Kimberly-Clark, a ‘new’ commodity business

The Regeneration and Resilience series of articles contain “Forward Looking Statements”, including “future-orientated information” aimed to start new debates. These statements are formed from the beliefs and opinions of the AG team in respect of their own perspective of the future and may change over time. COVID-19 is a rapidly changing landscape and information that is published is not a guarantee of future performance, therefore undue reliance should not be placed on them due to unknown risks and changing information as we all learn more about the virus and its impacts.

During the pandemic we’ve been looking to highlight businesses that inspire great debate, not as an exhaustive study but to signpost where businesses have made a concerted effort to address the virus directly whilst supporting staff and their communities. Many companies are doing incredible work but we wanted to highlight a business which is at the heart of the COVID-19 response and one which has a track record of sustainable operations. We also wanted to highlight a business which, from an investment perspective, had beat it’s market expectations 1. For all of these reasons we’ve chosen the American Multinational, Kimberly-Clark for this look deeper insight.

The elephant in the room

First let’s get the elephant out of the room, Kimberly-Clark produces paper products and they also produce personal protective equipment. Compared to companies who simply cannot continue to work under the lockdown and those who have been forced into making dramatic changes to their business model to survive, Kimberly-Clark doesn’t fall into either category extensibly. However, that doesn’t stop them from innovating, from being a responsible and moreover resilient business. During the ongoing crisis that is the Coronavirus pandemic, Kimberly-Clark has become one of many companies that you could even call a commodity based business - essential for the survival of people particularly in the healthcare sector.

What do we mean by a commodity?

The traditional economics description of a commodity is a tangible good that can be bought and sold or exchanged for products of a similar value. This takes place in a market where there is uniform quality between the companies that produce and sell it. Coal, gold, corn and sugar are some examples. What we are referring to here when we discuss a ‘new’ commodity, born from the Coronavirus pandemic, is a new necessity required by the world states and by its citizens in order to survive - a business who’s value extends well beyond it’s stock price into the ‘dark matter’ of what cannot be measured, the social value is perhaps as close as we can get to some attempt at a definition. We believe that the huge demand for PPE and the perturbed buying habits from consumers have placed Kimberly-Clark and it’s market competitors into new territory and as such we’ve defined that as the ‘new’ commodity.

The traditional cornerstones, the commodities of our global economic landscape remain but as the virus has shifted the economy we must now consider that for the short to medium term companies like Kimberly-Clark are now vital to the global effort to minimise the impact of the virus. These companies have switched from the fast moving consumer goods sector into a vital new role, the Coronavirus commodity sector. For now, until a vaccination is present we can be certain that KImberly-Clark and it’s counterparts will be essential in the effort to combat the spread of the virus and the protection of key workers.

Even during these unpredictable and unprecedented times we believe it’s still essential that companies, particularly those commodities that we rely upon, do not drop their guard and continue to support sustainable practice. This is not exclusively related to our environment, but also pertains to the other United Nations Sustainable Development Goals. It’s important not to lower the guard on human rights, corruption and bribery to maintain good ethical standards and transparency.

Missions and moonshots

To understand why we have chosen to highlight Kimberly-Clark we believe it’s important to establish our perspective on mission-led culture and the intrinsic link between an organisation's mission and it’s stability as a healthy profit making, positive contributor to the community. During the 2010’s in particular we saw the rise in mission driven companies and although not quite the same, BCorporations in the US and social enterprises here in the UK. During the relative economic calm these mission driven companies certainly delivered on the ideology that business could be driven by positive ethical actions alone, collecting followers inspired by their vision and committed to see their ideas succeed.

When missions are driven without an eye on the companies ability to perform and provide long term value, the vision, which is what the mission really is, actually becomes threatened. Moonshots, much like actual moonshots, need accurate information to use as a guide to ensure they don’t miss the moon entirely and vanish into space. We believe that building a sustainable business means operating with an ethical and vision driven directive, but that it also needs to encompass the ability to survive and overcome turbulent times.

Sir Ken Robinson, an author, speaker and internationally recognised education advisor describes creativity as ” Original ideas that have value” - it’s the with value part, in the context of a sustainable business that we believe needs to be understood as multidisciplinary, in order to create an effective economic model for success. The mission itself, or the vision therefore should at the very least have some intrinsic link to the business's ability to support the community with which it builds around it. That’s not exclusively suppliers and customers but the staff, shareholders and global community too - that’s the responsibility of operating a business which trailblazers a vision. Not all businesses will, however diligent in their planning, succeed, so as a leader the relative success of the mission can be what it propagates.

The legacy of the business even if they do not survive the COVID-19 lockdown should be whether it has succeeded in fulfilling that vision, effectively leaving the world in a better place than when it began. For the people linked to that business, whilst the pain of losing that particular endeavor will hurt, the value of the experience and the wealth knowledge gained, could, if applied productively, place the team in fallout as great candidates to restart new ideas born from the ashes of the old or to ignite their passions to develop the mission further in a new environment. Many people and indeed companies have been lost during previous financially turbulent times but left in their wake are opportunities to develop new ideas and rekindle growth of a new kind.

Where the operation of the organisation becomes largely unethical is when the extension of the vision comes at all costs to the ethical and moral values. This is where mass layoffs and the disregarding of the principles that pertain to the vision are dropped to sustain the business. We don’t believe that this is a factor of the virus, but an oversight of the company to be in a resilient position ready for times of hardship. In our view planning and operating purely on the basis of sustained economic growth for perpetuity isn’t a likely nor suitable risk management strategy. This is the exact same flaw in the system uncovered during the 2008-2009 financial crash. Companies have relied heavily upon the state and the banks in times of economic faltering but those companies who have been able to heal and grow with their own internal resilience have an even stronger position with which to push off into a market reset by the virus.

Profits for good

Socially driven or mission driven companies, social enterprises or BCorporations have for some time been able to highlight the qualities that drive their missions to circumnavigate the blatant fact that in any organisation people need to be remunerated for their efforts and generally speaking that’s a financial commitment. We have become somewhat lost in the idea that in order to act ethically we cannot make profits. Profits are the byproduct of good business and good sustainable practice and in fact the profits of productive business are the perfect remedy for reinvestment into external ethical practices, acquisition of innovative businesses for growth or the investment directly into ethical directives. The idea that profit is considered a dirty word in the ethical business world completely ignores the value of resilience and the importance of being able to support staff through the good economic times and the times of hardship. This is not to say that companies which by the very legal structure of their organisation cannot be resilient by design but what the virus slowdown has showed is that organisations purely driven by missions that are unsubstantiated and disassociated from generating value cannot acceptably fail to act responsibly when times are tough, staff, customers and the wider community alike call hypocrisy and the mission crumbles.

Tough decisions, are getting tougher

Back to Kimberly-Clark, whose mission is to lead the world in essentials for a better life. Importantly it’s the essential part of the mission statement that in times of need, link Kimberly-Clark to the new concept of what it means to be a commodity. This doesn’t make Kimberly-Clark inherently good to work for or totally in avoidance of controversy. In fact, a contractor working at one of Kimberly-Clark's plants contracted coronavirus 2, and in April 2019 Kimberly-Clark restructured the manufacturing and distribution arms of the business leading to mass layoffs and redundancies 3. However, today during the virus unlike most of the market and certainly most of their competitors Kimberly-Clark has performed exceptionally well, far beyond what would have been expected even by the most optimistic of industry commentators. Ultimately had the tough decisions taken last year to restructure the company not been taken, would the company have been in the position it is now to support their global community to the extent that they have done today?

This comes as no solace to those impacted by the restructuring last year and certainly doesn’t provide an ethical perspective where clearly the most ethically orientated decision wouldn’t have cut the livelihoods of hundreds of workers world wide. Essentially in this situation there are two kinds of moral or ethical standards, those upheld by law and those imposed by people’s values. The law will undoubtedly always lag behind the upper morale standards set by people at large and yet companies are held accountable almost entirely by the law, which in these cases, isn’t entirely clear or can be carefully manipulated. The values held by people far outstrip the values held by the law and companies that consider these standards the lower bar have to weigh up the cost of doing so on their ability to operate profitably within the boundaries of what shareholders reasonably expect. As Ray Dalio explains the profit system cannot adequately allocate resources to where they are needed and in times of huge disruption and change of the underlying system it’s productivity and now profits that should be given the ability to take leadership. In this scenario of global reform of the economic and social systems, Kimberly Clark's efforts externally to allocate support for those in need is only a partially adequate action and yet from the capitalistic point of view their actions have been tremendously philanthropic.

The COVID-19 response

Kimberly-Clark recognises that a lot of their PPE products are likely to end up in landfill, this is unfortunately still a common and recurring theme in manufacturing. At AG we are finding credible, innovative and sustainable systems that are beginning to make headway on these waste issues, including schemes such as RightCycle. The first large-scale effort to divert previously hard-to-recycle and commonly used laboratory nitrile gloves into new products. The programme launched in 2014 has diverted 70,000 pounds of waste from landfills so far. As gloves, masks and other protective equipment enter increasingly more public spaces so has more waste deposited on the streets. Greenmatters 4 expand on this issue in more detail, but what is clear is that there is a collective responsibility from consumers and manufacturers to ensure that scenes such as these are eliminated for the good of our health, the environment and our municipal systems such as sewage, water and healthcare.

As consumers stock up on staple items, including toilet paper, Kimberly-Clark are using their Cottonelle brand as a vehicle for the #ShareASquare campaign, aimed at discouraging consumers from hoarding products whilst donating $1 million worth of Cottonelle products and 1 million rolls of toilet paper to the United Way Worldwide COVID-19 Community Response and Recovery Fund. Their work is helping to support thousands of at risk people to get access to the basic items they need to survive the pandemic.

And what for the future?

As the demand for PPE increases, traditional manufacturing cannot keep up with new orders. This is where Matt Parlmer’s Open PPE Project aims to help empower individuals to develop their own solutions utilising open and shared standards.

The aim is to provide PPE where it is required at a rapid speed whilst developing better manufacturing techniques alongside new product designs which leverage the collective skills of engineers, entrepreneurs and problem solvers to create N95 masks. Critically Matt and his colleagues are aiming to track down the raw materials, develop resilient domestic supply chains and design a functional mask fit for mass production and more importantly reuse, a key system for sustainable design.

By crowdsourcing designs the Open PPE mask is reusable, allowing people to swap the complex to manufacture (in order to meet the N95 standard) filters rather than throwing away the product or sterilizing the entire product so that it can be used again. To go further, the team is focusing on manufacturing techniques that can be replicated in LDC’s (Least Developed Countries) so that the manufacturing of these products can scale appropriately.

Matt Parlmer tells Coindesk, “The need is not only acute for medical professionals, but for anyone riding the subway. It would be a profound injustice if respiratory PPE became some sort of precious scarce thing.” 5 Decentralising the face mask is just one example of how decentralised networks can create entirely new systems to solve complex problems. Matt Parlmer’s team are deploying sustainability systems such as modular design, reusability, product stewardship, dematerialisation and local raw material and production chains amongst many others to undertake complete product stewardship.

Latest Updates

  1. Episode I - Regeneration and Resilience
    By AG

    An introduction to the Regeneration and Resilience series, a commentary designed to spark informed debate about the future in a world economically, socially and environmentally impacted by COVID-19.

  2. Episode III - What does the business landscape look like?
    By AG

    We have put together a round-up of how the organisations who have ESG-profiles with us have responded to the global pandemic, COVID-19.

  3. Episode IV - What will the future look like?
    By AG

    Based on what we have seen, heard and felt today, where are we heading in the next 12 months. What does our immediate future look like?

  4. Episode V - Beyond the virus
    By AG

    Let’s peek into the future and pose the valuable questions that will be answered over the next couple of years. Beyond the virus maps out how the impacts of the virus have profoundly adapted our lives and challenges our lives.