This story is one of 24 outstanding entries selected as finalists in the Long-Term Capitalism Challenge, the third and final leg of the Harvard Business Review / McKinsey M Prize for Management Innovation.
Unilever is the second largest FMCG company in the world, with a huge environmental and social footprint. We are committed to growing in all our markets, but believe that growth and sustainability must go hand in hand. Paul Polman, Unilever’s CEO, has spoken of the need for a new type of capitalism that delivers for society as well as the business. His words have been backed with action at Unilever. We have moved away from quarterly profit reporting; aligned management incentives for the long term; and invested heavily in R&D to build our pipeline of innovations.
The Unilever Sustainable Living Plan was launched in 2010 and commits the company to rally round some big goals for 2020, including:
- help more than a billion people take action to improve their health and well-being;
- halve the environmental footprint of the making and use of our products; and
- source 100% of our agricultural raw materials sustainably.
Crucially, this strategy sets targets right across the value chain, from sourcing to consumer use and disposal of the everyday household products that we make, such as soaps, shampoos and tea. We have made the Unilever Sustainable Living Plan part of our vision and put it at the heart of our strategy, and it is now becoming clear that sustainability is helping to drive our growth.
In a world where temperatures are rising, energy is increasingly expensive, sanitation is worsening and food supply is less secure, Unilever believes that business needs to be part of the solution, not the problem. Unilever is proud of having been at the forefront of many environmental and social initiatives over the last 100 years that reflect the vision of our founders to ‘do well by doing good’. Unilever believes that businesses can and must take a leadership role in creating a more sustainable world – environmentally, economically and socially.
Unilever has more than 400 brands focused on health and wellbeing, 12 of which generate sales in excess of €1 billion a year. Our portfolio ranges from nutritionally balanced foods to indulgent ice creams, affordable soaps, luxurious shampoos and everyday household care products. We produce world-leading brands including Lipton, Knorr, Dove, Axe, Hellmann’s and Omo, alongside trusted local names such as Blue Band, Pureit and Suave.
On any given day, two billion people use our products, which are sold in more than 190 countries.
In 2011 our worldwide turnover was €46.5 billion and more than 171,000 people work for Unilever.
Our decision to develop a Plan to drive sustainability into the heart of our business has evolved from a long history of responsible business practices.
In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap – a revolutionary new product that helped popularise cleanliness and hygiene in Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products'.
This was long before the phrase 'Corporate Mission' had been invented, but these ideas have stayed at the heart of our business ever since. We’ve led the field in many aspects of sourcing and worked on sustainable agricutlure for over 16 years. Early successes in eco-efficiency in manufacturing and product innovation have also helped to fuel our progress.
In November 2010, we brought together a number of different initiatives into a single strategy - the Unilever Sustainable Living Plan. This has around 60 specific targets spanning the three pillars of: i) improving health and well-being; ii) reducing environmental impact; and iii) enhancing livelihoods, all to be achieved by 2020.
The Plan builds on our history, but two triggers can be identified that helped its evolution.
Firstly, we developed a real understanding of the full extent of all our impacts. During 2009-2010, we measured the environmental impact across the product lifecycle of over 1,600 products in 14 countries using metrics for greenhouse gas emissions, water and waste. This allowed us to understand the size and scale of our impacts across the value chain by product category, and prioritise our actions. Crucially, we realised that much of the impact of our products lies outside our direct control - such as sourcing raw materials and how consumers use our products at home.
Secondly, we recognised that the business case for embedding sustainability into our brands is increasingly strong:
- A small but growing number of consumers around the world are seeking the assurance that the products they buy are ethically sourced and responsibly made. A more sustainable brand is often a more desirable brand.
- Many retailers have sustainability goals of their own and need the support of suppliers like Unilever to implement them. This collaboration is deepening the relationships we have with our retail customers.
- Sustainability is also a fertile area for both product and packaging innovation. It is allowing us to deliver new products with new consumer benefits.
- Sustainability can help to develop new markets. Over half Unilever’s sales are in developing countries, which often face the greatest sustainability challenges. We believe that new products that help people adapt to the changing world will drive growth.
- The evidence also shows that it can save us money. Managing our operations sustainably reduces energy, minimises packaging and drives out waste. It not only generates cost savings, it can also save consumers money.
- Sustainable living can also inspire our people. Our vision to create a sustainable, growing business is motivating for our employees and appealing to people who are considering joining the company.
Unilever is harnessing sustainability to drive business growth. Innovative approaches to business management are helping us achieve this in five main ways.
- We have adding sustainability to the innovation process by integrating a sustainability mindset into our approach to product innovation. We have developed a set of proprietary tools to allow project teams and brand leaders to evaluate environmental impacts early in the development phase of new products and at every critical stage of the innovation process. We have committed a significant proportion of Unilever’s R&D budget to finding radical new technologies to address our sustainability targets.
- We are incentivising leadership on sustainability targets: The delivery of the Plan forms part of the personal work objectives of our Chief Executive Officer and our Chief Marketing Officer. Others have targets linked to specific areas of the Plan. Sustainability is championed and led by members of the Unilever Executive team.
- We are ensuring that there is ownership by the brand and category. Our global sustainability team works with brand teams to identify key sustainability priorities for every product category in our portfolio. The brand leadership teams are now responsible and accountable for reaching our targets.
- We are using the Plan as a platform for engaging our employees. A skilled, motivated and engaged workforce is essential to achieving our ambitions. We have appointed around 100 sustainability champions to promote and lead our sustainability strategies in every key function (e.g. R&D and packaging), category (food, home and personal care) and country.
- An open approach to new ideas is integral to reaching the goals we have set. We cannot deliver by our own actions alone. Working with others outside of the business forms a key plank of our work. As one example, in April 2012, we convened the Sustainable Living Lab – a 24-hour, live dialogue on sustainable living where we could learn from experts, co-create leading-edge ideas and share good practice. Over 2,300 people in over 70 countries signed up to take part. This type of collaboration – reaching outside of the business to harness the insights, networks and skillsets of others – will continue to be a major area of work for us in the years to come. It not only enhances our innovation, but can help us to realise the goal of sustainable growth
1884 - Lever & Co starts producing Sunlight soap with the mission "to make cleanliness commonplace; to lessen the work for women; to foster health and contribute to personal attractiveness that life may be more enjoyable and rewarding for the people who use our products"
1905 - Lever Brothers and Van den Bergh and Jurgens – the forerunners of Unilever – take hygiene and nutrition to the developing world
1926- Lever Brothers launches its Clean Hands campaign to educate children about dirt and germs and to encourage them to wash their hands "before breakfast, before dinner and after school". Lever Brothers and Margarine Unie join to create Unilever
1935 - During the Great Depression Unilever produces soap flakes and powders to make washing easier, and also fortifies margarines with vitamins A & D
1941 - Lifebuoy soap sponsors mobile bath units during the London blitz for people whose houses had been bombed
1955 - Fish fingers introduced in response to the need for nutritious food appealing to children following post-war food rationing
1971 -Unilever acquires Lipton tea, making it a leading beverages company
1984 - Unilever starts to focus on Foods and Home and Personal Care products
1995 - Sustainable Agriculture Initiative begins
1996 - Fish sustainability initiative sets long-term goal of sustainable sourcing; Marine Stewardship Council co-founded with WWF; First environmental report published containing eco-efficiency indicators
1998 - First agricultural pilot project begins
2000 - Project Shakti launched in India to increase rural distribution and help create women entrepreneurs; Sustainable Agriculture Advisory Board established; First social report published
2002 - Lifebuoy Swasthya Chetna handwashing campaign launched in India
2003 - Business Partner Code introduced; Good Agricultural Practice Guidelines published for all key crops
2004 - Roundtable on Sustainable Palm Oil established
2005 - Nutrition Enhancement Programme begins; Joint research published with Oxfam on the links between wealth creation and poverty reduction
2006 - Round Table on Responsible Soy Association established; Choices nutrition labelling launched; Shakti – our rural sales initiative in India – reaches 100,000 villages through 30,000 entrepreneurs
2007 - Nutrition Enhancement Programme completed; Lipton sustainable tea partnership with Rainforest Alliance launched; Independent study on the impacts of our South Africa business completed
2008 – Unilever commits to source all our palm oil from certified sustainable sources by 2015; Lifebuoy co-founded the first-ever Global Handwashing Day; Named food industry category leader in the Dow Jones Sustainability World Indexes for the tenth year running – the only company ever to have achieved this
2009 - Launched Compass vision to double the size of our business while reducing our overall environmental impact across the entire value chain; New 'Heart Age' tool attracted around 1.5 million people to assess their cardiovascular risk factors; Launched global 'Brush Day and Night' campaign with FDI World Dental Federation
2010 - Published the Unilever Sustainable Living Plan with over 50 targets that will help more than one billion people take action to improve their health and well-being, halve the environmental footprint of the making and use of our products and source 100% of our agricultural raw materials sustainably by 2020
2011- Released a report on first year progress against the Sustainable Living Plan targets; and held an online collaboration - the Sustainable Living Lab
Without doubt the greatest challenge we have faced in implementing the Plan has been in tackling those areas outside of our direct control where we need to work with others to find solutions.
This applies upstream with our suppliers as well as downstream with our customers and the consumers who cook, clean and wash with our products at home.
Firstly, with suppliers, we’ve kick started a number of partnerships to tackle shared issues. For example, our project with the Dutch Sustainable Tea Initiative (IDH) enabled us to engage nearly 180,000 smallholder farmers in improving their farming practices with a view to achieving Rainforest Alliance certification. We also work with the Kenya Tea Development Agency (KTDA) and other partners to train smallholder farmers in sustainable tea cultivation. We have developed the Cool Farm Tool - a greenhouse gas calculator that enables farmers to work out the best way to reduce their emissions. We have made the tool available free on an open source basis and a number of companies are now using it.
Looking downstream, things have been more tricky. Some of our targets require consumer behaviour change, such as reducing the use of heated water in showering and washing clothes, and encouraging people to eat foods with lower salt levels.
We’ve published our own approach to enabling consumer behaviour change – the Five Levers for Change – but recognise that we have much more to learn and do in this area.
Partnerships have helped us to make a start. For example, we joined together with Walmart to encourages Americans to save water through our Suave shampoo brand. In the UK, we partnered with Tesco to launch ‘A Better Future Starts at Home’, a four-week initiative to encourage consumers to buy more sustainable products and live more sustainably.
When we launched the Plan, we said that we didn’t yet know how we would meet some of the goals we had set. But you have to set uncomfortable targets if you are to really change things. Although the goals sometimes seem daunting, we continue to learn as a business, develop new approaches and collaborate with others on our journey to achieving them.
After one full year of delivery on the Plan, we’ve been able to point to some successes. For example, 64% of palm oil now sourced sustainably; we’ve made some good progress in reducing saturated fat and eliminating trans fat in our products; 100% of our electricity purchased in Europe is now from renewable sources; and 35 million people have gained access to safe drinking water from our Pureit home water purifier since 2005.
We are also able to point to evidence that the Plan is helping drive both growth and profitability for Unilever as a business. The brands which are building sustainability into their offer all performed well. For example, Lifebuoy soap, our concentrated liquid detergents and Comfort fabric conditioners all grew double digit in 2011.The eco-efficiency programmes in our factories have continued to deliver good levels of savings and our efforts to reduce the amount of packaging that we use have also cut costs.
In 2011, Unilever’s underlying sales growth was 6.5%, its market shares improved and its operating margin was broadly stable. That why we’ve said that we see no conflict between sustainability and profitable growth: they are mutually supportive.
Sustainability is helping to drive our growth because we have aligned our sustainability strategy with that of the business. This is a key lesson for Unilever. The needs of society and the business can and must be aligned for an effective strategy that delivers to both.
Secondly, we’ve learnt that big, bold goals can help to motivate those that work for and with us. But ambition must be backed up by action: alignining executive renumeration; stimulating the innovation pipeline; building the offer into the brands; and harnessing the skills and enthusiasm of people.
Finally, we’ve learnt that collaboration and co-creation needs to be at the heart of a new way of doing business in the twenty-first century. By working with others, we can scale-up our positive impacts; extend our reach into new areas; harness the collective skills and influence of different players; and work together to create a more sustainable future for all.
Paul Polman, our Chief Executive Officer has driven this agenda internally and externally with an enormous amount of energy and passion. But I know if I asked him he would say it's been a team effort, and there are thousands of people across the business who are working to make our ambition a reality.