From managing the issues to setting the agenda
17 October 2002: Ralph Kugler, President Unilever Home and Personal Care, Europe, discusses social and economic development issues at the Global Detergents Conference, Montreux, Switzerland.
Mr. Chairman, colleagues, ladies and gentlemen, I would like to start by saying how delighted I am to be here, in Montreux, by the clear blue waters of Lac Leman, and to be invited to address the fifth world conference of our industry.
We have just heard an excellent keynote address from AG Lafley, and we are set to have a stimulating and demanding conference! Later this morning, I am looking forward to hearing what my fellow panellists, Jean-Julien Baronnet and Marie McNeely, will have to say about strategic partnerships and the consumer, and to the open discussion that will follow.
Last time around, the keynote speech was made by my own Chairman, Niall FitzGerald, who challenged us to think about how we, as an industry, could better combine sustainability, affordability and creativity. That way, he said, we could deepen our markets in the developed world, expand them in the developing world, and do so with due regard for the environment.
Today, I would like to pick up where Niall left off, and to ask just how we can move from managing the complex and often difficult issues affecting our industry, to setting the international agenda – from defending the status quo, to offering sustainable solutions that are a win for all stakeholders.
Setting the agenda
We, as an industry, believe in what we do. So do the consumers who buy our products, our suppliers, the people who work for us around the world, and our shareholders. Constant improvement through innovation means that our products are meeting more cleaning and hygiene needs than ever before - and they are doing so with more regard for the environment. But we must recognise that, as an industry, we need to build our reputation through doing much more, rather than simply making what we already do look better. We must ensure that our actions truly reflect the contribution we can, and indeed are, making to a cleaner, healthier and more enjoyable world. Over the course of the next 25 minutes, I want to address the following issues:
- first, the social and environmental expectations of our industry
- second, how we can put sustainable consumption at the very heart of our industry
- third, the contribution our industry can make to sustainable development
I will end by making three concrete proposals for ways in which we can begin to set the international agenda, rather than simply react to it. A lot to get through, so let’s get going.
Social & environmental expectations
As you will all know, the World Summit on Sustainable Development held in Johannesburg in September, provoked discussion of social and economic development issues, as well as the global environment. Beyond the agenda of water and sanitation, energy, health, agriculture and biodiversity, the summit focused on the overarching theme of poverty alleviation, reinforcing the fact that sustainable development today is about economic development AND the environment, not just one or the other.
We know, as an industry, that progress will come from strong competition generating choice and value-for-money for consumers. But the discussions at Johannesburg showed that there are other ways of working - in partnership with each other, with other sectors of society – governments, civil society groups, international organisations and NGOs – and these should also be seen as important routes to progress.
And, if we forget the sustainable development imperative, then think tanks, pressure groups, NGOs and assorted politicians and pundits will remind us of it!
To quote from the Financial Times recently: "Companies have learned that they have to explain themselves and their activities much more effectively to consumers and a wider public. Consumers are more demanding than ever before, and" - it adds in case there was any doubt – "competitors are more ruthless". This is a real challenge to us concerning how we account for ourselves as individual companies, and as an industry! I will come back to this in a moment.
The implications for our industry
So what does this context imply for our industry in particular?
What it means is that consumer needs and expectations are getting more and more complex. Yes, they are looking for better value and performance, convenience, and choice… But there’s an added dimension to their expectations that’s not always well articulated or even understood: namely, that we as manufacturers must behave responsibly in producing and distributing our products, as well as ensuring that our products are safe.
It means that we have to look at the consumer not simply as a buyer of our competing products, but also as a global citizen with social and environmental concerns. We have a unique responsibility, in this industry, to the 'consumer citizen', because our products are so intimately connected with people’s everyday lives, and because they contribute to improving hygiene and to the well-being of people around the world.
In fact, we have a proud history of social responsibility in this industry from earliest times. My own company created Port Sunlight, which was a model of good social as well as business practice, when William Hesketh Lever first built it more than 100 years ago. Many other companies have similar stories to tell. In the US, 60 years ago, the founder of Johnson & Johnson, General Robert Wood Johnson, set out a 'credo', that defined the company’s responsibilities towards customers and suppliers, employees, local communities, the environment and finally, to stockholders.
In Europe, our industry has a Code of Good Environmental Practice. The industry association, the AISE, focused its 2001 annual report on Sustainability, and is working on a Charter for Sustainable Development (which, no doubt, Maartin Labberton will talk more about tomorrow morning). We have the Washright campaign, an industry-wide educational initiative to encourage people to consume more responsibly, and there are also companies here that participate in the World Business Council for Sustainable Development, which works to make the business case for sustainable development.
But what is becoming more and more apparent, is that all of this is still not enough.
Was the Chemicals White Paper in Europe a driver of change, or a consolidator of progress? As AG has mentioned, HERA - the Human and Environmental Risk Assessment project - is an excellent move in the right direction, where CEFIC and AISE members are working together to take ingredients through the risk assessment methodology. The objective is to show, with real examples, that the risk assessment concept can provide relevant safety evaluation concerning the substances used in our products. And, of course, HERA complements the commitment of the global chemical industry to produce initial hazard assessments on 1 000 HPV chemicals by the end of 2004. But are we sure that we are doing enough by way of good practice to take a compliance-plus approach, and to see regulations not as the most we must do, but as the least we should do?
And if we are going down this route, we need to be clear about our approach to sustainable consumption. Improving eco-efficiency is a sustainability challenge that we have addressed as an industry, and we have made real progress which we can measure and report. Sustainable consumption is the challenge that now lies before us, and I am confident that we as an industry, closely positioned to consumers as we are, have a unique contribution to make.
And what I mean by sustainable consumption, is finding new ways of delivering cleaning and hygiene which provide significant savings in resource consumption, and waste generation. It means doing things differently, developing and implementing breakthrough innovations, working together as an industry with consumers and other stakeholders, to find the best solutions for the future. These are highly ambitious goals.
If we want competition and sustainability to go hand in hand, we need to work together both as an industry, and with others, to define the balance between these two elements. This could lead to innovative directions for the development of our industry so that new products cut with the grain of our social and environmental ambitions, and keep pace with public opinion. We need to distinguish between collaborating to create a framework that enhances sustainability, and competing with our brands within that framework.
Changing consumer habits
How? I've already mentioned the Washright campaign in Europe, and it's a good start. But the reason I say it's just a start, is because it puts the onus on consumers to change their habits.
The best way to ensure that people consume in a more sustainable way, is to make sure that the choices open to them are all 'good' ones – that all of innovations are within our 'sustainability framework'. In future, consumers won't accept a trade-off between performance, value, convenience and environmental friendliness – and nor should they need to. It's simply not an option.
In future, successful solutions need to satisfy several criteria:
- they should be economically viable
- they should be attractive to consumers, and enable them to reduce resource consumption and waste generation at point of use
- they should have equivalent or better safety/environmental profiles throughout the product lifecycle, when compared to existing products
Changing industry habits
To do all of this, we as an industry need to change our habits. We need to prioritise sustainability improvement goals so that they become an integral part of how we operate, not just in R&D, but in how we develop our businesses in all areas. Unilever has sustainability guidelines for innovations, so too do our competitors. Some of us also have guidelines that we apply in the selection of suppliers, in our systems and processes. But are these embedded enough in the corporate culture, in everyday business thinking? The answer for most companies, in most industries, is probably "not yet".
It may be a question of taking steps in the right direction, for example, by looking at substantive unit performance improvement, as a means of stretching our vision of what is possible.
In 1998 Nissan set "the environment and driving pleasure 3-2-1" as its future R&D objective. 3-2-1 means tripling fuel economy, doubling driving pleasure and achieving exhaust emissions as clean as the ambient air. It is no coincidence, therefore, that the Nissan Sentra CA was the first vehicle to pass the California ultra low emissions restrictions that are coming into effect next year.
An example like this reminds us that businesses can grow and prosper with an agenda of competition and sustainability. Perhaps our own goals should be just as simple. What about double the pleasure, half the chore, while creating just a quarter of current waste?
And just so there is no doubt, sustainability improvements also mean continued efforts on existing fronts: to reduce chemical disposal, improve biodegradability and minimise the impact of packaging. This will include looking at the balance of materials from renewable and non-renewable sources, but it will also mean being willing to think outside the box, to reach out to ideas and partners who can influence the bigger picture. We must each be willing to look at our own part within the industry, as but one contributor in the overall search for sustainable hygiene and cleaning for all.
This question of sustainable consumption, and how to make sustainability sell is, to a large extent, conceived as a developed world issue – although I’m not sure I totally buy this assumption.
Four years ago, Niall Fitzgerald, invited us to take up the challenge of caring for water, on which our industry and human existence depend. As Johannesburg demonstrated, it is still the biggest, most visible, sustainability issue affecting our industry globally; and one which has increased in prominence since our last Congress.
The good news is that, since Montreux 1998, some positive initiatives have been started. In the US, for example, a group of companies under the umbrella of the Global Environmental Management Initiative have recently developed a web-enabled Water Sustainability Tool to help companies build a business water strategy. Individual companies have also taken up the challenge. Unilever for example, has developed the SWIM principles for water management: SWIM stands for Sustainable Water Integrated catchment Management. These principles define how Unilever can make an effective contribution to community water initiatives through partnerships, and make it easier for potential partners to engage with each other in these water initiatives.
One such project to come out of SWIM is in Indonesia, where Unilever Indonesia leads private sector involvement in pioneering a scheme for the adoption of villages along the Brantas River. In our adopted village – Jambangan – we have helped to improve sanitation systems, provided bins and composting for better waste management, and helped villagers to turn their houses around to face the river rather than back on to it, so that they are less inclined to use the river for dumping their waste. As a result, the project has raised the villagers' potential to generate income from planting and harvesting the native Morinda fruit tree and from small-scale fish farming.
The next stage is to replicate the 'adopt a village' concept with other industries along the river. So far the response has been very positive, and we are projecting that up to 100 companies are likely to participate in the scheme.
This example of the Brantas river, shows that if we really want to make a difference, we can leverage our industry's knowledge of sustainable development practices in small, local projects, and build upon these initiatives to create a much wider impact. And this is what it is all about: taking consistent and determined steps, no matter how small, to improve the way in which we act now for the long-term good of every citizen.
In light of this, I have three concrete proposals on how to move our agenda forward.
Working in partnership
My first proposal is that we must find a way to work together better as a total industry – and with consumers – to determine more sustainable means of delivering cleaning and hygiene for all. Until now, part of the problem has been that we have tended to act together on these things regionally and horizontally. But reputations are increasingly global and vertical, and supply chains are so integrated today that, one company alone cannot achieve significant progress in isolation, and one regional industry association cannot just be satisfied with progress on its own patch.
My challenge is to bring together all the players from our industry, both upstream and downstream, to define the innovative measures that will be required to achieve the goal of sustainable development.
A good example of such an approach was demonstrated by the car industry just two weeks ago when, just before of the Paris Motor Show, thirteen leaders of the world's largest car companies came together to discuss the global environment and traffic safety. The statement from their senior executives read:
"International harmonisation of technical regulations for motor vehicles will improve safety, protect the environment and reduce costs for consumers around the world."
In the short term, where we can make our mark is by strengthening our commitment to the Human and Environmental Risk Assessment project, HERA; The challenge open to us today is to agree to take all the chemical substances we use through the risk assessment methodology by the next World Conference in 2006. To be clear, I am talking about a global partnership between chemical suppliers and detergents manufacturers for the efficient delivery of evaluated safety information on all ingredients: we will show that we are taking action and put the safety of humans and the environment as a priority, we will anticipate chemicals management legislation and we will achieve this by working in full transparency with all stakeholders.
We must place sustainable development at the heart of our industry. We must demonstrate, through organisations such as HERA, that we put the safety of humans and the environment as a priority.
My second proposal is to interact as an industry with opinion formers more widely and globally than we have so far.
Let us take the lead to agree a common framework for voluntary reporting on environmental, social and economic indicators, which would provide comparability and credibility, and make a tangible contribution to industry transparency. This could prove to be the springboard we need as an industry to demonstrate to observers, that we are genuinely willing to be challenged on our performance in the area of sustainability.
We need to be ready and open to work with government, non-government and civil society organisations – to identify what is sustainable, raise awareness, make the business case, build credibility and trust, and above all – why not? – let the detergents industry take a lead in demonstrating that globalisation can be a force for good.
Working with employees
My third proposal, is to engage more widely with our own people, as until all of our employees have a shared understanding of what sustainable development really means for them and their job in practical terms, we will not make real progress. Business has to work out what sustainable development means for each employee; what it means for my job on Monday morning. We need to tackle the gap between what the Board of the company says and what each employee, as an individual, actually does.
In short, this means ensuring that our employees, in every area of the business, support the challenges set by the industry, and that they understand how they can contribute to achieving them.
Employees need to be made aware of the importance of making progress against the challenges, and of the consequences of failure. In whatever job they are doing, we need to develop awareness and deliver the appropriate training, tools and incentives to encourage engagement.
And we, as business leaders, need to listen! For every middle management roadblock there will be a young employee inspired by the vision, just waiting for the opportunity to put forward a sunrise industry insight. And for every whacky off-the-wall dreamer, there will be the mature idealist with a well-thought through plan. Success for our industry, as a whole, will come from unleashing this latent creativity.
We want our employees to be both proud to be part of this industry, and of the positive contributions each one of them can make to sustainable development.
Mr. Chairman, colleagues, thank you for the privilege of allowing me to share my thoughts on our industry’s future. Over the past 100 years we have made a great contribution to cleanliness, personal hygiene and public health. In the next 100 years, we will face challenges no less great, and rewards that will be just as exciting.
We will continue to compete through our brands, but let us also co-operate throughout the whole value chain. Let us reach out and say to the sceptics: yes, we are ready and willing to work with you on the Johannesburg targets. And to back up our words, we will create an industry framework for sustainable development so we can tackle my three challenges of
- partnerships in the supply chain
- interacting with opinion formers
- engaging with our own people
Let us have confidence in the ability of our industry to rise to the sustainable development challenge. And when we next come back to Montreux, I hope we will be marking our performance against these three challenges. And again looking beyond the issues, with confidence and enthusiasm, to setting the agenda.
We can make a difference. We can be a positive force for change. It is up to each of us to start now.