Research Korner: Procter & Gamble

Learning Organization Development

Learning Organization Development Introduction             There had been a huge change that had happened in many industries and market around the globe. All of the said changes are all driven by two of the most important aspects or factors: Globalization and Innovation. Innovation can be considered as a must in any organization or business in the global market. That is due to the fact that the competition in the market is continuing to bloom, and the need for speed is considered as one of the most important strategies in order to meet the demand and preferences of the target market.             Innovation can be considered as the foundation for many economic growths nowadays, but we still have the limited knowledge regarding what it can cause. It is consist of all the types of many intellectual capital as well as intellectual property ranging from know-how to patents up to the high tech as well as low tech inventions of each and every kind (LeValliant 2003).             Innovation, in simple term can be defined as the introduction of new things or approach. It is the incarnation, mixture, or fusion of knowledge in unique, significant, valued new products, processes and even services (Luecke & Katz 2003, p. 2). Each and every innovation begins with the different creative ideas. It is also considered as the successful implementation of the creative ideas inside the organization. The creativity of individuals as well as team can be considered as the starting point for innovation, but it is not sufficient (Amabile & Coon 1996). Furthermore, it is also like any functions in the business that requires different tools, rules as well as discipline (Davila & Epstein 1996).             Innovation process is considered as one of the most important activities that must be done by organizations and businesses in order to maintain their position in the market as well as to continue their research and development process. Many of the organizations and business are using innovation in order to drive their organic growth. It can give many companies to have a quicker access to new and improved technologies, outsourcing non-strategic elements as well as collaboration and relation with new partners. All of the said factors can help many companies to serve their ever more demanding customers in more efficient way (innovaro n.d.)             In order for the company to maintain their competitive advantage as well as influential position in the industry as well as in the market, organizations and businesses must consider innovation as a measurable business value, therefore make the innovation an important part of the life of the business (Anderson & Gimenez 2005).             Above all innovation can be considered as the science of business organization (Baker n.d.). There are many factors that might affect the process of innovation of any company such as the culture, the behavior of the employees or staffs as well as the plan and strategy of the company for change. All of these, together with the ever changing business environment as well as the change in the behavior of the market have made the innovation process more complicated. It had made innovation to become the process that starts with a kernel of an idea and continue to the different stages that will help the company to reach or produce their marketable product that will help to change the economy (Baker n.d.). Procter and Gamble (P&G): Innovation and Organizational Change             Procter and Gamble or P&G has been considered as one of the most successful company in the world. It is one of the many multinational companies that used the advantages of innovation and globalization for their marketing and management strategies. As a matter of fact, the company had become the top 9 in the 2005 poll of the most innovative company in the world. Procter and Gamble had formally started its operation during 1837. It is a small store that sells soap as well as candle in the Ohio. The first brand of the company was the Moon and Stars. Furthermore, P&G is considered as one of the minority companies that have established their own department that will handle the process of analyzing the customers’ behaviors towards their products and services. Innovation as well as organizational change has been considered as the primary weapon of the company in order to continue their position in the global market.             The Ivory soap was the first product innovation of the company. The product had become a great hit with the help of the extensive marketing strategy by targeting the national market as well as establishing sales relation outside the country.  (Ingham 1983).             The biggest innovation of the company ever made was its introduction of the Tide detergent just after the World War II. It was the result of their extensive research about the chemical compound that will pull out grease, oil and other stain from the clothes. This major innovation helps to change the laundry habit of the Americans. It also gave them competitive advantage and edge against their major competitor that time, the Colgate-Palmolive (Ingham, 1983).              In addition to innovation, the Internet, together with the globalization and the consolidation of the different retail production are all come together in order to create a dynamic global marketplace. The company also established different headquarters in different part of the world as part of their strategies in the global economy. Innovation Process in P&G Small Team Operation             Regardless of any good intentions, if all of the important decisions in the process of innovation will be made depending on the top management level’s agreement, it will result to time delay. That is why it is important to delegate the decisions to the innovation teams to avoid all of the said delays as well as enable the Fast Innovation to be done. The approval of the top management level is only required at the milestone of the gates of the innovation process (Wentz n.d.).             The company had established a designated team that will lead the innovation process of the company and focus on the process of developing their products as well as their services. P&G had established their Corporate New Ventures Group. The said approach is an advantage to the part of the company due to the fact that the team can focus on the specific challenges as well as help them to develop more ideas in faster manner (Dundon 2002, p. 137).             The Corporate New Ventures encourages new product ideas and then funds the best ones and will be putted into the quick production. All of the teams that are involved in the said ventures are acting in independent manner; the said approach will help each group or team to be more responsive as well as flexible in order for them to be one of the assets of the company (Schuler & Jackson 2006, p. 54).  Reducing Career Risk for Individual             One of the fears of the employees or staffs that belong to the R&D process of the company is their fear in being part of those risky projects. This is due to the fact that the origin of those successful breakthrough or innovation projects are often forgotten, on the other hand, those R&D effort that failed are never forgotten. As a result, it will give the employees the impression about the career risk if they will get off track and associate with a project that may have a conflict with the conventional organization as well as it has a big chance for failure (Leifer & McDermott 2000, pp. 169 - 170).              Individual performance in the radical innovation efforts can be measured with the sensitivity to the risks that each and every individual will take for the organization. Unfortunately, those individual are facing dilemma with regards to their career. People are being punished by demotion for their past sins such as not meeting the projections in the project plan, once that their projects were mainstreamed (Leifer & McDermott 2000, p. 170).             On the other hand, although, more often than not, the reward systems are all adjusted to the performance of the mainstream, and not focus with the radical innovation activities, radical innovators that are push ahead by relying on the intrinsic motivation (cited in Leifer & McDermott 2000, p. 170). The source of their rewards in from their own sense of achievement that is related with the process of making progress in order to bring something that is fresh, thrilling as well as important to the world (Leifer & McDermott 2000, p. 170).             The company had experimented as well as implemented their own system that will enable them to reduce the career risk for each and every individual who are working in the radical innovation projects. The said system is had been undergone several experiments under the Corporate New Ventures Group. Radical projects are all approved by the review board that includes the CEO as well as the Chief technical officer (Leifer & McDermott 2000, p. 170).             The senior management of the company had ensured that the said system will ensure that project members that their career will not be at risk. In addition to that, the rotation of the team members up to the line management position in the mainstream organization will be a part of the complete package (Leifer & McDermott 2000, p. 170). Involvement of Upper Management             The upper level management as well as support from the global business units can be considered as the most essential factor that affected the Procter & Gamble model. The CEO is also involved in the process of innovation and other related marketing strategies. The company is focusing on the development of different opportunities via the use of the CNBD as well as the business unit engineering, together with their manufacturing planning groups. It is also focusing on the different changes that will help to change as well as ensure that the change can mobilize different resources in quick and fast manner (Leifer & McDermott 2000, p. 214). Combat Training             P&G also focuses on the values as well as culture of the company in order to drive success by improving their working environment. Due to the fact that the company had started to grow in terms of global market, meeting the top leaders will be impossible due to geographical gap, and it had placed a strong limitation on the personal contact between the top and middle level management. That is why the company had decided to put up their P&G College that had been modeled by the Management Development Institute of GE. The said institution was established in order to reinforce the passion of the company to win as well as to help the company to be equipped with the different strategies as well as tactics to be the best that they can be. The said university will help the employees to get to know more about the culture and values of the company that will drive them for creativity as well as innovation (Dyer & Dalzell 2004, p. 290). Human Resource Management             The HR department is the one that handles the process of creation and establishing the independent team that will manage their very own resources, hire the team members, create their own reward system as well as report directly to the top management level (Schuler & Jackson 2006, p. 54).             The human resource department of the company is that one that handles all of the different activities as well as supports to the different innovation teams, whether internal or external team that will help them to be motivated in order for them to developed new products that will add to the product line of the company.             Furthermore, the human resource management of the company is also focusing on the external innovation in order for them to expand the creativity as well as innovation process of the company.             By doing all of the said activities, the company had been able to motivate the employees to be more innovative by giving different support such as the budgets as well as the different facilities that will help their task easier.             Furthermore, the HR department of the company also offers their employees the state-of-the-art training as well as development programs (Vance & Paik 2006, p. 282) Conclusion             Procter & Gamble can be considered as one of the most successful companies in the world in terms of its relationship with their customers. The said success was brought to the company by globalization as well as innovation. Globalization had helped them to become an international company and innovation had helped the company to maintain its position in the market.             In terms of the innovation process of the company, by focusing on the different team as well as letting them decide in independent manner had helped the company to gain more innovations as well as new products that they can add to their line of products. Allotting the control for the innovation process to the team is a great help because it can help the team to save time by direct decision-making in managing the innovation process. Another thing is that it adds up to the motivation and drive of each team to be successful in their innovation process due to the presence of competition.             Furthermore, the reward system is also one of the advantages of the company; this is due to the fact that the reward system varies from one team to another. By doing it, the team leader will be able to know more about the things that can motivate his or her team member, therefore, the need for motivation of the staffs of the company.  Recommendation             In order to improve the innovation process of the company, P&G must continue their team-based innovation as well as their external innovation team in order to maintain the level of their new product that they can offer to their customers.             Furthermore, it is also important to maintain their system in reducing the risk factor in the position of the employees in different important projects. The said system will help the employees to work minus the pressure and stress. The said system will also help the employees to gain their self confidence that will eventually reflect to their work.             Training and development are also important factor for the innovation process of the company. The training and development programs of the company must be updated based on current situation in the global market in terms of technologies as well as learning in the international marketing and management.             Furthermore, the company must also focus on the improvement of the human resource management. The said department must focus on the different programs and activities that will help their employees in the innovation department to be motivated and work on their best. The said activities will focus on the reward and appraisal system.             Above all, the company must maintain its sound and clear communication between the upper level management as well as the lower management in order to maintain the efficiency and consistency of information. It focuses on the objectives and the missions of the company in the industry.      References   2002 Annual Report, P&G, viewed 08 November, 2004,<http://www.pg.com/ann ualreports/2002/pdf/pg_ar2002.pdf>   Amabile, T, Conti R. & Coon R 1996, ‘Assessing the work environment for            creativity’, Academy of Management Journal, vol. 39, no. 5, pp. 1154-1184   Anderson, A, Gimenez L, Nunley, D & Baldwin, E 2005, Developing Systemic     Innovation in an IT Organization, Intel Corporation, viewed29 April 2008            <http://www.intel.com/it/pdf/systemic_innovation.pdf>   Davila, T, Epstein, M and Shelton, R 2006 Making Innovation Work: How to          Manage It, Measure It, and Profit from It. Wharton School Publishing:             Upper Saddle River   Dundon, E 2002, The Seeds of Innovation: Cultivating the Synergy that Fosters New Ideas, AMACOM Div American Mgmt Assn   Dyer, D, Dalzell, F & Olegario, R 2004, Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble, Harvard Business School Press   Ingham, J. 1983, Biographical Dictionary of American Business Leaders, Greenwood Press   Leifer, R, McDermott, C, O’Connor, G C, Peters, L & Rice, M 2000, Radical Innovation: How Mature Companies Can Outsmart Upstarts, Harvard Business School Press   LeValiant, D 2003, Innovation on overtime, CMA Management, viewed 29 April 2008, < http://goliath.ecnext.com/coms2/gi_0199-1304796/Innovation-on-overtime-with-the.html>   Luecke, R & Katz, R 2003, Managing Creativity and Innovation Harvard     Business School Press: Boston    Schuler, R & Jackson, S 2006, Strategic Human Resource Management, Blackwell Publishing   Vance, C & Paik, Y 2006, Managing a Global Workforce: Challenges and Opportunities in International Human Resource Management, M. E. Sharpe   Wentz, R C, The Organizational Structure of Innovation: How Toyota, Procter & Gamble, GE, 3M, IBM, Google, Microsoft, Sony, Hewlett-Packard, DuPont, Honeywell, Whirlpool, The Innovation Machine, viewed 29 April 2008, <http://www.the-innovation-machine.com/?p=83> Appendices   Appendix A: Top 20 Innovative Companies in the World 2005   Source: (Business Week 2005)

Learning Organization Development

Learning Organization Development Introduction There had been a huge change that had happened in many industries and mark...

Company profile of Procter & Gamble

Company Profile of Procter and Gamble 1 Introduction Greenpeace is conducting a worldwide campaign against Persistent Organic Pollutants (POPs) and other hazardous substances. These substances must be prevented from entering the environment by abolishing their production and use and replacing them with non-hazardous alternatives. The elimination and substitution debate was initiated in the 1990s in Europe and the first international formal policy proposals were produced in the OSPAR Convention, in which 16 European governments (including the EU) agreed to eliminate discharges of hazardous substances to the marine environment by 20201. On 29 October 2003 the European Commission made a legislative proposal for a new European chemicals policy, known as REACH, which is expected to enter into force by 20052. Persistent Organic Pollutants (POPs) are highly toxic substances that decompose very slowly in the environment and accumulate in humans and animals, sometimes with hormone-disrupting effects. Many of these pollutants are chlorinated substances. Well-known POPs, such as DDT and PCBs, have long been banned in Europe, but other toxic substances are still being produced and used. These toxic substances are transported by air and water to remote and vulnerable regions. For example, polar bears, whales, seals and human inhabitants of the Polar regions are highly exposed to these substances3. Environmentally harmful POPs accumulate in the food chain. Even low concentrations of a toxic substance in the environment can lead to high levels in animals at the top of the food chain. But the same substances are also found closer to home, in rainwater4 and household dust5 for example, and in our bodies.6 Hazardous substances must be prevented from entering the environment. The most powerful instrument for achieving this objective will be legislation banning the production and use of existing hazardous substances and the prevent the production of new ones, which for instance is the basis for the global POPs treaty,7 which was adopted in 2001. The OSPAR Convention was the first regional treaty that agreed to eliminate discharges of hazardous substances to the marine environment in one generation (by 2020).8 It gives the greatest urgency to phasing out the chemicals on what is called the OSPAR priority list. On 29 October 2003 the European Commission presented a new European chemicals policy. The European Parliament and the member states will be further consulted before new legislation will be adopted and enter into force. The new policy framework is called REACH (Registration, Evaluation and Authorization of Chemicals). These are the key concepts in the new policy framework that intends to severely restrict and ban unauthorised use of hazardous chemicals. The European Commission has already received a lot of input from various stakeholders, including the chemical industry, consumer goods manufacturers and retailers.9 The chemical industry claims that the proposed legislation will undermine the competitiveness of the sector and is seeking to water down the new regulations.10 On the other hand, others like the UK retailer Marks and Spencer, fear the potential cost of a consumer backlash over dangerous chemicals could far outweigh the impact of the additional testing that the rules being proposed by the European Commission would require.11 The presence of toxic substances is not limited to the production area, but is directly evident in many of the products around us, including everyday consumer products which pollute the environment while being used or in the form of waste after disposal. Greenpeace is therefore calling on industry to: 1) halt production and use of hazardous substances; 2) adopt the precautionary principle: only produce and use chemical substances for which sufficient evidence is available that the chemicals present no potential for hazards to ecosystems or human health; 3) substitute hazardous substances with clean or less hazardous alternatives; 4) publish information about products, including the chemicals they contain. Companies which manufacture and/or retail consumer goods play a major role in the worldwide use and distribution of these chemicals of concern. Some have already adopted progressive policies to find substitutes for hazardous substances, while others have failed to make progress and use their influence to lobby against the pending new chemicals legislation. Greenpeace is calling on companies that produce and/or use these substances to draw up an action plan showing how they will meet these demands within one year. Companies should accept their social and environmental responsibility and help to achieve a cleaner and safer future. But they can also benefit from such a plan since they will need to adapt to changing consumer and legislative demands. Greenpeace has sent letters to a large number of manufacturers of consumer articles enquiring about the presence of and their policy on hazardous substances in their products and their position on the pending EU legislation on hazardous chemicals. Some companies did reply while others did ignore the enquiries. To obtain a better picture of the presence of hazardous chemicals in consumer goods and about what companies are doing to avoid them, Greenpeace compiled the results of existing tests on consumer articles, most of them conducted by the German consumer group Oekotest. In addition, Greenpeace commissioned the Dutch research group TNO in 2003 to test a further selection of consumer articles for selected chemicals (organotins, phthalates, brominated flame retardants, musks, Bisphenol-A and alkyl phenols and its ethoxylates)12 and reviewed the social and environmental policies, particularly on hazardous chemicals and REACH, of a selected number of companies. These included companies producing sports wear, cosmetics and body-care products and electronics. The following report is a dossier on Procter and Gamble. A previous draft of this report has been discussed with Procter & Gamble and we thank the company for providing comments and additional information. History and background In 1837, William Procter and James Gamble combined their skills as a candle maker and soap maker and formed the partnership of Procter & Gamble. In 1879 they developed an inexpensive white soap named Ivory, and in 1890 the company established its own research laboratory, the first of its kind in the US, and a stream of innovative new products followed. In 1930, P&G purchased its first plant outside North America, with the purchase of British soap manufacturer Thomas Hedley & Sons. Five years later the company established a factory in the Philippines. During 1920s and 1930s, the company pioneered sponsorship of radio dramas aimed at a female audience that gave rise to the term "soap opera". The company still sponsors three daytime US TV shows, including As the World Turns.13 Nowadays Procter & Gamble markets nearly 300 brands, including leading brands such us Pampers, Tide, Ariel, Always, Whisper, Pantene, Bounty, Pringles, Folgers, Charmin, Downy, Lenor, Iams, Crest, Actonel, Olay, and Clairol. P&G has sales in more than 160 countries around the world and P&G’s worldwide headquarters is located in Cincinnati, Ohio, USA. The company operates 115 plants in almost 80 countries worldwide and employs nearly 98,000 people.14 P&G is divided into five global business units: fabric and home care; beauty care; baby and family care; health care; and snacks and beverages.15 The firm also makes pet food and water filters and produces soap operas.16 The biggest division in 2003 was Fabric & Home Care (sales of $12.6bn), followed by Beauty Care ($12.2bn), Baby & Family Care ($9.9bn), Health Care ($5.8bn) and Snacks & Beverages ($3.2bn). Fabric & Home Care was also the most profitable division (with net earnings of $2.1bn, marginally ahead of Beauty Care).17 In late 2003 the group announced a partnership with appliance manufacturer Applica Consumer Products to begin marketing a major line of household consumer appliances, jointly branded as P&G and Black & Decker, commencing in early 2004. No further details have been confirmed but among the first products are expected to be a Folgers-Black & Decker coffeemaker. After several years of strong development in the Nineties, several of its key brands lost their leadership of the market to rivals, while many of its new product launches proved disappointing or downright failures. After two years of further internal restructuring, P&G appeared to have found its way forward again by early 2002. The group reported headline sales for the year ending 2003 of $43.4bn, up 8%. Around half of total sales were generated in the United States. Key Numbers18 Company type Public (NYSE PG) Fiscal year end June 2003 sales (million) $43,377 2003 net income (Million) $ 5,186 2003 employees 98,000 Key People19 Alan (AG) Lafley is Chairman, CEO and President of P&G. Other key executives include Bruce Byrnes (Vice Chairman and President, Global Beauty Care and Global Health Care), Kerry Clark (Vice Chairman and President, Global Market Development & Business Operations. Top Competitors20 Johnson & Johnson Kimberley-Clark Unilever Procter and Gamble was the #2 beauty products company by revenues after L’Oreal in 200221 with top brands such as Head & Shoulders shampoo (#5 sales in US in 2002), Cover Girl (#2 colour cosmetics in US, 2002), Always and Tampax feminine hygiene (#1 and 2 world in 2001) and Secret Brands and Old Spice deodorant (#1 and 5 in 2002).22 Rankings23 Procter and Gamble ranks number 31 on the Fortune 500 and number 21 on the Financial Times Global Top 500 companies list. Procter & Gamble is included in the Dow Jones Sustainability Index (DJSI) and has been rated as the market sector leader in the Consumer Goods sector for four consecutive years. It is also in the FTSE4Good index. Procter and Gamble is listed on the Domini 400 Social Index of the socially responsible investment firm Domini Social Investments.24 Domini praised Procter & Gamble for its ‘notably generous’ level of charitable donations in countries outside the U.S., for its packaging waste reduction program and for its US workplace policies, especially towards working mothers. However, Domini voiced concerns about the company’s lay-offs in 2001 of 17,400 employees. Subsidiaries/Affiliates25 The Iams Company P&G-Clairol, Inc. Reflect.com LLC Wella AG Stock information26 P&G is a publicly owned company. Its stock is listed and traded on the following exchanges: New York, Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Brussels, and Tokyo. W Netherlands27 Procter & Gamble Nederland B.V. Watermanweg 100 3067 GG Rotterdam Netherlands Phone: 31-10-286-3100 Fax: 31-10-286-3131 Shareholders28 Country capital (%) Bank of America Corp. United States of America 1.15 Barclays Plc United Kingdom 3.4 FMR Corp. (Fidelity Investments) United States of America 2.59 JP Morgan & Co. United States of America 1.38 Mellon Financial Corp. United States of America 1.3 State Street Corp. United States of America 2.3 Vanguard Group Inc. United States of America 1.5 Wellington Management Co. United States of America 1.3 3 Business Strategy P&G is organized around five global business units that manufacture and market the product categories. These units are responsible for spreading product innovations across the company’s product categories and geographic markets. In addition to units formed along product lines, P&G also has Market Development Organizations (MDOs), which are geographically organized. Corporate Functions covers two main focus areas: 1) upstream research and development focussing on new developments, and 2) corporate needs not covered by the other departments, such as corporate human resources and corporate external relations, customer business development. Global Business Services provides support services to P&G business units and to P&G employees.29 Most of the products are produced or assembled in P&G-owned facilities and 10% at third-party manufacturers. This proportion has increased during the past few years.30 Employment Approximately 21,600 people lost their jobs since 1999 when the company initiated a multi-year restructuring program concurrent with the company’s reorganization into product-based global business units. While all geographic regions and businesses were impacted, a higher number of U.S. employees were affected because of the concentration of operations in the US.31 In 1999, concurrent with a reorganization of its operations into product-based Global Business Units, the company initiated a multi-year restructuring program designed to accelerate growth and deliver cost reductions by streamlining management decision-making, manufacturing, and other work processes, and by discontinuing under-performing businesses and initiatives. The program was substantially complete at the end of fiscal 2003. Advertising32 Advertising Age/TNS Media Intelligence estimated total media expenditure in the US of $2.7bn in 2002, including measured media expenditure of $2.0bn. Biggest spending brands were Olay (measured spend $161m), Crest ($160m), Clairol ($154m), Cover Girl ($110m) and Pantene ($99m). 4 Social and Environmental Responsibility “Sustainable development is about improving quality of life for everyone, now and for generations to come.” The company’s worldwide business conduct and its social responsibility is based on a set of principles, values and statement of purpose,3334 and the company’s supplier’s code of conduct is laid down in a set of guidelines for its suppliers.35 These guidelines include guidance on legal compliance, human rights, employment (including child labour and forced labour) and on health, safety and the environment. Procter and Gamble’s commitment is to and it expects its suppliers to ‘operate within the spirit and letter of the law and maintain high ethical standards’ wherever it conducts its business. The guidelines also state that if ‘a pattern’ of violation of these principles becomes known and is not corrected Procter and Gamble will discontinue the business relationship. P&G is also committed to supporting economic growth, social justice, human rights, political justice, and equal opportunity wherever it does business in the world. In 2003 Procter and Gamble published its fifth Sustainability Report for P&G’s worldwide operations. Data in this report cover the period from 1 July 2002, through 30 June 30 2003. According to the company, its key sustainability focus areas are water and health and hygiene. Environmental Protection focuses on water, use of resources and waste reduction. Social responsibility focuses on health, hygiene and education. P&G made total global philanthropic contributions (by the P&G fund and through corporate contributions) of $84.5 million in 2003 and $77.7 million in 2002 “P&G commits to providing a clean, safe and incident-free work environment. We expect vendors to provide a safe work environment, to prevent accidents and injury, and to minimize exposure to health risks.” Procter and Gamble Guidelines for Vendor Relations, p. 6 P&G commits to improve the environmental quality of its operations and products and to do business with vendors who share the company’s concerns for and commitment to preserving the environment. It expects vendors, as a minimum, to meet all current, applicable environmental rules, regulations and laws in their countries.36 Procter and Gamble has released a summary of data for the company’s resource consumption and waste production for its global business, specified by its five product groups.37 The company has more detailed policies in place on climate change, forests, health and safety.38 “…it is P&G’s policy to: Ensure our products, packaging and operations are safe for our employees, consumers and the environment. …“ Procter and Gamble 2003 sustainability report.39 According to the company’s environmental policy, it is committed to reducing or preventing the environmental impact of its products and packaging in their design, manufacture, distribution, use and disposal whenever possible. It also says it supports the sustainable use of resources and actively encourages reuse, recycling and composting. The policy also states that the company meets or exceeds the requirements of all environmental laws and regulations and uses environmentally sound practices, even in the absence of governmental standards. P&G follows uniform corporate safety standards around the world and has operating policies, programs and resources in place to implement its environmental policy globally.40 A global Health, Safety & Environment (HS&E) team is responsible for ensuring that the approximately 130 manufacturing facilities worldwide are operated safely and legally; that process hazards are minimized or eliminated; that health risks are identified, managed, or eliminated; and that waste from sites is reduced as much as possible.41,42 Product Safety & Regulatory Affairs (PS&RA) is responsible for ensuring that products are safe for consumers, safe for the environment and in compliance with laws and regulations where they are sold. PS&RA is also responsible for the development, validation and adoption of alternatives to animal testing and ensures that any claims the company makes about the safety or environmental profile of its products are scientifically sound. 43 The safety of the company’s products and ingredients is based on risk assessments of chemical hazard and exposure information. According to P&G, selection and formulation of product ingredients and mixtures is based on acceptable risk profiles, as well as ‘satisfying other important business and consumer needs’.44 The company is also applying a risk assessment process to assess the safety of its processes at its own manufacturing operations as well as at contractor manufacturing operations.45 A key part of PS&RA is the Central Product Safety (CPS) organization, whose primary role is to conduct scientific evaluations of the human and environmental safety and impact of the company’s products.46 Coffee workers’ exploitation In 2003, Procter and Gamble was targeted as one of the world's four biggest coffee sellers by Oxfam and other pressure groups for exploiting coffee producers. Oxfam released a report pointing out that it costs farmers more to grow and pick coffee than they receive when selling it, a situation that imperils the livelihood of farmers according to Oxfam. The price that coffee farmers receive for their harvest has fallen by almost 50 percent to a 30-year low. A shareholders’ coalition led by Domini Social Investment Fund filed a shareholder resolution in April 2003 to address the coffee crisis. 47. According to Oxfam, the “Big Four” coffee roasters--Sara Lee , Procter & Gamble, Nestle, and Kraft, owned by Philip-Morris --risk alienating consumers, who are gaining awareness of the social and environmental costs of coffee production. According to the NGO, these four companies buy nearly half of the world's coffee crop and thus dominate the $60 billion global coffee industry and their healthy profit margins range between an estimated 17 and 26 percent. Procter and Gamble responded in its 2003 sustainability report that it recognizes the social problems many coffee-growing families face but that this is the result of the current situation of global overproduction and low prices and that it pays prices based on the marketplace and must do so in order to secure the coffee it needs and to maintain competitive prices for its consumers. It further stated that P&G is committed to helping to address the underlying social and economic issues which contribute to this situation, and working with reputable organizations that can help provide long-term systemic solutions.48 Procter & Gamble recently agreed to begin marketing Fair Trade-certified coffee products within its Millstone specialty coffee products division in the US, where it is the market leader. Apparently P&G estimates that it will purchase approximately 2-3 million pounds of Fair Trade-certified coffee annually under the new plan. Coffee beans that are produced under the Fair Trade certification guarantees farmers a minimum of $1.26 a pound for coffee compared to non-fair trade coffee which pays farmers approximately $0.52 per pound. 49, 50 P&G has also introduced Rain Forest Certified Millstone coffee which uses beans grown to environmental standards, and Cup of Excellence Millstone coffee, which promotes quality among coffee growers, helping them to get a better price for their crop. P&G has entered into a 10-year alliance with the NGO Technoserve, to help coffee farmers join together to improve efficiency through pooling of resources, and to help diversification into other crops where coffee farming is not economically viable.51 Animal rights The animal rights pressure group People for the Ethical Treatment of Animals (PETA) campaigns against animal tests and lists Procter & Gamble as one of the many companies that conduct animal tests for personal care and household products, and that is not required by law.52 The P&G products that are listed by PETA to be tested on animals include Clairol, Cover Girl, Crest, Giorgio, Iams, Max Factor, Physique and Tide. According to P&G, the company does not use animals to evaluate the safety of non-food and non-drug consumer products, except where required by law.53 According to P&G, animal research may still be necessary to evaluate the safety of novel ingredients and new product types for which no validated nonanimal tests are currently available. Procter & Gamble has made a commitment to eliminate all animal testing and stopped testing in 80% of their product portfolio. Eighty-five percent of the animals used for human safety testing are rats and mice. The remainder are mostly guinea pigs, rabbits, hamsters and ferrets and, according to the company, it does not use cats or dogs in research or testing for non-food, non-drug products54 The company has voluntarily spent approximate $170 million over the past 10-15 years to support the development of animal alternatives.55 However, PETA is still running an international campaign against Iams pet-food company, a subsidiary of P&G. The pressure group accuses Iams of contracting with dozens of laboratories that use cats and dogs to conduct ‘cruel and unnecessary nutritional tests’.56 And in a recent P&G campaign update (March 15, 2004), Peta stated that Procter & Gamble has still not ended the animal testing by continuing animal tests on new ingredients, even when those tests are not required by law. And according to PETA the company's policy does not cover existing products in the oral care product area -- toothpastes and mouthwashes such as Crest and Scope. It further stated that although it welcomed P&G's step in the right directionit will continue to push the company away from animal experiments permanently, including by keeping P&G on its "do test" list and by continuing to encourage consumers to boycott all of its products.57 According to PETA, more than 550 companies, including large corporations like Gillette and Avon, ensure their customers' safety by using more accurate non-animal tests but that P&G has refused to stop animal tests even for products that are not required to be tested on animals by law, such as cosmetics and household goods, which make up the majority of P&G's products. 5. Chemicals of concern in Procter and Gamble products 5.1 Chemicals of concern in Procter & Gamble products Consumer organizations have tested several cosmetics and body care products for (potentially) hazardous substances, including in P&G products, and identified several phthalates and musks in some of these products Artificial Musks Nitro musks and polycyclic musks are a series of structurally similar aromatic compounds used as substitutes for natural musks. Artificial musks are cheap, easy to produce fragrances that are added to personal care and household products such as laundry detergents, shower gels, soaps, hand lotions and perfumes. Some musks are also used as additives in food, room fragrances, chewing tobacco, fish baits, Indian joss sticks, and in technical products such as herbicide formulations and explosives. The nitro musks include musk xylene, musk ketone, musk ambrette, musk tibetene and musk moskene. The major polycyclic musks are tonalide and galaxolide, also respectively known as AHTN and HHCB. Artificial musks are persistent and bioaccumulative chemicals. Most health studies focus on musk xylene (MX) and musk ketone (MK). Although MX and MK are structurally similar and possess almost identical physico-chemical properties, they differ significantly in their biological properties. Both musks display estrogenic activity in vitro, with MK showing an affinity for the oestrogen receptor three times greater than MX. However, when MK is reduced to its metabolite it loses its activity, whereas when MX is converted to pamino- musk xylene, its estrogenic potency increases58. Exposure of humans to MK might increase their susceptibility to the hazards of other cancer-causing chemicals. For example, MK acts as a cogenotoxicant by amplifying the harmful effects of the polycyclic aromatic hydrocarbon benzo(a)pyrene on DNA in human cells at relatively low doses59. One human study has shown a significant association between MX and MK levels in blood and hormonal and gynaecological problems in women, suggesting that these musks cause reproductive toxicity and endocrine effects in humans.60 The polycyclic musks AHTN and HHCB induce both estrogenic and anti-estrogenic activity depending on the cell type and the receptor subtype targeted. Weak estrogenic effects are observed at relatively high concentrations while anti-estrogenic effects are seen at lower concentrations61. However, a recent study on fish found that these musks could be significant endocrine disruptors.62 Phthalates Phthalates are a group of non-halogenated ester derivatives of phthalic acid which are widely used in a range of industrial and consumer applications. Some phthalates, including DBP and DEP, are commonly found in cosmetic and personal-care products, especially in nail polish, perfumes, hair sprays, household cleaners and deodorizers, but the main use of phthalate is as plasticizers in soft plastics, especially in soft PVC. As of October 2000, the US Patent and Trademark office had 309 patents registered for the use of DBP in cosmetics. And in 1995 DEP was reported to be in 67 formulations as a solvent and as a vehicle for fragrance and cosmetic ingredients63. Phthalate congeners with more than two and fewer than eight carbon atoms are reproductive and developmental toxicants of varying potencies.64 DBP and DEHP have been characterized as endocrine disruptors acting through complex pathways that generally do not involve the androgen and oestrogen receptors. Recent research suggests possible effects on human sperm development for a breakdown product of DEP, diethyl phthalate65, widely used in cosmetics and perfumes and, until now, considered to be of relatively little toxicological significance. Women of reproductive age (20-40 years of age) have been found to be more exposed to DBP than other groups, possibly due to the volatilization and inhalation of phthalates from a variety of commonly used cosmetics and household products66. Adibi et al. recently studied a group of 30 pregnant women in New York and a group of a similar size in Crakow, Poland, and found that DEP and DBP were present in both the personal air and the urine samples of the New York group in the highest concentrations. This and the high correlation between personal air and urine samples led the researchers to conclude that inhalation appears to be a significant route of exposure67. In a more recent study among 2540 US citizens, children were found to have significantly higher levels of the mono-ethyl metabolites of DBP, DBzP and DEHP than adults, whereas females were found to significantly higher concentrations of the mono-ethyl metabolites of DEP and DBzP than males. Adult females were found to have the highest MEP levels. The fact that women had higher concentrations of MEP than did men was according to the researchers most likely attributable to women’s increased use of personal care products, such as hair care products, cosmetics, and perfumes.68 The presence of phthalates and musks in their products is an indication for companies producing personal-care products that there is at least a suspicion that their customers can be exposed to the chemicals and their potential toxic impacts by using their products. This should be a reason for serious concern, especially since the target group of many of those products is often women and men at their reproductive age. 5.2 Procter & Gamble’s Chemicals Policy In response to a Greenpeace, Procter & Gamble stated that it is important to share information with all key stakeholders, and engage in dialogue about the safety of its products, including its ingredients.69 The company furthermore stated that all ingredients in Procter & Gamble’s products are evaluated to ensure they are safe. This includes chemicals that are broadly recognized as priority substances by the international scientific community and government authorities based on their persistence, ability to bioaccumulate, and toxicity (including chemicals that are known in humans as carcinogens or mutagens). According to the company, it avoids using such substances as ingredients in its products, unless it is sure it can conduct a sufficiently thorough risk assessment to ensure that their use is safe for humans and the environment.70 P&G does not publicize details of its policy on chemicals on its website or its environmental reports. But in rtesponse to Greenpeace inquiries, it provided the following information. According to Procter and Gamble, the company does not use natural musks that originate from animal sources, often farmed for this purpose or alternatively from animals taken from the wild. For this reason P&G has had a very strict policy not to use natural musks and this has been in force for as long as the company has been in the fine fragrance business (since the mid 90’s). In the 90’s P&G decided to stop using the synthetic nitro-musks because of environmental concerns raised by some NGOs and government authorities. It also pointed out that recently the most commonly used types of both nitro-musks and polycyclic musks have been reviewed for safety and accepted for use in cosmetics by the EU Scientific Committee on Cosmetics (SCCNFP). According to P&G, it has eliminated all musks (nitro and polycyclic) from its cleaning products since the 90-ties, but depends for it’s fine fragrances on the continued use of polycyclic musks.71 According to P&G, phthalates are typically sub-components of some ingredients (such as perfumes) and are not directly added as ingredients. Thus phthalates may be present in trace amounts in the finished products. A number of phthalates are banned in the EU for use in consumer products (primarily soft, chewable toys for small children) and P&G says it does not use those phthalates in any form in products marketed in the EU. According to Procter & Gamble, Di-Ethyl-Phthalate (DEP) has been confirmed as safe for use in cosmetics by the EU’s Scientific Advisory Panel convened and only DEP and other approved phthalates may be present in trace amounts in some of its product.72 Furthermore, P&G has confirmed that it will publicize the company’s policy on these and other chemicals of concern on the company’s website.73 6 Procter and Gamble and REACH In a letter to Greenpeace,74 the company said that it welcomes the political objectives of the White Paper issued by the European Commission. The company also stated that in situations where there is reasonable scientific evidence that the use of an ingredient would be unsafe, or where the company believes there is significant scientific uncertainty about its safety, it does not proceed with that use. Instead it uses a viable alternative, or it takes actions to reduce exposures to safe levels or does additional work to reduce uncertainty until the company is confident that the product is safe. But it also stressed the company’s commitment to the risk assessment approach, which is further outlined in the company's 2003 Sustainability Report, where the company explains why it relies on risk assessment. According to Procter and Gamble, this is because the precautionary approach could cause 'chemicals that are being safely used to be unjustifiably removed from the market, potentially depriving society of innovative and beneficial technologies.' 75 In response to a previous draft of this report, Procter & Gamble stated that it does not support approaches that would broadly restrict the use of chemicals based on concern about their potential hazards alone, and mandate the substitution of chemicals with less hazardous properties across all possible applications. According to P&G, it is important to consider whether or not exposure is possible. Risk-based chemical legislation has proved incapable of addressing the scale and severity of the problem. Moreover, such an approach suffers from a number of inherent and fundamental limitations which fatally compromise its utility. Assessing their risks and formulate and implement legal action takes to long and as a result, a large number of chemicals are being used world-wide without proper knowledge about their risk. The EU concluded in its White Paper that the risk assessment process is slow and resource-intensive and does not allow the system to work efficiently and effectively.76 The EU realized that the current riskbased regulations will never be capable of ensuring an adequate level of protection of the environment and human health from exposure to, and the effects of, hazardous chemicals. The current risk assessmentbased chemicals policy system is failing by design. The need for a revision of EU chemicals legislation was already highlighted at the informal Environment Council in April 1998 in Chester, England. This became all the more relevant when the Environment Ministers adopted the generational goal at the OSPAR Ministerial Conference in July 1998 in Sintra, Portugal, where they made a commitment to progressively work towards the cessation of discharges, emissions and losses of hazardous substances by the year 2020. A complete structural overhaul of EU chemicals legislation will be essential to achieve the OSPAR objectives, particularly the effective implementation of the generational goal, which needs to be fully transposed into EU legislation. This was the basis for the EU’s currently proposed REACH system, which was first outlined in the European Commission’s White Paper, the Strategy for a Future Chemicals Policy, in 200177: “EU chemicals policy must ensure a high level of protection of human health and the environment as enshrined in the Treaty both for the present generation and future generations while also ensuring the efficient functioning of the internal market and the competitiveness of the chemical industry. Fundamental to achieving these objectives is the Precautionary Principle. Whenever reliable scientific evidence is available that a substance may have an adverse impact on human health and the environment but there is still scientific uncertainty about the precise nature or the magnitude of the potential damage, decision-making must be based on precaution in order to prevent damage to human health and the environment. Another important objective is to encourage the substitution of dangerous by less dangerous substances where suitable alternatives are available. It is also essential to ensure the efficient functioning of the internal market and the competitiveness of the chemical industry.”78 European Commission White Paper - Strategy for a future chemicals policy 2001. The draft legislation, which will replace over 40 existing directives and regulations, will implement the proposals set out in the Commission's February 2001 White Paper on the Strategy for a Future Chemicals Policy.79 At its core is REACH: a single, integrated system for the Registration, Evaluation, and Authorisation of CHemicals. REACH will place a duty on companies that produce, import and use chemicals to assess the risks arising from their use - requiring new test data to be generated in justified cases - and to take the necessary measures to manage any risks they identify. Moreover, all substances of very high concern will be subject to authorisation. Authorisations apply to particular uses of the substance in question. Authorisation will be granted only if the producer or importer can show that risks from the use in question can be adequately controlled, or that the socio-economic benefits of the use of the substance outweigh the risks. In the latter case, the possibility of substitution should be considered. Substances will be subject to authorisation based on their intrinsic properties (rather than risk assessments) and the current proposal includes substances that are carcinogenic, mutagenic or toxic to reproduction (CMRs category 1 and 2), chemicals that are persistent, bio-accumulative and toxic (PBTs) and chemicals that are very persistent and very bio-accumulative (vPvBs). It also includes substances identified as having serious and irreversible effects to humans and the environment equivalent to the other three categories, for example certain endocrine disrupting substances (substances disturbing the body's hormone system). This means that under the current proposal chemicals will be severely restricted and replaced by safer alternatives based on their hazard properties rather than risk profiles. This will shift the burden of proof from public authorities to industry for putting safe chemicals on the market. “As an example, the likely occupational health benefits from the new regulatory system should be estimated at between 18 and 54 billion Euro over a 30-year period, which corresponds to an ultimate yearly reduction of some 2200 to 4300 cancer cases over the same period”. 2003.80 Despite the inability of risk assessments to protect human health and the environment, some industries, e.g. the European chemical industry (CEFIC), reject the EU’s proposed authorization and registration procedure (REACH) and its underlying principle of precautionary action. 81 Procter and Gamble commented directly on the REACH consultation papers and through a variety of industry associations to which Procter & Gamble is a member, and has been promoting risk assessment and rejecting the proposed EU process to ban chemicals of very high concern based on a hazard assessment. According to Procter & Gamble, a risk assessment, and if necessary a socio-economic analysis, must be carried out ahead of any decision on restriction for chemical uses, including consumer uses.82 The company participates in a voluntary industry project on human and environmental risk assessment called HERA, which supports the comments of its sponsor the European chemicals industry council CEFIC (and also AISA, see below). HERA, like P&G, rejects the REACH hazard assessment and authorisation approach and promotes risk assessment, including socio-economic analysis.83 Procter and Gamble's food and beverages activities are represented in Europe’s Confederation of EU Food & Drink Industry (CIAA).84 CIAA, together with 16 other food and feed organizations, reject the REACH draft proposal and also endorse the comments of the European chemicals industry council (CEFIC).85 Procter and Gamble is also member of AISE, the International Association of the Soap, Detergent and Cleaning Products Industry. AISE supports the risk assessment approach as promoted by HERA and rejects the REACH hazard approach.86 AISE is in turn a member of the Downstream Users Chemicals Co-ordination Group (DUCC) that likewise rejected the hazard approach of REACH and promotes risk assessment.87 According to the EU Commission, companies will be able to ensure better protection of their workers and their products will be safer for consumers and the environment and most chemicals will already be registered when they are utilized by downstream users (companies that buy chemicals and use them as ingredients in their own products).

Company profile of Procter & Gamble

Company Profile of Procter and Gamble 1 Introduction Greenpeace is conducting a worldwide campaign against Persistent Organic Pollutan...