Expert answer:Why a company does sustainability and CSR programs

  

Solved by verified expert:A) Executive Summary of one page or less. This is standard in business reports.B) Social sustainability: Create a list of the internal benefits of CSR and social sustainability initiatives. These can put in a table format. This includes the benefits that can accrue to employees, stakeholders, as well as the company in doing these programs.For example, one benefit is a charitable donation. The benefit provide a tax deduction, hence the company reaps a financial benefit. It also possibly garners some good will by consumers (if it is reported by the media). There may be other benefits as well that are strategic and related to effective management.The Dannon case provides as a good example that illustrates some of the internal social sustainability values of CSR programs. Explain why it was not their priority to advertise their CSR activities. Explain how a CSR strategy “fits” the firm’s management culture that values employees. C) Environmental Sustainability: Discuss the emerging opportunities in the evolving “green markets.” In this part, cite strategic opportunities to pursuing green markets. One part of this would be to summarize the different green markets in the Clorox case and provide the strategic discussion as to how they successfully developed green brands. Summarize the benefits of these efforts for marketing, branding, reputation enhancement, etc. D) Critique Deloitte’s CSR report (attached). Explain how Deloitte construed and defined their specific “responsibility” in the report. Cite any shortcomings and weaknesses. Don’t just parrot what the report states. Be tough. Ask questions…Is the company doing enough? Is it effective? Is the company fully transparent in addressing all social and environmental responsibility concerns? What would you suggest that the company needs to do? In the above assignment, do NOT forget the benefits that accrue to people, consumers, localities, and other stakeholders as well as the planet. Sustainability is not just about money (or solely an instrumental benefits to the firm’s shareholders alone). Triple bottom line thinking is required. Benefits are financial, social, and environmental, and these benefits are related to each other. Citing the key readings (not the merely the cases) are very important here, as they discuss many benefits. Involves the “business case” or rationale as to why a company does sustainability and CSR programs. Also, make sure to include the takeaways from the Dannon and Clorox cases. Each case provide good examples of the benefits of CSR.
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For the exclusive use of T. Swander, 2019.
9 -5 1 2 -0 0 9
REV: APRIL 3, 2012
ELIE OFEK
LAUREN BARLEY
The Clorox Company: Leveraging Green for Growth
We make everyday life better, every day.
— The Clorox Company Mission Statement from its 2007 Centennial Strategy 1
In late January 2011, Beth Springer headed into the executive committee strategy meeting at The
Clorox Company (Clorox) in Oakland, California. Clorox manufactured and marketed premium,
branded consumer products primarily in the U.S. through grocery stores and mass merchandisers.
Springer, executive vice president international and natural personal care, and the other executive
committee members would discuss Clorox’s annual and long-range plans. (See Exhibit 1 for
executive committee members.) She knew tensions could run high as they debated whether to
recommit to the existing strategy and tactics, offshoots of Clorox’s 2007 Centennial Strategy.
Shortly after the arrival of Clorox chairman and CEO Don Knauss in 2006, the company crafted a
strategic plan honoring the company’s 100th anniversary in 2013. The Centennial Strategy, as it was
called, provided a roadmap for long-term, accelerated growth and defined the metrics to evaluate
success. A key aspect was the company’s increased emphasis on major, global consumer trends
(“megatrends”). Over the next few years, Clorox focused on two of the megatrends—health and
wellness, and environmental sustainability—which led to products and go-to-market strategies that
addressed consumers’ growing interest in what Clorox broadly termed “sustainability.” This, in
turn, drove the successful repositioning of Brita (a water filtration system), the acquisition of Burt’s
Bees (a natural personal care line), and the launch of Green Works (a natural cleaning product line).
In August 2010, Clorox reported fiscal year 2010 sales of $5.5 billion and progress against its
Centennial Strategy annual targets that mostly met or exceeded expectations despite the challenging
business environment. (See Exhibits 2 and 3 for five-year financial summary and progress on the
Centennial Strategy annual targets, respectively.) However, the financial outlook for 2011 was less
favorable, and Clorox projected flat sales for its fiscal year ending June 30, 2011. Sales of Clorox’s
brands—most with leading market shares—were soft amidst the prolonged economic downturn.
As Springer settled into her chair, she wondered if Clorox should continue its strategy of investing
heavily in sustainability. Although Brita, Burt’s Bees, and Green Works comprised only about 10% of
Clorox revenues, they accounted for much of the company’s sales growth over the past several years.
But the growth rates of Burt’s Bees and Green Works, in particular, had slowed considerably in the
past year. Possible explanations included the weak economy and that the trends fueling their growth
________________________________________________________________________________________________________________
Professor Elie Ofek and Research Associate Lauren Barley prepared this case. HBS cases are developed solely as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2011, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by Thi Swander in Sustainabilty & CSR 3-1 taught by MARK KAY, Montclair State University from Mar 2019 to Sep 2019.
For the exclusive use of T. Swander, 2019.
512-009
The Clorox Company: Leveraging Green for Growth
were simply fads that had run their course. It was also possible that the brands’ marketing mix was
suboptimal and needed to be refined.
Springer knew the company had to allocate resources over its entire brand portfolio, not just the
three “sustainable” brands. Over the past year, Clorox had increased its consumer and trade
spending to shore up sales of its primary brands, such as Clorox Bleach, Pine-Sol, and Formula 409,
which were in mature categories. Most market shares in these categories were up, but it was unclear
how long Clorox should continue its defensive spending and at what level. Growth rates in the
sustainable brands had also picked up somewhat recently, and Springer wondered if Clorox should
invest heavily in these brands going forward. If so, where would this funding come from? Springer
was eager to participate in the upcoming discussion as the executive committee debated how best to
position Clorox to achieve its centennial targets as the 100 th anniversary grew ever nearer.
Company Background
Clorox was founded in 1913 as the Electro-Alkaline Co. It was reincorporated in 1922 as the
Clorox Chemical Corp. and was acquired by Procter & Gamble Co. (P&G) in 1957. By 1969, P&G
divested Clorox, and in the intervening years until 2011, Clorox grew to be a mid-size company in the
household and personal care industry through acquisitions and strong capabilities in research and
development (R&D), and marketing. Its portfolio of leading brands included its namesake Clorox
Bleach; household cleaning products such as Pine-Sol, Formula 409, Soft Scrub, Tilex, and Green
Works; Glad wraps, bags, and containers; Brita water filtrations systems; Kingsford charcoal; Hidden
Valley and KC Masterpiece dressings and sauces; and Burt’s Bees natural personal care products.
(See Exhibit 4 for brand portfolio.) Clorox’s competitors included industry behemoths P&G and
Unilever with $78.9 billion and $58.7 billion in FY10 revenues, respectively.
Don Knauss and the Centennial Strategy
Knauss joined Clorox in September 2006 after a 12-year career with Coca-Cola, Co., most recently
as its president of Coca-Cola North America. By May 2007, the company defined the Centennial
Strategy, which focused on achieving double-digit annual growth in economic profit through its
milestone anniversary in 2013.2 Under the strategy, Clorox would continue building the number one
or number two share brands in mid-sized categories. It would also push for accelerated sales growth
using various means, including: 1) extending existing brands to adjacent categories; 2) entering new
sales channels with its existing brands; and 3) increasing penetration in countries where Clorox
already did business.3 Driving “demand creation” and building “consumer loyalty” would fuel this
“organic” growth. Clorox articulated a “3Ds” framework to achieve this: desire (pre-purchase
communications to educate consumers how and why the Clorox brands met their needs); decide (instore and at-the-shelf strategies to ensure consumers chose Clorox brands where most purchase
decisions were made); and delight (continual innovation to secure customers’ loyalty and repeat
purchases).4 In addition, Clorox would be more deliberate in identifying and acting upon existing,
latent, and emerging consumer trends that could be important growth drivers for its business.
Clorox identified four global consumer trends that could be incorporated into its product lines
and go-to-market strategies: health and wellness, sustainability, convenience (changed to
“affordability” in 2009), and a multicultural marketplace. Springer summarized:
These global trends were not new. They were in the media; consultants like McKinsey were
incorporating them into their presentations. As we renewed our corporate strategy to grow
faster, we decided to be more externally focused and use these trends to anticipate changes
2
This document is authorized for use only by Thi Swander in Sustainabilty & CSR 3-1 taught by MARK KAY, Montclair State University from Mar 2019 to Sep 2019.
For the exclusive use of T. Swander, 2019.
The Clorox Company: Leveraging Green for Growth
512-009
that were relevant to our consumers. Before, we tended to be more narrowly focused on filling
gaps within our existing portfolio, and we thought our existing portfolio was sufficient.
Riding the Tailwinds of Sustainability
In late 2007, Springer’s group at the time—the strategy and growth office—fielded research with
The Cambridge Group to understand the size and nature of the “sustainability” opportunity for
Clorox. Springer explained, “We did the Cambridge research to get at emerging and latent demand
around sustainability. Would more and more consumers change their habits and buy different
products around sustainability? Our conclusion was yes.”
According to the Cambridge research, consumers seeking sustainable product solutions were no
longer a small niche; 15% of the population exhibited very strong demand for these products and
another 33% had strong demand. Clorox’s syndicated research confirmed the Cambridge findings.
One study found 15% to 30% of the population was comprised of consumers Clorox called “deep
greens”—those who were interested in sustainability and acted on their interest. Another study, an
online consumer survey of claimed purchased behavior, found that over one-third of consumers
claimed to regularly buy green products in December 2007 versus only 12% in August 2006.
The Cambridge research segmented consumers into six groups and ranked the most compelling
benefits for each segment. Clorox chose the “emerging eco guardians” segment as its primary target
for the company’s sustainability efforts with the “eco committed” and “personal purists” as its
secondary targets. (See Exhibits 5a and 5b.) Historical research was used to help predict potential
events that could propel or disrupt consumer demand for sustainable products. (See Exhibit 6.)
The research conducted also gave Clorox insight into what drove consumers’ interest and
involvement in sustainability. Springer elaborated:
Another important piece of learning was that sustainability was not always about saving
the world for our consumer—usually a female head of household. Health and wellness, and
environmental issues were often about her and her world—rather than the world. It was about
making her world better, and in doing so, she was doing a good thing for the world. These were
driven by desires and concerns for the well-being of herself and her family.
Out of this insight, we defined the market as the full spectrum encompassing “my
environment” and “the environment,” depending on the consumer’s level of involvement and
control. They also weren’t mutually exclusive; there were consumers who cared about both in
varying degrees. In general, we were targeting consumers who expressed concerns about the
products that were “in me, on me, and around me.” (See Exhibit 7.)
The research also looked at what drove first and repeat purchases of sustainable products for the
home and family. Among other things it found that consumers who bought environmentally friendly
products often relied on the channel to filter claims, with specialty retailers, such as Trader Joe’s and
Whole Foods Market, considered reliable authorities. Over the next couple of years, Clorox made a
series of moves to grow by capitalizing on sustainability.
The Repositioning of Brita-“In Me”
In 1988, Clorox acquired the rights to market Brita in the U.S. from a small German company,
Brita GmBH. Brita was a pour-through water filtration system with a two-compartment pitcher and
a replaceable filter. Brita did not have the Clorox name or logo on its packaging and was marketed as
3
This document is authorized for use only by Thi Swander in Sustainabilty & CSR 3-1 taught by MARK KAY, Montclair State University from Mar 2019 to Sep 2019.
For the exclusive use of T. Swander, 2019.
512-009
The Clorox Company: Leveraging Green for Growth
a standalone brand. Under Clorox management, Brita’s positioning and advertising focused on the
taste benefit of tap water filtered by Brita. By 2002, Brita grew to a 70% share of the high margin
category of pitcher filtration systems. But, over the next five years, the category declined and Brita
sales sagged.5 Shortly after Knauss’ arrival at Clorox, he gave slow growth businesses such as Brita a
year or two to improve sales.
As the company sought to revitalize Brita, there was a realization that water filtered by Brita could
replace the water in millions of plastic bottles Americans threw away each year. Al Gore’s 2006 film
“An Inconvenient Truth” had increased consumers’ sensitivity about bottled water’s environmental
impact, and backlash against bottled water grew. 6 It took some convincing before the Brita brand
group agreed to position Brita as the sustainable alternative to bottled water. Springer recalled:
Initially, sustainability was seen a bit as left-wing political correctness. The Cambridge
Group research helped convince some of the skeptics that “sustainable” brands represented
significant profitable growth upside. We also were fortunate to have a CEO who came from
Coca Cola and had lived through difficult issues on sustainability around health, water use,
and bottle waste. He came to Clorox knowing about the megatrend and that at a minimum
you needed a defensive stance if not an offensive one.
In August 2007, Brita partnered with Nalgene, a manufacturer of reusable beverage containers, to
launch the FilterForGood public relations (PR) campaign. The campaign prompted consumers to use
Nalgene’s reusable bottles and Brita-filtered water by invoking three primary messages: 1) the energy
used to make disposable water bottles in the U.S. could power 190,000 homes a year; 2) the water
from one Brita filter could replace as many as 300 16.9-ounce plastic bottles, giving users great taste
without the waste; and 3) drinking Brita-filtered water cost a user only $0.19 a day for annual savings
of $1,748 (based on 240 gallons per year at an average price of $1 per bottle). 7 The campaign was so
successful that Brita incorporated the messaging into its advertising. 8 (See ad in Exhibit 8.)
Initially, Brita’s growth rate increased substantially, but slowed a bit through the recession. By
FY10, Brita had $250 million in revenues (up from $170 million in 2007), and was still highly
profitable and one of Clorox’s fastest growing brands.
The Burt’s Bees Acquisition-“On Me”
In November 2007 Clorox acquired Burt’s Bees, a leading premium brand in the growing U.S. $6.4
billion high margin natural personal care (NPC) segment, for slightly under $1 billion. 9 At the time of
the acquisition, the NPC segment was small compared to the overall U.S. personal care market ($62
billion), but was one of the fastest growing subcategories with a projected annual growth rate of
almost 8% through 2010. The NPC subcategory was fragmented with the top 10 brands accounting
for 54% of the total U.S. NPC market size. (See Exhibit 9 for the shares of leading brands.) Health
and natural food stores were responsible for 40% of NPC market sales, followed by specialty stores
(27%), direct sales (9%), drug stores (6%), and mass merchandisers (6%).
Burt’s Bees was founded in the 1980s by Burt Shavitz, a beekeeper from Maine, and Roxanne
Quimby, a graphic designer he met in 1984. The company grew rapidly mostly by word of mouth
after the 1991 launch of its signature lip balm, made from bees wax and almond oil. Later, the pair
had a falling out, and Quimby acquired Shavitz’s share of Burt’s Bees in 1999. Over the next few
years, Quimby expanded distribution, launched an eCommerce website, and introduced new lines
including a toothpaste and a shampoo as well as the Baby Bee product line. Quimby put the
company up for sale in 2003, when it sold to AEA Investors, a New York private equity firm. AEA
paid Quimby $141.6 million for an 80% stake and hired John Replogle from Unilever as CEO in 2005.
4
This document is authorized for use only by Thi Swander in Sustainabilty & CSR 3-1 taught by MARK KAY, Montclair State University from Mar 2019 to Sep 2019.
For the exclusive use of T. Swander, 2019.
The Clorox Company: Leveraging Green for Growth
512-009
Based on the founders’ ideals, The Burt’s Bees team built the business around an idea called “The
Greater Good” that argued if companies were socially responsible, profit would follow. 10 (See
Exhibit 10.) The team grew distribution beyond health food stores and grocers to major retailers such
as CVS and Walgreens drugstores, and Target.11 By 2007, Burt’s Bees was in 15,000 retail outlets.
Burt’s Bees products were often set up in a dedicated area with unique merchandising that the
company referred to as “hives.” In the more health and natural oriented food chains, such as Whole
Foods, Burt’s Bees was able to train retailer employees on selling its products. By 2007, Burt’s Bees
revenues had grown to $164 million (90% in the U.S.), up from $23 million in 2000. 12
When Clorox acquired Burt’s Bees, Knauss commented, “The Burt’s Bees brand is well-anchored
in sustainability and health and wellness, and we believe it will benefit from natural and green
tailwinds.”13 Furthermore, Knauss said the acquisition signaled that Clorox was entering into a
strategic phase that would allow the company to expand into a natural product business platform. 14
The acquisition seemed a perfect fit with the Centennial Strategy. Springer explained:
We wanted a business that could be big in the U.S. market, but also had some international
potential. Based on our centennial criteria and looking through the vector of sustainability, we
screened many categories for internal growth and acquisition. We decided to look hard at
health and personal care because they had been important growth drivers for most of the big
household companies over the past decade. Burt’s Bees came on the market, and it had much
of what we were looking for in a small company that needed big company capabilities.
Some loyal Burt’s Bees customers were less enthusiastic about the acquisition and accused the
company of “selling out.” Springer summarized, “We reassured them that Clorox would not change
Burt’s products for the worse and that we intended to learn from Burt’s how to make the entire
corporation greener. We’ve delivered on both.”
Under Clorox ownership, Burt’s Bees remained somewhat independent and was marketed as a
stand alone brand with no reference to the Clorox name or logo on its packaging. In February 2008,
Burt’s Bees launched a “Natural Vs” campaign to educate consumers and address confusion about
what comprised a “natural” product in the health and personal care categories. (See Exhibit 11 for an
ad.) Burt’s Bees also added a “natural bar” on each of its product’s labels to show the percentage of
natural ingredients.15 Jim Geikie, vice president global marketing, Burt’s Bees, explained: “A
significant portion of the population is focused on their health and that of their families. With the use
of nicotine and birth control patches, there is a raised consciousness that what is applied to the skin
could be absorbed into the body. In fact, 60% of what is applied gets absorbed.”He added:
We have a five-segment consumer market. The far left is what we call the “committed
naturalists,” and they make up 1% to 2% of the female population. They are highly educated,
read the back labels, and research products. The next group over we call the “health and
beauty sleuths.” They are less environmentally focused, and more wellness focused. They are
on the lookout for harmful chemicals, which they avoid, and tend to be about 6% to 8% of the
population. We focus our marketing efforts on these two segments today. …
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