The just-food interview - Unilever CEO Paul Polman - part two
More "courageous interventions" are needed from industry and government on sustainability, says Polman
It is early days in Unilever's ambition to meet all the targets in its ten-year Sustainable Living Plan and the company has acknowledged there is still much more work to be done. In part two of an interview with just-food, Unilever CEO Paul Polman insists stakeholders need to work together to bring in real change, particularly in changing consumer habits.
Unilever CEO Paul Polman, when asked what had satisfied him the most about the first year of the consumer goods giant's Sustainable Living Plan programme, outlined the company's progress - but immediately set out some of the challenges ahead.
The company's report, issued yesterday (24 April), on the first year of the plan shows the improvements it is making in areas like sourcing and energy use. However, Polman says the issues that Unilever and others need to tackle are "bigger than people realise".
"We call it sustainable consumption," he says. "It's more difficult to galvanise the consumer [although], frankly, if you launch a report, you should not expect consumers to make a U-turn 12 months later. Look at how long it takes us to build a brand," Polman tells just-food.
While recognising the problem of changing consumer behaviour, Unilever acknowledges factors like taste, price and quality remain vital elements of a successful product.
Unilever has developed more sustainable products or made existing lines more ethical and had enjoyed success. Ben & Jerry's ice cream is "doing extremely well", Polman says, after its switch to Fairtrade. Karen Hamilton, Unilever's vice president of sustainability, points to the "double-digit" growth of non-food brands like Comfort fabric conditioner and Lifebuoy soup. She also says the tie-up between Lipton tea and the Rainforest Alliance has led to "strong above-average growth where we've implemented the programme well".
However, Hamilton says the link that consumers make between sustainability and one of those core tenets of a brand - taste - is part of the success of Lipton's Rainforest Alliance agreement. "We've seen something more powerful," she says. "Consumers have said 'They are selecting the tea more carefully, so it must be better higher quality and it must taste better.' Taste is the core driver."
For Polman, when trying to drive sales of more sustainable products, companies must remember those basic elements of a brand. "The best way to do this is to deliver in your products next to the basics of price and quality," he says.
Changing consumer habits and encouraging them to act and think differently is a tough task and will only be achieved over many years. For all Unilever's laudable ideas, creative plans and initial success, it cannot act alone and Polman says co-operation between competitors and with governments is vital.
"You need courageous interventions from others as well. Frameworks with governments is a good example. If you have clear goals on CO2 emissions and carbon trading globally, if you have governments saying no to illegal deforestation, things would move a lot faster," he says.
"You could even have some areas where consumer behaviour can be accelerated," he continues, warming to his theme. "In many places of the world, water does not have a price. If water doesn't have a price, you cannot price in your externalities and a lot people will not behave properly around that either. The framework discussions, which we call sustainable consumer behaviour, are going to be difficult and we have to work very, very hard."
Looking at the work Unilever has put in on its Sustainable Living Plan, is it frustrating that others haven't followed suit? "Because things don't go as fast as you wanted, you first have to ask yourselves what can you do differently to get them all on board. It is hard work but once you achieve things it's very gratifying," he says.
One area in which the food industry could be doing more is on palm oil. The supply of sustainable palm oil outstrips demand. Unilever said yesterday it would hit its target of using only palm oil covered by Green Palm certificates by the end of the year - three years ahead of plan. It has now set a target of using only "traceable" sources of the commodity by 2020.
Polman says Unilever is "actively working" with other companies in the industry to encourage them to buy certified sustainable palm oil. "If farmers go through all this work to make it more sustainable, which often has transition costs, and people do not take it up they will say: 'Why do I do the work?'," he says.
The Unilever chief acknowledges that to "get people on board, for different reasons, is not always easy, that's for sure". However, he says there have been tangible signs that industry and competitors can work together. He points to the commitment agreed by industry body the Consumer Goods Forum to achieve zero net deforestation by 2020. The Forum, a body representing 400 consumer goods manufacturers and retailers, also agreed to phase out HFC refrigerants from 2015. Polman, meanwhile, said the work done by the Roundtable for Sustainable Palm Oil in encouraging the cultivation and use of a more sustainable form of the commodity helped in similar work on soy. And, he adds, Unilever's work has played a role in "galvanising" others into action.
"We are increasingly able to transform markets. I get the biggest pleasure from that. If Unilever does all this and we are successful and our share price goes up, I might be called CEO of the year but at the end of the day if the world doesn't change I shouldn't be. If we galvanise this change to other companies around us in providing longer-term business models, in stop quarterly reporting or giving guidance, in changing compensation systems, in looking at agriculture differently, involving small-hold farmers, increasingly I see that happening and in that I am a very impressed."
And, although in some areas Polman believes government intervention is needed, he believes business can go further. At the World Economic Forum in Davos earlier this year, Polman arranged a meeting of CEOs on sustainability, which he says will lead to a range of businesses making commitments at the UN Conference on Sustainable Development in Rio in June. "At Rio, you will see business pushing much harder and faster than governments as they will be tied up in election cycles," he says.
Encouraging an ethos of sustainable consumption in emerging markets is also a challenge that Unilever and Polman acknowledges. To consume is an aspiration for more and more people in markets like India and China, where the middle classes are growing. Some would argue that a Chinese or Indian citizen should be able to consume in the way we in the West have done for decades. A simple argument against that position is that, with over a billion people in both countries, how they consume will have a profound impact on the environment. However, how can consumer goods companies get these new consumers to act more sustainably? Polman acknowledges it is a challenge but believes it is easier to create more sustainable habits when economies are evolving.
"You can design better when you design from scratch. You can design green cities. It's difficult to do in this part of the world. While everybody aspires to live like a European, you can design what that means in a more sustainable way," he says. "it is more difficult to change ingrained consumer habits than to leapfrog like in the emerging markets to the right habits. I am actually more encouraged about the emerging markets."
Overall, Polman believes there is "a momentum" behind the issues of sustainability, even if Unilever is perhaps ahead of some of its peers, and he lists again the progress on palm oil, on refrigeration and the CEO meeting in Davos. But what lies behind his work in shaping Unilever into a more sustainable business?
He insists it is "not a personal mission" but adds: "Increasingly, it's very clear people like to work for companies with a purpose. I think what you want to do is work very hard but also say I make a difference. I'd like to leave Unilever in a better state than I found it - not just say I grew market share because people will forget that but say 'We made a difference for my children, their children, we contibuted to make the world a better place for many generations to come', which goes right to the heart of the broader definition of sustainability. I have always found it is a shame if we have what we have been given to us and we don't use it optimally. I have a hard time with that."
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