the bold look of kohler and commitment to sustainability

8/14/2019 The Bold Look of Kohler And Commitment to Sustainability

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The Bold Look of Kohler

And

Commitment to Sustainability

By

Daniel Heibel

University of Wisconsin - Stout

Strategic Management and Business Policy

BUMGT-490

Date: December 17, 2009
http://www.us.kohler.com/savewater/home.htm


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Executive Summary

Waste not, want not is a centuries old idiom that reminds us that the

wise use of ones resources will keep one from poverty. But in the business

world, business stakeholders demand that the wise use of resources will lead

to profitability. This is the basis of corporate sustainability and can be

described by the three elements of environmental, social and economic

responsibility.

Why has corporate sustainability become such a concern? Executives have

come to recognize that long-term economic growth is not possible unless

that growth is socially and environmentally sustainable. A balance between

economic progress, social responsibility and environmental protection,

sometimes referred to as the triple bottom line, can lead to competitive

advantage.

Developing sustainability strategies is often an important challenge for

senior executives, but implementation is usually the larger challenge. Senior

managers often find it difficult to simultaneously improve all three elements

of sustainability.

This analysis describes the Kohler Companys commitment to

sustainability, compares it to other corporate strategies currently being

implemented, and presents possible alternatives that will improve their

implementation and strategy.


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Opportunity Statement

Identify Kohlers sustainability strategy and its implementation, and based

upon comparison with best-in-class organizations, recommend alternatives

or additions to its strategy.

Company History and Profile

The year was 1873, an unlikely time to start a new business in America.

Despite the economic uncertainties of the day, John Michael Kohler

purchased the Sheboygan Union Iron and Steel Foundry, never anticipating

the growth of the company that would eventually bear his name. The firm

produced cast iron and steel implements for farmers in the area, castings for

the citys furniture factories, and ornamental iron pieces that include hitching

posts, cemetery crosses, urns and settees.

In 1883, Kohler took a product in his line, heated it to 1700F and

sprinkled it with enamel powder. Placing a picture of it in the center of his

one-page catalog, he called it a horse trough/hog scalder when furnished

with four legs will serve as a bathtub. Kohler was in the plumbing business.

Legend has it that the first bathtub was sold on barter arrangement for one

cow and 14 chickens.

Like Kohler himself, many of the early employees were immigrants. Their

dedication to excellence helped forge one of the oldest and largest privately

held companies in the United States. Kohler ideas craftsmanship and


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production to torpedo tubes, artillery shells and other military components,

producing only the plumbing products and generators needed for WWII.

Following victory in WWII, Kohler converted back to peacetime production

of plumbing fixtures and begins marketing its line of small engines. This

begins another period of rapid expansion that is curtailed by a bitter six-year

strike by the United Auto Workers union from 1954-1960. Despite the strike,

a new 400,000 square foot small engine manufacturing facility is opened.

The company also makes its first expansion outside of Wisconsin by building

a vitreous china and reinforced fiberglass facility in Spartanburg, South

Carolina.

Kohler goes international by building a plant in Mexico City, to produce

small engines for the Mexican market and for export, in 1964. 1967 saw the

development of boldly colored products and the companyscurrent tagline,

THE BOLD LOOK OF KOHLER.

In 1974 we see the introduction of the first innovative, environmentally-

conscious products, as low consumption toilets, faucets and showerheads

are introduced to reduce the strain on municipal and private sewage

systems, and to lower sewage and water treatment costs. The Wellworth

Water-Guard toilet uses only 3.5 gallons of water per flush, a reduction of

30% from conventional toilets.


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Kohler again expands in 1975 with another production facility for vitreous

china and fiberglass reinforced plumbing products, this time in Brownwood,

Texas. This same year, the production of generators is moved to a

manufacturing facility in the Town of Mosel, just north of Sheboygan,

Wisconsin. In 1977, the second 50-year master plan for the Village of Kohler

is developed by the Frank Lloyd Wright Foundation. Another product

innovation milestone is reached in 1978, when Kohler engineers receive a

U.S. patent for a timed flushing system that increases the efficiency of

Kohlers one-piece, low-flow toilets.

The Kohler Company really takes off in the 1980s. Hospitality and Real

Estate, forms as a Business Group, with the American Club, River Wildlife

and the Sports Core. 1984 sees the first acquisition in the companys 111

year history, as Sterling Faucet Co. is purchased, significantly increasing

market share and allowing greater access to retail markets. In 1986, Kohler

enters the furniture business with the acquisition of Baker Knapp & Tubbs,

Incorporated. Kohler establishes itself in Europe, by joint-venture with Jacob

Delafon, a major full-line plumbing products manufacturer. To strengthen its

position in fiberglass and acrylic products, Kohler acquires a Canadian

company; Hytec Manufacturing Ltd. Kohler then acquires the FRP

Components Division of Owens-Corning Fiberglas Corporation, allowing it to

produce sheet molded bathtubs and enclosures. Not stopping there, Kohler

goes on to acquire the Kinkead Division of USG Corp, the countys largest


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manufacturer of tub and shower enclosures. Finally in 1989, Kohler adds two

more businesses to its family; Ann Sacks Tile and Stone, which produces

hand-made tile and marble, and Kallista, which produces high-end plumbing

products that appeal to the interior design market. Another product

innovation milestone is reached in 1989, as the 1.5 gallon Wentworth Lite

toilet (which many of us have had the honor of plunging) is introduced.

Kohler continues their rapid expansion in the 1990s by six more

acquisitions: McGuire Furniture Company, Sanijura S.A., Robern, Inc.,

Holdiam, Inc., Canac Kitchens Ltd., Lumatech International Inc. They also

expand by opening two plants in China, two in Indonesia; one in Mexico, as

well as two in the U.S. Kohler also enters a joint-venture with a Beijing

faucet manufacturer. A new business group is added, Kohler Rental Power.

Since 1998, Kohler expansion has continued, primarily through the

strategies of horizontal and forward-gaining integration, concentric

diversification, and through product differentiation. This has resulted in a

doubling of size, with more than 50 manufacturing locations worldwide,

32,000 Kohler Co. associates working on six continents, and 39 brands

comprised within four major business units; Kitchen & Bath, Global Power,

Interiors, and Hospitality. Being a privately held company, financial numbers

are hard to come by, but best estimates indicate revenue of $6 billion for

2008.


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The mission of the Kohler Co., in its higher level of gracious living concept,

is all about improving the quality life. They accomplish this through the

design and engineering of their products, and by capitalizing on the historic

and environmental nature of their services. For sustainability, the

enhancement of nature shows their commitment to improving the quality of

our environment.

Mission Statement

Kohler Co. and each of our more than 32,000 associates have the mission of contributing to a

higher level of gracious living for those who are touched by our products and services.

Gracious living is marked by qualities of charm, good taste and generosity of spirit. It is further

characterized by self-fulfillment and the enhancement of nature.

We reflect this mission in our work, in our team approach to meeting objectives, and in each ofthe products and services we provide.

Because their products are found in many public areas, homes and offices,

one can be touched by Kohlers products without being an actual

purchaser. The same can be said about their services; one can be a visitor

or guest without being an actual paying customer. For sustainability, the

world is touched by Kohlers sustainability initiatives in: waste

management, energy efficiency, water conservation, incorporating green

building principles into their facilities, and developing more environmentally

friendly packaging.


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Sustainability

The framework of Kohlers commitment to sustainability is the

Sustainability Strategic Plan, launched in 2007 to institutionalize

sustainability within Kohler. It is a triple-faceted strategy consisting of:

education, attaining a net zero environmental footprint by 2035, and driving

growth and competitive advantage with innovative sustainable products and

services.

It is more than a project as it sets forth to embed a culture of

sustainability throughout the company. 49 champions have been named for

the North American campaign, with a global network of champions soon to

be announced. We need respected, passionate associates to help bring the

plan to life in the workplace, says Jeff Plass, Manager Global Environment,

Health & Safety, and a member of the Kohler Environmental Leadership

Team (KELT). KELT is a cross-functional group of company leaders who have

designed the Sustainability Strategic Plan with an ambitious implementation

plan.

The champions of KohlersSustainability Strategic Plan have adopted an

informal mission statement of their own. It is a 1934 quote from then

company president Walter J. Kohler, which exemplifies the companys long

standing tradition of environmental stewardship,So-called free goods such

as sunshine and fresh air may be of more real wealth than most economic


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goods. This may be the first known mention of environmental stewardship

in the corporate world. Current President and COO, David Kohler, also has

an inspiring quote for commitment to sustainability, Business success

doesn't matter much if we can't say we left the world a better place than we

found it.

In phase 1 of the education facet of the Sustainability Strategic Plan, the

champions have been tasked to help create a culture where associates think

about sustainability in their day-to-day work. This is reflected in their vision

statement, Think green, and be green. For them, every little thing that

promotes sustainability counts. They believe that every associate can

contribute in some way.

In phase 2 of the education facet of the Sustainability Strategic Plan, as

champions have been involved in different business activities, they identify

and emphasize areas that can be used to promote sustainability gains. For

example, at a recent pottery division workshop that involved mapping value

stream inputs and outputs, excesses and wastes were found in water usage.

A sustainability project was subsequently launched and completed with the

Environmental, Health and Safety (EHS) team, resulting in a water savings

potential of 6.5 million gallons per year.

Kohlers educational strategy extends beyond the walls of its own

businesses and into the world with its Save Water America program, which


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holds events across the country and can be accessed online at

SaveWaterAmerica.com. These events partner with local water utilities and

plumbing distributors across the country to help consumers and businesses

save water. They demonstrate ways to save water at home through working

displays and offer event discounts on toilets, showerheads, and faucets.

Kohler Co. has used this program to raise water-conservation awareness and

help people take action to save water at home.

The key metric and focal point of the net zero footprint component to the

Sustainability Strategic Plan, is a 4% yearly reduction in energy

consumption, water usage, landfill usage and carbon emissions. Using the

year 2008 as their baseline, the 4% per year objective will allow them to

achieve their net zero footprint goal in 2035.

As with any sustainability strategy, the basic beginning is the reduction of

wasted energy, which also adds unnecessary carbon emissions. At Kohler,

the KELT team works closely with the Kohler Energy Management Group

(KEMG). KEMG is a group of engineers and technicians who are constantly

scrutinizing energy usage, looking for cost savings anywhere it might help

with the 4% plan for a net zero footprint. Many of these cost savings are

called the low hanging fruit of sustainability because they seem so obvious

and easy to correct, but with careful effort, implementation can be made to

further the sustainability effort.


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One of the main areas that KEMG is involved with is lighting systems, both

for offices and factories. An energy efficient lighting system includes bulbs,

ballasts, motion sensors, task-specific lighting, and integrated natural light.

KEMG specializes in retrofitting energy-efficient lighting systems through the

use of fluorescent lighting with low power factor ballasts, incorporating

motion sensors that turn off unused fixtures after a period of inactivity. By

adding these motion switches, an energy savings of 15 25% can be

realized, depending on the size of the area. Their favorite myth buster is to

disprove the idea that it uses more energy to shut off and start-up

fluorescent lights, than to leave them on all the time.

A recent sustainability project success of the KEMG team was realized at

the Brownwood, Texas plant, which installed more efficient lighting and kilns

to save 7,555,000 kW hours of energy, enough to power over 100,000

laptops for a year.

Another area of focus for KEMG is the lesser known area of energy waste

in compressed air systems. It turns out that air compressors can be a source

of electrical energy waste due to air leaks and the matching of demand to air

availability. Their team seeks out the air leaks and implements a timed-

sequence strategy of different compressors to match compressed air

demand. The team has also explored this approach as it applies to dust

collector systems, and has realized cost savings there as well.


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The third main area of focus for KEMG has been the retrofit of standard

efficiency motors, with premium or ultra-premium efficiency motors. A

standard electric motor has an efficiency rating of 88%, a premium has a

93.5%, and an ultra-premium carries a 95% rating. KEMG has specified the

use of premium and ultra-premium in all replacement situations, as well as a

minimum standard in OEM equipment purchases. Kohler participates in the

Wisconsin Focus on Energy program and receives rebates from $2 to$5 per

horsepower, depending on the type of motor.

KEMG recently applied for and just last week received a $1.7 million grant

from economic stimulus funds through the American Recovery and

Reinvestment Act. This grant was a part of a $14.5 million dollar fund, aimed

at cutting energy costs and creating and retaining jobs, administered

through the Wisconsin Focus On Energy Program. The money will be used to

remove and upgrade more than 800 light fixtures in the company's foundry

building. The company will also replace steam-powered hotwater systems in

two buildings with natural-gas-fired equipment. A third project will replace a

steam-powered clay dryer in the pottery division with a new system that

uses waste heat from pottery kilns.

The second part of the net zero footprint strategy involves water usage in

the manufacturing processes. The pottery division has completed several

water reduction projects in 2009, resulting in an overall consumption
http://www.sheboyganpress.com/article/20091211/SHE0101/912110389/Kohler-Co.-to-get-1.7M-for-upgradeshttp://www.sheboyganpress.com/article/20091211/SHE0101/912110389/Kohler-Co.-to-get-1.7M-for-upgrades


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decrease of 17%, compared to 2008. One of those projects involved the

elimination of a cooling tower. Cooling towers are major water consumers,

losing water mostly through bleed-off, and to a lesser extent, evaporation.

This particular cooling tower was found to use 1.5 million gallons per year.

Besides eliminating water in a process, another way to reduce water usage

in a process is simply to replace it with a substitute. This is exactly what an

EHS project accomplished when it converted the glaze filter magnet system,

from an open water-cooled system to a closed coolant system, resulting in a

water savings potential of 240,000 gallons per year.

Still another way to think about water usage is what can be done with the

wastewater from a production process. Kohler Co. operates a wastewater

pre-treatment plant and has a project slated for 2010 where recycled water

will be piped back into the plant and used for toilet and urinal flushing

systems. Other manufacturing processes are also being considered as uses

for this recycled (although not potable) water.

The third part of the net zero footprint strategy involves landfill use. The

Kohler Co. private landfill in Sheboygan County is approaching its capacity.

Kohler has made attempts to open a new landfill, but has been met with

opposition from residents who live near to the proposed locations. Kohler

has decided to abandon the idea of opening a new landfill, and incorporate

landfill use into the 4% plan. This dovetails quite nicely since a 4% reduction


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Climate Registry (http://www.theclimateregistry.org). CO2accounts for the

majority of carbon emissions, especially where fossil fuels are burned.

Kohler takes a production-specific approach to minimize or eliminate

carbon emissions through reductions in: electrical energy use,

manufacturing processes, packaging, transportation, space heating, water

heating, and disposal requirements. In most of Kohlers worldwide

manufacturing locations there are already strict controls on air emissions,

while other locations will likely see a substantial tightening of their standards

and enforcement.

The third facet of the Sustainability Strategic Plan, driving growth and

competitive advantage with innovative sustainable products and services,

has been a stalwart of the overall Kohler business strategy for decades.

Kohler Co. has the worlds largest portfolio of water-saving plumbing

products.

The Kohler and Sterling brands market 27 different models of High-

Efficiency Toilets (HET) that use only 1.28 gallons of water per flush (gpf).

The Kohler brand HETs can be had with five different proprietary flushing

technologies, Class Five, Class Six, Pressure Lite, Power Lite or Dual

Flush technology, while the Sterling brand features the Dual Force

technology.
http://www.theclimateregistry.org/):http://www.theclimateregistry.org/):http://www.theclimateregistry.org/):


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The Kohler brand markets six different styles of 1.75 gallon per minute

(gpm) showerheads and handshowers. For an average family of four taking

approximately seven-minute showers, using a 1.75 gpm showerhead equals

a 35% water savings over a less efficient 2.75 gpm showerhead. In other

words, you save over 7,700 gallons of water per year. Ironically, these 1.75

gpm showerheads have yet to be installed in employee showering facilities,

although projects to do just this are on the docket for 2010.

Kohler offers over a hundred different styles of bathroom faucets, most

carry the WaterSense label, which signifies that it has a 1.5 gpm water-

saving aerator. A 1.5 gpm faucet offers a 45% water savings over less

efficient 2.75 gpm faucets. For the average household, this can equal over

14,700 gallons of water saved each year.

On the commercial side of Kohlers environmentallyfriendly products is

the waterless urinal, and the .5 gallon gpf urinal. Kohler states that each

waterless urinal can typically save 40,000 gallons of water per year. The .5

gpf models use half of the industry normal 1.0 gpf urinals. Flushometers are

devices that control water flow in tankless commercial urinals and toilets,

and Kohler uses proprietary technologies such as; WAVE technology, which

puts control back in the hands of the user, and Tripoint technology,

suitable for challenging environments. Both technologies save water by


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activating only when needed and delivering outstanding performance with

minimal water use.

A project that exemplifies all three facets of the Sustainability Strategic

Plan was the transformation of the companys Environmental, Health and

Safety building into a more environmentally efficient structure, which

resulted in Kohler Co. being awarded Silver LEED Status from the U.S.

Green Building Council. The U.S. Green Building Council is a nonprofit

membership organization whose vision is a sustainable built environment

within a generation, and sponsors the Leadership in Energy and

Environmental Design (LEED) Green Building Rating System, which is a

feature-oriented rating system that awards buildings points for satisfying

specified green building criteria.

To earn Silver LEED status, Kohler made several enhancements to the

buildings interior and exterior, along with installing several upgrades and

monitoring devices for energy and water usage. A 50 percent reduction in

water usage was achieved by installing new faucets and fixtures in the

bathrooms, including the KOHLER Steward waterless urinal. High Efficiency

Toilets such as the KOHLER Highline 1.1 gpf were also installed, and .5 gpm

faucets with KOHLER Tripoint Touchless Technology all contributed to the

significant water savings. New landscaping around the building includes

native Wisconsin plant life, all of which is easy to maintain and are able to


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grow without the use of herbicides and extra potable water. A green cleaning

program was developed for the building, for which environmentally-friendly

cleaning products are used exclusively to maintain the building. Natural

lighting is utilized where possible, and in the areas extra light is needed, low

energy, long-lasting compact fluorescent bulbs are used.

KELT presents this Silver LEED accomplishment as an educational

centerpiece for sustainability because its incorporation of sustainable design

and practices, reminds employees and visitors alike that sustainability is a

part of the Kohler culture.

Sustainability Partnerships

The U.S. Green Building Council is one of four partnerships for

sustainability that Kohler has entered into. The other three are the Alliance

for Sustainable Built Environments (ASBE), the Alliance for Water Efficiency,

and the WaterSense program of the U.S. Environmental Protection Agency.

The Alliance for Sustainable Built Environments (ASBE) was formed in

2003, as an exclusive group of international building industry manufacturers

with a similar approach to business, who banded together and committed to

an aggressive, coordinated campaign to inform decision-makers that the

choices they make with regard to their facilities can be economically and

environmentally sustainable. They believe as catalysts for change,


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manufacturers have a unique place in the sustainability movement as they

are the ones producing the products and developing the services that deliver

high performance green buildings.

The Alliance for Water Efficiency is a stakeholder-based 501(c)(3) non-

profit organization dedicated to the efficient and sustainable use of water.

Located in Chicago, the Alliance serves as a North American advocate for

water efficient products and programs, and provides information and

assistance on water conservation efforts. A diverseBoard of

Directors governs the organization and has adopted a set ofguiding

principles and astrategic plan.

The WaterSense program of the U.S. Environmental Protection Agency is a

partnership program that seeks to protect the future of our nation's water

supply by promoting water efficiency and enhancing the market for water-

efficient products, programs, and practices. WaterSense helps consumers

identify water-efficient products and programs. TheWaterSense label

indicates that these products and programs meet water efficiency and

performance criteria. WaterSense labeled products will perform well, help

save money, and encourage innovation in manufacturing.
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Environmental Compliance

The sheer size and the global nature of Kohler present a challenge in

compliance with all the different environmental laws and government

agencies as they vary from state to state, and country to country.

Environmental compliance is only a precursor in achieving sustainability, but

represents an opportunity to work with the various government agencies.

Kohler Co. typically treats environmental compliance as a separate issue

from sustainability.

Recent legislation from the state of California brings up a case in point

where environmental compliance can be a driver for sustainability initiatives.

The California law calls for all water fixtures and fittings that are intended to

carry drinking water to contain less than 0.25% lead (typical lead content 2-

3%) starting in 2010. The law would only be applicable to newly installed

and replacement fixtures. The law doesn't take into account the

technological ramifications of using essentially lead-free copper alloys in

these applications, but Kohler Co. has developed their own secret formula

for a no-lead alloy brass used in their drinking water faucets.


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Analyses

I have discovered that the Kohler Co. actually employs three types of

sustainability strategies market-driven, process-driven, and cultural-

driven. Since becoming a full-line plumbing manufacturer in the 1920s, this

family-run, privately held company has been manufacturing plumbing

products which have a designedemphasis on environmental stewardship.

This has been their market-driven sustainability strategy. It is only in the

last 20 years that the manufacturing processesthemselves have been

developed to become more environmentally-conscious. This has been their

process-driven sustainability strategy; making products in a way that

minimizes the consumption of energy, water and other natural resources.

Importantly, a formal sustainability strategy has only been developed within

the last two years and only recently has its implementation begun. This has

been the genesis of their cultural-driven strategy.

The major strength of Kohlers market-driven strategy is their brand,

which can be represented by the companys tagline,THE BOLD LOOK OF

KOHLER. In our world of information overload, brands matter. As

customers are bombarded with product options and configurations, brands

provide a shortcut for customers to identify their favorite products and for

talented workers to pick their employers. The better a company does at

protecting its reputation and building brand trust; the more successful it will


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be at gaining and maintaining competitive differentiation. A strong brand

with a full trust bank is a valuable asset.(Esty, 2009) A tremendous brand

strengthening in regards to sustainability has been achieved through its

Save Water America Program,http://www.savewateramerica.com,and its

sustainability partnerships. For the customer, this means that choosing a

plumbing product with a high environmental performance also means long-

term savings. For Kohler Co. it means making consumers aware of this

connection.

Kohlers brand positioning as the world leaderin water saving plumbing

products has created exposure in a world where sustainability matters.

Marketing the companys greenness has worked extremely well, but does

company have the commitment to sustainability to maintain that image in

everything it does? Kohlers passionate focus on green products has allowed

it to adopt a process-driven sustainability strategy as a natural extension of

its existing business mind-set.

It is a steep challenge for any old-line, industrial business to transform

itself into a low-carbon and eventually a zero-carbon player. (Dumaine,

2008) Yet a company like Kohler has to start somewhere. Given the

resources that David Kohler is directing toward the Sustainability Strategic

Plan, the company so far seems to be laying a solid groundwork for the

implementation of a culture-driven strategy. Getting CEO leadership and
http://www.savewateramerica.com/http://www.savewateramerica.com/http://www.savewateramerica.com/http://www.savewateramerica.com/


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Recommendations

There is no one-size-all approach to sustainability. Strategies need to take

many different shapes and forms, depending on the unique interrelationship

between a specific organization and society, and the unique social,

environmental, and economic opportunities that result from that

interrelationship. (Wirtenberg, 2009) I have conducted research to identify

current examples of sustainability practices implemented by best-in-class

organizations and have included this research inAppendix A.

According to the Dow Jones Sustainability Index (2009), leading

sustainability companies display high levels of competence in addressing

global and industry challenges in a variety of areas:

Strategy: Integrating long-term economic, environmental and socialaspects in their business strategies while maintaining global

competitiveness and brand reputation.

Financial: Meeting shareholders' demands for sound financial returns,long-term economic growth, open communication and transparent

financial accounting.

Customer & Product: Fostering loyalty by investing in customerrelationship management and product and service innovation that

focuses on technologies and systems, which use financial, natural and


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social resources in an efficient, effective and economic manner over

the long-term.

Governance and Stakeholder: Setting the highest standards ofcorporate governance and stakeholder engagement, including

corporate codes of conduct and public reporting.

Human: Managing human resources to maintain workforce capabilitiesand employee satisfaction through best-in-class organizational learning

and knowledge management practices and remuneration and benefit

programs.

Kohler appears to be meeting these challenges head-on. An area which

could be improved upon in order to enhance their cultural-driven strategy is

stakeholder engagement. Stakeholder engagement can be achieved with

effective communication and providing access to information, focusing on

desired outcomes and frequently reporting progress. I propose that this can

be achieved at minimum with an article about sustainability in each weekly

Kohler Capsule, the companys news publication for Wisconsin associates, as

well as similar publications in Kohlers varied business locations. Kohler does

include a Green Tip section in the Capsule; it is usually a two sentence

concept that points out what people can do in their day-to-day living to

become more sustainable. Here is a recent example of the Green Tip.

Snow Removal: Whenever possible, chose to shovel snow rather than use


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the snowblower. Youll prevent emissions and get exercise at the same

time. The irony is that Kohler does indeed manufacture small engines used

in snowblowers, and they have worked very hard to feature those engines

with low-level emissions. So the Green Tip is just a tiny baby step in the

education process. An even better alternative would be a monthly world-

wide sustainability newsletter.

Ideally stakeholder engagement through communication should evolve to

what Procter & Gamble has been doing annually for 11 years now, as

illustrated inAppendix A, in the Strategic Focus on Data section. Kohlers

strategy and implementation have been similar to Procter & Gambles,

therefore I propose that Kohler prepare an annual sustainability report that

will build credibility and encourage stakeholder engagement.

Further development for stakeholder engagement through communication

would include an overview of sustainability similar to the methodology used

by Bristol Myers-Squibb as illustrated inAppendix A, in the Defining

Sustainable Development section. This method would be most effective if

globally implemented. Parts of this method can be found on the Kohler

intranet and on Kohlers various websites. I propose this overview of

sustainability be built into a dedicated website. Due to the private nature of

Kohler Co., there could be one site for the internet and one for the intranet.


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Finally, my recommendation for developing stakeholder engagement

through communication would include stakeholder relationship performance

indicators. I propose a tracking survey which measures the performance of

Kohlers sustainability efforts in comparison with its main competitors. This

will help Kohler to respond to new needs and to improve the quality of its

products and services.

An Alternative Recommendation

One idea for implementation that could be a home-run for all three of

Kohlers strategies, involves the use of lead in Kohlers products. One of the

most challenging materials to reduce and eventually eliminate is lead, which

poisons water and soil to the detriment of sea life and humans alike.

(Gordon, 2001) Kohler has successfully eliminated lead in all of its products

except in die-cast brass products. While the amount of lead that can be

leached from brass plumbing components is generally low, it has been found

that the amount of lead that can be leached from plumbing components may

exceed either current or future planned standards. The previously mentioned

California No-Lead law has been a driver for eliminating lead in water

carrying faucets and fittings. Kohlers response has been excellent, as they

have achieved a competitive advantage with its secret no-lead alloy brass.

But several technical obstacles still remain; it is still more costly to machine,

polish and plate the secret no-lead alloy brass. Although this might border


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on alchemy, I propose Kohler continue its research and development efforts

to eliminate lead from all alloy brasses, thus allowing Kohler to proudly claim

all its products to be lead-free. The key factor is decision criteria number 3;

is a 100% no-lead brass alloy a win for profitability? Right now its not, but if

it could, then it should be exhorted as a major breakthrough and definitely

as a way of sticking it to the competition.

Conclusion

The company has realized that the worlds perception of environmental

protection has been changing, and has adjusted their environmental strategy

with the times, realizing that sustainability is a long-term, ongoing process

that will continue for years to come. Ultimately for any business, the key

strategy will be financial sustainability. Making an environmental

sustainability strategy work with a financially sustainable strategy, will

enhance the strength and viability of the company and the world. At the

recent news conference where Kohler was awarded a $1.7 million grant for

sustainability projects, COO and President David Kohler said, We firmly

believe that (when) properly conceived, a sustainability strategy, one that

fully integrates business principles and environmental principles, is the only

strategy for the road ahead.


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Company Response

Daniel,

Thank you for the opportunity to review your analysis paper. You have

demonstrated a great deal of understanding of the company history, of

sustainability drivers and the Kohler Co. response. Your analysis did not

change our sustainability direction, as we are already working on closely

related ideas. However, I do appreciate the confirmation that we are

proceeding in the right direction. I hope for your personal good fortune as

you pursue your education.

Warmest regards,

Nathan Nissen

Kohler Co.

Environment, Health and Safety

Office 920.453.6312 | Cell 920.207.7565


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Appendix A

Current Examples of Sustainability Practices from Best-in-Class

Organizations

Type of

Practice

Current Example

A

Comprehensive

Reporting

Structure

Rio Tintos reporting structure is illustrated by this graphic. They used this

to prepare the companys Social and Environmental Report. This makes it

apparent that Rio Tinto PLC understands the importance of bringing

corporate policy makers together with operational managers to produce a

report that has meaning inside and outside of organization.


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Strategic Focus

on Data

Procter and Gamble builds credibility and uses resources most effectively

by providing detailed data on five sustainable strategies listed in their

2009 sustainability report,

http://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainabi

lity_Overview.pdf,

Strategy 1: Products

Delight the consumer with sustainable innovations that improve the

environmental profile of our products.

Strategy 2: Operations

Improve the environmental profile of P&Gs own operations.

Strategy 3: Social Responsibility

Improve childrens lives through P&Gs social responsibility programs.

Strategy 4: Employees

Engage and equip all P&Gers to build sustainability thinking and practices

into their everyday work.

Strategy 5: Stakeholders

Shape the future by working transparently with our stakeholders to

enable continued freedom to innovate in a responsible way.
http://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdfhttp://www.pg.com/company/our_commitment/pdfs/PG_2009_Sustainability_Overview.pdf


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Connecting Life

Cycle

Assessment

(LCA) to

Financial

Performance

Norsk Hydro has applied life cycle assessment to the workings of the

entire company. The aggregated data allows for a striking overview of

company consumption of natural resources and pollutant emissions in

light of annual profits. A LCA has also been completed for each major

company division.

Electrolux has also reported on the life cycle analysis of a number of their

products. A strong impetus for the appliance industry to offer products

with reduced environmental impact is the fact that the main

environmental impact is usually greater in product use than during

production, and furthermore is closely connected to the individual

household economy.

A life cycle assessment of a washing machine for example shows that

about 80 percent of the total environmental impact during the life of the

machine consists of water, energy and detergent consumption. A similar

analysis of the total cost of the entire life cycle of the machine shows that

the cost of water, energy and detergent consumption exceeds the initial

purchase price.

For the customer, this means that choosing an appliance with a high

environmental performance also means long-term savings. For the

appliance industry it means making consumers aware of this connection.

Replacing old, inefficient white-goods with a new generation, resource-

efficient appliance is beneficial for the environment.


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Defining

Sustainable

Development

In reporting on its definition of sustainable development, Bristol-Myers

Squibb goes beyond the traditional one-line statement to include a

comprehensive look at the all the issues that have an impact on

operations and stakeholders (both local and global).

BMS' overview of sustainability includes policy statements on external

evaluation of EHS policies and procedures, supplier compliance,

technology transfer, charitable contributions, transportation impacts, local

noise and odor issues, new acquisition and divestiture processes, animal

testing, pharmaceutical residuals in the environment, genomics,

biosafety, and bioprospecting.

Measuring

Social and

Environmental

Impacts

In 2001, UK-based The Co-operative Bank developed a methodology to

measure how its sustainability practices affect revenue and growth. The

methodology uses several calculations and survey questions. From the

survey, the bank determined that 53% of personal current account

customers state that sustainability is one of a number of important factorsin why they opened or maintained an account at the bank, while 31% cite

sustainability as the most important factor. The bank has estimated the

profitability of each product, including all direct costs and indirect costs

attributable to the product. The profitability is then multiplied by the

sustainability factor, and then aggregated to produce a sustainability

profitability contribution range (which ranges from those customers for

whom sustainability is the most important determining factor to those

customers for whom sustainability is one of a number of factors). The

bank concluded that 26% of profits could be assigned to customers who

cite sustainability as an important factor, and 14% to customers who cite

sustainability as the most important factor.


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Integrating

Long-Term

Economic,

Environmental,

and Social

Aspects inBusiness

Strategies

Unilevers group CEO, Patrick Cesau, is a strong advocate of assisting

developing nations, and he embraces the notion that this is tied to the

companys strength in the marketplace and fiscal well-being. According to

Engardio, Cesau sees the importance of helping such nations wrestle with

poverty, water scarcity, and the effects of climate change as vital to

staying competitive in the coming decades.

The company promotes its soap and detergent in an impoverished are of

Sao Paolo, Brazil, by running a free community laundry. In that same

country, Unilever supports tomato growers efforts to adopt

environmentally friendly irrigation systems by contributing financially to

the program. In addition, at a toothpaste factory, it focuses on recycling

waster.

In Ghana, Unilever brings potable water to communities in need and

teaches people how to reuse waste.

In response to green activists, the company discloses how much

hazardous waste and carbon dioxide its factories release worldwide. Asenvironmental regulations grow tighter around the world, Unilever

believes it must invest in green technologies or its leadership in packaged

foods, soaps, and other goods could be imperiled.

Unilevers efforts in these areas have profited not only the people in

developing nations but the company itself. About 40% of the companys

revenue now comes from developing countries, as does much of its

growth.

Shareholder

Value Analysis

Georgia-Pacific, the large forest products company, used shareholder

value analysis to align the companys goals of creating shareholder value

and environmental responsibility. The EH&S department at Georgia-Pacific, as well as individual environmental projects, has been evaluated

using shareholder value analysis, Included in each environmental project

evaluation is an assessment of the projects impact on revenues,

operating costs, such as consulting fees, fines and administrative costs,

and capital costs. Using shareholder value analysis, Georgia Pacific has

been able to identify environmental investments that create financial and

shareholder value for the company. For example:

-A project to use boiler fly ash generated at the plants reduced landfill

and transportation costs, generating a shareholder value analysis of

$800,000

- An aerator optimization project reduced energy usage, generating an

shareholder value analysis of $102,000

-By re-engineering the process for complex environmental permitting, the

cycle time for new permits and construction projects was reduced, as well

as external consulting fees, generating increased shareholder value of

$2.1 million.


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Incentives and

Rewards for

Sustainability

Performance

Swedish-based Scandic Hotels initiated a program called Resource Hunt,

which rewards employees for improving resource efficiency. The program

encourages employees to reduce consumption of energy, water, and

waste. The hotel invested $150,000 to train employees on the specific

objectives and issues of the program. Employees at each hotel receive a

percentage of the savings. From 1996 to 2001, 35 hotels saved $1.5million through Resource Hunt. This program saved money for the

company and motivated employees to consider sustainability in their day-

to-day decisions.

Stakeholder

Relationship

Performance

Indicators

BP Amoco reports on the objective research, carried out both in the UK

and internationally, which seeks the views of the public, business leaders,

opinion-formers and NGOs. A 12-country study confirmed the importance

of social and environmental responsibility as a factor in determining

opinions about companies.

BP Amoco's Global Image Tracking Survey measures the performance ofBP's brand in comparison with its main competitors, which helps BP to

respond to new needs and to improve the quality of its products and

services.

Benchmarking

Corporate

Environmental

Management

Practices

In its Towards Sustainable Development report, Ontario Power Generation

includes a description of the benchmarking study conducted by a

consultant to compare OPG's corporate environmental management

practices and processes to those of best-in-class organizations.

The consultant's report affords OPG a third-party evaluation of both

strengths and weaknesses in its corporate environmental practices and

processes, and an essential baseline for measuring its progress. A

synopsis of the findings is provided and OPG also outlines its response.


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Organizing for

Sustainability

DuPonts organizational structure has undergone changes over several

years. It was one of the first companies to create an officer-level VP (vice

president) of EH&S in 1989. At that time it used a decentralized EH&S

structure consisting of managers for medical, safety, occupational health,

and environment. These managers were supported by a small staff with

specialists in each facility. In the early 1990s, DuPont created theCorporate Safety. Health and Environment Excellence Center. The groups

services were contracted by the strategic business units as needed.

In 2004, DuPont was reorganized. Previously, the Excellence Center

reported to the VP of engineering, under the direction of VP of EH&s.

DuPont has now created a VP of safety, health, environment, and

engineering who is responsible for the strategic direction and

administration of the group. An additional position of VP and chief

sustainability officer was created to be responsible for product

stewardship, sustainable growth, and long-term strategy and goals.

DuPont also uses a combination of centralized and decentralized

structures. This includes a corporate group, leaders in each business unit,

and also leaders at each site.

Green building

Designs

The Oceano Community Center, in San Luis Obispo, CA, opened a 15,380

square foot facility that incorporated a variety of green building and

pollution prevention strategies in its design. The gym has a photovoltaic

system to generate on-site electricity and several energy saving features

to reduce energy demand, including clerestory windows that open to

provide efficient cooling; the use of light shelves to reflect and enhance

natural daylight; occupancy sensors for lighting control; a roof designed

to minimize solar heat gain; and north-facing glazing to provide light

without adding solar heat gain. In addition, recycled and environmentallyfriendly construction materials were used wherever possible; automatic

controls on the lavatories were installed to reduce water usage; and the

landscape plantings are drought resistant. Building maintenance practices

include the use of nontoxic cleaning supplies and recycling of waste

materials. Recognizing that 30% of the 7,250 resident users are below

the age of 18, bike racks were conspicuously placed to encourage travel

to the facility by means other than a car.


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Integrating

Collaboration

With Non-

Governmental

Organizations

Timberland Company, a U.S.-based clothing and footwear company, has

focused much of its sustainability strategy on a partnership with City

Year, a national youth corps. The partnership began in the late 1980s

when Timberland donated boots to City Year corps members. After this

initial donation, Timberland established its Path of Service community

service program, entitling employees to 32 paid service hours per year, toencourage employees to participate in volunteer activities, particularly

with City Year. Over the years, Timberlands relationship with City Year

has evolved. Timberlands CEO joined the City Year Timberland

headquarters. Timberland executives also realized that it needed to alter

its organizational structure to integrate sustainability into the

organization. It started the reorganization by hiring a director of social

enterprise, who happened to be a City Year employee. Then the question

arose as to where to house the Social Enterprise Department. Some

members of senior management argued that members of the Social

Enterprise Department could be located in an existing department such as

human resources. However, the decision was made for it to be its ownfour-person division within the marketing department. By separating the

department, Timberland management could signal to the other members

of the organization the importance of sustainability.

Product

Performance

Indicators

General Electrics Ecomagination program seeks to leverage the brand

value in green business. This program started because GE senior

leadership saw that there were major trends creating increasingly intense

environmental and growth challenges for customers across a majority of

GEs businesses. Ecomagination was created as a business strategy in

response to these challenges.

To measure some of these intended outcomes, GE uses a rigorous, third-party-audited certification process to determine whether individual

products and services deliver sufficiently differentiated financial and

environmental performance to be Ecomagination-certified.


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References

Jeff Plass, Manager Global Environment, Health and Safety

Steve Oliver, EHS Project Safety Specialist

Jeff Edge, Electrical Design AnalystKohler Energy Management Group

Wendy Johnson, EHS Project Safety Specialist

Preston Radant, HR Generalist - Operations Support

Nathan Nissen, Program Supervisor, Global Energy Management


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Selected Readings

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businesses of all shapes and sizes to implement eco-friendly policies,

programs, and practices, Franklin Lakes, NJ: Career Press, c2009

Callenbach, Ernest, EcoManagement: the Elmwood guide to ecological

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Epstein, Marc J., Making sustainability work: best practices in managing and

measuring corporate social, environmental and economic impacts, Sheffield,

UK: Greenleaf Pub. ; San Francisco: Barrett-Koehler Publishers, 2008.

Jensen, Derrick, and, McBay, Aric, What we leave behind, New York: SevenStories Press, c2009

Lockwood, Charles, The green quotient: insights from leading experts on

sustainability, Washington, D.C.: Urban Land Institute, c2009

Schendler, Auden, Getting green done: hard truths from the front lines of

the sustainability revolution, New York: PublicAffairs, c2009.

Swallow, Lisa, Green business practices for dummies, Hoboken, N.J.: Wiley,

2009

the bold look of kohler and commitment to sustainability

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