Colgate is Conquering Climate Change with a Smile, Michael Phelp’s Support, and a Mouthful of Corporate Initiatives

Colgate-Palmolive is driving multiple sustainability initiatives to compensate for the water over-consumption of its end-consumers when using their products.

When consumers hear Colgate, they typically associate it with toothpaste.  Now, why would a toothpaste company be focusing on combatting climate change?  Well, Colgate is not just a toothpaste company.  Colgate-Palmolive is a $15B consumer products company focused on home, pet, personal, and oral care with brands, such as: Ajax, Hill’s, and Speed Stick.  Colgate operations spread across 80 countries with products inside 67% of households across the world. [1, 3] Each of those products requires significant water across the supply chain; Colgate’s water footprint includes 9% from raw materials, 1% from manufacturing the product and 90% from consumers’ use. [2] While Colgate’s consumers continue to leave the sink on, global warming is putting pressure on the availability of fresh water.  Additionally, Colgate’s manufacturing facilities, packaging, and sourcing all contribute to increased emissions, in turn accelerating global warming. [2] Faced with these challenges, Colgate’s management has made sustainability a priority for the past decade and moving forward. [1]

In the near-term, Colgate has made significant investments in reducing water consumption downstream by consumers.  In 2016, Colgate launched the #EveryDropCounts campaign to raise awareness for water overconsumption.  More recently, the campaign has been led through a partnership with Michael Phelps [3].  Between Phelps and the new labeling on Colgate packages, the campaign has reached over 2.7 billion people worldwide [1].  Moreover, Colgate has partnered with MIT to develop a net zero water strategy to replenish water removed from highly stressed regions where Colgate operates [4].  Colgate is also looking at their product formulations to see if there is potential to reduce the water required.  For example, fabric softener technology within their Suavitel product line has prevented the need for a rinse cycle.  [2]

In the long-term, Colgate has set a number of ambitious goals to hit by 2020 within their manufacturing facilities and with their suppliers.  One of these, like the short-term goals, is focused on reducing water usage. Colgate has set a goal to reduce manufacturing water intensity by 50% of their levels compared to 2002.  [1] Outside of their water initiative, Colgate has set targets to limit the impact they have on emissions.  Internally, Colgate has been investing in renewable energy with the hopes of reducing their absolute greenhouse gas emissions from manufacturing by 25% compared to 2002 [1].  After pressure from a third-party advocate, Colgate has also agreed to set a goal of creating fully recyclable packaging for 3 out of their 4 categories by 2020 [5].  Furthermore, Colgate wants to make more of the packaging from recycled materials with a goal of 50%+ of the packaging coming from recycled content by 2020. [5]

Upstream, Colgate has been using their strength in the supply chain to apply pressure on their suppliers to become more sustainable.  Colgate has encouraged top suppliers to participate in a program to reach certain energy reduction targets and disclose greenhouse gas emission. [6] Additionally, for specific raw materials, Colgate has adjusted to more sustainable sourcing.  For example, Colgate has increased their use of certified sustainable palm oil (77% of total palm oil used), which helps limit deforestation [2].  Nonetheless, this effort should be viewed with uncertainty as there is no data on how much palm oil is truly organic (which limits deforestation, rather than replaces) and Amnesty International raised claims of forced child labor in the creation of the palm oil used by Colgate [7].  While this does not impact their climate change initiative directly, it adds a small amount of skepticism to the extent of the corporate responsibility touted by Colgate.  Additionally, while all of their sustainability initiatives are admirable, it is difficult to tell whether they are ‘stretch goals’ as there are no industry standards for most metrics Colgate tracks.

Overall, Colgate has received accolades for their efforts to combat climate change, while maintaining the #9 position in Gartner’s top 25 supply chains [8] and a 54-year record for consecutive annual dividend increases [9].  Regardless, management still has other opportunities they could consider.  First, Colgate appears to have a gap in monitoring the sustainable sourcing of their suppliers (e.g., Amnesty International’s palm oil claims and the responsible sourcing of seafood used in Hill’s pet food [2]).  Additionally, as a leader in creating a sustainable supply chain, Colgate should leverage their strength to drive change in other consumer product companies.  They could do this by developing industry-wide partnerships or using a lobbying group to support regulations (e.g., on water usage or greenhouse gas emissions).  While this is likely very difficult to do, it could have a transformational change across the industry.

Lingering questions:

  • How much responsibility should large consumer product companies bear for controlling the true “sustainability” of their suppliers?
  • What is the best way for a ‘first mover’ to help ‘laggard’ companies leverage sustainability best practices, while maintaining a competitive advantage?

Word Count: 799

[1] Colgate, 2016 Annual Corporate Social Responsibility and Sustainability Report 2016, https://www.colgatepalmolive.com/content/dam/cp-sites/corporate/corporate/en_us/corp/locale-assets/pdf/CPSustainability_2016_Full_Report%20061417.pdf, accessed November 2017.

[2] Colgate, 2015 Planet Report, http://www.colgate.com/Colgate/US/Corp_v2/LivingOurValues/Sustainability_v2/cpsus15_full_report_10_042616_Planet_v4.pdf, accessed November 2017.

[3] Alyssa Matos, Cohn & Wolf, “Michael Phelps, Family Man and World Champion Swimmer, Continues Global Ambassadorship with Colgate to Inspire the Next Generation to Save Water”, PR Newswire, October 23, 2017, via Factiva, accessed November 2017

[4] Gil Maria Campos Alabau, et al, “The Challenge of Positive Water Balances for Multinational Corporations,” MIT Sloan School of Management S-Lab Projects, May 14, 2015, http://mitsloan.mit.edu/actionlearning/media/documents/s-lab-projects/Colgate-Palmolive-Report-2015.pdf, accessed November 2017.

[5] Jennifer Elks, “Colgate Commits to 100% recyclable packaging for three of four product categories by 2020”, Sustainable Brands, April 17, 2014, http://www.sustainablebrands.com/news_and_views/packaging/jennifer_elks/colgate_commits_100_recyclable_packaging_2020_three_four_prod, accessed November 2017.

[6] Tamar Wilner, “Colgate Sustainability Report: Goals Met for GHGs, Water Use, Energy, COD”, Environmental Leader, February 7, 2012, https://www.environmentalleader.com/2012/02/colgate-sustainability-report-goals-met-for-ghgs-water-use-energy-cod/, accessed November 2017.

[7] Amnesty International, “The Great Palm Oil Scandal: Labor Abuses Behind Big Brand Names” (PDF File), downloaded from Amnesty International website, https://www.amnesty.org/en/documents/asa21/5184/2016/en/, accessed November 2017.

[8] “Gartner Announces Rankings of the 2017 Supply Chain Top 25”, Gartner Press Release (Phoenix, AZ, May 25, 2017)

[9] Black Coral Research, “Colgate-Palmolive: Sustaining the Dividend, for Now”, Seeking Alpha, September 16, 2017, https://seekingalpha.com/article/4107460-colgate-palmolive-sustaining-dividend-now, accessed November 2017.

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7 thoughts on “Colgate is Conquering Climate Change with a Smile, Michael Phelp’s Support, and a Mouthful of Corporate Initiatives

  1. This article is very informative in Colgate’s business and its initiatives to combat environmental challenges. I am also curious to learn more about 1) why Colgate chose water consumption as a particular focus 2) what measures have Colgate taken to get their suppliers on board with their long-term ambition. Among the author’s recommendations, I find lobbying for change very interesting. It seems to be a great way to impose change on the industry. However, it is unclear to me what Colgate’s incentive would be to invest in this, and whether Colgate should diminish its own advantage in public perception by getting others on board too.

  2. A very interesting look at Colgate’s admirable efforts to reduce their carbon footprint/ use of water.

    You raise an interesting question about the scope of Colgate’s responsibility with regard to their suppliers. Arguably, if Colgate wants to make any real difference, it has a duty to hold their suppliers to high standards, forcing changes in their production processes.
    If companies with such large purchasing power don’t act, I struggle to see who will. After all, few consumers have enough disposable income to always make planet friendly choices, sustainable goods frequently have a higher price point, and the current US President is seemingly disinterested, as demonstrated from his withdrawal from the Paris climate agreement.

    In sharing best practices with competitors, I wonder if Colgate can protect it’s competitive advantage by instilling care for the environment within the Colgate culture (e.g. Toyota willingness to share given it’s so hard to replicate)?

  3. I find the first question posed by Thomas C. Cranberry IV particularly difficult to answer. Yes, I agree that large companies are responsible for ensuring that their suppliers are in line with sustainability best practices, however – where do this obligation start and stop? To ZW’s point, it would be interesting to understand why is water consumption Colgate’s focus and whether it is the right “metric” to measure sustainability – not only of its own performance, but also of its suppliers. At a time when in most, if not all, industries, sustainability is becoming an increasingly hot topic, I wonder how can companies like Colgate navigate this territory and not getting trapped by making claims that they may not be able to fully control. It is certainly a very interesting topic and one that will for sure impact multiple of our future jobs.

  4. Very interesting example to challenge the common perception that sustainable supply chain and cost advantage can’t go hand in hand. Colgate definitely nailed it. There are pull factor and push factor when it comes to organization’s response to climate change. It seems to me that Colgate is more on the pull factor side and taking initiatives as the industry leader to set up industry standards.

    In answering the second lingering question, I think it’s really hard for the “first mover” to help “laggard” companies to replicate sustainability best practices while maintaining competitive advantage. First, the sustainability standard that Colgate “imposed” on its upstream suppliers came largely from its industry leader’s position. It’s a completely different story for smaller players in the industry. Second, there are a lot of PR elements in Colgate’s sustainability strategy to combat climate change, which might translate into a preferred public image amongst customers. I don’t think Colgate is willing to pass that image advantage to its competitors. Setting up industry standards seems to be a reasonable way to go – in the short term putting pressure on competitors’ supply chain, and in the long term creating a socially responsible corporate image that might become a future differentiator.

  5. I think it is a very noble goal to reduce water usage but I have some doubts about the main initiatives that Palmolive is employing.

    For starters, the fact that 90% of the water usage is at the consumer level is concerning. I’m not convinced that the campaign to consumers will/has done anything to reduce water consumption. I use colgate products and have never seen anything on this campaign. Changing consumer habits is hard and while not impossible, I don’t think the Colgate has done nearly enough to reduce consumer water usage.

    Additionally, it sounds like their efforts to convince suppliers to operate more sustainably lack the fire power needed to make an impact. To really change the behavior of suppliers, I believe Colgate should use more of a stick method to ensure that standards are actually followed.

  6. This was an interesting article, especially as I did not know Colgate had participated in such a campaign to reduce water usage. However, their participation makes a lot of sense: making their products has costs and if their consumers are increasing their costs, they will eventually see the ramifications. Thus, this leads to my answer for the first question posed. While I do not think big companies have any obligation to control for sustainability in their suppliers, it is to their best interest that they do so. There are many upsides: good PR, controlled future costs, and potentially even lower future costs. The main downside is that costs may increase in the future or that government regulation would cause changes/disruptions to the supply chain. Thus, its in the best interest of large companies to get in front of externally instituted regulations and make those changes themselves in a less costly manner.

    In regards to the second question, while not necessarily first movers, but companies that have a lot of purchasing/influencing power can work with suppliers to have sustainable practices to the point that it would be more costly to keep both operations open (sustainable/non-sustainable). In that way, they would force laggards to adopt sustainability, as the laggards would have no other interest. However, I recognize that such pressuring may be difficult from only one company, hence I believe that an agreement between different companies would oftentimes have to be formed in order to make widespread changes across an entire industry.

    I would be curious to know, however, whether Colgate has received any upside yet from implementing their Smile campaign. Have their costs decreased or their revenue increased?

  7. I think corporations are not only obligated but also have an incentive to push their suppliers to be more sustainable. Modern-day capitalism has begun to hold corporations to higher standards and have a positive impact on the world vs. solely existing to create shareholder value. As suppliers are a direct beneficiary of the scale and sales growth of major corporations, they are required to listen to respective clients. Companies like Colgate pushing suppliers to be more sustainable could result in suppliers developing less wasteful production processes that could result in lower costs for the corporation and the supplier and better overall products.

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