P&G seeks green success

27 March 2012

CINCINNATI: Procter & Gamble, the FMCG giant, believes innovation will be essential to creating popular green brands, as shoppers do not accept "trade-offs" when buying eco-friendly products.

The firm is currently pursuing the long term target of ensuring that 70% of washing loads in the US use cold water. Already during the last 20 years, it has cut the amount of solid waste from diapers by 40% in America.

"Our purpose as a company is to improve the lives of the world's consumers. We do that through our products. We do that through our operations. We do that through our philanthropy," Bob McDonald, P&G's chief executive, told the Wall Street Journal.

Research by Procter & Gamble showed that just 15% of shoppers would accept "trade-offs", such as a moderate decline in performance, while purchasing offerings with strong sustainability credentials.

"That leaves 85% of consumers who aren't willing to make trade-offs," said McDonald. "So we want to introduce products in every single category we're in that make a difference in people's lives and are better for the environment at the same time."

As a personal example of the potential pitfalls awaiting brand owners, McDonald cited the $30m launch of "enviro-packs", liquid capsules that could be used to refill bottles, in Canada.

"I had listened to the consumers in a focus group. While they were among their peers, they said, 'Oh, this is a great idea. Of course we'll buy it.' And then, when they went into the store, they behaved entirely differently," said McDonald.

One successful demonstration of P&G's recent activity in this area is Tide Coldwater, laundry detergent which does not require heated water to get clothes clean, a product also showing the importance of R&D.

"We spend over $2bn a year on research and development, twice as much as our next largest competitor. The reason we spend it is that innovation is the primary way we improve people's lives," said McDonald.

P&G is currently in the midst of attempting to reduce its outgoings by $10bn in the coming two years, but its sustainability goals will not suffer as a result, McDonald argued.

"With things like digital technology you can flatten the hierarchy of the organisation. You don't need the large number of people you had. And with the huge expense we have in raw materials, we can innovate the costs down. So really, $10bn on a business that is $85bn isn't that big," he said.

Data sourced from Wall Street Journal; additional content by Warc staff