The launch of Unilever‘s Sustainable Living Plan last week was one of those occasions where a sustainability initiative grabbed mainstream attention. The new strategy, which aims to “decouple” growth from environmental impact and sets ambitious sustainability targets, has been hailed by some as a game changer and likened to Marks and Spencer’s ground-breaking ‘Plan A’ initiative.
That Unilever should be making this move is not surprising. The company is widely regarded as having high standards of corporate responsibility. That ethos arguably goes back to the founding of Lever Brothers in the north-west England in the late nineteenth century. From the outset the company’s owners held enlightened views on the health and welfare of their employees, building the model village on the Wirral known as Port Sunlight. In more recent times, the company has held true to those tenets by taking a lead on environmental and social issues, for example co-founding the Marine Stewardship Council in 1997.
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The degree to which the Sustainable Living Plan represents a truly new departure for a company with such a strong record to date is therefore an interesting question.
Unilever CEO Paul Polman, who has been in post for two years and has personally championed sustainability concerns, said at the launch that Unilever had ambitious plans to grow but “growth at any price is not viable”. He said he would ensure that the company’s growth did not come “at the expense of the world’s diminishing natural resources”.
While this “decoupling” of growth and environmental impact appears to be the keystone of the new strategy, one problem for Unilever is that the rhetoric is inevitably similar to what many companies are saying, though of course not all are acting on it. Virtually all such pronouncements talk about growth being viewed in the context of environmental and social impacts.
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Polman and Unilever have arguably gone further in articulating this idea but perhaps to the casual observer the Sustainable Living Plan may not seem all that new.
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By GlobalDataHowever, Karen Hamilton, vice president for sustainability at Unilever, believes the plan takes the thinking to a new level. “Generally in the past we have focused largely on our manufacturing impacts when it comes the environment. Now what we’re saying is that we’re extending our approach across the whole life cycle, the sourcing of raw materials, through to the manufacturing, through to the way in which the consumer consumes and throws away the product.”
From a sustainability standpoint, there is good sense in this. Unilever points out that manufacturing only accounts for 3% of the greenhouse gas emissions associated with a typical product, while consumer use accounts for 70% and raw materials 26%.
“The second thing that’s different is that we’re looking at all of our brands and all of the 170 countries where we sell. This is a genuinely new approach. I believe it would be very difficult to find any other large company which is making as comprehensive plans for decoupling growth and environmental impact.”
A third key differentiator for Hamilton is the proactive steps the company is taking as part of the plan to improve people’s lives. For example, it will run a programme around its Lifebuoy soap brand educating people in Asia, Africa and Latin America to use soap at key times of the day to help reduce diarrhoeal disease, a move which also harks back to the brand’s history.
Even if what Unilever is actually doing is different, to be heard above the noise is more of a challenge than it used to be. Hamilton agrees that ultimately what will differentiate the plan from the general rhetoric is action.
“This is a plan and now we need to be judged by the way in which we execute that plan,” says Hamilton. “What we will do is report back in a year’s time on what progress we have made and we will have that externally audited as well so that then we can start to be judged on our actions. We have been leaders of the Dow Jones Sustainability Index for our sector for the last 12 years so I think that gives us a degree of confidence that we’ve actually been able to deliver execution that’s been publicly recognised.”
Hamilton believes that it is the ambitious nature of the goals – namely halving the environmental impacts of its products by 2020 across the life cycle, sourcing 100% of agricultural raw materials sustainably and helping more than 1bn people to take action to improve their health – which places Unilever in the vanguard on corporate sustainability. “What is different is they are very bold goals and they are backed up by 50 specific time-bound targets which we can really track our progress over the next ten years. And that I think is a leading position.”
A key pledge with regard to Unilever’s food businesses is its undertaking to source 100% of its agricultural raw materials sustainably by 2015. Hamilton points out that the company is not only aiming to address raw materials such as tea where Unilever commands a large percentage of the global market but also aiming for 100% sustainability in areas where the company has a much smaller share of global volume, such as dairy and soya, where Unilever’s global share is 1% or less.
Another significant – possibly even greater – point of difference between what Polman was saying last week and the pronouncements of other companies on sustainability was the forthright views he expressed towards short-term thinking in the investment community.
Aside from a few individuals and the Socially Responsible Investment (SRI) market, the financial community has been slow to recognise the importance of the sustainability challenge and the work companies are doing in this area. Campaigners suggest that as long as the behaviour of companies is conditioned by such short-term thinking among investors the drive for a more sustainable global market will be compromised.
Polman is one of the few heavyweight CEOs to have grasped this nettle in such a public way. “We certainly don’t want to attract the investor base that wants higher and higher and quicker results against targets that we put out every 90 days,” he said. Indeed, Unilever has stopped issuing such guidance.
One of the ways companies have sold sustainability initiatives to the investment community has been to stress the competitive advantage they can offer. However, while Unilever like any company makes reference to the cost savings and efficiencies that can be created by making the business more sustainable, Polman said last week: “I’m not interested whether [the plan] brings competitive advantage. This is about long-term value creation. It’s the only way to do business long term.”
Hamilton preferred not to comment directly on Unilever’s relationship with the investment community, suggesting that the debate listed companies have with investment analysts on sustainability issues remains a delicate one. But, for many, Polman’s warning-off of investors only looking to the short term will be extremely refreshing.
