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The Four Pillars of Hewlett-Packard

CEO Carly Fiorina outlines the company's four pillars of environmental and social commitment. Read More

Last November, green-business insiders converged on Los Angeles for Business for Social Responsibility’s 2003 conference, titled “Building and Sustaining Solutions.” The following is an excerpt from the keynote address by Hewlett-Packard CEO Carly Fiorina.


Perhaps more than most companies, I have the great privilege to lead a company that had respect for the environment wired into its DNA almost from the very beginning. Our co-founder, for example, Bill Hewlett, was one of the leading environmentalists of his day. And today, we are the largest consumer technology company in the world at almost $18 billion in the consumer space. We’re the largest small and medium business technology company in the world at almost $20 billion, and we are a $36 billion enterprise and public sector technology company.

We have, as a company, more than one billion customers in 178 countries – that’s a lot of people, that’s a lot of packaging, and that’s potentially a lot of waste. It’s one of the reasons why we’re proud to have pioneered a Design for the Environment program as far back as 1992, and why we were equally proud to be one of the first global businesses to achieve ISO 14001 certification for our worldwide manufacturing operations.

Like many of you, we are committed to providing products and services that are environmentally sound throughout their lifecycles; conducting our operations in an environmentally responsible way, and creating health and safety practices and work environments that enable HP employees to work injury-free. We think this is not just fundamental to our citizenship, it is fundamental to our long-term business success.

Now, our ability to meet those commitments rests upon four pillars. Our first pillar – and this comes from mistakes we’ve made and things we’ve learned – is that for us to be good environmental citizens, we need a common set of goals that everyone can aspire to, and we need a system that continually seeks to improve the environmental performance of our operations.

Our approach begins with comprehensive standards we apply to each and every HP site. The system is managed through what we call our Environmental, Health and Safety Management System, and this system provides performance monitoring, management reviews, plans for corrective action and enforcement mechanisms when needed.

Our performance is monitored through regular audits, and these audits complement annual self-assessments that are conducted by each site and third party audits, and together, the system provides a strong basis for continual improvement.

The important thing here, of course, is to celebrate the good news, but also to pay even more attention to the bad news. Take climate change – like many of you, we work to reduce greenhouse gas emissions that contribute to global warming, and as part of that, we work with the EPA and their voluntary initiatives.

By tracking emissions company-wide, we learned that increased production and more complicated production specifications led to increased emission. We experimented with alternative materials that had no climate impact, but unfortunately in many cases, these materials didn’t work in our processes.

And so last year, we changed our whole approach to emission reductions from materials substitution – which had not been yielding the results we needed – to process changes, and we reduced emissions by 15 percent on a per unit basis. And we could not have come to that understanding, and therefore, we could not have made those improvements, without our audit process. Now, once we have results of the audit process, we report our environmental performance, and then we set new goals and targets for our operations, and the audit process begins all over again.

We still have a lot of work to do. I’m confident we will still make some mistakes – but I’m equally confident that we are moving in the right direction, and this, like every other aspect of success, is a journey, not a destination. You never arrive. You just have to keep going. And the second pillar – or the second thing we’ve learned – is that environmental performance of our products and services is largely determined in the design stage. Through intelligent design, we can limit the environmental impact of our products and those of our customers.

The Design for Environment program that we began more than ten years ago has as its priorities energy efficiency, materials innovation, and design for recyclability. For every product category, we have a product steward that works with product designers and research and development teams to identify, prioritize, and recommend environmental innovations for products.

Energy efficiency is one example where we’ve achieved good results not only for our own company, but for our customers. One area that we focused on is our large data centers. With thousands of servers, these centers consume a lot of energy and they generate a lot of heat, and so to reduce the energy used in cooling, a team of our HP Labs people has developed a system that reduced energy consumption by 25 percent, and this has saved us, just as an example in our own company, a million dollars a year.

Here’s an example of where our customers also came in: we applied this same technology to reduce the massive server farm that DreamWorks uses. We’re the technology supplier to DreamWorks. They used a massive server farm to create the movie, Shrek, and we used this same technology and installed more efficient work stations. Working with this technology, we were able to help DreamWorks enjoy 40 times the performance of their previous system, in the same physical footprint, for less money than they did with their earlier setup, and it also helped them save costs in overtime, in hardware, and in energy consumption.

We have been amazed, as another example, at the cost of material savings that simple changes in packaging can produce. For example, we have a new bag design for toner cartridges that eliminates the need for end caps or a core-dated wrap around the boxes, and it allows us to reduce the box size by 30 percent and ship 40 percent more boxes per pallet. Now, that may not sound like a lot, but to a company that ships millions of these pallets every year, the savings are huge for us on our bottom line, as well as for the environment.

And the same goes for simple system changes. HP Personal Systems Group developed a bulk pack for large orders of PCs. Instead of packing them individually, we packed several PCs together on one container. That simple idea helped reduce packaging waste by 86 percent, and it translated into savings of about $4 million for us in 2003, not to mention all the trees.

Now, I really do know that everyone here has their own examples, and we have a lot of work left to do to continue to be more efficient in our use of paper and plastics, but the point is that paying attention to small details can make a big difference, and the point also is to think about this way up at the front end of the design process, not after the fact.

The third thing we’ve learned – so our third pillar for meeting our commitments – is that when it comes to state-of-the-art recycling systems, we’ve learned that if we build it, they will come. Recycling is an area that HP has worked on for 10 years or more. We were one of the first companies to offer recycling programs for our LaserJet print cartridges in 1992, and our goal here is to offer customers a return and recycling service for as many HP products as possible, and provide an environmentally sound, end of life solution to reduce waste and to conserve resources.

Today, our return and recycling program, which we call Planet Partners, covers the return of computer hardware and HP print cartridges. Our computer hardware recycling program operates in more than 20 countries, and interestingly, in some of those 20 countries we have enterprising entrepreneurs who have made a business out of taking those recycled parts and making something interesting and useful out of them. It works through specialist vendors that reclaim and recycle computer products made by HP and our competitors. We use two recycling facilities in the U.S., and a multitude of recycling vendors throughout Europe. Our operations are reviewed regularly to maintain the highest environment, labor, and union rights standards.

Now obviously, not only does this reduce the amount of garbage that goes into landfills, it is also smart business for us. It’s about saving money.

One interesting statistic is that you get six ounces of copper when it is mined from a ton of ore – but you get twice as much copper by recycling one ton of electronic products that goes through one of our recycling facilities.

Again, good recycling starts with designing products that are easier to upgrade and recycle, and that’s expressed in many different ways – from eliminating glue and adhesives from product construction, to reducing the numbers and types of materials in HP products. We’ve tested new ways to recycle material in our products and to use recycled material to build our products.

Earlier this year, for example, we qualified and began to use a scanner part that is made completely from recycled plastic. The scanner carriage cover comprises 25 percent plastic from recycled HP InkJet cartridges, and 75 percent post-consumer plastic from soft drink bottles. And we even have some people in HP Labs experimenting today with a printer made entirely of recyclable cornstarch, not yet production-ready, but a really interesting idea.

Now of course, we know that products made with recycled content must continue to meet all of our own requirements and customer expectations, so we’re not willing to lower our quality or our performance specifications, but so far, we are finding with the products we have on the market that we have not had to do that.

In the meantime, we continue to encourage sustainability by offering free recycling for HP LaserJet and InkJet cartridges. Customers can return empty HP original print cartridges by following simple instructions on the packaging, our web site, or even by phone, and some of the recyclable plastics are turned into products, such as auto parts or trays or wire spools. In total, we have recycled nearly 60 million HP LaserJet cartridges to date.

We were the first company to offer InkJet cartridge recycling here in the United States, and today, I’m pleased to announce a trial program where we are going to be adding U.S. postage-paid recycling envelopes in our packaging for two of our most popular HP InkJet cartridge products. For those of you who are customers – and I know all of you are – we’re talking about numbers 56 and 57, but we believe this prepaid envelope is going to take our recycling program to a whole new level.

Now, we still have a lot to learn on recycling. Two of the big challenges we face are closing the loop on end-of-life IT equipment so that materials are recovered and reused by efficiently integrating our environmental design, reuse and recycling efforts across all of our product lines in a better way, and frankly, we still have a lot of waste.

The other thing we still have to work on is to continue to find cost effective ways not only to comply with emerging laws on recycling, but also to lead. All told, we still have a long way to go toward achieving the technological innovations required to maximize the recyclability of our products and developing the logistics required to implement global take-back of our products through a viable business model. And I know there are some great ideas around those topics that will be discussed at the conference here today.

Now, all the things that I’ve described so far are things that we have direct control over, but one of the truths about our business is that suppliers are key to our whole manufacturing process. We have a global network of more than 10,000 suppliers, and thousands more support our operations. So it is in this vital supply chain – and we have the largest supply chain in the technology industry today, almost $46 billion a year – it is in this supply chain that we have some of our most significant social and economic impact, but we also have only a limited amount of control.

And so, our fourth pillar is that we can manage our supply chain to improve our environmental performance, but it is a major challenge for us. And while we’re making progress – and two of the people who have helped us make a lot of progress are here today – it’s going to also take us time.

Last year, we adopted a Supply Chain Social and Environmental Responsibility policy with a Supplier Code of Conduct that covers everything from employment, environment, and health and labor policies, to safety practices. Our goal is to use the leverage that our size gives us to get all of our suppliers to embrace and institutionalize the code of conduct.

The first step was to assess our 40 largest suppliers in 2003 – they collectively account for more than 70 percent of the total that we spend on product materials. Our experience supports the excellent report that BSR recently issued on this subject. I would be less than candid if I said to you this is easy. It is not. Most of our 40 largest suppliers are large, multi-national companies like us. Frankly, some of them took umbrage at being asked to sign our code; others wanted us to accept their citizenship reports as proof of their adherence; while some others flat out refused and discussions continue.

But the big stumbling block actually was in enabling them, helping them, asking them to provide the level of detailed information that we’re asking for, and so we’ve worked with them to help them understand that we’re not just tweaking them. We’re not just trying to be objectionable here, but we really do want to make sure that their practices are within the bounds of our code, so that we can look our customers in the eye and say that we’re sure that the product you’re buying is consistent with our standards. But it is a dialog and there’s learning going on on both sides.

At the end of our fiscal 2003 which we just concluded, we met our goal of engaging 50 suppliers so far, and we have gotten our top 45 suppliers on board, and that represents almost 80 percent of the total we spend on product materials. At this point, we’ve contacted an additional 100 suppliers in high risk and other categories for 2004 and beyond, but this is going to be an ongoing learning process – one that is difficult, but we think it’s clearly worth the effort.

So, those are our four pillars and the numbers that we have in place today.

Now, there may be some of you in the audience today who are saying, ‘Wow, we don’t yet have those same kinds of systems.’ Maybe it’s going to be years before you think you will reach that point, and, gee, is it really worth all this time and effort?

We’ve been at this for quite a long time. I think one thing I would say to you is not to worry too much about having the perfect strategy or answering every question of your critics. If you believe that the sustainability of your company is in play, if you believe that you can make a difference in a way that is meaningful to your customers, and your partners, and your shareowners, and your employees, just start the journey. Don’t wait for perfection. Don’t wait until all the pieces are together. Don’t worry that your company doesn’t have every single policy or written value statements.

Just start the journey, and keep going.

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For more tapes and transcripts from the 2003 Business for Social Responsibility conference, download an order form.

Looking for more examples of tech companies that are making a difference? Visit GreenBizLeaders.com.

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