james maxwell, lola matysiak, jennifer nash, and …infohouse.p2ric.org/ref/44/43001.pdf · james...

a James Maxwell, Lola Matysiak, Jennifer Nash, and John Ehrenfeld

-mPany: Procter and Gamble Corporation (P&G)

Headquarters: Cincinnati, Ohio

Number of Employees: 94.000 worldwide

Business: Leading multinational consumer products company with sectors in laundry and cleaning, personal care, paper, food and drug products. and industrial divisions that include pulp,chemical, and animal food ingredients.

Rogrm* Corporate source reduction and recycling programs for products and packages. External programs coordi- nated with suppliers and other groups to create a n infrastructure for recycling.

Objective: To reduce P&G’s products and packaging contribution to municipal solid waste.

Bottom line: Increased sales through the introduction of environmentally-sensitfue products and packages. Initiatives have helped to preempt restrictive and costly environmental legislation. Eighty million plastic bottles are kept out of landJlls and incinerators each year.

MANY OF THE products and packages that companies manufacture eventually find their way into the municipal waste stream. Local governments send them away to be landfilled or incinerated. Only a small percentage is recycled or reused. As the costs for waste disposal and concern for the environment have grown, the public has come to view municipal waste more critically. Today, some citizens and advocacy groups are arguing that too much waste is being produced, not enough is recycled, and that landfills and incinerators are both wasteful and unsafe.

Plastics, in particular, have been subject to attack. Indeed, plastics are the most visible symbol of the solid waste problem. They represent approximately 20 percent of the volume of municipal waste and are the fastest growingsegment ofAmerica’s trash. They are also a highly noticeable source of litter and can cause harm to marine and animal life when improperly disposed. State and local governments have responded to public concerns by enacting tough restrictions or even outright bans on the use of plastics in products or packaging. Individual consumers are demanding environmentally-sound packaging; according to recent polls, some may even be willing to pay higher prices for products that are less harmful to the environment.

Notwithstanding these concerns, the use of plastics is on the rise. The increasing use occurs because of the low cost, functionality, and safety of plastic materials. Moreover, it is not clear that the use of alternative materials, such as paper and glass, produces fewer environmental impacts. From a life cycle perspective, plastics may be superior to other materials in many applications because they take

James Maxwell is research director, Jennifer Nash is research associate, and John Ehrenfeld is director of the MIT Technology, Business, and Environment Program. Lola Matysiak contributed research for this article while completing her master’s degree in technology and policy at MIT. The authors wish to thank Edward Fox, Charles Wosaba, Deborah Anderson, Robert Stroud, John Leikim, Tom Rattray, Edward Taylor, Art Dornbusch, Bruce Jones, and Al Crawford of the Procter & Gamble Company for their invaluable assistance. Complete references used toprepare this case are available from the authors at MIT.

Pollution Prevention ReviewlSummer 1993 31 7

James Maxwell, Lola Matysiak, Jennger Nash. and John Ehrenfeld

Because P&G’s packaging represents a recognizable portion of the municipal solid waste stream in the United States. it is a ulslble target for public comment and criticism. Since the mid-1980s. P&G has been working to preempt thls p o ~ n ~ ~ liability and turn it into an asset by altering its products and packages.

to produce and generate less ir and water pollution uction. Regardless of their environmental attributes

relative to other materials, public con rns about plastic packaging could be mitigated through recycling. t the major kinds of plastic have only begun to be recycled.

has earned a reputation as a leader in addressing the myriad of concerns raised by the municipal solid waste issue. Because P&G’s packaging represents a reco portion of the municipal solid waste stream in the United it is a visible target for public comment and criticism. Since the mid-19808, P G has been working to preempt this potential liability and turn it into an asset by altering its products and packages. The company’s source reduction and recyclingefforts have also been extended beyond its own products and packages. It is working closely with its own suppliers and a variety of other groups to help create an effective infrastructure for recycling.

Among consumer products companies, Proc r and Gamble (P

VOl

P&G is a leading consumer products company in the United States and abroad. The company competed in thirty-eight consumer product categories in 1987, of which it had a leading market share in nineteen and the first, second, or third product line in fourteen. In the 1990-91 fiscal year, the any’s net sales for all of its geographic areas totaled $27 billion. employs approximately 142,000 people wo e.

s response to environmental issues has been shaped by three main characteristics of its corporate business strategy: its use of the brand-management system, its commitment to product excellence driven through research and de d its increasing~y globalized manage~ent structure. is most famous for its brand-management system, started in 1931. Under this regime, a brand manager and a brand assistant are wholly responsible for one brand and sometimes its extensions, allowing total concentration toward the development and marketing of a single product line. The

G developed has 150 brand managers overseeing averaged $100 million a year in sales in the mid- nd manager heads a brand group, typically com-

ur people, but someti~es more. The brand manager reports to an associate a~vertising mana three to four brand

general ~ a n a ~ e r of one of the consum own business unit, responsible to co

The corporation’s commitment to p its desire to be the leader in each of its

r, who is in char associate advertising mana r, who, in turn, reports to orts to an adverti

ce is reflected in ries. To achieve

spends a larger share of its n many of its competitors.

million in fiscal year 1990-

31 Pollution P ~ ~ v e n t f o ~ Review I Sumer 1993

Case Study: ~event ing Wmte beyond Co ny Walls: P&G's Response

P&G learned it could not rely solely on scientflc evidence in addressing enuironmentffl issues, but also had to take consumer and governmenta~ ~ @ r c e ~ t i o ~ into account, r e ~ ~ r ~ l e § s of their V a l iclity .

vely in the United

the real culprit was ~ ~ p ~ o p e r l y trea

h ~ m f u l , the public believed otherwise. '

'Summer 6993 31 9

James Maxwel l , Lola Matysiak, Jennifer Nash, and John Ehrenfeld

By addressing the problems of toxic materials in Inks and colorants back in the early 1970s. before strong demands for regulation appeared, P&G was able to work with ink and dye producers to develop organic alternatives without governmental pressure.

voluntarily to phase out the potentially harmful materials used in its products. ‘We could just imagine a Tide box that some child was

on somewhere,” recalls Ed Fox, associate director of corporate packaging. P&G worked with printing ink manufacturers to develop a harmless way to get the same brilliant colors P&G used in its product packaging. Over a period of ten to twelve years, P&G has successfully integrated the use of organic materials to produce safe inks and colorants so that no toxic materials are currently used in its packaging.

By addressing the problems oftoxic materials in inks and colorants back in the early 1970s, before strong demands for regulation appeared, P&G was able to work with ink and dye producers to develop organic alternatives without governmental pressure. This experience taught P&G another valuable lesson-advantages are to be gained by staying ahead of the regulatory game. “If you can identifjr a problem [early], it can save time and money,” says Charles Wosaba, vice president for packaging.

Lastly, it was P&G’s experience with the Rely tampon that illustrated how it is sometimes necessary to take quick and decisive action in order to maintain credibility with consumers and all other important stakeholders. When the government released a report concluding that the use of Rely might increase the risk of toxic shock syndrome, P&G decided that it could not take any risk with this possibility and voluntarily withdrew the product from the market on September 22,1980, suspending its production and sale. Although no study could definitively prove the connection to toxic shock or that the withdrawal of the product would eliminate the disease, P&G felt that it had a duty to the public to recall the product. As a result, the company took a $75 million after-tax loss.

The environmental implications of product packaging first be- came a salient public issue in the early 1980s in Germany and other European countries. In Germany, in particular, the environment had become a major consumer focus, as well as an important political issue. Germany’s politically effective Green Party took the position that source reduction and recycling alone were not sufficient to address the waste management problem; certain members of the Greens even cIaimed that consumer products like fabric softeners were superfluous and should not be used. Acting on behalf of many consumers who felt otherwise, in 1988, P&G introduced Lenor (the European equivalent of Downy) in super-concentrated form and sold it in a plastic refill pouch, reducing the packagingby 85 percent. Lenor was almost immediately a double success: It was popular with German Consumers, which led to a 12 percent increase in market share. It also helped to alleviate pressure from government officials and environment a1 activists.

By 1987, the environment was gaining prominence as an issue in the United States. John Smale, P&G’s chief executive officer at the time, had returned from a trip to Europe where he had seen firsthand

320 Pollution Prevention Review I Sumer 1993

Case Study: Preventing Waste beyond Company Walls: P&G’s Response

Although the supportfor increased attention to environmental issues initially came from senior level management, implementation is peuormed at the brand team level.

the impact of environmental concerns on consumer products and packaging. He recognized that environmentalists would soon initiate similar challenges to products in the U.S. marketplace. Other P&G employees were also becoming aware of the impact that the European environmental movement would have on the United States. Several managers at the corporate and business sector levels arrived at the same conclusion independently: The environment was a consumer need that P&G would have to address. P&G found environmental issues championed by senior and middle managers in positions throughout the company. Their first task was to convince other package design managers, brand managers, and advertising managers that the environmental issue was important to consumers.

P&G’s environmental initiatives were also spurred by several other trends developing during this period. These trends were exhib- ited through legislation, consumer comments, and the popular and trade presses. Of the forty thousand phone calls P&G received each week on its consumer hotline in the late 198Os, a large number concerned the environmental impact of P&G products. Legislators in several states were preparing bans of certain types of plastic. Some P&G customers, for example Wal-Mart, were beginning to call for “environmentally-friendly” products in their stores. In response, in the summer of 1988, John Smale asked one of his vice presidents, Tom Laco, to establish an environmental group to prepare a solid waste position paper for the company. This group was re-formed in early 1989, and headed by a vice president for research and development, Geoffrey Place, who set up an environmental quality team composed of key managers from every facet of the business. Today the environmental quality team meets monthly to ensure that the environment becomes “part of the fabric of the business.” The current chief executive, Edward L. Artzt, continues to underscore the importance of environmental issues.

Designing for the Environment Out of its broader environmental strategy, P&G has developed a

two-pronged approach to producing more environmentally sound products and packaging. This approach utilizes source reduction methods and integrates the use of post-consumer recycled materials in packaging. Although the support for increased attention to environmental issues initially came from senior level management, implementation is performed at the brand team level. P&G has integrated the environment into its business strategy in the same manner as price, quality, and performance. It has become P&G’s goal to prevent and reduce environmental impact from its products and packaging wherever possible.

An important part of upgrading environmental quality is to track performance. The manager of each product category is required to establish a goal for his or her particular products. For example, the goal might be to increase the use of recycled plastic by 20 percent

Pollution Prevention Review I Summer 1993 326

Jff tysiak, Jennifer Nash, and John Ehrenfeld

within a year, or to reduce the for specific brands. Thes

goal-setting process: (1) C today? and (2) Can recycl being used now?

their product ~ n d package prefe ~ronmental appropri~te~

ists from behind one-way mirrors in the interest of not intruding on the preference process, although panelists know they are there.

Another method invo he questionnaire, administered either by mail or by telephone. tionnaires address consumers’ habits and practices, or their usage of, and attitudes toward, a product. A usage test involves giving a product to a consumer for a specified period of time and asking questions llecting comments about the product. also conducts tr studies to see if a consumer9s attitude will change toward the same product over periods of time. These techniques are carefully designed not to

G wants to hear, but to reflect what the consumer test methods are our bible,” says Wosaba. cks consumer attitudes toward products, the

comDanv tracks consumer attitudes toward the environment. To do 6 ”

this, the moderator of a t ask panelists ant for the environ-

nmental issues when o you think recycling s annually so it can

s this information pa~ticularly useful for the

co~binations ac-

Just as P&G consumer att

enufr~nment.

32 Pollution Preuentfon evfew I Sumer 1993


The environmental policy stresses using less packaging material and incorporating post- consumer recycled materials whenever possible.

result in making the product in various forms that P&G then tests using blind-sampling techniques. This is repeated through several iterations. Then the product is tested in small markets with or without advertising to see how many consumers will actually pur- chase the product. This process takes one to two years. At this point, the design is reviewed by peer groups, including groups for safety and environmental issues. After all this testing is finished, production is expanded to a national level. This process requires a minimum of two years and a maximum of five to six years.

P&G has no formal companywide materials requirements for product packaging, except that controversial materials are not used when alternatives are available. This is because P&G makes such a broad range of products-from toilet paper to heavy duty detergents. In every case, P&G provides the package design that customers like best for each product, be it glass, metal, paper, or plastic. In addition, a primary consideration for packaging is its functionality the material must do what’s expected, and preferably e liquid laundry product, for example, cannot be kept in a simple paper container for obvious reasons. Many technical parameters govern the choice of a particular packaging material and its suitability for the customer. The environmental policy stresses using less material and incorporating post-consumer recycled materials whenever possible.

In addition to choosing the right material for the product, certain standards must be followed in translating consumer desires into a new product/package combination. ~tandards are written for materials purchasing, product and package materials, as well as finished products. In order to ensure the quality of the product, changes in standards are approved by a formal process, and standards are not changed very often.

with the idea of moldin

s the solid waste p umera would be

Pollution ~ r ~ v e ~ t i o n 323

James Maxwell , Lola Matyslak, Jennifer Nash, and John Ehrenfeld

Initially, P&G found f t more dmcult to produce recycled detergent bottles of the same high quality as the ulrgin resin bottles because of a uarfety of technical problems.

The Spic 'N' Span Pine household cleaner product was ideal for an experiment with recycled inputs for several reasons. The technology for making the bottles was developed (with Plastipak); a su recycled PET was available as a result of bottle deposits and curbside collection in many states; the recycled PET, was cheaper than the virgin PET, so that bottle costs did not increase (although production process costs did increase); and the product had a relatively small volume of production and so offered a good scale for experimentation. Unlike P&G, which could shift to other materials if necessary, PET suppliers' livelihood was dependent on demonstrating the practical- ity of using recycled material at no cost increase, in order to avoid possible legislation that could restrict the use of PET.

Buoyed by success with this product, P&G decided to try recycled inputs in its liquid laundry detergent and fabric softener bottles (e.g., Tide, Cheer, and Downy). Because these bottles are made from high density polyethylene (HDPE) and not PET, new problems presented themselves. The biggest problem involved supply. Bottles made of HDPE were not being widely collected at the time. Thus, P&G's strategy was to create demand for recycled HDPE resin, aiming to provide incentives for companies to become involved in HDPE reprocessing. Once suppliers began to respond, other problems remained. Swings in the market prices for both virgin and recycled resins often meant that virgin resin was cheaper. This raised questions among some business sector managers who were reluctant to guarantee long-term use of recycled inputs if their costs produced unacceptable profit margins. Discussion about the use of recycled inputs followed the course of other business decisions at P&G, in which the company encourages debate to reach resolution on all aspects of its business strategy.

In addition, P&G's technical and packaging people wished to maintain the aesthetics and integrity of the product and avoid risks involved in usingmaterials of uncertain quality. Initially, P&G found it more difficult to produce recycled detergent bottles of the same high quality as the virgin resin bottles because of a variety of technical problems. Processes bad to be developed to clean and remove the odor from recycled plastic and to efficiently sort the recovered plastics from contaminants. Surfactants in P&G's detergents also reacted with the resins from recycled milk bottles, causing the resins to stress-crack. To overcome many of these technical obstacles, P&G chose a three- layer bottle technology in which the recycled resin was sandwiched between two thinner layers of virgin resin in a process of co-extrusion. This solved two problems: The bottles were less likely to stress-crack, because the detergent now only touched the vis n resin and, because a virgin layer was also on the outside, P&G could mask the unattrac- tive color of the recycled resinArab green.

Although the company has moved quickly to integrate the use of recycled inputs in some areas where consumer demand is clear, other products have been slower to change when consumer tastes have not

324 PoZlution Prevention ReuiewlSumer 1993


P&G’s biggest success in the environmental area has been in source reduction, which, in this context, involves reducing the amount of material used in its packages by transforming the product or its packaging.

necessitated it. For example, change has come more slowly in the health and beauty care sector, which recently took steps to use recycled materials in its packages. In early 19 3, P&G began the process of converting from virgin paperboard to recycled paperboard for products in this sector. According to Art Dornbusch, who is with packaging development in the beauty care division, consumer attention in the United States has focused first on large-sized products, like detergents. Now consumers are beginning to focus on smaller products in beauty care; hence, the decision to take action with his products. “If you do things too early, you could have a marketing disaster and ruin the brand,” he says. This statement comes from a lesson learned in the early 1970s, when the company tried to market deodorant products without a carton. When the market response was flat, P&G returned to the cartons, not wishing to risk losing market share. P&G more recently changed to the cartonless version on a national basis, after consumer awareness of the need for source reduction substantially grew.

Technical considerations also temper P&G’s ability to make package changes. Mold changes, for instance, typically take nine months to complete. Because a change of this sort is very expensive to initiate, these decisions are made after careful deliberation.

Nearly all of the plastic P&G uses is HDPE and PET. In its U.S. markets, P&G used more than 170 million pounds of HDPE in its bottles in 1991. Of this, more than 30 million pounds was post- consumer recycled HDPE. In addition, the company used 50 million pounds of PET, of which 5 million pounds was recycled. The other amounts of plastic used are trivial in comparison-about 2 percent polystyrene and 1 percent to 2 percent polypropylene. The use of polyvinyl chloride (PVC) is being phased out. P&G detergent bottles currently use between 25 percent to 35 percent recycled HDPE. Plastic wrappers for diapers, toilet tissue, and paper towels also contain about 25 percent recycled plastic. These efforts keep 80 million plastic bottles out of landfills and incinerators each year. By the end of 1991,200 million bottles had been kept out of the municipal solid waste stream. P&Gs future goal is to increase its use of recycled materials to 50 percent in its non-food packaging.

Unexpected success with source reduction P&G’s biggest success in the environmental area has been in

source reduction, which, in this context, involves reducing the amount of material used in its packages by transforming the product or its packaging. Source reduction has enabled managers to offer a new product/package combination, expanding their business and reducing internal resistance to environmental initiatives. The Downy refill carton in the United States, for example, has reduced the product package size 75 percent by using a super-concentrated product and replacing the plastic bottle with a carton. Within six months after introduction for national distribution in June 1992, Downy refill

Pollution Prevention Review / Summer 1993 325

James Maxwell , Lola Matysiak, Jennrer Nash, and John Ehrenfeld

Through products lfke the Downy refin. P&G has been able to further its lmge as an envfronmental company. while expanding fts busfness.

approached 50 percent of Downy’s total market share in the country and led to a substantial increase in sales for the brand. According to

in the ~ ~ ~ ~ w ~ s ~ ~ ~ ~ sector, the Downy refill has been successful for two reasons: It offers value to the consumer because it costs less than regular Downy, and it is an environmentally-sound product. The introduction of the Downy refill carton in the United States followed the development of the Lenor pouch for the European market several years earlier. In the United States, consumers expressed a strong preference for the carton rather than the pouch. A Downy refill pouch has also been successfully sold in Canada. Through products like the Downy refill, P&G has been able to further its image as an environmental company, while expanding its business.

P&G would like to see source reduction play a more important role in the solid waste solution. In fact, P&Gstresses that source reduction has the highest priority. But source reduction presents greater challenges, because it requires more design creativity. In addition, source-reduced packages are often less convenient. To use the refill, the consumer now has to cut, pour, add water, and shake the package. This inconvenience is rarely welcomed by the consumer. It has been accepted, however, because the refill’s lower price and environmental benefits make it a very compelling product/package combination. According to Leikhim, the timing was right for the Downy refill. With the start of the recession in 1990, people were looking for a good value; the environmental aspects of the product were added bonuses.

Another promising product line is the ultra-concentrated powdered detergent that P&G is currently marketing. This ultra-concentrated powder reduces packaging by 33 percent, because the package is now one-third the size of the regular strength powdered detergent. The development of this ultra powder “was driven by consumer demand,” according to Robert Stroud, associate director of corporate purchases for P&G.

In the health and beauty sector source reduction is important too. Antiperspirants and deodorants are now being sold without the paper carton packaging. This materials reduction alone removes 80 million cartons a year (over 3 million pounds of paperboard) from the municipal solid waste stream even simple changes like this are not necessarily easy. Removin external packaging on antiperspirants made the product more tippy, forcing P revamp the package desi shampoos and conditioners are now being sold as a two-in-one combination, resulting in a 50 percent packaging reduction, in addition to providing extra convenience to the consumes.

ikhim, product development di

to be self-supportin

supply of recycled materials, P developed closer relationships with its suppliers. en the company began to use recycled plastics, a steady supply of high quality recycled

326 Pollution Prevention RevieewlSumer 1993

Case Study: Preventing Waste beyond Company Walls: P&G's Response

P&G does not manufacture any

I t relies suppliers

to manufacture its packages according to speclflcatfons. I t s supplier base is diverse.

resins was unavailable. d both to create demand for recycled plastics and to o technical problems associated with reprocessing.

P&G does not manufacture any packaging itself. It relies upon packaging suppliers to manufacture its packages according to specifications. Its supplier base is diverse. Depending on the particular product, suppliers can be either regionally or nationally based. For example, P&G's liquid filling factory in Lima, Ohio, is supplied with bottles by three major companies, a1 within a 20-mile radius. Ivory, Dawn, and Joy, produced in e and Kansas City, are packaged in bottles produced by two o ame suppliers used at Lima. Although P&G may account for ority of the business of a particular bottle production plant, the company's purchases still represent only a small fraction of total corporate sales for any one supplier. The fact that P&Gs suppliers sell to many companies, just P&G, affects the nature of P&G/supplier relationships. P must negotiaterather than d ic ta te i t s packaging specifications with its suppliers.

00 percent recycled PET bottles tipak had access to a consistent

feedstock from returned soda bottles and curbside collection systems. P&G supported and tested the idea and made a national announcement in November 1988 with Plastipak when the system had been demonstrated. Plastipak then formed CleanTech, Inc. to handle the recycling portion of its business. This arrangement ensured P steady, consistently high quality supply of re

has been more challenging. P&G approached its three major with the idea of using co-injected recycled HDPE in heavy duty liquid bottles. To the first molder who could execute that technology, P&G offered the opportunity to make a national press announcement in Washington similar to the one made Plastipak. This time supplier responses varied. One supplier ssively executed the co- injected recycled molding technology; another saw the venture as risky. This was because the cost of converting a production line to accommodate three-layer bottles was substantial. As a result, one supplier was not willing to assume the capital investment necessary

convert its production lines and wanted P&G to cover its cost. ppliers considered the venture a gamble because of the inconsis-

tency of supply and uncertainties associated with price. ~ i t h i n six months, all three suppliers moved ahead and discovered ways to manufacture bottles made with three suppliers to come to Was

G has not had to change suppliers to obtain recycled inputs. A change in package form, however, can cause a change in suppliers. When the Downy refill package was developed, a new supplier was needed for manufacturing, because most companies only produce one or two product forms, such as thirty-two or sixty-fou~ ounce glass and

G had little trouble obtaini $pic 'N' Span Pine cleaner.

Developing a similar supply source for

Poilu tion Prevention Review I Summer 1993 32 7

James Maxwell . Lola Matysiak, Jennifer Nash, and John Ehrenfeld

P&G’s relationships with its suppliers have grown

from purely commercial exchanges to interactive partners hips.

plastic. When new suppliers are needed, they are chosen on the basis of their ability to serve P&G’s needs and high quality requirements, whether for new materials or recycled material. For example, a recycled resin supplier must ensure that the resin is clean, free of odor, and of good quality. ‘We look at price, quality, overall total value, variability of an item, and timeliness [when choosing a supplier],” says Stroud.

Until several years ago, P&G had only a distant relationship with virgin resin producers. The company doesn’t actually buy the resin itself. This is normally the job of the bottle suppliers. Because the company wanted to start working with larger companies, however, it considered involving the virgin resin suppliers. These larger companies would be capable of producing greater volumes and could be expected to be more receptive to making environmental changes because oftheir larger scale and technical capabilities. Price volatility of the virgin resin market has caused difficulties. Virgin resin producers are respondingslowly to P&G’s need for recycled materials, which are only a small part of their total production.

The market for recycled resin is currently small, but it has the potential to increase with improvements in quality and reasonable prices. P&G is a member of the Council for Solid Waste Solutions, an industry trade group concerned with recycling issues, and works with suppliers to promote the use of recycled plastic. Resin industry sources acknowledge that the use of post-consumer recycled plastic will begin to dent demand for virgin resin by 5 to 10 percent by the mid-1990s. If recycled content becomes mandatory in consumer products, the market for recycled material will increase substantially.

P&G’s interaction with its suppliers on these environmental issues is reflective of a broader trend in its suppler relationships. P&G’s relationships with its suppliers have grown from purely commercial exchanges to interactive partnerships. For the past four or five years, the number of suppliers P&G has used has decreased. ‘We are consolidating the supply base to develop closer relationships with suppliers,’’ explains Stroud.

In the past, suppliers could hardly feel that they had a long-term share of the business, because P&G frequently redistributed its volume, sometimes as often as every six months. Suppliers could be reluctant to make capital investments for P&G’s products, for fear that such an investment would be lost. Now, however, suppliers frequently will have a two-, three-, or four-year contract with P&G. ‘Ten years ago, we were much more at arm’s-length . . . [Now], we’re developing trust,” reports Stroud.

Creating the Recycling Infrastructure P&G is working to develop a market infrastructure for recycling

and composting. This infrastructure for recycling is represented by the loop shown in Figure 1

328 Pollution Prevention Review ISumer 1993


e 1. P&G’s Infrastructure for Recycling

Collection centers

Consumers Sorting centers

Reprocessing I facilities

(grind, wash, pelletize)

Retail stores (e.g., Wal-Mart)

1 Bottle fillers (e.g., P&G)

\ Bottle manufacturers

\ P&G bottle recycling has required the company to work coopera-

tively with consumers, collection centers, sorting centers, reprocessing facilities, bottle manufacturers, and retail stores.

P&G stepped in to help create such an infrastructure because, according to Stroud, “No one [else] was doing [it].” Because consumer product companies were not demanding bottles made from recycled plastic, bottle suppliers were not making them. “Everyone was wait- ing for someone to do something,” recalls Stroud. ‘We closed the gaps in the loop by standing up and taking the first step.”

Initially, there were questions within the company over how much of the infrastructure P&G should support. Managers and their employees raised questions like “Is this the right role for industry to be taking? How will building an infrastructure help to build consumer satisfaction? Why is it our business to build an infrastructure?” Others felt it was inappropriate for industry to be active in a role that had, until recently, been considered the responsibility of the municipal government. Some argued that even though P&G is a large company, one company couldn’t do it all. All were good questions for debate.

But strong support for a proactive role in helping to deveIop a recycling infrastructure came from the highest levels of senior management. Both the previous and current chief executives, John Smale

Pollution Prevention Review/ Summer 1993 329

James Maxwell, Lola tysiak, Jennger Nash. and John Ehrenfeld

Theflrst step in P&G’s development of the recycling infrastructure was to advance the state of technology and emure its feasibility.

environment~l issues would ’9 consu~ers and customers.

consumer inter- ined from such

s development of the recycling infrastructure was to advance

prototype pilot plant for reprocessing plastics and made the re

exploration of chemical processes for recycling plastics. The most important aspect of the Rutgers research was that it showed that reprocessing post-consumer plastic into a form that could be used to make bottles was possible.

After this technology had been developed, P to the other elements of the infrastructure loop. aid the growth of reprocessing centers and enc efforts. In order to do this, P&G created demand when in 1989 it announced that it was looking for at least 20 million pounds of post-consumer recycled WDPE to make bottles. In addition, P&G began to work with state officials and legislators to facilitate collection and reprocessing. In Baltimore, P G entered into a part- nership with the Maryland state government, Giant Foods (the local supermarket chain), and National Broadcasting Company 1 afiliate stations. The effort began with Polysource, a compa t was interested in enter e reprocessing business, but lacked the required capital. After contracted to buy some of Polysource’s output of recycled material, the company was able to leverage a loan guarantee with the state to obtain working capital. This evolved into a coalition with the government to make plastic recycling viable and, at the same time, provide an alternative to landfillin into a coalition to promote the closed-loop philosophy. This philosophy tries to close the gaps in the recycling infrastructure through the cooperation of the different sectors of the infrastructure. N ates conducted a public service educational program to recycling effort. Giant Foods agreed to collect plastic bottle to use in making recycled Tide bottles. What finally resulted was a local infrastructure for recycling bottles.

330 Pollution Prevention RevfewlSumer 1993


Further obstacles to environmental advertising are the labeling restrictions on consumer pQCkQglng that are enforced by a number of state governments.

P&G could also potentially build stronger demand for environmentally friendly products through its advertising campaigns. The Downy refill pack obviously offers a substantial reduction in solid waste; P&G has promoted this feature strongly in its advertising in the U.S. market. Advertisingfor Lenor in Europe also emphasizes the source reduction benefits provided by the refill pouch. But overall, P&G has been cautious about basing much of its advertising on recyclingbenefits. One reason is that P&G’s research shows that most consumers do not make their purchasing decisions entirely on the basis of a product’s recycling attributes. Also, the company is uncertain whether consumers in some product areas will react positively to products that are packaged in recycled material.

Further obstacles to environmental advertising are the labeling restrictions on consumer packaging that are enforced by a number of state governments. These restrictions try to protect the consumer from false advertising of environmentally friendly products, as there are currently no standard definitions for terms such as “recyclable,” “recycled content,” and “contains recycled material.” Because of the plethora of state and local standards, P&G is working with eleven trade associations to institute uniform national rules and guidelines for such terms, so that consumers can fairly and accurately judge a product’s environmental impact.

The company would like to inform the public that many of its products use less packaging, contain recycled plastic, or are compostable. ‘‘I would love to be able to tell the consumer what I am doing and what I am trying to do. I’d like to tell consumers, ‘you have stated your desire to have recycled inputs and here [they] are,”’ says Stroud. According to Stroud, current labeling laws “tie P&G’s hands” in terms of what it can tell its consumers.

During the process of creating a recycling infrastructure, there has been a shift from the initial problems ofdevelopingtechnolo creating demand for the establishment of reprocessing centers to a lack of end-user markets for the recycled materials. According to Deborah Anderson, environmental quality coordinator, there must be a ‘Cbalance of collection, reprocessing, and market developments.” In 1990, Anderson urged a Senate subcommittee to stress the development of end-user markets more than collection programs in upcoming legislation, foreseeing a future glut of sufficient market demand.

To address the continuing uncertainties that are associated with the variability of price difference between virgin and recycled resins, P&G is now supporting legislation for what it considers to be reasonable mandatory recycled content in consumer and other products, Such legislation would in essence guarantee an end-user market for the recycled plastic. In addition, it would force other companies to adopt P&Gs practice of using recycled plastic and thereby help the economics of recycling to become more favorable.

In addition to source reduction and recycling, P&G supports a system of integrated solid waste mana~ement that includes

~~~~ ~~

Pollution Prevention Review I Summer 1993 331

James Maxwell, Lola Matysiak, Jennqer Nash, and John Ehrenfeld

P&G sees composting as a possible response to public concerns about the envfronmental impact of many organic materials, including disposable diapers.

composting. According to Ed Fox, commercial composting is an important method of waste management that is capable of taking up as much or more solid waste as recycling. P&G sees composting as a possible response to public concerns about the environmental impact of many organic materials, including disposable diapers. Currently, P&G points out that 80 percent of the materials in its diapers are compostable. At least twenty states are now considering taxes or bans on disposable diapers; composting offers an alternative to this political challenge.

P&G has set aside $20 million to develop composting technology and demonstration projects. To explore further composting possibili- ties, P&G is supporting a five-year research study at the University of Wisconsin to examine the biodegradability of diapers at landfill sites in Wisconsin, Florida, and Maine. In addition, P&G supports an experimental composting project in Minnesota and a diaper recycling effort in Seattle.

Establishing an infrastructure for plastic recycling has not been easy. Creating an infrastructure for composting will be equally difficult. P&G's role in establishing a composting infrastructure is different from its role in recyclingplastic, because it is not apurchaser of compost material. Possible end-user markets for the compost material are beingdeveloped. Legislation may be needed, as it was for recycling, to cause this market to develop.

Change Brings Environmental and Business Benefits From 1988 to 1991, P&G instituted major changes that have

significantly reduced the environmental impacts of some of its products through source reduction. Its recycling efforts have prevented large quantities of plastic from being immediately landfilled or incinerated. Although P&G has yet to close the loop for many of its own products, it is working towards that goal. The company has contributed to the establishment of an effective infrastructure through its technical, purchasing, and outreach activities. Through these initiatives, P&G has extended the focus of pollution prevention from reducing waste in the manufacturing process to managing the life cycle impacts of its products and packaging. Progress in this area depends on the design of new products and packages. This life cycle perspective has also involved P&G in unusual activities for a consumer products firm, including fostering the development of a recycling infrastructure and helping to establish high value end- user markets for post-consumer recycled materials.

P&G has achieved environmental benefits with continued economic performance. The benefits of P&G's source reduction initiatives have even exceeded the initial expectations within the company. Source reduction has also provided an opportunity for promoting brand sales through the introduction of new product/package combi- nations. The use of post-consumer recycled materials has had less tangible economic benefits, because the costs of these materials

332 Pollution Prevention Review 1 Sumer 1993

W e Study: Preveniing Waste beyond Company Walls: P&G’s Response

have, at times, exceeded those for virgin materials. The volatility in the relative prices of virgin versus recycled materials has led P&G to

dating recycled content.

The incorporation of environmental quality as a consumer need has enabled P&G to overcome internal obstacles and implement environmental goals rapidly in most of its businesses. But because consumer needs vary by geographic regions and product categories, this has meant accepting some variation in its environmental practices. A strategy based on consumer needs also requires diverse mechanisms for obtaining feedback from consumers. P&G has not pursued those strategies that lack public support.

P&G’s environmental quality strategy was designed to improve relations with important stakeholder groups such as consumers, customers, government officials, and environmental activists. Al- though acknowledging that P&G has made progress through its packaging initiatives, some environmental groups remain skeptical of its motives. The Environmental Defense Fund, which has worked closely with McDonald’s in the recycling area, suggests that P&G “develop a detailed plan for public scrutiny” including specific goals and timetables. P&G’s efforts have been well regarded by many consumers and have preempted overly restrictive environmental legislation. Some large customers report that P&G has been effective in staying ahead of consumer demands for more environmentally sound products.

P&G’s experience provides useful insights for large and small companies to consider in responding to public concerns over the municipal solid waste issue. For example, P&G successfully obtained the support of a diverse group of senior and middle managers to undertake its environmental quality strategy. P&G has also mar- shalled the financial and technical resources to address all consumer needs, including new environmental issues.

From a smaller company’s perspective, given scarce resources, should they focus on such a broad strategy that addresses product design, supplier issues, and helps create a recycling infrastructure? Another important question, which P&G has explored, is what are the consumer needs for environmental performance in the current social context? What will they be five years from now? Ten years? These are critical questions for big and small companies alike. +

rt what it considers re

Notes 1. Editors of Advertising Age, The House That Ivory Built, NTC Business Books, Lincolnwood, Illinois, 1988, p.103.

Pollution Prevention Review 1 Summer 1993 333

james maxwell, lola matysiak, jennifer nash, and …infohouse.p2ric.org/ref/44/43001.pdf · james...

Documents