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Sustainability as Opportunity: Unilever’s Sustainable Living Plan

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Managing Sustainable Business

Abstract

Sustainability, as it relates to both social and environmental issues, is treated very differently among companies that incorporate the subject into their business strategies. In this case, we explore sustainability at Unilever whose management addresses it not as a risk to be managed or cost to be avoided, but as an opportunity for competitive advantage and growth. With emerging markets as the backdrop, we learn about Unilever’s Sustainable Living Plan, and what the company has done to integrate sustainability principles into its business model and build on its core competencies, such as innovative product development and marketing expertise, to realise the potential of the fast-growing emerging markets (57% of its 2014 revenues came from emerging markets compared to less than 17% of most multinationals). Issues considered are the role of corporate culture and competencies, the importance of committed and courageous leadership, the willingness to set ambitious goals, and the challenge of creating internal and external alignment around strategic goals.

This case was developed with assistance from Hult EMBA student Kevina Kenny and with the generous help of Gail Klintworth, former Chief Sustainability Officer at Unilever and Karen Hamilton, Vice President of Sustainable Business, who kindly shared their unique perspectives and keen insights with us. Developed originally as part of an Executive Series intended to initiate discussions by Boards of Directors, such as those participating in the UN Global Compact LEAD/PRME Program, and senior managers on critical issues of the day, both the original (2013) and its revision (2015) are published by Hult International Business School. Used with permission.

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Notes

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  6. 6.

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  8. 8.

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  9. 9.

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  10. 10.

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  11. 11.

    Unilever Sustainable Living Plan. Retrieved from unilever.com/sustainable-living/uslp.

  12. 12.

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  15. 15.

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  16. 16.

    Unilever plc. www.unilever.com/Images/uslp-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf, p.11.

  17. 17.

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  18. 18.

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  19. 19.

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  20. 20.

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  21. 21.

    Unilever, plc. Retrieved from http.www.unilever.com/mediacentre/pressreleases/2013/UnileverSustainableLivingPlanhelpingtodrivegrowth.aspx.

  22. 22.

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  23. 23.

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  24. 24.

    Unilever plc. Annual Report 2014, p. 28. Retrieved from http://www.unilever.com/investor-relations/annual-reports-and-accounts/annual-report-and-accounts-2014.

  25. 25.

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    Unilever plc. Annual Report 2014, p.28. Retrieved from http://www.unilever.com/investor-relations/annual-reports-and-accounts/annual-report-and-accounts-2014/.

  27. 27.

    Unilever plc. Annual Report 2014, p.28. Retrieved from http://www.unilever.com/investor-relations/annual-reports-and-accounts/annual-report-and-accounts-2014.

  28. 28.

    Unilever’s Five Levers of Change. Retrieved from https://www.youtube.com/watch?jEaGM8kDac4.

  29. 29.

    Unilever plc. www.unilever.com/Images/up-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf, p.5.

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Correspondence to Joanne Lawrence .

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Appendices

Appendices

Appendix 1: Unilever’s Business Model: A Virtuous Circle of Growth

Our virtuous circle of growth describes how we generate profit from our sustainable growth business model.

Making sustainable living commonplace for our consumers is helping to drive profitable growth. By focusing on sustainable living needs, we can build brands with a significant purpose. By reducing waste and material use, we create efficiencies and cut costs. This helps to improve our margins. By looking at product development, sourcing and manufacturing through a sustainability lens, opportunities for innovation open up. And we have found that by collaborating with partners including not-for-profit organisations, we gain valuable new market insights and extend channels to engage with consumers.

Source: http://www.unilever.com/Images/uslp-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf (p. 14).

Appendix 2: Unilever’s Governance of Sustainability and Corporate Responsibility

Committee

Description

Unilever Leadership Executive

The Executive, led by the CEO, has responsibility for operational leadership of the business. The Executive has also overall responsibility for sustainability and corporate responsibility.

Corporate Responsibility Committee

Board committee consisting of Non-Executive Directors. This committee ensures compliance with the Code of Business Principles and oversees progress and potential risk regarding the Unilever Sustainable Living Plan. One of its priorities is to ensure that the Unilever Sustainable Living Plan is maintained through appropriate business strategies. The committee feeds back to the Board.

Unilever Sustainable Living Plan Steering Team

Chaired by the Chief Marketing Officer (CMO), contains senior leaders from a variety of corporate functions supporting the Unilever Leadership Executive. The team meets five times a year and is accountable for driving sustainable growth, and keeping the Board informed of emerging trends and potential risks associated with sustainability issues.

Unilever Sustainable Living Plan Council

Group of six independent external experts who advise and comment on progress regarding the Unilever Sustainable Living Plan and strategy.

Audit Committee

Board committee overseeing independent assurance with regard to the Unilever Sustainable Living Plan.

Global Code and Policy Committee

Chaired by the Chief Legal Officer, this committee oversees the implementation of Unilever’s Code of Business Principles.

Specialized Group: Sustainable Agriculture Steering Group

This group promotes sustainable supply chains and takes advice from Unilever’s Sustainable Sourcing Board of external experts.

Specialized Group: Safety and Environmental Assurance Centre (SEAC)

SEAC provides independent scientific evidence to help Unilever manage risk and environmental impact, including the development of relevant metrics and baseline measures (e.g., for environmental assessments).

  1. Source: Unilever Annual Report, 2014, p. 66

Appendix 3: The Unilever Sustainable Living Plan: From Seven (2010) to Nine Commitments (2013)

Commitment

Goal

Progress (2010–2014)

1. Health and hygiene

By 2020 we will help more than a billion people to improve their hygiene habits and we will bring safe drinking water to 500 million people. This will help reduce the incidence of life-threatening diseases like diarrhea.

397 million people reached through handwashing, sanitation, safe drinking water, oral health and self-esteem programmes (e.g., Lifebuoy handwashing campaign helped to reduce diarrhea and respiratory diseases, reaching 257 million people in 16 countries).

2. Nutrition

By 2020 we will double the proportion of our portfolio that meets the highest nutritional standards, based on globally recognized dietary guidelines. This will help hundreds of millions of people to achieve a healthier diet.

33% of portfolio by volume met the criteria for highest nutritional standards. (e.g., salt, saturated fat).

3. Greenhouse gases

Halve the greenhouse gas impact of our products across the lifecycle by 2020.

Greenhouse gas impact per consumer use increased by around 4% since 2010.

4. Water

Halve the water associated with the consumer use of our products by 2020.

Water impact per consumer use reduced by 2% since 2010 (e.g., laundry, washing).

5. Waste

Halve the waste associated with the disposal of our products by 2020.

Waste impact per consumer use reduced by around 12% since 2010.

6. Sustainable sourcing

By 2020 we will source 100% of our agricultural raw materials sustainably.

55% of agricultural raw materials sourced sustainably by end 2014 (e.g., 100% of palm oil; 87% of Lipton yellow tag tea sourced from Rainforest Alliance certified growers).

7. Fairness in the workplace

By 2020 we will advance human rights across our operations and extended supply chain.

85% of 200 key suppliers meet company’s mandatory responsible sourcing criteria.

8. Opportunities for women

By 2020 we will empower 5 million women.

Empowered 238,000 women, including training 70,000 Shakti micro-entrepreneurs in rural India to sell Unilever products.

9. Inclusive business

By 2020 we will have a positive impact on 5.5 million people.

Working in partnership, 800,000 smallholder farmers gain access to training and support.

  1. Source: http://www.unilever.com/Images/uslp-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf p.20–21; https://www.unilever.com/Images/ir_Unilever_AR14_tcm244-421557.pdf, p.11
  2. Note: In 2013, Unilever’s management increased the original seven Commitments of the Unilever Sustainable Living Plan to nine. The orginal seventh Commitment – Enhancing livelioods – was expanded to encompass more human rights issues, such as ensuring fair compensation, healthy and safe working conditions, and employee development, to more specificaly target women by upholding diverity and offering them opportunties, and to focus on bringing more people into the economy by helping to train and support smallholder farmers in particular.

Appendix 4: Unilever Sustainable Living Plan and the ESG Value Driver Framework

The ESG (Economic, Social and Governance) Value Driver Framework was developed by the Principles of Responsible Investment Management and the UN Global Compact to help companies communicate how sustainability- related actions link with business benefits. Following are examples from Unilever’s Sustainable Living Plan Reports for 2012–2014.

Growth

New markets and geographies

Gain access to new markets and geographies through exposure from ESG programmes

In 2012, efforts to save greenhouse gases by reducing hot water usage led to the successful rollout of dry shampoos in ten countries; use of “green”’ refrigeration won over major new retail customers in Denmark to carry Unilever products.

New customers and market share

Use ESG programmes to engage customers and build knowledge of expectations and behavior

Oral health campaign reached 50 million people between 2008 and 2012 and has led to increased toothpaste sales: e.g., Signal toothpaste up more than 22% since 2008, and helped to introduce the toothpaste into new markets, such as Cote d’Ivoire.

Dove soap’s “Free Being Me”’ campaign to build girls’ self-esteem grew from 20 countries to more than 70 in 2014, increasing brand loyalty and revenues.

In emerging markets, brands integrating sustainability such as Dove, Lifebuoy and Domestos grew faster than average.

Product and services innovation

Develop cutting edge technology and innovative products and services for unmet social or environmental needs

R+D efforts to reduce consumers’ water usage in water-stressed areas led to Lifebuoy Foam Handwash and Comfort One Rinse for laundry; to reduce waste and emissions, new packaging materials developed (bi-modal resins) that lighten weight and save shipping costs; waived exclusive rights to package-saving technology for Dove bottle that uses 15% less plastic to encourage other companies to use the technology; re-engineered aerosol spray system so that new compressed deodorant cans use half the propellant gas and 25% less aluminum than traditional cans, reducing carbon footprint by 25%.

Long-term strategy

Develop long-term strategy encompassing all ESG issues and shape material ESG communication based on value-driver framework

Unilever Sustainable Living Plan encompasses ESG elements and is integrated into strategy, operations and governance; human rights recently integrated more explicitly; company has a zero tolerance policy on forced labour, and trains employees on human trafficking prevention. Progress against financial and non-financial targets are included in annual report.

Return on capital

Operational efficiency

Enable bottom line cost savings through environmental operations and practices (e.g., energy, water, waste efficiency, less raw materials used)

Eco-efficiency programme addressing water, waste, energy and materials has avoided costs of €400 million since 2008; coordinating transport, managing logistics and using lower emissions vehicles has resulted in additional savings. By January 2015, greater focus on eco-production led to all 240 factories achieving zero non-hazardous waste to landfill.

Human capital management

Attract and retain better and highly motivated employees by positioning company and management as ESG leaders

Ensures that “employer brand” has sustainability at its core: voted No.1 FMCG employer of choice among graduates from 32 countries.

Facebook global careers page has attracted 100,000+ likes. Third most in-demand employer on LinkedIn’s global in Demand index, only behind Apple and Google. Two million job applications received in 2014.

Engages employees regularly: 2014 Global People Survey had 75% engagement score – in line with high-performing employers in class.

Reputational pricing power

Develop brand loyalty and reputation through ESG efforts that garners customers’ willingness to pay price increases or premium

In consumer marketing, the effect of multiple touch points helps to create pricing power. Unilever seeks ways in which its holistic activities–, of which sustainability is a key part – are affecting consumers’ loyalty. E.g., Kissan ketchup focused Indian consumers on its 100% real ingredients, propelling the brand to market leadership; Knorr s first ever ‘on pack’ sustainability logo improved its brand equity in Germany.

Risk management

Operational and regulatory risk

Mitigate risk by complying with regulatory requirements and industry standards by addressing ESG issues in policies, systems and standards and engaging with employees

Unilever helped found industry wide initiatives such as the Roundtable on Sustainable Palm Oil and Marine Stewardship Council to set standards for these critical resources. It ranked first of 152 companies in combating deforestation by the Carbon Disclosure Project (CDP), securing its supply chain.

Reputational risk

Facilitate uninterrupted operations and entry into new markets using local ESG efforts and community dialogue to engage citizens and reduce local resistance; avoid negative media publicity and NGO boycotts by addressing ESG issues

Unilever engages with local constituents regularly, building trust and reputation (e.g., partnering with governments and NGOs in its “Help a Child Reach Five” handwashing campaign; with UNICEF and water and deforestation initiatives.) Sector leader in the Dow Jones Sustainability Index (DJSI); ranked No. 1 by Globescan/SustainAbility as sustainability leader for the fifth year.

Supply chain risk

Secure consistent and long-term access to high-quality raw materials and products by engaging in supply chain community welfare and development

Working with smallholder farmers and local distributors to develop sustainable agricultural practices; ensuring traceability of raw materials (e.g., palm oil, soy, tea and cocoa) helps to secure supplies; its Responsible Sourcing Policy requires suppliers to comply with such principles as fair compensation, voluntary employment, and health and safety standards, and, in some cases, to submit to third party audits.

Leadership and adaptability

Develop leadership skills and culture to adapt to fast changing political, social and environmental situations

The Sustainable Living Plan is incorporated into management training and compensations programmes; the company offers flexible working hours, job sharing, maternity and paternity leave (women up to 43% workforce in 2014) to attract and retain women.

  1. Source: Unilever Sustainable Living Plan Report 2012; Annual Report, Sustainable Living Report, 2014

Appendix 5: Consolidated Income Statement and Key Indicators Since USLP Launch

Statement of comprehensive income

2010

2011

2012

2013

2014

Turnover (€ million)

44,262

46,467

51,324

49,797

48,436

Operating profit (€ million)

6325

6420

6977

7517

7980

Core operating profit (€ million)

6017

6276

7050

7016

7020

Profit before tax (€ million)

5951

6066

6533

7114

7646

Net profit (€ million)

4465

4491

4836

5263

5515

Diluted earnings per share (€)

1.42

1.42

1.50

1.66

1.79

Core earnings per share* (€)

1.31

1.37

1.53

1.58

1.61

Key financial performance indicators

 

2010

2011

2012

2013

2014

Underlying sales growth (%)

4.1

6.5

6.9

4.3

2.9

Underlying volume growth (%)

5.8

1.6

3.4

2.5

1.0

Core operating margin (%)

13.6

13.5

13.7

14.1

14.5

Free cash flow (€ million)

3365

3075

4333

3856

3100

Non-financial indicators

2010

2011

2012

2012 (1)

2013 (1) (2)

2014 (1) (2)

CO2 from energy (kg/tonne of production)

133.59

118.31

99.97

104.23

98.85

92.02

Water usage (m3/tonne of production)

2.68

2.4

2.23

2.27

2.12

2.01

Total waste sent for disposal (kg/tonne of production)

6.48

4.96

3.85

3.94

2.27

1.19

Total recordable accident frequency rate (TRFR) per 1,000,000 h

1.63

1.27

1.16

1.17

1.03

1.05

(1) In 2013 we adjusted our reporting period from 1 January – 31 December to 1 October – 30 September. We also show the prior 12 months to enable a like-for-like comparison, presented as 12(1). (2) PricewaterhouseCoopers (PwC) assured

      

For details and the basis of preparation see: www.unilever.com/ara2014/downloads

  1. Source: http://www.unilever.com/Images/charts_2005-2015_ar14_tcm244-416973_en.pdf

Appendix 6: Share Price Versus Market Index

2 graphs and 2 tables. The share versus market index presents two lines in each of the graphs with an increasing trend. Table 1 plots the N.V. and P.L.C. share prices in New York and London, respectively, in two tables of 11 columns. Table 2 plots the share price versus the market index.

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Lawrence, J., Rasche, A., Kenny, K. (2019). Sustainability as Opportunity: Unilever’s Sustainable Living Plan. In: Lenssen, G.G., Smith, N.C. (eds) Managing Sustainable Business. Springer, Dordrecht. https://doi.org/10.1007/978-94-024-1144-7_21

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