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Unilever raises sustainability bar, but neglects the markets

It’s been a bit of an open secret in the sustainability world for a while.

Unilever has been planning how a 40 billion Euro a year company can take sustainability seriously indeed, for some time.

Rumour has it that rivals, such as P&G, rushed out their own, weaker, plan earlier in response.

(This argument, whilst not proven, has some form, when you consider Tesco tried the same thing just before M&S launched Plan A in January 2007)

Today Unilever has set forth how it plans to become more sustainable, and grow larger at the same time.

Not sustainable, executives are key to stress. Not ‘green’. But ‘more sustainable’, ‘greener’. (US companies, in particular, need to grasp the difference)

Yesterday’s debate at Unilever with Paul Polman, CEO, on the far right (although not politically I understand)

The key commitments you can see for yourself here.

The big picture plan is to: “Halve the environmental footprint of our products” and “Source 100% of our agricultural raw materials sustainably” and to “help more than 1 billion people take action to improve their health and well-being”.

This means that Unilever’s palm oil, paper & board, soy, tea, fruit & vegetables, cocoa, sugar, oils, and dairy will all be sustainably sourced by 2020 or before. GHG emissions, water use and waste, at the company AND in the supply chain, must be halved by 2020 also.

It’s a game changer for corporate responsibility, no doubt about it.

For the first time since Marks & Spencer launched Plan A nearly four years ago, a big company has made seriously holistic commitments on sustainability.

You probably remember, or should, what big deal that was, and still is, in business.

Unilever are about four times bigger than M&S. With a whole series of influential brands.

Think, for a minute, what this will mean for the responsible business world. Think about what it means, particularly for the supply chain. The largest supplier engagement scheme in the world is about to begin, excepting perhaps only Wal-Mart’s.

Paul Polman, the CEO, would not be drawn on what marketing spend the company will put into communicating these plans. My bet is they will roll that out more slowly than M&S did, but it will happen over the next few years.

Unilever is trying to make the plan look customer driven, and is telling investors that if they don’t like their plans, to buy someone else’s stock.

These are two very bold gambits.

On the first point, as one well placed source put it to me today, they have basic permission from customers that this is what they want, and are looking to lead them.

This is the right way to do it.

(No-one knew they wanted an iPhone before Apple created it, but we all knew we wanted a device that worked for us)

The second bold gambit: Telling investors to buy in or sell out, is where the company is making a mistake.

The company will not affect most of the palm oil market, for example, until smaller players outside the big FMCG companies buy in.

Many of these will not buy in until either enforced regulation demands it, or investors do.

Unilever has the chance in the coming months and years, to present their new plan as a new “path to growth” (their older, pre-sustainability revitalisation plan) for investors.

Simply saying “buy in or get out”, as Polman did today when asked about it, is not enough.

The investor community needs educating. It will be a long, slow process. But only companies like Unilever can do it positively. Examples like BP in 2010 simply encourage more risk management.

Smaller companies, who collectively make up much of global supply of commodities after the big brands have taken their fill, will only come under pressure when articles that investors read, like this one in today’s Daily Telegraph, start referring somehow to sustainability.

Unilever and Paul Polman have a chance to link real growth and responsible business and persuade investors over the next five years that this stuff really matters, particularly in the commodities world. They should not pass that up.

UPDATE: 16/11/10. Since I wrote the above yesterday, in my usual fairly rushed way, I’ve had dinner last night with a couple of seasoned folks in the responsible business world. Between us I think we had about 50 years experience in the area to call upon in our conversation, most of it theirs.

Their view was the the plan is fantastic, but is missing specific community, human rights and labour discussions and targets. It also does not talk, they suggested, about how the company pays tax, or treats suppliers and will aim to do so in the future, particularly around payment terms.

Lastly, one experienced commentator said, there is not enough discussion about human resource issues, particularly with regard to layoffs now or in the future.

I don’t wish to appear too critical of Unilever. (Not for any commercial reason I might add. We have 3000-4000 customers a year, so that’s not really an issue for me.)

They have published an excellent and very challenging plan which will help set the agenda at a time when the business sustainability movement is flagging a little.

But what was announced yesterday is not by any means covering all the big issues.

That’s not to say many or all of them are not covered somehow elsewhere in their reports, actions and policies, just that they were not mentioned in yesterday’s launch, which was partly to help embed the plan in the business as much as for PR purposes.

Collectively over dinner, we agreed that we would expect further targets on the missing areas to be added over time.

Right now Unilever’s approach is a business-driven sustainability plan. It is not yet a holistic responsible business one. But I am guessing that is coming in the not too distant future.

1 Comment

  1. HOW MUCH CHUNKY MONKEY?

    Hi Toby

    You should choose your dinner guests more carefully. They seem well off track.

    The key here is whether Unilever is pointing the way to a sustainable consumer society or not. The title of their launch event was “Can consumption become sustainable”?

    I don’t think they answered that one.

    Unilever’s strategy is both broad and deep and the company can be commended for that. Their CEO Paul Polman clearly understands sustainability issues and is able to answer challenging questions with confidence.

    But if we look closely at the key environmental component, the life-cycle impact of their products, I think their target to halve this by 2020 is normalised i.e. on a per product sold basis.

    Their baseline is 2008 so the reduction equates to about 5.6% per year. If Unilever’s growth matches or exceeds this rate there will be no absolute reduction in environmental impact.

    The really interesting, and unaddressed question, is Unilever’s message to western consumers. We are addicted to luxury living and expect more of it generation to generation. And of course our eastern neighbours in the global village want some as well.

    Unilever needs to tell us just how much Chunky Monkey we can consume sustainably.

    Simon Propper
    http://www.econtext.co.uk

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