Keynote Speaker: Douglas Baker, Chairman, President and CEO of Ecolab

Douglas Baker: Good morning. You know, there are going to be some common themes here, which I imagine is appropriate, and I’ll see if I can forward to my slides; you know, things that I already heard, and I’m over here busily taking down notes, and I thought Tim did a great job talking about how do you really make this come true? And to me, the word that Jay, I think, you poked fun at earlier – “operationalize” – I don’t believe it exists, but I’ll take it, because it’s really, I think, the fundamental question. We could have principles, and we can have values, but at the end of the day, how do they show up? What are we actually doing? What kind of benefits are we bringing to the marketplace? What kind of difference are we making both for communities, for employees, and for the environment, if that’s one of the focus areas?

So, I’m first of all, honored to be here, and delighted to be here. It’s always somewhat daunting, you come in here to talk about it. We’re a big company. We’re in 160 countries; we have 23,000 employees, 13,000 of them are sales and service associates. We have 50 plants around the world, and all we know is not everything is right. And one of our values is talk about what’s going on. What are the issues? Don’t hide behind them; get after them. Talk about how can we make a difference. Where should we put our efforts? And get after it. And if there’s a fundamental principle we’re driving, it’s get better, and make a difference. Do something. Don’t be stymied. Don’t wait for the perfect solution. If you know what’s better, then do that while you’re waiting for the ultimate. And don’t hide behind fear, facts, legalities, PR issues, and the rest, because ultimately we need to be judged on are we moving or not?

So, let me begin by doing three things, and I’d like to back one slide. I guess it’s the overview. Well, I want to talk about how we view corporate responsibility, and the principles that govern us. I want to talk about challenges and learnings that we’ve had along the way, because it’s not a street climb; there have been pitfalls; there have been issues, and sometimes we get into trade-off decisions. So, I’ll share some with you. But before I do that, I want to give you some context. And so while Jay said you probably all come in contact with Ecolab, I’d like to at least tell you what we do, because it gives a framework for how we go about meeting what we think our obligations are in terms of CRO.

So, first a little overview of the company. As I mentioned earlier, we’re about $5 billion in sales; we’re a global company. Half our sales are outside of the US. The company was founded in 1923, and it’s a typical American story. We were founded by a family; we went public in 1957, but really the success of this company is probably the last 20-25 years. And some of this is because the values that were started early started taking shape, and frankly were becoming realized in the marketplace, and this has been core to us. Our promise to our customers, and to the constituents we serve is that we work to make the environment, their operation, frankly, the overall community, cleaner, safer, and healthier. And we do this by serving a number of industries, right?

The food service and hospitality industry. We’re sitting here in a Marriott. We serve all the Marriotts, worldwide. So, we will have the products that they use to keep their kitchen food safe. We’ll have the training in the kitchen. We have the audit responsibility in the kitchen. And so the kitchen and all the dishes and the glasses are cleaned with our products, and hopefully, they meet your standards, right? But we’re also here cleaning the linens; the maid carts will have our products. We’ll also perform a number of other services for this building treating water, making sure that we don’t have bad bugs in the HVAC system, etc. We also do this work in the food and beverage processing business. So, we call this farm to fork in terms of food safety. So, it’s understanding how microbes migrate through the system. How do you stop them early? And how do you help large and small organizations have safe food? And this is very important. We also do work in acute care and long-term care, and the difference there, of course, we’re performing our services in food service there, as well, but we’re also in surgical suites, in different types of surgical instrument reprocessing cleaning and disinfection, which of course, we view as very valued work, and there’s a lot of work to be done there, because there’s some big issues, and big solutions that we think we can bring long-term.

So, how do we go about this? We offer a variety of products, programs, and services, but at the end of the day, we start with consultancy. We have got some of the foremost food safety, infection control practitioners and experts on our team. We lend them out. We’re integrating the WHO, the CDC, and others, and we work with the organizations that we partner with – chains and the like – to make sure that they’ve got a thought process, and procedures that at the end of the day, end up with safe food. And so, we’ll do this with consultancy, design programs, training; use our anti-microbial technology, which is one of the core IP, or intellectual platforms that we have. We’ve got a variety of other services; water management, and energy management are increasingly becoming important. They’ve been important in Europe and Japan for a long time, but they’re getting a very different ear here now, because of the cost, quite frankly, but also people want to do the right thing as they move forward. And then we couple this with training and audit capabilities, so they can have a full cycle, and chains take this, honestly, quite seriously.

So, we take this idea, as we move forward to deliver what we call our promise, and that is we want to deliver superior efficacy. People hire us because they want to have safe food. They hire us because they want to have scalpels disinfected. They have to, and so that efficacy is very important, and then we work to deliver that efficacy, which is non-negotiable in the most – with the minimal impact through water and energy, and looking at the total process, and we have learned a number of interesting things, and I’m going to share some of this with you – a prosaic example – but, they’re very interesting, and they touch our lives all the time. But this philosophy helps us in a number of ways, but it’s backed by a huge investment in R&D, great expertise, and we want to be serious partners that can be trusted. When I listen to Tim talk, the word trust kept coming to my mind, because you can’t be a partner who’s trusted in one area and not trusted in others. I mean, it just doesn’t work. You’re either a stand-up company; you do what you say, and you do the right thing in all aspects of your operation, and the ways you touch everybody, or frankly you’re just not going to be a trusted partner. And I really don’t know how you can bifurcate, and say you can trust me here, and right over here just ignore what I do. It doesn’t work in this world, and I don’t think it appropriately should.

So, our approach is a four-pronged approach, usually involves product dispensing, training, and I’m not here to sell you anything, so I’ll move on, because at the end of the day what makes it important, is the 13,000 sales and service people. Why? Because we really have to take our know-how technology philosophy and make it work in this hotel, or in a food plant, or in a Pepsi bottling operation, or in a Starbucks, or in a Wal-Mart, or wherever it is that we’re showing up and partnering, and so we work to live in the real world, because our teams and our customers are counting on us to do real things for them, not theoretical things, and to make a difference where it counts, and it’s our people that do it. Now, importantly, our people are tied together by a culture. And it’s an inherited culture, and it’s really the strength of the company, and why I get to stand here today, and it’s a legacy that goes back a long way.

And so if I was going to describe our culture, which the next slide will do for, I would say that there’s a number of things that you can point to, right? We work to be very challenging. We want an open environment, and we want growth. We want growth for the business, but I’ll tell you, it starts with being open to personal growth, and growth as an organization. And the only way you get after of these is being open. And so I’ll give examples later, but open is, okay, what are the biggest issues that we have, and how are we going to address them? And it’s not one of the biggest issues in how do we hide them? Let’s go hire a PR firm in case these things come up, because now we need a shield just in case it happens. A much better process, quite candidly, is know what they are, and start getting after them. If you end up with a PR issue, I would take a firm, but I’d also, then, have something to talk about. We know you’re right. We’re on it. And we’ve got stuff that we have to be on. But this is the same type of approach that I expect everybody in the company, starting with me, to take. I need to be a better CEO next year. I’ve got to learn. I’ve got to grow. Every one of us does; the organization does, and the team does. And if you have this philosophy, I believe ultimately it starts driving you to the right places. And so like Tim said, it needs to be ingrained into the culture, because I think that is the starting point for this. So, you take all this, and it’s resulted in a very good business.

I can give you 20 pages of logos that you would recognize. We say that we’re the people behind many of the most important brands in the world, and our job is to do what we’re hired to, which is provide them the expertise to make sure that they are serving either safe food, have a clean environment, a safe environment for their employees, or for their guests, or whatever constituent is walking in there, and we work very hard to do it. And mostly we do a good job, but we’re not perfect. This has resulted in great financial results. And I’ll talk more about this at the end.

So, let’s get to innovation and sustainability; you know, not uniquely, the principles we follow are principles that I see in a lot of other places, and we don’t view this as one-dimensional. We view it as multi-dimensional. A couple of weeks – well, actually, it was a year ago, I had an interview with a reporter from the Japanese version of The Wall Street Journal or Financial Times, and he wanted to come talk to us about sustainability and how American businesses – he was interviewing a number of CEOs around – viewed sustainability, and what he wanted to get at was which of the constituents was first, second, third, fourth? And really had this kind of linear progression, and how did you rank them? And I honestly couldn’t intellectually play that game. I mean, I just – I don’t view it that way, and so the discussion that I had with him is I don’t think it really works that way. Fundamentally, if you do not have an approach that’s sustainable from a society and a community, and for your associates and for your industries, and customers, and also one that’s environmentally sustainable, I don’t think you’re going to have sustainable economic progress.

So, it depends on your view. I mean, yes, you can go do something for four years, but our plan is to be here for another 80-100 years. And ultimately, if you don’t have this grounding and you view it as kind of all one big ball, I really don’t know how it works. And this doesn’t mean it’s in balance every hour of the day. My life’s not in balance every hour of the day. (Laughter.) But you probably strive for a life-balance – this balance over periods of time. But you’ve got to keep pushing and understanding that there are many people to play to, and for our company – Tim had somebody to point to in his company; we’ve got somebody, too. It’s interesting. We went through our fiftieth anniversary recently as a public company, and so we’re going through the archives; you know, I don’t sit around and read our history all the time. I’ve been with the company almost 20 years, but Ida Koran is a name that we all know, and Ida Koran was our first employee. She was hired by the founder in 1923, and so like a lot of companies, this company had its fits and starts, and they got into cash flow trouble, and so what happened when they got into cash flow trouble? Well, they started paying the employees with stock. And so Ida ended up collecting quite a bit of stock; she would buy stock from other employees when they were in cash trouble. As the story goes, evidently we wouldn’t even be here, because the company got so tight that it was Ida from her thriftiness who ended up lending the founder five grand to keep the place afloat at one time, but Ida really was a remarkable woman, because what Ida did through her 44-year career certainly had an impact on the company during that period. But her legacy lives on, because she took her money, and the company obviously did well, and she took all of her stock, and she created a foundation.

And the foundation’s purpose is to serve Ecolab associates in need. And I can’t tell you what a gift this is. Right? It’s an idea I would have never thought of, but I am so happy we have this for a number of reasons. You know, we as a company do a number of things for people. If our people are in trouble, we go to the ends of the earth to help them. We’ll do clothing drives, food drives; we have hurricane victims, right? We send money right away as a corporation, and do these things, but there are a lot of needs that as a company you have a very hard time making a difference.

So, while we have employee assistance for chemical dependency that extends to the employee; it does not extend, often or far enough, when it’s somebody’s child. We have educational assistance for employees, but not for their children, but we do now, because we have this foundation. And so, this foundation has given away $15 million in the last ten years, and it all goes to our employees, globally. People apply. It can be a loan; it can be a grant; it can be employee assistance. We have scholarships. It’s fantastic. The reason I bring this up is this is deep in our company. And this whole mindset that you give back and you approach life in a way that’s circular was built from our very foundation, and it continues today.

So, we do a number of things, like many companies, right? So, we have a foundation. We give back to the communities. We do things with money. We have focus areas, but most important, I think, is that we also request our leadership to get actively involved by serving on a board in the community. Their choice. We will help fund the board, or the organizations that they serve on. For me, personally, I’ve done it for a number of years, I find that it connects you, it grounds you. It helps you understand more about what’s going on around the community. And our community is as good a proxy for any other community. You’ve got great things going on, and real challenges. But we want to use our leadership talent, as well as our financial talent to do it.

So, here are a number of programs that we’re currently funding. The one I’m probably most active in, and interested in right now is early learning. How do you help children all be prepared moving into kindergarten, which is a huge challenge in this country, right? And so, we’re trying to study, understand, grant, and do almost VC funds for great ideas. And it’s a very interesting process. But I think what gets lost in this is one of the things businesses do when they’re vibrant is they create jobs. If I view my job as I’ve got 23,000 associates, we’ve got responsibility for 23,000 families, and I hope it’s 24,000 next year. We want to grow. And we want to add jobs, and this is important to communities. I do not know how we can expect to have vibrant communities without vibrant businesses. They are interlinked, and they are not at odds at each other. They ought to be viewed as one and the same, and of course, we have a successful business, you pay taxes. And so I only bring this up, because it seems to be lost often in the whole discussion that successful companies make money; we pay taxes; taxes fund society, as well, and this is part of what business does.

Let me take a step back now and talk environment. Our company makes cleaning products, right? We get into all kinds of debates on ingredients and everything else. So, let me just talk a little bit about a couple of the examples and how we view this. The principles we follow are we want to deal with the facts. We want this to be a science-based deal, and we want to deal with the facts that are convenient for us, and inconvenient for us. We put them on the table. Forget the fundamentalism for – you know, we are phosphate guys or not phosphate guys. Let’s deal with whatever the real issues are, and move forward on principles based on science. And also focus on improvement, which I alluded to earlier.

So, our sustainability principles are these: Get after and deliver superior efficacy. I told you I think it’s important for us; we are we think responsible for human health; it’s one of our core mission statements, and we’re not going to sacrifice; nobody wants a scalpel that’s almost disinfected. (Laughter.) Right? Or is really close. (Laughter.) It’s got to be done properly, and so we hold ourself, but the way we approach it is let’s do it right the first time. I’ll show you how this ends up to be the environmental sustainable way; make sure it’s safe for the user, minimize water and energy, which in almost every process we touch is a much greater spend, and a much greater environmental issue than is the chemical, but we want to do both, and then minimize the impact of our packaging of our products, and understand what happens to them as they go through.

It isn’t always a straightforward discussion. Government organizations, NGOs, people in this room, people in our company don’t all agree on exactly what’s good and what’s bad. And so, I just put this one up, because you know, the phosphate debate. And I don’t even know if you know what phosphates do, right? Phosphates are called the builder; quite simply what they do is they negate the hardness in the water to make the cleaning product work better. So, everybody who’s washed their hair in hard water, it takes a lot more shampoo than it does in soft water, where you feel you can’t get the soap out if you rinse. So, this creates soft water, so you need less of the cleaning agents to clean. That’s what phosphates do, and so when you talk about non-phosphate products, it doesn’t make the problem go away, we just do it through things other than phosphates. This is the world. And some of those are MTA, and EDTA, and I can give you a longer list. But as you can see from here, there’s a lot of different opinions on what’s good, what’s bad, what’s legal, what’s not legal, as we go forward. So, okay, that’s life.

So, that’s the bad news. The good news is, as we look at this, and we may have a unique advantage, but I’m not convinced, when you look at the processes we focus on, what’s economically advantageous to our customers, also happens to be the environmental sustainable way, too. They are one and the same. They are not at odds, and the reason is this. I could give you a 100 charts, because we’ve charted all our processes; this is washing a dish. When you wash a dish, so that glass in front of you, to wash that costs this hotel some money – 6 percent of the cost is the product; 11 percent – double – and this is even larger now – is water and energy; 50 percent is the labor, and breakage is always the startling one; it’s 14 percent of cost of doing dishes, because every one of us has heard how many crashes around a restaurant, and in a hotel. Every time that crash goes, you know where it’s going on the pie chart, right? (Laughter.) So, now you’re insiders. The reason I bring this up is that this is important for us, because this helps us as we drive forward, and I’ll give you some examples, if you go on the next slide.

Because we think there are false gods out there that we’ve had to kind of challenge. We believe them; they seem to be a belief in society, as a whole. And we need to go through them, and the first one is that green is somehow the enemy of profit, which we don’t buy at all. And in fact, I don’t understand it. Now, there’s got to be economic discussions and everything else, but I don’t know a company or a customer – and we’re dealing with a lot of the Fortune 500 as customers – I don’t know one of them that wouldn’t like to use less fuel, less water, less natural gas, not one of them. Every one of them would like to. What happens is it comes down to – I mean, there is a fair economic argument. Are you going to go put hybrids in all your fleet right now? Well, I know what they’re going to ask for a study; I mean, we’re asking for it. What’s the incremental cost of a hybrid? What can I do? How long is it going to last? How many engines am I going to have to throw out? What’s the real impact? Or should I take that money and put it somewhere else to get a bigger bang for the deal -- the fair deal?

So, we’ve got to get economics and the environmental lined up, and when we do – and we have in many instances, we can make a huge difference. I’ll tell you a quick story. This is automatic dishwashing detergent. This is a 20-year old story with a new chapter. The whole world is selling in five-gallon buckets; we came up with a breakthrough. We took five gallons and created a nine-pound capsule. These are appropriate dimensions. So, now we’re using a lot less plastic. We’re taking a lot less trucks. So, when you look at this here are the impacts we think we’ve had: Almost 200 million pounds less plastic by reducing this. We have better formula in this solid, so we use a lot less rewash in the system. We estimate 10 percent reduction in rewash is $12 billion gallons annually. The reason is we’re in about 800, 000 restaurants around the world. So, when you have that kind of reach, making differences has a huge impact.

And so for our customers, they realize the benefit of less water. We believe in fuel. It’s 100 million gallons of diesel a year, by just this change, because I can get a lot more solid capsules in a truck than you can five-gallon pails. We’re not shipping 50 pounds of water per pail around the country. And so just this breakthrough, and I can tell you the genesis of it was not from a sustainable standpoint. This is 20 years ago. It was how do we improve user safety? Because now I’ve got a capsule where people can’t get at the chemical, and we protect the user in a much more robust way. But there was unintended learnings, and great sustainable consequences. So, we learned both pieces of this.

So, where do we go now? We’re just introducing a brand new platform, and (we’re redoing) all our plants. It’s code name Daypacks. It’s going to be rolled out. So what does this do? Well, candidly, this is much more environmentally friendly from an ingredients standpoint. It uses even less plastic, because I don’t have a plastic capsule. It’s got basically a light cellophane wrap around it. And so it’s another 95 percent reduction in plastic, versus the previous 95 percent reduction in plastic, but even more importantly, it’s more efficacious. It works better. And it’s tied to a dispense, where we can actually measure the wear wash process, and we’ve seen 25 and 30 percent reductions, which can translate into 36 billion gallons of water a year – right? – not used in this process, which takes pressure off infrastructure and society. It means you don’t have to build more water plants; you don’t have to do a number of other things, right?

So, this is how seemingly small ideas, when they have big numbers attached the them, can end up with huge results. And we have others. So, we’re applying this thought process to other processes. In this hotel, I imagine there’s a washing machine that will clean the linens on this table. It’s called on-premise laundry. Typically, it’s got like six cycles, right? The product goes in, you rinse, another product goes in, you rinse, right? It’s complicated stuff. We’re trying to get off lipstick and all kinds of other noise, right? (Laughter.) It moves forward. But what we developed was a new product, which takes liquids to solid, but more importantly, allows us to cut cycles back by 40 percent, which means we don’t have all these rinse steps, so water and energy reduced by 40 and 50 percent. Now, customers like it obviously, but it’s got big impact, so if we convert every on-premise laundry to this technology, we will save 10 billion gallons of water, 10 million pounds of plastic, and enough energy to light a city of 250,000. This is at a laundry. Have you guys even thought about this before you walked into this room? (Laughter.) So, I guess the point is we believe we’ve got a powerful offensive weapon to go out and make a real difference, and it’s not complete altruism. It’s also good for our business. It’s good for our customers. It gives us advantage. It’s a way for us to say, look, here’s a product; we need these. It’s a lot cheaper process than the one you’re following.

And Wash & Walk is another one is really after employee safety. We wanted a product that wasn’t slippery when it was on the floor. Remember all the signs every time you walk around you can’t – you know, be careful here, we’re mopping? Well, the problem is you put soap on the floor, and guess what? It gets slippery. (Laughter.) So, we wanted soap that became, frankly, less slippery than the floor was without it on the floor, so employees would stop falling. It’s a noble gesture, as you go forward, and it’s right for everybody. Well, what we also came up with was one that didn’t need to be rinsed, which employees like, too, because they hate mopping floors. So, now they’ve just got to put this stuff down; it dries and it creates a much safer floor, and oh, by the way, will save 2.7 billion gallons of water, and 2 billion hours of labor that they can focus elsewhere. So, I guess it’s an adventure, and you’ve got to be open to challenge, and if you have the right principles you tend to find some of the right savings.

The second thing I would talk is, I guess, how we’re challenging ourselves, and this is hard for people. It’s hard for me, right? Being right isn’t what counts; it’s getting results. And so, the example I’ll talk about is going back to the chart with smiley faces and frowns is phosphates. For too long we sat in this debate, and had this very scientifically based, very logical argument that the phosphates in our products had no impact on streams and lakes. You know what? I believe it. Why? Because they all go to the sanitary sewer, and they get treated. And so, while this is true, at the end of the day we realized nobody cares. (Laughter.) It really just took leadership – not mine – it was our Chief Technical Officer. Susan finally just said, you know, this is a silly way to go handle this debate. We’re debating with facts; we’re not getting at the heart of the problem. Let’s go challenge ourselves. And so, she and her team got after it. And what we believe we’re going to end up with is exactly what you would hope for, but would be afraid to wish for. We believe we’ve got a technical answer, which is much safer for the community, if it happened to get into the lakes and streams; that it is a non-phosphate answer that will be legal everywhere, and removes all the concerns. It also happens to make our products better, which was an unintended finding, and it’s cheaper.

So, it’s kind of funny – you know, the learning is sometimes, and I’ll be the guilty party here in the company, right? We challenge these things, and I have talked about it, and said it’s not about this. You guys want to do this because it’s politically easy. You don’t want to get after the politically hard stuff, where the real issue is. You know what? That is true. But we’re also part of the problem, because we won’t give them the political easy one, which is then going to force them to get after the next one, where the real difference is. And so you’ve got to just understand where you stand in this thing, and I think challenge some of the precepts, because I can you for 20 years I believe this is an issue. And I still secretly know it’s not, but I also know that that 20 years was probably 19 too long, and too many of us are just hung up on being right with facts, versus dealing with reality, which is let’s move this thing forward. Fortunately, Susan’s leadership changed that for our company.

So, final thoughts or challenges – and these are challenges we’ve had, and we still push forward, which is we want reality-based discussions. We don’t want to deal with denial. We want to understand what our issues are. We’ve recently sat as an operating team, and I asked, and said let’s talk about the ten worst things that we’re doing right now. I don’t know how else we’re going to get after them. Whether we talk about them or not, they’re happening. And so let’s deal with them, and understand them, and if we’re going to let it go, we’re going to do it consciously, and knowingly, and understand both the ramifications, good and bad, because there’s always things to get after and to improve.

And the other is there are real trade-offs. If you remember the solid laundry example I talked about, the formula one, just a few minutes ago? One of our metrics is what percentage of recycled plastic do we use in our packaging? It’s a common metric. The only thing I will offer is sometimes you start chasing the wrong metric. Well, we couldn’t use recycled packaging to pack that product, because of the nature of the chemistry inside of it, so then we had a discussion is that the right thing to go forward? Well, the truth is what we ought to be measuring is the percent – is the amount of virgin plastic we’re using, because the truth is, going from a big pail of partial recycled plastic to a small capsule of 100 percent virgin, is still better for the environment, because I’m using less virgin plastic in the capsule than we did in the recycle pail. But if you follow this other metric too closely, and you get too fixated on the wrong thing, it will lead you, sometimes, to the wrong answers, and so a lot of this is just understanding, exploring, and trying to push yourself as you go forward.

So, final conclusions: We view this as a journey. We are blessed; we work in a company where this philosophy has been ingrained from the very start. We had great leadership. We know we’ve got improvement, and we want to get better, and finally we think what makes a difference is actually doing something, and we don’t want this to be a PR move. We want to actually work to make a difference, because that’s what we’re going to hang our hat on when we’re all done. So, those are my thoughts. Thank you.