TOPICS > Science

Extended Interview: Clorox CEO and Sierra Club Chief on Green Products

August 15, 2008 at 5:00 PM EST

TRANSCRIPT

SPENCER MICHELS: Let’s start with Don. How big a decision, how momentous or how detailed was it to get to the point where you introduced this Green Works product?

DON KNAUSS, CEO, CLOROX CORPORATION: Well for us it was a big decision. I mean this was the first new brand we’ve done in 20 years. So for a company the size of Clorox — and we are a Fortune 500 company — to take on and do a new brand for the first time in 20 years, we thought it was a pretty big decision. But it was actually an easy decision. It was big but it was easy. It was easy because we thought it was right on trend.

SPENCER MICHELS: The five years before Clorox looked at green products and got interested but didn’t really jump, what made the difference?

DON KNAUSS: When I got here about a year and a half ago, I thought there were three trends that were irreversible, and we started talking about this with the management team. And the three trends were: health and wellness, which for us is disinfecting hard surfaces basically, sustainability, and then convenience, and convenience for solutions to consumers.

And as we looked at those trends and saying, you know, these things really are irreversible. How are we going to provide solutions to consumers inside those three trends? Because one of the things we found around sustainability, for example, is consumers were much more concerned about “my world” rather than “the globe.” So what are you going to do for my world around getting, for example, chemicals out of my home, what are you going to do in terms of offering me product solutions that are made from renewable resources? I want to feel like I’m doing the right thing, but, and oh by the way it had better be convenient. Don’t try and change my behavior radically.

SPENCER MICHELS: It had better be good, I imagine.

DON KNAUSS: Absolutely.

SPENCER MICHELS: And disinfecting is one of the trademarks of Clorox, and yet the new product I don’t think disinfects.

DON KNAUSS: Well, natural cleaners don’t disinfect. They clean effectively, but you’re right, one of the things we found, actually we found two things, one is the current natural cleaners that are out there don’t work very well. And consumers are getting turned off by that. The second thing is they typically cost 50 to 100 percent more than a conventional cleaner. So I’ve got this solution that doesn’t work very well and it costs me an arm and a leg, so what am I going to do about that? So we said, let’s give people a solution that really works and let’s only charge them 10 to 20 percent, about what the upcharge of our raw materials are. And that is what really I think caused Green Works to take off.

SPENCER MICHELS: What happened in the world, if anything, that made this product viable?

DON KNAUSS: Well, I do think that in the last year to 18 months there’s been so much discussion around climate change and people wanting to do the right thing for the planet. The focus is clearly on their world first, but their world is part of the bigger world, and I think people want to be responsible.

And what we found out, it’s very interesting, a lot of people, their decision to use products like Green Works is irrespective of their belief or nonbelief in climate change. They look at products like Green Works as a renewable resource, saying it’s just the right thing to do. We want to use things that have renewable resources, we want to do the right thing so whether we believe in climate change or we don’t, this seems to be the right thing to do.

SPENCER MICHELS: And I’m sure you tested this with focus groups and so forth.

DON KNAUSS: We did a lot of testing. We did a lot of testing with actually giving people the products uh in their homes to use on a blind basis, and that’s what really got us excited about Green Works. That’s when we knew, we thought, we may have a home run here in terms of our ability to mainstream cleaning — because what happened is we have five different products, an all purpose cleaner, a glass cleaner, a bathroom cleaner, we gave those to people in plain white packages and we gave them to them coupled with a conventional, leading conventional cleaner. We said take these home for a couple of weeks, use them, see what you think. Didn’t tell them they were natural. Four out of the five came back significantly preferred versus the conventional cleaner. We said, my lord, we’ve got something here because we’ve got something that’s very effective. And once we tell people, oh by the way they’re all natural, we’re going to have something.

Sierra Club endorsement

SPENCER MICHELS: The word on green products is that some of them probably are pretty good, but there are so many of them out there it's very hard to tell if they're good or not, and if they're green, and if they're helping the environment and so forth. How do you know that that's what it's doing and how can you convince the public?

DON KNAUSS: Yeah. Well I think we did two things. I think Green Works solves two issues the consumer had. A lot of the brands that are out there are not available in national distribution, so one of the problems that we helped solve, being Clorox, is we could get these products in the national distribution quickly. And we've done that so wherever people shop in their traditional grocery stores, they can now find these products. So we helped mainstream it.

The other thing we found that was very interesting is we, we debated long and hard. Should we put the Clorox label or logo on Green Works products? So a lot of debate internally. What we found is the average consumer wanted a reassurance, if you will, a Good Housekeeping seal that these products would work, so that's why the Clorox logo appears on these products. Because a lot of the purists said that's not going to work. But maybe for people who are on the extreme side of green, it doesn't work, but for a lot of folks who are in the mainstream, who want to do the right thing, they want a reassurance it's actually from a company they trust.

SPENCER MICHELS: But Clorox has this image of bleach, and bleach is a somewhat controversial product, it's got a smell, so forth and so on. Is that what you mean by some folks might not like that?

DON KNAUSS: Yeah, I mean some folks -- I think there are a lot of myths out there around bleach, you know, that this is a toxic product, which it's not. It is a harsh disinfectant. It'll clean and totally disinfect. It'll kill 99.99% of everything out there that can do bad stuff to you.

There are a lot of myths. For example, this is one of the most sustainable products we have. Essentially Clorox bleach is salt and water, and it breaks down into salt water after you use it in minutes. So I think what people were saying in the mainstream is "I trust Clorox, they make good products, they work, so give me a green product from a company that I trust, that'll deliver on the promise."

SPENCER MICHELS: But I guess that may be where Carl and Sierra Club come in, in terms of credibility of the product. Beside the Clorox label, you wanted some endorsement.

DON KNAUSS: Right. Well, we knew that going to Sierra Club, which is our neighbor across the bay from us, would really lend some credibility to Green Works and to Clorox in general. And we thought, if we can go through a vetting process where an organization like the Sierra Club, whom I think has a lot of credibility with folks around the country and around the world, then we really have something. And they put us through a pretty thorough vetting process.

[...]

You know there are always people, depending on what you believe in, there are always people on one extreme or the other extreme. And I think what Green Works was trying to do and what Clorox was trying to do is: Can we give a mainstream solution to people who want to use renewable source products that really work?

And the Sierra Club helped, I think, give us some credibility to say "whatever pole you're on, whether you're extreme in your commitment to green or you're not, or you're somewhere in the middle, maybe there's something here we should try." Because I think there's a real belief that the Sierra Club has tremendous credibility and would never compromise their own mission for a company like Clorox or any other company.

SPENCER MICHELS: Carl, what kind of process did you go through when Clorox came to you?

CARL POPE, SIERRA CLUB EXECUTIVE DIRECTOR: Well when Clorox came to us we had to look at two things. The first thing we had to look at was the products. They told us they'd been very transparent about what the ingredients are. You can find out what the ingredients are, which is very unusual in this business. I mean you buy a consumer product, you have a hard time finding out what's in it and what's its food. And Clorox actually went to the same kind of a labeling and transparency you would get with food. So people can really know what these chemicals are and you can look them up. You can ask EPA about them and you can say, okay, what is this? So we looked very carefully at the product, no gray areas.

SPENCER MICHELS: In a lab or what?

CARL POPE No, these ingredients have all been tested, so we went and looked at the lab test. We looked at EPA, we're not scientific but we know how to read the science. We went and we read the science. And we were very, very comfortable with what we found.

The second thing we had to do was we had to look at the company. because we were actually entering into a relationship with the company which does other things. And while not all of Clorox's products are green, we have no particular knowledge for example about the -- they make salad dressing, we don't know much about their salad dressing. But we made sure that this is a company we would be proud to be associated with.

We talked to our volunteers around the country who live near Clorox facilities. And who had had the contrast of dealing with Clorox and with some other people in the industry in saying, okay, how open are they to the community? How willing are they to show us how they're making sure they're producing bleach in a safe way? Bleach itself is quite a safe product, but the raw materials that go into it have some risks and need to be handled carefully. And actually we think there's some changes Clorox should be looking at and is looking at to make what's already a safe operation even safer.

The product and the company

SPENCER MICHELS: Are you talking about their Clorox product, their bleach?

CARL POPE: Their Clorox product, that's right.

SPENCER MICHELS: But Green Works is something else.

CARL POPE: No, Green Works doesn't involve anything toxic at all, but bleach itself , you can make it from chlorine and chlorine itself [...] is risky if you don't manage it well. We think they manage it well, we think there's some areas where they can maybe make some improvements and they're looking at doing that.

But having said that, we said this is really a much better than average company. This company we'll be privately associated with and we looked very carefully at bleach itself. The key thing is that there are a lot of people who have a perception that because bleach has chlorine in it, it's sodium hypochlorite, it therefore must be like DDT or one of these other chlorinated products.

But the thing people don't understand is that when you combine chlorine with an organic chemical, you get trouble in our opinion. We are very suspicious of anything that combines chlorine with an organic molecule. That's when you get trouble. That's what DDT was. But sodium hypochlorite doesn't do that. At Don says, sodium hypochlorite is simply associated seawater which goes back into being seawater after you use it, and you know I use it in my house.

SPENCER MICHELS: But I'm not sure what you're saying [..] You're talking about Clorox and the bleach. And Sierra Club didn't endorse Clorox bleach, you endorsed Green Works.

CARL POPE: No, but if -- I'm going to be very clear. If the main product of the company which made Green Works had been a product we had real concerns with, we would not have entered into this relationship. We needed to make sure that the product was essentially perfect and that the company's other products were very good. We have a very high bar.

We haven't done this before. We didn't want to be associated with somebody who's doing good with one hand and bad with the other hand. We had to actually look at the company as well as looking at the product. We're not endorsing bleach. Our logo is not on bleach, but we made sure that bleach was not a product that we thought nobody should be making. Bleach was not something that we thought didn't need to be out there.

SPENCER MICHELS: Now is there a precedent here? [If] Proctor & Gamble or some other company came along and said "Sierra Club, we've got a new green product and we'd like you to endorse that?" I mean aren't you on sort of a slippery slope here?

CARL POPE: It's not a slippery slope as long as we look very, very carefully at what we're doing. I suspect if we looked at a company with as many product lines as Proctor & Gamble, we would probably find some things we had a problem with. I'm not criticizing Proctor & Gamble, but it's just my guess.

But if somebody came to us, we've actually been open to this kind of partnership for about nine years. And the interesting thing was nobody came forward who met our standards, who was a major company. We have done some licensing agreements with small niche brands, and none of them could really get out and help consumers. They didn't have the marketing power. They didn't have the presence in the marketplace.

So when Clorox came along with Green Works, we said wait a minute. Green Works is really going to be able to help the average consumer. It's going to be priced to help the average consumer. It's going to be distributed in a place where the average consumer can find it, and we thought it was important to say that green is not a niche thing. Green shouldn't just be for people who happen to live in Berkeley or who happen to have a lot of money. Green should be for everybody, and we thought this was an opportunity to have a green product that everybody is going to -- people have to clean their houses. I mean even Sierra Club members have to clean their houses. And we thought it would be a wonderful way to help the average consumer. Our real focus was on helping consumers. That was what we were mainly focused on.


'Cause-related marketing'

SPENCER MICHELS: Now if I were a nonprofit like the Sierra Club and a big corporation, Fortune 500 company like Clorox was looking for an endorsement I might ask for a contribution. Did that happen?

CARL POPE: We didn't ask for a contribution, but we are going to get some money back from the sales. So the customer buys it, they're helping the Sierra Club. That's the relationship. It's called cause-related marketing.

SPENCER MICHELS: Is that ethical?

CARL POPE: I think that's completely ethical. I don't . . .

SPENCER MICHELS: It's not quid pro quo, you give us some money back and we endorse you?

CARL POPE: Well, but first of all we're not endorsing them, we're saying this product makes it through our screens. We run a mutual fund, Spencer, where we actually rate stocks and we get money from running that mutual fund. I mean we don't think there's anything wrong with a nonprofit organization providing value to customers and having the customers willingly make a contribution back.

In the early years of the Sierra Club, people don't realize this, but we were largely funded, not by our membership dues, but by the profits we made, some with calendars and books and other kinds of nature products. So we've always been open to the idea that business was a valid way to finance our advocacy work.

SPENCER MICHELS: Tell me what you think in general about the concept of remarketing. I mean here's one instance that you've more or less endorsed, that you think is working fine. But you know, you go out there and there's hundreds of people advertising their products as green. Is that something that concerns you?

CARL POPE: Well, Mahatma Ghandi was asked the question what he thought of western civilization, and his comment was "it would be a good idea." I think green marketing would be a good idea. There's very little of it out there. Very, very few of the products that are being sold as natural and green would meet any reasonable screen. It's mostly green washing.

The thing we're interested about this product and the reason we were excited by Green Works was it wasn't just 10 percent better than the average, it wasn't just a slight incremental, "oh we replaced one ingredient." It was category change out, and when we use our name in the consumer marketplace, the only time we've done this before, we did endorse two products previously. We endorsed the first two hybrid automobiles, the Insight and the Prius, because we thought they were category changes. We're only interested in using our name for category changes.

SPENCER MICHELS: Don, I wonder if you were concerned when you were going through this process that you would essentially be accused of green washing, just, you know, joining the group, let's have a green product.

DON KNAUSS: Yeah, I think that was certainly an initial concern, and that's why I think it took us a while to get these formulas right. If you look at the five different products that are out there under the Green Works label today, they're all 99 percent plus all natural. And that's as far as we know the highest standard that is out there for a natural product with renewable resources.

So we knew we had to get it right, and I think to Carl's point, we knew the Sierra Club would never give us the go-ahead in terms of this relationship unless we got it right. So we took this to the highest standard and said we're going to have the most natural product out there and we're going to have the most effective product out there. It's really going to work for people and oh, by the way, we're not going to charge them an arm and a leg for it. We're going to make it a 10 to 20 percent premium. And that's what we're seeing in the marketplace, Spencer, is about a 10 to 20 percent premium.

SPENCER MICHELS: You mean it costs that much more?

DON KNAUSS: Yeah, so on the average these products typically retail for between -- you know, conventional cleaners in these spaces are between $2 and $4 typically. So you can find these products in the $3.50 range. So you're talking 30, 40 cents maybe more a bottle. We think that's a fair price to pay given our higher cost because of the ingredients that go into it. So I think to Carl's point, we're trying to offer a convenient solution to people to really help everybody mainstream the ability to clean in a natural way.


Consumer, employee reactions

SPENCER MICHELS: How is it playing so far? I know you said the initial tests were good, but I'm sure Wall Street has been asking. Is this a good gamble? Are you doing the right thing?

DON KNAUSS: Well, we think it's off to a terrific start [..] On May 1st we had our earnings call and we talked to Wall Street investors and analysts about Green Works. We reported 9 percent top line growth as a total company. And almost 15 percent of that growth came from Green Works. And we've taken the forecast up a number of times, I don't know if we're bad forecasters or we really have a tiger by the tail. I think it's more the latter, but these products are off to an exceptionally strong start.

And what you'll see from us is Green Works getting into some adjacent spaces, like wipes, where there's no wipe out there that's biodegradable. You'll see us get into new adjacent spaces every six months or so on Green Works, so we think we're creating a natural cleaning platform that can go into different places.

SPENCER MICHELS: How important was it that your headquarters is in the bay area, which is an environmentally sensitive area? And your employees here, many of them are interested in that. Did that play a role in deciding to go for this?

[...]

DON KNAUSS: Yes it did. I mean folks here I think are very passionate about sustainability. And this really started, as I said, first on the trends. We're going to focus on sustainability as a growth engine for the company. You know it's interesting. As we put our long range plans together for the next three years, and we started to decompose those plans, we found that about a third of our growth is coming from ideas anchored in sustainability, which is huge.

SPENCER MICHELS: Sustainability meaning environmental . . .

DON KNAUSS: Environ--, using renewable resource and doing things that can create a healthy house, if you will. The other thing is it was part of our corporate social responsibility, which I think really feeds off the passion in this area for this space. So you have a combination of we're doing the right things in terms of driving growth. We think in the right spaces. And being on trend and then our employees in this area are very passionate about it from a corporate social responsibility side as well. So we have both of those working, so it really drives engagement in this company to say we're working on the right things.

SPENCER MICHELS: Was there some skepticism while you were discussing the product that, I don't know, maybe this is not a great idea?

DON KNAUSS: You know, I didn't sense any skepticism at all here. I think, as I said, people were really passionate about finding solutions for consumers.

SPENCER MICHELS: Yeah, but five years ago they said not to go ahead with it full blast.

DON KNAUSS: Well I think there was, you know it took some time to get these formulas right. I mean it's not insignificant that our scientists are pretty darn good at what they do in formulating products, and it took some years to get it right. And so I think it, it's been germinating if you will, but then I think our timing's been perfect about offering a solution in the last 6 months, because it is such a topic of concern now.

SPENCER MICHELS: Tell me what the product is, without maybe disclosing the secret sauce, but what is it? What is Green Works?

DON KNAUSS: Well, it's interesting. Green Works is a -- you know we have an all purpose cleaner, glass cleaner, a toilet bowl cleaner and a dilutable cleaner, like a Pinesol for example. And these products have used coconuts basically to provide a surfactant. A surfactant is what you need to break down grease or break down dirt, and we found that coconut is a very effective natural surfactant. Now you have to combine that with corn ethanol, corn to help drying, it's a drying action, and then the lemon is the basis for the scent of each of these products. And that's one of the things we think really has driven the preference of these products when people use it, is you get this wonderful lemon smell rather than some kind of chemical smell. So a very effective surfactant with coconut as the base.

SPENCER MICHELS: While you've got this new green product, you're also still making Clorox bleach, which is not a green product I guess.

DON KNAUSS: Well, you know it's interesting to Carl's point earlier -- Clorox, Clorox bleach, sodium hypochlorite bleach is actually a pretty sustainable product, essentially it's nothing more than salt and water when it breaks down after usage. And bleach is really a wonder product. There have been statements that no product has saved more human lives than bleach. And the reason being in the 1920s when sodium hypochlorite bleach was introduced into the water systems around the world it eliminated all water borne illnesses, cholera, etc. So it's a tremendous product, it really is the cheapest, most powerful disinfectant you can find and as Carl said, it really is a sustainable product. It comes from salt and water.

SPENCER MICHELS: But is it in competition with Green Works?

DON KNAUSS: Well,, as you said earlier, Spencer, Green Works does not disinfect, it cleans. It breaks down grease. If you want to disinfect a hard surface, kill bacteria and viruses, you're going to need sodium hypochlorite bleach or Clorox bleach to do that.

SPENCER MICHELS: Carl, you were going to talk about the area and that influence on this whole thing.

CARL POPE: Well I think one of the challenges you face in trying to create a partnership like this is, first of all, you have to have a good product -- and we think we have You have to have a good partner, we think we have that. But you've also got to be able to communicate.

And one of the interesting things for our staff and for me in working with the people at Clorox is given that this is a company that you say, well this is a big company, you know they make chemicals, they make stuff, they're not like the Sierra Club. But I think because of their common bay area roots, the communication has really been a pleasure. There really is an ability to just talk like I was talking with one of my fellow environmentalists and it's not like you have to have a translator. Sometimes when you go to deal with somebody [...]they have a translator actually to understand each other. That's just a communication problem.

And I think this has worked well because in the bay area there is kind of a common set of attitudes. And I sat down with some of, some of Clorox's scientists and engineers and I talked with them about the challenges they faced in designing this product and in solving the problem, the design problems that do exist. And it was just like talking with one of our environmental epidemiologists. I think the bay area's facilitated the communication between these two area partners.