Good morning. It’s a pleasure to be with everyone today at the opening session of the 2007 Ceres conference. When I was asked to participate in this conference, it didn’t take me long to agree. First of all, I like Boston. Second of all, as a 10-year member of Ceres, Baxter was the first healthcare company to join the organization, which gives me great pride in addressing this group this morning.
I truly believe that corporations today – particularly global corporations – have a much greater role to play, and a greater responsibility than ever before, to help ensure a sustainable world.
Historically, as a society, we’ve tended to leave all the really big problems to government. Poverty, hunger, climate change, access to healthcare and other social concerns have been deemed too big for any company, individual or private organization to tackle.
I’d say this is still the case. But I’d also say that now, these problems have grown too big for even governments to handle on their own.
So corporations need to play a role. But even corporations can’t do it alone. We all must share responsibility – governments, corporations, foundations and NGOs – and work together to find and implement solutions.
The good news is, there’s a fertile market for those who come up with the answers. While the global challenges facing us today from a sustainability standpoint are daunting, if there’s a profit motive to find a solution, you can bet some entrepreneurial individual or company will find it. That’s good news for that company or individual, and good news for the rest of us.
Making the business case for sustainability – that sustainability is good business – isn’t a novel concept. Most companies have come to realize, for example, that eliminating waste is good for their bottom line, as well as the environment.
But the concept has gotten a lot more attention lately, as new examples continue to pop up of innovations that meet the needs of society, while also bringing financial rewards to their creators.
So what is, or should be, the role of corporations?
Dr. Bruce Piasecki, sustainability consultant and author of the new book “World Inc,” estimates that of the 100 largest economies in the world today, half are corporations. Think about that. Not nations, but companies.
He goes on to say that the 100 largest multinational corporations control about 20 percent of global assets, and the combined sales of the top 200 firms account for more than 27 percent of the global GDP.
As companies have gotten bigger and more global, their ability to have an impact on the world has increased, along with expectations about the role they should play beyond their traditional businesses. While the goal of corporations is still to enhance shareholder value, we’re increasingly integrating sustainability into our corporate strategies.
This is a good thing. With sizable financial resources, deep managerial talent and entrepreneurial drive, companies are well suited to play a leading role in tackling the great challenges before us.
At the same time, solving the world’s problems takes more than money and resources. It also takes innovative thinking, and disciplined execution, to make things happen.
Sometimes the solutions to seemingly insurmountable problems don’t have to be expensive or complex. Sometimes it’s a matter of eliminating complexity and bureaucracy to figure out the most practical solution, and then executing effectively.
In some ways, it may be easier for companies to cut through the bureaucracy than it is for governments or NGOs. The challenge, of course, is to effectively balance society’s current and future needs with the goals of the business. The companies that will succeed in the 21 st century will be the ones that can make this happen.
Most corporations, including Baxter, still have a long way to go in integrating all of the elements of sustainability into our missions, strategies, business plans and goals.
But do this we must … for the interconnectedness and interdependence of all these elements will only become greater in the years ahead.
The companies that don’t recognize this will be at a significant disadvantage. This isn’t just about obligation and responsibility, but also opportunity. Every great business is built on the ability to recognize and embrace challenges, and develop effective solutions. A company’s response to sustainability challenges is no exception.
I think it’s fair to say that today, enlightened companies recognize that “doing the right thing” is aligned with doing what’s right for the business.
A survey conducted by the Center for Corporate Citizenship at Boston College and the U.S. Chamber of Commerce indicated that more than 80 percent of CEO respondents in the United States said good corporate citizenship helps the bottom line.
An article earlier this year in Business Week entitled “Beyond the Green Corporation” stated: “Helping nations wrestle with poverty, water scarcity and the effects of climate change is vital to staying competitive in the coming decades.”
Supporters of corporate social responsibility note that business organizations don’t live in a vacuum, but owe their very existence to the societies in which they operate.
Business literature is filled today with examples of the connection between sustainability and business success.
A good example is what’s happening in the automotive industry. You may have read recently that while new-vehicle sales in the United States fell in March at Chrysler, Ford and GM, Toyota posted its best month ever in the U.S., driven largely by sales of its hybrid car, Prius.
The auto industry represents the world’s largest manufacturing enterprise, with more than 44 million new cars and trucks produced each year – that’s more than the population of most countries. About 700 million vehicles are in operation worldwide, with 150,000 more added each day.
Automobiles also, as we know, are a major contributor to pollution, depletion of oil and other environmental concerns. Toyota had the foresight to take into account the need for new technology in a changing world and make it happen while others worried more about short-term profits. Now the others are scurrying to catch up.
While hybrid cars are just beginning to gain acceptance in the United States and other countries, automakers need to get on the bandwagon or risk missing the boat. They must put a priority on new technologies that are better for consumers, the environment and our sustainability as a society. If they don’t, their ability to remain competitive in the future will be highly compromised.
In China, for example, the government is preparing to impose fuel economy standards and other rules that will be far more stringent than those in the United States. When you consider the population of China and other developing nations, that’s a market size we’ve never seen before.
And its not just hybrid cars for which there is great opportunity in China. The government estimates that by 2010, electric bikes will be an $8.6 billion industry in China – another response to protecting air quality in a country where industrial growth is spawning an explosion of automobiles on the streets.
My company, Baxter, is in the field of healthcare, where technological innovation has been a cornerstone of the company’s success for 75 years. So I am particularly interested in technological innovation to address sustainability issues … not just by healthcare companies, but in other industries as well.
The most successful companies of tomorrow will be those that develop new technologies that meet a market need while also eliminating a social or environmental problem.
Vestergaard Frandsen is a 40-year-old Danish company that has transformed its business completely with this in mind. The company used to make industrial uniforms. Today, it applies its expertise in textiles in a very different way.
The company has developed a revolutionary mosquito netting with insecticide built into the fabric that is nontoxic to humans but kills mosquitoes on contact. The World Health Organization has endorsed the product as a way to save the lives of millions of children in Africa and other developing countries who die each year from malaria.
The company also has developed a drinking straw that filters out water impurities, producing drinkable water in countries where millions die from unsafe drinking water.
The best news is that Vestergaard Frandsen is more successful today than it ever was making uniforms. The company has grown 10-fold due to the success of these products, which were developed specifically to address global sustainability issues.
At Baxter, we use the term “sustainability” to describe our own long-term approach to balancing our business priorities with social, economic and environmental responsibilities. We focus on continuous improvement across all dimensions of sustainability, including:
- Operating in a sound and ethical manner.
- Using our financial resources wisely.
- Providing a safe, healthy and rewarding place to work for our employees.
- Contributing to communities in need and victims of natural disasters.
- Providing safe, high-quality products.
- Expanding access to care for the underserved around the world.
- And of course, reducing the company’s environmental impact.
Note that I emphasized continuous improvement in all of these areas … because a company’s approach to sustainability soon will be as important as growing sales.
At Baxter, we’re privileged to work in healthcare, where the work we do benefits thousands of people around the world each day in a profound way.
Our products and therapies save and sustain lives. They’re used primarily to treat chronic and acute life-threatening conditions. Being in a business like this provides an elevated sense of purpose to what we do.
When I joined Baxter as CEO in 2004, there was much work to be done to right the ship financially, and address other business challenges. But I felt good about joining a company with a history of innovation in healthcare, responsible for many medical breakthroughs we take for granted today. These include:
- The first commercial artificial kidney.
- The first therapeutic treatment for hemophilia.
- The first commercially produced intravenous solutions, and many others.
Baxter technologies have meant the difference between life and death for countless people, on every continent on earth. I was humbled to be joining a company with such a history of greatness.
Baxter’s success in introducing revolutionary life-saving products brought with it unprecedented financial success as well. The company’s greatest period came under the stewardship of William B. Graham, who passed away last year at the age of 94. Ironically, it was the year Baxter celebrated its 75 th anniversary.
Bill Graham termed financial success in a business dedicated to saving lives as “doing well by doing good.” Today at Baxter, we aspire to the same level of greatness Baxter achieved during the Graham years, in line with the company’s great legacy.
But today, as we’ve touched on, being a great company requires more than the obvious imperatives of technological innovation and financial success. It also requires leadership in addressing important societal concerns.
Being in healthcare, our products already address some of the world’s key sustainability challenges. One challenge that goes right to the core of our business is increasing access to life-saving therapies, particularly in developing countries.
In some countries, for example, people with end-stage kidney disease often lack access to life-saving dialysis therapy to cleanse their blood of toxins and waste normally removed by healthy kidneys. If dialysis is available, either patients can’t afford it, or they must make long trips to remote hospitals or clinics to receive their therapy.
Without dialysis or transplant, the fate of people with end-stage kidney disease is swift and certain death. One of our core strategies is to expand the use of peritoneal dialysis – an ambulatory, home-based form of dialysis – in developing countries, where many patients currently go untreated.
As a self-administered therapy, peritoneal dialysis, or PD, doesn’t require an infrastructure of hospitals or dialysis clinics. It’s also generally a lower-cost therapy than traditional clinic-based hemodialysis.
I should emphasize that as the world’s leading provider of products for PD, Baxter has a strong business interest in the growth of the therapy. But it’s an example of how some sustainability issues – in this case, access to affordable healthcare – are ingrained in our day-to-day business.
We sustain the lives of other patient populations as well. As a leading provider of clotting factor for hemophilia, we’ve continually improved the therapy to ensure a safe supply for people with this incurable, hereditary condition. Without clotting factor, people with hemophilia would suffer debilitating bleeding episodes resulting in permanent joint damage or even death.
In the 1980s, when people with hemophilia were contracting HIV from blood products, Baxter moved quickly to develop a heat-treatment process that killed blood-borne viruses, including HIV. Today, we make a recombinant therapy, produced in cell culture rather than derived from plasma, that uses a completely protein-free manufacturing process, eliminating the risk of blood-borne pathogen transmission.
One of the greatest public health concerns today is avian flu. Here, too, Baxter is playing a major role. We’re collaborating with health authorities around the world in the development and production of a candidate H5N1 vaccine to protect citizens in the event of a bird-flu pandemic. We’re also working with the World Health Organization on global pandemic planning, including ways to ensure that supplies of vaccine are made available, accessible and affordable to all countries in need.
Currently, only about 500 million doses of flu vaccine could be produced annually by all vaccine manufacturers – far short of what would be required in a pandemic. This has led to concern by some developing countries that only the richer, more developed nations would be able to afford the vaccine.
We’ve had discussions with some of these countries on ways we might be able to help, including licensing our technology and offering other support. We’ve also encouraged other companies to have their own discussions with these countries to ensure that the interests of the global community can be effectively met.
As with all serious social issues, no one entity can solve the problem alone. In the case of avian flu, governments, health authorities and the private sector must come together to ensure that the world’s citizens are protected.
We’re also exploring new treatments for diseases that currently lack a cure. One example is the use of intravenous immunoglobulin, or IVIG, as a possible treatment for Alzheimer’s disease. IVIG is another of our core product lines, currently used to bolster the immune systems of people with immune deficiencies.
In another program, we’re investigating the use of adult stem cells to treat myocardial ischemia, an advanced form of heart disease.
The health and well-being of people around the world is also affected by issues like climate change, pollution, resource depletion and other environmental concerns. I know this is an area in which we have many experts in attendance today.
I believe our position as a healthcare company has a strong connection to our responsibility to help protect the environment. We’re in the business of promoting health. We recognize that the health of the planet affects the health of the people who inhabit it, so we work toward improving both.
Baxter has made environmental stewardship a priority for more than two decades. We manage our environmental performance with the same rigor as any part of our business. We’ve been a pioneer in such areas as:
- environmental financial reporting;
- management of environmental, health and safety data; and
- establishing, tracking progress against, and reporting on specific environmental goals, including greenhouse gas emissions.
Baxter has continued its leadership in the ensuing years, becoming:
- one of the initial members of the Pew Center on Global Climate Change’s Business Environment Leadership Council;
- a charter member of the U.S. EPA’s Climate Leaders Program; and
- a founding member of the Chicago Climate Exchange, the first voluntary carbon-trading platform in North America.
As we all know, sound environmental practices go beyond one’s commitment to social responsibility. They also contribute to, and in some cases drive, competitive advantage.
For example, we’ve established new minimum energy efficiency standards to reduce greenhouse gas emissions at all of our facilities, resulting in savings and cost avoidance approaching $10 million a year. Similar goals are in place for water usage, where Baxter plants in Singapore, Canada, Puerto Rico and elsewhere reduced water consumption by as much as 30 percent last year.
Beyond cost avoidance and energy or material savings, many of the initiatives in our facilities have also resulted in greater production efficiency, higher quality levels and improved workplace safety.
We’re also proactively addressing a range of product stewardship issues related to the materials we use in our medical devices and other products, and product end-of-life issues.
One of the most important environmental issues of the day is climate change and the effect of greenhouse gases. What does a diversified healthcare company have to do with climate change? There are much greater experts than I in this room today who can talk about how society’s reliance on fossil fuels is driving up global temperatures. But the need to limit these heat-trapping emissions falls on all of us, regardless of industry.
Climate change is a serious issue, and it requires a serious response. Everyone has a role to play.
At Baxter, we began reporting our greenhouse gases on a global basis in the mid-1990s. We then set goals to reduce them.
Baxter’s approach to climate change is multifaceted, with energy conservation as the cornerstone – the foundation of any successful greenhouse gas-reduction program.
Our approach also includes piloting renewable energy projects, such as installing solar panels and exploring more sustainable fuels for company vehicles.
We have achieved significant reductions in energy usage over the last decade through a variety of facility-based initiatives. For example:
Our manufacturing plant in Malta has the largest solar grid-connected system in that country.
We have an IV solutions plant in North Carolina where the energy for steam used to sterilize our products comes from wood chips from area furniture mills that might otherwise go to landfill.
Our new AVIVA IV solution container is the first product of its kind made with 100 percent renewable electricity, earning it a “Green-e” label, the first in the medical industry.
We can take a leadership role in other ways as well. Perhaps most exciting, we are announcing today that we have made our corporate headquarters in Deerfield, Illinois, a “carbon neutral” facility. Our headquarters complex totals more than 650,000 square feet, covers 100 acres and is home to approximately 1500 employees.
We have purchased Green-e certified renewable energy certificates to offset all of the electricity used at our Deerfield headquarters. We also purchased credits through the Chicago Climate Exchange to offset emissions associated with our natural gas use.
As a company dedicated to saving and sustaining lives, respecting the environment is a natural extension of our business. Our decision to offset 100 percent of our electricity and natural gas use at our corporate headquarters with renewable, clean energy is part of our ongoing commitment to pursue environmentally friendly solutions to the problem of climate change. We believe it sends a strong message about the importance and growing demand for renewable energy sources.
Of course, sustainability goes beyond environmental initiatives. As a global company with more than half of its sales, earnings and employees outside the United States, Baxter International is appropriately named. Our global presence provides a looking glass into the world, giving us an opportunity to address a range of issues in the global communities we serve.
While this may not be unique among global corporations, we tend to establish our roots deeply in a country, elevating the quality of healthcare with the products we make there. In China, India, Latin America and other developing markets, our IV solutions, for example, have improved the quality of IV therapy, setting new standards for patient care. We also raise the bar in terms of workplace standards, employment practices, business ethics and other areas.
It should come as no surprise that our corporate giving also focuses on healthcare – whether it’s donating products to victims of disasters, providing grants through our foundation to programs that increase access to care, or addressing other local healthcare needs.
In 2006, our total giving surpassed $35 million, including nearly $15 million in product donations to developing nations and countries in crisis.
We also partner with governments around the world to respond to critical health needs. I mentioned our efforts in developing candidate vaccines for avian flu. We’ve also been involved, directly or indirectly, in the development and production of vaccines for smallpox, SARS, anthrax and other infectious-disease threats.
During wartime, our products are used to treat wounded troops as well as citizens and refugees in war-torn countries. We provide government agencies around the world, including the U.S. Department of Defense and FEMA, with stockpiles of essential healthcare products for use in medical emergencies.
Sustainability initiatives outside healthcare, such as corporate governance … business ethics … employee training and development … commitment to diversity in our workforce and supplier base … and other areas, are equally important to ensuring the sustainability of the company.
At Baxter, sustainability is a business priority. And we are working hard to make it even more a part of our business strategy, and our corporate culture.
Before I close, I’d like to talk a little about some of the sustainability challenges we, Baxter, face in the healthcare industry, as well as some of the challenges we all face, regardless of industry, in addressing social issues in the future.
The healthcare industry is highly complex, regulated and defined by constantly changing technologies. Patient safety is paramount, which makes product quality critical. There is no room for compromise here, where patients’ lives are at stake.
I’ve talked a little about the challenge of increasing access to healthcare around the world. The cost of new technologies, an aging population and limited reimbursement make expanding access a particular challenge for healthcare companies. This is particularly true in developing markets, where economic growth has not yet caught up with the tremendous need for care.
For all of us, the rapid growth of the world population, the great disparity between the affluent and less affluent, and the growing need for such basic commodities as food and water are challenges we all must face. They also are issues on which we all must work together to find solutions.
The speed of technological change represents another challenge. It will continue to force us to find new ways to stay competitive while still being sustainable and socially responsible. When most of us were growing up, there was no Internet. There were no cell phones, Ipods, Blackberries or other technologies we depend on today. We must be prepared for what tomorrow will bring, using our resources to apply new technologies toward better solutions for the common good.
Finally, we need to make sure that the business leaders of tomorrow are prepared to take on these and other challenges, and make sustainability a seamless component of the corporate agenda.
When I served as dean of the business school at Loyola University, I realized for the first time how our universities, and particularly business schools, needed to change and adapt to do a more effective job of educating students to be capable and responsible business leaders for the 21 st century.
The good news is, college curricula are changing, for the better. Tomorrow’s business leaders are being groomed with a much greater awareness of the role corporations must play and their responsibilities to society than the leaders of yesterday, or even today.
Today, virtually every business school offers courses in business ethics, for reasons we all understand. It wasn’t that long ago that this was not the case.
Schools also are evolving beyond ethical business behavior to the greater role and responsibility of business to society. This is essential in ensuring that tomorrow’s business leaders are well rounded enough to understand the importance of sustainability to the world, and to their company’s survival and bottom line.
As global corporations increasingly play a greater role in addressing sustainability issues, they’re changing how they operate in fundamental ways. And if they’re not, they should be.
Sustainability and profitability are not mutually exclusive. In fact, they are closely intertwined and reinforcing. The sooner we all recognize this, the better – for business and society.
Of course, as I mentioned at the outset, no single entity – not even the largest multinational corporations – can do it alone. It takes all the stakeholders represented in this room this morning, and then some.
Again, we need to work together to create a more sustainable world. It requires partnership between business, government, environmental groups and other stakeholders to make “doing good” … good business.
The bottom line … is that our future depends on it.
Thank you very much.
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