This is part of an ongoing series from Harvard Business Review and the Skoll World Forum on how mega-corporations are integrating innovative ways to solve social and environmental problems into their core operations.
Companies across the globe are tackling some of the world’s greatest societal challenges — water scarcity, climate change, and even the rights of women and girls in the developing world. Tom Falk, the CEO of Kimberly-Clark Corporation since 2002, talks about how the paper company is taking on environmental issues and has been practicing sustainability for 140 years.
Did you ever have a moment where you said to yourself, “We as a company can be part of the solution to environmental problems”?
In 1996, I picked up responsibility for our Energy & Environment group. We had already made a lot of progress in reducing energy consumption and water usage, improving forestry policies, and limiting air and water emissions, but my predecessor thought we should set some stretch goals for 2000. Because of our merger with Scott, we were a much larger company and the year 2000 was coming fast. It was a great time to lay out a bigger vision in this area and rally our teams around it. This was the first time we really put something down on paper.
I also remember a meeting several years later with Mike Duke, who was then head of Wal-Mart’s international business. I shared our goals for 2005 with him. Mike impressed upon me how much our performance and reputation in sustainability mattered to Wal-Mart and was fully supportive of our efforts. When our largest customer expressed that level of interest and backing, it underscored for me the importance of our sustainability efforts.
How is your company integrating sustainability into how you do business every day?
Every five years we increase the robustness of our goals, further stretching them. We’ve made excellent progress but we still have work to do. For example, we used to think setting a good example was enough but now we know we need to be more explicit about what we expect from suppliers. We require all of our suppliers to abide by the social compliance standards that we set.
Where in your company do ideas for sustainability initiatives start?
Some of the best thinking on how to meet our goals have come from employees in our mills. We first introduced Neve Compacto, a low-energy paper product, in Italy, to help retailers save shelf space and moms save room in their storage closet. Our Brazilian team saw how well it was working there and adapted it for use in their market. It’s been a huge success there. The Compacto rolls reduce the average amount of packaging used by 13%, which is equivalent to just over 1.8 million empty plastic water bottles in one year.
If the ultimate goal is to create both economic value and social value, how do you strike the right balance? Are you willing to take an economic loss of some kind if the social return is unmatched?
This is the tough question in sustainability. We face trade-offs in every area of our business. We never say, “Let’s not spend the money to improve the safety of our machines because it’s cheaper to let employees get injured.” So, yes, we make investments today that have a future payoff and like any investment choice, we consider the risk and benefits to our company and to the world around us.
We believe that sustainability and corporate social responsibility create value for Kimberly-Clark, whether it’s direct value, like cost savings or risk avoidance, or indirect value, like enhanced reputation or the ability to recruit and retain top talent.
How do you decide which investments to make?
We use the following criteria:
- We put our employees and the communities in which we do business first.
- We support legitimate social and environmental issues that are globally relevant but also have a clear fit with our brands and business strategies.
- We look for a connection to the business objectives for the target market.
- The benefit must be measurable—we can clearly track the impact on our business and our ability to improve lives.
How much of your company’s move in this direction is consumer-driven vs. conscience-driven?
As a paper company, established 140 years ago, we started off practicing sustainable forestry: When we cut one tree down, we needed to plant two so we would always have the resource to support our business. It’s only been in the last 10 years or so that the term “sustainability” has come in to common usage. For the 130 years before that, Kimberly-Clark was just doing the right thing.
Sure, consumer interest in sustainable products is increasing in various markets around the world. However, the vast majority of consumers won’t trade off product performance or cost for a more sustainable solution. Our challenge as brand-builders and manufacturers is to develop products and solutions that are better for the environment and don’t force moms to make a trade off.
Customers, consumers, employees, investors, suppliers and communities all now expect more from corporations. Great companies will live up to these expectations and win in the marketplace.