June 27, 2012
A Thought Leader Series Piece
By Kasper Rorsted
Note: ASU and Henkel have a long relationship on issues of sustainability, beginning with ASU’s collaboration with the Dial Corporation, now a Henkel company. More recently, Rob Melnick, executive dean of the Global Institute of Sustainability and the School of Sustainability, was an advisor to Henkel in the development of the company’s current sustainability strategy.
The Earth’s resources are finite – the faster we expand, the faster we use them up. This idea was central to the prescient 1972 study, “Limits to Growth,” commissioned by the Club of Rome.
Forty years later, it is now obvious that human consumption is exceeding these limits. Our population of more than seven billion people devours many resources more quickly than they can be renewed.
What will happen in another 40 years when the world’s population expands to a predicted nine billion people? Consumption and resource demand could grow faster than ever before. Will the people on this planet willingly forego a higher quality of life and the level of consumption that goes with it? Not likely.
Our approach to sustainability, therefore, must extend beyond the idea of simply reducing emissions, consumption, or living standards. We must find a way to maintain a high quality of life while consuming vastly fewer resources.
Finding smart solutions
What the world needs is an effective strategy for creating more from less. With such a strategy, we can decouple our standard of living and economic performance from the consumption of increasingly scarce resources. For companies, this will mean increasing the value of their products and services while reducing their resource footprint.
Most international companies already recognize the challenge of sustainability and its possible return on investment. Sustainable development can satisfy a duty toward future generations while making good economic sense. Embracing this idea provides a competitive advantage in at least three ways.
First, sustainability serves as an innovation engine. Henkel’s industrial and retail customers expect us to develop new products of high quality and low environmental impact. To accomplish this, we must continually find new ways to reduce energy, water use, and waste in the production of our products as well as in their use. These benefit our bottom line as well as those of our customers.
Second, sustainability is an important criterion in the labor market. Top candidates, in particular, tend to choose companies that show they are both economically successful and responsibly operated regarding the environment and society.
Third, financial markets increasingly consider sustainability a factor in identifying high-performing companies. Sound sustainability plans indicate that a company is thinking long-term and will perform in a consistent, coherent manner.
Many companies, however, find it difficult to reconcile their business goals and sustainability objectives. They see it as a conflict between making a profit and doing the right thing, but this doesn’t have to be the case. What makes attaining these goals possible is a commitment to innovation.
At Henkel, for example, we didn’t see a way to meet our sustainability targets without overhauling our production process. This meant we had to step back and invest in redesigning production to work with less input and greater efficiency. The result was we reached our 2012 sustainability targets two years earlier than expected, while simultaneously generating the best earnings results in our corporate history.
To make big improvements, companies need a long-term strategy. In 2011, we drafted a sustainability strategy that sets targets all the way to the year 2030. Our overall goal for this period is to triple the value we generate related to the resource consumption of our products and services. We believe we can achieve this objective of becoming three times more resource-efficient in a variety of ways: by reducing resource consumption and emissions, increasing value, or some combination of the two.
Whatever approach is used, the goal of tripling our company’s efficiency by 2030 guides our thinking and planning. We will apply it to all business sectors and functions across our entire value chain. Ultimately, customers, consumers, society, and the environment should all profit from the reduced ecological footprint that results.
To help us achieve our efficiency goals, we have defined three major approaches. These pull together the most important components of our business: our products, our partners, and our people.
The first approach is to develop and manufacture the most efficient and sustainable products. These products are the core of our business, and that is where we can make the highest progress through continued innovation.
The second approach is to involve our many partners – suppliers, craftsmen, industrial users, and consumers. They contribute by reducing their resource consumption all along the value chain. Hence we also focus on helping customers understand how to use our products most sustainably.
The third approach is to tap into the expertise of our people. The company’s many employees play a crucial role by contributing their knowledge and ideas to improving our designs and processes. They need to identify and implement the many small changes that can make a big difference.
With the effective interplay of innovative products, engaged partners, and committed employees, we feel it is possible to meet our challenge to triple our resource efficiency and achieve more with less. This must be the challenge and goal for every company. It is time to step up and make a difference.
For additional information on Henkel’s sustainability strategy, visit here.
About the author: Kasper Rorsted is the chief executive officer of Henkel, a Fortune Global 500 company based in Düsseldorf, Germany, with leading positions in consumer and industrial businesses. Henkel is regularly ranked as one of the world’s most sustainable and ethical companies. Mr. Rorsted previously served as Managing Director Europe of Hewlett Packard and General Manager of Compaq for the business in the Europe, Middle East, and Africa region. He studied economics at the International School of Business in Copenhagen and at Harvard Business School.