Unilever: Boldly going forward…

Since launching its ambitious Sustainable Living Plan in 2010, Unilever is buying more sustainable palm oil and cage-free eggs, putting less salt and fat in its tomato sauces and spreads, selling water purifiers to poor people in the global south and rolling out climate-friendly freezers for its ice cream.

No big company is doing more to limit its environmental footprint, while improving health and well being and growing its business. Unilever’s commitments are wide and deep. It’s no wonder that the firm and its CEO, Paul Polman, have become darlings not just of corporate-friendly NGOs like WWF, but also a favorite of  hard-charging activists from Greenpeace and the Humane Society of the US.

But even as Unilever today [Tuesday, April 26] reported making good progress towards its sustainability goals, questions remain about its strategy: Will consumers–and investors–notice and reward Unilever for its efforts?

It’s obviously too soon to say whether sustainability will drive growth at Unilever, but the early evidence appears mixed. Eco-efficiency efforts in factories have reduced waste and saved money. Unilever revenues have grown nicely, to $46.5 billion in 2011, up $44.2 B in 2010 and $39.8 B in 2009. But the company’s share price is up by less than 2% in the last year in the US market, slightly trailing the S&P500. (It’s doing better in European markets where currency factors don’t come into play.) Meantime, Unilever’s corporate identity is all but hidden behind consumers brands like Lipton, Skippy, Ragu, Bertolli, Hellmann’s, Suave, Dove, Ben & Jerry’s and Breyers, at least here in the US. That makes it hard to win over those consumers who care about companies that do good.

Today, I attended a Washington event with company execs, partners and NGOs where Unilever’s president for North America, Kees Kruythoff, released a progress report on the company’s sustainability efforts.

“Broadly speaking, we feel like we’ve made good progress,” he said, citing gains around agricultural sourcing, waste reduction and energy efficiency, among other things. Some highlights:

–24% of the company’s agricultural raw materials, including palm oil, soy beans and soy oil, paper and wood, tea, fruits and vegetables, were sustainable sourced last year.

–48 million people in poor countries were reached with Lifebuoy soap’s handwashing program aimed at curbing disease.

–100% of the electricity that Unilever buys in Europe comes from renewable sources.

–Pure-it, a water-purification technology, is expanding from India, where it has reached 35 million people, to Bangladesh, Mexico and Brazil.

This week, Unilever also said that as part of its commitment to source all of its palm oil sustainably, it will build a $100 million palm-oil processing plant in Indonesia, to accelerate its efforts to buy palm oil from sources that can be certified as sustainable. Palm oil is used in many products–soaps, detergents, shampoo, potato chips and ice cream–but expansion of palm oil plantations can destroy forests, threaten biodiversity and increase climate pollution.

Kees Kruythoff

More impressive than any single accomplishment, though, is the scope and seriousness of the plan, as well as the thinking behind it, as I’ve written before. (See my 2011 blogpost, Unilever CEO: Don’t stay on the sidelines) To see for yourself, you can download the progress report here.

During his presentation, Kees Kruythoff said sustainability is being embedded into all of Unilever’s operations–its procurement and supply chain, its manufacturing, its marketing (more slowly) and even in its efforts to influence the way consumers use its products.That’s partly because the world’s big problems create big opportunities for business.

“We live in a world where the population is growing, climate change is accelerating, water is scarce and 1 billion people are hungry. And another 1 billion are overweight,” Kruythoff said.

“Companies,” he said, “can no longer sit on the sidelines waiting for governments to take action on the huge environmental and social problems that face us.”

He said there’s no turning back from the company’s commitment to sustainability: “It drives growth. It drives efficiency. It drives innovation…This is how we run the business.”

But–aside from the obvious eco-efficiency gains–what’s unclear is how the effort will pay off with consumers. It costs more for the company to source sustainable palm oil or cage-free eggs, executives said. But will consumers pay more, for example, for Hellman’s Real Mayonnaise because it is made with cage-free eggs?

Kruythoff told me that outside the US, brands that have been showcased as sustainably have performed well. Lifebuoy soap, concentrated laundry detergents that use less packaging and water and Comfort One Rinse fabric conditioner, which saves water, have all performed well. “These brands have all grown by double digits, faster than the average of the company,” he said.

He also told me that the Unilever brand and its sustainability commitments will become more prominent in US marketing soon. Lipton Tea, for example, will be positioned as a brand that is healthy and good for the environment.

In an interview today with the Guardian, Unilever’s Paul Polman said many in the financial markets still don’t understand that the company has moved beyond old-style corporate social responsibility:

With Unilever, the Sustainable Living Plan is our business model. So we spend an enormous amount of time explaining it to our investors.

Does everyone get it in the City [and Wall Street] ? No, and to expect it will ever happen is wishful thinking but investors will increasingly value our business on the basis of what we are doing.

But Polman also said Unilever’s sustainability strategy is creating waves across the corporate sector: “We are showcasing a different business model that shows how you give to society and the environment rather than just taking from them.”

It will be fascinating to see Unilelver’s bold approach will spread.

Comments

  1. Thanks Marc for writing on this – it’s a fantastic story that I hope more people learn about. At the very least we can now conclude that this strategy has not hurt the company in any dramatic or obvious way. Most of the spreading would likely need to come from consumer or investor pressure – since the latter is at least a long way off, I hope Unilever does very well with US marketing highlighting sustainability and is rewarded. That seems like the best hope for spreading the strategy.

  2. Ryan Jones says:

    Thanks Marc,
    Really great to see Unilever driving sustainability so nicely. Now, I think they should attempt to move a step further down the enlightened path by finding a way to reconcile the cognitive dissonance they create by holding Axe and Dove within the same brand portfolio. Dove is a fabulous brand with a sense of purpose around “real female beauty” while Axe promotes exactly the opposite (juvenile female exploitation). I’m sure it is only a matter of time before Unilever does the right thing here.

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