Scaling Up Sustainability at McKesson

[Author Neal McGrath recently attended the Green Pharma Summit for GreenBiz.com; this case study of McKesson’s sustainability project is the first of several reports from the event.]

When Marcus Chung joined McKesson Corporation in mid-2008 as Director of Corporate Citizenship, he knew he’d face a challenge rolling out a comprehensive program to dramatically scale up sustainability activities: The pharmaceutical distribution and healthcare technology company has 32,000 employees spread across more than 300 locations — and operates with a highly decentralized management structure.

But Chung had two things going for him: Senior-level support for his work from the CEO, and huge untapped potential among the working masses within the organization.

McKesson CEO John H. Hammergren knew there was a lot of work being done on sustainability, but there was no central function to support it — and that to really maximize results, one was needed. In November of 2007 he sent a memo to his top 200 managers announcing his intention to make McKesson a more sustainably focused organization. Not long after, Chung joined as Director of Corporate Citizenship.

“There were a lot of projects in place, there was a lot of momentum,” said Chung. “That part was easy. What I needed to do was bring focus, define what our strategy would be and then empower people to carry it out.”

People in a few locations had already created some informal groups to manage sustainability initiatives, but the efforts were not coordinated. So, Chung got to work creating a formal process. And, through meetings with senior managers and other stakeholders, Chung developed a sustainability charter and mission.

To maintain the momentum, he also created a two-tiered set of councils: an executive-level council that meets quarterly to assess progress and refine high-level direction, and a series of operational-level “Environmental Councils” in different parts of the business which meet monthly to plan and implement specific initiatives.

Some of the steps taken at the corporate level include incorporating sustainability questions into requests for proposals from vendors to extend the reach into the supply chain, incorporating specific steps in the travel booking procedure to encourage video conferencing instead of air travel and using mass-transportation if actual travel was selected.

At the department level, the councils hold educational events to help people better understand company policy, demonstrate how individuals can contribute and solicit ideas.

“The councils have insights into local operations that we would not be able to identify from headquarters,” notes Chung.

One such opportunity came from a part of the business that repackages large containers of medicines into smaller containers for distribution to retailers. This department was throwing away four 40-yard containers of plastic containers every month. After investing $2,000 in a plastic shredding machine, they now sell this waste to recyclers — generating $300,000 in revenues per year.

“They had a great idea, they just did not think they had permission to act. They saw their job as repackaging product for distribution. Knowing there was high-level buy-in for initiatives such as this and being able to get working-level support to make it happen made all the difference.”

Chung now hosts a monthly call with representatives from the 13 councils to share best practice. To extend the reach even further, Chung is creating a tool kit to help people start their own department-level councils, while a social networking feature on the company’s Intranet will help people share ideas with one another directly.

Chung estimates that in the first year alone these sustainability activities have saved the company $600,000. “This is a low-ball estimate, there’s still a lot happening that we haven’t captured yet, but we’re getting there.”

Neal McGrath is the director of Green Tree Communications, a sustainability consulting company based in New York City.