Lessons for Success When Companies Merge
Written by Emilio Tenuta
When companies merge, executives traditionally focus on integrating human resources, finance, procurement, R&D and other functional areas. When Ecolab and Nalco merged in late 2011, senior leaders followed tradition, but they also placed top priority on melding the two organizations’ sustainability efforts. Their ultimate goal: Make sustainability integral to culture, operations and service. The journey continues, but lessons learned thus far may be applicable to others faced with integrating sustainability efforts.
When Ecolab and Nalco merged in late 2011, there was no question that sustainability would be an integral cultural value and strategic priority of the new $11 billion company.
Before the merger, both Ecolab, the global leader in cleaning and sanitizing, and Nalco, the global leader in water treatment, had made sustainability a key focus of their operations – and a vital element of their customer value proposition. With the merger, senior leaders made clear that, going forward as a combined Ecolab, a single, unified sustainability effort would be a top priority.
Although aligned in intent, the two companies’ sustainability programs were hardly identical. Each had its own metrics, terminology, and, in part, its own focus. Both had long recognized that their most significant environmental impact lay in providing products and services to help customers reduce water and energy consumption. But internally, Nalco, which provides water management technologies to manufacturing, energy, paper, mining and other industrial companies, had focused on reducing energy use at its manufacturing plants. And Ecolab, which offers cleaning and sanitizing products and services to hospitality, healthcare, and food and beverage customers, had made reducing fleet and facility greenhouse gas emissions a main priority.
The challenge, then, was to bring the two together, drawing from the best practices of each to create a robust, unified focus and approach. While weaving sustainability into every fiber of the company’s culture, operations and service is the ultimate goal, the journey thus far has yielded lessons that others, faced with the challenge of integrating sustainability efforts, may find applicable.
Lesson 1: Leverage the power of purpose and vision
Seemingly all successful change begins with a meaningful purpose and a clear vision – helping employees, customers and other constituents understand why the organization exists and what it envisions for the future. Recognizing the power of a clear purpose and bold vision, senior Ecolab and Nalco leaders worked closely before the merger to develop a purpose statement for the combined company. Through the statement, they sent a strong message about sustainability’s centrality: “We help make the world cleaner, safer and healthier,” they wrote, “protecting people and vital resources.” The vision they set for the company also reflected sustainability’s importance: “Ecolab will be a global leader in providing clean water, safe food, abundant energy and healthy environments.” By emphasizing sustainability in both purpose and vision, the company’s leadership gave added meaning to the day-to-day work of the merged company’s 40,000 employees – and provided them with inspiration to make a difference.
Lesson 2: Develop a shared approach to achieving greatest impact
In developing a sustainability approach, it’s important first to determine the greatest opportunity for positive impact. Many organizations make the greatest environmental impact upstream by setting high standards for suppliers, or internally by improving their own operations. Both Ecolab and Nalco knew their greatest impact was downstream, helping their customers conserve natural resources. With that core understanding, the challenge was to develop a shared approach for delivering sustainability benefits to customers. During the integration period, senior leaders from both companies agreed on a “total impact approach,” a holistic view of the environmental, economic and social impacts of the company’s products and services on customers. Going forward, each of the company’s businesses would need to consider how each of its solutions would increase efficiency, minimize use of natural resources and improve safety – from sourcing, manufacturing and use to disposal.
Lesson 3: Demonstrate that sustainability is a priority
Immediately after the merger closed, dedicated workstreams were implemented with the ambitious goal to integrate people, policies, systems and operations in the newly combined organization within 12 months. Notably, of the hundreds of possible workstreams that could have been identified, sustainability was one of just 22 given top priority – equal standing with research and development, manufacturing, human resources and finance. So critical were the prioritized areas that they were required to report progress quarterly to the company’s chief executive officer. Clearly, by making sustainability a top priority, leadership bestowed it special status – and underscored its importance in the new organization.
The sustainability integration team, made up of representatives from both companies and representing supply chain, safety, regulatory, corporate marketing and research, development and engineering, worked to define priorities, set common policies, synchronize reporting and metrics and design how the company would organize to promote sustainable practices across the organization. One outcome was bringing members of both company’s sustainability organizations together into a new, combined Office of Sustainability, charged with developing a blueprint for embedding sustainability practices throughout the company. Each sustainability team member brought a distinct area of expertise — similar to that represented on the integration team.
Lesson 4: Embed a sustainability mindset
As taxing as it can be to define shared goals, set a common direction and synchronize policies, the long-term challenge is to embed a sustainability mindset – from senior leadership to the front line. Because Ecolab business unit leaders are held accountable for performance on many metrics, including sustainability, their role in integrating sustainability into day-to-day operations was critical. Thus, it was important to engage them in ongoing, meaningful ways. To do so, the corporate sustainability office organized an executive advisory team, made up of top leaders from business units and functions who meet monthly. Members of the group have worked together to define corporate-wide goals – to reduce water usage, greenhouse gas emissions and waste. They’ve led their respective teams in creating a sustainability mindset among front-line and middle-management employees. And they have regularly provided strategic direction, served as a sounding board for corporate-led initiatives and offered insight into progress against goals.
Lesson 5: Make sustainability part of the culture
To make sustainability integral to daily routines and business practices, it needs to become part of the culture. As anyone who has been through a merger knows, getting culture “right” is critical but tricky. Ecolab and Nalco recognized this and immediately began to make it clear that sustainability is part of “who we are.” Values the two organizations held in common before the merger became the foundation for a common set of shared sustainability principles. Shared sustainability goals were announced. Special activities, aimed at engaging employees globally in sustainability-focused events, such as World Water Day and World Environment Day, were sponsored. Special recognition was given – through global, internal communications channels – to employees who had made outstanding contributions to protect water and other resources. Relationships with non-governmental organizations and other stakeholders were expanded after extensive benchmarking of peer companies, customers and suppliers demonstrated the positive impact of engagement. The first combined sustainability report was published and promoted within the company. These and other activities – along with an ongoing focus on achieving sustainability targets across business operations – have helped shaped a culture in which employees know that sustainability matters.
Clearly, integrating two sustainability programs requires time and work – more than might be expected. It also requires buy-in and engagement at every level: The front line, middle-management and senior leaders are critical, and should be engaged as soon in the change process as possible. The importance of metrics – in quantifying impact on customers and measuring progress against goals – also cannot be overemphasized. But most critical is leadership – defining a vision, articulating goals and commitment, making sustainability a top priority and demonstrating resolve to meet sustainability targets in the face of other pressing business challenges.
The integration of the combined company’s sustainability programs has provided positive results for Ecolab, and the company continues to be recognized for its initiatives. In 2013, Ecolab was named to Ethisphere’s list of the World’s Most Ethical Companies for the seventh consecutive year, and in September, Ecolab was named to the CDP Global 500 Climate Performance Leadership Index and CDP Global 500 Climate Disclosure Leadership Index, one of only 26 global companies to be named to both indices in 2013.
Expert Biography
Emilio Tenuta is Vice President of Corporate Sustainability for Ecolab. He has held technical and marketing management positions serving various industries including food and beverage, pharmaceutical, healthcare, primary metals and automotive.
