Heading Earthwards: Johnson & Johnson dives deep to green up healthcare
It's widely recognised that the healthcare sector has a large and costly environmental footprint. Hospitals in particular account for some of the most energy-intensive facilities, yet many traditionally have been slow to embrace resource efficiency. A study by the University of Chicago found that the industry stands to save up to $15bn over 10 years by adopting more sustainable practices - it's an opportunity that hasn't gone unnoticed by Johnson & Johnson (J&J), the world's sixth-largest consumer health company.
J&J’s product stewardship lead Al Ianuzzi says customer demand is increasing for more sustainable products – highly significant when you consider that healthcare is one of the highest growing industries in the world. Globally, he says, the sector spends more than $200bn a year on medical and non-medical products. It’s also constantly innovating: around 25% of J&J’s 2015 sales came from new products introduced within the past five years.
These two drivers sit at the heart of the company’s product stewardship programme, Earthwards, which Ianuzzi helped pioneer back in 2009. Earthwards was launched as the company had a hunch that the market would demand greener products that could deliver added value and performance. It’s an approach that uses lifecycle data to identify the environmental and social impacts of a product, and identifies opportunities to dematerialise them.
Earthwards recognition is reserved for the company’s most improved products, which must achieve three significant improvements across seven impact areas: materials, packaging, energy, water, waste, positive social impact and product innovation.
“Our criteria for Earthwards I think is the most stringent of any company I’m aware of … they have to have three sustainability improvements compared to a previous version of that product,” says Ianuzzi.
Back in 2011 Ianuzzi’s team set a goal to have 60 Earthwards-recognised products by 2015 – a goal it achieved a year early. “Right now we have 87 [Earthwards-recognised] products, reflecting approximately $9.2bn in J&J revenue during 2015. But that number is understated as it doesn’t account for all the different variations of a particular product,” says Ianuzzi.
Later this month, the company is due to formally launch a new, far more ambitious target as part of its upcoming 2020 citizenship & sustainability goals, which includes a target of creating 20% of company revenue from Earthwards-recognised products by 2020.
“If we achieve this, we hope to have at least 175 Earthwards-recognised products by the end of 2020. It doesn’t sound like a lot of products, but in terms of revenue, it’s a huge impact,” says Ianuzzi.
To help achieve this, the company has now incorporated Earthwards into its new product development process. Every new product and package has to go through three steps: identifying regulatory, corporate and supply chain risks; understanding lifecycle impacts and associated hotspots for that product category; encouraging the product brand teams to make three improvements. Once these three steps have been completed, the product is then independently verified.
Much of this work relies on a deeper level of supply chain engagement. “We used to think our biggest impacts as a company were at our manufacturing facilities, but really they’re in the raw materials we choose and the lifecycle of those products,” notes Ianuzzi. “It’s really difficult in some cases to find out where all of the component parts of a product are coming from. Trying to understand where each of these raw materials are sourced from is very complex.”
As with any engagement process, Ianuzzi acknowledges there can be challenges as well as opportunities – especially as J&J deals with more than 78,000 suppliers. “We may be only one of hundreds of companies [that a supplier] is dealing with, we don’t always have that leverage. But there are other suppliers that are like-minded, that are thinking with a sustainability lens. They are easier to partner with and so we gravitate towards them strategically.”
Supplier innovation will be a key focus going forward. The company plans to facilitate at least five innovation sessions this year with key partners, to brainstorm ideas that can potentially be taken to market. “We will prioritise which ones would be most impactful and then those resulting projects will be investigated by the supplier,” Ianuzzi says.
When a product does achieve Earthwards recognition, the outcomes are impressive. One example is J&J’s work with DePuy Synthes, part of the J&J companies portfolio. DePuy Synthes manufactures replacement knees and through adopting the Earthwards approach for its Attune Knee system, the company reduced the number of instruments required for surgery by 36% compared to a previous version of the knee. Further savings were acquired in the instrument sterilisation process, which now uses 22% less energy and 25% less water. Packaging was also reduced by 25%.
The Band-Aid brand has also had the Earthwards treatment, resulting in 29% dematerialisation savings. The manufacturing process for this product line now requires 30% less energy compared to the previous process, and shipping efficiencies have increased by 60%. As a result, the product has achieved a 42% reduction in GHG emissions of raw material transport.
Ianuzzi says the Earthwards approach is also driving wider benefits in the supply chain, particularly around risk. “The first step of Earthwards centers around understanding risk, so for instance, regulatory risk like the REACH regulations. We also look to identify materials of concern up front – we want to understand what raw materials or chemicals might be on a NGO list, or in a conflict area, so we can evaluate them and steer away from them if necessary.”
Asked how much J&J has invested in Earthwards so far, Ianuzzi says it’s hard to give a definite figure as the programme is built into the company’s R&D budget, but says in 2015 J&J invested more than $9bn in R&D to bring new products to market. In terms of how return on investment is stacking up, he says there are a lot of proof points for Earthwards.
“Nobody is buying a product just because it’s more sustainable,” Ianuzzi maintains. “The product needs to perform, with sustainability built into that performance. In terms of business value for our customers, relationship building is so much better when you’re doing this from a sustainability perspective. It gives customers more security and confidence, and enables us to have discussions about other, non-price issues.”