9 9 S SUUSS TT A
A II NNAAB BI LI ILTTY Y R RE E
PO
1 91 99 9
P ROTR T

EMBRACING THE FUTURE
Using the powerof innovation to improve
lives, the environmentand shareholder value.

2Statement of Purpose
We will provide products of superior
quality and value that improve the livesof the world’s consumers. As a result,consumers will reward us with leadership sales and profit growth, allowing
our people, our shareholders, and thecommunities in which we live and work
to prosper.

T

his report was prepared in accordance with the
Global Reporting Initiative’s (GRI)’s
Sustainability Reporting Guidelines: Exposure Draft
for Public Comment and Testing, March 1999. The
mission of the GRI is to promote international
harmonization in the reporting of relevant andcredible corporate environmental, social andeconomic performance information to enhance
responsible decision-making. GRI pursues thismission through a multi-stakeholder process ofopen dialogue and collaboration in the design andimplementation of widely applicable sustainability
reporting guidelines. GRI has not verified thecontents of this report, nor does it take a positionon the reliability of information reported herein.
For further information about GRI, please visit:
http://www.globalreporting.org.

Table of Contents
Part 1. CEO Statement ......................3
Part 2. Key Indicators ........................4
Part 3. Profile of P&G........................6
Part 4. Policies, Organizationand Management Systems .. 10Part 5. Stakeholder Relationships ... 20
Part 6. Management Performance . 23

This report is available on P&G’s World
Wide Web site: http://www.pg.com/99sr

Part 7. Operational Performance ... 28

Please visit P&G’s Corporate Web site:
http://www.pg.com for the latest P&G
news, shareholder, and career information.

Part 8. Product Performance .......... 35
Part 9. Sustainability Overview ....... 40
FRONT COVER: In Zimbabwe, health care workers
trained by the Health Volunteers Overseas program
use Crest toothpaste educational materials toimprove dental hygiene in remote villages.

3Part 1. CEO Statement
This is taken from a letter that Durk I. Jager, P&G President and Chief Executive, sent to the Company’s
Global Business Leadership Council and to employees on sustainable development on July 1, 1999.

S

ustainable development, or sustainability, integrates economic progress, social development
and environmental concerns with the objective ofensuring a quality of life for future generations atleast as good as today’s. It is becoming an increasingly important public policy issue, andalso a significant business opportunity.

Fabric & Home Care to consider new cleaning
methods that use less water, cold water,
non-potable water and even salt water. These newcleaning methods not only help meet thesustainability needs of developing countries, but also
can be leveraged for breakthroughs indeveloped countries.

Consistent with the Company’s new
In Food & Beverage, the need for betterbusiness structure, Organization 2005, we
nutrition for the world’s growing populaare looking to the new Global Businesstion, particularly in developing countries,
Units (GBUs) for leadership on how
has led to our development of a new nusustainability will be ref lected in theirtrient drink that has been clinically proven,business plans. Concurrently, we have Durk I. Jager,
in a Tanzanian study, to improve thereorganized the Company’s Corporate President andgrowth and development of children. These
Environmental Quality group to encom- Chief Executive
innovations respond to important conpass all aspects of sustainability, and tosumer needs, and br ing substantial
focus its leadership on activities best done at a sustainability benefits.
corporate level.
We need to make further progress. Each GBU must
George Carpenter has been appointed Director- understand how sustainability impacts its business,
Corporate Sustainable Development to lead this and identify the implications for innovation andgroup. This reorganization is designed to shift geographic expansion programs. As part of this, I
accountability for sustainable development to our have asked Fabric & Home Care to develop a
GBUs, and better align our efforts with the new sustainability plan for its GBU which can also serve
organization design. These moves will build on, as a model for other GBUs. Paul Polman, Presidentand strengthen, our Company’s long-standing Global Fabric Care, will lead this work and collabocommitment to the environment, while taking a rate with George Carpenter to define resources that
more holistic view that also incorporates the so- will be useful to the GBUs as they develop thesecial and economic concerns of our consumers, plans. Sustainability also will be one of the areas
shareholders and communities.
we explore in our upcoming strategy reviews.
Over the past several years, academics, governments
and non-governmental organizations have been
evolving their views of environmental quality to thebroader, more holistic concept of sustainable development. While some see this as inevitably leading
to restraining consumption, I view it as an opportunity and stimulus to innovate, to improve consumers’ lives, while also making positive contributions to environmental quality and society, particularly in developing countries.

George Carpenter and the new Corporate Sustainable Development group will focus on defining theCompany’s overall sustainability policy, identifying
emerging sustainability issues, managing corporate
reporting and building relations with external
stakeholders. George’s group also will work closelywith other internal resources involved in thesustainability issue.

We already have made progress in this area. For
example, the global water supply issue has led

Durk I. Jager

4Part 2. Key Indicators
Key Sustainability Focus Areas

Major Stakeholder Groups

P&G intends to focus its sustainability efforts on Waterand Health & Hygiene. These two areas are applicable
across both the Company’s global business units andthe interlocking drivers of sustainability; economic
development, social equity and environmental protection. The Company’s approach is to increase shareholder value by contributing solutions to problems,
needs and concerns associated with these two areas.

• Consumers• Communities

While P&G intends to focus on Water and Health& Hygiene, the Company will continue its long tradition of:• doing what is right for consumers, employees,
shareholders and communities where it operates.
• building sales and profit growth in a socially andenvironmentally responsible manner.
• increasing diversity within its workforce.
• contributing to a more educated population.
• maintaining high standards of health, safety andenvironmental protection for its products andoperations throughout the world.

• Employees• Shareholders

Major Impacts Associatedwith Products
Economic• Shareholder Value• Employment• Taxes, Fees and Contributions
Social• Health• Hygiene• Education
Environmental• Resource Use (Materials and Energy)• Water• Waste and Emissions

Economic Data
Financial Highlights (Millions of dollars except per share amounts)
1998/99
Net Sales$38,125Net Earnings$ 3,763
Basic Net Earnings Per Common Share$2.75
Total Assets$32,113Long-Term Debt
$6,231
Shareholders’ Equity$12,058
Income Taxes$2,075Marketing, Research & Administrative Expenses$10,666

1997/98$37,154$ 3,780$2.74$30,966$ 5,765$12,236$ 1,928$10,035

1996/97$35,764$ 3,415$2.43$27,544$ 4,143$12,046$ 1,834$ 9,766

5

Social Data
Diversity – U.S. Enrollment

P&G expects its workforce to become even more diverse in the future. This is a global policy and programs
are in place for continuous improvement in all regions. The percentages of minority and women employees in the U.S. are shown in the following table:% Minorities
1998/99 1997/98 1996/97
15.0
15.6
15.5
18.1
18.6
18.6
16.9
17.4
17.4

Management
Technicians, Laborers, Service Workers
Total% Women
1998/99 1997/98 1996/97
38.4
38.0
37.5
41.7
41.1
40.8
40.4
39.9
39.5

Worldwide P&G Philanthropic Contributions
1998/99$73,245,604

Total

1997/98$66,859,204

1996/97$60,616,378

Production, Waste and Energy Data (Thousands of Metric Tons)
Total

1998/99 By Region
Europe,Latin
Middle East, America
Africa
5,040
1,280
n/a
296

North
America

Production

1998/99 1997/98

1996/97

Asia

Packaged Product Shipped
Raw Materials from
Recycled Sources
Packaging Used
Packaging Material from
Recycled Sources

14,644 14,436 14,019
380
400
n/a

1038
84

1,375
490

1,367
455

1,330
480

101
24

440
171

105
52

729
243

864
56%

895
56%

730
67%

67
58%

209
70%

146
14%

443
64%

Solid Waste — Non-Hazardous 271
Solid Waste — Hazardous
27
Effluents (Excluding Water)
31
Air Emissions
20

324
12
37
20

175
7
34
21

18
5
1
1

36
19
4
2

115
2
3
1

102
2
23
16

947
1.9

853
1.6

58
n/a

219
n/a

57
n/a

633
1.6

7,286
n/a

Waste
Generated Waste
Recycled/Reused Waste

Disposed Waste

Other
Energy Use (10 5 GJ)
SARA Releases*

967
1.6

* Releases defined in the U.S. Superfund Amendments and Reauthorization Act by the U.S. Environmental Protection Agency.

Summary of Violations andInterventions

Occupational Health & Safety Data

Past three years’ data on environmental, transportation, and worker health and safety violations andinterventions follow:

NumberFines

1998/99
46$33,250

1997/9854$73,100

1996/9756$14,900

Past three years’ data on two key metrics for worker
health and safety follow:
Total Incident Rate
(injury and illness per 100 employees)
1998/99
1997/98
1996/97
0.7
0.8
0.9
Total Lost Workday Case Rate(lost & restricted workday cases per 100 employees)
1998/99
1997/98
1996/97
0.3
0.4
0.4

6

Part 3. Profile of P&G
markets approximately 300 brands of consumer products to nearly 5 billion consumers in over
140 countries. The products include laundry detergents, toothpastes, shampoos, feminine hygiene products, pharmaceuticals, snacks, diapers, cosmetics, and cold remedies. These products are best known by
their brand names: Tide, Ariel, Crest, Pantene Pro-V, Always, Whisper, Didronel, Pringles, Pampers, Oilof Olay and Vicks.
P&G’s worldwide headquarters is located in Cincinnati, Ohio, USA. The Company has on the ground
operations in over 70 countries and employs more than 110,000 people worldwide.
P&G is a publicly owned company. Its stock is listed and is traded on the following exchanges: New York,
Cincinnati, Amsterdam, Paris, Basle, Geneva, Lausanne, Zurich, Frankfurt, Brussels and Tokyo.
As of July 23, 1999, there were 278,245 Common Stock shareholders of record, including participants in
the Shareholder Investment Program. Five billion shares of Common Stock have been authorized. About
1.32 billion shares were outstanding as of June 30, 1999.
This is the first Sustainability report for P&G’s worldwide operations. Data in this report cover the period
from July 1, 1998 through June 30, 1999. Financial information is given in U.S. dollars.

Key Sustainability Focus
Areas
P&G intends to focus its sustainability
efforts on Water and Health & Hygiene.
These two areas are applicable across both
the Company’s global business units andthe interlocking drivers of sustainability; economic
development, social equity and environmental protection. The Company’s approach is to increase shareholder value by contributing solutions to problems,
needs and concerns associated with these two areas.
While P&G intends to focus on Water and Health& Hygiene, the Company will continue its long tradition of:• doing what is right for consumers, employees,
shareholders and communities where it operates.
• building sales and profit growth in a socially andenvironmentally responsible manner.
• increasing diversity within its workforce.
• contributing to a more educated population.
• maintaining high standards of health, safety andenvironmental protection for its products andoperations throughout the world.

Changes this Fiscal YearIn September, 1998, P&G announced far-reachingchanges to its structure, work processes and culture
to accelerate growth. In June, 1999, the Company
reported on progress toward this initiative called
Organization 2005. The new organization structure, including the move from four geographic business units to seven Global Business Units (GBUs)
based on product lines, became effective July 1,
1999. The GBUs are responsible for all strategic,
manufacturing and sourcing activities. Each of the

Building for the Future$1 Million
Net Sales
1859

Wm. Procter &James Gamble,
Founders, Candle& Soap Business

1837

1850

Northern U.S.
Markets

1860

1870

7

new GBUs is expected to integrate sustainability inits business plans. Accountability for sustainable
development resides with the GBUs.
The costs resulting from Organization 2005 include
those related to separation and relocation of employees, streamlining manufacturing capabilities,
including consolidation and closure of certain manufacturing facilities, and other charges. Total charges
related to Organization 2005 are expected to ap-

proximate $2.6 billion ($1.9 billion after tax) over
six years. The Company recorded charges totaling$481 million ($385 million after tax) for the year
ended June 30, 1999.
Acquisitions accounted for as purchases in
1998/99 totaled $137 million.

Financial Information
Core net earnings, which exclude Organization 2005 costs, were $4.15 billion or $3.04 basic net earnings per share – an 11% increase over the prior year. Fiscal year 1998/99 net earnings totaled $3.76
billion. Basic net earnings per common share of stock were $2.75.
Common share dividends were $1.14 per share in 1999. For the coming year, the annual dividend rate
will increase to $1.28 per common share, marking the forty-fourth consecutive year of increased commonshare dividend payments.
More information on P&G’s financial performance is available on-line at http://www.pg.com/investor.
Financial Highlights (Millions of dollars except per share amounts)
1998-99
Net Sales$38,125Net Earnings$ 3,763
Basic Net Earnings Per Common Share$2.75
Total Assets$32,113Long-Term Debt
$6,231
Shareholders’ Equity$12,058
Income Taxes$2,075Marketing, Research & Administrative Expenses$10,666

Regions
For reporting purposes in 1998/99, P&G divided
the world into four geographic regions. The North
America region includes the United States andCanada. The Europe, Middle East and Africa region stretches from the United Kingdom to South
Africa, Pakistan to Russia. The Asia region includes
Net Sales by Region (Millions of dollars)
Europe,North
Middle East,
Fiscal Year
America
Africa1998/99$18,977$11,878
1997/98$18,456$11,835
1996/97$17,625$11,587

P&G
Advertising
1882

1880

ProfitSharing1887

Incorporated
Company
1890

1890

Asia
$3,648$3,453$3,573

1997-98$37,154$ 3,780$2.74$30,966$ 5,765$12,236$ 1,928$10,035

1996-97$35,764$ 3,415$2.43$27,544$ 4,143$12,046$ 1,834$ 9,766

China, India, Japan, Korea, the Philippines, thecountries of South Asia, Australia, and New
Zealand. The Latin America region includes Mexico
as well as Central and South America. A small portion of sales cannot be accounted for regionally andis reported as Corporate sales.

Latin
America$2,825$2,640$2,306

Beginningof P&G
Research &Development

Corporate
$797
$770
$673

Total
Worldwide$38,125$37,154$35,764

Shortening &Oils Business

1900

1910

P&G
CanadaCode ofMarkets Regulations

1920

8

Business Sectors
Throughout f iscal year 1998/99, P&G also
reported sales according to its business sectors:
Laundry & Cleaning, Paper, Beauty Care, Food &Beverage, and Health Care.

Net Sales by Business Sector (Millions of dollars)
Laundry &BeautyFiscal year
Cleaning
Paper
Care
1998/99$11,517$11,451$7,115
1997/98$11,099$10,862$7,1601996/97$10,892$10,101$7,101

As part of P&G’s Organization 2005 initiative to
optimize resources to fit a growing global businessand to accelerate innovation and growth, theCompany began operating its business along
seven product-based Global Business Units, effective July 1, 1999.

Food &
Beverage$4,381$4,376$4,107

HealthCare$2,836$2,849$2,895

Corporate& Other
Total$825$38,125$808$37,154$668$35,764KEY BRANDS
Fabric & Home Care
ACE BLEACHARIEL
BOUNCECASCADE
CHEER
DAWN
DOWNY
FAIRY
JOY
LENOR
MR. CLEAN
TIDE
Feminine Protection
ALWAYSALWAYS ALLDAYSLINES FEM PROTAMPAX
WHISPER
Health CareACTONELASACOLBLEND-A-MED
CREST
DIDRONEL
MACROBIDMETAMUCILNYQUIL/DAYQUILPEPTO-BISMOLSCOPEVICKS FORMULA 44
VICKS VAPORUB

Building for the Future,
SafetyProgramStarted

1920

Philippinesand U.K.
Markets

1930

Beauty Care
CLEARASIL
COVER GIRL
HEAD & SHOULDERSIVORYMAX FACTOROIL OF OLAY
OLD SPICEPANTENE PRO-V
PERT PLUS
REJOICESAFEGUARD
SECRETSK-II
VIDAL SASSOON
ZEST
Tissue/Towel
BOUNTYCHARMIN
PUFFS
TEMPO
Baby CareBABYSANLUVS
PAMPERSPAMPERS WIPES

continued...
Tide
Overseas
Introduced Division
1946
1948

Synthetic
Detergents
Oral Care
Business

Food & Beverage
CRISCOFOLGERSJIFMILLSTONE
OLEAN
PRINGLES
PUNICASUNNY DELIGHT

1940$1 Billion
Net Sales

1950

First
Disposable
Fluoride
Diapers
Toothpaste Business
1955

1960

Affirmative
Action1965

9Industry Associations
P&G is a member of many industry associations
whose activities are directly related to the Company’sbusiness. These associations include the following:North America
American Forest & Paper Association
American Industrial Health Council
American Legislative Exchange Council
Association of National Advertisers
Business Roundtable
Chemical Producers/Manufacturers Associations
Consumer Healthcare Products Association
Corporations Supporting Recycling
Cosmetic Toiletries and Fragrances Associations
Food Industry/Processors Association
Global Environmental Management Initiative
Grocery Manufacturers Associations
National Association of Manufacturers
Research Based Pharmaceutical Companies Associations
U.S. Council for International Business
Europe, Middle East and Africa
American European Community Association
Centre for European Policy Studies
Chemical Manufacturer Associations
Cosmetic Toiletry and Perfumer Associations
Efficient Consumer Response Association
Environmental Risk Assessment Steering& Management Committee
European American Industrial Council
European Association of Industries of Branded Products
European Centre for Ecotoxicity and Toxicology
of Chemicals

European Chemical Industry Council
European Disposables and Non-Woven Association
European Industry of Hygiene Paper Products
European Recovery & Recycling Association
Food Business Forum
Food Industry/Processors Associations
Paper Industry Associations
Pharmacy Industry Association
Union of Industrial & Employer’s Federations
World Federation of Advertising
Asia
Confederation of Indian Industries
Cosmetic Toiletries and Fragrance/
Perfume Associations
Industry Councils
Paper Industry Associations
Latin America
Business Councils for Sustainable Development
Cosmetic Toiletry and Fragrance Manufacturers
Associations
Industry Councils
National Societies of Industry
Worldwide
Business Industry Advisory Committee
Conference Board
International Chamber of Commerce
Local & National Chambers of Commerce
Nonprescription Drug Manufacturers Associations
Soap & Detergent Associations
Solid Waste Associations
World Business Council for Sustainable Development

Contact Information
This sustainability report is available on P&G’s web
site: http://www.pg.com/99sr
Other available repor ts include the 1999
Annual Report to Shareholders, 1999 Global
Contributions Report, and the 1998 Environmental Progress Update.
For questions or comments about this report orto request an Executive Summary of this report,
write, fax, or e-mail:Mr. Keith Zook
Corporate Sustainable Development
Two P&G Plaza
TN-02 MS-28
Cincinnati, OH 45202 USA
Fax: (513) 983-5226
E-mail: sustainrep-im@pg.com

Toll-free Environmental
Juice & Feminine Statement
World
Opportunity
Consumer
Audit$10 Billion
ProtectionofEnvironment
2000
HotlineProgramNet Sales
Businesses
Purpose Center Award
Award
1987
1992
1994

1970

1980

1990

FutureShares1998

2000

Organization
2005

10

Part 4. Policies, Organizationand Management Systems
is guided first and foremost by its Purpose,
Values and Principles, subject only to sovereign
Societaland inter national laws. Inter national
Expectations
guidelines, codes, laws and societal
expectations have always provided the
Rio Declaration on
Sustainable Development
Ethicsfoundation for the policies andmanagement systems employed
Organisation
International Guideline
for Economic
by the Company.
Chamber of
Codes
Co-operation

ReportingCommerce Rules
and Development
on Extortion
Guidelines& Briberyfor Multinational
Policies
Enterprises
International
Management
Chamber
Systemsof Commerce
Business
Principles
International
CharterLabouron S.D.
Organization
Statement
Universal
Declaration
Coreof Purpose
Declaration
on Fundamental
Valueson HumanPrinciples &RightsGlobal Sullivan
Rights at WorkPrinciples
International Labour
Organization Tripartite
Improved
Declaration
Standard
Educationof Living

Law

InternationalCore Values

Statement of Purpose

We will provide products of superior
quality and value that improve the livesof the world’s consumers. As a result,consumers will reward us with leadership sales and profit growth, allowing
our people, our shareholders, and thecommunities in which we live and work
to prosper.

Religious
Values& Norms

Transparency

11Core Values

capability to deliver our strategies and eliminate
organizational barriers.

• Ownership We accept personal accountability to meet
LEADERSHIPPEOPLEOWNERSHIP

PASSIONFOR
WINNINGTRUST

INTEGRITY

P&G is its people and the Core Values
by which they live.
• P&G People We attract and recruit the finest people

the business needs, improve our systems and help others improve their effectiveness. We all act like owners,
treating the Company’s assets as our own and behaving with the Company’s long-term success in mind.

• Integrity We always try to do the right thing. We
are honest and straightforward with each other. We
operate within the letter and spirit of the law. We
uphold the values and principles of P&G in every action and decision. We are data-based and intellectually honest in advocating proposals, including recognizing risks.

in the world. We build our organization from within,promoting and rewarding people without regard toany difference unrelated to performance. We act on
the conviction that the men and women of Procter &Gamble will always be our most important asset.

• Passion for Winning We are determined to be• Leadershi p We are all leaders in our area of• Trust We respect our P&G colleagues, customers andresponsibility, with a deep commitment to deliver
leadership results. We have a clear vision of where weare going. We focus our resources to achieve leadership objectives and strategies. We develop thethe best at doing what matters most. We have ahealthy dissatisfaction with the status quo. We
have a compelling desire to improve and to win in
the marketplace.
consumers and treat them as we want to be treated.
We have confidence in each other’s capabilities andintentions. We believe that people work best when there
is a foundation of trust.

Principles

We challenge convention and reinvent the way we dobusiness to better win in the marketplace.

These are the Principles and supporting behaviors which
f low from our Purpose and Core Values.

WE ARE EXTERNALLY FOCUSEDWE SHOW RESPECT FOR ALL INDIVIDUALS
We believe that all individuals can and want to contribute to their fullest potential.
We value differences.
We inspire and enable people to achieve high expectations, standards, and challenging goals.
We are honest with people about their performance.

THE INTERESTS OF THE COMPANY AND THE
INDIVIDUAL ARE INSEPARABLE
We believe that doing what’s right for the business withintegrity will lead to mutual success for both the Company and the individual. Our quest for mutual success ties us together.
We encourage stock ownership and ownership behavior.

WE ARE STRATEGICALLY FOCUSED IN
OUR WORK
We operate against clearly articulated and aligned objectives and strategies.
We only do work and only ask for work that adds value
to the business.
We simplify, standardize, and streamline our current work
whenever possible.

INNOVATION IS THE CORNERSTONE OFOUR SUCCESS
We place great value on big, new consumer innovations.

We develop superior understanding of consumers andtheir needs.
We create and deliver products, packaging and concepts
that build winning brand equities.
We develop close, mutually productive relationships withour customers and our suppliers.
We are good corporate citizens.

WE VALUE PERSONAL MASTERY
We believe it is the responsibility of all individuals tocontinually develop themselves and others.
We encourage and expect outstanding technical masteryand executional excellence.

WE SEEK TO BE THE BESTWe strive to be the best in all areas of strategic importance to the Company.
We benchmark our performance rigorously versus the very
best internally and externally.
We learn from both our successes and our failures.

MUTUAL INTERDEPENDENCY IS A WAY
OF LIFE
We work together with confidence and trust across functions, sectors, categories, and geographies.
We take pride in results from reapplying others’ ideas.
We build superior relationships with all the parties
who contribute to fulfilling our Corporate purpose,including our customers, suppliers, universities,
and governments.

12

Business Conduct Policies

3. Conflict of Interest Policies

P&G has been built through the character of its people.
The character is reflected in the Company Statement of
Purpose, Core Values and Principles. The following isa brief extract from the P&G Worldwide Business Conduct Manual.

The Company policy regarding possible conf lict of interest is based on the principle that an employee’s decisions in the business must be made solely in the bestinterest of P&G.

1. Compliance with Laws and P&G BusinessConduct Policies

As a general rule, an employee or his/her immediate family
should not have an ownership or profit interest in a competing firm or with any firm, supplier, or customer withwhom they deal in their employment.

P&G is committed to complying with all laws and meeting or exceeding regulations wherever we conduct ourbusiness activities.
P&G employees worldwide are expected and directed tocomply with all laws and all P&G business conduct policies relating to their P&G business activities.
Every P&G employee is expected to fully cooperate in theinvestigation of any alleged violation. Concealing a violation or altering or destroying evidence to hinder aninvestigation is not tolerated.
Employees who violate the law may expose themselves aswell as the Company to substantial criminal fines, prison
terms and civil damages.
If an employee believes another P&G employee, consultant or contract worker, is violating the law or P&G policies, the employee is expected to bring this information
to the attention of his/her management. If he/she does
not want to discuss this with his/her management, he/she can talk to (a) Corporate Security, (b) any Human
Resources manger or (c) P&G legal counsel.
The “P&G Hot-line” can be used to report illegal behavior and enables employees to remain anonymous, if theywish. The Hot-line has been installed in most countries
where P&G does business and is operational 24 hours aday.
If employees choose to identify themselves, the Company
has a strong policy prohibiting intimidation or any retaliation by any manager or co-worker.

2. Ethical Business Conduct Guidelines

No employee should have any outside business interest
which diverts a significant amount of time or attention
from duties and responsibilities owed to P&G.
A P&G employee should not participate in decisions withrespect to P&G’s relationship with any customers, suppliers or competitors if he/she has a spouse or close relative who is an employee and/or owner of that firm.
A conflict of interest would exist if a P&G employee or a
relative provides goods or services to P&G as an independent supplier.
Employees should never accept entertainment, gifts, trips,
sporting event tickets, vacations, personal gratuities, etc.
in connection with their work at P&G. This would notinclude very minor items like pens and calendars. Eventtickets may be occasionally accepted when the P&G employee personally pays their value. Business meals may
be accepted if the P&G employee offers to bear the expense on some of the occasions.

4. Confidential/Proprietary Information
Protecting confidential information and materials isvital to the Company’s future success and, therefore,
could be important to the job security of all employees.
By accepting employment with P&G, an employee has
accepted a moral and legal obligation not to disclose confidential or trade secret information to third parties, even
if he/she should decide to leave the Company.
Employees should not discuss confidential information
at any time in any public place.

P&G sets high standards for itself regarding its behavior and the behavior of its employees when conducting
business activities. Integrity and doing the right thing
have long been core P&G values.

5. Personal Behavior in the Workplace

Employees should ask themselves the following questions
when considering any business situation:

Actions constituting harassment of any P&G employee
by another employee, customer or supplier are strictly
prohibited, no matter where they occur. Avoidance of actsof harassment is a continuing condition of employment
for every P&G employee.

Is my action the “right thing to do?”Would my actions withstand public scrutiny?
Would my actions protect P&G’s reputation as an ethicalcompany?
If any of the answers are not an unqualified “yes”, thenan employee should not do it.

P&G’s fundamental policy is that we will treat all of
our P&G colleagues with respect.

Every employee is expected to perform his/her work in asafe manner, free of the influence of alcohol or drugs.

13
Any person who threatens to commit or actually engages
in a violent act on P&G property will be removed fromthe premises and remain off, pending the outcome of aninvestigation into the incident.

The Company does not practice or approve of reciprocity
with suppliers in any part of the business.

6. Commercial Bribery

Internal Controls refers to systems and processes which
combine policies, authorizations and procedures withproper authority and management tracking andreporting to ensure the business operations areproperly managed. Strong internal controls assist
management to deliver required business results. Inadequate controls can lead to actual losses and lost
business opportunities.

Any personal payments, bribes or kickbacks to P&G
customers or suppliers or the receipt of kickbacks,
bribes or personal payments by P&G employees are absolutely prohibited.

7. Safety, Health and Environmental Policies
It is the responsibility of employees to be aware of thelaws and regulations that govern their activities andto comply with those laws, using all appropriate corporate resources.
All employees associated with the safety assessment ofour products have a responsibility to see that the design,
execution and interpretation of research meet the highest professional and scientific standards so that the Company and the consumer are assured of the best possible
safety judgments.
With respect to P&G’s Environmental
Quality Policy, which states that wewill continually strive to improve theenvironmental quality of our operations, compliance with the law is a corevalue and it is the single highest priority for the Company’s environmental programs.

9. Internal Controls Policy

All managers must ensure that there are appropriate control policies and procedures in their areas of operation,and that these policies are understood and followed.
Every P&G employee must cooperate fully with and provide full and complete information to P&G Internal Control personnel and P&G’s independent external auditors.

10. Financial and Accounting Records Policy
The Company’s business records are relied upon to produce reliable and accurate reports to management,
shareholders, creditors, governmental entities and others. Therefore, it is essential that each employee comply strictly with the Company financial control procedures and internal accounting systems.
All official records of the conduct of the Company’s business must be accurate, honest and complete without any
restriction or qualifications of any kind.

Every employee must understand and be responsible forincorporating safe behavior and environmental quality
into their daily business activities.

All P&G operations worldwide must comply with all local
and national laws relating to accurate and complete
maintenance of Company financial books and records.

8. Fairness in Dealing with Customers
and Suppliers

11. Securities Trading Policy

P&G’s success depends on building productive relationships with our customers and suppliers based on integrity, ethical behavior and mutual trust.
All customers are treated fairly and without
discrimination.
All P&G consumer products, including value packs, areavailable for purchase by all competing customers withina given market.
Purchases of materials and services from suppliers are
based on the merits of the purchase opportunities available from competing offers.
All discussions with an existing or potential suppliershould be restricted solely to the Company’s needs. There
should be no reference to the Company’s present or potential activities with other suppliers.

Employees must not engage in “insider trading” in securities based on confidential P&G information, or give
“tips” to outsiders who might trade on the basis ofsuch information.

12. Advertising/Promotion Policies
The principle of honesty is a basic operating principleof the Company. Neither deceptive advertising nor questionable promotional activity can ever be justified. Theseare essential tenets of our dedication to consumers andessential to gaining and keeping their continued loyalty to our brands.
Claims about P&G and competitive products must be substantiated through objective product testing based on
sound statistical and scientific principles.

14

13. Antitrust Policy and Compliance Guidelines
It is Company policy that all employees strictly comply
with antitrust laws and the competition and antimonopoly laws of all countries, states and localities
in which they conduct P&G business.
Supervisors and managers are responsible for ensuringthat employees under their supervision are aware of andcomply with this policy. It is very important for employees to understand this policy so that P&G, and its employees, may avoid even the appearance of an antitrust
violation.
The Company’s general rule is “NO CONTACT WITH
COMPETITORS.”

14. Political Contributions and Related Policies
The Company’s basic policy is that P&G funds or resources may not be used to make a political contribution to any political candidate or political party anywhere in the world.
Exceptions to the Company’s basic policy are allowed only
where such contributions are permitted by law and express permission has been given in advance by the Chief
Executive of The Procter & Gamble Company.
P&G policy does not permit the use of any P&G facilities
or resources by employees for political campaigning, political fund raising or partisan political purposes.
A decision by an employee to contribute any personaltime, money or other resources to a political campaign orpolitical activity must be totally voluntary.
Laws covering political contributions by corporations arevery complex. Any questions should be discussed with
P&G Legal Counsel.

15. Policy Governing Contacts with
Government Officials
While honesty is part of the ethical behavior expectedin conducting any P&G business, the need for accuracy
and honesty applies with special vigor when providing
reports or information to governmental agencies.
It is P&G policy to comply with all applicable laws, rules
and regulations related to lobbying or attempting to inf luence government officials. Such information provided
to governments must be accurate and government officers must be dealt with honestly and ethically.

16. Transacting International Business
Managers and employees of P&G affiliates doing business around the world are required to conduct theirbusiness activities in compliance with the applicablelaws of these countries.

The Foreign Corrupt Practices Act makes it a crime tomake payment (other than small gifts intended only to
expedite performance of routine actions) directly or indirectly to a government official or political party.
United States laws prohibit participation in certain international boycotts. As a result, any employee who receives a request which relates in any way to an international boycott should promptly consult with P&G legal
counsel before responding to that request.
It is Company policy to comply with all customs laws andregulations as well as U.S. and foreign Export Control
laws. Consultation with P&G legal counsel early on is
encouraged to avoid problems.

Other Policies
In addition to the policies described in the Worldwide
Business Conduct Manual, P&G has adopted the following policies which are applicable globally.

Animal Testing
Effective July 1, 1999, P&G ended the use of animal
testing for current non-food, non-drug products, except where required by law. In the future, animal testing will only be done when required by law or to evaluate the safety of new ingredients and new to the world
products for which no validated non-animal tests are
currently available. This decision applies to all countries where the Company operates. This policy covers
a broad range of packaged goods that representsroughly 80 percent of P&G’s total product portfolio,
including color cosmetics, shampoos and hair styling
products, skin-care products, deodorants, laundry anddishwashing detergents and household cleaners.

Diversity
All leaders within the Company hold themselves and theiremployees accountable for creating and managing a diverse organization so each individual can contribute tohis or her fullest potential. This includes ensuring we comply with the laws of the countries where we operate. In
those countries where some personal attributes and characteristics (like race and gender) require affirmative action in terms of hiring and representation, we will continue to meet these requirements.
Individuals will help create and maintain a discrimination-free and harassment-free environment that encourages people to be themselves by eliminating racism, sexism, classism or any other artificial distinction.
All stakeholders associated with P&G (suppliers, contractors, organizations and other individuals) will value diversity so they are better equipped to contribute to theCompany’s success.

15

External Initiatives
Listed below are some of the external initiatives thatP&G recognizes as consistent and synergistic with
its internal policies.
• Alter natives to Animal Testing, http://
www.jhsph.edu/~altweb/• Association Internationale de la Savonnerie dela detergence et des produits d’Entretien (AISE)
Code of Good Environmental Practice – as it applies to our laundry products in 15 countries of
the European Union plus Iceland, Norway and
Switzerland, http://www.euronet.be/washright/
uk/who.html• Global Environmental Management Initiative,
http://www.gemi.org• The Global Sullivan Principles• International Chamber of Commerce Business
Charter for Sustainable Development• Responsible Care™ – as it applies to our chemicals business at a limited number of facilities.
• Sustainable Forestr y Initiative, http://
www.afandpa.org/Forestry/• World Business Council for Sustainable Development, http://www.wbcsd.ch

Organizational Structure & Responsibilities
In September, 1998, P&G announced far-reaching changes to its structure, work processes and culture toaccelerate growth. In June, 1999, the Company reported on progress toward this initiative called Organization 2005. The new organization structure, including the move from four geographic business units
to seven Global Business Units (GBUs) based on product lines, became effective July 1, 1999. The GBUs
are responsible for all strategic, manufacturing and sourcing activities. Each of the new GBUs is expected
to integrate sustainability in its business plans.
Each of the new GBUs is expected to integrate sustainability in its business plans. Accountability forsustainable development resides with the GBUs.

Baby
Care

BeautyCare

Fabric &Home
CareFeminine
Protection

Food &
Beverage

HealthCare

Tissues &Towel

A Corporate Sustainable Development department has been formed which focuses on leadership activities
best done at a corporate level. This department will focus on:• Defining the Company’s overall sustainability policy• Identifying emerging sustainability issues• Managing corporate reporting• Building relationships with external stakeholders.
This structure builds on, and strengthens, the Company’s long-standing commitment to the environment, while taking a more holistic view that incorporates the social and economic concerns of the Company’s
stakeholders.

16Management Systems
P&G’s Management Systems ensure that theCompany’s policies are implemented in a consistentmanner throughout the world. These management
systems align with the Company’s policies and promote a regular flow of information that helps theCompany better manage its progress on elements ofsustainable development.

Human and Environmental Safety
Professional & Regulatory Services (P&RS) – addresses issues related to products and packages.
P&RS is responsible for ensuring that products aresafe for consumers, safe for the environment and incompliance with laws and regulations where they
are sold. They also address other environmental
questions or issues as they arise about products andpackages, such as their compatibility with waste
management systems, natural resource use or issues of “perceived safety.” P&RS is also responsible
for ensuring that any claims the Company makes
about the safety or environmental profile of its products are scientifically sound.
Risk assessment is the process the Company uses toassess the safety of its products and ingredients. In
this process, chemical hazard and exposure information are related in a way that describes the likelihood for a chemical to adversely affect biologicalsystems. The P&RS organizations in each business
unit work closely with product development teamsin the development, selection and formulation of
product ingredients and mixtures with acceptablerisk profiles, as well as satisfying other importantbusiness and consumer needs.
Part of P&RS is the Environmental Science Department (ESD). The ESD is a resource center for basic
science which develops procedures, data and understanding that are used to make business decisions
and develop environmental risk assessments. As a
Company resource, its role is to advance science,and develop protocol for understanding and evaluating the environmental safety and impact of products and packages. It also conducts basic studies intoxicology, microbiology and biodegradation.

Worldwide Health, Safety& Environment Systems
Health, Safety and Environment (HS&E) is a global community of resources responsible for ensuring that the nearly 150 manufacturing facilities
worldwide are operated safely and legally; that process hazards are minimized or eliminated; that
health risks are identified, managed, or eliminated;
and that all waste from sites is reduced as much as

possible. More than 1,700 employees spend all or a
portion of their time on HS&E management.
The HS&E organization is made up of three
disciplines: Industrial Hygiene & Safety (IH&S),
Technical Safety and Environmental. The IH&S
group focuses on protecting the health and safetyof employees. Technical Safety focuses on maintaining the safety of capital assets. Environmental
focuses on protecting the environment throughlegal compliance and reducing emissions to air,water and land.
HS&E’s policy is derived from principles, values,
legal requirements and regulatory requirements.
The policy is translated into action by standards ofperformance (Mandator y What’s), standard
operating procedures (Mandatory How To’s), andcurrent best approaches (Voluntary System Guidance), and reinforced by mandatory annual audits.
A regular reassessment of the standards structure
promotes continuous evaluation of the system toimprove performance.

PolicyStandards(Mandatory What’s)Standard Practices(Mandatory How To’s)

Current Best Approaches(Voluntary System Guidance)

Key Element Audit(Mandatory Measure)P&G applies a single performance standard to eachof its worldwide manufacturing facilities. This isreinforced by training and mandatory annual audits. Facilities have flexibility in how they achieve
the standard so that local circumstances can be considered and costs can be controlled.
The Company uses audit scores and performanceagainst a set of critical measures to assess how
effectively sites are implementing the global standard. These measurements are endorsed by Company management and are conducted semi-annually. Overall results are reported to senior management and to the Public Policy Committee of theBoard of Directors.
At each of P&G’s manufacturing facilities, training
is provided at three levels: awareness training for
all employees, subject-specific training for employ-17

ees on the manufacturing floor and formal certification process training for site HS&E leaders.
Computer based safety training is being used at 90%
of P&G’s sites covering over 50% of the plant personnel. The program is currently available in English, Spanish, German, Chinese and Portuguese.
Expansion into other languages is anticipated.
Contractor Safety Expectations
The P&G Environmental Quality Policy makes aCompany commitment to safe operations. Safe,
incident free operation at P&G’s sites is a fundamental
expectation.
The Health & Safety policy expectations forcontractors include:• Compliance with site HS&E expectations and allapplicable laws and regulations.
• Training of contract employees on safety issues as
they apply to the job or project.
• Periodic review to assure compliance with site
expectations.
• Documentation of reviews, performance andcompliance.

Manufacturing Site System Assessmentss a global company, it is important for P&G toevaluate its performance versus recognizedinternational norms. In 1997, P&G commissioned
Environmental Resources Management, Inc. (ERM), ahighly respected international environmental
consulting firm, to perform an independent assessment of its HS&E management system. The purpose
was to determine whether the system meets theintent of ISO 14001, a global environmental management standard, as well as the European “EcoManagement and Audit Scheme” (EMAS), a similar
regional standard.

A

The study involved a detailed review of P&G’s
corporate policies, organizations and work systems,
followed by in-depth, on-site evaluations of fivetypical P&G sites in North America, Europe, Latin
America and the Far East. Two additional European
sites were also evaluated specifically against the
EMAS standard.
During the reviews, ERM identified three areas forfurther development. These were management andtraining of external contractors, document control,
and reporting on internal audit findings. After P&G
addressed these areas, ERM concluded: “In our
professional opinion, the design and implementationof P&G’s environmental management system meetthe intent of ISO 14001.” They also issued a similarstatement that “P&G’s facilities in Europe, Middle East
and Africa meet the intent of EMAS.” A moredetailed review of the project is available on request.

Insurance Systems
The goal of the Corporate Insurance Program is to
optimize the financing of insurable risks to minimize costs while providing protection from the effect of potential major loss.
The Program is guided by the following basic
principles:• The Company’s primary defense against loss iseffective loss prevention programs• Insurance is no substitute for effective loss
prevention.
The Corporate Insurance Program covers those areas of loss and potential loss such as; property damage, business interruption resulting from property
damage, legal liability resulting from property damage or personal injury, the legal liability of Directors, Officers, Trustees and employees arising fromthe performance of their duties, and theft.

Fire Protection Systems
P&G operates its fire protection program on thebasic principle that each facility is unique and shouldhave a program designed to meet its specific requirements. The Insurance Division, working withthe local management, determines the appropriate
level of fire protection for each P&G location.
Each facility’s program is organized and built aroundthe following “Key Elements”:
•
•
•
•
•

Protection Engineering
Maintenance and Inspections
Prevention Programs
Emergency Response
Qualified Personnel

Each facility has a Fire Defense Profile that describes
in detail the program requirements within each Key
Element. Annual assessments are conducted to verify
compliance with the profile requirements.

Human Resources
Human Resources ensures that P&G has the employees to deliver increasing business productivity
and to continually improve consumer, employee andshareholder value. They provide recruiting, training, development, diversity, benefits and compensation coordination for the Company.

18

It is the Company’s intent to develop all employees
to their full potential. To achieve this goal the following support systems are in place:• Career discussions, performance appraisals, assignment plans, transfer and promotion plans.
• Informal network support groups.
• Mentoring to provide informal support and guidance, in addition to coaching and training provided by each employee’s direct manager.
• Open job listings to identify potential growth
opportunities.

Global Medical Systems
The well being, productivity, and innovativeness of
employees are cr itical elements to P&G’s
competitive advantage. The Global Medical network
advises and assists management and employees inassuring a safe, healthy work environment throughthe delivery of preventive health and clinical services which optimize business contributions.
The Global Medical network manages health issues
and allegations which may impact employees, technologies, and brands. The work priorities of the Global Medical network are to:
1. Save lives (protect employees)
2. Obey the law (protect Company reputation)
3. Protect key technologies (protect brands)
4. Enhance speed to market (protect emerging
technologies)
5. Optimize employee productivity.

Information Sharing
P&G’s presence on the Internet began in March,
1996, when the corporate site went live with the
U.S. Career Center. Since then, P&G’s presence on
the Internet has expanded considerably. Today, theCorporate Web Site, http://www.pg.com/, provides
information about the Company as well as provides
links to the Career Center, Investor Information,and information on P&G products.
P&G also has developed an internal computer network for employee communications. The Intranet
gives employees access to policies, data, publications,news releases, stock information, training opportunities, technical information and the ability tocommunicate with colleagues around the world.

Community Contributions
P&G makes financial and in-kind contributions toorganizations thoughout the world. Company
managment has long believed it has an obligation
to use its resources for the long term benefit of society as well as the Company.

To carry out this obligation, P&G makes gifts toorganizations which improve educational quality
and access, and supports activities which enhance
the quality of life for all residents in communities
with P&G operations. The effectiveness of these contributions is enhanced by P&G employee and retiree volunteer activities.
Recipients include the colleges which train P&G employees, United Way organizations, cultural institutions, social service and disaster relief agencies
and conservation groups.

Management Systems for Suppliers andthe Supply Chain
Worldwide, P&G has over 50,000 suppliers andcontractors including small, entrepreneurial firms
and large multinational conglomerates. The Company bases its worldwide supplier relationships
on fundamental concepts of honesty, fairness,mutual respect and nondiscrimination. P&G encourages continued supplier support of all kinds
which enhances prosperity and builds sound,long-term relationships.
The Company respects and values healthy competition, believing it is essential to a sound business system. At the same time, additional efforts
are made to encourage minority and womanowned suppliers to do business with P&G.
In addition to developing new technologies thatmake product innovations possible, suppliers are asource of cost saving ideas and efficiency improvements that help improve the overall value of P&G
products to consumers.
P&G’s purchasing organizations use an overall
supplier management approach known as
Supplier Business Development (SBD). The SBD
approach facilitates ef fective relationshipmanagement and helps both parties achieve theappropriate business results. Key, strategic suppliers are identified and multi-functional teams
are established to better manage the interdependency in these key relationships.
Sourcing decisions are made on the basis of best
total value to the Company. Supplier relationships
are leveraged across business units and regions. Suppliers are always treated honestly, ethically andfairly. Stable sources of supply are highly desirable.
Supplier research and development efforts are alsoof major value to P&G and are recognized and factored into business allocation decisions.

19

P&G views purchasing as an integrated part of its
overall business strategy and seeks to integrate thesafety and environmental aspects of raw materialpurchases into its everyday relationships with suppliers. The Company has also established programswith suppliers to improve one or more aspects of a
raw material’s environmental profile, or to help
address new environmental concerns. The following are several examples of such programs:• Plastic bottles which contain recycled resin• Surfactants and other product ingredients withimproved biodegradability• Elemental chlorine free and totally chlorine freebleaching processes for paper pulp
• Sustainable forestry practices.
As the Company explores the economic and social
aspects of sustainability as they relate to its performance, they will be integrated, as appropriate,
into purchasing practices and specifications. ■Historically
Underutilized
Business ProgramI

n 1972, P&G established a minority supplier
program in the U.S. to identify and work withminority-owned businesses. At that time, P&G spent$44,000 with six minority suppliers. In 1981, theCompany assigned its first full-time manager to leadand develop this effort. Today, the Historically
Underutilized Business (HUB) Program is staffed by six
full-time employees who provide minority supplierswith the following assistance:••••

An equal opportunity to do business with P&G
Coaching and feedback
Financial support, where it is needed
Matches between P&G buyers and qualified
suppliers
Timely payment
Realistic and understandable specifications
Development of additional opportunities withother P&G vendors, including both supplier andstrategic-alliance opportunities.

•••

P&G’s purchases from minority businesses in the U.S.
have grown from $76 million in fiscal year 1988/89 to$445 million in fiscal year 1998/99. The target for
1999/2000 is $540 million. By fiscal year 2001/2002,
P&G will spend about 6 percent of its U.S. businessspending with HUB firms.

HUB Spending

600
500
400
300
200
100
0
1996/97

1997/98

1998/99

Fiscal Year

1999/2000
Target20

Part 5. Stakeholder
Relationships
T

he P&G Statement of Purpose identifies theCompany’s key stakeholders – Consumers, Communities, Employees and Shareholders. Others
include suppliers, trade customers, retailers, public
interest groups, regulators, insurers, academia, investment groups, governments and industry groups.

Key Stakeholders Groups andOur Interactions With Them
Consumers
Consumers are the people who buy P&G products.
Understanding their needs and concerns has been apriority of the Company for many years.
P&G was one of the first companies in the world tohire full-time professionals to study consumer needs.
In fact, the Company has been gathering consumer
feedback for more than 70 years.
Many of the research techniques now widely used
across industry – focus groups, attitude surveys,
product tests – were pioneered by P&G. Today, theCompany interacts with more than seven million
consumers a year throughout the world to learn what
people need to make their lives better.
From this process P&G has learned that consumers
expect great performance and value in the products
they buy. Consumers want products that are safe touse, safe for the environment and safe to manufacture. They expect the Company to behave responsibly and operate within the requirements of the law.
Many want products made efficiently – avoiding
waste, and using resources wisely. Moreover, consumers expect that the Company will answer any
concern they have about products or the performance of products.
To understand the needs of consumers, P&G interacts with consumers in the following ways:· Attitude surveys· Focus groups· Habits surveys· Products tests· Test markets· National market shares· Product web sites· Toll free telephone numbers
Understanding consumer needs helps P&G designand deliver products that better meet these needs.
Products that have been developed through interaction with consumers are the ones most likely tosurvive competition in the marketplace.

Communities
Communities that host P&G facilities have a stakein the local operations and performance of theCompany. With on the ground operations inover 70 countries, P&G is intimately involved in thelife of communities around the world. Clearly, the Company has a stake in these communities as well.
It is in these communities where Company employees live, raise their families, educate their children
and spend their leisure time.
P&G interacts with communities in the following ways:• Company employees play active roles in their communities by volunteering for local non-profit or-

21

•

•

•
•
•

ganizations and schools, providing business advice and perspective for community projects, conducting business training for teachers and developing conservation projects.
The Company provides financial assistance to selected community projects. This includes funding for education, cultural activities, health andsocial services and disaster relief.
P&G sponsors lectures, exhibitions, educational
projects and site open houses that provide opportunities to reach out to communities.
The Company assists communities in planning
for and conducting emergency response drills.
P&G conducts and sponsors research projects
based on community concerns.
P&G has a formal Volunteer Support Program
to help employee and retiree volunteers throughout the U.S.

For example, P&G is working with communities toaddress solid waste management. P&G has adapted
the emerging techniques of lifecycle inventory (LCI)
to the waste management field, and has shared the

Public Perception
Measurement System
P&G’s Mehoopany, Pennsylvania, USA, paper
plant has developed a process to identify community concerns and perceptions about theplant. Plant leaders conduct periodic surveys ofresidents and routinely talk to community
leaders. This process helps the plant identify andprioritize community concerns, measure progress
towards addressing these concerns, and builds
trust and credibility with the community. Recent
issues worked with the community include plantodor improvements, local traffic concerns, andcommunity education and information aboutplant efforts to protect the Susquehanna River.

findings with community officials as a way to estimate the environmental and cost implications ofhandling solid wastes.

Based on a P&G
scientist’s instruction,
students from the Universityof the Philippines collect
All ages participate in Ökopannon’s waste recovery pilot project in Hungary.
water samples.

Understanding and Sharing Information on Waste• SUSTENTA, a Mexican solid waste association promoted by P&G, coordinated an internationalseminar on Integrated Solid Waste Management in October, 1998.
• P&G scientists are assessing waste water systems around the world to ensure that products designed
to be flushed after use are compatible with household and municipal wastewater treatment systems
in the Company’s growing markets.
• P&G collaborated with the University of the Philippines, Peking University and the Chinese Academyof Science to better understand the fate of products and product ingredients in municipal waste
water systems in the Philippines and in China.
• P&G and 13 other companies in Hungary, have established Ökopannon, a packaging waste recovery
organization, to support the development of integrated solid waste management systems for
local communities.
• Through Corporations Supporting Recycling, a Canadian industry association, P&G helped guide thedevelopment of a lifecycle inventory tool for use by communities to guide decisions on waste
treatment options.

22

Employees
P&G’s 110,000 employees are a
key stakeholder group. Employees are the driving force behind
everything the Company does.
As declared by the Company’s
Core Values Statement, “Themen and women of P&G will
always be our most important
asset.”
P&G asks its employees for feedback regarding their career goals,
their thoughts on organizational
structure of the Company, andtheir exper iences with otherstakeholder groups.
P&G interacts with employees in
the following ways:• Career feedback and development are managed using Work& Development Plans.
• Employee surveys are conductedperiodically.
• “Connections” – an informal
discussion for um on the
Company’s Intranet, enables all employees to interact with the CEO and senior management.
Periodic questionnaires on the Company’s Intranet
allow employees to provide feedback on the usefulness of selected P&G publications.

Shareholders
Shareholders have a financial stake in the performance of the Company. As of July 23, 1999, there
were 278,245 shareholders of P&G stock. Shareholders are owners of the Company.
P&G reaches out to shareholders in the following
ways:• An annual meeting for all shareholders is heldin Cincinnati each year.
• The investor relations web site of fers
information to shareholders and invites theircomments, questions, and feedback, http://
www.pg.com/investor.
• An automated, toll-free telephone number(1-800-764-7483) is available for shareholder
information 24 hours a day. (1-513-945-9990
outside the U.S.)
In addition to the activities listed above, theCompany is experimenting with a number of programs to interact with and better serve its corporate stakeholders.

Other Stakeholder Groups
In addition to the four key groups, the Company
recognizes that there are other stakeholders. These
include suppliers, trade customers, retailers, public
interest groups, regulators, insurers, academia, investment groups, governments and industry groups.
The Company reaches out to these groups in thefollowing ways:• Company publications are available on subjects
ranging from Community Contributions toEnvironmental Management Systems.
• Educational programs covering a variety of issues including; dental care, women’s health, solid
waste and parenting.
• Participation in industry groups, like the World
Business Council for Sustainable Development.
• Working with third party organizations to address stakeholder concerns, like the European
Partners for the Environment.
P&G is continuously seeking ways to reach out tostakeholders. Through these programs, P&G is learning more about the needs of a wide variety of stakeholders around the world. ■23Part 6. Management
Performance
regularly measures its management performance against mandatory standards and its internal
policies. These measurements provide a snapshot of the Company.

Compliance with Laws
and Regulations
There are numerous health, safety and environmental requirements worldwide. Facilities are subject toemission limits and operating requirements
embodied in these statutes, regulations, laws andpermits. It is P&G’s intent to comply with both theletter and spirit of statutes, regulations, laws andpermit requirements. Identified compliance issues
are treated seriously and all non- compliance matters are resolved as expeditiously as possible.
Past three years’ data on environmental, transportation, and worker health and safety violations andinterventions follow:

NumberFines

1998/99
46$33,250

1997/9854$73,100

A breakdown of 1998/99 Notice of Violations(NOVs) and Occupational Safety & Health Act(OSHA) interventions follow:

46

U.S. OSHA interventions included any employee
or contractor complaint or incident that required
OSHA follow-up. Last year’s interventions also
included three routine visits or scheduled inspections. It has been three years since the last serious
OSHA citation.

HS&E Program Costs
There are two aspects of Health, Safety & Environment (HS&E) program costs;
1) capital costs for new site HS&E equipment2) people and operating costs for existing facilities.

1996/9756$14,900

Number
U.S. Clean Water Act
20
U.S. Clean Air Act
2
U.S. Department ofTransportation
5
U.S. RCRA (hazardous waste)
Paperwork
4
U.S. OSHA Interventions
12
Nuisance Ordinance (non-U.S.)
1
Wastewater (non-U.S.)
2

Whenever a facility receives a NOV, management
determines the cause of the noncompliance and develops an action plan to prevent its recurrence. Aninternal audit group then works with business management to ensure that the corrective action has
been implemented. In each case above, the NOV
has been resolved.

Fines$2,6000$25,000
0$150$4,000$1,500$33,250

Most NOVs associated with the US Clean Water
Act were wastewater related (i.e. pH and oil orgrease) involving 9 separate sites – all of which discharged to municipal treatment systems.

Capital costs for 1998/99 were $44 million to ensure compliance in new facilities. This included thepurchase and construction of pollution control
equipment such as wastewater pretreatment systems and air emission controls.
HS&E costs for operating existing sites in 1998/
99 were $193 million of which $14 million wasoffset by revenue from recycling activities.

Environmental Liabilities
P&G is also subject to contingencies pursuant toenvironmental laws and regulations that in the future may require the Company to take action tocorrect the effects on the environment of prior manufacturing and waste disposal practices. Accrued
environmental liabilities for remediation and closure costs at June 30, 1999, were $58 million, andin management’s opinion, such accruals are appropriate based on existing facts and circumstances.
Current year expenditures were not material.

24
Typical P&G Superfund Site Interaction
P&G has had limited Superfund liability due to its strong waste management practices which have been in place since1970. As a result, P&G’s typical involvement in Superfund sites has been as a minor Potentially Responsible Party(PRP). The Casmalia situation described below is representative of this involvement.
The Casmalia Superfund Site is an inactive, commercial hazardous waste treatment, storage and recovery facility
located in Santa Barbara County, California, USA. In 1993, the U.S. Environmental Protection Agency (EPA) notified anumber of waste generators of their potential liability for environmental problems at the site. Fifty-four of theseparties, including P&G, subsequently formed the Casmalia Steering Committee (“CSC”) and in 1996 negotiated andexecuted a consent decree (“Decree”) with EPA to clean up the site. The Decree provides for certain remedial work
including the collection and treatment of liquids, the design and construction of landfill caps, and the developmentof other response actions. The CSC members are to fund and perform Phase I work. During the next 3 phases, theroles of the CSC and others have not been defined at this time and will depend in part on EPA’s current efforts toreach cash-out settlements with numerous PRPs. P&G’s share of the CSC cost is 0.3%.
The Nenagh Plant
P&G was recently fined for an incident at its Nenagh plant in the Irish Midlands that occurred in August 1996. The
findings concluded that process waste, to a small degree originating from the plant, together with waste fromothers leaked into a local well. The Company is disappointed at the fine. It continues to maintain that the incident
was a result of significant deficiencies in the local drainage system, not under its control, to which it legally discharged its treated effluent. The Company regrets its indirect involvement in this incident and the inconveniencecaused to Nenagh residents.
The Sacramento Plant
In May 1999, approximately 31,800 liters of product raw material overflowed from a tank in P&G’s plant in Sacramento, California, USA. As a precaution, the Sacramento Fire Department was contacted. The fire department’s
Hazardous Materials Team reported there was no threat to public health. The spill was mostly contained in a
concrete holding area surrounding the tank. The material was a mid-cut ester which is not hazardous, even though
the local paper reported otherwise. The plant has reinforced its procedures to prevent such occurrences in the future.

Performance Against
Internal Standards
P&G’s internal standards go beyond legal compliance and apply to all of its facilities worldwide. The
fundamental philosophy is to have the same
standards worldwide, implemented by trained professionals at all sites, and audited each year using aconsistent, comprehensive approach. The metrics
used are consistent with that philosophy. Graphs
below describe the Health, Safety & Environment(HS&E) performance.

HS&E Audits
The P&G HS&E Audit Programs are designed toensure compliance with federal, state and local regulatory requirements as well as Corporate environmental standards and procedures. Audit findings
are reported promptly to the business management
teams who must address and correct all issues in atimely manner.
Audits measure performance against a mandatory
set of standards and standard operating procedures.
The target performance is eight or better on a ten
point scale. Currently over 80% of sites worldwide
are at the expected performance for Industrial

Health & Safety (IH&S), Environmental Safety,
Technical Safety and Fire Protection. Most, if notall, of the remaining sites not at target are acquisitions and joint ventures that have been with P&G
for less than six years.

100

Percent of Sites with Audit Scores
Greater than 8.0
1996/97
1997/98

Target1998/99

80

60

40

20

0
IH&S

Environment

Tech
SafetyFire
Protection

25

Currently, 88% of the sites are receiving annual
environmental audits. For the third year in a row,
Europe has completed 100% of its audits.
100

Sites Conducting Annual Audits
TargetPercent

80

60

Health, Safety & Environmental Management
System Improvements
One of the recent improvements is the complete
redesign of the Company’s HS&E Management Systems.
Environmental, Technical Safety and Industrial Hygiene& Safety have merged into one system. Early results
have shown that the systems have been significantly
simplified while critical technical requirements havebeen maintained.
The highlights of the HS&E management systemredesign are:

40

20

0
1996/97

1997/98

1998/99

Site Leadership Training
Another key indicator of system capability is thepercentage of sites with trained and qualified environmental leaders. Leadership candidates train foran extensive period of time on site prior to attending a week long school where their knowledge andability to handle special situations are assessed. Only
then are candidates considered qualified. Currently,
over 50% of sites worldwide have leaders qualified
by the Corporate staff.
Percent of Sites with Qualified Leaders

100

Target1996/97
1997/98
1998/99

80

60

40

20

0
IH&S

Environment

Tech
SafetyFire
Protection

This is the last year Environmental, Technical
Safety, and Industrial Hygiene & Safety will
be reported separately since the Company has
moved to an integrated HS&E Management
System. Fire Protection will continue to be managed separately.
Understanding and balancing economic, environmental and social issues are an important partof leadership in sustainable development. The
HS&E management system has undergone a tremendous change with the integration of the threesystems at all sites. While P&G has reached important levels of success in its health, safety andenvironmental efforts, the Company is committed
to continue to pursue technology and systems thatmake it a benchmark.

Work Process Simplification – The new system
consolidates three programs into a single program with
one set of standards and standard operating procedures, one integrated audit, and one set of HS&E
priorities for each site.
Improvements to Increase Productivity –Management systems and audit requirements havebeen reduced.
Increased Focus on High Risk & Technology
Systems – Sites are focusing on “high risk” andcritical systems.

26

External Recognition
P&G received
the Catalyst
Award fordemonstrated
success atmovingwomen into
leadership
positions.

Below is a list of key awards and recognition received by the Company over the past year.

Company Awards• No. 1, America’s Most Admired Companies,
Soap and Cosmetics Industry, Fortune
Magazine, 1999.
• Interactive Marketer of the Year, AdvertisingAge, 1999.
• Hispanic Corporate 100, Hispanic Magazine,
1999.
• Annual Worldwide CIO 100 for use of
information technology in business, CIO
Magazine, 1998.
• Enterprise Value Award for achieving dramatic
business value through innovative applicationof information technology, CIO Magazine,
1998.
• Worldwide Best in Class Data Wide-Area Communications Network, Gartner Group
Benchmarking, 1998.
• 2nd Most Admired Company in Venezuela,
Inversiones Magazine, 1999
• ProGro and Power Ranking Awards for nonedible grocery and health and beauty care,
Progressive Grocer Magazine, 1998.
• “Brand of the Year” awards to: Pantene Pro-V,“Best Shampoo Brand;” Tide, “Best Washing
Powder Brand;” Blend-a-Med, “Best Toothpaste Brand” and the overall Company, “Most
Trusted Organization” — ahead of Russian
flagship companies, Russia, 1998.
• Donor of the Year, Second Harvest, 1998.

Employer Awards• Top 50 Best Companies for Latina to Work forin America, LATINA Style Magazine, 1999.
• Optima Program, Spanish Institute for Womenin recognition of P&G’s diversity efforts, 1999.
• No. 11 in a list of the top 50 companies whichaccommodate employees with disabilities,
Careers and the disABLED Magazine, 1999.
• 100 Best Companies for Working Mothers(13th year), Working Mother Magazine, 1999.
• 100 Best Companies to Work For in America,
Fortune Magazine, 1998.
• Top 25 Companies for Executive Women,
Working Woman Magazine, 1998.
• Catalyst Award for demonstrated success atmoving women into leadership positions,
Catalyst, 1998.
• Top 100 Employers, Black Collegian Magazine,
1998.

• No. 1 in Recruiting and Retention Survey,
National Society of Black Engineers, 1998.
• Premio a la Equidad (Equity Award), to P&G
Peru in recognition of P&G’s labour policy protecting the rights of women, Peru Ministry of
Women’s Affairs and Human Development,
1998.
• Second Annual Golden Ladder Award, as oneof the top 10 companies that accommodate
employees with disabilities, WE Magazine,
1998.
• Employers Hall of Fame, Careers and the Disabled Magazine, 1998.

Environmental Awards• William H. Phelps Environmental Award;
Venezuela Headquarters, Baruta
Municipality, Caracas, Venezuela, 1998.
• Environmental Protection Award; Tianjin Bar
Soap Plant, Mayor, Tianjin City, China, 1998.
• Corporate Award; Urban Litter Partnership,
Keep America Beautiful, 1998.
• Environmental and Energy Achievement
Award; Albany Plant, New York, USA, American Forest & Paper Association, 1998.
• Health, Hygiene and Education Award,
Bombay Chamber of Commerce and Industry,
1998.

Safety Awards• Award of Best Honor for the best safety record;
Ivorydale Beauty Care Plant, Ohio, USA, National Safety Council, 1998.
• Excellence in Safety Award; Canada Manufacturing Facilities, Canadian Chemical Producers,
1998.

27

External Activities
Sustainability Activities• P&G promoted the creation of a local businesscouncil for sustainable development in Venezuela. The new organization, CEVEDES, ispart of the global network of business councils affiliated with the World and Latin American Business Councils.
• An International Sustainable Development
Symposium in Taipei was coordinated by
P&G with the Taiwan Soap & Detergent Association. Attendees included non-governmentalorganizations, industry, academia and government officials.

Social Activities• A seminar in Cincinnati, Ohio, USA, to encourage local companies to employ people with disabilities was hosted by P&G, in May 1999.
• P&G created an awards program to honor
outstanding family oriented television programs in conjunction with the Forum for Responsible Advertisers, in April 1999.
• P&G joined a new alliance, compr ised of
15 organizations from private and public sectors, dedicated to fighting vitamin A deficiency,
in March 1999.
• March 1999, The William McConnell Education
Center, an environmental and historic park,
opened in Lexington, Kentucky, USA. P&G wasa key funding partner. The site, previously anurban industrial dump site, now has nature trails
and a visitor center.
• P&G’s Pampers brand and Fisher-Price announced a joint project to donate andrenovate toddler playgrounds throughout Western Europe, in February 1999.

Economic Activities• June, 1999, P&G Eastern Europe completed theinitial $50 million investment program for the
Novomoskovsk plant in Russia.
• P&G announced plans to invest $150 million
to expand its existing plant in Chachoengsao,
Thailand, in May 1999.
• March 1999, P&G, Johnson & Johnson andEastman Kodak formed a Consumer Products
Manufacturer’s Consortium to create and license
a global security standard which will help prevent product counterfeiting and theft.
• P&G announced plans to increase production
capacity in bar soap and liquid laundry detergent, and a capital investment of $20 million at
the Ivorydale Plant in St. Bernard, Ohio, USA,in October 1998.
• August 1998, P&G hosted a meeting of interactive marketing and technology industry stake-holders to accelerate development of effective
advertising models and to identify ways to ensure interactive media is available to all people.
• P&G announced plans to convert its soap plantin Hamilton, Ontario, Canada, to a distribution
center. The Company also announced plans tobuild a 300,000 square foot facility in Butler
County, north of Cincinnati, Ohio, USA, to houseits Manufacturing, Supply and Technology Groupin August 1998.

Environmental Activities• March 1999, Phase 1 of GREAT-ER, a tool topredict environmental concentrations of downthe-drain chemicals in selected river basins in
Europe, was completed on schedule. P&G led the
project, involving partners from industry,
academia and regulatory agencies. The tool,a CD-ROM modeling program, was distributedat the European Union Technical Meeting for
Risk Assessment.
• Summer 1998, Automobile gasoline cap checking program to improve air quality in Cincinnati, Ohio, USA, was sponsored by P&G, otherindustries and a regional council of governments.
• A promotion to raise money for tree planting inJapan was conducted by P&G in cooperation with
55 retail stores. The promotion resulted in about
15,000 trees being planted by volunteers. ■28Part 7. Operational
Performancehas developed a comprehensive system ofmeasuring performance throughout the Company.
The Company measures operational performance inorder to drive continuous improvement. This approach enables the Company to report data on awide range of operational categories. Some of thesedata are included in this report.

Process for Data Collection
All data are reported on a global basis. In order toachieve consistency and ensure a common understanding throughout the organization, employees
are trained in how to report and document data.
Metric units are used for weights and English isused as the business language (backed up with local
translations where needed).
To ensure the standard collection of data, the Company has the following work processes in place:• Key terms are defined.
• The data to be collected are identified.
• Flow sheets are agreed upon regarding who collects data and on what systems.
• Technically sound methods are used by facilities
to estimate data and validate year-to-year results.
• Personnel are trained on the work processes, as
appropriate.
P&G’s data collection systems are designed to be
simple enough so that the people closest to the work,
regardless of location, can use the tools. This simplicity enables the Company to collect data andupdate systems annually at a relatively low cost.
Each business unit is responsible for the accuracy
and consistency of the data.

Industrial Hygiene & Safety
The health and safety of P&G employees are of paramount importance to the Company.
The Company tracks and reports two metrics forworker health and safety; total incident rate (TIR)and total lost workday case rate (LWDC). TIR includes all cases that result in loss of consciousness,
lost workdays, restriction of work or motion, medical transfer to another job or medical treatment
beyond first aid. LWDC includes all cases that involve days away from work, or days of restrictedactivity beyond the day of injury or onset of illness.
The TIR target for sites is to be below 1.5 cases per
year, per 100 employees. To achieve such rates, programs to address employee safety such as safe behaviors, ergonomics, and confined space entry havebeen implemented. No target has been set for LWDC.
Instead, incidents that potentially could lead to lost
workdays are managed.
The following data are based on criteria establishedby P&G for use at all worldwide facilities. The data
are representative of all P&G manufacturing facilities, worldwide.

1.5

Total Incident Rate
(injury and illness per 100 employees)
Target

1.2

0.9
TIR

Overview

0.6

0.3

Acquisitions and Divestitures
All facilities that operate during the fiscal year
reporting period are included in the data of thisreport. For divestitures, wastes and emissions are
estimated for the last year that they operated.

0.0
1996/97

1997/98

1998/99

29

Total Lost Workday Case Rate(lost and restricted workday cases per 100 employees)
1.5

LWDC Rate

1.2

0.9

0.6

0.3

0.0
1996/97

1997/98

1998/99

Product, Packaging and Manufacturing Data
As the diagram below illustrates, P&G’s use of material resources is highly efficient. The vast majority ofmaterials are converted to products and the output of manufacturing waste (which are largely nonhazardous) is low. To give the reader a more comprehensive understanding of materials used, data, in
metric tons, for packaging and manufacturing operations are provided on page 5.

30

Product & Packaging Trends
The Company achieved record shipments for the year
ending June 30, 1999. Packaging for product remains less than 10% of total volume shipped.
Product & Packaging Volume Shipped

Thousand Metric Tons

15000

Product
Packaging

The Company’s energy management program consists of loss analyses at the site level and life cycle
cost analyses during the engineering phase. At thesite level, energy use is considered a loss. Losses aredefined as anything not shipped out the door as
product. When energy is identified as a major loss
at a site, it receives focus for reduction.

12000

Energy use for new projects is evaluated by looking
at costs through the life cycle. This analysis compares capital costs to ongoing expenses. For example,
spending money to fully insulate a building is compared to the ongoing expense of heating or coolingthe same building.

9000

6000

3000

0
1996/97

1997/98

1998/99

Recycled material is used in a variety of packages
from corrugated shipping cartons to plastic bottles.
More than 30% of the material that P&G uses for
packaging is from recycled sources.
Recycled Material Used in Packaging
100

Percentage

80

60

40

A number of facilities have already identified water
use as an area for reductions. These facilities have
reduced water use through recycling, changes in raw
material sources and reusing water to irrigate green
areas around facilities.
Reductions in Water Use
Here are examples of how some plants are
reducing water use.

20

0
1996/97

1997/98

1998/99

Manufacturing Trends
With the exception of Energy, the data in this section have been indexed against a 1990/91 baseline,
and adjusted for sales growth. For absolute figures,
see page 5 of this report.
Energy Use
P&G’s use of energy is primarily concentrated in its
manufacturing processes. This year energy use increased slightly versus last year, however, it is 44%of the 1984/85 baseline, adjusted for sales growth.
Energy Use

100

Fuel
Indexed vs. 1984/85

Water UseTo date, P&G has not corporately tracked water use
at its facilities. This year water tracking has been
initiated at all manufacturing sites worldwide, andwill be reported next year.

Electricity

80

60

40

20

0
1996/97

1997/98

1998/99• Tissue and towel facilities in Witzenhausen,
Germany, and Apizaco, Mexico, have implemented long-term process changes to increasewater recycling. Also, on-line membrane
filtration, that allows the use of recycled waterin the paper making process, has been successfully pilot tested at Witzenhausen.
• The Mariscala Beauty Care plant in Guanajuato,
Mexico, is now treating all process water andusing the water for on-site irrigation.
• Through a series of capital improvements, theVallejo detergent plant in Mexico City, Mexico,
has become a “zero waste water” process
operation. The plant reuses 100% of its
industrial waste water.
• In the Philippines, the Cabuyao soap anddetergent plant changed raw material sources
to reduce process waste and water use.
• The Kansas City coffee plant, Kansas, USA, has
installed a closed-loop system for coolingwater, reducing water use and effluent fromthe facility.
• The Beirut, Lebanon, Fabric and Home Careplant reduced the amount of COD generated
by 66%. The facility controlled leaking pumps
and valves and installed a recycling system forthe process washout water.

31

Non-Hazardous Waste Disposed
Non-hazardous waste disposed is defined as the solid
waste landfilled, incinerated, or specially treated.
Recycled waste is not included in this measure. Disposed non-hazardous waste decreased 7.4 index
points this year, due to increased awareness at theplants, improved separation processes, and an increase in recycling. “Design Manufacturing WasteOut” efforts on upstream projects also continue toreduce waste.
Non-Hazardous Waste Disposed

Hazardous Solid Waste Disposed
100

80

60

40

20

80

0
1996/97

60

40

20

0
1996/97

1997/98

1998/99

Waste Recycled or Reused
Recycling and reuse have been significant efforts
within the Company to minimize impacts on
the environment. Over the last 3 years the recycling/reuse rate has ranged from 56% to 67%, andcontributed between $14 and $20 million in revenue annually.
Waste Recycled or Reused100

1997/98

1998/99

In the U.S., a strong focus on reduction, recycling
and material substitution has reduced the amountof hazardous waste requiring disposal over the last
three years. To further reduce risks, the Company
inspects hazardous waste sites annually and maintains a limited number of hazardous waste handling and disposal vendors.
100

Indexed vs. 1990/91

Indexed vs. 1990/91

100

Hazardous Waste Disposed
Hazardous wastes are defined by regional policies
and local rules and thus vary among regions. Globally, reported hazardous waste increased in 1998/
99 because wastes that are not classified in somecountries or regions are now being reported as hazardous waste. This also includes 12,000 metric tonsof contaminated soil from the Manchester, UK, site.

Indexed vs. 1990/91

Non-Product Output (Waste)
Each facility worldwide tracks and reports all wastethat leaves the site. In this section, waste is reported
by management process.

Hazardous Waste Disposed
U.S. Sites Only

80

60

40

20
80
1996/9740

20

0
1996/97

1997/98

1998/99

1997/98

1998/99

Non-Product Output to Air
Sites monitor total suspended particulates (TSP),
volatile organic compounds (VOCs), carbon monoxide (CO), nitrogen oxides (NOx), and sulfur dioxide (SO2). The total amount of air emissions has
increased three index points from last year due to a
global expansion in the Tissues & Towel businessand better worldwide reporting.
Air Emissions

100

TSP
Indexed vs. 1990/91

Percentage

0
60

80

VOCs
CO

NOx
SO2

60

40

20

0
1996/97

1997/98

1998/99

32

Carbon dioxide emissions have remained flat, andare 70% lower than the 1990 baseline. The decrease
from 1990 resulted from the sale of pulp mills in
the United States and Canada, and the conversion
from coal to natural gas in the United Kingdom
and China.
Greenhouse Gas (CO2) Emissions

80

60
100

20

0
1996/97

1997/98

1998/99

Non-Product Output to Water
Ef f luent waste includes oxygen consuming
substances in water (measured as COD – chemical
oxygen demand) but excludes water. The amountof COD leaving sites has decreased by nearly elevenindex points this year. The main contributions tothis reduction were from the Ivorydale site inCincinnati, Ohio, USA, through higher reliability
and effective loss analysis and lower production at
the Sacramento, California, USA, plant.
100

Indexed vs. 1990/91

SARA 313 (U.S. Only)
Released or Transferred

40

Wastewater COD Disposed

Indexed vs. 1990/91

Indexed vs. 1990/91

100

Pollutant Release and Transfer Registers
Globally, many countries are considering some typeof public reporting of toxic releases and transfers.
In the U.S., P&G facilities report annually on therelease of toxic chemicals to the land, air and water. These releases are defined in the U.S. Superfund
Amendments and Reauthorization Act (SARA) by
the U.S. Environmental Protection Agency. Total
releases and transfers are down 70% versus the1990 baseline.

80

60

40

20

0
1996/97

1997/98

1998/99

Reductions in Material and Energy Use
and Waste
Here are a few examples of waste, material andenergy reductions at P&G facilities:• Energy use in the Crailsheim, Germany, paper
plant has been reduced by reusing heat fromair compressors.

80

60• The Millstone coffee plant in Henderson,
Kentucky, USA, has made process changes that
reduce both air emissions and energy use.

40

20

0
1996/97

1997/98

1998/99• The Green Bay plant, located in Wisconsin,
USA, found a use for fines (short paper
fibers). The plant pays to send the fines to a
local company for re-use in lightweight
paperboard production. An on-site incinerator, previously used for fine disposal, hasbeen shut down.
• The Lucca, Italy, site installed machinery to separate plastic and paper scrap
from finished product. The plastic issold, and the paper is recycled within
the plant.

Pampers Plant in Euskirchen, Germany• The Pampers plant in Euskirchen,
Germany, is producing a newbikini-shaped baby diaper thateliminates trim waste from the
manufacturing process.

33

Social Performance
Diversity
A diverse workforce is a business advantage in understanding the needs and differences of people aroundthe world. P&G expects its workforce to become even more diverse in the future. This is a global policy andprograms are in place for continual improvement in all regions. The percentages of minority and women
employees in the United States are shown in the following table:

Management
Technicians, Laborers, Service Workers
Total% Minorities
1998/99 1997/98 1996/97
15.0
15.6
15.5
18.1
18.6
18.6
16.9
17.4
17.4

% Women
1998/99 1997/98 1996/97
38.4
38.0
37.5
41.7
41.1
40.8
40.4
39.9
39.5

Disabilities
Employing people with disabilities is part of P&G’s commitment to diversity. The Company works
with employees with disabilities to ensure a positive working environment so that they can develop to
their full potential. P&G is committed to improve its hiring of people with disabilities and will focus on
the following:• Nearly one million dollars will be spent in the next year to upgrade facilities and offices to meet theneeds of workers with disabilities.
• A master plan is being prepared for all of the Company’s technical centers to determine how people
with disabilities can be accommodated and welcomed in the workplace.
• A team of P&G employees is visiting major companies across the US to benchmark what the best are
doing regarding hiring and accommodating people with disabilities.

Community Donations
Total P&G philanthropic contributions in 1998/99 were $73.2 million, an increase of $6.39 million(+9.5%) versus 1997/98. This represents 1.25% of worldwide pre-tax earnings versus 1.17% in
1997/98. Contributions for the past three years are provided in the following table:
Worldwide P&G Philanthropic Contributions
Total

1998/99$73,245,604

1997/98$66,859,204

1996/97$60,616,378

Here are a few of the ways P&G is making a difference in the communities where it operates:• In Canada, P&G has supported KEY, a foundation providing environmental education to teachers. Each year, the program holds three weeklong summer conferences for teachers who thenapply what they learned to benefit students inthe classroom.

For ten years, P&G has partnered with Earl Haig
Secondary School in Toronto, Canada, to teach highschool students leadership and business management skills that prepare them for future careers.

• P&G’s Mariscala Plant is located in a small village in Mexico. Since the opening of the facility
six years ago, P&G has built a school for special
education students, provided water to the community during dry seasons, and offered environmental training to schools in the region. As partof Fondo Unido (United Way), P&G also has provided funds for a children’s hospital and a program to house homeless children.

34• This past year, P&G’s Targowek
Plant in Warsaw, Poland, discovered an innovative way to put
leftover detergent to good use.
The detergent is donated to
12 homeless shelters where it isused to clean and wash clothes.
This innovative idea saves the
shelters money and reduces waste
for P&G.
In Venezuela, P&G is helping students contribute to their education. Through Mision Futuro (Mission for the Future), students
redeem used packages of P&G products for school equipment.
Nearly 70% of the schools in Venezuela participate in the program.

Progress on Animal Testing
July 1, 1999, P&G announced that it would no longer conduct animal tests for current beauty, fabric andhome care, and paper products, except where required by law. This was a major step towards the Company’s
ultimate goal of eliminating animal testing. In the future, animal testing will only be done when requiredby law or to evaluate the safety of new ingredients and new to the world products for which no valid nonanimal tests are currently available.
Over the last 15 years, P&G has invested nearly $100 million in the study and development of alternative research methods. These methods include the development of historical research databases, computermodels, in vitro tests and other advances in toxicology.
P&G will continue to support research to develop non-animal test methods for food, drugs and newingredients and technologies. The Company actively advocates reforms around the world to speed up theapproval of reliable, non-animal test methods and to eliminate regulations that require unnecessary
animal tests.
Additional information on P&G’s support for alternatives to animal testing can be found at http://
www.pg.com/animalalternatives/. ■35Part 8. Product Performance
OverviewP

roduct innovation is at the core of P&G’s
success throughout its history. P&G innovation
focuses on –Setting new performance standards in existing categories such as:• Tide and Ariel compact detergents that remove stains andsanitize laundry while protecting
the original fabric colors.
• Pampers Rash Guard, thefirst diaper specificallydesigned to protect against
diaper rash.

Creating entirely new categories andbenefits like:• Febreze, an odor eliminating fabricspray.
• Dryel, a product that allows consumers to clean and freshen “dryclean only” clothes at home.
• Swiffer, a new cleaning system that
more effectively removes
dust, dirt and hair fromf loors and other hardsurfaces.
P&G’s unique innovative capability is based on three
key characteristics:• A deep understanding of consumers, their habits and product needs.
• The capability to acquire, develop and apply
technology across P&G’s broad array of productcategories.
• The ability to make “connections” between consumers’ wants and what technology can deliver.
This year, P&G invested $1.7 billion, 4.5% of net
sales in research and development – one of the largest
amounts among consumer product companies in theworld. The Company employs over 7,500 scientists

working in 22 research centers in 12 countries aroundthe world. Of the Company’s scientists, 1,250 holdPh.D. degrees, which is more than the combined science faculties of Harvard, Stanford and MIT.
P&G’s innovation is evident in the 25,000 patents
that the Company currently holds, making it oneof the world’s leaders in number of U.S. andglobal patents.

Major Impacts Associatedwith Products
Impacts associated with products don’t exist in isolation. They span across all aspects of sustainable
development. Certain impacts can be more closely
associated with one area than others and that is
how the following section has been organized.

Economic
P&G and its products have impacts that go beyond
the Company’s balance sheet.
The Company works across the entire product supply chain to enhance the value of raw materials,
and to build relationships with suppliers and retailers that provide mutual economic benefits.
The Company works to get unnecessary costs out of
the system while still delivering high quality products to consumers.
P&G’s broad range of consumer products contributes to economic prosperity for employees, suppliers, retailers, shareholders and communities where
the Company operates.
The Company’s products have impacts on the distribution, solid waste and water treatment infrastructures of the communities where its products
are made, sold, and used.
The Company pays taxes and fees in the communities in which it operates and makes voluntary contributions to organizations in those communities.

36

SocialThe major social benefits of P&G products are improved health and hygiene for consumers. P&G products are an important part of many consumers’ daily
bathing and cleaning routines.
P&G products make clothes cleaner, babies drier andsmiles healthier.
• In the U.S., Tide with Bleach sanitizes laundry,
killing at least 99.9% of bacter ia and isregistered with the U.S. Environmental Protection Agency.
• Pampers Rash Guard is the first diaper specifically designed to protect against diaper rash.
• Crest toothpaste was the first toothpaste withfluoride clinically proven to fight cavities.
In addition to the health and hygiene benefits, manyof the Company’s products, like Crest and Always,
also have an important educational component.
Improving education, self esteem and offering superior performance are just as important to theCompany as healthy bodies.

Environmental
Material use, waste disposal, energy
and water use are of concern to theCompany and to many of its stakeholders. The Company is able to account for and manage the use of
raw materials, water and energy
within its manufacturing operations. However, it is more difficult
to measure and reduce resource use
associated with raw material sourcing, distr ibution, product use
and disposal.

or clothes are hand washed impacts the amount ofenergy used for clothes washing.
One of the ways in which P&G is working to reduce
environmental impacts throughout the product life
cycle is by making products that use less raw material. P&G first introduced concentrated laundry detergents in Europe in 1989. Today, they are soldaround the world. A life cycle study, done under
U.S. manufacturing conditions, indicates that concentrated laundry detergents save 0.6 gigajoules ofenergy for every 1,000 loads of laundry, the equivalent of slightly more than 14 liters of gasoline. Concentrated detergents also use less packaging, resulting in less solid waste for disposal.
Waste disposal of down-the-drain products and solid
wastes varies with local conditions and infrastructures. P&G designs all of its products for safe disposal in order to minimize environmental impacts.
More than 30% of the material that P&G uses for
packaging is from recycled sources. Packages are designed with recycling in mind, although actual recycling depends on local markets and programs.

P&G also has monitored the impacts of down-thedrain products on water quality inrivers, streams and municipal waRaw Material Sourcing
ter treatment facilities for years. The
Company is beginning to examine
the broader issue of water; its use inProcessing
manufacturing facilities, its use by
consumers and the availability of
Manufacture
clean water around the world.
Distribution

Use
The amount of energy and waterused with consumer products dePost-consumer Displosalpends in part on consumer habits
and practices, which vary widelyaround the world. For example, whether the waterused is hot or cold and whether a machine is used

P&G continues to address these issues as the Company works to reduce waste and resource use throughevery part of the product life cycle.

P&G’s Support for SETAC Helps Make Products Safer, Advances Risk Sciences
Since 1979, P&G has supported the efforts of the Society of Environmental Toxicology and Chemistry(SETAC), a non-profit professional society devoted to advancing multi-disciplinary approaches to solving
enviromental problems. SETAC’s membership extends across business, goverment and academic sectors,
offering an important forum for P&G scientists, engineers and risk managers to participate in theexchange of ideals and principles underlying sound environmental management policies. Now withgrowing units in North America, Europe, Latin America and the Asia-Pacific region, the ecological risk
assessment tools developed through SETAC help P&G and other companies evaluate the safety of new
product and packaging systems. In addition to serving on numerous SETAC Boards, panels and advisorygroups, P&G is proud to sponsor a pre-doctoral fellowship award in SETAC.

37

Product Development
P&G’s product development process is followed
virtually every time the Company develops a
new product or makes a significant change to an
established brand. The process has four phases:
Concept, Development, Evaluation, and Execution.
These phases are designed to ensure that products
meet important consumer needs and are safe.
They also are used to manage risk and improve financial return.
The Concept Phase identifies an important consumer need or needs, using research with consumers from around the world. Once a need is established, the Company looks at ways to meet the identified need based on P&G’s technologies and business strategies. The result of this work — the concept, is an approach to meeting the consumer need.
In the Development Phase, the concept is further
refined into a product that will meet the consumer
need. The Company identifies raw materials, packaging, manufacturing and distribution systems thatwill be necessary to deliver the product to consumers. Initial evaluations are made of human safety,
environmental safety, market concerns and the economic impacts of the product on the Company andits shareholders.
A variety of tools are used to ensure the productwill be safe for people and the environment. (See
Product Development Tools Chart) The manufacturing process also is examined to ensure that healthand safety issues for employees and communities
are addressed. A regulatory assessment is done toensure compliance with applicable laws andregulations, both where the product is manufactured and marketed. The Company also looks at
the economic impacts on investment, jobs, profit
and growth.
During this phase, P&G conducts consumer research
to be sure the product meets the consumer need.
Employees and consumers sample the actual product. Often, small batches or one-of-a-kind models
of products are used to gain consumer feedback before the product is manufactured on a larger scale.
It can take many tries before the Company develops
just the right combination of ingredients for the
final product.
In the Evaluation Phase, the Company confirms
the product’s viability with a wider group of consumers. P&G manufactures the product at theCompany’s facilities, ships it through the distribution system to target communities, and sells it toconsumers. In this phase, the Company gets a better idea about consumer acceptance, distribution
issues and profit potential.
In the final phase, the Execution Phase, the product moves into national or global distribution channels. Sales projections are confirmed. Ongoing monitoring of the product is conducted through theCompany’s consumer relations department.
Throughout this phase, P&G is continuously looking at ways to improve products to increase theirvalue to consumers. Other ongoing programs include reducing costs, increasing reliability, qualifying additional suppliers and improving performance.

Product Development Tools
Goal
1. Human and environmental safety

Tools
Human health risk assessment
Ecological risk assessment

2. Regulatorycompliance

Manufacturing site management system audits
Manufacturing site waste reporting
Materials consumption reporting
New chemicals testing & registration
Product and package classification & labeling

3. Efficient resource
use and waste
management

Material consumption monitoring
Manufacturing site management system audits
Manufacturing site environmental audits
Supplier audits
Disposal company audits
Product life cycle inventory
Design Manufacturing Waste Out
Economic analysis

4. Addressing societal
concern

Opinion surveys
Consumer research
Networking
Presentations
Lobbying
Corporate reporting
Problem solving

Design Manufacturing Waste Out
While waste reduction has always
been a key focus area for us, in 1996
we introduced a process to ensure
we focus even more sharply on
eliminating waste in our manufacturing processes, and set a goal to save$300 million by 2000. Design Manufacturing Waste Out (DMWO) uses a
series of “think lists” to help teams
developing the product and manufacturing processes to eliminate
waste up front. This saves both raw
materials and money. Over the past
year, over 100 new projects haveundergone DMWO reviews. This year
the program exceeded $300 million
in cumulative savings, one year
ahead of schedule.

38

Recent Product News
Global Shampoo Packaging
A newly designed bottle is replacing the bottle previously used bymany of P&G’s leading shampoo
brands. Designed to reducematerial use and improve handling, the new bottle saves 2000
metric tons of plastic, enough tofill an Olympic-sized swimming
pool, each year.

Dawn Saves the Day – Again!
Greasy messes are nochallenge for Dawn
dishwashing liquid. Not
only does Dawn cut
grease on dishes, but
highway officials credit
Dawn for the clean-up of two greasy spills
on Cincinnati, Ohio, USA, highways lastyear. From animal fat to biscuit dough,Dawn cut the grease and the highways reopened in record time.

Dental Care Education Brightens
Smiles in Zimbabwe
P&G is a sustaining member of Health Volunteers
Overseas, a group dedicated to improving the availability of health care in developing countries
through training and education. In Zimbabwe,health care workers trained by the program use
Crest toothpaste educational materials to improvedental hygiene in remote villages.

Crest Schools
Program Improves
Dental Hygiene
For thirty years, P&G’s
Crest Schools Program has
provided dental health education to elementary students in the United States.
Today, children around theworld have the opportunity to learn about gooddental hygiene through global school programs
sponsored by Crest and Blend-a-Med toothpastes.

P&G Promotes
Self-Esteem for
Teenagers in Mexico
In Latin America, studies
have shown that many
women have low self-esteem. To address this,P&G’s Always feminine
hygiene products introduced a program to improve
women’s self-esteem by reminding them that they
can aspire to live a fulfilling life through increased
education, personal hygiene and the reinforcementof their family values. The education program targets teenagers and is based on aseries of lectures in school classrooms and acolorful magazine.

Improved
Dishwashing Detergent Cleans Best in
Low Temperatures
New Fair y Tab-in-Tab
automatic dishwashingdetergent provides tough food cleaning in low temperature wash cycles. The innovative use of enzymes delivers two to three times more cleaning
while saving consumers water and electricity.

VOCs Reduced in
Hairsprays
P&G has taken
an innovative
approach to red u c i n g VO C s(volatile organic
compounds) inhairspra ys. A
concentrated formula and new package deliver
hairspray more efficiently, using 25% less packaging and with lower VOC emissions than conventional hairsprays. Consumers in California,
USA, are the first to try this new hairspray.

39

Systems to Assist
Consumers in Proper
Use and Disposalof Products
In order to ensure consumers use and dispose of products and packages safely, P&G
has the following systems in place:

Advertising — creates awarenessof Company products, provides information on how and when to use theproducts, and educates consumers regarding product benefits.

Global Waste & Recycling Networks — help educate consumers and better enable them to properly dispose of products and packages.

Labeling and Instructions — provide Toll-free Telephone Numbers — allow conappropriate information on how to use theproducts.

sumers to call with questions and problems about
products and packaging. P&G receives around 2.5
million contacts a year from consumers.
Around 86% are calls, 7% are e-mail and
7% are postal mail.

Websites — provide information about
product benefits and contact information
for specific questions about products.

Work with Appliance Manufacturers — allows the Company to conduct ongoing tests of how products respond to new
and improved appliances. ■Packaging — increases shelf life of products,
allows for efficient distribution, enhances product use, reduces product tampering and contamination, and provides space for product information, usage and disposal instructions.

Poison Control — partners with the Company
regarding how to respond when the Company’s
products are used improperly.

40Part 9. Sustainability OverviewT

he year 1999 mark s two impor tantsustainability milestones for P&G. The first is
the creation of the Corporate Sustainable Development organization that Durk Jager outlined in Part
1 of this report. The second is our move from anannual Environmental Progress Report to thisSustainability Report, including participation in the
Global Reporting Initiative’s (GRI) pilot ofa standardized reporting format.

Malnutrition affects 50% of the world’s population. Water borne diseases, lack of sanitation, lackof hygiene and health care, and other problems affect populations in areas without adequate infrastructures. For P&G, sustainable development will
come to life, and bring value where it intersects with
our ability to bring innovation to bear on issues ofhealth, hygiene, environment, nutrition,
education and the overall quality of life of
both today’s and future consumers.

For the past two years, we have had a
The decision to move from an annual
worldwide team of P&G people analyzing
Environmental Progress Report to a
how sustainable development could andSustainability Report is, of course,
should relate to our business. We realized
closely related to our decision to stratethat P&G, to date, could be described as ag i c a l l y e m b ra c e t h e c o n c e p t o fsustainable corporation. Over the past 162 George D.
sustainability. We have been publishingyears, P&G has changed and reinvented Carpenter,
an Environmental Report since 1993.
itself many times. Today, it is a $38 bil- Director ofWith each report we used market relion global company with on the ground Corporate
search tools to understand the informaoperations in over 70 countries, products Sustainabletion needs of our target audience, andsold in over 140 countries, and over Development
110,000 employees. But, the challenge for us as a to sharpen the content.
sustainable corporation is how will we change andevolve to improve the lives of the world’s consum- As we again reviewed our target audience for thisers, such that we continue to exist and thrive into Sustainability Report, we chose external thought
leaders, non-governmental organizations, academthe future.
ics, social investors and governments as our priThe creation of P&G’s Corporate Sustainable mary focus. This is a smaller audience than we have
Development depar tment marks a strategic traditionally tried to satisfy.
decision to more closely align our business with themore holistic concept of sustainability, taking ad- Having settled on this audience, it then became
vantage of the broader “umbrella” which encom- important to format our report in a way thatpasses economic development, social equity and en- best met their needs. This is where participationin the pilot project of the GRI became opportune,
vironmental protection.
since the GRI was made up of a global crossSustainability aligns very well with our Company’s section of our chosen target audience. Furthermore,Statement of Purpose which describes the synergy participation in the GRI pilot provided us both anamong meeting the needs of our consumers, build- easy means of obtaining customer feedback on thising our sales and profit and contributing to the year’s report, and an opportunity to have an improsperity of our employees, shareholders and com- pact on the format of the report itself, from amunities. This is not to say that we are defining supplier’s viewpoint.
sustainability as “business as usual.” Instead, we
see sustainability as an opportunity to address needs This year’s report continues our evolution towards
that are today unmet. Needs that are driven by the paperless reporting. Therefore, this year’s report issix billion people on this planet, which may grow to available in its entirety on our corporate web site,
http://www.pg.com/99sr. In addition, for those thateight to ten billion in the next century.

41

do not have Internet access, we have publishedan abridged Executive Summary which includes
key sustainability data and charts. I hope that
our attempt to address your needs, as the consumers of this report, meets with your approval. I encourage you to contact us if you have any questions
or comments.

George D. Carpenter
Director, Corporate Sustainable Development

To request an Executive Summary of this report,
write to:
Corporate Sustainable Development
Two P&G Plaza
TN-02 MS-28
Cincinnati, OH, 45202 USA
Fax: (513) 983-5226
E-mail: sustainrep-im@pg.com
Editor: Keith Zook, P&G, Cincinnati, Ohio, USA.
Core Report Team: Margaret Gerber, P&G,
Cincinnati, Ohio, USA; Chris Smith, P&G,
Newcastle Upon Tyne, UK; Robin Tollett, P&G,
Cincinnati, Ohio, USA.
Writing: John Swartzbaugh, Environmental
Technologies and Communications, Inc.,
Cincinnati, Ohio, USA.
Design: Andy Ruttle, Ruttle Design Group, Inc.,
Cincinnati, Ohio, USA.

The report team wishes to thank all theindividuals throughout the Company who
contributed information, stories and data
to this report.