P&G Steps Up Sustainability Commitment

Procter & Gamble is only in the beginning stages of what could be a long turnaround effort under CEO Bob McDonald. One promising step announced today: P&G is partnering with the U.S. Environmental Protection Agency to help the consumer packaged goods giant make serious strides towards its sustainability goals.

The company announced that it will be working with the EPA's National Risk Management Research Laboratory "to develop new tools to optimize sustainability improvements in manufacturing facilities, and their associated supply chains."

The collaboration will focus on the pillars of P&G’s long-term environmental sustainability vision, announced in September of 2010: "Powering its plants with 100% renewable energy; Using 100% renewable materials or recyclate for all its products and packaging; Having zero consumer or manufacturing waste going to landfills; and Designing products that delight consumers while maximizing the conservation of resources."

The partnership is a big coup for McDonald, who has been fending off activist investor Bill Ackman. P&G's CEO recently gained some time and confidence as the company's independent directors and entire board made a public display of confidence in the CEO and his recovery plan. "The Board ... unanimously supports the plan and Chief Executive Officer, Bob McDonald, as he leads its implementation; and is monitoring its effectiveness," the board's independent directors said in a securities filing.

Investors have been berating McDonald for a while because of the company's recent strategic shifts, lack of marketplace momentum, stalled innovation efforts and declining competitiveness of some of its brands. Its stock price also has been stagnant for two years while that of a main rival, Colgate-Palmolive, for example, has surged 27 percent. (P&G takes its dental business very seriously; it just sued Team Technologies in a tooth-whitening intellectual property tussle.)

McDonald laid out a plan last month for fixing the problems, saying the company would focus more intensely on 40 product and country categories that produce the bulk of its profit.

But that wasn't enough to ward off Ackman, owner of Pershing Square Capital Management, who has a track record of getting results — or helping displace management — at companies that he targets, even big ones like P&G. Ackman owns about $1.8 billion in P&G stock and has made it clear he'd like to see changes — and bigger and faster ones than McDonald may be planning.

In fact, he has made replacing McDonald his main "action item" for fixing the company, while also calling for deeper cost cuts than McDonald currently plans. P&G has "disappointed investors for some time and we're going to take a hard look at seeing if we can add any value," Ackman said, according to the Wall Street Journal.

And while P&G's board remains behind McDonald at the moment, few other factors are doing the embattled CEO any favors. Most significant global economies are in slower modes these days than recently, including the United States, Europe and even China, an important growth market for P&G.

P&G may get some respite from Ackman's glare with its sponsorship of the 2012 Summer Olympics in London. But as McDonald looks to make his vision sustainable, too, he isn't planning to go anywhere until long after the torch has moved on.