Sustainability Videos & Lecture Series

Kevin Dooley: Good morning, everyone. Hi, I'm Kevin Dooley. I'm academic director of the sustainability consortium and welcome to the Global Institute of Sustainability's seminar series this year on implementing sustainability in corporate America. Today we're lucky to have Tod Arbogast, who is vice president of sustainability and corporate responsibility at Avon, one of our leading sustainability companies. Tod oversees Avon's corporate—comprehensive long-term strategy, building on the company's foundation of environmental progress.

In this role, he manages the balance of Avon's growth strategy with goals to minimize Avon's impact on natural and human resources. His team's role is to fuel sustainable innovation, embed sustainability into the heart of the business model, and mobilize key constituencies to measure sustainable action. He works with leaders to implement and execute those strategies, taking into account economic value to the company's shareholders and ethical responsibility of the enterprise, and its impact on people, communities, and the environment.

Previously, Mr. Arbogast spent nine years at Dell, where he served recently as director of sustainable business and Dell Giving, working directly with Dell's chairman and CEO, Michael Dell. He also serves on advisory council at the Environmental Science Institute at the University of Texas at Austin and the sustainable council at Penn State. You are University plugged in. He is current member of the board at MedImpact, another good student group, and previous member of the National Recycling Coalition. Please welcome Todd. [Applause]

Tod Arbogast: No, I've got this, it's great. It's a real honor and pleasure to be here today. I love Arizona, so when I got the invite I quickly accepted. It's also really great to be in this building. We'll share over the next few minutes why I think buildings like this—I think 1894 is the plaque on the front of the building, and we'll talk about some relevance to 1894 here in a minute.

Okay, so real quick, this will be the only time I talk about Avon, just to give you a context of who we are. We're a little over 11 billion dollars. We have more than six million independent sales representatives that touch about 300 million consumers in more than 100 markets around the world. That's kind of Avon. The three key principles that drive corporate responsibility for Avon, one, economic empowerment of women, core to who are. Last year, we were the largest economic force for women worldwide. We generated over four billion dollars in income for women. If you wanna see the impact of that, I encourage you to go out and look at a study by Oxford that looked at our impact in South Africa in alleviating poverty. It's a fantastic piece of work that demonstrates how you can really change the world by empowering women economically, great piece of work. One key fundamental focus for Avon, economic empowerment of women.

Second, we're focused on philanthropy, specifically around women's core causes. This is where you likely know Avon. We focus on domestic violence and we focus on breast cancer eradication. Why is that critically important to women? Well, look around and kind of glance at the women in the room, and let me give you two alarming statistics. One, one in eight women in their lifetime will be diagnosed with breast cancer. I can't count that fast, but the odds are pretty strong that a couple of women in this room, if not a few, will be diagnosed with breast cancer in their lifetime.

Second, an even more alarming statistic, one in three women will be impacted by domestic violence in their lifetime. Again, look around the room and shake your head in utter disappointment and disgust, but the odds are several women in this room will be impacted by domestic violence in their lifetime as well. A key fundamental focus for us is helping eradicate breast cancer. We're in it to end it, with respect to domestic violence. That's a second pillar around philanthropy, women's issues core to Avon.

Third and final focus for us around our corporate responsibility mission relates to sustainability. I'll spend the next 30, 35 minutes, maybe 40 minutes not talking about Avon, but talking about how Avon is using tools and strategy to address key issues with respect to the environment and what our focus and priorities are. That's kind of the core, and then we'll spend whatever amount of time we have remaining, 30 minutes or so, on Q and A.

Okay, so that's all you're gonna hear about Avon. Real quickly about me, I've been with Avon for three years. Prior to Avon, as mentioned, I was with Dell for about nine. I've been in the field of sustainability for about 12, 13 years, which in the US is kind of—fairly long time. If I was in Europe, it would be a different story. In the US, the reality is corporate America is still emerging in terms of the commitment to this space.

Okay, so let's get started here. These are kind of the three key areas we're gonna talk about. We're gonna talk about what's the business case for sustainability? What's the rationale? Why are companies increasingly committed to sustainability? Second, what are companies using in terms of tool sets to help manage the various issues and impacts they have? Then finally, how are organizations structured to address sustainability?

Okay, let's talk about the rationale for sustainability. Let's first start with some great work by Jason Clay, out of World Wildlife Fund. I really encourage you if you haven't yet, go look at his Ted talk. It's about 20 minutes. Jason Clay, World Wildlife Fund. It will give you a great, deep dive into the next few slides that we're gonna talk about.

Okay, so let's get back to—I talked about the placard out front, 1894. Let's bring that to life, and let's give it some relevance. As our company was founded 125 years ago, in 1886, there were 1.3 billion people on the planet. As these halls were being anointed, let's say they were just over 1.3 billion people on the planet. Let me ask, and this is gonna be probably the overwhelming majority given that we're in Phoenix, but how many of you came from a city that has more than one million people in the city?

Okay, well we're in Phoenix where there's more than one million as well, so—but let's kind of rewind. In 1810, there was only one city on the planet that had more than a million people residing in it. Does anybody know which city that was? London, very good, whoever hollered that out. That's right. London was the only city on the planet in 1810 that had more than one million people in it. In 1804, we reached one billion people. Anybody know how long it took for us to hit two billion? It wasn't until 1926 that we reached two billion people on the planet.

Today, fast forward, not too far, we've got nearly seven billion people on the planet. Now, let me ask too, does anybody know how long it took for us to go from five billion to six billion? Twelve years. It took 125 years to go from one billion to two billion, and it took 12 years to go from five billion to six billion. Why is that—why is this relevant? What's the material issue with respect to this?

Let's apply some math. Back in the day where we had a billion people, let's just assume—well, let's use this number. Today, let's assume we have seven billion people and everyone is consuming at a factor of one. We have seven billion consumption units. There's another issue in play besides just the population growth, and it's the fact that by 2050, we will have nine billion people on the planet. The consumption rate isn't at a factor of one. As an example, in the United States, if we look at our consumption versus the consumption of a South African, does anybody know what the ratio is? How many South Africans does it take to equal the consumption of one US citizen? 34. Some would say that a cat in the United Kingdom consumes the same resources as a human in South Africa.

There's another phenomenon that's occurring here. Our population is growing; we'll hit nine billion by 2050. The rate of consumption is growing as well. We have India, we have China, we have other countries that are emerging as powerful consumers and they should. They have the right to. We're at nine billion, and we won't just have a factor of one in terms of consumption rate, we'll easily have a factor of two in terms of consumption rate. Remember the simple math; we had seven billion consumption units. Well by 2050, we'll have 18 billion consumption units. You ask yourself, as we're all goin' out into the workplace, is the efficiencies, is the consumption, all those issues in play gonna grow three times where they are today? They're probably not.

What's gonna happen is we're gonna drive into issues, right? These create issues. They create issues on our natural resource dependencies. They create issues in a multitude of ways. What—I missed a slide, did it not do it? Oh, here we go. One of the issues, our natural ecosystems and the services they provide, and the rate of depletion that's occurring based on that consumption growth.

One is tropical rain forests. Some of you who know me know that this is a really passionate area for me, forestry. Since 1947, half of the Earth's mature tropical rain forests are gone. When you look at Brazil as an example, and you look at the Amazon and the Atlantic rain forests, the Atlantic rain forest in Brazil once covered the vast majority of the southern tip, as well as extending into multiple surrounding countries. Today, the Atlantic rain forest, which few people hear about, you hear about the Amazon, only seven percent of the Atlantic rain forest remains today.

When you look at the deforestation that's occurring in Indonesia, with respect to palm oil plantations, this is real issue. You might say, "Okay, hey, it's forests." Yeah, some countries it's not an issue. If you look at the United States and you look at our forest footprint 100 years ago, we actually have greater than that footprint today. You can manage forests appropriately if you're focused.

The issue that gets created here, let's talk around some dependencies on forests. San Paolo, about 12 million folks reside in San Paolo. Where do they get their water? Water just doesn't magically appear, well maybe in Arizona I guess this week it has, right? It's been pretty heavy rain. The forests, in large part, are part of the ecosystem that delivers us fresh water. In San Paolo, the dependency on the Atlantic and the Amazon are critical to the water supply. We know this, right?

What's the percentage of climate change impact associated to the loss of forests? Some of you probably know this. It's about one-fifth to one-fourth of the total impact that we see around the increase in atmospheric particles is directly related to the loss of sequestration and the loss of forests. One-fourth to one-fifth of our climate change impact, loss of forests.

The other one that some might say, "Ah, you know," one in four species are threatened with extinction based on the loss of these forests. Most of you probably know this, but two-thirds of all the species on the planet are found in tropical rain forests. As we lose those species, I ask myself and I go back to our focus on eradicating breast cancer, I ask, "Did we lose potentially the cure? Did we lose that hidden gem? Did we lose the cure through the loss of a species?"

Anybody know what's the core ingredient in migraine, headache medicine? The bark of a tree. We have to look at the loss of species, whether they be plant or animal, and say, "What potential amazing things have we lost?"

Okay, sorry, I’m done. Okay, that'll be all I'm gonna do. It's important to note the context of population growth, consumption growth, one planet, and a finite set of resources. How do we manage those resources to ensure that we can continue to use them? At the current rate of consumption, by 2050, we'll need two planets not just one.

Okay, so that's one driver of business and the need for sustainability, is the dependency on resources. If you're not in the service sector, and you're in a product or consumer sector, everything about your business is dependent upon natural resources. Based on what we just talked about, you need to be looking at what is my supply continuity of those natural resources extending out?

Okay, before we get too much further, I wanna lay a foundation for the definition of sustainability. A lot of folks use different words, corporate responsibility, corporate social responsibility, sustainability; they all kinda mean the same to me. I wanna just lay a foundation. A great piece of work, some of you are probably familiar with, based on the Brutland Commission and the report that defines sustainability fairly simply, but I think fairly profoundly. Are we using resources today in such a way that they'll continue to be able to be used and meet the needs of future generations?

I think it's important to look at the word need. Need in the context of this report, if you really read through it, isn't about our iPhones, and texting, and the comforts that we enjoy. The needs that they're talking about very specifically here, natural resources, water, air quality, the core environmental components. That, I just wanna lay a foundation, that's what we're talkin' about today. What are we doing as businesses to ensure the resources we use today will be available and abundant and be able to be used in the future?

Okay, other drivers of sustainability in business, there's many. Risk is certainly one. What is the risk to my supply chain? What is the risk to my ability to attract and retain employees? Risk is certainly a lens. The right thing to do, many companies, whether it's Ben and Jerry's or some of the others, the core of their company is built on the right thing to do. Reputation, a lot of companies are clearly focused on this. Return on investment, when you look at much of the supply chain in your manufacturing and in your distribution, investments have a clear return. They reduce your costs based on targeted, sustainable focus.

Revenue, there's entire new opportunities for growth in revenue if you look at sustainability through the lens. Just a few quick story on revenue, and I am being recorded so I can't be too specific here, but I was in a meeting about nine months ago, maybe a little longer, with some of our core suppliers. That we were looking at, we wanna shift our strategy on our fleet, and look at embedding a sourcing component that looks at miles per gallon, and looks at that against total cost of ownership, and then drives ultimately what our selection is.

Historically, we never looked at fuel consumption as a sourcing component of our fleet. We looked at maintenance, and acquisition cost, and service, and others, but we never factored in specifically what is the miles per gallon of this vehicle? What is its total cost over the period of ownership based on fuel? Aside from acquisition cost, what's the number two cost for your fleet? It's fuel, right? It's kind of like a no brainer to embed this as a component of our sourcing strategy.

As we did this, we began to get lots of input from our suppliers around, what is the horizon? What is the transition out of fossil fuel based vehicles and into alternative vehicles? I was amazed. When you look at where that industry is going, I'd suggest by 2050, the vast majority of the vehicles will be alternative fuel based. They won't be, as we've known for many, many years, at least as I've known for many years, based on fossil fuels.

When you look at revenue, there's an industry that if they don't shift their practices in the next 20, 30, 40, 50 years, they won’t be here. I would argue that GM, Ford, others in that industry will not be here if they don't adapt the core, and that's the fuel that drives the vehicle.

Okay, so that's a little bit of a basis on why this matters so much. We've got population growth, we've got consumption growth, we've got finite resources. Companies have to manage that risk. We have reputation. Anybody old like me and remember Kathy Lee Gifford crying on TV?

Audience Member 1: Yes.

Tod Arbogast: Yes, right? Does anybody remember what—so somebody tell me why she was crying on TV?

Audience Member 1: Child labor accusations for her company.

Tod Arbogast: That's right, so she was making a clothing line, it was being sold I think through K-Mart? I can't remember. There were findings associated to child labor, and she was utterly disgusted and disappointed, so much so that it reflected on television her disappointment. Was that a reputational issue for her brand? Absolutely. Where are—fast forward today, where are companies focused on their supply chain? Anybody read in the news about Foxconn and Apple? You can't but see it just about every day. Reputational issues are certainly a driver. There's revenue opportunities that we talked about. There's all kinds of drivers of why you focus as a business on sustainability.

Okay, that being said, it seems pretty obvious, right? There's lots of good reasons why businesses should focus on this. Where do you think we are on this curve? So look at this and apply that curve, which is a great social movements model curve, to kind of where you think sustainability is. Think of it in the context of the civil rights movement, women's rights movement, other historical social movements.

I mean, let's just kind of do a vote. Does anybody think sustainability is in the maintenance stage, leading to termination? Probably not, right? What about enthusiastic mobilization? Are there folks—you think so? Okay. I wish—we—those of us—you're here because you have a focus on this space. We're kind of a tilted crowd to begin with. If we went and gathered 1,000 students on the street and pulled 'em in, it would look very different.

We are nowhere near enthusiastic mobilization with sustainability. I wish we were. If we were, think about what would be different. If there was clear understanding of the issues that we just talked about a few minutes earlier, if there was clear acceptance, if there was 100 percent enthusiasm against those issues, would we have legislation on climate change? Yeah, right? I mean if everyone in the country was enthusiastically mobilized against these issues, and there was undisputed clarity against the issues, we wouldn't have some of the political debates that we're having today.

Is there even social unrest? I really don't know. I really don't know. In certain sectors there is. I'll tell a story here in a moment about civil society sectors that are certainly driving it. There's also industries, such as the Sustainability Consortium here in ASU, that are certainly mobilized and enthusiastic in driving it. You still see fairly small pockets.

One way to look at this, if you look across the Fortune 500, as you get into the 100, 200, 300, you're gonna see mobilization against sustainability. If you then say, "Let me look at the Russell 2000. Let me see how sustainability is being embedded in the Russell 2000." You'll see a dramatically different picture. I'd argue we still got a long ways to go with respect to mobilization, engagement, and real enthusiastic shifting against these issues. Wish I could say it was different. I'd love to debate with folks if we think differently, but I think we have a long way to go.

Okay, I haven't been at this since the '80's, but I've been at this since the early '90's, late '80's. I would tell you that stakeholders in this space are shifting their expectations. You think about the '80's and maybe '70's and '60's, you think about big companies like GE. It was a pure compliance mode. "Just trust me. I'm a big company. I'm doing what's right. I'm compliant with the regulations. I'm doing what I need to do." We've seen some of the ramifications of that.

We moved into, "Tell me more about what's occurring," from a stakeholder to a company." We then moved most recently, and in large respect we're still here, to, "Show me. Okay, you've told me, but show me." Now, increasingly, you're seeing stakeholders wanna be involved. For the most material issues in your company, it's not about compliance anymore; it's about engagement in solving the issue. Oftentimes, I would tell you that stakeholders are more attuned to the issue than you will ever be. To not involve them, frankly is a disservice to you, your organization, and will slow you down in terms of successfully mitigating whatever it is you're trying to address. We've seen a big shift here.

Okay, this one's—let's talk about issues for a few minutes. How does a company identify an issue? When should they begin to address the issue? What are the timing behind it? Think of just any issue, and most issues will flow from voluntary to required. Between that voluntary stage and required stage, there's time. In that time, which is yellow, green, yellow on that chart, in that time you as a company have an opportunity to choose your path. Do nothing, wait for it to be required and then go, or find out when to jump in.

What this chart shows is the smartest companies aren't waiting for the last moment, because it's the most expensive time to engage, and you gain the least in terms of reputation or other benefits. The best time to engage is somewhere in the middle there, when the issue is becoming more relevant, while the costs to jump in and address the issue are coming down, and where the risk and the associated benefit are its peak. You say to yourself, "Okay, great, that's easy." How do companies identify what the issues are? Where are they in their maturity cycle? "Where should we be jumping in?"

I'd tell you that almost all issues that I've seen in sustainability tend to go through this phase. They're very latent at the beginning; a very small group of grassroots advocates are driving the issue. Over time, it matures. It matures through organization and NGO reporting. It moves up to SRIs and other community organizers beginning to drive media and other awareness. It moves into governments criticizing, and it inevitably drives up to governments mandating or customers requiring. You can see this shift.

Let me tell ya a quick story. While I was at Dell—in the early days at Dell I was in a meeting not too dissimilar to this, and we were talkin' about sustainability and our focus on product recovery and recycling, which was a key issue that Dell, I would argue today, is an absolute leader in. In the back of the room, a gentleman stands up, his name was Ted Smith. I didn't know that, and he was with Silicone Valley Toxics Coalition. He stands up and he says, "What are you doin' about brominated flame retardants and Polyvinyl chloride, PVC, in your products?" I remember it was kinda like—I didn't even know we had those things in our products. It was what's the relevance? What's the materiality? I don't get it.

Well, Ted was down here at the very early stages of that issue 15 years ago in the PC industry. Fast forward, today every major manufacturer is committed and, in large part, has exited BFRs and PVC from their products. You could clearly have tracked, and had I had a better sense of Ted and the issue, I would have said, "Let me talk with you and understand more specifically against what that issue is." I won't bore you with why that's such a critical issue, but it's an example of how if you listen closely, you engage broadly, you'll learn about the issues and you'll be able to track them through their maturity cycle. You'll learn about when you should jump in as a company and begin to more effectively address 'em.

Okay, but not all issues are the same. Not all issues should a company be addressing. You should be looking at relevancy, materiality, and others. What this chart shows is on the bottom, what is the issue relevancy to the company? Irregardless of how important that issue is, what is its relevancy to the company? Low, high? On the left hand side, what is the capability, all in, for a company to the address the issue? Low, high? Clearly, if I put all my resources and I can't move the needle on the issue, and it's not at all relevant to me, it's gonna fall down here in this lower left box. Doesn't mean I should avoid it, I should monitor it. I should keep an eye on it.

If I can move the needle in a huge way with my resources, but it's still not relevant to me, I have to be pragmatic. I'll fall up in the upper left. On the bottom right, and this is a great example of the work the Sustainability Consortium is doing, if it's very relevant to me but I need more than just me to move the needle on this issue, I should partner. I think that's an excellent example of the work that the Sustainability Consortium is doing. Highly relevant work, highly material work, and mobilized to move the needle.

In the top right, if I can move the needle and it's highly relevant, I better be engaged. I better be strategic. I better be focused. That's a very relevant issue. That's where you have the greatest risk if you choose to do nothing as a company.

Another tool to look at, in terms of when do you address, how do you address. Similar chart here, what's the issue's maturity and relevance, however? Not what's it mean to me, but what's the issue's maturity and relevance just generally? Does nobody know about it, and nobody cares about it, or does everybody know about it? It's completely institutionalized, everybody cares about it. Irrespective of its relevance to you as a company, if an issue is completely institutionalized, you better be doin' somethin' about it.

On the left, you begin to look at what is your company strategy, relevant to that issue? Am I defensive? Oh, no, no, it's not true. Am I in a compliance mode? Am I committed, I'm driving some action? Is it a strategic focus for me? Or am I all in on duty bound on this issue? Clearly, if it's very material to you and it's highly institutionalized, you're probably duty bound. This chart begins to look at is on an issue, not necessarily relevant to the company, but on an issue, where do you stand? What is your action?

Okay, combining those two charts and these are fictitious circles, not really, but I won't put any further detail in there. Here's a tool that we use at Avon. We look at what is the impact relevance on the company? What is the issue's maturity? Where does it fall? The size of the circle, just by the way, also demonstrates our ability to impact the issue. If it's a very small circle, we really can't move the needle on the issue. If it's a bigger circle, we can move the needle on the issue. What this allows us to do from a sustainability strategy; it allows us to appropriately allocate our resources. You'll see us move our focus and resources into this area here.

I'll share one of the—I'll share one of the bubbles with you, and it's actually the bubble that's on the furthest right above the line. It's forestry, which might be surprising for some of you when you think about Avon. How is forestry such a material, relevant issue for us? I'll talk a little more in a moment about that. Think about—all right, you heard me talk about driving engaged action for the most material issues in a company, one of 'em is forestry for Avon, so what are we doin'?

Okay, the other thing that's important when you look at strategy relative to issues is to think in the context of business. I've talked with a lot of folks that are deeply passionate about this space. I would tell you, taking your passion and not combining it with pragmatism in the workplace is absolutely a recipe for failure and disappointment for you. You must combine your passion with pragmatism if you want the outcomes to be successful.

With this chart begins to look at that notion, so if you're addressing an issue and you're implementing a strategy that is reducing, not benefiting, the issue, and it's reducing your profit, that's the bottom right box, that's delusional sustainability. Nobody wants to be doin' that. We don't do that intentionally, but I would tell you if you're not constantly looking at, "Am I moving the needle against what I thought I was set out to do?" sometimes you'll find your strategy didn't work and you're actually not helping, you're deteriorating, and you're reducing the viability of your company. Time to change.

At the same time, if you are driving benefit, but you're doing so at a material impact to the company in terms of profitability, you're on borrowed time. Unless you happen to work for a very, very select group of companies that are classified different, which some of you may be aware of the different classifications for companies today, an S corp, a B corp. If you work for a company such as mine and the vast majority, you can't forever borrow. You need to focus on, "How do I drive benefit while driving benefit to the company as well?" That's that upper left box. That's where the sustainability strategy should inevitably continue to move.

Okay, this is a piece that I absolutely love. Um, if you haven't gone out and looked at the work by the Natural Step, up in Canada, I'd encourage you to do so. They're great thought leaders on, "How do you begin to shape a strategy through kind of an aspirational North Star vision that allows you to take that strategy, that aspiration, and bring it down to a business executable tactic?" The view is pretty simple, and I think it's very elegant. They say, "Look, business does three things. They take stuff. They make stuff. They waste stuff." That's what businesses do. They take stuff. They make stuff. They waste stuff. In that context, they also say, "Businesses are also pretty simple in how they're structured." They're structured in three fundamental ways. They source stuff. They manufacture stuff. Then the channel consumes stuff.

I think when you step back and you try to really fundamentally narrow down business, I think that chart's pretty accurate. You've got inputs on the left. You take it, you make it, you waste it. You've got [distorted audio 00:36:59], which is you design it, you manufacture it, and your consumers consume it. Inside that matrix, if you get the opportunity to stand back and you say, "What would my aspiration, what would my North Star look like inside of each of these?" You begin to look at this, and you say, "Okay. If I'm going to make stuff in my manufacturing facilities, ultimately I'd like to be powered by 100 percent clean energy and have zero emissions associated to that impact. How do I begin to do that now?

Also, if you look at as I take stuff, and I'm designing my products, inevitably I'd like to use resources that regenerate faster than I consume them. You begin to see aspirations against each of the fundamental actions that your company takes, and you can set in motion very specific actions. Let me give you an example of one, relevant to Avon.

Avon, again you may not—I wouldn't expect you to—we're a huge consumer of paper. We don't have brick and mortar stores; our go to market strategy is an independent sales representative touching 300 million consumers. They way they touch them is through a brochure. We operate in more than 100 markets around the globe. You can kinda quickly see how much paper we likely use. Paper's a very material issue for us. We set out and said, "Look, we need to establish a paper promise that unequivocally leads the industry and leads all that we compare against."

We set in motion a strategy that had three fundamental underpinnings. We're gonna protect and sustain forests. All the paper we source will be 100 percent sourced again five certification schemes with a specific preference for FSC. Secondly, we're gonna replenish forests. You may be familiar, Avon is partnered with World Wildlife Fund and the Nature Conservancy on working Indonesia and Brazil, and we've donated about four and a half million dollars. We're doin' restorative services in those two critical systems.

Finally, we're gonna engage and we're gonna be very transparent. You can go out and see how much paper we consume, what our rate is against our commitment. About 24 percent is FSC certified; about 78 percent in total meets all five of those schemes. You bring it back to an earlier chart. As we first began to look at this issue, I would argue that we were in a compliance mode. Avon was certainly doing nothing wrong, but we were focused mainly in our sourcing of paper through the lens of compliance. You can see, although Avon had not seen any criticism, we were really in a risky zone. As we implement the strategy, we still have risk, but you see we're very strategic and we've moved ourselves from a zone of risk into a zone of opportunity.

Lastly, let me just tie it back to what I talked about earlier. How aspirations and visions can tie back to a very specific strategy. We have a vision for a greener tomorrow. If you recall back to that three by three slide, in the sourcing component one of our aspirations is the preservation of nature. When you look at the organization specifically that's responsible for sourcing, it's that product development, it's that first one. You look at what would—what was that North Star for the product development and the sourcing, utilize resources that regenerate faster than we consume them. You look at the action, our paper promise. If you manage forests appropriately, they're renewable and they regenerate. We're tying that all back together.

Okay, finally, last bit here. How are folks like me structured inside of most organizations? I'll just spend a couple of minutes on this, and then we'll open it up for Q and A. Most of us are very small teams. I'm a team of two. Myself and one other colleague, Susan, drive sustainability across the globe in Avon. While I was at Dell, I ran the foundation at Dell as well, so my team was a little bigger, but we had five at the time. They've grown since then. It's a small team, and that's the right approach. Inevitably, what we're doing is we're looking across just a multitude of issues and we're inevitably trying to identify which ones are material? Where is the company today on the issue? Who in the company—which organization in the company ultimately should be the owner of addressing this issue? Then what's the right approach and strategy that that business should implement? Then how can we help?

You'll rarely find that we are the owners of executing against an issue. We try to drive the business to be accountable and drive the business to own the execution. What that looks like, more often than not, we do these big four things. Our teams are small. I think you'll see most companies that are implementing sustainability in a strategic, deeply embedded way; this is the way it looks. I'd argue that a company that owns identification of the issue in the sustainability department, and owns resourcing and execution correction of the issue, it's not sustainable. You have—then you look like this, you look like a totally disconnected organization solving a company issue while the department that inevitably created the issue goes about their business and continues doing what they did. The best way, small teams driving identification, setting strategy, and holding the business accountable. That's how you see 'em organized.

Okay. I think we got 20 minutes or so. Open it up to questions. Yeah? [Applause] Oh, thank you.

Audience Member 3: I appreciate the thoughts that you have regarding corporations. I'm wondering if someone was to take this same information and put it down on the individual level in our family and in our homes so basically we can do the same thing as individuals.

Tod Arbogast: Yeah, I think you can. Individuals, universities, the premise is all the same. What is your largest impact as an individual? It's likely the home you reside in. It's likely the resources you use. When you ask yourself are you making consumption choices with the dollars you spend? That's inevitably where you'll see the shift. Until we get there, you won't see massive shift. That's part of the challenge where I say it is not yet widely mobilized, because we, in large part, still spend our money like we did 30, 40, 50 years ago. The real opportunity for the individual is in how you spend your money and what choices you make, and the driving the associated marketplace that way.

Audience Member 4: I've got a question. I loved all your graphs and things like that. I work for a local water company, and I do their conservation education and outreach. They've got places all over the US, what I'm finding is that things are working, which is great from my point of view, really bad from the revenue point of view. We've got a—we're regulated by the operation commissions, and everything like that, and they like to see those things, so we get the benefit from there. Overall, it's kind of hard to justify doing more—keeping on doing the conservation stuff when it's working, which is good, not according to my boss, but um. One slide I was really interested in was that pragmatic approach. How would you true up the whole—ultimately when we're conserving water, we're decreasing revenue. How do you—do you have any help on strategies of how to chew those up so they're—

Tod Arbogast: Yeah, actually it's really—it's an interesting one because there's a whole emerging bit of work around sustainable consumption. Some of you may have heard of that before. It's this notion of we actually need to, as companies, retool some of our models around revenue increase while consumption decrease. There's a lot of really good work out there that you should look at, specifically in the sustainable consumption header. It—I'll be honest, it's one of the biggest challenges. That's where you see ride sharing model in the auto industry. You see a lot of sharing models versus owning models, and the revenue driven from the sharing not from the selling. I don't know if it applies to water, it certainly probably doesn't, but it's—that's—it's a big challenge, yeah.

Audience Member 5: I'm one of the graduates from the school of sustainability, and on consulting assignments, I've come up against the long-term employees, been around 30 years, business as usual. Unless there's an economic incentive for them, they're just not seeing this big picture.

Tod Arbogast: Yeah. That's the reality of the most—majority of the folks, right? There—I rarely will go in and pitch a sustainability strategy to a business leader that I can't articulate a business benefit. If I can't articulate a business benefit, then I have to be able to articulate a real business threat, whether that's a continuity threat, a reputation threat, a future revenue threat. If I can't articulate cost reduction, revenue increase business, then I better be able to articulate one or the other key pillars. I better be able to have real good evidence against it or else I won't go do it.

That's again where—that earlier notion of combining pragmatism with enthusiasm, you gotta do that. You can't just go in with enthusiasm, or else—number one, you'll lose credibility. Number two, you won't be successful. Over time, you'll lose the lens and the focus from the company. You have to be able to articulate. If it's not business direct revenue or cost, you gotta be able to articulate a real threat or other—or else you don't go do it. Sorry, I'm not—I haven't gotten anybody from this side, have I? I'm sorry, okay, yes.

Audience Member 6: If I may ask, I was wondering how you get involved with Dell and Avon. Were they looking for a sustainable manager or were—did you market yourself that way to them?

Tod Arbogast: Yeah, I'll tell you real quick. My story at Dell was one of pure luck. I see Bruno in the back, and he's smirkin' a little bit, but um—so Dell at my time when I had joined, I was actually running the home installation business, had nothing to do with sustainability. I'd wanted to move back to Austin. I love Austin, that's where I am today, found my into Dell setting up their home installation business, reporting up through the services organization.

Not too long after I started with Dell, Dell came under enormous criticism for their lack of product take back in recycling. Michael looked at it as, "Hey, we don't have a service for take back and disposal." At the time, the service leader Gary Kotshot said, "Hey, Tod, you need to—great, thanks for startin' that business. I need you to start a business for product recovery and recycling."

My entry point into sustainability was all about a threat and alleviating that threat. What we found, and Michael would tell you this as well, is that it was amazing how looking and engaging with the stakeholder, and deeply understanding a stakeholder's concerns and interests, and then mapping that against customer concerns and interests, a lot of times you see an overlap. There was significant demand for consumers and the need for disposal.

When you look at institutional organizations, having 100 thousand—I don't know, how many assets does ASU have in terms of technology? Hundreds of thousands, I'll bet, right? Fifteen years ago, how would you get rid of 'em? There really was nothing in place. You look today, there's a lot of service opportunity.

Anyway, long and short, my entry point into this was around resolving a need and we recognized that actually if you apply some of the—what we talked about, you can project what the issues are gonna be. You can address the issues proactively. You can find yourself not being reactive, but instead being proactive and actually driving benefits. Then at Avon, it was actually a really tough choice. They had recruited me for about a year, and finally I said yes. It was great; it's been a great move. Right here.

Audience Member 7: I'm a sustainability manager and a supply chain manager as well, I was just wondering if you could talk about some things that's Avon's doing to green their supply chain? Just some steps you guys are takin' moving forward.

Tod Arbogast: Yeah, yeah. Avon—first off, Avon's a little unique. We manufacture 95 plus percent of our own products in our corps beauty which is—so our supply chain is our manufacturing footprint. That's a little unique. Let me talk about what we're doing in our manufacturing, cuz that is our supply and then I'll talk about our raw material inputs.

We are focused keenly on water, energy and waste, as everyone is in our manufacturing. On the energy side, we've had an absolute reduction in greenhouse gas emissions since 2005 of 16 percent. We've committed to a 20 percent absolute reduction commitment, and we're very active on the regulatory side, policy side, with membership in BICEP as well, which is an advocacy organization that some of you may be familiar with led by Ceres. On the energy side, 20 percent absolute commitment and a focus on advocacy.

On the water side, we've got an aspiration that is borrow it and return it clean. That's kind of our vision for water. As we use it, we're borrowing it, and we need to return it clean. We have a keen focus on water stressed regions, which for us that's India, and China, and Mexico. What you'll see, we have zero wastewater discharge in China. We're—we actually were one of the first to implement a zero wastewater discharge facility in China. We've got similar commitments around the other areas, so that's water.

Then in terms of waste, that's—anyone who's not focused on waste is not focused on saving the company money. We've got an aspiration for zero waste to landfill. We're long on our journey to that as well. In terms of raw material inputs, you heard me talk about one of them, forest products. We're also focused on sustainable issues like palm oil, and sourcing those sustainably as well. Good.

Audience Member 8: How are you accomplishing the waste and water reduction?

Tod Arbogast: Yeah, we—we are not—so when you look at that materiality, slides that we discussed, water is not a highly, highly relevant issue in terms of an input. Water for us is more relevant in the consumption phase, so whether it's a shampoo and you're applying it and then washing it off, or it's a face soap and you're applying it and washing it off. Frankly, the amount of water use in our facilities is very, very small. We're able to, through water purification, just continually recycle the water that we do use, which is primarily for cleaning, for ensuring purification of the bottles and purification of the different jars. We don't necessarily use a lot of water input.

Audience Member 9: In terms of sustainability strategy, do you use—at Avon, were you the one that originally made the strategy, or is there framework that you followed?

Tod Arbogast: Yeah, I had the good fortune to set and kind of live the strategy at Dell. I've had the good fortune to set the strategy and we're three years into implementation, we have a long way to go, but I helped—I set the strategy at Avon as well.

Audience Member 10: With any particular framework, or just kinda what you saw that Avon needed?

Tod Arbogast: Well, the framework that we started with was a real deep materiality assessment. I think that's where you start. You start by looking at what are the real impacts that your company has. Then you map those out, and then you look at, "Well, what are my actions relevant to those material issues?" That begins to frame where you should be addressing, in terms of resource allocation inside your company, where the priority areas are, begins with materiality assessment more often than not. Yep.

Audience Member 11: What ways do you market to the consumer what you guys are doing?

Tod Arbogast: None really. There's been—there's a ton of really good work out there on the relevance of this issue in the consumer marketplace today. I would tell you that there is a niche consumer who deeply cares about this space. The vast majority don't believe it, don't trust it, don't necessarily buy based on it, and so you—and Avon's not a green—we're not—we are not Burt's Bees. We're not Aveda. We're not The Body Shop. That's not who—that's not who we are. We're not gonna pretend to be something that we're not.

When you look at the framing of Avon's strategy and I don't have it or I'd share it with you, but you'll see two key pillars. The first is what we're calling be authentic, not be green. Not market ourselves as green, not be green, because we're not, but be authentic. When we look at our supply chain, are we authentically looking at the issues, mitigating our challenges and being authentic? When we look at our own internal operation, are we being authentic? That's the first pillar of our strategy.

Then the second pillar is our outward strategy and our focus on ending deforestation, which I didn't talk about, but we've got a lot of outward movement around being a critical force to help end deforestation on a global scale. That's kind of where our strategy is. Now if I was Aveda, I'd have a whole different discussion with you, but we're not. Yeah.

Audience Member 12: Where do you gain your knowledge about sustainability?

Tod Arbogast: Yeah, it's a great question. Where did I gain my knowledge about—I still am not a—what I would tell you, the three most important skills I think for sustainability practitioners, one, to your point, is around an inquisitive kind of mind. I'm not an expert in anything, but I would tell you that tomorrow or next week, something new is gonna come across my desk that I literally knew nothing about, that is gonna pose a risk to the company that I quickly have to become schooled in. One key, successful—is an inquisitive mind, always looking and learning around what are the issues? Where are they?

The second equally important, is the ability to translate those issues into a business, strategic response. Okay, not just recognized the issue and the gravity of it, but also then translating it in such a way that you can take it forward into a business and drive a responsive strategy, so business.

The third, and I think the most important hands down, is the ability to influence, the ability to align, the ability to really engage internally and externally, mostly internally. When I go into a business partner, more often than not I'm coming to them with an issue that they've never heard about. They've never planned for. They've never allocated resources to address, and they don't even wanna talk to me. I'm coming to them and saying, "I now need you to take this strategy which I've kinda given you a framework of, I need you to allocate resources, time, energy, and be committed to this." The skills necessary to get a business to align and shift on that are the most important skills. You might be really good at being inquisitive and learning. You might be exceptional at developing a strategic response plan, but if you can't get the business to move, it's kind of all for naught.

All right, I'll shift back over here. Yeah?

Audience Member 13: I'm a graduate student in the school of sustainability, and we're using the life cycle assessment tools. You talked a little about [inaudible]. In the corporate world, do you find that there's maybe a—I don't want to call it a gullibility, but how does the corporate world receive studies that are life cycle assessments, where you can make your numbers say almost anything you want based on how you draw your boundaries? If that's the case, then how could life cycle assessments be made better to be more useful?

Tod Arbogast: Yeah, I'm gonna probably step on the toes of some of the work being done by the Consortium in this area, but I would tell ya that most practitioners look with a wary eye at LCA studies. It's because of what you just said. It's because there are so many inputs to an LCA, as a matter of fact you can have as many—you could go on forever with inputs. You actually have to draw the boundary for where you stop, right? Each of those inputs themselves has a factor of correctness or incorrectness. By the time you combine all of those, I think most LCAs are just statistically invalid. That's one reason.

The second reason I would tell you is most—if you just stand back and you say, "What is the biggest impact of my hamburger patty?" and you bring five or six really good stakeholders in a room and you say, "Let's spend an afternoon talkin' about the real materiality of the hamburger patty, and where I, McDonald's, should be focused." They're gonna tell ya. You'll walk out of there in an afternoon, and you'll know, "Here's the five areas that I need to go address."

You don't need to spend what is considerable amounts of money, long amounts of time, to get you an answer that, frankly, number one you could've got in half a day with some great stakeholders. Number two, is probably invalid anyway, it's what you wanted it to be. I hope I didn't step on the toes of the Consortium over there. I think that's a pretty common view of practitioners on LCAs.

Now, some of it is really good. If you look at miles per gallon on a vehicle, there has been a framework that's been put in place where you can look at that and say, "Consumers are basing their buying decisions on that. It's valid. It's common across all vehicles, and I trust it." There's some that get there. I think we've got a long ways to go. Labeling carbon on a bag of chips, yeah we gotta long ways to go on that. Yep?

Audience Member 14: Just a comment on the LCA, can you really work with recycling? The benefit of LCA is not just to be able to compare across products, but to look from beginning to end of the product life cycle. For example, when you develop that recycling program, you created a benefit that your competitors didn't have and only LCA would point that out.

They could say, "Well, our computers look the same when they're in operation," and they could ignore the end of life. There is some benefit—what I'm tryin' to say is that I disagree, but I think when you brought up the—one of the slides about being able to determine whether your action is gonna provide a benefit to the environment or noet, LCA allows you to determine across the whole life cycle whether it's gonna be beneficial.

Tod Arbogast: There's no doubt. Some practitioners, I'll give you an example. There were some folks that did some studies on produce impact. They used LCA methodology. They did find something that you bring in stakeholders you may not have found, and that was that fertilizer was actually one of the largest components of the environmental impact. There is—there are times where you can find gems in an LCA. I don't mean to—yep?

Audience Member 15: Thank you very much. You mentioned briefly the policy advocacy work that you do. Can you speak a little bit more about how you see maybe Avon specifically, or in generally—more generally a corporate citizenship perspective, in terms of being involved with the government?

Tod Arbogast: Yeah. Advocacy is one of the hardest things for a company to do. When you look across getting a company to move on various issues, advocacy's one of the hardest, and especially for consumer facing companies like Avon. Where, you know, our consumers are of all walks of life. You have—some believe in climate change, some don't believe in climate change, and everything in between.

Advocacy is a very, very hard thing to get a company that has such a broad perspective to drive. The way we get comfortable with advocacy is through partners. If you remember that one chart, if it's a material issue and you alone—so Avon alone, being an advocate for climate change would be irrelevant. I would just tell you it would be completely irrelevant, so we look for partners. That's where we chose the work from Ceres and BICEP. If you look at that organization specifically, it's primarily consumer facing companies, Levi's, Target, Best Buy, a number of others, are participants in that.

As a collective force, representing the consumer, we can begin to have an impact. That's a very hard one to gain alignment from a company on, very hard. Oh, yes?

Audience Member 16: Can you give us an example of a specific Avon product, and describe its evolution from a less sustainable to a more sustainable product?

Tod Arbogast: Yeah, on the product side—this kinda goes back to, we're not green, in terms of our company and the product side. If you look at, there are certain segments in the market, consumers, who may have a preference towards natural products. Some would argue natural is good. I would ask, and love to have a discussion with someone, what does natural mean in the context of products? On the product side, our focus is on the efficacy of the product.

When we say it will do something, does it do it? Our focus is on the safety of the product. Our focus is on the optimization of the product, in terms of the cost, and the performance, and the delivery, and others. What you won't see us—I mean, we let the consumer dictate. Today, there isn't an overwhelming demand from a consumer side on what we would, or some of us in the room, might call a green product, a natural product.

While we have a product called Naturals, we have a product set in our—primarily it sells into the university student population from Mark that has fair trade. We have a number of other products that we might sit here and say are green. It's not a huge focus area for us in terms of our product set, and that's—it's our consumer. That's why you heard me talk about a strategy that's internally authentic and then outwardly focused on forestry. It's a little unique.

Audience Member 17: Hi, you talked a little bit about your paper consumption. My question is, how do you work with your marketing department or in terms of how they support your local Avon lady, for example? I've seen that—I don’t get a brochure dropped at my door anymore, I get an e-mail. I was just wondering if you could talk about that a little bit.

Tod Arbogast: Yeah, there's no doubt—the ideal would be to not have any paper resource for many reasons, for cost, for efficiencies, for the representative and their earnings opportunity. There's no doubt we're focused on going fully electronic. In several markets, like the US, where there's wide adoption of technology, that's where we're goin'. We operate in more than 100 countries, where technology isn't necessarily at the same level and our representatives aren't necessarily as technology capable or frankly, they don't have that technology access. We are moving to that, but—

Audience Member 17: Who makes the decision though? Is it you, or are you working—who kind of directed that change? Or did it just come about naturally?

Tod Arbogast: Well, yeah that was clearly a—I wish—well, actually I'm glad that I didn't have to be the driver for a shift to—that would—no that was clearly a recognizing how we can further support that, what we call the Avon lady, the representative, how we can support her to be more efficient and effective. We know that for her to be able to distribute through her Facebook to her friends, the Avon brochure is much more efficient than having her need to go and handout. We're focused on her and enabling her work to more efficient, with the ultimate outcome allowing her to earn more income.

Kevin Dooley: All right, thank you Tod. [Applause]