CSR Commitments: Unilever's Sustainable Living Plan

An interesting, and highly controversial, illustration of corporate social responsibility (“CSR”) commitments was the introduction in 2010 of Unilever’s Sustainable Living Plan, referred to as the “USLP”.  The USLP was conceived and driven by Paul Polman, who began serving as the CEO of Unilever in 2009.  An Anglo-Dutch company launched in the 1880s near Liverpool, Unilever has grown to more than 300 factories across the world by 2017 and has developed and maintained more than 400 brands sold to around 2.5 billion customers (one in every three people on the planet).  The USLP has been described as a sweeping canvass of over 50 ambitious goals that include stopping all non-hazardous waste going to landfills, training 5 million women and cutting the water waste in the company’s factories by half (click here for more on the USLP).  Polman made the USLP, and sustainability in general, a core management principle with respect to his leadership of Unilever, not surprising given that the French government bestowed a knighthood on him in 2015 for his global campaigning to rein climate change and he was one of 26 people, the only business executive in the group, chosen in 2012 by then United Nations Secretary-General Ban Ki-moon to participate in the working group that eventually produced the United Nation’s Sustainable Development Goals.

Results from the Fortune list of the World’s Most Admired Companies for 2017 indicated that Polman’s emphasis on sustainability had bolstered its global reputation.  Unilever ranged No 38 among the “Top 50 All-Stars”, up from No. 41 in 2016, and it marked the sixth straight year that the company had made the list.  However, traditional financial measures were giving analysts and investors cause for concern.  While Unilever reported $58 billion in revenue and $5.7 billion in net profit for the year, sales growth was slowing, the company’s stock price had dropped 2% over the previous twelve months as the S&P 500 shot up 25%.  Analysts believe that most investors have little interest in the USLP and the analysts themselves wonder whether Polman has “morphed into the classic Davos Man, more intently focused on fixing global problems than the nitty-gritty details of operations”.  Other concerns include the ability of Unilever’s six research centers, disbursed all over the world and supported by more than $1 billion annually, to develop enough new products to keep up with the company’s growth requirements.  The answer appears to be “no”, since Polman has increasingly relied on acquisitions to grow the business, a strategy that makes integrating sustainability throughout the company more difficult.

Polman quickly understood that it would take years for the USLP to show concrete results, and that some of its targets could run counter to growth.  So he scrapped quarterly earnings guidance for investors, a system he called “absolutely ridiculous.” Polman sided with those who argue that the tyranny of quarterly goals traps public companies into continually trying to drive up share prices for investors, while downgrading more long-term, complicated missions, like improving working conditions and the environment.  This all may be true; however, stakeholders need to be able to follow a company’s journey along the path established in its sustainability plan, particularly since goals such as significant reductions in greenhouse gas emissions may take decades for a company as large as Unilever and it cannot reasonably be expected that the executive team will remain in place long enough to see everything through (a reality that illustrates the important of building a durable sustainability culture within the organization so that turnover and succession can be accommodated without “missing a beat”).

Source: V. Walt, “Selling Soap and Saving the World”, Fortune (March 1, 2017), 122.  For discussion of methodology used by Fortune to identify and rank the members of its annual list of The World’s Most Admired Companies, as well as the rankings for 2017 that cover over 40 industries and companies from 28 countries, see fortune.com/wmac.  Social responsibility is one of several criteria used when information is collected from 3,800 executives, directors and securities analysts, along with investment value, quality of management and products and ability to attract talent.  The result of the survey process is “The 50 All-Stars”, described as an elite assemblage that won votes from inside and outside their industries, and a “top five” in sectors across broader industry categories such as computers and communication, consumer products, contracted services, financials, media and entertainment, natural resources, power, precisions, shelter, stores and distributors and transport.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project and further information and guidance on creating and implementing CSR commitments and goals is available through the Project’s website.