Procter & Gamble: Making Money, Making a Difference

Recently, we looked at General Electric (NYSE: GE  ) and how it planned to use "ecomagination" to generate $20 billion in revenue from more environmentally friendly products. We saw how Coca-Cola (NYSE: KO  ) planned to use its Global Water Stewardship campaign to make the company's water usage less wasteful. And McDonald's (NYSE: MCD  ) showed how there is more than one way to contribute to sustainable forestry -- like tweaking the size of its North American fries box and using more recyclable material.

These efforts that contribute to better business and a better Earth -- and for Foolish long-term-minded investors, better investments -- often fall under the category of corporate citizenship or corporate social responsibility. Another term you'll hear repeatedly in relation to these issues is sustainability. Today, we will look at a report written by two Procter & Gamble (NYSE: PG  ) executives on the topic of sustainable development and highlight a couple of P&G initiatives that are building a more sustainable business model by contributing to a more sustainable environment. 

Corporate social opportunity
First, I want to highlight an essay written by George Carpenter and Peter White; both were executives for P&G at the time of the article's February 2004 publication in Corporate Environmental Strategy: International Journal for Sustainable Business.

If you think that the women and men in the shiny suits, operating some of the world's most powerful corporations, are just sitting around talking dollars and cents all day, then take a look at this report. Fortunately, there are executives out there who recognize the necessity in addressing serious global issues while doing some serious global business. 

One of the main points the authors make is that the discussion framed around corporate social responsibility has often had a negative bent. From this standpoint, corporations have been viewed as primarily "the problem," hence, corporate social responsibility initiatives have looked at ways that enterprises can work on being "less bad," like reducing the usage of natural resources and improving worker conditions.

But Carpenter and White argue there is a flaw in this approach, writing, "When you focus only on being 'less bad,' by definition you can never be 'good.'" From their perspective, this approach neither sends a positive message, nor is it an adequate foundation for a strong, sustainable business model.

By linking opportunity with responsibility, Carpenter and White believe that corporations can begin shifting to a mindset where business can become part of the solution. I was pleased to see that one of the influences that the authors tapped into to reframe the "responsibility" discussion is C.K. Prahalad, a leading business strategist and professor at the University of Michigan Ross School of Business and someone whose work I've commented on a couple of times, including his essay in  Harvard Business Review and his book titled The Fortune At the Bottom of the Pyramid.   

From the perspective of responsibility and opportunity, Procter & Gamble can identify new ways to bring new products to new consumers. Carpenter and White highlight a few ways P&G is doing that, including teaming up with UNICEF to introduce NutriStar -- a powdered drinking product that addresses micronutrient malnutrition in some populations and by acquiring the PuR brand to bring low-cost water purification technologies to consumers in developing markets. The company also promotes better hygiene in at-risk communities, which has the benefit of forming new markets for P&G's soap and toothpaste products.

From sustainable coffee to eco-efficiency
Stepping away from the report, let's look at a couple of other ways P&G is looking to both make money and make a positive difference in the world.

Socially responsible coffee procurement is an issue of major importance for Starbucks (Nasdaq: SBUX  ) , and so it is for P&G. Among other related initiatives, through its Millstone brand, P&G is participating in certified "green" coffee programs that "enable eligible farmers to become specialty coffee producers and receive a premium price for their coffee."

Another way P&G is continuously striving to make a difference is by becoming eco-efficient: maximizing production while minimizing waste. The company appears to be making a measurable difference in this regard.

From 2004 to 2006, P&G increased its total product shipped from 18.5 million metric tons to 21.3 million. At the same time it reduced non-hazardous waste from 300 metric tons to 289, hazardous waste from 21 metric tons to 19, and greenhouse gas emissions from 2.937 million metric tons to 2.889 million. The company's water consumption during the same time frame increased only marginally from 79 metric tons to 80.   

A commitment to being Foolish
P&G has identified three pillars to support its sustainable development strategy: environmental protection, economic development, and social responsibility. "Sustainable" is the catchword used by P&G and the rest of the industry, but I like to think of it as simply being "Foolish."

As Foolish investors, we want to be co-owners in companies that are looking out for the interests of long-term-minded shareholders -- in a nutshell we want Foolish businesses. Proctor & Gamble, through its efforts to make money through making a difference, is the kind of Foolishness we are looking for.

Further socially responsible Foolishness:

Starbucks is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have recommended to subscribers, check out a 30-day free trial.

As part of a graduate degree at Duke University, Fool contributor Jeremy MacNealy has written an ethics and law thesis paper on corporate social responsibility. He has no financial interest in any company mentioned. Johnson & Johnson is an Income Investor recommendation. The Motley Fool has a disclosure policy.


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