In early 2022, consumer products giant Unilever came under fire from Terry Smith, one of the UK’s top investment managers of recent decades. He criticised the firms performance, suggesting it had become distracted by its focus on sustainability. And, he said, why did Hellmann’s mayonnaise need a “purpose.” We all know what mayonnaise if for – “spoiler alert, salads and sandwiches”, he said.
Actually, I thought Unilever’s “purpose” for Hellmann’s was quite clever. It reduces food waste by helping make left-overs tastier, said the firm. Put some on that bit of slightly curling lettuce and eat it rather than throwing the greenery in the bin.
But it looks like the new CEO of Unilever might agree to some extent at least with Smith. In his results presentation the other day, he announced changes to the firm’s approach to sustainability. Hein Schumacher, who took over in July, talked about simplifying the firm and focusing on key brands. He also signalled that “purpose” was not going to be key for every product. When done well, and with credibility, it can be highly effective, he said, citing examples such as Dove and Lifebuoy.
“But we will not force fit this across the entire portfolio, for some brands it simply won’t be relevant and that’s okay,” he added. And he does not think that Unilever’s approach has “advanced the cause of purpose”. He wants to have an overarching purpose and sustainability agenda for the business, which brands will support, but without integrating a social or environmental purpose into every brand proposition.
He also suggested that the firm had spread its sustainability work too thinly. “We have too many long-term commitments that failed to make a sufficient short-term impact.” You can see what he means – but the fact is that many sustainability initiatives, whether it is improving working conditions in the agricultural supply chain, or developing new packaging materials, are inherently long-term. So I do wonder what this will mean to the work the firm is currently doing.
This is significant because Unilever was a clear leader in its industry and more widely in terms of sustainable and purposeful business. Paul Polman back in 2010 was one of the first big firm CEOs to make bold statements about sustainability targets, and I believe the firm has more mentions in the Procurement with Purpose book than any other business. So this is all a little worrying for supporters of this agenda. However, sustainability does have to deliver for the organisations supporting it as well as benefitting the wider “planet and its people”. Purpose has to have a purpose in the eyes of shareholders, if you want to look at it that way.
Schumacher talked of “radically focusing our sustainability efforts”. He will accelerate the efforts but with a short term focus - he does not want a lot of “aspirational goals that are so long term none of us will be around to be held to account for them”. Maybe that is a bit of a dig at his predecessors. And he defines the priority areas as “climate, nature, plastics and livelihoods”.
What confuses me here is how that list is really very different from current focus? If you look at the whole “purpose” agenda, pretty much everything we might consider, from human rights or diversity in the supply chain to water management and biodiversity can fit into one of those four buckets. So one big question for Unilever is this - “what sustainability work are you going to stop doing”?
But Unilever is also facing renewed criticism over its position with regard to Russia. It continues to operate there, paying millions in taxes which in some sense support Putin and Russia’s invasion of Ukraine. The firm says it has a responsibility to its staff in the country; but it has been observed that Unilever seems quite happy if its staff are conscripted into the Russian army, which hardly speaks of a deeply caring approach. Schumacher made this disappointing statement last week, which says nothing really.
“I have now had the opportunity to review the presence of our business in Russia and I have listened carefully to our stakeholders and many experts on this matter. After looking at the situation in detail, it is clear that the containment actions we have taken minimise Unilever’s economic contribution to the Russian state. However, I understand why there are calls for our company to leave the country and we continue to look at our options, within a context that has become more complex following recent regulatory developments in Russia. We remain steadfast in our condemnation of the war in Ukraine.”
We will see what happens in terms of the emerging approach to purpose and sustainability. But with this new direction and the Russia situation, I don’t expect Unilever to be quoted quite so often in the next few years when commentators look for examples of businesses that operate for the greater good.