The consumer goods multinational is making progress in its own operations but calls for deeper collaborations across society if transformational change is going to be achieved.
Unilever CEO, Paul Polman, is recognized as the standard bearer for the corporate sustainability movement but do the actions of the multinational company he leads match his calls for radical action?
The consumer goods giant has just published its second annual sustainability progress report and it’s a story of both highs and lows.
The company continues to make progress in embedding social and environmental considerations into its own operations. For example, all US operations now buy their energy from renewable sources and more than half its sites around the world have achieved zero non-hazardous waste to landfill.
But the company also admits its broader influence is limited and the complexity and scale of sustainability challenges across society means that much deeper collaborations are needed if there is going to be transformational change. Polman is particularly critical of the inaction by governments to deal with climate change.
He says: “In areas where big breakthroughs are needed, we must step up joint working with others. Making more progress on healthy eating, for example, will require action across the industry whilst governments will need to take a bigger lead on action to combat climate change and decarbonise energy supplies.”
Changing consumer behaviour: an uphill struggle
Where the company continues to struggle, in particular, is in finding effective ways of encouraging consumers to take sustainability more seriously. For example, despite the obvious environmental advantages, Unilever says many consumers still shy away from buying refillable pouches for products.
It is also finding it hard to convince consumers to accept lower salt in its products. In fact, people are so hooked on the taste that even when it reduces the salt content, people often compensate by adding salt at the table.
Integrating finance and sustainability
Perhaps the most important progress over the past 12 months is that Unilever is finally starting to integrate its financial and sustainability management and reporting, which until now have been dealt with separately.
…Unilever has an ambition to create monthly combined internal reports to drive better performance.
While some companies are edging towards the idea of producing an integrated annual report, Unilever has an ambition to create monthly combined internal reports to drive better performance. A dedicated sustainable finance director has been appointed, who reports into the group finance controller, and 400 finance executives will be meeting next month to help move this agenda forwards.
Veteran campaigner, Jonathon Porritt, who heads up Forum for the Future and is on Unilever’s external advisory board, says this is a critical step: “By any reckoning, this is one of the most ambitious ‘change management’ programmes going on in any big company today.
“As this report shows, progress is good, and some individual projects are hugely inspiring. But there is still a long way to go before the sustainable living plan is lived and breathed by every single part of the business.
“For instance, it’s only in the last couple of years that finance has seriously addressed the challenge of aligning all those processes focused on ‘the numbers’ of the plan. Doubling the size of the company and halving the footprint have to become one and the same ambition – not separate drivers.”
The business case for sustainability
One reason the company is more comfortable integrating its social and environmental responsibilities with finance is because it believes it is now able to show that sustainability is driving innovation, which in turn is helping the company become more profitable and resilient.
Polman says: “Sustainability is contributing to our virtuous circle of growth.”
Polman makes this clear when he says: “Sustainability is contributing to our virtuous circle of growth. The more our products meet social needs and help people live sustainably, the more popular our brands become and the more we grow.
“And the more efficient we are at managing resources such as energy and raw materials, the more we lower our costs and reduce the risks to our business and the more we are able to invest in sustainable innovation and brands.”
Another reason progress has been made possible is that the company’s sustainability strategy has been further decentralised, with individual brands building sustainability into their “brand love key,” which describes what the brand stands for and informs strategy and target setting.
The company has also reduced risk at a time of volatility in food commodity prices by increasing its purchases of agricultural raw materials from sustainable sources from 14% in 2010 to 36% in 2012 with particular progress in palm oil, sugar, cocoa, vegetables and sunflower oil.
Other changes over the past 12 months include recognizing the need to place more attention on human rights and supporting women in developing countries.
A new vice-president for social impact has been created to help implement the UN’s Guiding Principles on Business and Human Rights, and to look at supporting the development of women entrepreneurs and smallholder farmers.
An honest reflection
The Unilever annual update stands out from the majority of companies by being honest about the challenges it faces. There are many examples of this in the report, including the recognition that if it is to help more than a billion people improve their hygiene habits, then it needs to develop a more holistic approach to the inter-related issues of water, sanitation and hygiene.
Malini Mehra, founder and CEO of the Centre for Social Markets in India, who is an external advisor to Unilever, says: “In a world of fakery and greenwash, Unilever stands tall for being different. This is not a report that shouts ‘we got it all right’ but dares to say, when it needs to, ‘we’re not on target – yet’ and ‘we find this very difficult.’
“This modesty is entirely appropriate for the times. Today’s readers don’t want tough challenges hidden from view. They want to know what they are and how the company intends to address them. For example, how to deliver on the social dimensions of sustainability — something that requires more complex socio-cultural interventions. Or how to reduce growing inequalities and wealth gaps — which will as profoundly affect the context Unilever works in globally as much as resource security.”
This article was originally published on the Guardian
Jo Confino is an executive editor of the Guardian and chairman and editorial director of Guardian Sustainable Business. He also advises Guardian News & Media and Guardian Media Group on their sustainability strategies.