2017 Integrated Annual Report

GRI

2020 Strategy

Entering the fifth year of our 2020 Strategy, The Clorox Company remains focused on what we refer to as good growth — growth that is profitable, sustainable and achieved responsibly.

  • Mission
    We make everyday life better, every day.
  • Objective
    Be the best at building big-share brands in economically attractive, midsized categories.
  • Commitment
    Leverage environmental, social and governance performance to help drive long‑term, sustainable value creation.

Strategies

Business Corporate Responsibility
1 Engage our people as business owners. Promote diversity, opportunity and respectful treatment for all people who touch our business.
2 Drive superior consumer value behind strong brand investment, innovation and technology transformation. Make responsible products responsibly.
3 Accelerate portfolio momentum in and around the core. Safeguard families with Be Healthy, Be Smart and Be Safe initiatives.
4 Fund growth by reducing waste in our work, products and supply chain. Shrink our environmental footprint while we grow.

Long-Term Aspirations

  • Grow
    Net Customer Sales By
    +3-5% Per Year
  • Expand
    EBIT Margin
    +25-50 Basis Points Per Year
  • Deliver
    Free Cash Flow As % Of Sales
    10-12% Per Year

Operating Model

Factors Driving Our Business Success

To achieve our business goals, we need to leverage the unique attributes of our company; maintain and build on our relationships with important partners such as our employees, retail customers and communities; and manage external factors that can influence our success.

External Influences


  • Laws and Regulations

  • Global Economy

  • Natural Resources

  • Competition

  • Raw Materials Cost

Our Relationships


  • Consumers

  • Employees

  • Suppliers and Other Business Partners

  • Civil Society/
    NGOs

  • Communities

  • Retail Customers

  • Investors

Foundation

  • Our Values
  • Do the right thing
  • Stretch for results
  • Take personal ownership
  • Work together to win
  • Our Resources
  • Talented and engaged employees
  • Superior brand-building capabilities
  • Strong product portfolio
  • Financial discipline
  • Strong cash flow

Progress Update

Diversity and Safety

Diversity and Safety

Our Goal

Driving minority and female representation and maintaining workplace safety.

Our Progress

Inclusion and diversity are top priorities, and we’re making good progress.

Minority and female representation on our board has consistently exceeded that of our peers in the Fortune 500. Women continue to assume senior leadership roles, now making up 36 percent of our Executive Committee, compared with 20 percent four years ago.1 During the same time frame, representation of U.S. minority nonproduction employees and managers has edged upward toward industry averages.2

Promoting safety as a core value remains a key component within our business culture. Employees actively consider safety in what they undertake. As a result, our priority of maintaining a world-class recordable incident rate of less than 1.0 has been consistent throughout the goal period, remaining between 0.52-0.69 from 2013 to today.

For us, employee well-being starts with ensuring diversity and safety. They’re the cornerstones of an engaged workforce that’s focused on growing our business profitably, sustainably and responsibly.

Clorox U.S. Minority Nonproduction Managers:

  • 24%FY13
  • 24%FY14
  • 25%FY15
  • 25%FY16
  • 26%FY17

2010 U.S. Census 30%

Clorox U.S. Minority Nonproduction Employees:

  • 30%FY13
  • 30%FY14
  • 30%FY15
  • 31%FY16
  • 31% FY17

2010 U.S. Census 32%

1 Past data on Clorox minority and female board members only counted independent board members. To facilitate comparisons to peer companies, Clorox now counts all board members when calculating its diversity data. 2 Benchmarking of Clorox performance on U.S. minority managers and employees reported from fiscal years 2013 to 2016 has been updated to compare with the 2010 Census instead of the 2000 Census. Reviewed by Ernst & Young LLP. Please refer to the Review ReportReview Report.

Engage Our People

Business Highlights

Engage our people as business owners.

  • Our annual employee engagement survey showed that 88 percent of Clorox employees feel engaged or highly engaged, far surpassing the norm for consumer goods companies (80 percent), and even for global high-performing companies (85 percent).1 Results improved by 1 point over last year, with increased survey participation (82 percent versus 79 percent), and more than 8,000 comments overall about the employee experience at Clorox.
  • Voluntary employee reviews contributed to the company’s No. 12 ranking on the list of Best Places to Work in the U.S. and our CEO Benno Dorer’s No. 1 ranking on the 2017 Highest-Rated CEOs list by job site Glassdoor.

Corporate Responsibility Highlights

Promote diversity, opportunity and respectful treatment for all people who touch our business.

  • Clorox Chairman and CEO Benno Dorer was one of more than 150 CEOs from across the globe who were original signatories to the CEO Action for Diversity & Inclusion™, reaffirming that our company is a place where diverse perspectives and experiences are accepted and encouraged.
  • We instituted “Plus One” initiatives through which individuals with different thinking styles or experience could be added to teams to make them stronger.
  • The company spent $140 million with diverse suppliers during the fiscal year, up from $20 million in 2008. Diverse suppliers include minority-, women-, service-disabled- and veteran-owned business enterprises, as well as gay, lesbian, bisexual and transgender business owners in the U.S. and Puerto Rico.
  • The company maintained a world-class recordable incident rate (<1.0) of 0.60, reflecting a slight reduction compared to the previous year.

1 The Willis Towers Watson global high-performance companies norm is based on responses from 142,506 employees at 26 companies. Companies qualify for the norm by meeting two criteria: 1) superior financial performance, defined by a net profit margin and/or return on invested capital that exceeds industry averages; and 2) superior human resources practices, defined by employee opinion scores near the top among the most financially successful companies surveyed by Willis Towers Watson.

At Clorox, 88 percent of employees are engaged or highly engaged.

In fiscal year 2017, Clorox reaffirmed its commitment to inclusion and diversity through a public pledge as well as internal staffing and purchasing initiatives.

We continue to make progress in the representation of minorities and women in both managerial roles and in the overall workforce.

Progress Update

Product Sustainability Improvements

On Track to Meet Our Goal

2020 Goal 50%

Results to Date 34%

Product
Sustainability
Improvements

Our Goal

Make sustainability improvements to 50 percent of the product portfolio by 2020.

Our Progress

Since our 2011 baseline, the percentage of our product portfolio with sustainability improvements has increased steadily, from 7 percent in our first year to 34 percent in 2016, our most recent available data.

To meet our 2020 goal, we have established four pathways for improving the sustainability of our products and packaging, allowing each brand to consider which approach makes the most sense while delivering superior consumer value. These options include 1) reducing materials; 2) using more sustainable materials; 3) reducing the amount of water or energy required by consumers; and 4) sourcing materials more sustainably.*

Most of our product sustainability improvements have been achieved through material reduction in the product or package, or both. By reducing materials in our designs, we eliminate the footprint associated with the materials saved and reduce the transportation footprint, as we can load more product onto fewer trucks for distribution.

We’re on track to meet the 2020 goal, with a defined pipeline and path for product sustainability improvements. Looking beyond 2020, we anticipate needing to shift more of our efforts beyond material reduction, as opportunities for further material efficiency gains become more limited.

*Refer to the Review ReportReview Report for a full description of the criteria.

Product Portfolio with Sustainability Improvements (cumulative progress since 2011 base year):

  • 7% CY12
  • 15% CY13
  • 20% CY14
  • 31% CY15
  • 34%  CY16
  • 50% CY20 Goal

Drive Superior Consumer Value

Business Highlights

Drive superior consumer value behind strong brand investment, innovation and technology transformation.

  • We delivered 3 percent incremental sales growth from product innovation across our global portfolio during fiscal year 2017.
  • Our businesses tapped 360-degree video technology to showcase the global problem of safe water access along with solutions supported by the Clorox® brand in Peru and Brita Canada in Kenya.
  • We continued to lead the industry with 45 percent of our media spending focused on digital.
  • To win with the digital shopper, Clorox tapped technology partnerships to help deliver consumer experiences extending beyond product usage. In Canada, we launched geofencing — a feature that uses GPS or radio frequency identification technology to create a virtual geographical boundary — with Snapchat to target consumers in a specific neighborhood, inviting them to an experiential event for the launch of Burt’s Bees® lipsticks, and used virtual reality to showcase the Brita® brand’s clean-water initiatives.
  • The Fresh Step® brand has returned to market share growth by accelerating momentum behind last year’s Fresh Step with the power of Febreze® launch. Some of this year’s innovations included a Hawaiian Aloha™ scent; new, easier-to-use four-packs; and improved shelf presence. Expansion was fueled further by a 75 percent improvement in advertising effectiveness and increased merchandising compared to the previous fiscal year.
  • Our RenewLife® brand, acquired in May 2016, continues to grow, gaining distribution and market share in the food, drug and mass channels, in line with our expectations, while maintaining a strong presence in the natural channel.
  • The Brita® brand launched The Filtered Life marketing campaign featuring basketball superstar Stephen Curry to inspire people to filter out the bad and get to the good, in water and in life, starting with negativity and bullying online.

Corporate Responsibility Highlights

Make responsible products responsibly.

  • For its facial towelettes, the Burt’s Bees® brand replaced the hard plastic door with a sticker-like closure, eliminating approximately 108,000 pounds of hard plastic from production annually and keeping it out of waste streams. A redesigned cardboard display tray for the towelettes also uses 90,000 pounds less paperboard per year.
  • Packaging for the Burt’s Bees® facial moisturizer was converted from mixed resin material, which is not recyclable curbside, to single-material tubes made of high-density polyethylene, or HDPE, making it easier for consumers to recycle.
  • In support of our goal to eliminate all PVC packaging, we changed the material used for our Kingsford® charcoal lighter fluid packaging to more environmentally friendly PET.

Our RenewLife® brand, acquired in May 2016, continues to grow, gaining distribution and market share in the food, drug and mass channels, in line with our expectations, while maintaining a strong presence in the natural channel.

The Brita® brand launched The Filtered Life marketing campaign featuring basketball superstar Stephen Curry to inspire people to filter out the bad and get to the good, in water and in life, starting with negativity and bullying online.

Progress Update

Community Support

$23M
In Grants to Support Our
Communities Since FY13

Community
Support

Our Goal

Safeguard families with our Be Healthy, Be Smart and Be Safe initiatives.

Our Progress

Every year, we contribute in a meaningful way to support the communities where we live and do business. It’s not about achieving a certain level of activity but about meeting the needs they face from year to year.

Four years into our strategy, we’ve made substantial contributions to the well-being of our neighbors and our planet. From our 2013 to 2017 fiscal years, we’ve given a total of $23 million in grants to support youth education, cultural and civic organizations, health initiatives and more through our nonprofit foundations.

During the same time frame, the company made $44.4 million in product donations, much of which helped in the recovery from natural disasters such as floods in the U.S., an earthquake in Ecuador and disease outbreaks such as Ebola in West Africa, while our brands invested $4.3 million in cause marketing campaigns to make a difference in safe drinking water, childhood obesity and pet adoption, to name a few projects aligned with their purposes.

During a corresponding period from the 2012 to 2016 calendar years, our employees volunteered 543,383 hours of their time to improve their local communities, effort that is valued at $11 million.

Consistent with our values as a company, we will continue to be committed to our communities, helping them remain healthy and safe, as well as supporting educational and cultural initiatives.

Accelerate Portfolio Momentum

Business Highlights

Accelerate portfolio momentum in and around the core.

  • Sales in the e-commerce channel grew more than 30 percent in the 2017 fiscal year through partnerships with fast-growing online retailers and testing of novel shopping methods like Amazon Dash, which simplifies the reordering process for commonly used products.
  • Licensing partnerships that extended our brands into new categories and generated profitable revenue streams included Clorox® Fraganzia® air care, Brita® commercial filtration and softener systems, Clorox® pool salt for saltwater pools, Clorox® laundry accessories and Pine-Sol® cleaning tools.
  • Seeing a market opportunity, we developed a powder oxygen bleach in Korea in just three months. We secured the No. 1 market position in key account channels, which represent 60 percent of the country’s oxygen bleach market, and also introduced a liquid line this year.

Corporate Responsibility Highlights

Safeguard families with our Be Healthy, Be Smart and Be Safe initiatives.

  • We continued to help communities around the world recover from natural disasters. Following historic flooding in Louisiana, we donated 10 truckloads of product, including over 8,600 cases of Clorox® liquid bleach and 18,700 cases of Glad® trash bags, through the American Red Cross Annual Disaster Responder Program. We also donated Clorox® bleach in Peru to aid survivors of floods there in early 2017.
  • We awarded six grants to urban farms in Oakland, California; Northwest Arkansas; and the Atlanta, Georgia, metro area. This is a new focus area for The Clorox Company Foundation and also a geographical expansion geared at fighting food insecurity in a number of the communities where our employees live and work.
  • Our brands continued to engage in cause marketing programs consistent with their purpose that are also meaningful to consumers.
    • The Peru business empowered Peruvians to support our Clorox Safe Water Project and provide more people in rural areas of the country with access to clean water.
    • Through the help of consumers with the purchase of specially marked products, Brita Canada helped provide cleaner drinking water for an entire community in Kenya — over 40,000 people this year — impacting not only their health, but also their education, since many young girls who had been responsible for retrieving water for their families are now able to attend school.
    • The Clorox® brand in the U.S. partnered with DonorsChoose.org to help teachers prepare for back-to-school.
    • The Burt’s Bees Bring Back the Bees campaign returned in 2017 to double its impact and plant 2 billion wildflowers.
    • The Fresh Step® Hot to Adopt™ program sent shelter cats down the catwalk at New York Fashion Week to help promote cat adoption.
  • In the wake of Hurricane Matthew, we donated nine truckloads of product — over 5,400 cases of Clorox® liquid bleach and nearly 17,000 cases of Glad® trash bags — to support people in the Southeast U.S. and Haiti through partnerships with the American Red Cross and Americares.

Seeing a market opportunity, we developed a powder oxygen bleach in Korea in just three months. We secured the No. 1 market position in key account channels, which represent 60 percent of the country’s oxygen bleach market, and also introduced a liquid line this year.

In the wake of Hurricane Matthew, we donated nine truckloads of product — over 5,400 cases of Clorox® liquid bleach and nearly 17,000 cases of Glad® trash bags — to support people in the Southeast U.S. and Haiti through partnerships with the American Red Cross and Americares.

The Fresh Step® Hot to Adopt™ program sent shelter cats down the catwalk at New York Fashion Week to help promote cat adoption.

Progress Update

Corporate Responsibility Priorities:
Operational Footprint Reduction

Reduce the environmental impact of our operations and improve the sustainability of our upstream supply chain.

As the fifth year of our footprint reduction goal period comes to a close, we have already exceeded our 2020 goals to reduce solid-waste-to-landfill and water use and remain on target to reach our 2020 goals to lower energy use and greenhouse gas emissions. Our facilities are not energy-intensive or water-intensive, making ongoing progress challenging now that we have already reduced energy and water use by 23 percent and 33 percent, respectively, per case of product sold, since establishing our first sustainability strategy in 2008. Nevertheless, we continue to seek innovative ways to reduce our overall operational footprint.

Energy

On Track to Deliver 2020 Goal

2020 Goal 20%

Results to Date 15%

Energy

Our Goal

Reduce energy use by 20 percent per case of product sold versus a 2011 calendar year baseline.

Our Progress

With the exception of a slight setback in 2014, we’ve made steady progress to reduce our energy use during this goal period. Based on our current data, we have now cut our energy use by 15 percent and are three-quarters of the way toward our 20 percent reduction goal by 2020. Some of the recent reductions in energy use on an intensity basis are due to an increase in product volume and the resulting efficiencies of scale.

To achieve our progress, we’ve focused on identifying potential efficiencies in some of our most energy-intensive processes. One area of focus has been the process of converting wood scrap to char, a key ingredient for manufacturing Kingsford® charcoal briquets. The team came up with two ideas to approach our operations differently in order to significantly reduce our footprint: to keep our inventory of wood scrap dry and to reduce the frequency of shutdowns and furnace restarts.

In addition to the newer initiatives, we continue to focus on site-specific efficiency improvements — such as installing LED lighting — identified through our Energy Audit Action Plan created a few years ago.

Energy Use (annual progress versus 2011 base year):

  • 10% CY12
  • 10% CY13
  • 6% CY14
  • 14% CY15
  • 15% CY16
  • 20% CY20 Goal
GHG Emissions

On Track to Deliver 2020 Goal

2020 Goal 20%

Results to Date 18%

Greenhouse
Gas
Emissions

Our Goal

Reduce greenhouse gas emissions by 20 percent per case of product sold versus a 2011 calendar year baseline.

Our Progress

We’ve made steady progress to reduce our greenhouse gas emissions during this goal period, with the exception of a slight setback in 2014 due to the increased energy needed to offset the effects of extreme weather. We have now cut our greenhouse gas emissions by 18 percent and have nearly reached our 2020 goal of 20 percent.

We’ve begun use of renewable energy, with solar panels activated at our Fairfield, California, plant and our regional distribution center in Aberdeen, Maryland. Both solar panel arrays were built with a third-party provider as power purchase agreements, or PPAs. That means we didn’t spend company money to build these projects, and the facilities buy the solar-produced power from the third party instead of from the utility.

While both arrays reduce overall greenhouse gas emissions, we do not include those of the Aberdeen RDC in the calculation of our greenhouse gas footprint because the third party retains the renewable energy credit rights in the PPA. The benefits from the Fairfield project will be included in next year’s data, as it came online in early 2017, after our current reporting period closed.

As with our energy use, some of the recent reductions in greenhouse gas emissions on an intensity basis are due to our increase in product volume and the resulting efficiencies of scale. Greenhouse gas emissions are also reduced through facility-based initiatives to install energy-efficient LED lighting.

GHG Emissions (annual progress versus 2011 base year):

  • 10% CY12
  • 12% CY13
  • 11% CY14
  • 17% CY15
  • 18% CY16
  • 20% CY20 Goal
Waste

More Than Doubled Our Goal

2020 Goal 20%

Results to Date 41%

Waste

Our Goal

Reduce solid waste-to-landfill by 20 percent per case of product sold versus a 2011 calendar year baseline.

Our Progress

Our path to reducing solid waste-to-landfill has been up and down. We’re currently at a 41 percent reduction, more than double our 2020 goal. While we exceeded our goal just two years into the goal period, in the two subsequent years our progress slowed. After an analysis, we determined that a significant contributor was the periodic replacement and disposal of bricks used to line furnaces that turn wood chips into char at our Kingsford plants. We resolved this issue by repurposing the brick to build the base of an onsite access road rather than sending it to a landfill and have targeted similar beneficial reuse opportunities for brick in future years.

Throughout the goal period, we have also identified additional opportunities to reduce waste.

Although we’ve already significantly surpassed our 2020 goal, we’re continuing to identify additional ways to reduce solid waste-to-landfill. Three of our facilities have achieved zero-waste-to-landfill status — our plants in Fairfield, California; Orangeville, Ontario; and, most recently, Rogers, Arkansas — and we remain on target to reach our goal of 10 sites by the end of the goal period.

Solid Waste to Landfill (annual progress versus 2011 base year):

  • 1% CY12
  • 34% CY13
  • 30% CY14
  • 25% CY15
  • 41% CY16
  • 20% CY20 Goal
Water

Exceeded 2020 Goal

2020 Goal 20%

Results to Date 21%

Water

Our Goal

Reduce water use by 20 percent per case of product sold versus a 2011 calendar year baseline.

Our Progress

With steady progress throughout the goal period, we surpassed our 20 percent water reduction goal this year, four years early.

To spur further reductions in the back-half of our goal period, we engaged a third party in 2015 and 2016 to conduct water audits for our most resource-intensive plants and identify best practices for saving water. Since taking some initial steps recommended through the audits, and achieving intensity reductions through efficiencies of scale associated with recent volume growth, we accelerated our progress, from a 14 percent reduction in water use in 2015 to a 21 percentreduction in the current year.

Going forward, we believe additional water savings initiatives across the company have the potential to reduce water use by over 30 million gallons per year, particularly through efficiency, recycling and reuse.

Water (annual progress versus 2011 base year):

  • 5% CY12
  • 8% CY13
  • 11% CY14
  • 14% CY15
  • 21% CY16
  • 20% CY20 Goal

Fund Growth

Business Highlights

Fund growth by reducing waste in our work, products and supply chain.

  • Taking the first step to becoming zero-waste-to-landfill facilities, our Jacksonville, Florida, and Costa Rica sites held dumpster dives to evaluate their existing recycling programs and determine how to reduce volumes of waste.
  • Our Hidden Valley® Simply Ranch® dressing went from concept to shelf in just 10 months — more than 50 percent faster than our average development timeline of 24 months for large product innovation projects — thanks to adoption of agile, or more efficient, business practices.
  • The company’s Research and Development division saved $400,000 by designing a lab testing process to deliver higher-quality data in a shorter amount of time. This initiative enables us to move faster in product development and create backup labs for product testing, while still providing necessary data and validation.
  • Enterprisewide initiatives, including identification of alternative dedusting agents for our litter formula, improvements to our namesake bleach with polyelectrolyte complexes, or PECs — technology that makes it easier to clean hard surfaces and improves the whitening performance in laundry — and a number of other administrative improvements, contributed to $111.6 million in cost savings.
  • Our European cat litter business developed a new, locally sourced base formula and consolidated manufacturing in a central location, increasing distribution efficiency and providing $640,000 in cost savings in less than a year, leading to a double-digit increase in margins for our Ever Clean® brand.
  • Progress made in our Go Lean strategy in International yielded strong cost savings and productivity gains throughout the fiscal year, enabling us to invest selectively in higher-growth businesses.

Corporate Responsibility Highlights

Shrink our environmental footprint while we grow.

  • Our Glad® brand’s Rogers, Arkansas, plant — our largest manufacturing facility by number of employees — reached zero-waste-to-landfill status, becoming our third site to achieve this designation.
  • A partnership with a nonprofit is helping the Burt’s Bees® brand achieve its sustainability goals while also helping adults with disabilities gain self esteem through meaningful work. By separating unsellable product from its packaging — for example, squeezing all the lotion out of a tube or twisting a lip balm out of its stick — the brand’s nonprofit partner was able to turn product waste into compostable or recyclable material, reducing waste to energy by 90 percent compared with past practices.
  • Based on a supplier survey that received a 100 percent response rate, more than 99 percent of the fiber we source directly was determined to be recycled or certified virgin fiber.
  • Our Kingsford® brand’s Summer Shade, Kentucky, manufacturing facility installed a fabric superstructure — slightly larger than a football field and nine stories tall — over its woodpile to prevent the material from being exposed to the elements. With the woodpile protected, less energy is required to dry it before it’s used to make char, a key ingredient for manufacturing charcoal briquets.
  • As part of our ongoing commitment to responsible sourcing of palm oil, we targeted our top suppliers, tracing more than 70 percent of the palm ingredients we source from them back to the mill. This figure is based on information collected by TFT, which is conducting our palm oil mapping work. The suppliers engaged represent 95 percent of our direct, domestically sourced palm-derivative ingredients.
  • A superstructure designed to keep woodpiles dry is expected to reduce one Kingsford manufacturing facility’s annual energy consumption by 10 percent.

Taking the first step to becoming zero-waste-to-landfill facilities, our Jacksonville, Florida, and Costa Rica sites held dumpster dives to evaluate their existing recycling programs and determine how to reduce volumes of waste.

As part of our ongoing commitment to responsible sourcing of palm oil, we targeted our top suppliers, tracing more than 70 percent of the palm ingredients we source from them back to the mill. This figure is based on information collected by TFT, which is conducting our palm oil mapping work. The suppliers engaged represent 95 percent of our direct, domestically sourced palm-derivative ingredients.

A superstructure designed to keep woodpiles dry is expected to reduce one Kingsford manufacturing facility’s annual energy consumption by 10 percent.

2020 Strategy

Overview

READ MORE

Strategy 1:
Engage our people as business owners.

READ MORE

Strategy 2: Drive superior consumer value behind strong brand investment, innovation and technology transformation.

READ MORE

Strategy 3:
Accelerate portfolio momentum in and around the core.

READ MORE

Strategy 4:
Fund growth by reducing waste in our work, products and supply chain.

READ MORE