a page showing P&G’s goals in that area for 2012 and the results.  A page in each section discusses goals for 2020. 
 

Progress towards the goals are fleshed out and various highlights get special attention — the report is 84 pages long.   For instance, P&G discusses the business attitude towards animal research and the company’s efforts to replace it with alternatives.
 

Towards the back of the report, a chart collects and summarises all the 2020 goals, some of which are newly announced in this report.  Towards the front a similar page outlines the final results for P&G’s five year goals set in 2007.
 

There is also a separate section about stakeholders, including employees.
 

What could be simpler?  Here is what we have done and what we want to do.  Not much is left for speculation.  (Whether P&G’s goals are lofty or lowly is not the debate here.)
 

A few embellishments in the report are worthy of mention. 
 

An impressive roster lists all of the approximately 130 manufacturing plants around the world.  The list shows country, city, plant name, and the business segment the facility reports to, e.g., health care, or beauty, or fabric & home care, etc.  (Only 10% to 15% of P&G’s total manufacturing volume is from external suppliers.) 
 

The report opens, as all others do, with a corporate profile.  But P&G’s version goes much further than most by explaining why and how the company gets involved in lobbying and  political activity.  The revelations include monetary expenditures.  Later in the report P&G lists their principle industry and business association memberships by region.
 

Communication:
 

P&G chooses a landscape format for the report (pages laid out horizontally).  Some pages contain fewer than 110 words; others are filled with text nearer to 1,000 words.   On any given page, the text can be one, two, three, or four columns wide.  The style is graphically entertaining, but somewhat confusing for researchers who don’t want to dig for the facts. 
 

Nearly two-thirds of the pages in the report have no graph or table — just text alone or text with photos.
 

Navigation is easy.  From the contents page in front to the Global Reporting Initiative (GRI) index of indicators in the back, the report is laced with interactive links.  Hyperlinks connect to corporate web pages, and links are provided to relevant external web sites.
 

Some of the web links connect to more illuminating content.  P&G’s discourse on political activities in the report has a jump to the corporate web site where candidates’ names and dollar contributions are listed. 
 

Not every item mentioned in the report that one might expect to have a link does.  For instance, there is no link to P&G’s site where their extraordinary Supply Chain Environmental Sustainability Scorecard is presented and explained in detail.  Here is the missing link for CorporateRegister.com’s users who want to explore it: http://pgsupplier.com/en/current-suppliers/environmental-sustainability-scorecard.shtml
 

Credibility:
 

P&G has always been idiosyncratic in its approach to environmental management and social responsibility.  The company does things their own way, even while helping to develop harmonised approaches for industry to follow internationally. 
 

George Carpenter, director of corporate sustainable development who retired in 2006 , was one of the original environmental, health and safety executives in US industry.  He helped define the profession and formulate the strategies adopted by multinational corporations.  Carpenter was the business representative on the US government’s delegation to the Earth Summit in Johannesburg in 2002.  Carpenter was also a founder of the Global Environmental Management Initiative, an association of 26 member companies promoting ethics and sustainability tools for businesses worldwide.
 

P&G’s interventions and contributions aim to maintain a level playing field and protect the company’s brands from what is considered to be unfair competition mounted by rivals who might easily cut corners along with their prices.   P&G was a major contributor to the content and phraseology of the ISO standards for environmental labelling, and participated during the drafting of the GRI guidelines for sustainability reporting.
 

The P&G sustainability report, though, is only “prepared using the GRI G3 Reporting Guidelines”.  While the report contains a GRI index of performance indicators, no assertion is made about the application level of reporting (A, B, or C).
 

As for ISO 14001, P&G claims without further ado to have confirmed that their health, safety and environmental program at all manufacturing facilities complies with the “intent” of the environmental management systems standard.
 

P&G says that facility audits were extended this reporting year to cover the health and safety management standard OSHAS 18001.  Its verification was conducted by the consulting firm Environmental Resources Management.  Otherwise, little mention is made about assurance.  Each business unit is responsible for the accuracy and consistency of
its data.   No independent audit statement is provided for the report.
 

A blemish on the sustainability report is its disconnect with PG’s financial core business.  The company is under pressure from a new investor to streamline operations far more than the executives have already announced.  (P&G wants to cut $10 billion from costs of goods, advertising, and overhead and is also on record to eliminate at least 5,700 non-manufacturing jobs.)
 
Where do the sustainability initiatives really fit into the larger picture?  How are the company’s goals for resource efficiency impacted by P&G’s stock performance?   What role do environment concerns play when the company is making decisions about which products to jettison and which to acquire?   The answers to these sorts of questions are not clear.
 

Recommendations:
 

1. Integrate the sustainability report with the annual financial report from now on. 
2. Add graphic devices (red, yellow, or green marks, or bar graphs) to the information provided on goals so progress or lack thereof can be seen at a glance.
3. Have outside stakeholders evaluate the report and include their comments.
 

William D’Alessandro is president of Victor House News Co., an independent agency reporting on law and the environment for trade publications and executive newsletters.  He also edits Crosslands Bulletin http://www.crosslandsbulletin.com covering strategic corporate environmental management and sustainability issues.

 

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