Corporate Leaders’ Insights on the Golden Rules of Sustainability: Al Iannuzzi of Johnson & Johnson

The Five Golden Rules of Sustainability

Jim Fava (JF): Al, as a start could you explain what your book is about and why you wrote it?

Al Iannuzzi (IA): Whenever I speak about greener products, there are two things I usually say:

1. There is no such thing as a green product, and
2. What good is a greener product if no one knows about it?

The reason for these assertions is that life-cycle assessments have shown that every product has impacts, from raw materials to transportation, manufacturing, customer use, and end of life.

Every product can be improved in some way, which is why I use the term “greener.” And once you have a greener product, you must appropriately inform your customers why it is greener; if no one knows about your product, it is essentially worthless to have an improved product since no one will know about it or the value that the changes have created.

That’s why it is critical to make and market greener products—the communication aspect is just as important as having a greener product. That is why I wanted to publish these books. In the second edition, I focus on three major topics:

• Making the Case for Greener Products
• Making Greener Products
• Marketing Greener Products.

JF: Thanks for that perspective on your book, I’m sure the readers will find it as informative and useful as I have. Now I’d like for us to explore each of the Golden Rules.

Our first golden rule is titled “Bring Your Customer In.” As you have worked in the field for 30 years, I am sure you have seen a transition within the EHS space from operations/manufacturing to now going beyond your own operations to the entire value chain. Our first golden rule speaks directly to that transition. If you are going to drive sustainability or greener products within your own portfolio, one must bring your customer and their priorities and concerns into your own business practices, e.g., innovation, marketing etc.

What did you learn from the research on greener products about bringing your customer in?

AI: We found many examples where customers’ needs and expectations were critical to inform innovators to consider when designing and manufacturing greener products as well as how companies used that information to communicate to their customers. Here are 3 examples:

1. GE’s Ecomagination focuses on their customers’ desire to have more eco-efficient products by selling products that use less energy and water.
2. Method addresses the growing desire for customers to have products that have organic materials and they are transparent on all the ingredients used.
3. Honest Tea capitalizes on the health conscious consumer, selling beverages without sweeteners and they are USDA organic certified.

JF: Thanks for those examples, Al. Now let’s consider second golden rule: “Success requires focus and action.”

Over the years, we have seen numerous studies whether they are life cycle assessment or hotspots analysis identifying the critical impacts which are the most important to improve the sustainability of the product, category, portfolio – all helping to inform the question – are we working on the right issue and at the right stage of the value chain? However, we must go further – we should identify the actors and prioritize solutions to address each hotspot.

The second golden rule is about focus and action. Can you provide examples and insights moving beyond the ‘what’ and ‘why’ to the ‘how’?

AI: I fully agree businesses cannot work on all possible issues simultaneously. They must identify the hot spots or issues that are material to them, and then act. Prioritisation and action are key. Two examples I highlight in chapter four in the book are BASF’s Sustainable Solutions Steering – their portfolio segmentation approach, and Johnson & Johnson’s Earthward system.

BASF’s greener product development platform is called Sustainable Solution Steering. This process puts all products into four categories tied to providing sustainability solutions to their customers:

• “Accelerator” is the highest level and is described as products that provide a “solution with a substantial sustainability contribution in the value chain.”
• Performer—meets basic sustainability standards on the market.
• Transitioner—has specific sustainability issues, which are being actively addressed.
• Challenged—has identified significant sustainability concern and an action plan is in development to address the concerns.

As a chemical company, they believe chemistry is an enabler, offering “business opportunities” for meeting customer needs. This is another example that fits into the first golden rule.

BASF’s Sustainable Solution Steering has a three-step process:

1. Analyse sustainability needs and trends of value chains
2. Check product sustainability performance in the market segments
3. Develop action plans for strategies, R&D and market approach; define concrete goals.

For example, BASF has set a goal to increase the sales share of Accelerators to 28 percent by 2020.

Johnson and Johnson Earthwards is a process that enables product-development teams to evaluate a product throughout its life cycle and identify areas where it can be improved, to lower its impact and increase social benefit. Tools and a scorecard have been developed to assist design teams to uncover improvements to reduce product impacts. Products that have been significantly improved can receive special recognition if they complete a life-cycle screen, meet prerequisites, and achieve the Earthwards criteria.

JF: Having read the latest edition of your book, it becomes clear to me that greener products drive value beyond just cost savings. For our third golden rule, we explain that the “value is in more than just tightening your belt”. Could you share with us some examples of where companies are seeing greater value creation beyond cost savings?

AI: In my book, we show examples of companies who have changed practices to reduce costs as well as generate revenue.

For example, Dell wanted to demonstrate the huge potential benefit of scaling up closed-loop plastics recycling and assessed the net environmental benefit of closed-loop recycled plastic in terms of lower pollution, reduced greenhouse gas emissions, and improved human health compared to using traditional plastic. This involved quantifying positive and negative environmental impacts and putting a monetary value—natural capital cost—on the result.

The results show that Dell’s current usage of closed-loop plastic has a 44 percent greater environmental benefit compared to virgin plastic, equivalent to an annual saving to society of $1.3 million in avoided environmental costs.

Of critical importance are the reduced human health and eco-toxicity impacts achieved by closed-loop recycling of plastic instead of disposal. If all of Dell’s plastic was supplied by closed-loop recycling, the environmental benefit to society would increase to $50 million per year. If the entire computer manufacturing industry switched to using closed-loop recycled plastic, the environmental benefit would increase to $700 million per year.

In addition, the book finds at a minimum there are nine businesses (e.g., Unilever, GE, IKEA,) with over a billion US dollars in annual revenue connected to a product or service with “sustainability at its core.” It should be noted that this is not a comprehensive list because there are other companies that have over a billion in revenue from greener products that are not included here.

For one, the company I work for, Johnson & Johnson, has at the writing of this blog, $11.5 billion in Earthwards recognised greener products on the market.

JF: I’ve been intrigued with the number of tools that have been developed and used within the innovation practice in companies to drive more sustainable products. I have also seen many examples of companies developing tools without an agreed destination or business practice where the tool can inform decision-making.

For our fourth golden rule, “If you don’t know your destination, any tool will get you there,” we explore the importance of using a sustainability tool that aligns with the broader organisation’s objectives. Al, can you give us some insights on the importance of aligning the tool within the practice where the information will be applied?

AI: One of the observations from writing this version of the book, was that there was no ‘silver bullet’ tool. Each product category has its own unique set of hotspots that are meaningful with respect where the innovation teams should focus their improvement efforts.

For example, life cycle assessment is a solid tool to identify environmental impacts. But is not the best tool to consider toxicology of the materials used or being considered. Nor does it consider customer expectations. Additionally, evaluation of greener products should be viewed through the lens of ‘risk mitigation’ and “customer delighters.”

I also have to add: keep it simple — R&D is not going to slow down for sustainability, so the easier and faster you make it, the more successful you will be.

JF: Our fifth and final golden rule– “Without a seat, three legs of a stool are useless”– is foundational to any company that wants to realise the business value of operating sustainably.

In this analogy, the legs of a stool are the environment, social, and economic components of sustainable development. We refer to the seat as the governance that a company has in place to understand their sustainability hotspots and how should the company respond. It is the management systems that allows a company to plan, do, assess, and respond. Al, in your book governance appears to be a key success factor to help companies embed sustainability.

Can you describe why this is so critical and provide a few examples of good governance?

AI: As you note in chapter five that you and your colleagues at Anthesis wrote, governance is parament to any successful ‘greener product’ program. One must have a strategy, management systems (e.g. clear targets tied to objectives, designated accountability, and continual improvement mechanisms), and programs (e.g., specific practices, standards that are focused on priority business practices).

In my book, I found that an operative word is “institutionalise”. For example, within my own company (J&J), we embedded what we call Earthwards checks into our new product development processes and encourage Earthwards innovation sessions for major new products and product changes to ensure compliant and more sustainable products.

Another example is SC Johnson’s Greenlist. Every new product innovation project must have a Greenlist success factor formulated during the ideology phase. That governance requirement drove greater Greenlist performance.

JF: Final question: When will your next book be released, and where do you see the priority focus for sustainability issues going forward?

AI: I’m not sure of the timing on another book but what I do know is that keeping on top of sustainability issues is extremely challenging. One area that I know will get more focus in the future is the area of supply chain issues. Transparency on what’s in your product and where it comes from will increase. It will be like taking the pressures on conflict minerals to all your raw materials. Customers are going to want to know if your supply chain is clear of environmental issues like deforestation and social issues like forced labour and poor worker conditions.

I also see businesses putting more pressure on their suppliers to address these issues and that of toxicity of chemicals used. Retailers like Walmart and Target, building product companies Home Depot and Lowes and health care companies like Kaiser Permanente all have become de facto regulators by asking their suppliers to remove chemicals from their products which are permitted to be used legally.

So overall more pressure on product design and sourcing – it’s going to be exciting and the companies with the best processes to make and market greener products will be the big winners.

JF: Al I want to thank you for your insights and perspectives. Your vision to see the need for a book that will help scale and accelerate the application of many of the frameworks, tools, and approaches you cover should be celebrated. Many thanks.

Summary

The insights described and highlighted in this blog are further examples that we are moving from a niche application within a few leadership companies to broader applications. Of course, there is still a long way to go. Hopefully, the insights described as it relates to the five golden rules will help you along your journey to culturally embed sustainability criteria and considerations into your innovation and marketing practices.

We will be posting another concluding interview to reflect on the application of the five golden rules. Ron Voglewede, global sustainability director at Whirlpool, will share his insights and additional examples on the golden rules.

We will then conclude the series with a reflection on the feedback and additional learnings since the Introduction to the Golden Rules series was published.

To Start a Conversation

If you are interested in further information on the golden rules and the approaches Al described from his book, please do not hesitate to contact Al Iannuzzi and myself.