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Robert A. McDonald, chairman, president and chief executive officer of Procter & Gamble Co., opened the WWD Apparel and Retail CEO Summit early Monday morning with a ringing call to action. There is no ambivalence in his mind about the role that his $83 billion consumer products behemoth — and other companies — should play in the world.
This story first appeared in the November 15, 2011 issue of WWD. Subscribe Today.
“The one overarching factor that has driven P&G’s growth and success is the constancy and pervasiveness of our company purpose, which is to touch and improve lives, now and for generations to come,” he said. “We integrate responsibility for improving lives into every aspect of our business and operations. When we do this well, our business grows faster, our relationships grow stronger and the contribution we make today and for generations to come grows larger.
“We do well by doing good,” McDonald continued. “And when we do good, we’re increasingly able to do well. It’s a virtuous cycle. And it’s becoming increasingly important.
“When I think about the decades ahead of us, I see much that is uncertain, but I also see one thing I know for sure: the world needs us — all of us — to be at our best,” he continued. “Companies like yours and mine have a huge role to play in the years ahead. The world will benefit and we will benefit by playing that role.”
His motive is not do-goodism; McDonald sees social responsibility as a genuine avenue of growth. In a previous interview with WWD in August, McDonald said in order to win dramatically more customers, the Cincinnati-based giant has to move its center of gravity more toward Asia and Africa, “where babies are being born”; in this country toward, the Hispanic population, or in the Middle East to the Islamic population.
During the speech Monday morning, he pointed out that two weeks ago, the population of the earth hit seven billion people, and is projected to hit eight billion before 2030, and nine billion by 2050. As the population swells, the strain on the environment grows. “Sustainable businesses require a sustainable world,” McDonald pointed out. “It’s just that simple. It’s in our near — and long — term interest to embrace this responsibility.”
The third dimension of his vision is more complex — public policy. It grows more important as the population grows, “as global inter-dependence increases, and as societal issues grow more complex. Local, national and international policies create both opportunities and risks for business. We can help shape policies that protect consumers, stimulate economic growth, drive innovation and protect the environment.”
McDonald acknowledged that the needs of the least fortunate will increase as poverty, disease, war and natural disasters mount. “We can’t solve all of these problems,” he admitted, “but we can make a real difference in some areas.”
P&G has the on-the-ground base to do such high-flying thinking. The company just marked its 174-year anniversary and has amassed $83 billion in sales with a phalanx of 50 brands that generate 90 percent of revenue and 90 percent of income. That list of leadership labels runs the gamut from Tide, Crest, Pampers, Febreze, Olay, SK-II, Boss and Dolce & Gabbana. These brands are distributed in 180 countries and P&G has on-the-ground operations in nearly 90 markets. Collectively, its brands claim to touch 4.4 billion people around the world, and the average per-capita spend on P&G products amounts to $12 for every man, woman and child on earth.
McDonald referred to an article, called “Creating Shared Value,” written by Michael Porter in the January edition of the Harvard Business Review. He quoted Porter: “Shared value is not social responsibility, philanthropy or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do, but at the center.
“Business acting as business, not as charitable donors, are the most powerful force for addressing the pressing issues we face,” Porter’s quote continued. “The purpose of the corporation must be redefined as creating shared value. This will drive the next wave of innovation and productivity growth in the global economy.”
McDonald noted that P&G has put those thoughts into action, in the form of what the company calls Purpose-inspired Growth. He freely admitted that many companies are going down the same path. “I don’t presume that P&G has it all figured out,” he said, “but I would like to share some of our efforts with the hope that our experience can stimulate discussion and other good ideas.” Two years ago, P&G decided to elevate the notion of this purpose to a full-blown strategy, McDonald said.
The strategy hinges on “touching and improving more consumers’ lives in more parts of the world…more completely,” McDonald said, then described the dynamics. The first concept is to reach more consumers by innovating and extending product portfolios vertically by adding higher and lower value tiers. The second idea is to expand into more parts of the world. And finally, the company can innovate existing products and expand portfolios into adjacent categories.
McDonald said the heart of the Purpose concept can resonate across businesses and industries. Achieving business goals can be highly motivating — and essential, he said, “but it is rarely inspiring as a goal in itself.”
He maintains that “we don’t have to make a profit so we can improve lives. We make a profit by improving lives.” McDonald stressed that the Purpose strategy engages imagination and generates passion. When this is lavished on consumers, it inspires empathy from them. “This is where innovation comes from,” he continued. “Empathy helps us identify tensions in people’s lives that we can help resolve, which leads to insights — big ideas — which become life-improving innovations.” This, in turn, “leads to big ideas that invite participation.”
He pointed out three examples of major brands that widened their focus beyond mere product functionality. The Pampers brand leadership demonstrated to women how they could help their babies sleep through the night and be healthier. Gillette Guard marketed a new low-cost razor for young Indian men that promoted self-esteem. SK-II promoted sachets that clean polluted water and makes it drinkable, dramatically reducing the workload of village women, who previously had to haul drinking water from the mountains, then chop firewood to heat and purify the water.
McDonald emphasized, “we’re a force for good when we create products and services that improve people’s lives…when we find ways to innovate and operate responsibly, ethically and with less environmental impact…when we create new product formulations that improve consumer value…or new distribution models that make our products more affordable…when we create jobs, pay taxes, and help make our communities a better place [in which] to live and work.”
Calling this doctrine “an inherently 21st-century idea,” McDonald stressed, “we’re a force for good when we integrate responsibility for improving lives into every aspect of our business and operations. There is no separation between a company’s profit responsibility and its social responsibility. The two must be integrally linked.”
McDonald then posed the big question: “How can we, as leaders of large successful businesses, make this higher-order capitalism a source of business growth and social progress for us all? How can we elevate the role that business needs to play in the world while accelerating business and shareholder growth?”
He then suggested that the answer can be found in a book, “The Surprising Solution,” written by Bruce Piasecki. In it, he uses the ancient example of Archimedes, who boasted that with a large enough lever, he could move the world, given the right pivot point.
McDonald pointed out that the collective need to create a better world is a natural pivot point for investments, hopes and aspirations. “We can each find that fulcrum in our own lives and work,” he said, admitting that this proposition sounds daunting. “But our efforts will always come down to the impact we have on individual people whose lives are improved because of innovations we’ve created, choices we’ve made, relationships we’ve cultivated and actions we’ve taken.”