Sustainability Report
2005

Linking Opportunity with Responsibility

P&G 2005 Sustainability Report

Sustainable development
is a very simple idea. It is
about ensuring a better
quality of life foreveryone, now and forgenerations to come.1

P&G’s Statement of Purpose
We will provide branded products
and services of superior quality andvalue that improve the lives of theworld’s consumers.
As a result, consumers will reward us
with leadership sales, profit and value
creation, allowing our people, ourshareholders, and the communities inwhich we live and work to prosper.

This report was prepared using the Global Reporting Initiative’s(GRI) July 2002 Sustainability Reporting Guidelines. The missionof the GRI is to promote international harmonization in
the reporting of relevant and credible corporate economic,
environmental, and social performance information to enhance
responsible decision making. The GRI pursues this mission througha multistakeholder process of open dialogue and collaboration in
the design and implementation of widely applicable sustainability
reporting guidelines. The GRI has not verified the contents of thisreport, nor does it take a position on the reliability of information
reported herein.
on theWeb

For further information about the GRI,
www.globalreporting.org
For the latest P&G news and shareholder
and career information,www.pg.com

1

Table of Contents
CEO Statement
VisionPUR and the Children’s Safe Drinking Water Program
P&G Profile
Policies, Organization, and Management Systems
Goals
Performance
Environmental
Economic
SocialSustainability In Action
Water
Health and Hygiene
Index
Contact Information
AddendumOn the Cover
Jemima Odo, in the Nyanza Province
of western Kenya, thanks P&G forproviding PUR Purifier of Water forher village.

1 Definition from UK government report from Department for the Environment,

Transport and the Regions – 1998.
Note: Years listed in this report‘s data charts signify the fiscal year ending June 30.

© 2005 The Procter & Gamble Company. All Rights Reserved.
References to trademarked products in this report are to trademarks owned by andregistered to The Procter & Gamble Company.

2
3
4
9
20
42
43
45
57
58
60
62
64
66
70
71

P&G 2005 Sustainability Report

2

CEO Statement

Improving the qualityof life for children inneed is a powerful andtangible way to bring
P&G’s Purpose to life
Touching Lives, Improving Life
P&G’s Purpose is to improve consumers’ lives day in and day out.
Fulfilling this Purpose sustains our Company’s growth year in andyear out. One of the most important ways we fulfill our Purpose– beyond our brands and products – is through the work we do, asa Company and as individuals, in communities around the world.
In 2004, P&G donated more than $100 million to support
philanthropic efforts. We’ve asked ourselves whether our efforts
and dollars are working as hard as they can. We’ve concluded that
we can make a bigger, more enduring difference by focusing P&G
philanthropy more sharply on helping children in need to Live, Learn
and Thrive.
We want to help children live by ensuring a healthy start; to provide
them with places, tools, and programs that enhance their ability
to learn; and to help them develop skills for life so they can thrive.
Improving the quality of life for children in need is a powerful andtangible way to bring P&G’s Purpose to life.
As you will read in this report, we are collaborating with global
partners such as UNICEF and the World Health Organization, withnational governments, and with NGOs to offer programs around theworld that support the development of children in need from birththrough age 13.
We have also established safe drinking water for children as P&G’s
corporate signature program of our Live, Learn and Thrive efforts.
With the U.S. Centers for Disease Control, we have developed
technology that can purify even heavily contaminated drinking waterwith a single sachet that costs pennies and treats 10 liters of water.
This is critical because 5,000 children die every day from diseases
caused by unsafe drinking water.

These are among the most visible examples of P&G’s commitment
to being a leader in global sustainable development. As you’ll readin the letter that follows from George Carpenter, P&G Director of
Sustainable Development, we are making progress in developed anddeveloping countries alike – and we are even more encouraged by
the opportunities we see in the years ahead.
We welcome your interest in our efforts and achievements andremain dedicated to touching lives and improving life in all that we
do. It’s our Purpose and our business.

A.G. Lafley
Chairman of the Board,
President, and Chief Executive

P&G 2005 Sustainability Report3

Vision

We continue to be
deeply committed tothe promise ofsustainable development

Corporate Social Opportunity – Fulﬁlling P&G’s Purpose
Six years ago, P&G embraced the concept of sustainable
development. We challenged conventional wisdom thatcompanies should limit their sustainability efforts to reducing
the negative impacts of pollution, waste, child labor, and poor
working conditions. We contended that these efforts werenecessary but not sufﬁcient – and we stepped up to a bigger
opportunity: to help achieve the U.N. Millennium Development
Goals of safe drinking water and sanitation, reductions in childand mother mortality and morbidity, and quality of life for slum
dwellers and women and girls in the developing world.
While we remain humbled by the scale of poverty and disease
and lost human opportunity that the world faces, we feel we aremaking progress toward our vision of sustainable development.
• Over the past year, P&G’s water puriﬁcation technology and
our Children’s Safe Drinking Water program have delivered
the equivalent of 220 million liters of safe drinking water into
both disaster relief situations and in new social markets. With
partners such as UNICEF, Samaritan’s Purse, World Vision,
International Rescue Committee, CARE, Red Cross, andAmeriCares, we have helped respond to some of the mostcritical global emergency situations, including the tsunami in
Asia, hurricanes in the Caribbean, ﬂoods in the Philippines andBangladesh, and the refugee crisis in Chad and Sudan. Johns
Hopkins University has shown that our technology reduced
diarrhea by more than 90 percent in a Liberian refugee camp.
• We’re not just making donations of product and technology,
and then leaving. We are building market-based partnershipsthat will sustain the delivery of safe drinking water. We arepartnering with Population Services International (PSI), the U.S.
and UK governments, and Johns Hopkins University to createsocial markets in Haiti, Pakistan, and Uganda – countries where
the emergencies may be less dramatic, but where the need forsafe drinking water is equally severe. In these countries, PSI isusing its substantial distribution and marketing capability toreach rural villages and urban slums.

Last year also saw a new developed-world execution of
our sustainable development model to provide social andenvironmental beneﬁts with high-performance products thatoffer good economic value.
• P&G launched Tide Coldwater in North America, Ariel
CoolClean in the UK, and Ariel Actif à froid in France, withcleaning technology to give consumers the performance theywant, energy savings, and environmental improvement. Thisis an important innovation because washing clothes is one of
the most energy-intensive activities in the home, and heatingwater can be as much as 95 percent of that energy. In Europe,
washing clothes in cold water could save nearly 3 percent
of household electricity use. In the United States, cold-water
washing could save 10 percent of the total energy consumed
by all domestic appliances – and generate 26-34 million tons ofgreenhouse gas reductions.
We’re encouraged by the progress we are making but even moreencouraged by the potential that remains. We continue to be
deeply committed to the promise of sustainable development
because we know that by improving lives in small but meaningful
ways day after day, we fulﬁll P&G’s Purpose and sustain our
Company’s growth year after year.

George D. Carpenter
Director
Corporate Sustainable Development

P&G 2005 Sustainability Report

4

PUR and the Children’s Safe Drinking Water Program
P&G People Feel Great about the Power of PUR
P&G’s PUR Puriﬁer of Water presents opportunities to improve
lives unlike other P&G brands. PUR can clean even heavily
contaminated water: It kills viruses and bacteria that cause
typhoid and cholera. It effectively reduces parasites, pesticides
such as DDT, heavy metals such as arsenic, and other dangerous
contaminants. In short, PUR has the ability to improve and evensave lives in the developing world.
P&G’s main challenges regarding PUR are providing it where it’sneeded and ensuring its long-term use. This includes teachingpeople how to use the product, and collaborating with publichealth organizations in the poorest parts of the world.

More than a billion
people in thedeveloping worldlack access to clean
drinking water.

P&G teams with partners such as Population Services International(PSI), which markets health care products in developing countries
around the world on a nonproﬁt basis. These partnerships help
P&G make connections in communities, distribute PUR at no cost in
emergencies, and sell PUR at cost for everyday use. Together, P&G,
PSI, and other partners develop and execute plans to reach people
who desperately need PUR. Plans include carefully thought-out
steps: building awareness and acceptance for the product, thenbuilding support with communities and retailers.
It is difﬁcult to comprehend the enormity of this urgent task. P&G
is attacking it with all the tools in its arsenal – not just the PUR
product but also our expertise in distribution, marketing, andworking with communities. Here is a brief sampling of the past
year’s exciting work in sub-Saharan Africa, in Haiti, and in areas hit
by the devastating 2004 tsunami.

The global corporate
signature program for
P&G’s Live, Learn and Thrive
is Children’s Safe Drinking
Water. It addresses themore than 5,000 children
who die every day from
diseases caused by drinking
unsafe water.

continued on next page

Jemima Odo

One Woman’s Story
Jemima Odo, in the Nyanza Province of western Kenya, thanks
P&G for providing PUR Puriﬁer of Water for her village. Odo has
HIV/AIDS. “For people with HIV,” she says, “we are prone tostomach problems. Since I’ve used PUR, the stomach problems
have gone.”
With her strength returned, Odo raises seven orphans who losttheir parents to AIDS and visits churches and youth groups toteach about HIV and safe drinking water. To support the orphans,
she buys PUR at low cost from the Society for Women and AIDS
and sells it at a proﬁt to her neighbors.

PUR and the Children’s Safe Drinking Water Program continued

P&G 2005 Sustainability Report

UgandaWith our partner PSI, P&G coordinated PUR distribution in Uganda
and also worked with local health and social service groups to gain
their help in teaching people to use PUR.
A concern among the people is whether PUR will continue to beavailable. They need assurance they’ll be able to get the productover time before they adopt it into their daily lives. To assure
availability, PSI has been building relationships with retailers andwith institutions that can provide PUR in poor, rural areas on an
ongoing basis.
Many small shops are now selling PUR. Many shopkeepers sell fromone dozen to several dozen packets a day. An idea was tested withan enthusiastic pharmacist who has been selling about 240 packets
a week. He agreed to make every Friday a “PUR day,” with productdemonstrations and clerks wearing PUR T-shirts.
PUR is sold in Uganda and also in Kenya at an affordable price, andprovided free of charge where needed, such as to orphanages.
P&G’s UK Market Development Organization is funding free
supplies of PUR for Ugandan orphanages for the next three years.
All around Africa, the sight of people collecting their drinking
water from contaminated sources is common. Even though
PSI has sold enough PUR packets to treat nearly 5 million litersof drinking water, it’s clear we’re only scratching the surface
compared to the need.

continued on next page

“I’m extremely optimistic. We aredoing the right thing, and we’relearning to do it well.”– Greg Allgood
Public health specialist in P&G’s Corporate Sustainable
Development organization, with responsibility for theCompany’s Children’s Safe Drinking Water program

Using PUR can reduce
diarrheal disease by
about 50 percent, evenmore when used tocombat epidemics ofwater-borne disease.

P&G sells PUR at cost in developing countries where it’s needed on an
everyday basis to clean contaminated water and prevent disease, andfor emergency relief situations, such as for natural disasters. Here is
how it works:

Local Water

Add PUR and stir

Filter through cloth

Clean, safe water

5

PUR and the Children’s Safe Drinking Water Program continued

TsunamiWhen the tsunami hit in December 2004, P&G immediately
doubled PUR production at its plant in Pakistan. The result wasenough PUR to provide 150 million liters of safe drinking water. But
getting PUR to survivors was a huge challenge.
The ﬁrst hurdle was getting product out of Karachi and to theaffected areas urgently. We ﬁgured that every day lost to bureaucracy
meant more than 100,000 packets weren’t getting to tsunami
survivors. P&G Pakistan, PSI, and AmeriCares, waiting to transport
the product, had to work out alternative export arrangements.
Once paperwork was completed, a plane ﬁlled to the gunwales
with PUR started making runs from Karachi to our humanitarian
aid partners. Teams worked day and night to move nearly 10
million packets. AmeriCares booked a plane to ﬁll up in Karachiwith 4.5 million packets to go to Indonesia. The plane came backto Karachi to be crammed with nearly 5 million packets for Sri
Lanka. The organization WorldVision took the job of getting the
PUR through customs and distributing it to various aid groups tobring to the survivors.
Various groups worked with P&G to distribute instructions on how
to use PUR. The organization Samaritan’s Purse translated the
instructions into both Tamil and Sinhala.
At the start of the tsunami disaster, it seemed inevitable that asecond wave of deaths would occur from the lack of safe drinking
water. But the World Health Organization is reporting that, due
to the enormous relief efforts, a major disease outbreak has been
avoided. P&G people who worked on getting PUR to tsunami
survivors feel fantastic about that, knowing that our work has
played an important role in this humanitarian effort.

Collaborative Efforts Succeed
Following the December 2004 tsunami, P&G worked with
AmeriCares, Population Services International, UNICEF,
WorldVision, CARE, Aquaya, and the International Federation of
Red Cross and Red Crescent Societies to get enough PUR to hardhit areas to make 150 million liters of water drinkable. This effort
is credited with saving many lives by preventing post-disaster
illness from contaminated water.
In total, P&G and individual P&G employees contributed morethan $3 million in product and cash donations to the tsunami
relief effort. Many employee contributions memorialized P&G
Thailand Country Manager Orapim Milindasuta, who lost her lifein the tsunami.

continued on next pageP&G 2005 Sustainability Report

P&G provided 200
million liters of safe
drinking water to thedeveloping world and indisaster relief during thepast year.

6PUR and the Children’s Safe Drinking Water Program continued

Haiti
P&G launched the Children’s Safe Drinking Water program in
Haiti in November 2004. Diarrhea is the leading cause of deathamong Haitian children less than 1 year old and the secondleading killer among children between 1 and 5. Ninety percent of
Haitian homes do not have safe drinking water; they commonly
collect drinking water from irrigation ditches. Political unrest anda struggling economy make it unlikely that water safety will get
the attention it needs.
PSI has been working with PUR in Haiti and has had success ingetting people to use it. A key communication tool has been
putting the instructions into a local context. For example, PSI tells
people that the amount of time to wait for PUR to fully disinfectwater is the amount of time it takes to cook a green banana.
Johns Hopkins University is working with us on outreach in Haiti.
Through a U.S. government grant, Johns Hopkins is providing
100,000 PUR packets to people with HIV/AIDS, as part of an AIDS
care program. People with HIV/AIDS are particularly susceptible
to parasites and other pathogens in unsafe water. With their
weakened immune systems, there is a greater-than-normal risk ofcholera, typhoid, dysentery, and other water-borne diseases.
Through emergency relief work, the HIV/AIDS kits, and sales
through PSI, Haitians received 700,000 PUR packets over the past
year. This is sufﬁcient to treat 7 million liters of drinking water.

P&G 2005 Sustainability Report

7

Millions of people
die every year frompreventable illnesses
caused by contaminatedwater and poor sanitaryconditions. Of that
number, about 2 million
are children.
P&G won the 2005 Stockholm
Industry Water Award fromthe Stockholm International
Water Institute. The award
recognizes PUR’s role inproviding life-saving cleanwater in the developing world
and in disaster relief.

International Water DecadeWorld Water Day, in March 2005, kicked off the U.N.’s International
Water Decade (2005-2015). The goal of International Water
Decade is “a greater focus on water-related issues, with emphasis
on women as managers of water, to help to achieve internationallyagreed water-related goals.” This includes halving by 2015 theproportion of people unable to reach or afford safe drinking waterand basic sanitation.
on theWeb

P&G recognized World Water Day by announcing a grantfrom the UK government to expand our safe drinking
water work in Haiti. See www.pghsi.com for details.

continued on next page

PUR and the Children’s Safe Drinking Water Program continued

Joint Efforts are Effective
By working in a number of collaborative efforts around theworld, P&G is playing a major role in bringing safe drinking waterto people who desperately need it. Here are some examples:• An alliance with UNICEF, focused on providing safe drinking
water in schools and for emergency relief school-based
puriﬁcation in seven countries – Mozambique, Ethiopia,
Bangladesh, Vietnam, Uganda, Kenya, and Pakistan.
• A project with AmeriCares, to deliver 1 million PUR packets to
the Chad desert, where Sudanese refugees are suffering an
epidemic of malnutrition and diarrhea.
• Working with the International Council of Nurses to train
Ugandan nurses and midwives to use PUR and to teach othersin their communities.
• An effort by three P&G Italy detergent brands and the retailer
Carrefour in a promotion to donate one packet of PUR
to Uganda’s orphanages for every purchase of one of thedetergents.
• Providing technical expertise and funding to the Safe Drinking
Water Alliance – composed of the U.S. Agency for International
Development, Johns Hopkins’ Bloomberg School of Public
Health, CARE, and Population Services International – toprovide safe drinking water in Haiti, Ethiopia, and Pakistan.

Partners with P&G in the Children’s Safe Drinking Water
program include:• U.S. Centers for Disease Control and Prevention• International Federation of Red Cross
and Red Crescent Societies• Population Services International (PSI)• UNICEF• CARE• AmeriCares• Johns Hopkins University• Samaritan’s Purse• International Council of Nurses

Developing countries
welcome PUR because• It works visibly and reliably,
so they can see and trustthat water has come clean.
• It’s a practical, dependable
solution for getting safe
drinking water into
their homes.

P&G 2005 Sustainability ReportMore than 250 million
people each year
suffer from diseases
caused by dirty water.
These diseases lead tomalnutrition and loss of
performance in schools
and workplaces.

8�����������

P&G 2005 Sustainability Report

10

P&G Profile
in P&G stock ownership plans, and beneﬁcial owners withaccounts at banks and brokerage ﬁrms.

For 167 years, P&G has been focused on providing branded
products of superior quality and value to improve the lives of theworld’s consumers. We believe this will result in leadership sales,
proﬁts, and value creation, allowing employees, shareholders,
and the communities in which we operate to prosper.

This is the seventh Sustainability Report for P&G’s worldwide
operations. Data in this report covers the period from July 1,
2004, through June 30, 2005. Financial information is given in
U.S. dollars.

P&G’s worldwide headquarters is located in Cincinnati, Ohio,
U.S.A. The Company markets more than 300 branded products
in more than 160 countries. We have on-the-ground operations
in 80 countries and employ nearly 110,000 people.

on theWeb

P&G is a publicly owned company. Its stock is listed and tradedon the New York and Paris exchanges.

For more information on P&G’s investor relations,please visit our website at:www.pg.com/investors/sectionmain.jhtml
Please visit www.pg.com for the latest news and in-depth
information about P&G and its brands.

As of July 29, 2005, there were approximately 1,608,000
common stock shareholders, including shareholders of record,
participants in the Shareholder Investment Program, participants

Global Key Brands
Of P&G’s more than 300 branded products around the world, these are the ones we consider our key brands.

Global Business Unit

DetailKey Brands

P&G Beauty

Cosmetics, Deodorant, Feminine

Pantene, Always, Whisper, Olay, Head & Shoulders, Tampax, Herbal Essences,
Nice ‘n Easy, Natural Instincts, Wella, Koleston, Wellaﬂex, Shockwaves,
Cover Girl, SK-II, Rejoice, Hugo Boss, Max Factor, Old Spice, Safeguard,
Secret, Lines Feminine Care, Zest, Lacoste, Vidal Sassoon, Ivory, Aussie, Evax,
Camay, Infusium 23, Naturella, Ausonia, Noxzema, Infasil, Laura Biagiotti, Sure
Pampers, Charmin, Crest, Bounty, Iams, Eukanuba, Actonel, Vicks, Prilosec OTC,
Luvs, Asacol, Kandoo, Dodot, Puffs, Tempo, Metamucil, Fixodent, PUR, Scope,
Pepto-Bismol, ThermaCare, Didronel, Kukident, Blend-a-Med

Care, Fine Fragrances, Hair
Care, Hair Colorants, Personal
Cleansing, Professional Hair
Care, Skin Care

P&G Family HealthBaby Care, Family Care, Oral
Care, Personal Health Care,Pet Health and Nutrition,
Pharmaceuticals

P&G Household Care

Coffee, Commercial ProductsGroup, Fabric Care, Home Care,
SnacksTide, Ariel, Downy, Lenor, Pringles, Folgers, Dawn, Fairy, Joy, Gain, Ace, Swiffer,
Mr. Clean, Febreze, Dash, Bold, Cascade, Cheer, Bounce, Millstone, Bonux,
Linidor, Daz, Era, Flash, Dreft, Vizir, Salvo, Viakal, Myth, Alomatik
2005 Net Sales(by GBU)

32%

34%

P&G Beauty
P&G Family HealthP&G Household Care

34%

Building for the Future

1837

1859
$1 Million
Net Sales

William Procter andJames Gamble, Founders,
Candle & Soap Business

1840

1850

1860

1863
Regional
U.S. Markets

1870

P&G ProfileP&G 2005 Sustainability Report

1117Billion-Dollar
BrandsCharminAmerica’s favorite bathroom
tissue.

In alphabetical order:
ActonelA prescription medication
to treat and prevent postmenopausal osteoporosis.
Always/Whisper
Women around the world
count on Always and Whisper
feminine protection.
Ariel
Fabric cleaning and care atits best.
BountySpills happen. With the
Quilted Quicker Picker-Upper
paper towel, cleanup is easy.

Crest
Oral care products, creating
beautiful, healthy smiles
every day.
Dawn
No matter what your dishwashing need, Dawn has a
product that’s right for you.
Downy/Lenor
Laundry feels soft and smells
fresh because of Downy andLenor.
Folgers
Millions of Americans wakeup with Folgers coffee
every day.

Head & Shoulders
Smooth, beautiful, ﬂake-freehair. It’s not what you’d
expect in a dandruff shampoo. Head & Shoulders has
12 customized formulas – onejust for you.
Iams
Nutrition for every life stage
and lifestyle of your pet.
Olay
Designed for women of
all ages to “love the skinthey’re in.”
Pampers
Millions of babies experience
the comfort and dryness ofPampers diapers.

PanteneHair around the world shines
because of Pantene hair careproducts.
PringlesPotato chips: Once you “pop”
the fun doesn’t stop!
Tide
Tough cleaning power thatgets out laundry stains.
Wella (Magma)
The newest member of the
P&G Beauty family, with haircare products used in salonsand at home.

Building for the Future

1882
P&G Brand
Advertising

1880

1887
ProfitSharing

1890
Incorporated
Company

1910
Shortening &Oils Business

1891 Beginning of P&G
Research & Development

1890

1900

1910

1915
P&G Code ofRegulations

CanadaMarketP&G ProfileP&G 2005 Sustainability Report

12

Organizational Structure
P&G’s unique organizational structure of Global Business Units(GBUs) and Market Development Organizations (MDOs) drives
clear focus, accountability and go-to-market capability. This
organizational structure leverages our knowledge and scale at
the global level with a deep understanding of the consumer andcustomer at the local level.
The GBUs leverage their consumer understanding to develop
overall strategy for our brands. They identify common consumer
needs, develop new products, and build our brands througheffective marketing innovations.
The MDOs develop go-to-market plans at the local level,
leveraging their understanding of the local consumer andcustomer. The MDO is focused on winning the “first momentof truth” – when a consumer stands in front of the shelf andchooses a product from among many competitive offerings.
The GBU is focused on winning the “second moment of truth”– when the consumer uses the product and evaluates how wellit meets his or her expectations.
Global Business Services (GBS) operates as the “back office”
for the GBU and MDO organizations, providing world-classtechnology, processes, and standard data tools to better
understand the business and better serve consumers andcustomers. GBS personnel or highly efficient and effective thirdparty partners provide these services.

Linking Opportunity with Responsibility in La Moran
A key challenge when linking business opportunity withcorporate responsibility is whether we can create new businessmodels appropriate to low-income developing markets.
To meet this challenge, P&G has been testing a new businessmodel in an impoverished community, La Moran, a neighborhoodin Caracas, Venezuela. La Moran is typical in Venezuela, where
60 percent of our consumers live in shanty towns, and 53 percentof the population lives under the poverty line.
The La Moran test had two main components aimed at improving
consumers’ lives: First, we worked on improving businesschannels in order to cut costs involved in getting products to ourconsumers. This resulted in lower prices in the stores. Second,
we worked on having a positive social impact in the community,
beyond our brands.
The program included many activities, from ﬁrst aid training withthe help of Red Cross volunteers to marketing and microﬁnancetraining, cleanup activities, and children’s education. The peopleof La Moran participated actively in our program, and we could
see that they gained useful knowledge from it.

Corporate Functions covers two main focus areas: 1) upstream
research and development, working with new, cutting-edgeknowledge, and 2) corporate needs not covered by GBUs or
MDOs, such as corporate human resources and corporate
external relations, as well as the sales effort called Customer
Business Development.
Both the Corporate Functions and Global Business Services
organizations leverage our size to deliver better-quality services
internally, at significantly lower cost.
In July 2005 we changed the names of the GBUs. Beauty Carebecame P&G Beauty. Health, Baby & Family Care changed
to P&G Family Health. Household Care was renamed P&GHousehold Care. These changes have no impact on thecomposition or historical results of the GBUs.

Building for the Future

1925
Beginning of
P&G Market
Research

1920

1930
SafetyProgramStarted1930

1932
Philippines 1935
and UK
Synthetic
Markets
Detergents

1946
Tide
Introduced
1948 Overseas
Division

1938
Oral Care
Business

1940

1950

1953
$1 Billion
Net Sales

1955
First Fluoride
Toothpaste

1961
Disposable
Diapers
Business

1960

P&G Profile
Organizational Structure

P&G 2005 Sustainability Report

13

The Three GBUs Operate in the Seven MDOs
Global Business Units (GBUs)• Business Strategy and Planning• Brand Innovation and Design• New Business Development• Full Profit Responsibility

Market Development Organizations (MDOs)• P&G Beauty• P&G Family Health– Baby Care and Family Care
– Health Care
• P&G Household Care
– Fabric Care and Home Care
– Snacks and Coffee• Market Strategy• Customer Development• External Relations• Recruiting

North America
Latin America
Western Europe
Greater China
ASEAN, Australasia, and India
Northeast Asia
Central & Eastern Europe,
Middle East, and Africa

Corporate Functions• Cutting-Edge Knowledge• Transfer Best Practices• Function Work Supporting P&G Corporation

Global Business Services
Key Business Processes• Accounting• Info and Technology Services• Order Management• Employee Benefits & Payroll

Building for the Future

1965
Affirmative
Action1970
Environmental
Audit Program

1970

1974
Toll-Free
Consumer
Hotline1978$10 Billion
Net Sales

1982
Feminine
Protection
Business

1980

1992
World Environment
Center Award
1987
Statementof Purpose

1993
1st Annual Global
Environment
Report1998 2001
1994 Opportunity Future Clairol
2000 Award
Shares Acquisition

1990

2000

2004
Wella
Acquisition

P&G ProfileP&G 2005 Sustainability Report

14

Plant Locations
Plant Name

City

Country

GBU Owner

Plant Name

City

Country

GBU Owner

Akashi
AlbanyAlexandria
AmiensAnchieta
ApizacoAuburnAugusta
AuroraAvenelBangkok
Bangkok (Wella)Barquisimeto
Beijing
Belleville
Binh Duong
Blois
BorispolBrockville
Budapest
Cabuyao
Cairo
Campochiaro
Cape Girardeau
Casablanca
Cayey
ChengduChochiwon
ChonanCincinnati
Coevorden
Cologne (Wella)
Crailsheim
DammamDover
Dzerzhinsk (Wella)
Epping (Wella)
Escuintla
Euskirchen
Gattatico
Gebze
Goa
Green Bay
Greensboro
Gross-Gerau
GuatireHenderson
Huangpu
Hub
Huenfeld (Wella)

Akashi
AlbanyPineville
AmiensAnchieta
ApizacoAuburnAugusta
AuroraAvenelBangkokSamut Prakan
Barquisimeto
Beijing
Belleville
Binh Duong
Blois
BorispolBrockville
CsomorCabuyao
Cairo
Campochiaro
Cape Girardeau
Casablanca
Cayey
ChengduChochiwon
ChonanCincinnati
Coevorden
CologneCrailsheim
DammamDover
Dzerzhinsk
EppingEscuintla
Euskirchen
Gattatico
Gebze
Goa
Green Bay
Greensboro
Gross-Gerau
Guatire, Miranda
Henderson
Guangzhou
Hub
Hünfeld

Japan
United States
United States
FranceBrazilMexicoUnited States
United States
United States
United States
ThailandThailandVenezuela
China
CanadaVietnam
FranceUkraineCanadaHungary
Philippines
Egypt
Italy
United States
MoroccoPuerto Rico
China
Korea
Korea
United States
Netherlands
Germany
Germany
Saudi Arabia
United States
RussiaSouth Africa
GuatemalaGermany
Italy
TurkeyIndia
United States
United States
Germany
Venezuela
United States
China
Pakistan
Germany

Baby Care and Family Care
Family Care
Fabric Care and Home Care
Fabric Care and Home Care
Fabric Care and Home Care
Family Care
P&G Beauty
Fabric Care and Home Care
Health Care
Fabric Care and Home Care
P&G Beauty
P&G Beauty
Fabric Care and Home Care
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
P&G Beauty
P&G Beauty
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
Fabric Care and Home Care
Fabric Care and Home Care
Baby Care and Family Care
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
Family Care
P&G Beauty
Fabric Care and Home Care
Health Care
P&G Beauty
P&G Beauty
Fabric Care and Home Care
Baby Care and Family Care
P&G Beauty
P&G Beauty
Fabric Care and Home Care
Baby Care and Family Care
Fabric Care and Home Care
P&G Beauty
Health Care
Family Care
Health Care
Health Care
Baby Care and Family Care
Health Care
P&G Beauty
P&G Beauty
P&G Beauty

Hunt Valley
IbadanIbaraki (Wella)
Iowa City
JacksonJeddahJijonaKansas City Coffee
Kansas City F&HC
KuantanCockeysville
IbadanIbarakiIowa City
JacksonJeddahAlicante
Kansas City
Kansas City
Kuantan

United States
NigeriaJapan
United States
United States
Saudi Arabia
Spain
United States
United States
Malaysia

P&G Beauty
P&G Beauty
P&G Beauty
P&G Beauty
Snacks and Coffee
Baby Care and Family Care
Baby Care and Family Care
Snacks and Coffee
Fabric Care and Home Care
Fabric Care and Home Care

Leipsic
Lewisburg
Lima
LondonLongjumeau
Louveira
Lucca
ManatiManchester
Mandideep
MariscalaMataroMateriales
MechelenMedellin
Mehoopany
Mequinenza
Mohammedia
Montornes
Naucalpan
NenaghNeuss
New Orleans
Novomoskovsk
Orleans
OxnardPescaraPhoenix
Pilar
Poissy (Wella)Pomezia
Porto
RakonaRothenkirchen
Russellville (Wella)
Rydalmere (Clairol)
Sacramento
Santiago
Sarreguemines
Seaton Delaval
Sherman
Shiga
Somersby (Wella)
St. Louis
Stamford (Clairol)
TakasakiTalisman
Targowek
Tepeji
Tianjin
Tianjin (Wella)
Timisoara
VallejoVilla Mercedes
Weiterstadt
Witzenhausen
Worms
XiqingLeipsic
Lewisburg
Lima
LondonLongjumeau
Louveira
Lucca
ManatiManchester
BhopalApaseo El Grande
MataroLima
MechelenMedellin
Mehoopany
Mequinenza
Mohammedia
SalidaMexico City
NenaghNeuss
New Orleans
Novomoskovsk
Saint Cry En Val
OxnardPescaraPhoenix
Pilar
PoissyPomezia
Custoias
Rakovnik
Rothenkirchen
Russellville
SydneySacramento
Santiago
Sarreguemines
Whitley Bay
Sherman
Shiga
Somersby
St. Louis
Stamford
Takasaki
Mexico City
Warsaw
Tepeji
Tianjin
Tianjin
Timisoara
Mexico City
Villa Mercedes
Weiterstadt
Witzenhausen
Worms
Tianjin

United States
United States
United States
United Kingdom
FranceBrazilItaly
Puerto Rico
United Kingdom
India
MexicoSpain
Peru
Belgium
Colombia
United States
Spain
MoroccoSpain
MexicoIrelandGermany
United States
RussiaFranceUnited States
Italy
United States
Argentina
France
Italy
Portugal
Czech Republic
Germany
United States
Australia
United States
Chile
FranceUnited Kingdom
United States
Japan
Australia
United States
United StatesJapan
MexicoPolandMexicoChina
China
Romania
MexicoArgentina
Germany
Germany
Germany
China

Health Care
Health Care
Fabric Care and Home Care
Fabric Care and Home Care
Health Care
P&G Beauty
Family Care
Health Care
Family Care
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
Fabric Care and Home Care
Fabric Care and Home Care
Fabric Care and Home Care
Family Care
Baby Care and Family Care
Fabric Care and Home Care
P&G Beauty
Health Care
P&G Beauty
Family Care
Snacks and Coffee
Fabric Care and Home Care
Family Care
Family Care
P&G Beauty
Health Care
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
Fabric Care and Home Care
Fabric Care and Home Care
P&G Beauty (Wella)
Health Care
P&G Beauty
Fabric Care and Home Care
Baby Care and Family Care
P&G Beauty (Wella)
P&G Beauty
Snacks and Coffee
P&G Beauty
P&G Beauty
Fabric Care and Home Care
P&G Beauty
Fabric Care and Home Care
P&G Beauty
Baby Care and Family Care
Baby Care and Family Care
P&G Beauty
P&G Beauty
Fabric Care and Home Care
Fabric Care and Home Care
Baby Care and Family Care
Health Care
Family Care
Fabric Care and Home Care
P&G Beauty

Note: Data as of June 30, 2005

P&G ProfileP&G 2005 Sustainability Report

15

Reliance on Third-Party
Manufacturers(percent)

Manufacturing Outsourcing
Most of our products are produced or assembled in P&G-owned
facilities. However, we rely on third-party manufacturers for about
12 percent of our total manufactured volume. This has increased
during the past few years, and we will continue to evaluate thirdparty manufacturers for our products in the future.

12
10

10

2003 2004 2005

Financial Information
The Company reported net earnings of $7.26 billion for the fiscal
year ended June 30, 2005, an increase of 12 percent compared to$6.48 billion in 2004.
Diluted net earnings per share were $2.66 in 2005, compared to$2.32 in 2004.
Net sales were $56.74 billion in 2005, up 10 percent from last year.
One of our first discretionary uses of cash is dividend payments.
Common share dividends grew 11 percent to $1.03 per share in
2005, representing the 49th consecutive fiscal year of increased
common share dividends. Total dividend payments, to both common
and preferred shareholders, were $2.73 billion, $2.54 billion, and$2.25 billion in 2005, 2004, and 2003, respectively.
Financial Highlights
Amounts in millions
except per-share amounts

Net Sales
Selling, General, andAdministrative Expenses
Income Taxes
Net Earnings
Basic Net Earnings
Per Common ShareTotal Assets
Long-Term Debt
Shareholders’ Equity

2005$56,741

2004$51,4072003$43,377

18,0103,182
7,257

16,504
2,869
6,481

13,383
2,344
5,186

2.83
61,527
12,887
17,477

2.46*
57,04812,554
17,278

1.95
43,706
11,475
16,186* Restated for two-for-one stock split effective May 21, 2004.

As part of P&G’s initiative to optimize resources to fit a growing
global business and to accelerate innovation and growth, theCompany operates its business through Global Business Units(GBUs), as described earlier.
This organizational structure accounts for why P&G does not provide
employee data, sales, or profits by country. Some countries may
provide this data in reports other than this one.
Net Sales by Global Business Units
Amounts in millions

Total P&G Beauty
Total P&G Family Health
Total P&G Household Care2005
$19,483
19,676
18,402

2004$17,122
17,70916,776

2003
12,221
15,72915,231

For more financial details, please see P&G’s 2005 Annual Report:
www.pg.com/investors/annualreports.jhtml
on theWeb

P&G ProfileP&G 2005 Sustainability Report

Stakeholders
A stakeholder is anyone who has an interest in or interaction with
P&G. Stakeholders can be internal, such as the Company’s 110,000
employees and its Board of Directors, or external.
External stakeholders include P&G’s consumers who use our
products 2 billion times a day, our customers and suppliers withwhom we do business, our shareholders, and the communities inwhich P&G people live and work.

P&G’s External Stakeholders
Consumers,
Consumer Organizations
News Media

NGOs
HealthSocial Service
Education
Environment
Governments
Local
Regional
National
Agencies (such as Health Ministries,
Regulatory Boards)
Pan-National Commissions (such as EU)
Embassies, Diplomatic Missions

Stockholders

Business Partners
Retailers, Wholesalers, Distributors
Vendors, Contractors, Suppliers
Advertisers
Trade Unions
Industry Associations,
Professional Organizations,
Scientific/Medical Communities

16

P&G Profile

Major Acquisitions
Net cash used for acquisitions in the current year totaled$572 million. This includes acquisitions of a pharmaceuticals
business in Spain and fabric care businesses in Europe.
P&G and Gillette
On January 27, 2005, P&G entered into an agreement to acquire
The Gillette Company. The acquisition, which has been approvedby the boards of directors and the shareholders of both companies,
is subject to approval by all global regulatory authorities and is
expected to close in fall 2005.
The acquisition of Gillette will add five billion-dollar brands to P&G’s
stable of 17 billion-dollar brands. Gillette had $10.5 billion in sales
in fiscal 2004. It has more than 70 percent global market shareof razors and blades, 40 percent global market share in alkaline
batteries, and 36 percent share of the global toothbrush market.
The Gillette acquisition will accelerate P&G’s goal to increase its
presence in the beauty and health care markets. Gillette will help
P&G achieve better balance – in brands, geographic presence, andretail customers. Balance helps the Company reach its goals despite
external pressures. P&G and Gillette have similar corporate cultures,and operating as one company is projected to bring more than
$1 billion in cost synergies.

Major Divestitures
Proceeds from asset sales, $517 million, increased primarily due tothe divestiture of the Juice business in August of 2004.

Restructuring Program
In 1999, concurrent with a reorganization of our operations
into product-based GBUs, we initiated a multi-year Organization2005 Restructuring Program. Total restructuring program
charges were $538 million after tax in 2003. The program
was substantially complete at the end of June 2003, with aremaining reserve of $335 million. Substantially all of the liability
was settled through cash payments through June 30, 2004.
The Company continues to undertake projects to maintaina competitive cost structure, including manufacturingconsolidations and work force rationalization, as part of its
normal operations. We expect to recognize between $150
million and $200 million after tax per year in charges forthese types of projects. Spending in both 2005 and 2004 wasconsistent and within the range described above.

P&G 2005 Sustainability Report

17

P&G ProfileP&G 2005 Sustainability Report

18

Awards and Recognitions
P&G annually receives recognition for its work, its character, its
brands, and its community contributions. We are highlighting a few
and listing some others.

P&G Tops Dow Jones Sustainability Index
For the sixth straight year, P&G has been named the top company
in the Nondurable Household Products category of the Dow Jones
Sustainability Index.

P&G is the only company to appear on seven Fortune magazine
company lists in 2004, including:• Best Companies to Work For• Most Admired Companies• Best Companies for Minorities• MBA’s Top Employers

According to Dow Jones, “The company views sustainability as
an opportunity for product innovation, especially in the areas ofwater, health and hygiene, where it considers having the biggest
potential for a positive difference. As such, P&G’s attention
is increasingly focused on serving basic needs of consumers
in developing countries. Innovative products providing safe
drinking water or improved nutrition for children are examples
for this development. The company strongly cooperates
with communities and local organizations for development,
production and distribution of such products.

P&G ranks among the top companies for Executive Women(National Association for Female Executives), African Americans(Family Digest magazine), Working Mothers (Working Mothermagazine), and Best Corporate Citizens (Business Ethics magazine).

“Building up a presence in emerging markets will enable P&G tobenefit from the growing consumer power in such regions for all
its brands. Moreover, P&G is committed to continually improve theenvironmental quality of its products. The corporate Environmental
Science Department therefore focuses on the evaluation of theenvironmental safety of consumer products, taking into accounttheir entire life cycle. In the social dimension, the company shows
best practice in stakeholder engagement and also leads its industry
in terms of talent attraction & retention.”
The Dow Jones Sustainability Indexes (DJSI), launched in 1999,
are the first global indexes to track the financial performanceof the leading sustainability-driven companies worldwide. Only
the top 10 percent of the world’s 2,500 largest companies
are selected as components of the DJSI World based on theirsustainability performance.
on theWeb

To view the P&G DJSI 2005 Sustainability Leader report,
please visit
www.sustainability-indexes.com/djsi_pdf/Bios06/
CBR_ProcterGamble_06.pdf

P&G ProfileAwards and Recognitions

Corporate Awards• P&G Belgium ranked #1 as Best Company/Springboard to workfor by BIZZ – a Belgian magazine where recruitment specialists
said P&G is most prestigious and considered to be the best
boost for their experience and resumé.
• P&G Chile, for the ﬁrst time ever, made the Top 10 Most
Admired Companies in Chile and came in #2 – while placing #1
in Health & Beauty care!
• P&G tied with FedEx in the #1 spot in the innovation study by
Hay Group, a global organizational and HR consulting ﬁrm, inpartnership with Fortune, in its Most Admired Companies list
for the magazine’s March 7 issue.
• P&G Japan earned the Tele-work Award from the Tele-work
Association for the Company’s adoption of ﬂexible work
arrangements, including tele-work to help employees better
manage their work-life balance.
• Korea Management Consulting Association awarded P&G
Korea as the country’s Most Admired Company for consumer
goods products.
• P&G Korea also takes the “Fun Management Award” by
Hankook Daily Newspaper sponsored by Ministry of Culture &Tourism for “Sam’s Café.”• P&G China receives “Most Inﬂuential Multinationals” award
for corporate reputation among external stakeholders andcorporate governance.
• P&G Latin America ranked 8th in Latin Trade Magazine’s 2004
readers’ poll of Most Respected Employers.
• P&G tops Fortune’s 2004 Blue Ribbon Companies.
• P&G earns Best Place To Work in IT by Computer Weekly,
recognizing P&G’s commitment to ensuring a ﬂexible work-lifebalance for its IT staff and its advanced career development andtraining programs.
• For the second time, P&G UK remains top of our section andoverall ranked 7th in the Financial Times’s Best Places to Work.
Also received Special Award for Best Practice in the ﬁeld ofHealth & Wellbeing, recognizing P&G’s commitment to safety
and an active approach to health of individuals and care ofdependants.
• P&G Latin America ranked 2nd as the best place to work in
Latin America by The Great Place to Work Institute.
• P&G Singapore named the Best Employer in Asia and alsoranked 2nd in the Best Employer in Singapore Survey 2005.

P&G 2005 Sustainability Report

19

Brand Awards• Germany’s Innovation Foundation (Stiftung Innovation)
awarded ThermaCare the Egg of Columbus 2005 Innovation
Award (Ei des Columbus) on the occasion of Germany’s
Schmertztag (National Congress on Pain).This prize honors
brands that provide an “exemplary model for an especiallysuccessful, vivid innovation” that improves consumers’ lives.
• Biomat ad wins Cannes’ Lions Grand Prix for Advertising
Laundry detergent campaign directed at hard to reach orthodox
Jews in Israel• Cutie (diaper brand for Korea) selected #1 (for 2 consecutive
years) for “Best Kids Award” by Hankook Daily Newspaper, oneof Korea’s national newspaper
Environment Awards• P&G Guatemala’s Escuintla plant was honored with theCommunity Contributions Award-Environmental Category,presented by the American Chamber of Commerce.
Executive Awards• A.G. Laﬂey, CEO, wins Overall Executive Leadership Award in
the inaugural Executive Leadership Awards by The Wall Street
Journal and NBC.
• A.G. Laﬂey also received the Global Leadership Award by theAmerican Institute for German Contemporary Studies.
• Dick Antoine, Global Human Resources Ofﬁcer, was inducted
into the 13th class of Fellows, the most prestigious honorawarded to human resources professionals by the National
Academy of Human Resources.
• Gil Cloyd, Chief Technology Ofﬁcer, received a signiﬁcantrecognition by Industry Week magazine, naming him the 2004
Technology Leader of the Year.
• Philippe Charrier, General Manager, P&G France, recently
received the prestigious Légion d’Honneur in recognition of
P&G’s long-term involvement with improving the environment.
• Charlotte Otto, Global External Relations Ofﬁcer, received oneof eight 2005 Matrix Awards given by New York Women in
Communications, Inc.

������������������������
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P&G 2005 Sustainability Report

21

Policies, Organization, and Management Systems

THINKSAND ACTSD E C I S I V E LYLEADSB UI L DS DI V E RSE ,C OL LA BO RAT I VE
REL AT I ON SH I PS

LEVERAGESMASTERYI N N O VAT E S
AND
REAPPLIESGROWSC A PA B I L I T Y

IN TOUCHEMBRACESCHANGEO P E R AT E S
WITHDISCIPLINE

valuesintegrity • trust • ownership • leadership • passion for winning
Sustainable development is a simple idea – ensuring a better quality of life for everyone, now and forgenerations to come. P&G embraces sustainable development as a potential business opportunity, as
well as a corporate responsibility. Through our activities we contribute to the economic and social wellbeing of a range of stakeholders, including employees, shareholders, communities in which we operate,
and more widely, to regional, national, and international development. In summary, P&G contributes tosustainable development through both what we do and how we do it.
“What we do” is provide products and services that improve the lives of consumers via health, hygiene,or convenience.
“How we do it” includes addressing any environmental and socioeconomic issues associated with our
products and services. Our Principles, Values, and Statement of Purpose, which are central to P&G’sorganization, act as guidance for the development of our entire organizational structure, all over theworld. They are the basis for an integrated set of management systems and policies applied across thewhole Company.

Success Drivers are the competencies
that define how our people succeed
in today’s business environment. They
are the characteristics we look for in
new employees, how we measureperformance in the Company, and thebasis for our employee-development andcareer systems.
P&G's edge over competition – theadvantage that’s hardest for competitors
to duplicate – is P&G people.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

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

Our Values
P&G is its people and the values by which they live. We attract andrecruit the finest people in the world. We build our organizationfrom within, promoting and rewarding people without regard to any
difference unrelated to performance. We act on the conviction thatthe men and women of Procter & Gamble will always be our mostimportant asset.
Leadership• We are all leaders in our area of responsibility, with a deep
commitment to deliver leadership results.
• We have a clear vision of where we are going.
• We focus our resources to achieve leadership objectives andstrategies.
• We develop the capability to deliver our strategies and eliminate
organizational barriers.
Ownership• We accept personal accountability to meet 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 anddecision.
• We are data-based and intellectually honest in advocating
proposals, including recognizing risks.

Consumers

P&G Values
Leadership
Ownership
Integrity
Passion for Winning
Trust
P&G
BrandsP&G
PeopleP&G Brands and P&G People are the foundation of P&G’s
success. P&G People bring the values to life as we focus on
improving the lives of the world’s consumers.

Passion for Winning• We are determined to be the best at doing what matters most.
• We have a healthy dissatisfaction with the status quo.
• We have a compelling desire to improve and to win in themarketplace.
Trust• We respect our P&G colleagues, customers and consumers, andtreat them as we want to be treated.
• We have confidence in each other’s capabilities and intentions.
• We believe that people work best when there is a foundation oftrust.

22

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

23

Our Principles
These are the Principles and supporting behaviors which flow fromour Purpose and Values.
We Show Respect for All Individuals• We believe that all individuals can and want to contribute to theirfullest 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 is right for the business with integrity
will lead to mutual success for both the Company and theindividual. 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 andstrategies.
• We only do work and only ask for work that adds value to thebusiness.
• We simplify, standardize and streamline our current work
whenever possible.
Innovation Is the Cornerstone of Our Success• We place great value on big, new consumer innovations.
• We challenge convention and reinvent the way we do business tobetter win in the marketplace.

P&G-Customer Cooperation Helps Contributeto China’s Economic and Social Development
Customer relationship is an important linchpin, not only for
P&G China’s business development, but also for the Company’s
corporate philanthropy goals. Since P&G’s China entry in 1988,
P&G has attached great importance to working cooperatively withcustomers and will further efforts in this key area in the future.
Since 1996, through the P&G Hope Schools project, P&G has
been a generous supporter of China’s Project Hope, whose
mission is to put economically challenged children back into
school. P&G Hope Schools builds and maintains schools in areas
with high poverty levels. The project depends on retailer support
because P&G donates 1.2 cents for each P&G product bought atparticipating stores. As the number of participating stores goesup, so do donations.
For the 2004-2005 ﬁscal year, P&G Hope Schools raised$481,000. This year’s donation will be used mainly to improveexisting Hope Schools and also to build ﬁve new ones. It brings
P&G China’s total donation to Project Hope to 20 million yuan
RMB ($2.41 million).

We Are Externally Focused• We develop superior understanding of consumers and their needs.
• We create and deliver products, packaging and concepts that build
winning brand equities.
• We develop close, mutually productive relationships with ourcustomers and our suppliers.
• We are good corporate citizens.
We Value Personal Mastery• We believe it is the responsibility of all individuals to continuallydevelop themselves and others.
• We encourage and expect outstanding technical mastery andexecutional excellence.
We Seek to Be the Best• We strive to be the best in all areas of strategic importance to theCompany.
• We benchmark our performance rigorously versus the very bestinternally 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 business units,
functions, categories and geographies.
• We take pride in results from reapplying others’ ideas.
• We build superior relationships with all the parties who contributeto fulfilling our Corporate Purpose, including our customers,
suppliers, universities and governments.

P&G has been a positive contributor to China’s economic
development, having invested more than $1 billion since entering
the country. With operations in Guangzhou, Beijing, Chengdu,
and Tianjin, P&G has brought such well-known brands as Crest,
Rejoice, Head & Shoulders, Pantene, Clairol, Vidal Sassoon,
Safeguard, Oil of Olay, Whisper, Pampers, Ariel, and Tide into
the Chinese marketplace, touching and improving the lives of
millions of Chinese consumers.

Policies, Organization, and Management Systems

Executive Compensation
Executive compensation is based on principles that have served theCompany well and enabled it to increase shareholder value:• Pay competitively.
• Pay for performance.
• Design compensation programs that support the business.
These principles have helped the Company develop and retain
extraordinary executive talent. P&G develops executives from within,an achievement few other major corporations have matched.
A substantial portion of compensation is composed of variable,
at-risk incentives, the majority based on the Company’s long-term
success. We also benchmark the Company’s pay structure and its
business and financial performance.
Additionally, we expect executives to uphold the fundamental
principles in the Company’s Statement of Purpose, Values, andPrinciples, plus the Worldwide Business Conduct Manual, theSustainability Report, and the Environmental Quality Policy. These
principles include integrity, maximizing the development of eachindividual, developing a diverse organization, and continually
improving the environmental quality of the Company’s products
and operations. In upholding these principles, executives not only
contribute to their own success but also help ensure the prosperityof P&G’s business, employees, shareholders, and the communities inwhich the Company operates.

P&G 2005 Sustainability Report

24

Governance Structure
We believe that good governance practices contribute to better
results for shareholders. Our objective is to maintain corporate
governance principles, policies, and practices that support
management and Board of Directors accountability. These are in
the best interest of the Company and our shareholders, and areconsistent with the Company’s Purpose, Values, and Principles.
Governance starts with the Board of Directors, which has
general oversight responsibility for the Company’s affairs,
pursuant to Ohio’s General Corporation Law and theCompany’s Code of Regulations and Bylaws. In exercising its
ﬁduciary duties, the Board of Directors represents and acts onbehalf of the shareholders. Although the Board of Directors does
not have responsibility for the day-to-day management of theCompany, it stays informed about the business and provides
guidance to management through periodic meetings, site visits,
and other interactions.
The Board is deeply involved in the Company’s strategic planning
process, leadership development, and succession planning. The
Board has several committees to facilitate its oversight of theCompany. These include Audit, Compensation & Leadership
Development, and Governance & Public Responsibility. The
responsibilities of the Governance & Public Responsibility
Committee include oversight of organization diversity, sustainable
development, community and government relations, productquality assurance, and corporate reputation. The Board of
Directors and its committees operate under our Corporate
Governance Guidelines and Charters. Additionally, the Board
has adopted guidelines for determining the independence ofits members. As of June 2005, approximately 73 percent of ourdirectors qualiﬁed as being independent.
The Board has approved a code of conduct, outlined in ourWorldwide Business Conduct Manual. This code applies to all
directors, ofﬁcers, and employees and is designed to help
ensure compliance with all applicable laws and Company
policies, including those related to sustainable development.
Shareholders may communicate with the Board of Directors andsubmit shareholder proposals as described in the Company’s
proxy statement.
on theWeb

To read P&G’s 2005 Annual Report, please click here:
www.pg.com/investors/annualreports.jhtml

Policies, Organization, and Management Systems

Corporate Governance and Management’s Responsibility
At Procter & Gamble, we take great pride in our long history of
doing what’s right. If you analyze what’s made our Company
successful over the years, you may focus on our brands, ourmarketing strategies, our organization design, and our ability
to innovate. But if you really want to get at what drives ourCompany’s success, the place to look is our people. Our people
are deeply committed to our Purpose, Values, and Principles. It is
this commitment to doing what’s right that unites us.
This commitment to doing what’s right is embodied in ourﬁnancial reporting. High-quality ﬁnancial reporting is our
responsibility – one we execute with integrity and within both theletter and spirit of the law.
High-quality ﬁnancial reporting is characterized by accuracy,
objectivity, and transparency. Management is responsible formaintaining an effective system of internal controls over ﬁnancial
reporting to deliver those characteristics in all material respects.
The Board of Directors, through its Audit Committee, provides
oversight. They have engaged Deloitte & Touche LLP to audit ourconsolidated ﬁnancial statements, on which they have issued an
unqualiﬁed opinion.
Our commitment to providing timely, accurate, andunderstandable information to investors encompasses:
Communicating expectations to employees. Every employee –from senior management on down – is trained on the Company’s
Worldwide Business Conduct Manual, which sets forth theCompany’s commitment to conduct its business affairs with highethical standards. Every employee is held personally accountablefor compliance and is provided several means of reporting any
concerns about violations. The Worldwide Business Conduct
Manual is available on our website at www.pg.com/company.
Maintaining a strong internal control environment. Our system
of internal controls includes written policies and procedures,segregation of duties, and the careful selection and developmentof employees. The system is designed to provide reasonableassurance that transactions are executed as authorized andappropriately recorded, that assets are safeguarded, andthat accounting records are sufﬁciently reliable to permit the
preparation of ﬁnancial statements conforming in all material
respects with accounting principles generally accepted in the
United States of America. We monitor these internal controls
through control self-assessments by business unit management.
In addition to performing ﬁnancial and compliance audits aroundthe world, including unannounced audits, our Global Internal
Audit organization provides training and continuously improvesinternal control processes. Appropriate actions are taken bymanagement to correct any identiﬁed control deﬁciencies.

P&G 2005 Sustainability Report

25

Executing ﬁnancial stewardship. We maintain speciﬁc programs
and activities to ensure that employees understand their ﬁduciary
responsibilities to shareholders. This ongoing effort encompasses
ﬁnancial discipline in our strategic and daily business decisions
and brings particular focus to maintaining accurate ﬁnancial
reporting and effective controls through process improvement,
skill development, and oversight.
Exerting rigorous oversight of the business. We continuously
review our business results and strategic choices. Our Global
Leadership Council is actively involved – from understanding
strategies to reviewing key initiatives, ﬁnancial performance,and control assessments. The intent is to ensure we remain
objective, identify potential issues, continuously challenge eachother, and ensure recognition and rewards are appropriatelyaligned with results.
Engaging our Disclosure Committee. We maintain disclosure
controls and procedures designed to ensure that information
required to be disclosed is recorded, processed, summarized,
and reported timely and accurately. Our Disclosure Committee
is a group of senior-level executives responsible for evaluating
disclosure implications of signiﬁcant business activities andevents. The Committee reports its ﬁndings to the CEO and
CFO, providing an effective process to evaluate our external
disclosure obligations.
Encouraging strong and effective corporate governance fromour Board of Directors. We have an active, capable, and diligent
Board that meets the required standards for independence,
and we welcome the Board’s oversight. Our Audit Committee
comprises independent directors with signiﬁcant ﬁnancial
knowledge and experience. We review signiﬁcant accounting
policies, ﬁnancial reporting, and internal control matters withthem and encourage their independent discussions with external
auditors. Our corporate governance guidelines, as well as thecharter of the Audit Committee and certain other committeesof our Board, are available on our website at www.pg.com/
company/our_commitment/corp_gov.
on theWeb

To read P&G’s 2005 Annual Report, please click here:
www.pg.com/investors/annualreports.jhtml

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

Policies
These are the policies that support our Purpose, Values, andPrinciples.
Our Values and Policies
As an important part of our Corporate Social Responsibility program, we have released a publication, Our Values and Policies.
This booklet provides sustainable development guidelines forbusiness conduct that are based on P&G’s Purpose, Values, andPrinciples. These key elements are of utmost importance forproper conduct and respect for all individuals in the quest forcommon prosperity.
Our Values and Policies can be downloaded at:www.pg.com/content/pdf/01_about_pg/
on the01_about_pg_homepage/about_pg_toolbar/
Webdownload_report/values_and_policies.pdf

Sustainability Guidelines for Supplier Relations
We have developed a publication, Sustainability Guidelines for
Supplier Relations.
This document shares what we expect from our suppliers in termsof business conduct and what our suppliers can expect from us. It
explains that the foundation of our supplier selection guidelines is
our Statement of Purpose, Values, and Principles.
We operate within the spirit and letter of the law and maintain highethical standards wherever we conduct business. We will actively
seek business relationships with suppliers who share our values andpromote the application of these high standards among those withwhom they do business.
Sustainability Guidelines for Supplier Relations can be
downloaded at:www.pg.com/content/pdf/01_about_pg/
on the 01_about_pg_homepage/about_pg_toolbar/
Webdownload_report/guidelines_for_supplier_relations.pdf

The Global Sullivan Principles
P&G was one of the founding members of the Global Sullivan
Principles. In accordance with the Global Sullivan Principles, we
support economic growth, social justice, human rights, politicaljustice, and equal opportunity wherever we do business in theworld. The products we deliver, the consumers we serve, and how
we serve them are in line with these expectations. We consider
ourselves a global company and a global citizen.
At P&G, everything we do begins with our Purpose, Values, andPrinciples. We have reviewed and revised our policies to make sure
we are aligned with the Global Sullivan Principles. We ensure ourcommitment to employees through our human resources systemand profit-sharing program. We train, educate, and develop our
people. We instill our culture and policies to ensure that everyone
is treated fairly and has the opportunity to contribute to our visionand mission. The profit-sharing program is designed to provide
employees with a stake in the future of the Company. Our flexible
work arrangements offer employees the opportunity to meet bothbusiness and personal needs. Programs such as these enable us tobe a sustainable business and a viable part of the communities inwhich we do business.

26

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

Diversity Data – Global Enrollment
P&G continues to focus on diversity as a global strategy andexpects its work force to become increasingly more diverse. Global
data on enrollment by gender is shown in the following table:
Global Enrollment % Female

Management
All Other Employees1

2005
38.0
38.4

2004
36.7
36.9

2003
35.5
37.1

1 The category of “All Other Employees” continues to be an evolving global database as
more of P&G’s acquired plants are included.

The percentages of minority and female employees in the UnitedStates are shown in the following table:% Minorities
Management
All Other Employees2% FemaleManagement
All Other Employees2

2005

2004

2003

19.6
18.7

18.8
19.5

18.0
19.8

36.3
39.6

35.4
38.9

34.8
38.7

2 Administrative, Technical, and Plant Technicians

P&G Japan Diversity ForumIn May, P&G Japan employees had the opportunity to discuss
openly how to leverage diversity to improve business results andthe lives of P&G employees.
Employees from various functions and job levels attended the
day-long forum. Also participating, to learn about diversity, were
guests from outside the Company, such as local governmentofﬁcials responsible for gender diversity empowerment, experts
from academia, and media.
P&G Japan President Ravi Chaturvedi opened the forumwith remarks about diversity and business strategies: “Peakperformance comes from fulﬁlled people. Every one of us
is unique, and we all feel special when our uniqueness isvalued and nurtured, when we know we can uniquely makea difference. That will be the key to successfully sustainable
diversity efforts – creating an environment where all our people
are fulﬁlled.”
The forum offered four workshops that included interactive
discussion – Boss & Employee Relationship Building, Practical
Ideas to Leverage Diversity at Work, What’s in It for Men?, andWork/Life Balance for All of Us.

27

Diversity Policy
P&G has a strong legacy of ownership, commitment, andaccountability for diversity because we recognize the direct link
between the Company’s success, both short-term and long-term,and engaging the full power of all our employees. We believe a fully
utilized and diverse work force creates competitive advantage andfulfills P&G’s Purpose, Values, and Principles. Our business leadersrelentlessly pursue valuing, trusting, respecting, and leveraging
individual differences and inclusion to ensure we are “in touch”
with our global markets, customers, and business partners. Thus,
we are more creative and innovative in developing products andservices that improve the lives of the world’s consumers. Diversity is afundamental component of P&G’s culture and integral to our “Howto Win” business strategy for success.
Leadership Focus and Accountability
A.G. Lafley, Chairman of the Board, President, and Chief
Executive, holds himself accountable for leading diversity andmonitoring progress in every part of our Company. He also
expects top leadership to hardwire diversity into their businessstrategies, establish clear expectations, and demonstrate personalaccountability. This encompasses showing strong, visible leadership,commitment, and constant focus that includes diverse leadershipand work teams and robust systems for ongoing measuring andtracking of diversity progress.
At P&G, top executives conduct in-depth diversity reviews annuallywith organization heads to assess progress and reinforce leadershipaccountability for corrective actions across the business units. The
top 30 officers in the Company have diversity results tied to theirstock options awards, and strong diversity performance influences
top ratings. Diversity action plans are developed in each region of
the world to reflect the greatest opportunity for advancement oflocal diversity strategies.
Talent Support and Development
P&G strives to build a diverse and fully engaged organization byattracting the best talent from around the globe, leveraging thefull talent of each individual through effective assignment andpromotion planning processes, and executing with excellence thecritical systems that affect and support retention of each employee.
We focus on establishing long-term relationships with educational
institutions that have diverse populations of highly qualified students.
To broaden our candidate base worldwide, we have launched
Recruitsoft, our first fully global Web-based online candidate
management system. We supplement our base recruiting efforts
by utilizing intern programs, participating in recruiting conferences,and increased outreach to high school students. We execute special
programs such as INROADS and P&G Marketing and Finance
Summer/Winter Camps to introduce students to P&G. Additional
teams are available to help with efforts to recruit women aroundthe globe and Hispanic, African-American, military, and disabled
candidates in the United States.
continued on next page

Policies, Organization, and Management Systems
Diversity Policy
continued from previous pageOur foundation systems for ensuring employee retention include
effective first-year orientation/join-up programs, providing a good
match with the first boss, developing coaching/mentoring/ advocacy
relationships, high-quality challenging work/career plans, training(virtual, classroom, and external), and supportive work/life policies
and practices. Employee support groups and network teams exist
throughout the organization and contribute strongly toeffective recruiting, join-up, and development efforts. These groups
include women globally and Hispanic, African-American, Asian/Pacific-American, gay/bisexual/lesbian, and disabled employees in the
United States.
Inclusive Culture
P&G leaders are expected to build an inclusive work environmentthat welcomes and embraces diversity – an environment where
people feel comfortable being who they are, regardless of theirindividual differences, talents, or personal characteristics. This is anenvironment that provides everyone equal access to information,
opportunities, and involvement so each person learns, grows, excels,and maximizes his or her personal contribution.
Training, policy, and sensing systems are utilized to reinforce
development of an inclusive culture. Focused diversity training/learning processes are utilized to equip leaders to value and nurture
differences in management experiences, styles of leadership, andproblem-solving/decision-making approaches. All employees haveaccess to supportive and enabling policies and practices in the areasof flexible work arrangements, family care, resource/referral services,and personal wellness management to improve work/life balanceand productivity. Employee surveys and culture sensing, as well as
the diverse leadership networks, provide advisory data and learnings
to top leadership about how to be more effective at leveraging local
customer/employee practices and beliefs.
Business and Community Partnerships
Improving lives in the countries and communities in which we
operate is a long-standing P&G value. We are committed to making
a difference in all our communities – from India to Kenya, from
Canada to Brazil, from France to Australia. Around the world, P&G
and its employees strive to improve lives every day. This has led to afocus on building effective business and community partnerships inareas where we can make a meaningful difference:education, volunteerism to improve the quality of life in ourcommunities, and economic development.
Education is a means of improving quality of life and a pathway
to fulfill personal aspirations. P&G supports educational programs,
from preschool through college, through financial contributions
and mentoring/tutoring programs. The volunteer leadership of P&G
employees, who can be counted on to help with virtually every
significant community project, greatly enhances the effectivenessof our contributions. Through volunteerism, P&G provides ongoingsupport, sponsorship, and leadership for many civic, cultural, andnonprofit organizations across all geographies in which we operate.
This year alone, P&G and The P&G Fund contributed more than$100 million to support our communities.

P&G 2005 Sustainability Report

28

P&G is committed to the economic development of minority- andwomen-owned businesses and suppliers around the globe. P&G has
one of the oldest supplier diversity programs in the United States,
spending more than $1.1 billion across nearly 700 minority- andwomen-owned suppliers. Additionally, P&G provides continuing
leadership in the advertising industry by partnering with our agencies
to refer applicants to each other and help minorities gain entry into
commercial production companies.
Summary
In 2004, P&G’s solid progress in diversity was recognized in many
U.S. surveys: Fortune’s World’s Most Admired (#1 in our industry
category), Family Digest’s Best Companies for African Americans(Top 7), DiversityInc’s Top 50 Companies for Diversity (#30),
Executive Women (Top 30), LATINA Style magazine’s Best 50
Companies for Latinas to Work, and the Ohio Governor’s Minority
Business Development Recognition Award. P&G global rankings forbest places to work include: Latin America (Top 10), Chile(Top 5), Canada (Top 100), and Singapore’s HRM Award for theBest Retention Strategies.
P&G is committed to being a leader. We want our brands to leadin their categories and our Company to be a leader in our industry
and our communities. Our mission is to be, and be seen as, the best
consumer products company in the world. In order to achieve our
mission, we must be among the best places to work and leverage
diversity as a competitive advantage. Our corporate challenge is tobecome the most in-touch company in the world. To be in touch isto practice – and believe passionately in – diversity and inclusion.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

Child Labor and Worker Exploitation Policy
P&G does not use child or forced labor in any of our global
operations or facilities, and we expect suppliers and contractors
with whom we do business to uphold the same standards.
More speciﬁcally, we will not conduct business with suppliers
employing child, prison, indentured, or bonded labor, or using
corporal punishment or other forms of mental or physicalcoercion as a form of discipline.
In the absence of any national or local law, we will deﬁne “child”
as less than 15 years of age. If local minimum-age law is set
below 15 years of age but is in accordance with developing
country exceptions under International Labor Organization (ILO)
Convention 138, the lower age will apply.
For more information:www.pg.com/content/pdf/01_about_pg/
on the01_about_pg_homepage/about_pg_toolbar/
Webdownload_report/guidelines_for_supplier_relations.pdf

India’s Shiksha Program Reaches
Children Needing Education
P&G India has shown that education can take place one day at
a time, even in the country with the world’s largest number of
uneducated children. Some 60 million Indian children receive
no education, and millions more study in sub-standard schools,
some outdoors. Village parents usually pull their girls out ofschool by age 12.
Through the Shiksha (education) campaign, consumers whobought a P&G product between April and June helped support
one day’s education for an underprivileged child.
The organization Child Relief and You (CRY) and four TV
channels were P&G’s partners in this campaign. More than 20
celebrities – actors, dancers, models, singers, sports ﬁgures –gave their endorsements, to build awareness of the campaign.
The money raised through Shiksha helped more than 11,000
children through 10 CRY projects in seven states.

29

Policies, Organization, and Management Systems

Personal Information Privacy
Advances in computer technology have made it possible fordetailed information to be compiled and shared more easily andcheaply than ever, around the globe. That can be good news forsociety as a whole and for individual consumers.
At the same time, as personal information becomes more accessible, each of us – companies, associations, government
agencies, consumers – must take precautions against misuse ofthat information. Several countries already have laws protecting
consumers from misuse of their personal information, and manyothers are following suit.
P&G places high priority on safeguarding people’s personal
information. Even in countries without privacy legislation, we still
adhere to our privacy policy. We want to have the trust of consumers
and all others who do business with us, including employees,
shareholders, retail customers, and recruitment candidates.
P&G’s robust privacy program is managed by a Global Privacy
Council. Our ﬁrst objective is to protect an individual’s personally identiﬁable information as if it were our own. All outsidecompanies handling data on our behalf are required to abide by
our privacy principles.

Advertising Policy and Sustainable Development
If sustainable development is about ensuring a better qualityof life for everyone, now and for generations to come, thenadvertising has a key role to play in this. Advertising helps informconsumers about products and services and facilitates consumer
choice. After all, it is consumers themselves who are best placed
to choose how best to improve their own quality of life.
more
info

For more information, please click here.

P&G 2005 Sustainability Report

Externally, P&G has been a strong advocate of work within theindustry to protect the privacy of consumers. For example, P&G
has been a leader in the effort to make privacy notices moreconsumer friendly, and have recently made our on-line marketingstatement available in 39 languages. We are also active in theindustry effort to create privacy and security guidelines for Secure
Vendor relationships.
on theWeb

For more information on P&G’s global privacy
principles, please visit:www.pg.com/company/our_commitment/
privacy_policy/privacy_policy.jhtml

P&G adheres to U.S./European Union Safe Harbor principles.
For more information, visit:www.export.gov/safeharbor/
In the United States, P&G is an active participant in the Better
Business Bureau OnLine (BBBOnLine) Privacy Seal Program.
For more information about BBBOnLine, visit:www.bbbonline.org/

We approach our work with respect, openness, and responsibility by using animals as a last resort, working with animal welfareorganizations and ensuring high standards of care. We collaborate with governments and academia to promote the acceptanceof alternatives. We actively share our discoveries so that others
can beneﬁt from them. News of our advances has been shared in
more than 300 scientiﬁc publications.
on theWeb

For details of our updated policy and practices please
go to:
www.pg.com/science/ria_policy.jhtml

P&G Updates Animal Welfare Policy
P&G products are used in homes around the world 2 billion times
a day, and we are committed to safeguarding the health of ourmany consumers.

You can read about ongoing work to advance our animal
welfare and animal alternatives programs in our quarterly
newsletter Forward Focus:
www.pg.com/science/PGForwardFocus.pdf

Sometimes, to ensure materials are safe and effective, we must
conduct research involving animals. This is a last resort; weconsider such research only after every other reasonable option
has been exhausted. The vast majority of our tests do not use
animals. Wherever possible, we use computer models, synthetic
materials, published scientiﬁc studies, and comments from consumers about products they use.

For more technical articles regarding animal welfare, please
go to:
www.pgperspectives.com

P&G is well-known for leadership in developing alternatives toanimal testing, investing more than $190 million and helping todevelop more than 50 proven alternative methods.

30

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P&G 2005 Sustainability Report

31

Iams Brings Pet Food Studies Into Homes
With assistance from its International Animal Care Advisory
Board, Iams is changing the way pet food feeding studies arebeing done. More and more dogs and cats participating infeeding studies have been “working from home.” This past year,
more than 90 percent of dogs and cats in feeding studies lived
with their families.
After October, 2006, most dogs and cats in feeding studies will
be pets living in their homes, with others living at the Iams Pet
Health & Nutrition Center. Iams will no longer have any dogs orcats in university or contract facilities.
The new Iams Pet Health & Nutrition Center opened in December
2004. Dogs have roommates and share large windows. They
have full-time access to the outdoors, where they have playyards with toys and places to climb and hide. There are no cages.
When the dogs and cats complete their work at the Center, thesocialization and play skills developed there make them goodcandidates for adoption.
Iams is also actively seeking alternatives to feeding studies
requiring dogs and cats. In addition to developing 17 alternatives,
Iams has made a substantial donation to the University of Missouri
to support its Comparative Orthopaedic Laboratory. This laboratory
uses breakthrough in vitro models to study osteoarthritis, avoiding
use of research animals while still offering useful, relevant, andtimely data. These methods are at the forefront of medical science,with potential for developing pet foods that might alleviate thepain of arthritis, without animal testing.

Iams Helps Orphan Pets Find Homes
P&G’s Iams Company works with local shelters to ﬁnd homes fororphan pets.
During the 2004 season, the annual Iams Home 4 the Holidays
adoption drive set a program record by securing homes for morethan 313,000 pets through a worldwide partnership with morethan 1,800 shelters.
Iams also helped shelters through its Friends for Life campaign.
Working closely with the American Society for the Preventionof Cruelty to Animals, Iams exposed more than 400 U.S. shelterorganizations to a new process for making better matches
between potential adopters and dogs needing homes. Called
the Meet Your Match Canine-ality Adoption Program, the newprocess assesses and then color-codes both the pets and theadopters according to traits. During a pilot program at the Kansas
Humane Society of Wichita, implementing Meet Your Match
reduced pet returns by more than 50 percent.

Policies, Organization, and Management Systems

Environmental Quality Policy
We will provide products and services of superior quality and valuethat improve the lives of the world’s consumers. As part of this,P&G continually strives to improve the environmental quality of its
products, packaging, and operations around the world.
more
info

For more information on P&G’s Environmental Quality
Policy, please click here.

Climate Change
P&G supports efforts to deal with climate change under the
U.N. Framework Convention on Climate Change. P&G is not anenergy-intensive business, though we understand the potential
impacts of greenhouse gases from our operations. We take energy
conservation and efficiency seriously. We strongly support continued
scientific efforts to understand the causes and consequences of, andpotential remedies for, the negative effects of climate change.
It is critical that the international community take action to provide
the flexibility essential to minimize negative economic and social

Health and Safety Policy
P&G is committed to having safe and healthy operations around theworld. The goals are to protect the lives and health of its employees
and the communities surrounding its operations, as well as toprotect its assets, ensure business continuity, and engender publictrust. To accomplish this, P&G will:• Operate facilities safely and ensure processes are safe and healthy
for our employees and residents of the surrounding communities.
We will accomplish this by following uniform corporate safety
standards around the world. Safe operations have been a longstanding part of Company culture, reflecting the belief that ourpeople are our most important asset.
• Construct our facilities so as not to compromise the safety andhealth features designed into them.
• Monitor progress toward our objective of preventing injuries,
illnesses, and incidents. We will continually assess and improve oursafety and health technologies and programs.
• Have every employee understand and be responsible forincorporating safe behavior in daily business activities. Every
employee is trained to work in a safe and healthy manner.
• Have operating standards, practices, systems, and resources inplace to implement this policy.

P&G 2005 Sustainability Report

32

impacts of climate change on countries, individual businesses, andultimately, on the general public.

Forest Resources Policy
Though P&G does not own or manage forests, we are a majorpurchaser of wood-derived ﬁber. Because of this, we believe wehave a responsibility to ensure the sustainability of the world’s
forest resources.
The principles of sustainable forest management include
economically and environmentally responsible harvesting andreforestation to minimize impacts on wildlife habitat, soil, andwater quality and protection of special sites of unique geological,
biological, or historical signiﬁcance.
Consistent with this view, P&G has three policies which apply to
how we manage our purchasing and utilization of ﬁber.

more
info

To see those requirements, please click here.

Our Commitment to Combating the HIV/AIDS Pandemic
At the 2004 Shareholders Meeting, CEO A.G. Lafley shared theCompany’s commitment to play our part in combating the HIV/AIDS
pandemic. He also described P&G’s policy regarding employees who
are HIV-infected or who have AIDS. The policy reads as follows:
HIV/AIDS Policy
All employees, including those who are HIV-infected or with AIDS,
are treated consistently with the Company’s Purpose, Values, andPrinciples by the Company, their managers, and coworkers. Amongother things, that means that each individual is treated with dignity
and respect, and that we do not discriminate against any individual
based on any difference not related to performance. We treat
employees with HIV/AIDS the same as we treat those with otherserious illnesses.
Specifically, an employee who is HIV-infected or with AIDS:• has the same employment rights and responsibilities as other
employees.
• has the same eligibility for employee benefits and programs,
including medical care and disability coverage, as non-infected
employees.
• is afforded privacy and confidentiality protection consistent with
the Company’s handling of confidential, medical, or other sensitive
information.
• is provided management support to remain productive.

more
info

For more information see theSustainability in Action sectionof this report.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

33

Management Systems
P&G’s Management Systems ensure that the Company’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 the Company better manage its progress onelements of sustainable development. This section provides an overview of our Management Systems.

Human Resources
Human Resources ensures that P&G has the employees,organizational design, and work culture to deliver businessproductivity and to continually improve consumer, employee, andshareholder value.
more
info

For more information on Human Resources,
please click here.

Employee Privacy
P&G respects employee privacy and dignity. We will only collect andretain personal information from employees that is required for theeffective operation of the Company or as required by law. We willkeep that information confidential and release it only to those whohave a legitimate need to know.

Weybridge Festival Raises Funds for Charities
Employees at P&G UK in Weybridge have been raising money
for charities via a fun annual event for nine years. They and theirfamilies get together each summer for P&G Charity Festival Day,
with family entertainment and items for sale. Each year the site
chooses charities to receive the proceeds.

Harassment Policy
P&G is committed to providing a harassment-free work environment.
This is the right thing to do not only from a social perspective,
but also from a business perspective. It enables our diverse workforce to contribute to their highest potential. We will not tolerateharassment of anyone by anyone – including employees, suppliers,
customers, contractors, and agencies. Every employee is expected
to be proactive in ensuring that the work environment is free fromharassment of any kind. Managers of others are responsible forsetting clear expectations for acceptable behavior in the workplace.

In addition, P&G invites local charities to do their own fundraisingat the festival.
The 2005 Charity Festival Day raised more than $100,000. The
money went to The Rainbow Trust Children’s Charity, which helps
families with a child who has a life-threatening condition or terminal
illness; Asthma UK, which sends children with severe asthma on
specially supervised outdoor activities that include learning how
to manage their asthma; and the Stephanie Marks Appeal, which
provides resources and services for people with diabetes. Weybridge
has raised more than $600,000 for local charities in its nine
Charity Festival Days.

Community Meets Japan HQ Employees at Festival
P&G Japan headquarters employees and their families
volunteered at the Rokko Island Welcome Festival in April. P&GJapan headquarters had four booths at the annual community
event. Some 10,000 people came to the festival to get
acquainted with Rokko Island’s businesses, schools, and shops.
P&G had a second reason to be at the festival – to convey
appreciation to people who helped Kobe City after the big Kobe
earthquake of 1995. P&G volunteers and their families wore
T-shirts saying “Kobe Earthquake 10-Year Anniversary” and“Many Thanks from Kobe.”
The P&G crew gave out Crest Spin Brushes and Whisper samples
and held a Pringles lottery with prizes of Pringles chips andsouvenirs featuring Mr. Pringles. Employees who formed a
Flamenco Club went on stage for a dance performance, showing
another side of P&G people.

Policies, Organization, and Management Systems

Insurance Systems
The Corporate Insurance Program sees that P&G is protected frompotential major losses. It tries to secure the best coverage at thelowest cost.

more
info

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please click here.

Human and Environmental Safety of Our Products
The Product Safety and Regulatory Affairs (PS&RA) organizationis responsible for ensuring that products and packages are safe.
This means safe for consumers, safe for the environment, and incompliance with laws and regulations where they are sold. PS&RA
also addresses other environmental aspects of products andpackages, such as their compatibility with waste management
systems, natural resource use, or issues of perceived safety.
For further details, we encourage you to visit the following
websites regarding the science and safety of P&G products:
Science in-the-Box (www.scienceinthebox.com), the Scienceof Beauty (www.pgbeautyscience.com), and P&G Perspectives(www.pgperspectives.com).
more
info

For more information on Human andEnvironmental Safety, please click here.

Business Continuity
P&G’s Global Business Continuity Program ensures that all criticalsites and work processes evaluate their risk mitigation programs,
exposure to catastrophic events at P&G sites and at our key
suppliers and service providers that could signiﬁcantly interrupt
business operations, and the business impact of such events.
Site and business unit leaders then develop contingency plans
to minimize business interruption if a disabling event should
occur. Crisis Management team structures are deﬁned to manage
business recovery using the pre-deﬁned contingency plans. Tests
are conducted annually to ensure the contingency plans are
sufﬁcient and up-to-date. Business Continuity Plans are audited
regularly, and a report of the Business Continuity Program’s status
is made each January to the Audit Committee.
Worldwide Health, Safety & Environment Systems
at Manufacturing Operations
Health, Safety & Environment (HS&E) is a global community ofresources responsible for ensuring that all manufacturing facilities
worldwide are operated safely and legally; that process hazards areminimized or eliminated; that health risks are identiﬁed, managed, or
eliminated; and that waste from sites is reduced as much as possible.
Several thousand employees spend all or a portion of their time on
HS&E management; this totals more than 919 full-time equivalents.

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info

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please click here.

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HS&E Benchmarking
Benchmarking continues to be an important tool used by P&G
to assess and maintain the health of its global HS&E program. It
provides Corporate HS&E with important external data to verify
the robustness of our performance and to identify improved
management and technology approaches.
To that end, P&G works with many multinational as well as
European companies to understand their performance in areas
such as injury/illness, workers compensation, property loss andregulatory ﬁnes, and HS&E personnel productivity. In addition,
we are routinely involved in studies led by GEMI (Global
Environmental Management Initiative, with a membership ofmore than 42 multinational companies) that survey several key
HS&E topics. As a result of this work, we have concluded thatcompared to other leading companies, P&G has:
• Strong HS&E performance results
Injury/illness rate for employees – lowest 25 percent
Lost workday rate for employees – lowest 25 percent
Penalties paid (in dollars per billion dollar sales)– lowest 33 percent
Property loss (in dollars per billion dollar sales)– lowest 33 percent• “Best in class” HS&E operations costs (in dollars per billion dollar
sales) due to shift of more HS&E work to site technicians thanmost other companies.
While P&G’s current situation is quite positive, our long-term
challenge is to continue delivering excellent benchmarking results.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

35

Medical Systems
P&G’s Global Medical organization advises and assists management
and employees in assuring a safe, healthful work environment
through the delivery of preventive health and clinical services. These
services are for all employees, not just those at manufacturing sites.
Global Medical manages health issues that may affect employees,
technologies, and brands. As P&G is a principles-driven company, all
medical system work is undertaken in the following order of priority:
1. Save a Life (Protect our People)
2. Obey the Law (Protect Company Reputation)
3. Protect Key Technologies (Protect Brand Integrity)
4. Enhance Speed to Market (Protect Emerging Technologies)
5. Optimize Employee Productivity
All medical standards of performance and standard operatingprocedures flow directly from specific P&G Principles, Values, andcompelling business needs.

Fire Protection Systems
P&G operates its fire protection program on the basic principlethat each facility is unique and should have a program designed
to meet its specific requirements. The Insurance Division, working
with Global Business Unit fire protection leaders and local
management, determines the appropriate level of fire protection
for each P&G location.
Each facility’s program is organized and built around the 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.

Employee Health Is a Top Priority
in Germany/Austria/Switzerland
Recognizing that its most important resource is its employees, P&G
Germany/Austria/Switzerland has launched the Health System Key
Elements program. All P&G sites in the three countries are required
to implement this program for their employees.
Health Systems Key Elements provides standards and strategies
for ﬁrst aid, occupational health screening, the Employee
Assistance Program, disability management, vaccinations, andqualiﬁcation of the medical staff. Every year, priorities andmeasures related to employee health and well-being are deﬁned,
based on a Site Health Needs Analysis.
To inﬂuence and enhance the health of its employees, sites in thethree countries offer ongoing health activities as well as special
health campaigns. Here are some examples:
Ongoing activities:• General health advisory service• Health risk appraisal• Travel health advisory service• Vaccination advisory service• Ergonomic assessment and training
Special campaigns:• Nutrition guidance, in cooperation with the cafeteria• Fitness and exercise• Heart Week
• Stress• Alcohol• Support to quit smoking

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report36

Principal Industry and Business Associations
P&G holds membership in many industry, business, and environmental associations whose activities
are related to the Company’s. Please click on the links below to view these memberships.
Asia
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info

Europe, Middle East,
and Africa
For a complete list,
please click here.

North America

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info

For a complete list,
please click here.

more
info

For a complete list,
please click here.

Latin America
more
info

For a complete list,
please click here.

Worldwide

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info

For a complete list,
please click here.

Infasil per Te Reaches Italian Women
Italy’s Infasil brand, with extra-mild cleansers for feminine hygieneand for infants, is reaching more and more women through its
Infasil per te (Infasil for you) program.
Infasil per te circulates information, developed with the Italian
Association of Obstetrics and Gynecologists, about intimate
hygiene and also prevention of diseases linked to poor hygiene.
Key to the program is its ability to reach women “where you are”
– in places they frequent in their daily lives.
In its ﬁrst year, Infasil per te targeted new mothers. Last year, ittargeted all young women. In 2005-2006, it will expand to reach
all women.
Infasil per te reaches pregnant women in hospital pregnancy
classes. The information also appears on the www.infasil.it
website for pregnant women who are homebound or don’t live
near a hospital offering the class. The ﬁrst year, this portion ofInfasil per te reached 1,000 pregnant women in hospitals, and
2,000 per week clicked onto the website.
This past year, Infasil per te brought information to active young
women at universities. At the Infasil Active Booth, they could
take informational leaﬂets and also have a free consultation
with a gynecologist. Women going to www.infasil.it can also
get a free electronic consultation with a gynecologist. The Active
Booths reached more than 10,000 young women, with 400 ofthem consulting with the gynecologists. Ten thousand of thewomen volunteered to ﬁll out questionnaires that will help Infasil
plan future projects.

Oily Birds Come Clean With Dawn and Joy
Long known for cleaning birds caught in oil spills, P&G’s dishwashingliquids have come to the rescue again during the past year.
Birds coated with oil cannot maintain their body temperature andcan lose buoyancy. If left in this condition, they die in a few days.
It was Dawn that rescued birds at the PEMEX oil spill in
Veracruz, Mexico, in December 2004. P&G donated Dawn
to the Environmental Ministry and the International Fund forAnimal Welfare (IFAW). IFAW cleaned the oil off 250 pelicans,
30 sea gulls, and more than a dozen other birds, saving theirlives and sending them back to their natural habitat. Mexico’s
environmental minister recognized Dawn publicly, calling it anenvironmentally friendly product.
It’s Joy that does the job in Japan. More than 300 times a year,
Japan experiences oil spills, such as from tanker accidents.
But Joy dishwashing liquid and the good work of volunteers cansave the birds’ lives. Veterinarians in a nonproﬁt organization
called the Wildlife Rescue Veterinary Association, working withlocal community organizations, wash the birds with Joy andreturn them to their natural habitats. With its oil-dissolving
strength, combined with its gentleness, Joy works perfectly on
bird feathers.
P&G Japan also makes ﬁnancial contributions to the Wildlife
Rescue Veterinary Association to help its bird rescue work.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

37

Stakeholder Interaction
Communities
Each P&G production facility has site-specific activities to build
constructive relationships with local authorities, local industry
associations, neighbors, local action groups, thought leaders, andnews media. Depending on the culture of the community in which
the plant is located, this can range from regular official meetings
during which new information is shared or questions are answered,
to more informal meetings. This could be, for example, a reception
for the immediate neighbors, where information on the past year
and plans for the new year are discussed. P&G ensures continuity
in community interaction by meeting regularly with local authorities
to update them on plant news. In the neighborhoods of many P&G
operations, the Company cooperates with and sponsors local events,
so the whole area benefits from the presence of a P&G site.
P&G recognizes the importance of improving the quality of life in our
local communities, and we support local initiatives and encourage
employee involvement. The most valuable community support we
provide usually involves not only writing a check but also taking
advantage of the intellectual capabilities and energy of P&G people.
We look for areas where we can make a significant long-term,
systemic difference. This leads us to focus heavily on education andhealth, with special emphasis on youth. It also leads us to build
alliances with strategic partners to achieve a better result than we
could alone. We look to our people in the area to work with theirlocal communities and government officials to learn where we canmake the biggest difference.
In addition, P&G employees and retirees have a long tradition ofvolunteer involvement in the communities where we live. We lend
a hand to those in need. We pitch in when disaster strikes. We
support the arts. We support education. We invest our resources– and ourselves, through tens of thousands of volunteer hours – inour neighborhoods around the world.

NGOs: Local - Regional - Global
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info

For more information,please click here.

Scientific Community
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info

For more information,please click here.

Authorities: Local – Regional – Global
P&G communicates with local, regional, and global authorities
directly, as an individual company, as well as through industry
associations. Scientists and legal experts in the P&G External
Relations organization review existing and proposed legislation thatis relevant to the Company and work with authorities to ensure thatpolicies take the needs and experience of business into account. Thisis done via meetings with the authorities and comments on theirposition papers and industry position papers. Activities like these canbe very important to ensure the Company’s needs are understoodand considered when decisions are being made that can influence
P&G’s business.
P&G also works closely with authorities to provide assistance for avariety of programs around the globe. P&G provides business andscientific expertise, funding (either financial or donations of product),and employees’ time to a wide variety of projects.

Mamás del Corazón Helps Children in Argentina
P&G Argentina is working in alliance with UNICEF on a campaign
to raise funds and awareness for a child welfare project of the
UNICEF-sponsored NGO Redinfa. P&G Argentina developed
a campaign for its Pampers brand called Mamás del Corazón(Moms of the Heart) that donates money to UNICEF for each
Pampers product purchased during the campaign.
Redinfa’s goal is to strengthen the ability of low-income
families to improve their own children’s education, health, anddevelopment from birth to age 6. Redinfa works with families
who live in rural areas, where more than 85 percent of children
under 2 live below the poverty line and 25 percent of them
do not receive sufﬁcient nutrition. The program in Argentina
replicates a successful Redinfa initiative in Brazil that has reached
1.8 million children over the years and reduced child mortality
60 percent.
Through Mamás del Corazón, Redinfa is building networks ofcommunity leaders in Argentina who get trained in areas such as
nutrition, early childhood development, and health. Each leader
advises 10 mothers from his or her community. In the past year,
Mamás del Corazón reached more than a million mothers andalmost 2,000 babies in six provinces. In time, Mamás del Corazón
is expected to reach at least 10,000 babies in 15 provinces.

Policies, Organization, and Management Systems

Philanthropic Contributions
P&G and its employees have a long-standing commitment tobeing good neighbors in places where we do business around theworld. We show our commitment through both financial supportand volunteerism.
This year alone, P&G and The P&G Fund contributed more than$100 million to support our communities.
Our commitment has evolved to now focus on a corporate cause
we call P&G Live, Learn and Thrive. P&G Live, Learn and Thrive
focuses on the development of children in need ages 0-13. It does
this by building on P&G’s range of competencies, products, andexisting programs to: help children in need live by ensuring they
have a healthy start; provide access to educational facilities, tools,
and programs that enhance their ability to learn; and provide
access to programs that build self-esteem and life skills so they can
thrive. P&G Live, Learn and Thrive comes to life through a numberof programs benefiting children in need in local communities
around the world, including through our global corporate
signature program, Children’s Safe Drinking Water.
See Children’s Safe Drinking Water on page 4 for more on
P&G Live, Learn and Thrive.

P&G 2005 Sustainability Report38

bathrooms and classrooms. For the 49 physically challenged
children attending these schools, this means they no longer haveto worry about entering school, the cafeteria, or a bathroom.
To eliminate attitudinal barriers, the Ministry of Education
provided training to nearly 600 teachers and administrative
personnel from 15 schools, giving them tools and knowledge toensure fair and equal treatment for all students.
In Malaysia, P&G is focusing its Open Minds program on raisingfunds to beneﬁt children with disabilities. They usually attend
class in facilities not built as schools and not accommodating
physically challenged students.
Working with the Yayasan Nur foundation, which raises money
for physically challenged children, P&G Malaysia aims toraise $500,000. Funds raised will beneﬁt children with Down
syndrome, autism, cerebral palsy, and other physical and mental
challenges. Funds will provide physiotherapy equipment, learning
tools, computers, specialized music therapy facilities, newschool buildings, swimming pools, school buses and vans, andconversions of existing buildings to make them accessible.
The fundraising campaign includes various activities. P&G
Malaysia employees have jump-started it with a pledge toraise $100,000 in 12 months under the banner Charity Begins
at Home. They are spending their personal time to create
fundraising activities such as charity bazaars, dinners andauctions, and a tennis carnival.
Using the universal and unifying language of music, thecampaign is partnering with the international music recording
company EMI to make an Open Minds theme song and charity
album featuring local artists, who also will perform at a charity
concert. Open Minds albums and concert tickets will be sold at a
discount in stores, with purchases of P&G products. This portionof the fundraising campaign will culminate in a gala dinner withthe king and queen of Malaysia.

Physically Challenged Children Gain Access to Daily LifeP&G is helping physically challenged children in developing countries
gain access to education and making their daily lives much easier.
In Costa Rica, in cooperation with the Ministry of Education, P&G
has developed the Eliminating Barriers Program. This programis expected to improve the lives of more than 8,000 children.
Eliminating Barriers focuses on two elements that prevent physicallydisabled children from enjoying equal access to education:• architectural barriers, which restrict access to schools• attitudinal barriers, which prevent the students from getting
the attention they needThrough Eliminating Barriers, access to seven schools in the San
José metropolitan area has been made easier. These schools
have been refurbished with ramps, handrails, and accessible

Operation Smile in Morocco
P&G Morocco recently launched its ﬁrst employee volunteer
program in partnership with Operation Smile, a nongovernmental
agency that provides free surgical treatment for children withfacial deformities.
When the children have surgery, P&G employees act asinterpreters for the doctors and nurses, most of whom don’t
speak Arabic. The employees also assist the families of children
undergoing surgery.
This new effort builds on the support P&G Morocco already wasproviding Operation Smile. This includes ﬁnancial donations,
donations of products such as Pampers, and games for thechildren to play while they’re recuperating.

Policies, Organization, and Management Systems

Consumers
At P&G we have declared that “The Consumer is Boss.” We
are committed to meeting the needs of our consumers andproviding products that improve their lives. We embraceand promote this mindset throughout the development andmarketing of our products.
We set out to delight consumers by bringing to market only new
products and product improvements that genuinely meet theirneeds better than ever. Before establishing a project for a new
product or line extension, P&G technologists research consumer
needs in-depth to identify and understand those needs that are
not adequately met.
Following thorough screening of these products to ensure safety
and compliance with all relevant legal requirements, P&G market
researchers appoint panels of consumers to try out the products
and answer the key question: Do these products better meet
consumer needs in practice? Based on what consumers tell us
in these early trials, the test product may be rejected or adapted
and improved.
Our commitment to our consumers does not stop there. When
our products reach the market we want to hear what consumers
have to tell us about their experiences with them. Providing tollfree numbers on our packages makes it easy to contact us. Via
our Consumer Relations organization, we learn a great deal fromthe more than 5 million consumers worldwide who contact us
every year.
Our skilled Consumer Services advisors are expert in responding
quickly and effectively to occasional requests for urgent
help (such as following accidental ingestion of a detergent),
answering general questions, and listening to comments.
Consumers call to ask for information or to tell us about theirexperiences with a product – a delight or, less fortunately, adisappointment. Listening to consumers enables us to retain
the features of our products that consumers like, make
improvements where necessary, and address specific issues suchas difficulties with packaging or product availability in their local
stores. Consumer calls give us critical early indications about
acceptance of our new initiatives as well as valued feedback
about established products. These comments have influenced
product development, packaging, the way we manage direct
marketing and promotions, the way we communicate with
consumers to enable them to get the very best from our
products – and more.

P&G 2005 Sustainability Report

39

This consumer learning is so valuable to us that we have
implemented leading-edge tools to bring the voice of theconsumer to those who can make a difference within P&G.
In the United States and Western Europe, we have created“Listening to The Boss.” Via this internal website, P&G
managers responsible for product development, marketing, andmanufacturing listen to consumers describing their delights anddisappointments with our brands. The website is a library of
selected and edited consumer calls, letters, and e-mails. (Privacy
guidelines are strictly adhered to.) A new Consumer Relations
system will provide even faster access to worldwide consumers’comments. This has already been launched in Asia and willcontinue to roll out to all Consumer Relations teams worldwide.
We listen carefully to consumers’ views on important topics suchas animal testing, waste management, and others. More details
about our efforts in these areas are elsewhere in this report.

Science in-the-box Brings Added Value to Consumers
The Science in-the-box website started in 2002 by P&G Fabricand Home Care in Western Europe has been a tremendous
success and is being replicated elsewhere in the Company.
Science in-the-box tells consumers about the science andinnovation that make P&G’s fabric and home care products work,
as well as about the safety and sustainability of those products.
Since its introduction, some half a million people have gotten
information from www.scienceinthebox.com. Their feedback
indicates that consumers want to learn more about the products
they buy. On our side, we see that presenting this information to
consumers helps build their trust in our brands.
Over the past year, Science in-the-box has served as a modelfor two new websites: P&G Beauty started a website that helps
consumers understand the science behind the beauty brands; it’scalled www.pgbeautyscience.com. And the Company createdwww.pgperspectives.com to present our views on public policy
issues.
As for the original Fabric and Home Care Science in-the-box
site, it has been getting improved in response to consumer
feedback. It now covers a larger geography, with attention to
local relevance. The site is now available in six languages, andinformation on compliance with European detergent regulations
is coming soon.

Policies, Organization, and Management Systems

Combined Stakeholder Dialogues
P&G convenes workshops, inviting scientists, regulators, andNGOs to come together to discuss speciﬁc issues and attempt toreach a common understanding. P&G gains invaluable experiencefrom these types of interactions. These dialogues also hold great
promise for frank discussions in the future.

Shareholders
There were approximately 1,608,000 common stock
shareowners, including shareholders of record, participants in the
Shareholder Investment Program, participants in the P&G stock
ownership plans, and beneﬁcial owners with accounts at banks
and brokerage ﬁrms, as of July 29, 2005.
We work to increase the value of P&G stock for all ourshareholders in a variety of ways, including growing the Company’ssales and earnings each year. Our Shareholder Services team isavailable every day to answer questions, listen to shareholder
feedback, and provide perspective on Company decisions.
Contact Info:
E-mail us at shareholders.im@pg.com.
In the United States, call for ﬁnancial information at
1-800-764-7483.
Write to The Procter & Gamble Company, Shareholder Services
Department, P.O. Box 5572, Cincinnati, Ohio, U.S.A. 45201-5572.
on theWeb

For more information, please visit:www.pg.com/investors/sectionmain.jhtml

P&G 2005 Sustainability Report40Policies, Organization, and Management Systems

P&G’s Commitment to Product Safety,
Chemicals Management and Sustainability
Household consumer products use a variety of chemical ingredientsto provide benefits to society – improving the cleanliness of ourhomes, personal hygiene, nutrition and health, and enabling an
overall better quality of life. One expectation of such products is thatthey will be safe, meaning their use will not adversely affect humanhealth or the environment.
Throughout its history, P&G has believed that the safety of our
products is a prerequisite for responsible business. Our co-founder,
James Gamble, stated in the mid-1800s that “if you cannot makepure goods and full weight, go to something else that is honest,
even if it is breaking stone.” Today, this philosophy is reflected in
our Statement of Purpose: “We will provide branded products
and services of superior quality and value that improve the lives of
the world’s consumers.” Safety is an intrinsic part of our products’
quality and value.
Our approach is based on the scientific assessment andmanagement of risk – the likelihood that people or the environment
will be exposed to harmful amounts of a substance. Risk assessment
is based on two factors: 1) how “toxic” or “hazardous” a chemical
is, and 2) how it is used, specifically the extent of exposure tohumans or the environment.
In recent years, some stakeholders have expressed concern about
using risk as the basis for product safety. These concerns have been
driven by several issues, including:• Questions about whether the hazards of existing chemicals havebeen sufficiently studied, and whether chemical exposures can beadequately understood.
• Frustration with the slow pace of developing publicly available risk
assessments.
• New scientific findings that have not been previously known or
evaluated.
As a result, some believe that it might be better to base decisions
on a chemical’s hazards alone. This has been coupled with calls
for the far-reaching use of the “precautionary principle,” whereby
substances that are classified as “hazardous” would be broadly
restricted, with little further evaluation. We recognize the attractionof such a “black and white” approach. However, we believe that it
could cause chemicals that are being safely used to be unjustifiably
removed from the market, potentially depriving society of innovativeand beneficial technologies. Furthermore, experience has shownthat even chemicals that could be considered “non-hazardous”(e.g., soybean oil or even water) can cause harm under certain
circumstances, while “hazardous” chemicals can be safely used
(e.g., ethanol).
We recognize that continuing questions about the safety ofchemicals mean that industry must take a more collaborativeand open approach. Thus, we have initiated a variety of industry
partnerships, including: the collaborative assessment of laundry andcleaning product ingredients in Europe (Human and Environmental

P&G 2005 Sustainability Report

41

Risk Assessment – HERA (www.heraproject.com);
evaluations of “High Production Volume Chemicals” in the
United States and Organization for Economic Cooperation andDevelopment; assessments of flavors, fragrances, and colorants by
European and U.S. cosmetic products associations; work in Canada
to implement renewed chemicals legislation; the promotion of risk
assessment via the U.S. Alliance For Chemical Awareness(www.chemicalawareness.com) and the American ChemistryCouncil; and development of a targeted risk assessment
approach in Europe, via the European Center for Ecotoxicology
and Toxicology of Chemicals, an industry-sponsored researchorganization (www.ecetoc.org).
In addition, we are actively promoting the responsible production
and use of chemical products, and better information sharing
with the public. For example, we are working with theEuropean soap and detergent industry association (AISE), on
formulation improvements, as well as providing consumer
guidance on how to use detergents properly (www.washright.com).
We launched and then expanded a P&G Internet site(www.scienceinthebox.com) to help inform consumers andstakeholders about the science and safety behind our European
cleaning products. Very high public interest in this site led to a similarsite covering the science and safety of skin and hair care products(www.pgbeautyscience.com) and another site covering P&G’s
approaches to product safety and views on a variety of chemical
management and science policy issues (www.pgperspectives.com).
For more on this work see Science in-the-box, page 39.
From a policy standpoint, we continue to believe that chemicals
management programs should be based on:
1. Efficient risk-based priority-setting processes that use hazard
data and basic exposure information together to identify issuesof potential concern, followed by practical risk evaluations thatanalyze chemicals in a tiered fashion to resolve such issues.
2. Risk management decision making that combines information ona chemical’s risks, benefits, and costs with an understanding ofsocietal concerns; the risks, benefits, and costs of alternatives; andthe use of appropriate precautionary measures.
3. Communications that provide meaningful and relevant
safety information to stakeholders, such that they can makeknowledgeable decisions.
These policies are the foundation of what we do internally, as
well as what we encourage across government and industry.
Internally, they are enabled by collaboration between Research& Development, Product Safety and Regulatory Affairs,
Manufacturing, External Relations, and management. Our efforts
go beyond safety and risk to include product lifecycle issues such asenergy and resources use and waste management.
Collectively, we believe these activities and policies enable continued
progress toward sustainability and enable us to provide safe,
effective products that improve lives.

Policies, Organization, and Management Systems

P&G 2005 Sustainability Report

42

Goals
Our History, Our Future
P&G published its ﬁrst global environmental report in 1993 and has
published a report each year since then. That ﬁrst report set fortha series of worldwide goals, to be met by the end of ﬁscal year
1995/96:• Reducing total packaging usage by 20 percent below 1989/90
levels• 37 percent use of post-consumer recycled materials• Achieving $100 million in savings through waste reduction,
resulting in a 35 percent reduction in manufacturing wastes perunit of production versus 1991/92 levels
By the end of 1994 we had met or surpassed each of these goals,
resulting in a set of new goals:• Further reducing packaging use per unit of production by
6 percent by 1997/98.
• Further reducing manufacturing waste, achieving a cumulativesavings of $300 million by 2000.
We achieved the packaging goal in 1998 and the manufacturing
waste, or eco-efﬁciency goal in 1999.
But 1999 represents an even greater milestone in P&G’s history.
It was the year we evolved from a focus on just environment,
becoming the ﬁrst U.S.-based multinational company to embrace
the more holistic concept of sustainable development, publishingour ﬁrst annual sustainable development report, with a vastly
expanded set of metrics covering all three pillars of environment,social, and economic. Integral to P&G’s embracing of sustainable
development was a vision that we could move beyond the “bottomline” savings of eco-efﬁciency, as summarized above, to a future
where we would also grow “top line” business growth in terms ofsales, new markets, new consumers, and new businesses. As P&G’s
Director of Corporate Sustainable Development, George Carpenter,wrote in our 1999 sustainability report, “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 of health,hygiene, environment, nutrition, education, and the overall qualityof life of both today’s and future consumers.” This was a bold new
vision of sustainability, not only for P&G, but for business in general.
The traditional 1990s measures of waste and packaging reduction
no longer sufﬁce, as they are measures of the elimination ofnegative byproducts associated with business, byproducts that
had little or no value to the end consumer in and of themselves.
Great companies, like P&G that has been in existence for 167
years, have not been built on the elimination of non-value, but on
the creation of new value for consumers and for society. Clearly
our sustainability vision based on new value creation needs new
metrics. We see a future where our contribution to sustainable
development in such areas as safe water, improved hygiene, andthe quality of children and women’s lives will be measured by such
metrics as disease avoided, lives saved, the number of children
who reach their full development potential, and ways women’s
lives are better because of the innovation brought to themthrough the products and services of Procter & Gamble.

We cannot set goals until we have the proper metrics. Our dilemma
is how to measure this new value creation in a credible andtransparent way. Our metrics task is complicated in that we arenewcomers to this public health and development arena, which
has long been occupied by NGOs, governments, and researchand health organizations. Just as our business models are built
on partnerships with these long-standing members of the publichealth community, our metrics and goals must be aligned withthese same groups. For example, in our safe water work, we canaccurately measure the consumption and repeat usage of our
PUR safe water technology. Because of the PUR clinical studies in
Guatemala, Kenya, and Pakistan, we have scientiﬁc support for the
efﬁcacy of this product. But the idea of measuring and reportingon disease avoided and lives saved by an innovation, at a company
level, is relatively new. Some of our NGO and public health partners
are making strides in this area. For example, Population Services
International, PSI, our PUR distributor and partner in Haiti, Pakistan,and Uganda, in their annual report has attempted to report on theirresults in these terms (www.psi.org/resources/annual-report.html).
As they get feedback on their use of these metrics, we will attempt
to build on their leadership in this area. As we gain experience in thepotential of our market-based approaches to deal with such issues
as water and sanitation, we will then develop goals to guide oursustainability actions.
But with or without goals, P&G remains committed to a future
where you will measure our sustainable development contribution
in terms such as disease elimination, lives saved, child development,
and the way a woman’s life is better because of the products andservices of Procter and Gamble.

Turkish Students Learn Facts of Life From Orkid
P&G’s Orkid feminine care brand is helping Turkish students learn
about what happens to their bodies as they grow up. This topic
has almost been a taboo in Turkey and is not included in school
curricula. Orkid works with the national Ministry of Educationand local city education directorates to bring this puberty
education program into schools.
Orkid began this educational program 13 years ago for girls inthe sixth and seventh grades and then included boys as well.
This year, Orkid invited mothers to attend. The students learn
from nurses about the physical and psychological changes they
will undergo during puberty. At the end of the program, they
all receive an informational booklet, and the girls receive Orkid
samples. The Orkid program has reached 3.5 million students allaround Turkey.

�����������

P&G 2005 Sustainability Report

Performance
P&G measures operational performance in order to drive continuous improvement. A comprehensive,
Company-wide system of measuring performance has been developed. This approach enables theCompany to report data on a wide range of operational categories.
Our actions are not just profit-driven but also progress-driven, to ensure a better quality of life foreveryone, now and for generations to come. Our extensive consumer research related to our brands also
helps us identify ways we can best address sustainability.

Process for Data Collection
P&G’s data collection systems have been in place for many years.
They 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 and update systems annuallyat a relatively low cost. Each business unit is responsible for accuracy
and consistency of its data.

Major Opportunities and Impacts
Associated with Products and Services

All data are reported on a global basis. In order to achieve
consistency and to ensure a common understanding throughout theorganization, employees are trained in how to report and document
data. Metric units and English are used as the business language,
backed up with local translations, where needed.

Social Responsibility• Health• Hygiene• Education

To ensure the standard collection of data, the Company has thefollowing work process in place:• Key terms 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 process, as appropriate.
Acquisitions and Divestitures
All plants that operated during the fiscal year either reported data, or
it was estimated based on past performance. The Wella acquisition
has been included in the table and graphs.
Nine sites were either shut down or divested during the fiscal year.
The emissions for each were prorated based on the number ofmonths operated.

Environmental Protection• Resource Use• Water• Waste Reduction

Economic Development• Shareholder Value• Employment• Taxes, Fees, and Contributions
The very nature of producing and using products causes P&G andconsumers to use resources and to generate wastes and emissions.
P&G is committed, through its Environmental Quality Policy, toreducing or preventing this whenever possible.
With products that are effective and of good value, P&G aims toprovide social and economic benefits that improve the lives of theworld’s consumers. We do this via:
• Introducing innovative technologies.
• Generating employment in the communities in which we
do business.
• Supporting local and national economies through taxes,
contributions, and purchases.
• Increasing shareholder value.
• Improving the health and hygiene of consumers through our
products and information on their use.

44Performance

P&G 2005 Sustainability Report

45

Environmental
As the diagram illustrates, P&G’s use of material resources is highly efﬁcient. The vast majority ofmaterials are converted to products, and the output of the manufacturing waste (which is largely
non-hazardous) is low.

Manufacturing Material Flows 2004-2005

Energy 81.6 million gigajoules

95.93%
Finished Product

Raw Materials& Packaging

Materials for Recycling/Reuse
2.38%

Non-Hazardous
Solid Waste 1.37%

Hazardous
Solid Waste 0.11%

Air Emissions 0.13%

Water Emissions 0.11%

Manufacturing Resource & Waste Summary by Global Business Unit (GBU)
All waste units are in thousands ofmetric tonnes unless otherwise noted.†

Totals
2005

2004

2003

2005 Global Business Unit Detail*P&G B P&G FH

P&G HCBCFC

Production
Product Shipped
Raw Materials from Recycled Sources
Waste
Generated Waste
Percent Recycled / Reused Waste
Disposed Waste
Solid Waste
Non-Hazardous
Hazardous
Effluents (Excluding Water)
Air Emissions**
Other
Energy Consumption (105 gigajoules)
Greenhouse Gas Emissions**
Water Consumption (million cubic meters)
SARA Releases (metric tonnes)***
†
*

HC

FCHC

SC

19,58071

18,471
102

17,055
119

2,547
0

5,265
71

3,841
71

1,424 11,768 11,192
0
0
0

576
0

831
58%

817
56%

793
52%

159
58%

480
61%

427
64%

53
38%

192
49%

158
48%

33
54%

280
22
22
26

300
21
21
16

317
9
35
24

56.0
3.3
6.7
1.1

165.0
3.2
7.4
9.8

139.0
1.0
4.1
8.4

26.0
2.2
3.3
1.4

59.0
15.2
8.2
15.5

47.0
15.2
6.9
13.6

12.0
0.0
1.3
1.9

816
3,282
83
1,722

731
2,937
79
1,843

758
3,122
86
1,567

100
456
6.0
40

524
2,188
55.8
349

491
2,086
54.0
0

33
102
1.8
349

192
638
21.6
1,333

159
508
19.2
1,333

33
130
2.4
0

1 metric tonne = 1,000 kg = 2,205 lbs.
P&G B = P&G Beauty.
P&G FH = P&G Family Health: BCFC = Baby Care and Family Care, HC = Health Care.
P&G HC = P&G Household Care: FCHC = Fabric Care and Home Care, SC = Snacks and Coffee.
** Air emissions include particulates, SO2, NOx, CO, and VOC whereas greenhouse gas emissions include CO2 from fuel combustion sources.
*** Releases defined in the U.S. Superfund Amendments and Reauthorization Act (SARA) by the U.S. Environmental Protection Agency.

Performance
Environmental

EnergyEnergy eco-efﬁciency*, as measured by production units per
gigajoule (GJ), decreased 11 index points. The difference wasfrom adding the Wella sites while not modifying the baseline.
There was insufﬁcient data to modify the 1990 baseline.

P&G 2005 Sustainability Report

Energy Consumption(by type, 105 GJ)

759

Results are shown in absolute value by business unit and also presented in eco-efﬁciency format. Our eco-efﬁciency is more than
60 percent greater than in 1990, meaning there is 60 percent
more product being made per unit of energy.
The actual energy usage increased from 73.1 to 81.6 million
gigajoules. The increase is mainly from the acquisition of
Wella sites.

731

816

2003 2004 2005
Fuel

Electricity

Purchased Steam

Energy Consumption(by GBU, 105 GJ)

As part of our ongoing efforts to minimize losses, the Company
does a loss analysis at the plant level. Losses are deﬁned asanything not shipped out the door as product, including energy
used. When energy is identiﬁed as a major loss at a plant, it
receives intense focus for loss reduction.

758

731

816

* Eco-efficiency data used throughout this report is based on the framework developedby the World Business Council for Sustainable Development.

2003 2004 2005

Baby Care and Family Care Fabric Care and Home Care
P&G Beauty Health Care Snacks and Coffee

Condensate – The Key to Energy Savings
The Household Care plant in Worms, Germany, is saving energy byusing and re-using condensate in the mixing part of the production
process.

Energy Eco-Efficiency(global production units / gigajoule,indexed vs. 1990)

153

171

160

Previously, the condensate discharged via a cooling tower into theplant sewer system. Now the site uses the condensate instead ofsteam for a heat exchanger, and the site uses condensate instead of
hot water to produce a liquid dye solution.
At the end of the production process, the site uses the “cold”
condensate to cool the compressors. The switch to condensate
from demineralized water generated onsite is saving more than
20,000 euros ($26,000) a year.

2003 2004 200546

Performance
Environmental

P&G Saves and Even Produces Energy
P&G plants continuously search for opportunities to reduce energy
consumption. This contributes to the United Nations’ efforts tominimize the negative effects of climate change.
Here are a few examples of energy saved over the past year, alongwith an example of extra energy produced:• In the Western European plants where P&G makes powder
laundry detergents, a “Connect and Save Energy” task force is
identifying potential energy savings. Tools being used include
benchmarking, understanding energy usage in manufacturing
processes, prioritizing, and studying both time-tested and newtechnologies. The task force encourages information sharing andreapplication of good ideas, connecting thought leaders within
P&G and also among external groups such as other companies
and energy experts.
The task force expects a 10-percent energy saving within 12 to 18
months. This is especially important now, with Western Europe’s
energy costs expected to rise about 15 percent a year for several
years. Reducing energy costs will help keep down manufacturingcosts and thus the cost of detergents.
• In North America, the Family Care plants making tissue and towel
products continued a multi-year energy and water reduction effort.
The effort emphasizes “best performance” benchmarking, efficientuse of steam and compressed air, and optimization of plant energy
control systems.
A number of energy projects and operating system improvements
have been completed in the past year. These include upgrades tocompressed air controls at several plants and installation of newpaper-drying equipment. Overall, these improvements have led toa 5 percent increase in energy efficiency for P&G’s North Americanbusiness.
• Production of Pampers diapers generates paper dust, which theplant in Euskirchen, Germany, used to collect in plastic bags. Now
the plant has a filter press that makes compact pellets from thedust. The pellets have a high caloric value and are sold as fuel toproduce energy.

P&G 2005 Sustainability Report

47

Energy Savings Through Increased Drying Efficiency
At the Timisoara, Romania, plant, one of the major focuses thispast year was on the Capacity Increase Project within the operation
making laundry powders. The existing insulation was severely
damaged and could not prevent dissipation of heat into theenvironment. As a result, more gas was needed to create more heatin order to obtain the right moisture for the blowing powder. Thisin turn created extremely uncomfortable working conditions on thesecond floor due to high temperatures. With these problems, it wasdetermined that there was a need to improve the drying efficiencyof the atomization tower.
The old insulation (100 mm-150 mm thick and damaged) was
entirely replaced by two new layers of mineral wool, 100 mm each,separated by a 0.1 mm layer of aluminum film. The plate coating of
the tower was replaced as well, by 0.8 mm aluminum sheets.
Since replacement of the insulation, the working environment on
the second floor has improved due to decreased temperature,
while tower emissions have not increased. Another benefit of the
improvement was that average specific gas consumption decreasedby 6 percent, the result being a $30,500 savings per year.

Tampax Plant Reduces Fuel Use and Emissions
The Tampax plant in Auburn, Maine, has upgraded its raw materials
processing and its production lines to double fiber production
while decreasing fuel consumption. New equipment includes bale
breakers, blending machines, fiber-opening equipment, carding lines,
and dust control and HVAC equipment.
This upgrade has resulted in reductions in carbon emissions andother pollutants. Sulfur dioxide emissions have been cut by almost
50 percent. Emissions of particulate matter PM2.5 and PM10 havebeen eliminated.
Previously, the production lines exhausted into the atmospherethrough baghouses, but now the plant recycles air from theproduction area. This decreases the fuel needed to heat and cool theplant. The upgrade also allows the plant to capture fiber particulate
and recycle it into useful material for sale to other manufacturers.

Performance
Environmental

P&G 2005 Sustainability Report

Water
Water use has increased by similar percent as production, resulting
in the eco-efficiency’s staying mainly the same. Actual water use
increased slightly, from 79 million cubic meters to 83 million.

Water Consumption Eco-Efficiency(global production units / cubic meters,
indexed vs. 1998-1999)
147 146

126

2003 2004 2005

Water Consumption(by GBU, thousand / cubic meters)

85

79

83

Euskirchen Plant Improves Water Usage
Evaluating its water usage, the Euskirchen plant discovered it could
save significant amounts of both water and money by installinga second water treatment unit. It’s a reverse osmosis system witha storage vessel. It enabled the plant to reduce the amount ofdrinking-quality water used in industrial processes and in plantheating and cooling systems.
This reduced overall water usage as well as the need for watercleaning chemicals and regeneration salt for the water softener. In
money terms, the savings included 33,000 euros ($43,000) spenton potable water previously used because the industrial water was
too dirty, 22,500 euros ($28,000) spent on exchanging water in thecooling towers, 45,000 euros ($58,000) spent on extra chemicals
needed to prepare water for the cooling towers, plus 79,000 euros($103,000) spent on wastewater disposal.
The new system also reduced the amount of manual labor neededin the water treatment unit. Efficiency of the new unit resulted ina 192,000-euro ($250,000) reduction in the total cost of getting
products to consumers. Rate of return on the investment is 50
percent, with the investment expected to pay out in 1 1⁄2 years.
Euskirchen Plant Water Usage(by type, thousand metric tonnes)
300

2003 2004 2005
Baby Care and Family Care Fabric Care and Home Care
P&G Beauty Health Care Snacks and Coffee

48

225
150
75
0

Before After
Industrial Water Usage Wastewater Potable Water
Chemical Usage Potable Water Usage Rest Plant

Performance
Environmental

P&G 2005 Sustainability Report

Emissions, Effluents, and Wastes
Greenhouse Gas
Every company in every sector of the economy has a role incontrolling greenhouse gas emission. While P&G is not anenergy-intensive company, we are stepping up to do ourpart. P&G is committed to energy-efﬁcient programs, and weparticipate in voluntary programs.
P&G’s eco-efﬁciency of greenhouse gas has decreased by 15 index
points. Each point represents the amount of product leaving ourplants per metric tonne of CO2 emissions. The main reason for thisyear’s decline was the need to add Wella sites while not modifying
the base line from 1990.
In addition, absolute CO2 emissions are slightly higher, but
the emissions are still more than 226 percent more efﬁcient ascompared to 1990.

Greenhouse Gas Emissions Eco-Efficiency(global production units per metric tonne of CO2,
indexed vs. 1990)
241 226
211

49

War on Waste
The London plant has declared a “war on waste.” Results for the
past year include identifying ways to reduce energy consumption
by 40 gigawatt hours per year, representing an 11,000-ton
reduction of C02 emissions and an 18-percent savings. From theidentified possibilities to reduce energy, 5 percent of the project was
implemented this year. The rest will follow next year.
The plant also conducted a wind turbine feasibility study and isinvestigating renewable energy sources, new technologies, andenergy management techniques.

Winton Hill Technical Center Succeeds in Recycling Freon
When Freeze-it, the material once used to remove adhesive frombaby diapers, was replaced by a more environmentally friendly
substance, the Winton Hill Technical Center in Cincinnati found itself
with 13 pallets of Freeze-it aerosol cans left over. Freeze-it is a formof Freon 22 and contains chlorodifluoromethane. The disposal costfor incinerating this large quantity of aerosol cans was going to run
close to $20,000.
To avoid this cost and to avoid wasting the freon, Winton Hill
worked with Clean Harbors Environmental Services to find a vendor,
approved by the U.S. Environmental Protection Agency, who could
reclaim the freon. The company, Lenz Distributing, was able toextract the freon from the aerosol cans, transfer it to much larger
cylinders, and sell it to a company licensed to reuse it. All of this wasdone with no cost to P&G.

2003 2004 2005

Greenhouse Gas Emissions(by GBU, thousand metric tonnes)

3122

3282

2937

2003 2004 2005
Baby Care and Family Care Fabric Care and Home Care
P&G Beauty Health Care Snacks and Coffee

Climate R.E.S.O.L.V.E.
P&G continues its active participation in Climate R.E.S.O.L.V.E.
(Responsible Environmental Steps, Opportunities to Lead by
Voluntary Efforts). This ambitious initiative was developed by theBusiness Roundtable in response to a call for voluntary action to
reduce overall greenhouse gas emissions by 18 percent by 2012.
Over the past year, greenhouse gas emissions have been reducedby 16 percent on an intensity basis since 2001. Even though theactual emissions increased from 2.9 million tonnes to 3.2 million
tonnes over the past year due in part to the recent Wella acquisition,
production has increased 29 percent since 2001, contributing to theoverall 16-percent reduction. Also, the reduction would be higher if
the base were adjusted for Wella, but due to lack of data the basewasn’t changed.

Performance
Environmental

P&G 2005 Sustainability Report

Total Waste for Disposal
Total waste for disposal is our key management measure to keep
waste under control. Total waste disposed comprises the sum of
non-hazardous and hazardous solid waste, plus effluent measured
as COD (chemical oxygen demand) and air emissions. It excludes
recycling or reused waste. This measurement has been in effectsince 1990.
Our disposed waste had a 14-point increase in eco-efficiency. This
reduction was broad-based across all our GBUs. Actual waste
disposed decreased from 358,000 tonnes to 350,000 tonnes.

Waste Disposed Eco-Efficiency(global production units per metric tonne of waste,indexed vs. 1990)
240
226
195

50

P&G Shares Expertisewith Communities
Often, P&G people haveknowledge and skills they canshare with their communities.
One example is firefighting.
New students at the Catalan
Firemen School come to the
P&G site in Mataro, Spain, to
train with the site’s fire brigade.
The Catalan Firemen School
requested this assistance due tothe Mataro site’s high standards
in both safety and training.
The Pressure’s On at Miami Valley Innovation Center
The Miami Valley Innovation Center near Cincinnati found a usefulsolution in a simple pressure gauge.

2003 2004 2005

Waste Disposed(by type of waste, thousands of metric tonnes)
385

358

The pressure gauge was installed on the solid waste compactor used
for routine trash disposal at the site. The pressure gauge indicateswhen the compactor is full, which indicates when pickups should beordered. Previously, the compactor got hauled to the local sanitary
landfill on a fixed schedule, twice a week, whether or not it was
full. Using the pressure gauge reduced the number of pickups
significantly, which led to overall solid waste disposal cost reductions.

350

Cost Savings Generated
by Pressure Gauge Method(amounts in millions of dollars)
1.6
1.2

2003 2004 2005
Solid Waste Non-Hazardous
Solid Waste Hazardous
Effluents Air Emissions

0.8
0.4
0

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

2003

Waste Returned to Process or Market
The percentage of waste recycled increased slightly to 58 percent,and revenue received increased to $23 million.

Waste Recycled or Reused(percent of waste)

52

56

58

2003 2004 2005

2004

Sharon Woods Technical Center Waste Gets New Life
Cincinnati’s Sharon Woods Technical Center sends as much wastematerial as possible to Clean Harbors Environmental Services,which in turn sends collected waste to New Life Chemical, tobe made into new materials. A nonprofit organization, New Life
Chemical accepts a wide range of raw materials, finished products,
and perfumery products. These materials are either reprocessed tomake potpourri, surfactants, or other materials, or are sold as raw
material ingredients.
Since 2004, Sharon Woods has provided New Life Chemical with morethan 45,000 pounds of non-hazardous raw materials and surfactants,
as well as more than14,000 pounds of hazardous raw materials andperfumery products. This not only has helped Sharon Woods reduce
waste but also saves more than $22,000 in disposal costs.

Performance
Environmental

Manufacturing Products with Recycled Materials
Argentina’s Pilar plant has been working for more than eight
years with the recycling company Rezagos Industriales, which
specializes in the integrated handling of non-hazardous residues
from plant operations. A number of varied products come fromthis recycled material.
The high-efficiency materials from the Pilar plant are used to
manufacture a corrugated plate with characteristics similar
to Durlock. The manufacturing process consists of grinding
carton and plastic film materials, such as tetra brick packages
and plastic bags. The mixture is heated to a temperature that
ensures bonding and compaction. The resulting plates are used
for building materials, such as roofing and interior walls, and for
prefabricated housing.

Unique Recycling Effort Produces FuelAt several of P&G’s Cincinnati technical centers, Clean Harbors
Environmental Services collects flammable solvents from the labs
and bulks them into 55-gallon drums. These solvents contain a wide
variety of hazardous wastes such as acetone, toluene, and methanol.
The drums of solvent are blended with other flammable liquids andoils to achieve the right BTU value for fuel. Cement kilns use this“waste derived fuel” to replace coal, oil, and other fossil fuels.
This practice provides an alternative to incineration for P&G’sorganic waste streams that contain more than 5,000 BTUs. Since
the beginning of 2004, the Health Care Research Center alone has
sent more than 7,000 gallons of flammable solvents and oil for fuels
blending, for a total cost savings of more than $27,000 versus thecost of incineration.

P&G 2005 Sustainability Report

51

Continuous Improvement in Recycling
The Mataro plant’s detergent-making operation in Spain has started
up a wastewater treatment unit designed to reduce surfactant
emission to below 4 ppm (the legal limit is below 6 ppm), to comply
with new legislation. Design improvements enable the plant to avoid
releasing surfactants into the wastewater effluent and to use internal
recycling. The plant aims to complete further improvements that will
enable it to become a “zero effluent site,” reusing its wastewater as
industrial water for the manufacturing process.
Previous efforts at Mataro improved materials recycling byseparating waste into paper, metal, etc., and also completely
separating the waste streams from the detergent plant and thebeverage plant.

Performance
Environmental

Non-Hazardous Solid Waste Disposed
Overall, the non-hazardous solid waste disposed to landfill has
decreased this year, resulting in a 24-point increase in eco-efficiency.
P&G continues to find innovative recycling methods.

P&G 2005 Sustainability Report

Non-Hazardous Solid Waste Eco-Efficiency(global production units per metric tonne,
indexed vs. 1990)
234
210
184

2003 2004 2005

Hazardous Solid Waste Disposed
Hazardous waste has remained flat (shown as a slightly higher ecoefficiency). This was due to an ongoing reduction effort.
Hazardous wastes are defined by regional policies and local rules,
so they vary from region to region. In the United States, a strong
focus on reduction, recycling, and material substitution has reduced
the amount of hazardous waste requiring disposal over the past
three years. To further reduce our risks, the number of approved
hazardous waste disposal sites that all U.S. plants use is limited.
Similar programs have been started in many regions of the world.

Air Emissions
Each site monitors total suspended particulates, volatile organic
compounds (VOCs), carbon monoxide (CO), nitrogen oxides (NOx),and sulfur oxides (SOx). The total amount of air emissions released
has increased, resulting in lower eco-efficiency.
This is due to new capacity coming on-line in the coffee business,
and also the inclusion of emissions from the Wella sites.

Hazardous Solid Waste Eco-Efficiency(global production units per metric tonne,
indexed vs. 1990)
1143

523

529

2003 2004 2005

Air Emissions Eco-Efficiency(global production units per metric tonne,
indexed vs. 1990)
208

129

126

2003 2004 2005

Effluents to Water
Wastewater COD (chemical oxygen demand) increased, resulting in aslightly lower eco-efficiency.

Wastewater COD Eco-Efficiency(global production units per metric tonneof COD, indexed vs. 1990)

372

362

205

2003 2004 200552

Performance
Environmental

P&G 2005 Sustainability Report

SARA 313 Releases (United States only)
U.S. P&G plants report annually on the release of toxic chemicals
to the air, water, and land. These releases are defined in the U.S.
Superfund Amendments and Reauthorization Act (SARA) by
the U.S. Environmental Protection Agency. The purpose of thisdocumentation (referred to as section 313) is to report publicly
the releases and transfers of hazardous chemicals as defined by
the agency.
The amount of SARA 313 releases has decreased slightly.

SARA 313 Releases(global total metric tonnes released or transferred)

1847

1567

1722

2003 2004 2005

53

Amiens Improves Chemicals Handling
Last year, the Amiens plant in France improved its chemicals
management, following the best environmental practices via:
• The installation of an evaporator, which has already avoided theneed to incinerate 2,700 tonnes of liquid waste.
• The installation of a roof above the area used for unloading andstoring chemicals dangerous to the environment. This will prevent
rain dilution and eliminate the risk of spillage into the environment.

Performance
Environmental

Audit Programs
P&G’s internal standards go beyond legal compliance and apply to
all its plants worldwide. The fundamental philosophy is to have thesame standards worldwide, implemented by trained professionals at
all plants and audited each year using a consistent, comprehensive
approach. The metrics used are consistent with that philosophy.
Charts show the performance of Health, Safety & Environment(HS&E) and Fire Protection.
P&G HS&E audit programs are designed to ensure compliancewith national, state, and local regulatory requirements as well as
corporate environmental standards and procedures. Audit findings
are reported promptly to the business management teams, whomust address and correct all issues in a timely manner.
The Company reviews its sites on a frequent basis. The graphshows percent of sites receiving an audit this year. The percent ofsites audited increased 17 percentage points to 89 percent this year.
Audits measure performance against a mandatory set of standards
and standard operating procedures. The target performance is 8
or better on a 10-point scale.
During the last year we implemented a new standard which caused
the number of audit scores above 8 to fall to 44 percent, taking into
account new electrical safety standards. The extra bar not taking into
account the new standards shows a slight increase of audits withscores above 8. Plans are in place to work on improving the scoreswith the new standard.

P&G 2005 Sustainability Report

Percent of Plants Conducting
Annual Audits
89

81

72

2003 2004 2005

Percent of Plants
with Audit Scores > 8.0
85

82 82

91 91 8844

03 04 05 05
HS&E

03 04 05
Fire Protection

with Electrical Systems without Electrical Systems

54Performance
Environmental

P&G 2005 Sustainability ReportCompliance with Laws and Regulations
There are numerous health, safety, and environmental requirements
worldwide. Plants are subject to emission limits and operating
requirements embodied in these statutes, regulations, laws, andpermits. It is P&G’s intent to comply with both the letter and thespirit of statutes, regulations, laws, and permit requirements.
Identiﬁed compliance issues are treated seriously, and all noncompliance matters are resolved as expeditiously as possible.
The table lists global data on environmental, transportation, andworker health and safety violations over the past three years.
Number
Fines

2005
80
$147,400

2004
64$28,320

2003
67$154,756

The number of fines and violations increased over last year.
Most of the “air based” fines and violations were due to a newprocess start-up where control efficiencies were not being met,
as well as other paperwork violations. New hardware and permitchanges are being implemented that will eliminate a recurrence.
A breakdown of 2005 Notices of Violation (NOVs) and Occupational
Safety & Health Act (OSHA) interventions follows:
Water-Based
Air-Based
Solid Waste-Based
Paperwork
Transportation-Based
Other
Worker Safety (for U.S. OSHA, the number is 0)
Total

Number
32
29
8
3
3
3
2
80

Fines
$12,860
93,00020,580017,7501,000
2,210$147,400

Environmental Liabilities
P&G is subject to various lawsuits and claims with respect tomatters such as governmental regulations, income taxes, andother actions arising out of the normal course of business. We
are also subject to contingencies pursuant to environmental laws
and regulations that in the future may require us to take action
to correct the effects on the environment of prior manufacturing
and waste disposal practices. Accrued environmental liabilities
were not material.
While considerable uncertainty exists, in the opinion ofmanagement and our counsel, the ultimate resolution of thevarious lawsuits and claims will not materially affect our ﬁnancial
condition, cash ﬂows, or results of operations.

55

P&G Sites Come to Aid of Communities
P&G has had the opportunity to help a community by sharing its
firefighting resources.
In the past year, there have been two major fires near the industrial
park where P&G’s Pilar, Argentina, plant is located. The plant’s
fire brigade collaborated with community firefighting efforts bysupplying water from the plant’s firefighting system. In addition, thePilar plant supplied 84 firefighting pumps with a storage capacity of
4,000 liters, plus other resources. Pilar has contributed a shipping
container in the industrial park for the community firefighters to use
for their equipment. This will cut response time by half if there are
future fires in the area.

How “Zero Loss” Mentality Led to Savings in HS&E
Over the past two years, HS&E (Health, Safety & Environment) at
Belgium’s Mechelen site, with help from purchasing staff in Global
Business Services, has increased the site’s efficiency and effectiveness.
This has saved more than 500,000 euros ($660,000).
Not only is the HS&E work now done with fewer people, but also
the site saved:• 300,000 euros ($390,000) by reducing waste through recycling,sorting, using new companies for waste treatment, andnegotiating new contracts at better prices.
• 80,000 euros ($104,000) on personal protective equipment usage
and prices by negotiating prices and looking for alternative or
longer-lasting materials and materials better fit for the purpose.
• 17,000 euros ($22,000) on legal inspections by making an
overview of required inspections to eliminate unnecessary ones.
• 18,000 euros ($23,400) in dust sampling by using risk analysis andhistorical data to identify where sampling reduction was possible.

Performance
Environmental

Business Continuity Drills Practice Coordinationof Emergency Services
P&G sites around the world regularly conduct BusinessContinuity Planning and Crisis drills, involving key local
emergency agencies. In the United States, drills sometimes
involve local, county, state, and federal agencies, depending onsite location and testing requirements.
Business Continuity Planning drills help P&G learn how best to
protect its people and assets and how to recover critical business
operations if a disaster occurs. Most sites are required to conduct a
drill of varying scope once a year.
These photos show a Business Continuity Planning drill at P&G’s
world headquarters in Cincinnati in May 2005. The drill involved fiveengine companies from the Cincinnati Fire Department, Cincinnati
and Hamilton County bomb squad and canine units, the Cincinnati
Police, and the American Red Cross. These local agencies were very
pleased with P&G’s preparedness and will conduct joint exerciseswith P&G in the future.

P&G 2005 Sustainability Report56Performance
Economic

P&G 2005 Sustainability Report

57

Economic
Additional economic data can be found in our financial report at:
www.pg.com/investors/annualreports.jhtml

These intellectual assets are of tremendous value to P&G. But
some are not being fully realized; we invent more than we cancommercialize. Through our External Business Development group,
we continue to identify non-strategic proprietary technologies which,when developed to their full potential, can yield sustainable revenue
sources and bring important technologies to the market thatenhance the lives of the world’s consumers.
Through technology donations, universities and other not-forprofit research institutions can receive these off-strategy, yet highly
valuable, patents and technology know-how, and provide theresearch and development needed to bring them to commercial
reality. P&G is excited to see these technologies reach their fullpotential. Each donation fosters applied research development
work at universities and research institutions and can eventually
deliver new revenue streams to universities through out-licensing
and/or start-ups. As part of the donation, P&G receives a tax
benefit for our shareholders.

Technology Donations, Fiscal Year 2004-2005
Through P&G’s technology donations, we contribute valuablepatents, seed money, time, and resources to U.S. universities andresearch institutions for the enhancement of education and thelong-term beneﬁt of society. These nonproﬁt groups can continue
the research efforts, providing a venue for development of potential new products and technologies.

Global Purchases
P&G is a global company. We produce brands in 118 plants in
42 countries around the world. This year, P&G purchased morethan $25 billion in materials and services to manufacture andmarket our products. We employ locally and purchase the majority of our raw materials within those regions where we manufacture our products. Our purchasing professionals understandand participate in both global and local markets to acquire thematerials and services to make our products.

Financial Highlights
Amounts in millions
except per-share amounts

Net Sales
Net Earnings
Before-Tax Earnings
Total Assets
Basic Net Earnings
Per Common Share1
Dividends Per Common Share1

2005$56,741
7,257
10,43961,527

2004$51,407
6,481
9,350
57,048

2003$43,377
5,186
7,530
43,706

2.83
1.03

2.46
0.93

1.95
0.82

1 Restated for two-for-one stock split effective May 21, 2004.

Supplier Diversity Program
In 1972, P&G established a program to identify and work withminority-owned businesses in the United States. Today, the Supplier
Diversity Initiative is a fundamental business strategy which identifies
and works with minority- and women-owned businesses. The Vice
President of Global Purchases serves as Executive Sponsor.
In 2004/2005, spending with minority- and women-owned
suppliers exceeded $1.5 billion. This spending accounted for about
10 percent of P&G’s total U.S. spending. This is the second year ina row P&G has exceeded $1 billion in spending. In May 2005, P&G
achievements were recognized with our induction into the Billion
Dollar Roundtable, a forum of 14 top corporations that spend morethan $1 billion annually with diverse suppliers.
Minorities continue to become a more substantial part ofAmerica’s population, and women continue to be P&G’s key
consumer base. As such, P&G is committed to remain at aleadership level because it is good for our business and goodfor the health of the U.S. economy.
Supplier Diversity Spending(amounts in billions of dollars)

1.500

Economic Development
Innovation is a P&G cornerstone. More than $1.8 billion is invested
annually in research and development – the largest amount among
consumer product companies worldwide. We have more than
28,000 patents worldwide, and we average more than one newpatent per day.

.225
.282
.420
.411
.401
.547
.661
.865
.939
.949
.960
1.100

on theWeb

93 94 95 96 97 98 99 00 01 02 03 04 05

Our ongoing commitment to investingin minority- and women-owned
business enterprises has resulted inincreasing expenditures.

Performance

P&G 2005 Sustainability Report58

SocialWages
P&G supports paying employees a competitive wage, as
benchmarked against other leading companies. Consistent with
our principle of valuing personal mastery, we reward employees for
improving their skills and capabilities.
Benefits
P&G is a recognized leader in employee benefits. The Company’s
benefits have been developed to help protect the financial securityof employees. These benefits include comprehensive coverage forhealth care, generous vacation and holiday time, and other work/
family balance benefits, including flextime, child care leave and lessthan-full-time schedules.
Plant HS&E Leadership Training
A key indicator of HS&E (Health, Safety & Environment) systemcapability is the percentage of plants with trained and qualified
leaders. Leadership candidates train on-site for an extended period
after attending a week-long “distance learning” event where theirknowledge and ability to handle specific situations are assessed.
For full qualifications the candidates must complete a qualification
project at their own plant. Currently, more than 80 percent of plants
worldwide have leaders qualified by Corporate/GBU staffs.

Percent of Plants
with Qualified Leaders

76 76

82
71

76

83

Industrial Hygiene and Safety
The health and safety of Procter & Gamble employees areparamount in the principles of the Company.
Nothing we do is worth getting hurt.
Safety can be managed.
Every illness and injury could and shouldhave been prevented.
Safety and health are everyone's responsibility.
The Company tracks and reports two metrics for worker 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 toanother 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 below 1.5 cases per 100 employees
worldwide. To achieve such rates, programs to address employee
safety, such as safe behaviors, ergonomics, and conﬁned spaceentry, have been implemented. No target has been set for LWDC
because of our belief that one has to manage incidents that
potentially could lead to lost workdays.
The following data is based on criteria established by P&G for
use at all worldwide plants and technical centers. This year’s total
incident rate stayed nearly the same, at .46 versus .55 incidents
per 100 employees, while the lost workday case rate also stayed
the same, at .17 versus .21 cases per 100 employees.

Total Incident Rate

(injury and illness per 100 employees)

2003 2004 2005
HS&E

2003 2004 2005
Fire Protection

HS&E Program Costs
There are two aspects of HS&E program costs:
1. Capital costs for new HS&E equipment.
2. People and operating costs for existing facilities.

.54

.55

.47

2003 2004 2005

Total Lost Workday Case Rate
HS&E capital costs for 2004/2005 were $11.9 million (slightly lessthan last year) to ensure compliance in our facilities. This included
the purchase and construction of pollution control equipment suchas wastewater pretreatment systems and air emission controls.
HS&E total costs for operating existing sites in 2004/2005 increased
to $185 million. (This does not include the $23 million in revenue
gained from recycling activities.)(lost and restricted workday cases
per 100 employees)

.22

.21

.17

2003 2004 2005

Performance
SocialEuropean Safety Achievement Demonstrates
P&G’s High Standards
P&G safety standards worldwide are at the highest level, as
illustrated by the Company’s experience in Europe.
In the European Union, all of P&G’s big Household Care sites areregistered under the Control of Major Industrial Accident Hazards(Seveso II) directive, one of the most demanding pieces of legislationin the field of industrial safety today. The sites obtained registration
because their corporate safety management systems meet key
requirements of the directive. P&G’s safety management system
is implemented uniformly, with the same level of rigor, at all P&G
production sites in every region of the world.

Lima Plant Sets Safety Record
The Fabric & Household Care plant in Lima, Ohio, has reacheda safety milestone – 4 million work hours without a lost-time
injury. This means that none of the more than 400 employees
at Lima have lost any work time because of injury for more thanfour-and-a-half years.
Only a few P&G plants have celebrated 4 million safe hours, and thisis the first time for Lima, which opened more than 30 years ago.
More than 40 P&G sites have more than a million safe hours.
More than 20 have between 1 and 2 million. Fifteen have
between 2 and 4 million, and three are at greater than 4 million.
The best P&G safety record is Thailand’s Bangkok plant, withmore than 7 million safe hours.

P&G 2005 Sustainability Report59���������������
���������

P&G 2005 Sustainability Report

61

Sustainability in Action
Key Sustainability Focus Areas
At P&G, we proactively bring together innovative ideas and resources
to create new products and services that improve the quality ofpeople’s daily lives around the world, at all income levels. P&G isparticularly well-positioned to do this because we are in touch daily
with the needs of the world’s consumers.
To bring our sustainability efforts to life, we decided to focus onareas in which we can most effectively make a positive difference
and which can involve all our businesses and regions. After muchinternal and external discussion, we selected two areas:• Water• Health and Hygiene
P&G’s work in these areas entails developing new ideas regarding
our products, services, initiatives, and markets. For example, it
includes:• Reaching consumers we have never reached, such as in the ruralvillages and urban slums of the developing world.
• Creating new products responding to the needs, frustrations, andaspirations of those new consumers and selling those products at
an affordable price.
• Exploring new business models, often with new supply anddistribution systems to lower cost and extend reach.

P&G has chosen to focus on water because we have a great dealof expertise in this area and tremendous capability to improve life
for people with insufficient access to clean water. In addition, water
is integral to the use and disposal of most P&G products; nearly 85
percent of them have some connection with household water use.
Why Health and Hygiene?
Health and hygiene affect all of us, in both the developed and thedeveloping worlds. Here are some current concerns:• Population growth is leading to overcrowding and disease in majorurban areas.
• Micronutrient deficiency or "hidden hunger" affects many millions
of people, causing blindness, inadequate childhood growth, andother developmental issues.
• Food-borne diseases impact greater numbers of people
every year.
• People’s increased mobility enables infection and disease to
move rapidly around the world.
P&G has chosen to focus on health and hygiene because we have
many products that improve health and well-being and that clean
skin, clothing, and homes.

Why Water?
Water affects the lives of all of us, each day. Worldwide, more than
• 1 billion people do not have access to safe drinking water.
• 3 to 4 billion people do not get enough water.
• 3 billion people do not have access to adequate sanitation systems.
• 3 million people – mostly children – die from water-related illnesses
each year.

Tsunami Relief
P&G was the ﬁrst multinational company in Malaysia tocontribute to relief efforts after the December 2004 tsunami.
Only four days after the tragedy, P&G Malaysia had set up a relief
fund. Employees donated generously, and their donations werematched by the Company. The funds were earmarked for bicycles
and other transportation for displaced survivors.
The Malaysian organization also provided gift boxes of P&G
products to about 800 families in the worst-hit area, Kota Kuala
Muda. Residents were especially grateful to receive shampoo,
Pampers, and Whisper.

Sustainability in Action

P&G 2005 Sustainability Report

62

Water: Cool-Water Washing Makes New Energy Savings Possible
There’s an energy-saving laundry revolution going on. With Tide
Coldwater in the United States and Canada and Ariel Actif à froid(Ariel Cold Active) in France, both launched in early 2005, plus
Ariel CoolClean, launched mid-2004 in the UK – P&G is making
it possible for consumers to turn down the temperature dial of
their washing machines, as they no longer need hot water to get
the laundry clean.
Lowering wash temperatures can save signiﬁcant amounts of energy
and cost. Estimates are that a North American household can save
up to 20 percent of the energy it uses to heat water. A Frenchhousehold can reduce its electricity usage by up to 3 percent.
Washing machines are one of a home’s highest energy users,
taking most of the energy to heat water. In North America, theproportion of energy used to heat wash water may be as high as
95 percent of the total energy used by the washing machine.
The numbers show that washing in cold water makes a lot ofsense for both consumers and the environment. So why do many
households in Europe and North America still use hot water towash? The key reason is that lower temperatures have not given
them the cleaning performance they want.
With the introduction of Tide Coldwater and Ariel Actif à froid,
all that has changed. These detergents are speciﬁcally designed
for improved cold-water washing performance. The scientiﬁc
explanation is that they use smarter chemical energy to clean,
thus requiring less help from heat. All consumers need to know
is that they can save energy and money and still achieve excellent
cleaning performance.
Government agencies and nongovernmental organizations are
so enthusiastic about the energy savings now available fromlaundering in cool water that they are teaming up with P&G invaluable alliances:
In France, Ariel has entered into a three-year alliance with
Consodurable, a nonproﬁt association whose mission is topromote sustainable consumption among French consumers.
Consodurable (www.consodurable.org) is endorsed by the French
Ministers of Environment and Consumption and has been chosen
by the Prime Minister as one of the very few “national causes”
for 2005. A TV advertising campaign to promote cleaning at
lower temperatures is an illustration of the alliance between Ariel
and Consodurable.
P&G France has formed an alliance with Alain Chauveau’s La Famille
Durable (The Sustainable Family, www.familledurable.com) to
promote washing in cool water. Chauveau is an author specializing
in sustainability issues. The alliance developed an illustrated
booklet on how a family can adopt more sustainable habits andpractices on a daily basis. The booklet was distributed to a million
consumers in Carrefour hypermarkets during France’s National
Sustainability Week in June 2005.
continued on next page

What if an average household
converts to cold-water washing?
A North American household could save up
to 730 kilowatt hours of electricity per year,
for a savings of up to $63. These savings
amount to 10 percent of the total energy
consumed by all domestic appliances, or
20 percent of energy used for water heating.
A French household turning its temperature
dial one step down could save 68 kilowatt
hours of electricity per year. This represents
nearly 3 percent of household electricity use.** as publicly validated by ADEME (the French national agency in chargeof energy savings)

Sustainability in Action
Water

P&G 2005 Sustainability Report63

Cool-Water Washing Makes New Energy Savings Possible continued
In the United States, P&G formed a cooperative effort with theAlliance to Save Energy to promote the beneﬁts of cold-water
washing. A ColdWater Challenge (www.coldwaterchallenge.com)
was issued with the goal of getting a million consumers to wash
their laundry in cold water to save money and energy. The
Alliance to Save Energy also provided numerous money- andenergy-saving tips to help consumers further reduce their energy
bills. A million people did accept the ColdWater Challenge, acrossall 50 states and more than 33,000 ZIP postal codes. Following
the success of the Challenge, Tide donated $100,000 to the
National Fuel Funds Network, which assists state and local groups
that help low-income families pay their energy bills. Tide also has
developed an online energy calculator, which allows consumers
to calculate personalized energy savings from switching to lower
temperatures in their own households.

P&G Philippines Promotes Water Economy
P&G Philippines initiated a two-pronged water savings campaign
in a rural area in the southern part of the country. The campaign
was run in conjunction with a test market of Tide 1-Banlaw (Tide
1-Rinse, in English) in Davao, starting early 2004. The campaign
involved working with the Davao City Water District (the waterprovider for the city of Davao) to promote water saving tips andalso the “adoption” of two hectares of watershed land.

The beneﬁts of washing in cool water apply to commercial settings
as well as homes. Even establishments that require hygienic
laundering to remove dirt and debris, such as hospitals and thefood industry, can use P&G’s low-temperature detergents.

Water in the Philippines is often expensive and available only inlimited quantities. Using Tide 1-Banlaw makes it possible to getclean laundry with only one rinse.

In Europe, P&G and an outside partner have developed the Ariel
Sterisan system. Ariel Sterisan provides hygienic cleaning at
40°C versus the traditional 70°C or 90°C. If washing in coolwater with Ariel Sterisan replaced current commercial andinstitutional washing at higher temperatures, some 748,000
gigajoules of energy could be saved. That’s roughly equivalent to
the energy consumption of 23,500 people.** As validated by a Life Cycle Assessment carried out by P&G with theGerman Institute for Applied Ecology, Öko-Institut.

Potential energy savings if U.Shouseholds wash in cold water
Up to 70-90 billion kilowatt hours/year, which represents:• up to 3 percent of total national energy consumption• up to 10 percent of output from the nation’s nuclear power plants• reduction of 26-34 million tons of CO2• reduction of 1 percent of total CO2 emissions• an energy cost savings of $3.4-$4.4 billion

Potential energy savings if Frenchhouseholds wash in cool water**
1.6 billion kilowatt hours/year, which represents:• the domestic electricity consumption of 1.75 million people• a 125,000 ton reduction in CO2 emissions**As publicly validated by ADEME, the French national agency in chargeof energy savings

The Tipid Tubig Tips (Water Saving Tips) campaign encouraged
residents who rinse laundry manually to adopt water savings
practices such as rinsing only once instead of several times,
recycling rain water and rinse water, and using rinse aids. These
three tips reached 150,000 households via catchy radio jingles
and ﬂyers sent with water bills.

P&G also supported the Davao water district’s Adopt-A-Siteprogram by adopting two hectares in the Mt. Talomo-Lipadas
Watershed. The watershed is home to several indigenous andendemic tree species such as narra, molave, and mahogany.
Reforestation in these two hectares, which involves planting,
maintaining, and rehabilitating seedlings, should yield 5,000 newtrees over the next ﬁve years.

Sustainability in Action

P&G 2005 Sustainability Report

64

Health and Hygiene: HIV/AIDSWorldwide, 40 million people are infected with HIV/AIDS.
Statistics are frightening; it is estimated that someone becomes
infected every six seconds.
Infection rates in some African countries run as high as 40
percent of the population. AIDS has become the leading causeof death in sub-Saharan Africa, with more than 28 million people
infected. In addition to the many, many lives lost, there are an
estimated 14 million orphans.
With HIV/AIDS impacting sub-Saharan Africa more than any
other area in the world, P&G’s sub-Saharan organization isleading the Company’s HIV/AIDS effort. P&G’s effort, whichbegan in 1998, was revised last year to coordinate with the latest
national and international developments and standards. The
effort’s objectives are to:• Use employee and family awareness and prevention programs
at our African locations to help prevent the spread of HIV/AIDS.
• Offer medical plans that assist employees with HIV/AIDS to
get life-prolonging medication, and in some cases supplement
these plans with additional Company support.
The workplace portion of the effort consists of the following
elements:• Establishing baseline measurements, such as for knowledge,
attitude, perception, and disease prevalence• Conducting risk analysis and impact assessment, considering
issues such as costs to P&G and impact on customers, suppliers,
health care facilities• Implementing prevention strategies, such as awareness training,
voluntary counseling, and testing for HIV/AIDS and sexuallytransmitted disease• Implementing wellness programs to keep infected employees as
healthy as possible and providing post-exposure prophylactics,
anti-retroviral treatment, Nevirapine, vitamins and nutritional
supplements, and home-based care
• Evaluating and monitoring the effectiveness of theseinterventions• Assessing and improving Company beneﬁts• Obtain baseline information against which to measure andmonitor efﬁcacy and impact of the program over time.
Almost three-quarters of our employees participated. The
majority acknowledged the existence of HIV/AIDS and had
accurate perceptions of their personal risks. The majority knewof our workplace policy and were interested in our VoluntaryCounseling & Testing program.
Prevalence Survey
In January 2005, we conducted a survey to determine thenumber of employees who are HIV-positive. With this information
we can provide adequate resources (e.g., beneﬁts, recruitment,
training) and focus them effectively. Overall, 70 percent of
employees participated, including 97 percent of the high-risk(i.e., younger employees), among whom the infection rate is far
lower than national averages.
Using the survey report, we have completed an impact
assessment on the business. The impact assessment conﬁrmedthat we have the right program in place to reduce/mitigate theeffect of HIV/AIDS on the business.
on theWeb

For more information on P&G’s anti-HIV/AIDS workin South Africa, please visit:www.pg.com/content/pdf/01_about_pg/
corporate_citizenship/sustainability/reports/
pg_south_africa_2004_hiv_aids_report.pdf

Speciﬁc P&G activities to ﬁght HIV/AIDS in Africa include:
Awareness Training
Awareness training was launched in October 2004, using a Webbased portal, weekly e-mailed curricula, and special campaigns.
The campaigns focused on special events (e.g., World AIDS Day,
the Christmas season, Valentine’s Day, and World TB Day). Almost
90 percent of employees enrolled in the program and have accessto more than 1,300 pages of HIV/AIDS information.
Knowledge, Attitude, and Practices Survey
During November 2004, we conducted a survey to:• Assess our employees’ HIV vulnerability by exploring theirknowledge, attitude, and practices.
• Collect information to guide development of a comprehensive
HIV/AIDS strategy.

P&G participates in HIV/AIDS programs in other parts of
the world as well. For example:• P&G Mexico joined with other large corporations to form abusiness coalition called Consejo Nacional Empresarial sobre
SIDA (National Business Council on AIDS). This coalition was
launched on World AIDS Day 2004, with members committed
to “eradicate HIV/AIDS discrimination in their workplaces.”• P&G China’s medical staff is working with the Global BusinessCoalition’s China Business and AIDS Working Group. This
group brings together more than 60 Chinese businesses to help
facilitate business involvement in eradicating HIV/AIDS.
continued on next page

Sustainability in Action
Health and Hygiene

HIV/AIDS continued
PUR and HIV/AIDSIn Haiti and Kenya, we are seeing that safe drinking water is
helping people live better with HIV/AIDS. CNN’s Global Health
Watch featured Jemima Odo, telling how she used PUR to help
regain her strength after contracting HIV and how selling PUR
helps her support her grandchildren and also community orphans
whose parents have died from AIDS. See more on Jemima Odo’s
story on page 4.
It’s clear that the global response to HIV/AIDS needs to include
provision of safe drinking water. People who have HIV/AIDS are
more susceptible to water-borne diseases, including parasites,
viruses, and pathogenic bacteria. P&G’s PUR Puriﬁer of Water
effectively removes all of these from contaminated water andhas become one of the most critical health tools for people with
HIV/AIDS.
For more information on PUR go to page 5.

P&G 2005 Sustainability Report65

P&G 2005 Sustainability Report

Index
GRI#

Index Listing

Page(s)Profile
1.1
1.2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9

Statement of vision and strategy
Statement from CEO
Name of organization
Major products and/or services, including brands, if appropriate
Operational structure
Description of major divisions, operating companies, subsidiaries, and joint ventures
Countries where operations are locatedNature of ownership
Nature of markets served
Scale of reporting organization
List of stakeholders

3, 42
2
10
11, 1512, 1313
14
10
10
10, 1516

Report Scope
2.10
Contact person
70
2.11
Reporting period
10
2.12
Date of most recent report10
2.13
Boundaries of report (countries/regions, products/services, divisions/facilities/joint ventures/subsidiaries) and specific limitationsof scope
10, 12, 15
2.14
Significant changes in size, structure, ownership, or products/services that have occurred since the previous report17
2.15
Basis for reporting on joint ventures, partially owned subsidiaries, leased facilities, outsourced operations, and other situations
that can significantly affect comparability from period to period
44
2.16
Explanation of the nature and effect of any restatements of information provided in earlier reports
N/A
2.17
Decisions not to apply GRI
N/A
2.18
Criteria/definitions used in any accounting for economic, environmental, and social costs and benefits
38, 44
2.19
Significant changes from previous years in the measurement methods applied to key economic, environmental,
and social information
N/A
2.20
Policies and internal practices to enhance and provide assurance about the accuracy, completeness, and reliability thatcan be placed on the sustainability report44
2.21
Policy for independent assurance
N/A
2.22
Means to get additional information and reports about economic, environmental, and social aspects of theorganization’s activities
26, 57Structure & Governance
3.1
Governance structure of the organization, including major committees under the board of directors that are responsible
for setting strategy and oversight of the organization.
3.2
Percentage of impendent board directors
3.3
Process for determining board expertise
3.4
Board-level process for overseeing sustainable management
3.5
Linkage between executive compensation and achievement of the organization’s financial and non-financial goals
3.6
Organizational structure and key individuals responsible for oversight, implementation, and audit of economic,
environmental, social, and related policies
3.7
Mission and value statements
3.8
Shareholder mechanisms to provide information to Board
Stakeholder Engagement
3.9
Basis for identification and selection of major stakeholders
3.10
Approaches to stakeholder consultation
3.11
Type of information generated by stakeholder consultations
3.12
Use of information generated by stakeholder engagements
3.13
Explanation of whether and how the precautionary approach or principle is addressed by the organization
3.14
External developed, voluntary economic, environmental, and social charters, sets of principles, or other initiatives
to which the organization subscribes or which it endorses.
3.15
Principal memberships in industry associations
N/A = Not applicable. P&G only reports on data that is relevant to the business. It does not collect data that is used solely for the sustainability report.

12, 2524
24
24
24, 25, 27
12
22, 23, 26
24

24, 37, 40
37
N/A
N/A
41
26
36

66

IndexGRI#

P&G 2005 Sustainability Report

Index Listing

Page(s)Stakeholder Engagement (continued)
3.16
Policies and/or systems for managing upstream and downstream impacts
3.17
Approach to managing indirect economic, environmental, and social impacts resulting from its activities
3.18
3.19
3.20

Major decisions during the reporting period regarding the location of, or changes in, operations
Programs and procedure pertaining to economic, environmental, and social performance
Status of certification pertaining to economic, environmental, and social management systems.

32, 34, 57
21, 27, 28, 30, 31, 32, 38,
44, 57, 58
N/A
25, 34, 35, 54
N/A

GRI Content Index
4.1
Table Identifying Location of Indicators

66

Performance Indicators
Integrated Indicators
Economic Indicators
Direct Economic Impact – Customers
EC1
Net Sales
EC2
Geographic breakdown of markets

15, 57
P&G reports data by global business units.

Direct Economic Impact – Suppliers
EC3
Costs of good, materials, and services purchased
EC4
Percentage of contracts that were paid in accordance with agreed terms, excluding agreed penalty arrangements

57
N/A

Direct Economic Impact – Employees
EC5
Total payroll and benefits broken down by country or region

58

Providers of Capital
EC6
Distributions to providers of capital broken down by interest on debt and borrowings, and dividends on all classesof shares
See Our Annual Report
EC7
Increase/Decrease in retained earnings at end of period
See Our Annual Report
Public Sector
EC8Total sum of taxes of all types broken down by country
N/A
EC9
Subsidies received broken down by country or region
See Our Annual Report
EC10
Donations to community, civil society, and other groups broken down in terms of cash and in-kind donations per typeof group
38 - Globally
Environmental Indicators
Materials
EN1
Total materials use other than water, by type
EN2
Percent of materials used that are wastes

45
45EnergyEN3
EN4

Direct energy use
Indirect energy use

46
46

Water
EN5

Total water use

48

Biodiversity
EN6
Location and size of land owned, leased, or managed in biodiversity-rich habitats
EN7

Major impacts on biodiversity

P&G does not track biodiversity land use
as in general we do not operate in these areas.
P&G does not track biodiversity land use
as in general we do not operate in these areas.

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P&G 2005 Sustainability Report

Index Listing

Environmental Indicators (continued)
Emissions, Effluents, and Waste
EN8
Greenhouse gas emissions
EN9
Use and emissions of ozone-depleting substances
EN10
EN11
EN12
EN13

NOx, SOx, and other significant air emissions by type
Total amount of waste by type and destination
Significant discharges to water by type
Significant spills of chemicals, oils, and fuels in terms of total number and total volume

Page(s)49
We do not use ozone depleting substancesin our manufacturing operations.
52
50
52
N/A

Environmental Impacts of Products/Services
EN14
Significant environmental impacts of principal products and services
39 - Please visit www.scienceinthebox.com
EN15
Percentage of weight of products sold that is reclaimable at the end of the products’ useful lifeand percentage that is actually reclaimed
P&G is a consumer goods company.
End use of products generally means
product is disposed of.
Compliance
EN16
Incidents of and fines for non-compliance with all applicable international declarations/conventions/treaties,
and national, subnational, regional, and local regulations associated with environmental issues
55
Social Performance Indicators – Labor Practices/Decent Work
Employment
LA1
Breakdown of work force by region/country/type
LA2
Net employment creation and average turnover segmented by region/country

N/A
N/A. We do not track this data.

Labor/Management Relations
LA3
Percent of employees represented by independent trade unions
LA4

While employees are free to join a union,
the Company does not track this data.
Policy and procedures involving information, consultation, and negotiations with employees over changes in thereporting organization’s operations (e.g. restructuring)
N/A

Health & Safety
LA5Practices on recording/notification of occupational accidents/diseases
55
LA6
Description of formal joint health and safety committees comprising management and worker representatives andproportion of work force covered by any such committees
34
LA7Standard injury, lost day, and absentee rates and number of work-related fatalities
55
LA8
Description of policies/programs (for the workplace and beyond) on HIV/AIDS
32 - Please visit www.pg.com/srTraining/Education
LA9
Average hours of training per year per employee by category of employee

We do not track this information.

Diversity/Opportunity
LA10
Description of equal opportunity policies or programs, as well as monitoring systems to ensure compliance andresults of monitoring
26, 27, 28, 33, 57
LA11
Composition of senior management and corporate governance bodies, including female/male ratio and otherindicators of diversity as culturally appropriate
24 - Please see our Annual Report
LA17

Specific policies and programs for skills management or for lifelong learning

Social Performance Indicators – Human Rights
Strategy/Management
HR1
Description of policies, guidelines, corporate structure, and procedures to deal with all aspects of human rights
relevant to operations, including monitoring mechanisms and results.

58

26 - Please view our
Values and Policies, 29

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Index Listing

Page(s)Strategy/Management (continued)
HR2
Evidence of consideration of human rights as part of decisions, including selection of suppliers/contractors.
26 - Please view ourSustainability Guidelines for Supplier Relations
HR3
Description of policies and procedures to evaluate and address human rights performance within the supply chain
and contractors, including monitoring systems and results of monitoring.
26 - Please view ourSustainability Guidelines for Supplier Relations
Non-Discrimination
HR4
Description of global policy and procedures/programs preventing all forms of discrimination in operations

Freedom of Association
HR5
Description of freedom of association policy

26 - Please view our
Values and Policies

P&G recognizes the Global Sullivan Principles
which support voluntary freedom of association.
See page 26.

Child Labor
HR6
Description of policy excluding child labor as defined by ILO Convention 138

29

Forced/Compulsory Labor
HR7
Description of policy to prevent forced labor

29

Social Performance Indicators – Society
Community
S01
Description of policies to manage community impact

37

Bribery & Corruption
S02
Description of policy, procedures/management systems, and compliance mechanisms for organizations andemployees addressing bribery and corruption

26

Political Contributions
S03
Description of policy, procedures/management systems, and compliance mechanisms for managing political lobbying
and contributions
S04
Awards received relevant to social, ethical, and environmental performance26
18, 19Social Performance Indicators – Product Responsibility
Consumer Health & Safety
PR1
Policy for policy for preserving customer health and safety during use of products and services, and extend to which
this policy is visibly stated and applied, as well as description of procedures/programs to address this issue, including
monitoring systems and results of monitoring.

34, 39Products & Services
PR2
Description of policy, procedures/management systems, and compliance mechanisms related to product informationand labeling.

34, 39Respect for Privacy
PR3
Description of policy, procedures/management systems, and compliance mechanisms for consumer privacy.
PR9
Description of policies, procedures/management systems, and compliance mechanisms for adherence to standards
and voluntary codes related to advertising.

30
30

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P&G 2005 Sustainability Report702005 Sustainability Report
Global Editor

In Memory
A few days before this report went to press, a dear colleague
and friend, Tom Feijtel, died in a tragic bicycle accident. He wasonly 46.
Tom joined P&G in 1989 and has left his mark in the ﬁeld ofenvironmental science both inside and outside P&G, having
contributed to more than 80 scientiﬁc publications. Tom
championed the value of stakeholder relations and partnerships
and was always available to coach and mentor young people.
We will miss him.

Cindy Mastin, U.S.A.

Core Report Team Ina Andreasen, Denmark
Angela Vanegas, Venezuela
Lucy Bogaerts, Belgium
Bea Buyle, Belgium
Eddy Linclau, Belgium
Dennis Darby, Canada
Chris Smith, UK
Robin Tollett, U.S.A.
Pam Wright, U.S.A.
Shinobu Yasutake, Japan
Copy Editor

Jan Sherbin, Cincinnati, Ohio, U.S.A.

DesignAndy Ruttle, RDG – Ruttle Design Group, Inc.
Cincinnati, Ohio, U.S.A.

The report team thanks all the individuals throughout the world
who contributed information, stories, and data to this report. Special
thanks to Greg Allgood, P&G U.S.A., for the use of his photographyon the cover and throughout the report.

Contact
Cindy Mastin
Corporate Sustainable Development
2 Procter & Gamble Plaza
Cincinnati, Ohio 45202 U.S.A.
E-mail sustainrep.im@pg.com
on theWeb

P&G’s 2005 Sustainability Report can be found at:www.pg.com/sr

P&G 2005 Sustainability Report

71

Addendum“For More Information” links from previous pages in this report.

Policies, Organizations, andManagement Systems
Policies
Child Labor And Worker Exploitation Policy
P&G does not use child or forced labor in any of our global
operations or facilities. We do not tolerate unacceptable worker
treatment such as the exploitation of children, physical punishment
or abuse, or involuntary servitude. We expect our suppliers andcontractors with whom we do business to uphold the same
standards. Should a pattern of violation of these principles become
known to the Company and not be corrected, we will discontinue
the business relationship.
For purposes of implementing the above policy, we will employ thefollowing definitions:
CHILD LABOR:• We will look first to the sovereign laws of the country in which weare doing business.
• In the absence of any national or local law, we will define “child”
as less than 15 years of age.
• If local minimum-age law is set below 15 years of age but is inaccordance with International Labor Organization (ILO) Convention
138, the lower age will apply.
FORCED LABOR is any work or service extracted from any person
under the menace of any penalty and for which said person has notoffered himself voluntarily.
SUPPLIER or CONTRACTOR is someone who has a “direct” businessor contractual relationship with P&G. We will urge our suppliers andcontractors to promote the application of these principles by thosewith whom they do business.

Advertising Policy and Sustainable Development
We believe advertising contributes to sustainable development
through a variety of general and specific ways in the marketplace.
To achieve sustainability through the market, we need effective
competition to drive innovation and increased efficiency.
Competition thrives on advertising, and advertising thrives oncompetition. Competition promotes innovation, which leads tobetter products and services, and more variety and choice for
consumers.
There are also many specific business-building opportunities in which
advertising can contribute to sustainable development by improving
lives around the world:• In developing countries, advertising often also involves healtheducation and awareness raising, such as addressed by P&G’s• Healthy Smiles dental health campaign in China.
• Providing social or environmental messages as part of public service
or corporate campaigns. P&G’s Open Minds campaign in India, forexample, raised public awareness of the plight of India’s working
street children while collecting money to fund their education.
• Promoting innovative products that have environmental or social
benefits.
• Promoting more sustainable use of existing products to maximize
environmental or social benefits. For example, the WashRight
campaign, run by P&G and other members of the European
Detergents Association in Europe, promotes correct usage oflaundry products and efficient use of water and energy.
• Communicating the sustainability attributes and performanceof companies and other organizations as the public increasingly
wants to know more about the companies behind products
and services.
Despite contributions to sustainable development, advertising’s roleand effects have been questioned. Advertising has been blamed for
spreading Western lifestyles around the world and for promoting
excessive consumption in developed countries.
Spreading awareness of how other people live is one of theinevitable consequences of the global media revolution. We do not
accept that people in developing countries should be denied a better
quality of life. The first priority of sustainable consumption must
be to provide access to adequate consumption opportunities foreveryone. Nearly half the world’s population lives on less than $2 perday; they need access to adequate products and services that can
improve their daily lives.
In developed countries, the idea that advertising fuels overconsumption overplays the importance of advertising, since itcannot cannot make people buy things they do not want or need.
Advertising can inform and influence and help consumers makemore informed decisions, but it is consumers who choose how
best to improve the quality of their own lives. Advertisers alone areunable to regulate the overall demand for goods and services.
However, there are clear responsibilities, as well as opportunities,
for advertisers such as P&G. There is a responsibility to ensure truthin advertising and to ensure that messages are legal, decent, andhonest. We also assume our responsibility to ensure the sensitive
portrayal of all groups in society, including women, children, theelderly, and minorities. For this reason, P&G actively supports truthin-advertising mechanisms and conforms to relevant national codesand guidelines wherever we operate.
The contribution of advertising to sustainable development is
discussed in more detail in the report “Industry as a Partner for
Sustainable Development – Advertising,” which was written by
the advertising industry in collaboration with UNEP – the United
Nations Environment Program. P&G helped the World Federation ofAdvertisers (WFA) and the European Association of Communication
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P&G 2005 Sustainability Report72

continued from previous pageAgencies (EACA) write this report, which was presented at theWorld Summit on Sustainable Development in Johannesburg, South
Africa, in August 2002

Environmental Quality Policy
We will provide products of superior quality and value that best
fill the needs of the world’s consumers. As a part of this, P&G
continually strives to improve the environmental quality of its
products, packaging and operations around the world. To carryout this commitment, it is P&G’s policy to:• Ensure our products, packaging and operations are safe for our
employees, consumers and the environment.
• Reduce or prevent the environmental impact of our products
and packaging in their design, manufacture, distribution, use
and disposal whenever possible. We take a leading role indeveloping innovative, practical solutions to environmental issues
related to our products, packaging and processes. We support
the sustainable use of resources and actively encourage reuse,recycling and composting. We share experiences and expertiseand offer assistance to others who may contribute to progress inachieving environmental goals.
• Meet or exceed the requirements of all environmental laws andregulations. We use environmentally sound practices, even in
the absence of governmental standards. We cooperate withgovernments in analyzing environmental issues and developing
cost-effective, scientifically based solutions and standards.
• Continually assess our environmental technology and programs
and monitor progress toward environmental goals. We develop
and use state-of-the-art science and product life cycle assessment,from raw materials through disposal, to assess environmental
quality.
• Provide our consumers, customers, employees, communities,
public interest groups and others with relevant and appropriate
factual information about the environmental quality of P&G
products, packaging and operations. We seek to establish andnurture open, honest and timely communications and strive to be
responsive to concerns.
• Ensure every employee understands and is responsible andaccountable for incorporating environmental quality considerations
in daily business activities. We encourage, recognize and reward
individual and team leadership efforts to improve environmental
quality. We also encourage employees to reflect their commitment
to environmental quality outside of work.
• Have operating policies, programs and resources in place toimplement our environmental quality policy.

Forest Resources Policy
P&G’s three policies for purchasing and utilization of fiber:
1. Fiber Procurement
P&G purchases wood-derived fiber from suppliers that:• Ensure the safety of forestry and manufacturing operations for
employees and the environment.

• Document that the fiber is from legally harvested wood and that
other legal requirements are met.
• Practice principles of sustainable forest management in their own
operations and in sourcing of wood.
• Do not obtain the fiber from sites designated for conservation or
judged to have unique environmental or cultural value.
• Reflect our social values and support of universal human rights
through work with local governments and communities toimprove the educational, cultural, economic and social well-beingof those communities.
We ensure compliance with this policy through site visits,
comprehensive surveys and research, required documentationand independent third-party certification of sustainable forest
management practices.
2. Sustainable Forest Management Certification
A majority of our fiber supply is currently purchased from companies
that have independently certified their forestry operations withina credible forest certification system. P&G is requiring all its fiber
suppliers to independently certify their forestry operations by
December 31, 2006. In addition, P&G will require suppliers toprovide an auditable assurance that fiber sources not directly owned
and managed by them are obtained via legal means and that harvest
is conducted via sustainable practices.
P&G believes that independent certification can be an effectivemeans for a fiber supplier to verify its sustainable forest management
practices. As a global company sourcing fiber worldwide, we also
recognize the importance of flexibility in forest certification systems
and the need for these systems to be responsive to specific local
requirements. To this end, the certification systems that our suppliers
select must be consistent with the following generally accepted
criteria for sustainable forestry management:• A commitment to forest regeneration and reforestation.
• Protection of soil quality, riparian zones and water quality.
• Protection of ecologically and culturally unique forest areas.
Maintenance and conservation of biological diversity.
• Stakeholder consultation and public reporting. Continuous
improvement in forestry practices.
• Compliance with legislation.
• Social development principles.
We also support the World Business Council for Sustainable
Development and the International Forest Industry Roundtable intheir efforts to develop a Legitimacy Threshold Model (LTM) for
credible forest certification systems.
3. Efficient Use of Forest Resources
P&G is committed to strategies that reduce demand on the world’s
forest resources and will continue to:• Focus on source reduction or use of less fiber throughdevelopment of innovative technologies that provide maximum
product performance using minimal fiber.
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P&G 2005 Sustainability Report73

continued from previous page• Evaluate the use of non-forest derived sources of fiber, recognizingthat alternatives must also meet principles of sustainable
management.
Use recovered fiber in our products when it can be done without
having a negative impact on product performance, manufacturing
efficiency, resource and energy usage and waste generation.

Management Systems
Human Resources
Human Resources ensures that P&G has the employees,organizational design and work culture to deliver increasing businessproductivity and to continually improve consumer, employee andshareholder value. They provide recruiting, training, development,
diversity, benefits and compensation coordination for the Company.
It is the Company’s intent to develop all employees to their fullpotential. To achieve this goal the following support systems are inplace:• 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.

Insurance Systems
The goal of the Corporate Insurance Program is to optimize thefinancing 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 is effective loss
prevention programs.
• Insurance is no substitute for effective loss prevention.
The Corporate Insurance Program covers areas of loss and potential
loss such as property damage; business interruption resulting fromproperty damage; legal liability resulting from property damage or
personal injury; the legal liability of Directors, Officers, Trustees andemployees arising from the performance of their duties; and theft.

Human and Environmental Safety of our Products
Product Safety & Regulatory Affairs (PS&RA) is responsible for
ensuring that products are safe for consumers, safe for theenvironment and in compliance with laws and regulations where
they are sold. PS&RA also addresses other environmental questions
or issues about products and packages, such as their compatibility
with waste management systems, natural resource use or issues ofperceived safety.

PS&RA is also responsible for the development, validation andadoption of alternatives to animal testing and ensures 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 to assess the safetyof its products and ingredients. In this process, chemical hazard
and exposure information are related in a way that describes thelikelihood for a chemical to adversely affect biological systems. The
PS&RA organizations in each business unit work closely with productdevelopment teams in the development, selection and formulationof product ingredients and mixtures with acceptable risk profiles, aswell as satisfying other important business and consumer needs.
A key part of PS&RA is the Central Product Safety (CPS)
organization. CPS has the direct responsibility to “ensure that our
products are safe for consumers and safe for the environment.”
This involves conducting basic studies in toxicology, biodegradation,
together with an understanding of exposures, to ultimately complete
human and environmental safety assessments. In addition, thisorganization has responsibility for the basic and applied researchused to develop state-of-the-art risk assessments as well as to makebusiness decisions. As a Company resource, its primary role is toadvance science for understanding and evaluating the human andenvironmental safety and impact of our products.

Worldwide Health, Safety and Environment Systems at
Manufacturing Operations
Health, Safety and Environment (HS&E) is a global communityof resources responsible for ensuring that the approximately 126
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.
There are 3 major components to an HS&E organization at a site:
the base HS&E component (includes Environmental, Technical Safety
and Industrial Hygiene & Safety disciplines), Fire Protection (FP)Systems and Medical Systems.
A phased, detailed Risk Assessment is the process the Company
uses to assess the safety of its processes and new initiatives that are
being introduced at its own manufacturing operations as well as at
contractor manufacturing operations. The whole Risk Assessment
process is designed to enable “high-speed” innovation.

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P&G 2005 Sustainability Report74

continued from previous pagePrincipal Industry and Business Associations
Europe, Middle East, and Africa
Advertising Associations: WFA – World Federation of Advertising
Chemical Industry Associations: CEFIC – European Chemicals
Industry Association; DUCC – Coalition of Downstream Users
Cosmetics Industry Associations: COLIPA – Cosmetics & Fragrances
Industry
Detergent Industry Associations: AISE – Association Internationale dela Savonnerie de la Detergence et des Produites d’Entretien
Employer Associations: UNICE – Union of Industrial & Employers’
Confederation of Europe
Environmental Associations: ECETOC – European Center for
Ecotox and Toxicology of Chemicals; EUROPEN – The European
Organization for Packaging and the Environment
Euro/American Business Associations: AECA – American European
Community Associations; EU Committee of AmCham
Food Associations: CIAA – European Food Industry Association; CIES
– Food Business Forum
Grocery/Brand Associations: AIM – European Brands Association
Multi-stakeholder Associations: EPE – European Partners for theEnvironment
Nordic Partnership: WWF and Industry Partnership in Nordic Region
to Target Sustainability to Rewarding Business
Paper Associations: EDANA – European Industry of Non-Woven
Products; HAPCO - European Industry of Hygiene Paper Products
Pet Food Industry Association: PFMA – Pet Food Manufactures
Association
Pharmaceutical Associations: AESGP / OTC Manufacturers
Association; FPIA – Pharmaceutical Industry Association
Waste Management Associations: ASSURRE – Association for
Sustainable Use and Recovery of Resources in Europe
North America
American Chemical Society
American Industrial Health Council
American Legislative Exchange Council
Association of National Advertisers
Business for Social Responsibility
Business Roundtable
Canada’s Research-Based Pharmaceutical Companies (Rx&D)
Canadian Chamber of Commerce
Canadian Chemical Producers Association
Canadian Manufacturers and Exporters
Canadian Consumer Specialty Products Association
Canadian Cosmetic, Toiletry and Fragrance Association
Consumer Specialty Products Association
Consumer Health Products Association
Cosmetic, Toiletry and Fragrance Association
CSR Canada – Corporations Support Recycling
Food and Consumer Products Manufacturers of Canada
Global Environment Management Initiative
Grocery Manufacturers of America
Keep America Beautiful
National Conference of State Legislatures
National Environmental Development Association

National Food Processors Association
Non-Prescription Drug Manufacturers Association of Canada
Pharmaceutical Researches and Manufacturers of America
Soap & Detergent Association
Soap & Detergent Association of Canada
The Council of State Governments
US Council for International Business
Water Environment Research Foundation
Latin America
ABIPLA – Brazilian Association of Household Cleaning Products
ANALJA – Colombian Soaps and Detergent Manufacturers
Association
Argentinian National Industry Association
ASOQUIM – Venezuelan Association of the Chemical Industry
CANIPEC – Mexican Association of the Industry of Cosmetics andPerfumesCámara Nacional de la Industria de Aceites, Grasas, Jabones y
Detergentes. Mexico
Cámara Nacional de las Industrias de la Celulosa y del Papel.
Confederación Patronal de la República Mexicana.
CONCAMIN – Confederación de Cámaras Industriales.
Asociación Nacional de la Industria Química. Mexico
AMECE – Asociacion Mexicana de Estandares para el ComercioElectronico
Asociacion Mexicana de Fabricantes de Pañal Desechable y Similares,
A.C. (AMPADE)CONAR – Consejo de Autorregulación y Etica Publicitaria. Mexico
COMCE – Consejo Mexicano de Comercio Exterior
CONMEXICO – Consejo Mexicano de la Industria de Productos deConsumo
CAVEME – Venezuelan Pharmaceutical Products Association
CEVEDES – Venezuelan Business Council for Sustainable
Development
ANDA. Venezuelan Association of Advertisers
CONINDUSTRIA. Industrial Confederation of Venezuela
CONAR – Chilean Advertising Self–Regulation and Ethics Council
SOFOFA – Manufacturers Industry Association
Chamber of the Cosmetic Industry of Chile
AmCham – Chilean American Chamber of Commerce
Chilean–Brazilian Chamber of Commerce
ANDA – National Advertisers Association Chile
Latin America Federation of Waste Management
Peru –Sociedad Nacional de Industrias
Asia
State Committee of Cosmetic Industry
Asia/Pacific Economic Cooperation
Australian Consumer & Specialty Products Association
China – Amcham Membership
China – CC of Foreign Invested Enterprises GZ
China – Academy of Environment Science
China – Association of Enterprises with Foreign Investment
China – Association of Fragrance Flavor and Cosmetic Industry
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P&G 2005 Sustainability Report75

continued from previous page

China – Daily Use Groceries Association
China – Detergent Products Industry Association
China – Association of Surfactant, Soap and Detergent Industries
China – Hygiene Supervision Magazine
China – Hygienic Material & Technology Association
China – National Household Paper Industry Association
China – Standardization Association
China – Standardize Technological Consulting Service Center
China – China Toothpaste Industry Association
China – GD Associated Net for Anti–counterfeit & High–quality
Protection
China – GD Fragrance Flavor Cosmetic Branch of GD Light Industry
Association
China – Guangdong Quality Magazine
China – Guangdong Quality Management Association
China – Guangzhou Municipal Foreign Trade Investment Law
Association
China – Guangzhou Municipal Lawyers’ Association
China – Guangzhou Quality Inspection Association
China – Guangzhou Trademark Association
China – GZ “Three” Associations of Economic & Technological
Development District
China – GZ Association of Enterprises with Foreign Investment,
China
China – GZ Education Fund Association
China – GZ Industry & Commerce Administration Management
Institute Branch of Foreign Investment
China – Living Use Paper Specialized Committee of China Paper
Making Institute
China – National Bar Code Association
China – National Environment Hygiene Standard Specialized
Committee (MOH)
China – Perfume / Fragrance Magazine
China – Quality Management Association
China – State Committee of Cosmetics Industry Standardization(SBQTS)
China – State Technical Committee of Paper Making Industry
Standardization
China – State Technology Committee of Food Industry
Standardization
China – Tianjin Association of Enterprises with Foreign Investment
Hong Kong – The Cosmetic and Perfumery Association of Hong
Kong
Hong Kong – The Hong Kong Association of the PharmaceuticalIndustry
India – Associated Chambers of Commerce and Industry of India
India – Confederation of Indian Industry
India – Federation of Indian Chambers of Commerce and Industry
India – Feminine & Infant Hyginene Association
India – Indian Soap & Toiletries Markers’ Association
Indonesia – Indonesian Cosmetics Association
Indonesia – Indonesian Food&Beverage Industry Association
Indonesia – Indonesian Moslem Scholar Association
Indonesia – Indonesian Pulp & Paper Association
Indonesia – Indonesian Tissue Paper Association
Indonesia – National Standardization Body

Indonesia – Pharmaceutical Industry Association
Japan – Japan Cosmetic Industry Association
Japan – Japan Health and Nutrition Food Association
Japan – Japan Hygiene Product Industry Association
Japan – Japan Soap and Detergent Association
Japan – Pharmaceutical Association of Japan
Korea – American Chamber of Commerce
Korea – Association for Fair Trade of Tissue & Hygiene Products
Korea – EU Chamber of Commerce
Korea – Korea Chemical Management Association
Korea – Korea Cosmetics Industry Assoc.
Korea – Korea Food Industry Association
Korea – Korea Food Traders Association
Korea – Korea Hygiene Paper Product Association
Korea – Korea Paper Manufactures’ Association
Korea – Korea Pharmaceutical Trade Assoc.
Malaysia – American Malaysian Chamber of Commerce (AMCHAM)
Malaysia – Federation of Malaysian Manufacturers –FMM Food
manufacturer
Malaysia – Malaysian International Chamber Of Commerce And
Industry – MICCIMalaysia – The Cosmetic, Toiletry & Fragrance Association of
Malaysia–CTFA
Philippines – Soap & Detergent Association of the Philippines
Philippines – Cosmetic, Toiletry & Fragrance Association of thePhilippines
Singapore – The Cosmetic, Toiletry & Fragrance Association of
SIngapore–CTFAS
Taiwan – Taiwan Cosmetic Industry Association
Taiwan – Taiwan Paper Industry Association
Taiwan – Taiwan Soap & Detergent Industry Association
Thailand – Federation of Thai Industries
Thailand – Thailand Soap & Detergent Association
Worldwide
Conference Board
International Chamber of Commerce
Society of Environmental Toxicology and Chemistry
World Business Council for Sustainable Development

Stakeholder Interaction
NGOs: Local – Regional – Global
P&G frequently enters into dialogue with nongovernmentalorganizations (NGOs) to understand their concerns and cares.
In order to work constructively with stakeholders, it is essential
to have their confidence and to be seen as a reliable and open
discussion partner. By building an open relationship we canapproach our NGO partners when issues arise. There is a wide
range of NGOs varying by area of interest (environmental,
consumer, animal welfare, etc.), by attitude (from extreme tomoderate) and by their geographic links (from local to global).
Depending on their characteristics, a number of NGOs can beseen as the vocal spokespeople for the general public.
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continued from previous page

Consumer organizations exist in many countries. These organizations
contact companies to compare products and voice comments theyreceive from their members. P&G continuously provides consumer
organizations with information on new initiatives and cooperates
with them in answering consumer questions.

Scientific Community
P&G works a great deal with external scientists in various
disciplines (e.g. human and/or environmental toxicology, newtechnologies, etc.). This happens during many phases of a
product’s life: at the initial development of new technologies,
during the early marketing phases, and on an “as needed” basis
while the products are on the market.
As a technology-based company, P&G has long establishedrelationships with many leading scientists at various universities allover the world. P&G often asks for their advice in panels whichtake place before a product is placed on the market. On key
developments, the Company organizes Scientific Advisory Groups(SAGs) consisting of leading external scientists. They review the data
P&G scientists have collected so they can assess aspects such as
safety. Then they recommend additional work or modifications to
the program to ensure the Company has adequately addressed allsafety issues.

P&G 2005 Sustainability Report76