The Wall Street Journal reports that “consumer-product suppliers are pushing to make their products and supply chains more environmentally friendly in an effort to bolster their images with consumers and garner favor with retail titan Wal-Mart Stores Inc. Their initiatives -- which have ranged from cutting down on packaging to shrinking detergent bottles -- can help save costs for packaging and reduce fuel costs. But those moves also require substantial initial investments and sometimes even changes in manufacturing processes by suppliers.” The problem for many of these companies is that these changes can have an enormous short-term impact on profitability.
One example cited by the Journal: “Procter & Gamble Co., which is also converting its detergents to a concentrated formulation, has said that it expects fiscal 2008 to be a net investment year for that initiative. Procter said one-time costs for new molds, manufacturing-changeover costs, retail-conversion costs and higher marketing support would hurt fiscal 2008 earnings by a few cents a share, but that the changes would eventually help retailers, consumers and its own supply chain. While consumers are paying far more attention to companies' impact on the environment, it is still hard to gauge and to quantify how much that trend will affect their buying decisions.”
One example cited by the Journal: “Procter & Gamble Co., which is also converting its detergents to a concentrated formulation, has said that it expects fiscal 2008 to be a net investment year for that initiative. Procter said one-time costs for new molds, manufacturing-changeover costs, retail-conversion costs and higher marketing support would hurt fiscal 2008 earnings by a few cents a share, but that the changes would eventually help retailers, consumers and its own supply chain. While consumers are paying far more attention to companies' impact on the environment, it is still hard to gauge and to quantify how much that trend will affect their buying decisions.”
- KC's View:
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At least one executive interviewed by the Journal says that while he wants to do the right thing, he still has a business to run, and that he’s looking for solutions that are “win-win.”
In a way, he’s right. But he may also be dreadfully short-sighted, because attention to the long-term sometimes means that the short-term must suffer.
Making the kind of infrastructure changes necessary in order to become a more environmentally friendly society isn’t going to be painless…and we’re probably all going to pay the price in various ways. To suggest that there won’t be sacrifices is to propagate a lie…and it does the subject a disservice. Sometimes, I suppose, consumers may even fight back against these shifts in direction and priorities, but I believe – I have to believe – that leaders will be rewarded in the long run.
P&G is absolutely right to bite the bullet and say that 2008 will be an investment year that could hurt earnings a bit, but will be healthy for the company – as well as for customers, retailers and even the planet – in the long run.
Short-term wins often are exactly that. And it seems to me that the ultimate win is the one that changes the world as opposed to the balance sheet.
And yes, to anticipate the inevitable emails that follow a story such as this, I do believe that climate change is one of two or three central issues that will define our generation’s stewardship of this planet. MNB had a story and commentary about this subject the other day, and I got the following email:
I can't believe that you have bought into the whole "Global Warming" thing. What a cop out for not looking at the facts. Climate change has always been with us. I love it when the news uses the weather changes to prove their point, like, because of the man-made effects on Global warming, today was the warmest day since 1907. One hundred years ago was a time when all the causes used today to blame for Global warming didn't exist. What caused it to be so high back then?
I am sorry for you if you are choosing the global warming position, and have bought into their phony science. I thought you had more intelligence than that.
I guess you misjudged me. But I continue to believe that the “phony science” is that which denies the impact that industrialization and technology are having on the planet.
