Unilever has set a target to double the size of its business by 2020 at the same time as cut its environmental impact by half. Forum for the Future's Martin Wright speaks to Unilever ceo Paul Polman about the bold move.
For years, Unilever has enjoyed a reputation as the quiet giant of sustainable business.Trying to do the right thing, in a cautious, unflashy manner. Diligent, if a touch dull. The kind of business you could take home to meet your mum… When it did put its head above the parapet, it made sure it was in good company. Initiatives such as the Marine Stewardship Council or the Roundtable on Sustainable Palm Oil were object lessons in careful consensus-building. This was not a company in danger of suffering from tall poppy syndrome.
But in the last two years, something has happened that very few expected. Unilever’s broken cover. It has trumpeted some extraordinarily bold targets, notably that of doubling the size of the business by 2020 – while reducing environmental impact by half. That’s the kind of target which would, assuming they took it seriously, have most ceos waking up in a cold sweat. And it’s not the only one. Other flagship goals included in the company’s Sustainable Living Plan include commitments to bring clean water to half a billion people, and ensure every one of the thousands of ingredients used in its products is sustainably sourced.
If Unilever hits these targets, then such is its size and influence that it will have done more than any other company, ever, to shift the world economy to a more sustainable footing.
If it misses them, it will not only be pilloried with cries of "I told you so": it will also provoke a surge of cynicism over the potential of business to do good.
No one embodies the company’s new-found passion for public commitments more than ceo Paul Polman. Joining Unilever in 2008, after a professional lifetime with arch rivals Proctor and Gamble and, more recently, Nestlé, he became chief executive one year later.
I meet him in the rooftop offices at Unilever House, overlooking the Thames. Below us, builders at Blackfriars station are starting work on the world’s largest solar bridge; across the river, London’s latest, tallest skyscraper, The Shard, pierces the skyline. There must be something in the air on this stretch of the river which encourages bold ambition…
First impressions of Polman are of a very tall, unstuffy man, without a hint of the overbearing ceo I was half expecting. Then he sits back, stretches out his legs – and imposes himself on the conversation with the passion of an activist. Polman’s words come in a fluent torrent, with just enough quirks in accent and phrasing to betray his Dutch homeland. I don’t think I’ve ever met a more talkative ceo – or one harder to interrupt once he’s warmed to his theme…
I start by asking him about the experience of setting that 2020 target…
Q: It must have ruffled a few feathers when you were discussing it internally. How easy was it to get everyone on board?
A: Well, it wasn’t the easiest target to set! It is audacious, and, yes, it makes people feel a little bit uncomfortable. But if you don’t start with something uncomfortable, I don’t think you’re moving the needle far enough… We live in a world where resources are scarce, and we cannot keep stealing [them] from our children and grandchildren. So the biggest thing the world needs right now is courage to do the right thing – at a political and business level.
But at the end of the day we have to convince our investors that it’s also a good business model for growth. That’s why I always emphasise that we’re doubling our business, otherwise it doesn’t work. [And then I point out] that by decoupling growth from environmental impact, we actually accelerate our innovations and so we grow faster. And because we set our standards higher and build them into our business plans, we look at our cost structures differently. To give one example: the yield from sustainably sourced palm oil is three times higher than that from [palm oil from illegally deforestated land], so we get better sourcing at lower costs.
But we can’t make the changes we need to on our own. Say we hit all our own targets, but nothing else has changed around us, then we’ll have failed. In our own factories, we’re responsible for around three million tonnes of CO2. But if we add in suppliers and consumers, it’s around 300 million. Now, we’re [on track to] reduce our own emissions by 50-60 per cent, but if we take the whole value chain and achieve cuts of just 10 per cent, that adds up to 10 times what we can do ourselves. So we have to galvanise change right across industry, and right down the value chain, and we really have to involve consumers.
Q: You’ve talked a lot about the growing clout of consumers – is this really making a difference?
A: Definitely. Today’s consumers have tremendous power. There are 750 million people on Facebook, making it the third biggest 'nation’ in the world; 200 million on Twitter and growing fast. And they’re increasingly aware of their connectivity and the power that brings. We’ve already had the first internet revolution [in the form of the Arab Spring].
Sure, there were food price increases, there was corruption, youth unemployment – but frankly all that had been there for a long time. Why now, and why so fast? It can really be traced back to a few people on the net. Now, if they can bring down a government in weeks, they can bring down a company in seconds…
But on the other hand, if we can harness that power, we are in an ideal position to be a force for good. Unilever has two billion consumers using our products every day. No nation state can reach that many people!
Q: Talking of your products, let’s take Pot Noodle: a very popular, very successful Unilever brand, and the butt of a lot of jokes, too! Are you really reaching the consumers of Pot Noodle with a sustainability message?
A: Increasingly so. But if I may, I will not take Pot Noodle as the best example, but rather Ben and Jerry’s…
Q: Yes, but that’s the easy one! Everyone knows Ben and Jerry’s as the ethical ice cream brand…
A: Yes, but I’m using that as the example because that [embodies] the high standard of ethics we want to achieve across all our brands. Each should have a social mission, a product mission and an economic mission – and they should [complement and support] each other… [The most important aspects for consumers] are price and performance, but increasingly we are able to get other benefits through to them, too. Let’s take the whole Knorr brand [including] Pot Noodle. Consumers are telling us that sustainably sourced vegetables and fruits translates as better taste. It is the same with Lipton Tea: when we achieved the Rainforest Alliance certification, we saw our business growing in all the countries in which we did it, and consumers feeding back that the tea tastes better.
Q: Most people only know these as individual brands. They don’t identify them as Unilever products; it still isn’t exactly a household name. So will the word 'Unilever’ ever feature more prominently?
A: Yes, I think that by 2020, people will be saying, "I’m not only buying into what the individual brands stand for, but what the company stands for". So yes, that’s the Unilever brand I’m talking about.
Q: Let’s talk a bit about India. You’ve got some great initiatives there, like Shakti Amma [which fosters a network of village-level women entrepreneurs]. But how do you find the experience of promoting the whole sustainability agenda in
India – or any developing countries, come to that – compared to the more environmentally-aware West?
A: I’m not so sure we are more 'environmentally aware’! If everyone consumed like Europeans, we would need three planets. We may be very good at verbalising [sustainability], but we’re not very good at living it. So be very careful there! You talk to any Indian, even the emerging middle class, and they’ll tell you what drought means to them. Farmers will tell you what falling water tables mean. They may not dress it up in triple bottom line language, but they know what is happening to them – more so than most people realise.
So we have to address that. I talk to many Indian people who say, "I can only shampoo once a week; I would like to do it more often for my own dignity, but I just simply don’t have the water." That’s why we introduced the [Suave brand] waterless shampoo… And in Indonesia, one of our big fabric softeners is Molto, which cuts the number of rinse [cycles] needed from three to one. Consumers there might not [describe this feature as] sustainable, but, boy, do they understand the benefits of it.
Now interestingly, in these parts of the world, people have a higher expectation that companies, not governments, will provide solutions. Because for many years, they have had governments that were either corrupt, autocratic or simply not delivering. So, they are not so cynical about the role of business as people here can be.
Q: All the same, there’s a lot of pretty unconstrained growth happening in such places, too. Can it really be sustainable?
A: Well, there’s incredible consumer demand coming onstream from countries like China, India, Indonesia, Brazil – partly because of population growth, partly because of rising standards of living. Now, if it’s mindless consumption like we see in the West, it’s not going to be very pretty. So we have a unique opportunity to reinvent consumption; to bring about what we could call 'mindful consumption’.
We’re looking for what you could call a 'virtuous cycle’ of growth. We have a target to bring 500,000 smallholder farmers and small-scale distributors into our supply chain by 2020. This will not only help them improve their livelihoods, and address the issue of food
security and malnutrition, but it will also create micro communities that are then increasingly buying our other products. In Indonesia, I visited a group of 7,000 smallholders, and I got tears in my eyes listening to their testimonies about the opportunities that we gave them. And it’s not just food. We have programmes there like 'trashion’, where we help [train local women as entrepreneurs making bags and shoes from recycled packaging]. And not surprisingly, these people feel loyal to Unilever, and that means they are more likely to buy our products. So we are creating a market through our suppliers. That’s the virtuous cycle of growth we are after.
Now when it comes to the governments of places like India and China, we are very clear that they need to take a bolder stance on sustainable sourcing. They cannot keep importing tremendous amounts of palm oil from deforested sources, for example. They are mature enough to extend their influence beyond their own boundaries. And we need them to do so, especially as we see some of the Western countries shrinking or becoming preoccupied with their own issues. With size comes responsibility. This is true for Unilever, but it’s also true for some of these emerging countries. That’s exactly the discussion we have in Indonesia or in China and India.
Q: How do governments there respond to you saying that? You must meet some resistance…
A: It’s not the response in meetings that I’m worried about, it is the actions that result. On a rational level, people broadly agree with everything that we are trying to achieve. When it comes to implementation, it’s harder. There are often different interest groups... [But] I was with the President of Indonesia last week, and we were talking about deforestation. He’s concerned about the image of Indonesia as one of the world’s biggest carbon emitters [because of forest loss]. So support from industry actually helps him to move faster [on tackling it].
Interestingly, the 2008 financial crisis had a big impact in China and India, from governments to consumers. [For years] they had been taught by the IMF and others to mimic the Western model of capitalism. But the crisis really made them question it, and ask what wealth creation actually is.
Q: Sounds like a classic case of crisis bringing opportunity…
A: Well, there’s nothing better than a burning platform to galvanise change! I have always said that it was as much an ethical crisis as it was a financial one. I think it’s very clear that any system where the benefits of risk accrue to just a few people, but the costs are borne by the whole of society, is just not sustainable. Overall, I think it did two things: first, it made people look again at what I call the 'real economy’, which includes our very humble sector of growing some materials, putting them into packages and selling them under the Knorr brand or the Lipton brand, etc. It actually increased people’s interest in working in sectors like ours.
Secondly, it galvanised some change in the financial sector. The 2008 crisis was partly a crisis of short-termism. (This is equally true in politics, incidentally. The election cycles mean short-term issues are always the dominant ones. I saw a quote once from the Luxembourg finance minister, who said: "Every politician knows what is right, but equally knows that if you do what is right you won’t get re-elected.")
Now our business model is a long-term one. It takes longer than three or six months to get results. So we’ve stopped doing quarterly [financial] reporting, we’re focusing on communicating our long-term goals much more clearly, and we’ve found our investor base increasingly understands them – and indeed, that they want a longer term model of value creation. And that doesn’t have to involve a compromise in business success. We’ve seen a re-rating in the Unilever share price. We are out-performing the market and our competitors. So these things don’t have to be trade-offs.
I think this is a great time for brands which can provide a beacon of trust for consumers. These days, ceos don’t just get judged by how well their share prices are doing, but by what impact they are having on society. No ceo will ever be remembered for the market share during their tenure. But if you can have an impact which touches the broader society, it’s not only energising for people that work here, but your life has just that little more meaning.
Of course, there’s still an awful lot of cynicism and scepticism out there, among the press, the 'thought leaders’. They don’t understand what companies like ours are trying to do.
But I always say to the sceptics, "What’s your alternative?" And if it’s better than what we’re currently doing, we’ll be the first to listen. This is a book that still has to be written, and we are educating ourselves very fast.
The Unilever Sustainable Living Plan
Comprises 50 targets to be achieved by 2020, with the overall aim to:
• help more than one billion people improve their health and wellbeing
• halve the environmental impact of our products
• source 100 per cent of our agricultural raw materials sustainably.
It goes far beyond conventional corporate goals, including targets on "halving the water associated with the consumer use of our products", bringing 500,000 small farmers and distributors into the Unilever supply chain, and making affordable water purification kits available to 500 million people.
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