Research Paper on "Procter and Gamble CSR Strategy"

Research Paper 6 pages (2298 words) Sources: 6

[EXCERPT] . . . .

future of Procter and Gamble's Corporate Social Responsibility Strategies

About Procter & Gamble

Procter & Gamble (NYSE:PG) reported $83B in Sales and earned Net Income of $10.7B in their latest full fiscal year which ended June 30, 2012 (Procter & Gamble). P&G continues to experience profitability declines, and in their most recent financial reporting provided guidance of organic sales growth of between 2% to 4% wile also reporting the successful sales of their Snack business in May, 2012. P&G also announced in February, 2012 that the company was initiating an aggressively cost reduction plan of trimming $10B over the next five years, with $8B in immediate cost reduction programs at trimming 5,700 non-manufacturing and corporate jobs (Procter & Gamble). P&G is looking to this significant effort to add 10% greater gross margin corporate-wide in the next two years. P&G, while having one of the most extensive global manufacturing and distribution networks, has seen deterioration of its more profitable, long-standing product lines. One of P&G's greatest strengths is its ability to continually create and launch innovative products. As several of the top-selling brands are struggling to retain market share globally, P&G has said they are investing heavily into bolstering their innovation processes and centers globally (Procter & Gamble). Regionally strong competitors throughout Brazil, India and China are also eroding P&G's market share (Procter & Gamble).

Recommendation

P&G competes in several industries that are among the most toxic in terms of waste materials produced within their supply chains and during the production process. Given the highly toxic nature of the production process for cleaning supplies, detergents, soaps and other chemically-based products, P&G has made corporate-wide sustainability and corporate social responsibility (CSR) one of the top three priorities in their strategic planning framework (Warner, 71). P&G continues to lead the industry in the definition and use of balanced scorecards and the triple bottom line methodology of evaluating how their organization is progressing to corporate social responsibility and sustainability goals (Procter & Gamble). One of the foundational elements of the CSR initiatives within P&G is the definition of a Vice President of Sustainability and another for CSR Programs and Performance (Procter & Gamble). Both of these positions report to the CEO with dotted line reporting to the board of directors. As P&G has over 75,000 suppliers in their global supply chain and compliance to corporate-wide CSR programs cannot be directly monitored in each case, P&G has defined a balanced scorecard for each supplier and regularly evaluates their level of compliance to CSR initiatives (Procter & Gamble). This approach to enforcing a higher level of CSR compliance than any other consumer packaged goods manufacturer gives P&G a competitive advantage globally and further strengths their global corporate reputation as well (Riccaboni, Leone, 133, 134). Based on these factors and the innate strengths of P&G in managing a diverse and globally-based supply chain, with many suppliers located in 2nd and 3rd world countries, P&G needs to show that their CSR initiatives are delivering measurable improvements in the lives of people there. P&G needs to build its CSR branding around success stories in 3rd world nations where the company's projects on water recycling and sustainability are delivering significant results

(Procter & Gamble). The company has the breadth and depth of process-based expertise to completely revitalize villages and towns in 3rd world nations while still earning a profit on the products produced there. The "doing well by doing good" mantra of successful companies who are excelling at CSR initiatives also needs to become part of the P&G branding platform and strategy.

Analysis and Summary of the P&G Sustainability Strategy

The intent of this section of the analysis is to analyze and provide a summary of the P&G sustainability strategy. Its approach to defining a global sustainability strategy began with its focus first on suppliers, then extended to its strategic sourcing and procurement process areas (Procter & Gamble). This parallels the best practices of manufacturing organizations globally, which often begin with managing supply chains to sustainability, progressing towards integration within strategic sourcing (Cornelius, et al., 355, 356). What P&G has also done is successfully integrate the foundational elements and methodologies of Triple Bottom Line reporting into their sustainability initiatives (Keyes, Sykes, 2009). P&G is the global leader in sustainability for consumer packaged goods manufacturers, as is shown in the 2012 Sustainability Overview. The report highlights the company's aggressive sustainability goals through 2020, the most notable of which is Robert McDonald's ambitious goal of having P&Gs' sustainability efforts are so effective that they save one life very hour by 2020

(Procter & Gamble). This commitment to sustainability is impressive and sets a pace of innovation in this area that few if any other consumer goods products manufacturers can match. Please see the CEO's letter at the introduction of the

2012 Sustainability Overview for this and other sustainability goals the company has set for itself for attainment by 2020.

Unlike its competitors who predominantly focus on environmental sustainability strategies that readily deliver lean supply chain, manufacturing and reverse logistics business value, P&G includes both social and environmental responsibility in its strategic frameworks for value delivery (Busco et al., 32)

(Keyes, Sykes, et.al). P&G has deliberately chosen to be more encompassing with its sustainability strategies across both social and environmental responsibility in order to better support triple

P&G has implemented the Triple Bottom Line (3BL) framework by integrating the economic, environmental and social factors into a solidified platform for future growth based on measurable sustainability (Riccaboni, Leone, 132, 133). Using the 3BL framework to unify its strategic planning for products, operations, employee education and support of overarching CSR initiatives have given the company greater visibility and control into sustainable design, brand and reputation management, resources and efficiency, and Governance, Risk and Compliance (GRC). Figure 1 indicates how the P&G Strategic Framework for Value Delivery has been designed with specific attention paid to the levers, outcomes and advantages across the four strategic areas of their business model. One of the major factors in P&G's continued success is the aligning of each specific process area to increased profits, lower costs and competitive advantage and long-term value creation. This signifies the "doing well by doing good" mantra or philosophy that is illustrative of the highest performing enterprises today who have found that CSR initiatives are good business.

Figure 1: P&G Strategic Framework for Value Delivery

Based on an analysis on the following sources: (P&G Annual Reports; filings with the SEC; 2006 -- 2012) (Keyes, Sykes, et.al); (Damian, 54) (Cullen, Victor, Stephens, 50) (Riccaboni, Leone, et.al.) and from the Gartner Report Achieving Competitive Advantage Through the Pursuit of Sustainable Business. (December, 2012) Stephen Stokes, Simon Mingay. Stamford, CT.

P&G's strategic framework for value delivery is defined internally with specific focus on strategic role of products, their support supply chain, manufacturing and service processes, operations targets of performance as defined through the 3BL framework, and continual benchmarking of performance against CSR short-term goals and long-term objectives. What is most significant about the P&G strategic framework for value delivery is the continual emphasis on employee ownership and change management initiatives to keep the entire ecosystem working correctly (Warner, 71). P&G has so engrained sustainability into their company that every employee understands their role in contributing to its attainment, as evidenced by external audits (Procter & Gamble). The results have been significant, with the company attaining a reduction in water waste unit per unit of production of 16%, in addition to purifying approximately 2.9 billion liters of drinking water in 2011, with the goal set of attaining 4B in purified drinking water for 2020 (Procter & Gamble).

P&G at the Integration Stage of Corporate Citizenship

As one of the most innovative, globally recognized consumer products companies globally, P&G has been able to attain the integration stage of corporate citizenship based on a solid foundation of customer engagement and innovation (Procter & Gamble). These strengths have been underscored with how well the company is managing the diverse processes, systems and product lines that together comprise its brand and business model. The P&G Strategic Framework for Value Delivery is predicated on consistency and the continual reinforcing of value delivered to customer, suppliers, stakeholders while attaining ambitious environmentally-based goals and objectives. P&G has ascended to the integration stage of corporate citizenship by determining how each of their broader strategic initiatives and goals can be made to align with increasingly ambitious CSR and sustainability goals. P&G is also the first company to implement a position specifically for managing these initiatives at the corporate level, by creating a Vice President of SustainAbility position (Procter & Gamble). The Vice President of SustainAbility reports directly to the CEO and is also required to present to the board of directors quarterly.

What also makes P&G unique and well-positioned at the integration stage of corporate citizenship is their heavy reliance on the 3BL reporting methodologies and corresponding technologies to ensure compliance to their own internal standards and those of the 180 different nations they operate in today… READ MORE

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