SC JOHNSON’S CEO ON DOING
THE RIGHT THING EVEN IF IT HURTS BUSINEES
SC Johnson has a long history of taking action
to address concerns related to the environmental or health effects of the
chemicals in our products. We’ve often made changes in product formulation
before regulations required us to do so—even if it would hurt sales. One of the
most notable examples of such a decision concerned Saran Wrap, not only a
longtime market leader, but also one of the most recognizable brands in our
portfolio.
Like several other iconic products, including
Play-Doh, penicillin, and microwave ovens, Saran Wrap emerged from an
accidental discovery. In 1933 a lab worker at Dow Chemical named Ralph Wiley
came across residue in beakers that had been used in developing a dry-cleaning
chemical from chlorine. He couldn’t scrub away the residue, which he dubbed
eonite after a fictional material featured in “Little Orphan Annie.” Dow
researchers turned it into a slick green sheet and renamed it Saran. During
World War II the U.S. military used the product in insoles for combat boots and
to protect fighter planes from the elements. Carmakers used it in upholstery.
In 1953 Saran Wrap debuted as a food storage product, and in 1998 SC Johnson
acquired it from Dow.
The key to Saran Wrap’s success was that it
created an impenetrable barrier to odor. Its other competitive advantage was
superior microwavability. Polyvinylidene chloride (PVDC) was responsible for
both those unique differentiators. Without it Saran Wrap would have been no
better than wraps made by Glad and Reynolds, which did not contain PVDC. No
manufacturer of a product as successful as Saran Wrap would make changes to it
without a lot of thought and groundwork beforehand. Not only product sales but the
manufacturer’s credibility—which in the long run may be more important than
trust in any one product—would be in jeopardy. But sometimes not making
changes, even to a profitable go-to household item like Saran Wrap, is just as
risky.
Erring
on the Side of Caution
Around the time we acquired Saran Wrap, the
U.S. Food and Drug Administration, environmental groups, and consumers began to
express concern over the use of polyvinyl chloride (PVC), which is common in a
wide variety of products in virtually every industry, including construction,
electronics, consumer products and packaging, toys, health care, fashion, and
automotive. We ourselves were concerned, because when materials containing
chlorine, such as PVC and PVDC, end up in municipal incinerators and are
burned, they may release toxic chemicals into the environment. Some of our
product packaging contained PVCs.
Fortunately, we soon had a process in place
that would help us reevaluate our use of PVCs. We called the process Greenlist.
It launched in 2001 and has been one of the most significant steps in our
ongoing sustainability efforts. In the Greenlist process, which has undergone a
variety of rigorous updates since then, ingredients we use or are considering
using are sorted into functional categories, such as solvents and insecticides.
Within each category relevant criteria, including biodegradability and human
toxicity, are used to rank the impact of ingredients on the environment and
human health. An ingredient the company would use only when no alternative
existed (and even then, only on a limited basis) is rated 0; 1 is “good,” 2 is
“better,” and 3 is “best.” Scores for a product’s ingredients are averaged, and
the product is assigned an overall rating. Once rated, ingredients are included
in a database that SC Johnson product developers can access when creating new
products or reformulating current ones.
Under Greenlist criteria, PVC rated 0, so we
pledged to eliminate it from our external packaging altogether. But concern
over PVCs, used in one of our main competitor’s wraps, was moving beyond
packaging to the products inside. Although Saran Wrap did not actually contain
PVC, the wrap category as a whole came under scrutiny, and the difference
between PVC and PVDC got lost in the discussion.
It didn’t matter, however, whether concern
over PVDCs was misplaced or conflated with concern over PVCs, or whether people
were calling for manufacturers to stop using PVC specifically but not
necessarily PVDC. Although most decisions are a matter of trade-offs and
evolving priorities, one priority doesn’t change for us: acting in the best
interests of our customers, whose trust in our company is a primary reason they
buy our products. As a result, we go out of our way to act with care. When it
comes to the safety of our ingredients, we prefer to err on the side of
caution.
This was not the first time we had been faced
with eliminating a key chemical from a formulation. We’ve removed product
ingredients for reasons of health or environmental hazard many times, especially
since we introduced Greenlist—and we’ve taken whatever hit accompanied each
instance. For example, we simply do not use some of the active ingredients
available for use in pest-control products because of their Greenlist score,
even though our competitors do. We found a substitute for them, and we
maintained performance. Despite the cost, it was the right thing to do, and as
someone with experience in chemistry and physics, I sleep better at night
because of it.
My
Forefathers’ Values
When I became the chairman of SC Johnson, in
2000, and then the CEO, in 2004, I wasn’t just taking over those positions. I
was assuming guardianship of my family’s good name and of a legacy built on the
hard work of four generations before me. I knew that part of this job was to
protect not only our business interests, but also the values on which my
great-great-grandfather Samuel Curtis Johnson founded the company, in 1886.
Our first decision to unilaterally remove a
major chemical occurred in 1975, when research began suggesting that
chlorofluorocarbons (CFCs) in aerosols might harm Earth’s ozone layer. My
father was CEO at the time, and he decided to ban them from all the company’s
aerosol products worldwide. He did so several years before the government
played catch-up and banned the use of CFCs from everyone’s products. Although a
decision like this is never easy, as a privately held company, SC Johnson
doesn’t have to take into account how it will affect shareholders. That’s not
to say the decision went unnoticed. Not only were some of my father’s
colleagues unhappy with him, but other leaders in the industry were really
upset. My dad was in the middle of his remarks at a Business Roundtable meeting
when the CEO of a major chemical company stood up, pointed at him, and said
angrily, “Sam, you’re gonna ruin this industry.”
Banning CFCs was the right thing to do, and my
father never regretted his decision. When we were faced with determining Saran
Wrap’s future, I was inspired by his perseverance in the face of doubters. We,
too, had to choose between what we felt was right and what we knew might be the
beginning of the end for one of America’s most iconic brand names, because
changing the chemicals in Saran Wrap could result in a product that didn’t
perform as well. That would disappoint consumers, who might lose trust in the
company. So it was not a decision we made lightly.
We could have simply eliminated PVCs from our
product packaging and left Saran Wrap as it was. Instead we pledged to stop
selling wraps that contained chlorine of any kind, including PVDCs, by 2004. We
gave the research, development, and engineering team a year to try to re-create
Saran Wrap without PVDCs. We assigned a dedicated team to the project
full-time, and we allowed a substantial budget.
At first RD&E was optimistic that it could
develop a PVDC-free product that would be every bit as good as the original.
Then reality set in. To provide the odor barrier and microwavability of the
original would require a multilayer film. Not only would it be noticeably
thicker (think trash bags), but we would need new industrial machinery to
manufacture it, which meant a prohibitive financial outlay. Still, the team
continued working hard. We were doing everything we could to save the original
characteristics, but with little success.
Then a glimmer of hope appeared, in the form
of a packaging company in Europe with which we were working to find a solution.
It created a chlorine-free polyethylene wrap. We had high hopes that it would
provide the same benefits as the original Saran Wrap. But our tests found it to
be less sticky, less effective at preserving foods’ freshness, and a
lower-quality product overall.
Revenue
or Goodwill?
We had a choice: Risk losing customers and
market share by replacing the original product with an inferior one, or
continue with the original formulation and risk losing the goodwill we had
built over the years with consumers and other stakeholders. Some on the team
argued that we should keep the original formulation and wait it out; others
disagreed.
Back in 1927 my great-grandfather said
something that has been a guiding principle for me throughout my career: “The
goodwill of people is the only enduring thing in any business. The rest is
shadow.” In other words, trustworthiness is the most important quality a
company can have. It has to be earned. At the same time, we need to be
transparent and make sure the public is aware of our efforts. So we replaced the
original Saran Wrap with this newly reformulated polyethylene product, knowing
full well that it would no longer have competitive advantages over other wraps
on the market. But we believed that it was still a useful product.
As predicted, Saran Wrap’s market share
dropped—from 18% in 2004 to only 11% today. That wasn’t solely because the
product became less competitive. Once Saran Wrap had been reformulated and we
no longer had a claim to make about its superiority, we chose to reduce
marketing support for it as well. We took some comfort in the knowledge that
the overall wrap market was shrinking anyhow, as Ziploc containers and bags
(also our brands) and similar products grew. Given the circumstances and the
team’s valiant efforts to re-create Saran Wrap, I don’t regret the decision. As
in the past when we eliminated ingredients, we gained a surer sense of who we
are as a company and what we want SC Johnson to represent
https://hbr.org/2015/04/sc-johnsons-ceo-on-doing-the-right-thing-even-when-it-hurts-business
COURTESY: PUSHKAR GHANEKAR
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