Unilevers Attempts to Improve the Sustainability - Essay Example

International Sustainable Business Unilever Case Introduction Continuously growing customer’s awareness of sustainability and environmental concerns makes businesses to adjust their strategies towards the sustainable development in order to be competitive on the market. Unilever is not an exception in this case as the company is striving to achieve its sales targets through being sustainable and socially oriented organization. The company believes that “following its sustainability plans will secure its future and profitability through efficiency savings, better health of customers and employees, secure renewable resources, and an improved ethical image, among others” (MarketLine 2012, 13). Based on this approach, Unilever has implemented a set of sustainable initiatives during the last few years and has developed a sustainability plan for the next 6 years. The purpose of this paper is to analyze critically the Unilever’s attempts to improve the sustainability of the period since 2009. The main activities and geographical scope of the business Unilever is a company leader in the fast moving consumer goods (FMGG) industry. The company sells food, personal care, refreshment, and home products throughout the whole world, including Europe, the Northern and Southern Americas, Asia and Africa (MarketLine 2014). The total number of Unilever’s brands has grown up to 400 by 2012 (MarketLine 2012). The four major business categories and key brands are listed below. The food segment includes such assortment as: sauces, bouillons, soups, snacks, salad dressings, margarines, liquid margarines, and other cooking products (Blue Band, Knorr, Hellmann’s and Amora); The personal care segment includes the assortment of hair and skin care products, oral care products, and deodorants (Lux, Dove, Sunskilk, Pond’s, Close up, Rexona, etc.); The refreshment segment assortment is comprised of tea-base beverages, ice-cream, weight-management products, and nutritionally enhanced staples (Lipton, Bacel, Slim-Fast, Flora, etc.); The products for home include the assortment of laundry tablets, soap bars, powders and liquids and other cleaning products (Domestos, Comfort, Omo, Sunlight, Surf, etc.). Unilever’s environmental, sustainable and green achievements and awards gained Unilever being a globally operating company has felt the pressure of growing sustainability and environmental concerns, and responded to the modern trend by adopting a special plan to become environmentally responsible and sustainably sourced business (MarketLine 2012, 8). In 2010, Unilever presented its Sustainable Living Plan which covered a number of initiatives that the company was planning to undertake with a purpose to improve its operations in sustainable and environmental framework (Marketline 2012). This plan was comprised of three major goals that should be achieved by 2020: improving health and well-being of more than 1 billion of people; halving of the environmental footprint of producing and use of Unilever’s products; enhancing of the livelihoods of millions of people (Unilever Sustainable Living Plan 2013, 3). Sustainability monitoring bodies and industry associations have recognized the Unilever’s efforts in relation to sustainable and environmental responsibility, and have given some awards to the company. Thus, for example, Unilever has been ranked in the Dow Jones Sustainability Index for being a super sector leading company in food& beverage industry (MarketLine 2012). In addition to this recognition, Unilever has received some other awards from external organizations since 2009 (Unilever.com, 2014): Unilever – 5th in Carbon Clear’s annual ranking of carbon measurement (2013); Winner of Best Sustainability and Stakeholder Disclosure FTSE 100 Award (2013); Sector leader in CDP’s Forests programme (2013); Top rank by GlobeScan/SustainAbility (2013, 2012, 2011); Top rank in the first Access to Nutrition Index Global Index (2013); Gold Medal award by the World Environment Center (2013); CDP recognition for carbon performance and climate change disclosure (2013); Top performer in the Tomorrow Value’s Rating (2013); The C K Prahalad Award from the Corporate Economic Forum (2012); Winner of the 2012 World Business and Development Awards at the UN Conference on Sustainable Development; FTSE4Good Sir Mervyn Pedelty Award (2012); Winner at the FT’s Boldness in Business Awards (2012); Platinum Plus status in Business in the Community’s 10th Corporate Responsibility Index Winner of the Overall Grand Prix and the Gold Winner in the Best Green International Large Business category (2011); Ethical Corporation’s top Responsible Business Award (2011); Company of the Year Award by the UK’s Business in the community (2010); Top performer in new FTSE Carbon Strategy 350 Index; The International Charter’s Committed to the Environment 2010 Award; Recognized as “best practice by the Natural Value Initiative’s Ecosystem Services Benchmark; The Level II International Corporate Health and Productivity Management Award (Unilever.com, 2014). The number of these awards is significant and illustrates the Unilever’s strong sustainable position on the market. All these awards contribute to the company’s positive reputation and help to retain sustainability oriented consumers. The indicators/metrics used to inform observers about improvements in sustainability Together with a Sustainable Living Plan development, Unilever has set the targets that it is aiming to achieve and by what timeline. This information is absolutely transparent as the results (both success and failures) are published on the corporate website of the company (MarketLine 2012). Some of the key indicators and metrics that the company is measuring against the set targets include: % of raw materials coming from sustainable sources; The number of people whom the company helped to improve health and well-being through its brans: Signal, Lifebuoy, Pureit, and Dove; The number of beverages and foods that meet nationally recognized nutritional standards; The number of smallholder farmers whom the company helped and provided training; The number of Shakti women micro-entrepreneurs in India employed by the company (Unilever.com, 2014). In addition to the above listed indicators, Unilever is aimed to work on deforestation elimination, improving the livelihoods of smallholder farmers and improving food security, helping people gain access to proper sanitation, safe drinking water, and proper hygiene habits (Unilever.com, 2014). The sustainability improvement compared with similar competitors Unilever faces a tough competition on behalf of the companies operating in the same sector and developing similarly innovative products. Procter & Gamble, Mars, and Nestle are the major direct competitors to Unilver (MarketLine 2012). All these companies invest significant sums into R&D and marketing efforts. Figure 1 provides a comparison of the yearly growth of net income for Unilever and its two major competitors: Procter & Gamble and Nestle. Figure 1: Yearly growth of net income for Unilever, Nestle, and P&G As it can be seen, the performance of Nestle was fabulous during the period from 2009 to 2011. Nestle has implemented a great sustainability campaign, focusing on such major areas, as: resource efficiency, climate change, environmental impact of products, natural capital, etc. (Nestle 2014). Procter & Gamble being a direct competitor to the Unilever also has active sustainable positioning, with a focus made on environmental sustainability and social responsibility. P&G environmental efforts are similar to the Unilever, and have focus on renewable resources, resources’ conservation, and waste elimination. In relation to social responsibility, P&G the same as Unilever supports hygiene education (Pg.com, 2014). Moreover, P&G has also been recognized in one of the same ethical processes rankings as Unilever (MarketLine 2012). On the one hand, competition of businesses on the sustainability background is a positive trend towards making planet greener and improving lives of people in the communities. But on the other hand, competition of businesses for being the most sustainable company in the sector requires serious investment for costly projects (MarketLine 2012). Being sustainable is not more a competitive advantage, but to what extend the business is sustainable is more important. The major areas that still need to be improved Even though Unilever is positioning itself as the company focused on sustainable development and corporate social responsibility, there are many criticisms towards the true Unilever’s business. First of all the company declares about its goal to double the sales, thus to double production of the products. The company is promoting increased consumption in the South, thus increasing ecological costs that usually come along with processing of products, waste processing, packaging, transport, etc. Moreover, in order to sell all its products the company puts a lot of efforts and costs to advertising, which generates some negative psychological effects (disorientation, cynism, feeling of inadequacy, and mood disorders) (Corporatewatch.org, n.d.). By promoting increased consumption the company violates the sustainability principles despite its environmentally friendly efforts. Sustainable solution to environmental problems would be decreased production and decreased consumption (Corporatewatch.org, n.d.). This principle is especially appropriate to Unilver as the company produces many goods that are not vitally important for human lives. The constraints on further attempts to improve the sustainability of the business Unilever being a company with more than 400 different brands faces a problem of distinguishing some of its sustainable products or brands in the minds of consumers. There was a problem of recognizing a particular brand with the company itself – not many consumers knew that the product was manufactured by Unilever (MarketLine 2012). In order to overcome this challenge, the company has been making brand-specific improvements (MarketLine 2012). While attempting to improve the sustainability of the business, Unilever as any other multi-brand company faces a problem of recognition of green-focused and sustainable projects (MarketLine 2012). The overall company’s image can be negatively affected by a scandal in one particular area of company’s activities (MarketLine 2012). Thus, the scandal or accusation of the company in failing to be sustainable can have detrimental effect on the company’s image. Another constraint on the company’s further attempts to improve sustainability of business is known as “greenwashing”. Greenwashing is a trend when a company only provides the appearance of sustainability values without providing any actual change or improvements to make their activities greener” (MarketLine 2012, 14). In case Unilever will be accused for greenwashing either rightly or by mistake it might stultify all the company’s sustainable activities. Therefore, the company should set realistic targets and achieve these targets in order to avoid “greenwashing” label. One more constraint on Unilever’s further attempts to improve the sustainability of its business relates to fierce competition on this field. As it has been discussed previously, more and more competitors focus on sustainable development and therefore invest more and more money to it. For Unilever to compete with other companies it might be very costly to implement some projects. Conclusion Unilever is giant retailer in the industry with more than 400 different brands. The company is committed to develop its business not only on economic pillars but also on social and environmental pillars. Such a focus on sustainable development and corporate social responsibility has been reflected on the Unilever’s strategy and implemented through the Sustainable Living Plan. The company’s achievements in this area are significant and recognized by many different authoritative institutions and organizations. However, on the sustainability background Unilever face a tough competition on behalf of major market players such as P&G and Nestle. Such a competition drives the company forward to more sustainable future; however, it also imposes the risks of increased costs related to sustainable projects implementation. Being sustainability oriented company, Unilever has a huge responsibility and its reputation is at high risk in case of any minor scandal either truthful or not. Because of this aspect, the company should be very cautious and careful in being truly responsible corporate citizen. However, sustainability of Unilever’s business is a double-edged weapon, whereas on the one hand the company claims to do business in sustainable fashion, and on the other hand it is aiming to double its sales, thus to drive production and consumption increase. This approach is conflicting with a sustainable solution to environmental problems and should be addressed through decreased production and consumption. References: Corporatewatch.org, (2014). Unilever : Corporate Crimes | Corporate Watch. [online] Available at: http://www.corporatewatch.org/content/unilever-corporate-crimes [Accessed 12 Jun. 2014]. MarketLine, (2012). Unilever: Proving that sustainability and profitability can coexist. MarketLine. MarketLine, (2014). Unilever. 1st ed. MarketlineAdvantage. Available at: http://advantage.marketline.com/Product?pid=E00C82E3-8DA1-4F1A-B0A1-046B87A8C4BC Nestle.com (2014). Environmental sustainability. [online] Available at: http://www.nestle.com/csv/environmental-sustainability [Accessed 12 Jun. 2014]. Pg.com, (2014). PG.com Sustainability Overview: sustainability goals, scorecard. [online] Available at: http://www.pg.com/en_US/sustainability/overview/index.shtml [Accessed 12 Jun. 2014]. Unilever.com, (2014). Awards & recognition | Sustainable Living | Unilever Global. [online] Available at: http://unilever.com/sustainable-living-2014/news-and-resources/awards-and-recognition/ [Accessed 12 Jun. 20 Unilever Sustainable Living Plan 2013. (2013). 1st ed. [ebook] Unilever. Available at: http://unilever.com/images/slp_Unilever-Sustainable-Living-Plan-2013_tcm13-388693.pdf [Accessed 12 Jun. 2014]. Read More