{"id":22337,"date":"2017-11-15T12:56:14","date_gmt":"2017-11-15T17:56:14","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-can-ecolab-ecl-a-38b-global-leader-in-water-hygiene-and-energy-technologies-and-services-that-protects-people-and-vital-resourc"},"modified":"2017-11-15T12:56:14","modified_gmt":"2017-11-15T17:56:14","slug":"how-can-ecolab-ecl-a-38b-global-conglomerate-continue-to-increase-shareholder-value-while-minimizing-its-impact-on-the-environment","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-can-ecolab-ecl-a-38b-global-conglomerate-continue-to-increase-shareholder-value-while-minimizing-its-impact-on-the-environment\/","title":{"rendered":"How can Ecolab (ECL) \u2013 a $38B global conglomerate \u2013 continue to increase shareholder value while minimizing its impact on the environment?"},"content":{"rendered":"

Ecolab context<\/strong><\/em><\/h4>\n

Ecolab\u2019s scale and environmental impact cannot be overstated: today, the food and energy sectors are the two largest consumers of fresh water (e.g., Consumer Packaged Goods companies, Oil & Gas), and Ecolab provides technical solutions to these and other sectors in order to reduce their water consumption.\u00a0Ecolab operates four business units that provide water, hygiene, and energy solutions to their customers across the globe. With such scale, Ecolab helps manage 1.1 trillion gallons of water annually and the safety of 27% of the world\u2019s processed foods every year\u00a0[1]<\/a>.<\/p>\n

\"\"<\/a>
Ecolab operating and geographic units<\/figcaption><\/figure>\n

 <\/p>\n

Management focus<\/b><\/em><\/h4>\n

Water management is important for Ecolab\u2019s management for two primary reasons: first, it\u2019s important to their customers. Water efficiency is among the top goals for global multi-nationals. For example, Coca-Cola aspires to reduce its water usage from 2.26 liters per 1 liter of product in 2010 to 1.7 liters of water per 1 liter of product in 2020 [2]<\/a><\/p>\n

\"\"<\/a>
Coca-Cola water usage per liter of product<\/figcaption><\/figure>\n

 <\/p>\n

Exxon Mobil, the world\u2019s 10th<\/sup> largest company by revenue, used a staggering 290 million cubic meters of freshwater to support its global operations [3]<\/a>.<\/p>\n

\"\"<\/a>
Exxon Mobil total global freshwater consumption<\/figcaption><\/figure>\n

 <\/p>\n

Second, water preservation is important to its broader stakeholders. By 2030, total water usage due to population growth and affluence will require an estimated 40 percent more water relative to today, putting increased pressure on natural resources. Companies have been tasked by their stakeholders to increase their focus on the environment, including suppliers, distributors, communities that firms operate in, and employees. For example, from a Human Resources point of view, 45% of candidates would be willing to work for 15% below market rate to work for a company that has positive social or environmental impact [4].<\/a> By continuing to invest and be conscious of its impact on the environment and water use more specifically, Ecolab can continue to attract world-class talent to the great state of Minnesota.<\/a><\/p>\n

Plan to tackle<\/h4>\n

Ecolab has historically relied on its strong Research & Development pipeline to build solutions for customers that reduce their overall impact on the environment, while simultaneously supporting these products and customers with a 25,000 person sales-service force. For example, Ecolab was named the Environmental Protection Agency\u2019s 2016 Safer Choice partner of the year due to its innovative disinfectant system that includes a closed-loop dispensing system that reduces packaging waste and simplifies on-site dilution for users in healthcare settings. The active ingredients in the main product breaks down into water and vinegar after use. These and other innovations have historically allowed Ecolab to minimize it and its customers’ overall impact on the environment.\u00a0\u00a0[5].\u00a0<\/a><\/p>\n

Ecolab has been able to achieve these and similar accolades (e.g., 2016 Global 100 Most Sustainable Companies, 2016 World\u2019s Greenest Companies, etc.) due to top-down commitment to reducing its impact on the climate, including overall water usage. One strategy that has allowed them to achieve this is by dedicating a Vice President role to Corporate Sustainability who oversees, among other responsibilities, Ecolab\u2019s innovation pipeline to ensure that impact on the environment is considered when making investment decisions. Further, Ecolab is regarded as an industry leader by formalizing their point of view on climate change holistically; their position states:<\/p>\n

\u201cEcolab is committed to continuous efforts to reduce greenhouse gas emissions in its own operations. Ecolab addresses climate change impact as criteria in its innovation process and actively works with customers on their climate change mitigation strategies by providing products, services and data to support these efforts.[6]<\/a><\/em>\u201d<\/p>\n

To continue delivering value to its customers who seek to reduce their water usage, Ecolab should further invest in in Research & Development to help drive product innovation to ultimately deliver shareholder value while reducing global water usage. In 2016 Ecolab spent ~1% of revenue on R&D expenses, which is in-line with other Chemical & Energy providers in North America, however European and Japanese counterparts spend ~1.5-2.5% of revenue on R&D [7].<\/a><\/p>\n

Open questions<\/h4>\n

As one evaluates Ecolab and other multi-nationals\u2019 position on water use and the climate more broadly, a few questions come to mind:<\/p>\n

    \n
  1. Do these efforts truly add value to shareholders and uphold management\u2019s fiduciary responsibility to create shareholder value?<\/li>\n
  2. How, if at all, should American CEO\u2019s react to the Trump Administration\u2019s decision to leave the Paris Accord?<\/li>\n
  3. What role, if any, do global companies have to mitigate climate change?<\/li>\n<\/ol>\n

    729 words<\/p>\n

    Sources<\/h4>\n

     <\/p>\n

    [1] (2016). 2016 Annual Report. [online] Available at\u00a0http:\/\/investor.ecolab.com\/~\/media\/Files\/E\/Ecolab-IR\/Annual%20Reports\/2016-annual-report.pdf\u00a0[Accessed 14 Nov. 2017].<\/span><\/a><\/p>\n

    \u00a0[2] (2017). Water Stewardship & Replenish Report<\/i>. [online] Available at: http:\/\/www.coca-colacompany.com\/stories\/setting-a-new-goal-for-water-efficiency [Accessed 14 Nov. 2017].<\/span><\/p>\n

    [3] (2017).\u00a0Corporate Citizenship Report.\u00a0<\/em>[online] Available at\u00a0http:\/\/corporate.exxonmobil.com\/en\/community\/corporate-citizenship-report\/environmental-performance\/water-management#\/section\/0-freshwater-management\u00a0[Accessed 14 Nov. 2017].<\/span><\/p>\n

    [4] Meister, Jeanne (2012). [online] Available at from https:\/\/www.forbes.com\/sites\/jeannemeister\/2012\/06\/07\/the-future-of-work-corporate-social-responsiblity-attracts-top-talent\/#71313c543f95<\/p>\n

    [5] (2016)\u00a0Ecolab Press Release.\u00a0<\/em>[online] Available at\u00a0http:\/\/investor.ecolab.com\/news-and-events\/press-releases\/2016\/05-16-2016-213225230 [Accessed\u00a014 Nov. 2017].<\/span><\/p>\n

    [6]\u00a0(2016) Ecolab Policy Climate Change.\u00a0<\/em>[online] Available at\u00a0http:\/\/www.ecolab.com\/~\/media\/Ecolab\/Ecolab%20Home\/Documents\/DocumentLibrary\/PositionStatements\/EcolabPolicyClimateChange.pdf [Accessed\u00a014 Nov. 2017]<\/span><\/p>\n

    [7] (2016)\u00a0Strategy& Comparison of R&D Expenditures (2005-2015).<\/em> [online] Available at https:\/\/www.strategyand.pwc.com\/global\/home\/what-we-think\/innovation1000\/rd-intensity-vs-spend-2015.\u00a0[Accessed\u00a014 Nov. 2017]<\/span><\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

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