Acquisitions

Acquisition activity was not material in 2017 or 2016.

 

Business Continuity

P&G’s Global Business Continuity Program ensures that all P&G businesses and sites evaluate their risk profile and exposure to catastrophic events that could significantly interrupt business operations. Site and business unit leaders then develop mitigation plans to reduce the vulnerability to a catastrophic event and contingency plans to minimize business interruption if a disabling event should occur. Crisis Management team structures are defined to manage business recovery using the predefined contingency plans. Tests are conducted annually to ensure that 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 periodically to the Audit Committee.

 

Diversity Metrics

P&G continues to focus on diversity as a global strategy and expects its workforce to become increasingly diverse, enabling us to serve more of the world’s consumers Global data on enrollment by gender is shown in the following table:

Global Enrollment 

The percentages of minority and female employees in the U.S. are shown in the following table:

 

US Enrollment

 

 

Eliminating Research On Animals

P&G strongly believes that ending animal testing is the right thing to do. We do not test our products or ingredients on animals anywhere in the world unless required by law. We are working hard to make it obsolete. Therefore, we’ve developed over 50 alternative, non-animal testing methods, and have invested more than $380 million in finding alternatives and getting them accepted by regulators around the world.  

We are passionate about continuing our progress in alternatives to research involving animals so that animal testing can be eliminated. Highlights of our progress include:

  • Developing non-animal test methods with more predictive approaches, using human cell lines, genomics and the latest in computer modeling and informatics—including the first non-animal alternative to skin allergy testing approved by the OECD.
  • Sharing our discoveries in more than 1,000 scientific publications so that others can benefit from our progress.
  • Collaborating with universities, scientists from other companies, governments, and scientifically engaged animal welfare groups to develop and promote acceptance of alternative test methods to change regulations that still require testing with animals.

P&G scientists invented the first ever non-animal alternative to skin allergy tests to be officially adopted by the OECD in 2015. Skin allergy is a complex process and an important safety question for almost all ingredients. As a result, this test, known as DPRA (Direct Peptide Reactivity Assay), marks a milestone in overcoming the need for animal testing. The DPRA was widely applauded by the international scientific and animal welfare community and won a prestigious animal welfare prize in 2015. 

For additional information on the non-animal alternative to skin allergy tests, please go to:

Skin allergy testing

For details of our policy and practices, please go to: 

Animal welfare alternatives

 

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting of The Procter & Gamble Company (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Strong internal controls is an objective that is reinforced through our Worldwide Business Conduct Manual, which sets forth our commitment to conduct business with integrity, and within both the letter and the spirit of the law. Our people are deeply committed to our Purpose, Values, and Principles, which unite us in doing what’s right. Our system of internal controls includes written policies and procedures, segregation of duties, and the careful selection and development of employees. Additional key elements of our internal control structure include our Global Leadership Council, which is actively involved in oversight of the business strategies, initiatives, results and controls, our Disclosure Committee, which is responsible for evaluating disclosure implications of significant business activities and events, our Board of Directors, which provides strong and effective corporate governance, and our Audit Committee, which reviews significant accounting policies, financial reporting and internal control matters.

The Company's internal control over financial reporting includes a Control Self-Assessment Program that is conducted annually for critical financial reporting areas of the Company and is audited by our Global Internal Audit organization. Management takes the appropriate action to correct any identified control deficiencies. Global Internal Audit also performs financial and compliance audits around the world, provides training, and continuously improves our internal control processes. Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of the Company's internal control over financial reporting as of June 30, 2017, using criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal control over financial reporting as of June 30, 2017, based on these criteria.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of the Company's internal control over financial reporting as of June 30, 2017, as stated in their report which is included herein.

 

Manufacturing and Outsourcing

P&G has approximately 130 manufacturing facilities in more than 35 countries. These facilities handle the majority of P&G’s production.

Our primary focus is delighting consumers. To ensure that our products deliver superior value and quality, our manufacturing facilities must provide the most efficient option for the Company. We conduct regular reviews to ensure that our facilities are highly competitive, and this process includes benchmarking versus third-party manufacturers. P&G has regional facilities which provide the best value equation to support our approximately 5 billion consumers around the world.

When it makes sense for the business and it is the most competitive solution, we may decide to use contract manufacturers. For example, when entering a new market, introducing a new product or accessing a technology or process we don’t currently have, we may rely on contract manufacturing. In these instances, we are usually manufacturing in the region and for the region, as almost all of our third-party manufacturers are regional. In addition, many of our products simply do not lend themselves to shipping long distances. The exception to this would be where unique manufacturing capability exists in one region and we are able to economically ship across regions.

The percentage of P&G production supplied by contract manufacturers varies according to the needs of the business. and the ability of P&G facilities to compete and win production based on providing the best value. Currently, our plants do this extremely well, and we rely on third party manufacturers for only 8% to 12% of our total manufacturing volume.

~130 manufacturing sites in more than 35 countries

Countries where P&G has manufacturing operations include:

COUNTRY

Argentina

Belgium

Brazil

Canada

Chile

China

Colombia

Czech Republic

Egypt

France

Germany

Hungary

India

Indonesia

Ireland

Italy

Japan

Malaysia

Mexico

Morocco

Nigeria

Pakistan

Peru

Philippines

Poland

Romania

Russia

Saudi Arabia

Singapore

South Africa

Spain

Thailand

Turkey

Ukraine

United Arab Emirates

United Kingdom

United States

Venezuela

Vietnam

 

Proceeds from Divestitures and Other Asset Sales

Proceeds from asset sales in 2017 contributed $571 million in cash, primarily from real estate sales and other minor brand divestitures. Proceeds from asset sales contributed $432 million in cash in 2016 primarily from plant asset sales and other minor brand divestitures. In fiscal 2016, the Company invested $1.0 billion of cash, received from the pre-Beauty Brands divestiture issuance of transaction-related debt, in restricted cash. In fiscal 2017, the Company invested an additional $874 million of cash, received from the issuance of debt, in restricted cash. At the closing of the Beauty Brands transaction, $1.9 billion of restricted cash was released and returned to cash and cash equivalents and $475 million of cash was transferred to the discontinued Beauty Brands business.

 

Product Safety & Ingredients

Safety is at the heart of everything we do. Before we bring a new product to market, we go beyond meeting regulatory requirements and by ensure every product’s safety through our additional four-step, science-based process. Our approach uses the same process as regulatory agencies around the world, like US FDA, EPA, the EU, the WHO, and others. Simply put, we take extra steps to ensure product safety. We know that feeling safe can be a different matter altogether. You may be curious about the ingredients we choose, so we are sharing more information about what’s in our products and what’s not in our products, based on common questions we hear from people like you.

 

Ingredients by Brand

It’s important to us that you can find the ingredient information you’re seeking. Our brand websites are a good starting place for this information; please visit Our Brands for a list of sites. Additionally:

  • For our Oral Care, Personal Health Care, Beauty & Hair Care, and Skin & Personal Care products, please check the product label for a list of ingredients
  • For our Fabric Care and Home Care products, ingredients can also be found on the Product Safety & Compliance site.

 

What we do not use

We know that many people are interested in what materials are — and are not — in the products they use everyday. Here is a list of some of the most common materials we get asked about that we do not use as ingredients in any of our formulated products (health care, skin and personal cleansing, hair care, laundry, home care, and oral care):

What we do not use

 

  • Alkylphenols and alkylphenol ethoxylates
  • Benzene
  • Bisphenol A (not in formulas**)
  • Heavy metals: Arsenic, Lead, Chromium VI, Mercury, Cobalt, Cadmium, Nickel

 

  • Microbeads*
  • Organotins (TBT, DBT, MBT, DOT)
  • PVC (not in formulas**)
  • PCBs (Polychlorinated biphenyls)
  • Phthalates (incl. perfume materials)*
  • Triclosan
  • Triclocarban*

 

This list does not cover everything we exclude, but it covers the ingredients which we have heard many people are interested in knowing about. We have also included a list of materials we do not use in our product fragrances and a more detailed tracking chart for preservatives for each major product type. Each brand may share some additional ingredients they do not use on their brand websites from questions they receive.

We have strict product safety limits in place when any of these materials could be found in tiny amounts due to their natural (or background) presence in water, the environment, or as part of the manufacturing process. * We do not use these ingredients in new products and are exiting them. More details on our exit timings for these materials can be found in the Common Ingredient Questions section below. ** We do not use BPA or PVC in any of our product formulas. Our use of PVC and BPA is restricted to very small amounts in some product packaging like pressurized aerosol cans or electrical devices where their unique performance is essential for the safety of the product. We will consider new material options as soon as they do arise.

Common Ingredient Questions

Although we ensure our products are safe for use before they hit store shelves, we know there’s more conversation around certain ingredients. You can learn about our perspective on those ingredients using the links below.

1,4 dioxane

Microbeads

Natural vs. Manmade

Preservatives (incl. Parabens and others)

Phosphates

Phthalates

Triclosan and Triclocarban

Fragrance Ingredients Matter

By the end of 2019, P&G will publish online fragrance ingredients down to 0.01 percent for all our products in the US and Canada. P&G is the first company to disclose such detailed fragrance ingredient information across such a broad product portfolio. Learn more about our latest announcement here.

Reporting Boundaries

Our Sustainability Report covers environmental data on sites where we have operational control and the facility falls within the typical boundary of our GHG Inventory Management Plan. HS&E data covers approximately 119 manufacturing sites, 16 offices and innovation centers, and 20 distribution facilities. Human Resources data covers all P&G facilities, unless otherwise stated. Financial data covers The Procter & Gamble Company and its controlled subsidiaries.

Worldwide Health, Safety & Environment Systems

Health and Safety Policy

P&G is committed to having safe and healthy operations around the world. Our goals are to protect the lives and health of our employees and the communities surrounding their operations, as well as to protect our assets, ensure business continuity, and engender public trust.

To accomplish this, P&G will:

  • Operate facilities safely and ensure that 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 long-standing part of Company culture, reflecting the belief that our employees are our most important asset.
  • Construct and maintain our facilities so as not to compromise the safety and health features designed into them.
  • Monitor progress toward our objective of preventing injuries, illnesses and incidents. We will continually assess and improve our safety and health technologies and programs.
  • Have every employee understand and be responsible for incorporating 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 in place to implement this policy.

 

Worldwide Health, Safety & Environment Organization

Health, Safety & Environment (HS&E) is a global community of resources responsible for ensuring that all sites worldwide – including innovation centers, distribution centers, acquisitions and established plants – are operated safely and legally; that process hazards are minimized or eliminated; that health risks are identified and 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.

There are three major components to a site’s HS&E organization: Environmental, Technical Safety and Industrial Hygiene & Personnel Safety. In addition each site typically has both a Fire Protection Systems Leader and an overall HS&E Leader. The HS&E site organization also closely partners with the site Health Service, or Medical leader. P&G uses a phased, detailed Risk Assessment process to evaluate the safety of processes and initiatives being introduced at its own manufacturing operations as well as at contractor manufacturing operations. The Risk Assessment process is designed to enable high-speed innovation.

 

Industrial Health and Safety

The health and safety of P&G employees are paramount in the principles of the Company:

  • Nothing we do is worth getting hurt.
  • Safety can be managed.
  • Every illness and injury could and should have 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 to another job or medical treatment beyond first aid. LWDC includes all cases that involve days away from work or days of restricted activity beyond the day of injury or onset of illness. The TIR target for sites is to be below 0.5 cases per year per 100 employees. To achieve such rates, programs to address employee safety, such as safe behaviors, ergonomics and confined space entry, have been implemented. No target has been set for LWDC. Instead, incidents that potentially could lead to lost workdays are managed. These charts summarizes performance over the last three years.

Total incident rate

Total lost workday case rate

 

Top five sites with the Highest Number of Employee Safe Working Hours

 

Manufacturing Sites

Technical Centers

 

Audit Programs

P&G’s internal HS&E audit programs are designed to ensure compliance with national, state and local regulatory requirements as well as corporate standards and procedures. Audit findings are reported promptly to the business management teams, which must address and correct all issues in a timely manner. P&G’s audit programs apply to all plants, innovation centers, and distribution centers worldwide. The fundamental philosophy is to use standards worldwide, implemented by trained professionals at facilities and audited each year using a consistent, comprehensive approach. The metrics used are consistent with that philosophy. Audits measure performance against a mandatory set of standards and standard operating procedures. The target performance is 8.0 or better on a 10-point scale. The percentage of sites assessed this year was 95%.

Sites Conducting Annual Audits

HS&E Audit Scores

P&G HS&E resources have been working through a rigorous calibration exercise across all geographies to ensure an appropriate calibration and focus on high-priority areas. This calibration exercise is helping to ensure we are holding ourselves to the highest standards and has resulted in a decrease in the number of sites achieving scores of 8.0 or higher. In addition, over the last few years, we added several acquisition sites. As is typical with many acquisitions, it takes time for them to reach an HS&E audit score of 8.0 or higher, and several sites are still short of that target. However, through robust action plans, over the last year we have closed the gaps from previous audits and today have over 81% of our global sites scoring of 8.0 or higher.

Plants with HSE Audit Scores

Fire Protection

P&G operates its fire protection program on the basic principle that each facility is unique and should have a program designed to meet its specific requirements. Working with the Insurance division, HS&E has developed a checklist-based assessment process that evaluates the fire protection equipment, maintenance and inspection, and emergency response capability of a site versus the appropriate level of fire protection required at that site. Each plant, innovation center, and major distribution center is assessed annually. The target performance is 8.0 or higher on a 10-point scale.

 

Fire Protection Audit Scores

The fire protection assessment program was changed significantly in 2011, even though we had a historically low number of fire losses and no regulatory issues. The new audit process was designed to be much clearer and calibrated relative to our internal fire protection standards.

These process changes resulted in a more rigorous and globally calibrated approach to conducting these assessments. This 2011 process change decreased the number of sites with scores of 8.0 or higher. However, since that intervention, we have been making steady progress and this year, 76% of sites had Fire Protection audit scores of 8.0 or higher. Sites will continue to work against action plans to improve scores over the course of the next year.

Plants with Fire Protection Audit Scores

Site HS&E Leadership Training

A key indicator of HS&E systems capability is the percentage of sites with trained and qualified leaders. Leadership candidates train onsite for an extended period after attending a week-long seminar where their knowledge and ability to handle specific situations are assessed. For full qualification, the candidates must complete a qualification project at their own plant. This training and qualification program applies to all sites, including technical centers, and acquisitions. In 2012, we saw a decrease in the number of qualified leaders due to acquisitions and normal attrition. Short-term gaps were covered via corporate resources while we accelerated training plans. The charts below summarize our progress over the last three years.

Sites with HSE Qualified Leaders

Sites with Fire Protection Qualified Leaders

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