The Attempt to Improve Unilevers Business - Essay Example

The Attempt to Improve Unilever’s Business Recent years have been characterised by an interest in creating businesses that have minimum negative impacts on the global as well as the local environment, the community, a society or the economy as a whole. For a business to be considered as a sustainable business it must incorporate in it progressive environmental and human rights policies (Ballow et al. 2009). A sustainable business can be described as a business whose activities are environmentally friendly this in turn ensures that all its products, processes and manufacturing processes satisfactorily address the environmental concerns while at the same time maintaining a profit (Audsley et al. 2010). For a business to be green it should satisfy the following threshold: The principle of sustainability is incorporated to each of its business decision. The firm supplies environmentally friendly products or services. The firm’s activities are greener than its competitors. Its commitment to environmental principles can be said to be enduring. The aim of this report is to analyse critically the attempts to improve the sustainability of Unilever’s business, the hindrances to achieving a sustainable business. The report will then recommend changes that Unilever can take up and be able to achieve business sustainability. Background Information Unilever is an Anglo-Dutch multinational company which specialises on consumer goods. Its headquarters are situated in two cities which are London, England and Rotterdam, Netherlands. Its products mainly comprise of personal care products, beverages, food, and cleaning products. Unilever is the third largest consumer goods company this is measured by the revenue received in 2012 after Proctor and Gamble and Nestle. Unilever has over 400 brands, with sales surpassing the 1 billion Euros mark (History of Unilever 2014). Over the recent past Unilever has won a host of environmental sustainability or “green” awards which include; in 2013 Unilever earned position five in Carbon clear’s annual ranking of carbon measurement and reporting practices of FTSE companies gaining a score of 77%. In November 2013 Unilever won the Best Sustainability and Stakeholder Disclosure FTSE 100 Award received from the Institute of Chartered Secretaries and Administrators (ICSA). In 2013 CDP’s Forests programme recognised Unilever’s work with suppliers to increase capacity in providing sustainable commodities. For the third year in a row Unilever retained its top ranking in 2013’s survey in sustainability leaders by GlobeScan/Sustainability. Unilever received position two overall in the first Access to Nutrition Index (ATNI) Global index, receiving top rankings for under nutrition and also the products, lifestyles and engagement categories. In December 2013 Unilever was awarded a Gold Medal for International Corporate Achievement in Sustainable Development by the World Environment Centre. In 2013 CDP recognised Unilever’s climate change disclosure and carbon performance for nine years in a row. Unilever yet achieved another award in 2013 from Two Tomorrow’s agency after garnering 91% and leading the Food and Beverages sector in Tomorrow Value’s rating. In December 2013 Unilever was ranked No. 2 in a new carbon emissions study published by Climate Counts. During the UN conference on sustainable Development (Rio+20), Unilever emerged winner of the 2012 World Business and Development Awards (WBDA) in recognition with their efforts to improve living standards in some of the most disadvantaged communities in the world, Sustainable living 2014 (Unilever awards and recognition 2014). There are many indicators that observers use to determine whether there is an improvement in sustainability. The most popular tool for evaluation of sustainability performance is the use of performance indicators. Indicators do help in systematic performance evaluation and they do present information in a way which is suitable for decision making purposes. The main driving forces for sustainability performance evaluations include; Pressure from stakeholders Establishment of “socially responsible” investment funds and investment rating systems (Ballow, Heitger, Landes 2009:167). The metrics that are used for the measurement of sustainability improvement are said to be evolving, they include among benchmarks, indexes, accounting, audits not forgetting assessment appraisal (Dalal, Barry and Sadler 2009:208). Sustainability performance indicators help to indicate a company’s performance and also to monitor and help compile a report on future progress. They can be divided into three areas which are Environmental, Economic and Social pointers to sustainability. The social indicators would include, Labour practices, human rights. Environmental performance indicators would include; greenhouse gas emissions, water consumption, waste output, land use patterns (Stern 2009). More and more businesses are seeking to create greener, cleaner goods and services in a faster and better way (Tevis, 2010:42). Unilever has made great attempts towards sustainability in various fields such as health and hygiene where by 2013 they had reached 303 million people, improving nutrition by meeting the highest standards in nutrition; in 2013 31% of their nutritional products met these standards. Unilever has reduced its greenhouse emissions by 32% per tonne since 2008. Reduced water use, in 2013 they used 14 million m3 less than in 2008. Waste and packaging, Unilever’s waste impact per consumer has seen a reduction of around 7% since 2010 (Unilever sustainable living 2014). In 2009 Unilever did recognise that collaboration could hasten its product development whilst maintaining sustainability. In this light Unilever created and launched open innovation thus increasing the number of research projects which involved external collaboration from 25% to 60%. Percentage of products created through collaboration before 2009 25% Percentage of products created through collaboration after 2009 60% Innovation without collaboration 40% Table showing the percentage of collaborative innovation after 2009 Unilever Figure showing the percentage of collaborative innovation after 2009 Unilever. P&G also has made great strides in various areas such as conservation of resources in using less energy, water, and materials when making their products. Since 2010 P&G has reduced CO2 emissions by 11% and energy usage by 8%. The truck transportation kilometres have reduced by 12% since 2010. P&G has reduced manufacturing waste by 0.65% since 2010. P&G children’s safe drinking water project has been able to deliver 1.2 billion litres of clean, safe drinking water by 2014 (P&G sustainable living 2014). . With the modern consumer being hugely empowered as she/he closely scrutinises these companies online. He/she has the ability to punish unethical, irresponsible behaviour in any aspect of the environment, social or the economy (Jackson 2009). Consequently companies especially in the consumer goods arena should try and appeal to the consumer through investment in sustainable businesses (Landrum, 2009:17-24). This has seen many companies endeavour to create sustainable businesses (Tueth, 2010:30-32). Major Areas That Need Improvement Improvement of farmers’ livelihoods Freemantle (2008:54) argues that a major area of improvement is in the third world countries where tea farmers continue to languish in poverty. In most African countries that produce tea Unilever has a presence there. Considering tea processing, packaging and exporting the results are grim with huge income gaps between the upstream and downstream actors. In the tea industry globally trading power is concentrated among just four multi-national corporations namely Unilever, Van Rees, James Finley and Tata Tetley standard. These four companies have a huge influence at price setting auctions in India, Kenya and Sri Lanka where 70% of tea is traded worldwide. Thus Unilever has a social obligation to try and improve the welfare of such farmers through offering better prices, agricultural training for them to achieve better production. Figure showing the percentage influence the major tea companies have. Easy Access to Unilever hygiene products As the world’s leader in providing health soap, Unilever should strive to make a difference in poor countries. WHO states that poor countries are severely affected by diarrhoea causing 4% of all deaths worldwide. The major cause is poor hygiene precipitated by a lack of sanitation and hygiene products to influence hand washing behaviour among these communities. Therefore Unilever should strive to make hygiene products accessible in such under privileged societies mainly in Africa, Asia and Latin America (Lutz, et al 2010). Constraints on Further Attempts To Further Improve Sustainability of The Business Drive towards sustainable agriculture Tiffin & Gichuki (2000:21) argue that through clearing of forests, farming along river banks and reclamation of wetlands for purposes of agriculture a case in example being Kenya where Unilever has large presence. Then sustainable Agriculture becomes a pipe dream. Since the laws and regulations in place do not support sustainable Agriculture. Nilsson (2011:1117-1128) argues that institutions and politics should be put at the forefront of conserving the environment. Political constraints It is argued by Aiginger (2009:309-316) that no improvement on sustainability can take place with the backdrop of political instability. Political instability scares away investors and also halts investment. Thus Unilever may face constraints and impediments in attempts to improve sustainability in business environments shrouded with political instability. Corruption and deficiencies in governance Obare (2014:18) argued that the lack of proper and strong institutions often leads to an environment that propagates corruption and rent seeking. This increases the transaction costs, which are major impediments to trade and improvement of sustainable businesses. Recommendations Unilever should continue in its endeavour of aiming to achieve a sustainable business. They should strive to promote sustainability across the entire value chain process. Right from the sourcing of raw materials right to the social responsibility Unilever bears to the people who consume its products (Kaufman, 2014:487-507). Reducing their environmental footprint in the manufacture of their products should be priority number one. The greatest impact of this endeavour should be felt in areas where environmental degradation is rampant in the supply chains. Unilever can also try to encourage legislation of laws that promote sustainability for example in matters relating to land conservation, labour laws (Burchel, 2013:505-518). Conclusion With pressure emanating from the government all the way to the consumer for the business to conduct its business in ways that conserves the environment, economy and the society. A sustainable business ensures profitability but at the same time helps the people and their environment resolve their troubling social problems. References Aiginger, K. (2009) Strengthening the resilience of an economy: Enlarging the menu of stabilisation policy to prevent another crisis, vol. 5 pp. 309-316. Allwood, J.M., Ashby, M.F., Gutowski, T.G. & Worrel, E (2011) Material efficiency: A white paper resource conservation and recycling, vol.1 pp. 362-381. Audsley, E. et al (2010) How low can we go? An assessment of greenhouse gas emissions from the UK food system and the scope for reduction by 2050, London, World Wildlife Fund. Ballow, B. Heitger, D. & Landes, C. (2009) The future of corporate sustainability reporting, viewed June 4, 2014 from . Bardi, U. (2009) Peak oil: The four stages of a new idea, vol.3 pp. 323-326. Burchel, J. & Cook, J (2013) ‘Sleeping with the Enemy? Strategic transformations in business-NGO relationships through stakeholder dialogue,’ Journal of Business Ethics, 113, vol. 3 pp. 505-518. Dalal, C., Barry, B. & Sadler, B. (2009) ‘A source book and reference guide to international experience,’ Sustainability Appraisal, vol. 1, pp. 208-209. Freemantle, A. (2008) ‘The sustainable business handbook’ A comprehensive guide to responsible corporate behaviour and sustainable business practices across the triple-bottom-line, vol. 5, pp. 54. Hall, C.A. & Day, J.W. (2009) Revisiting the limits to growth after peak oil, American Scientist, vol. 97, pp. 230-237. Jackson, T. (2009) Prosperity without growth, The transition to a sustainable economy, London, Sustainable Development Commission. Kaufman, N. (2014) Overcoming the barriers to the market performance of green consumer goods, resource and energy, vol. 2, pp. 487-507. Landrum, N.E. & Sandra, E. (2009) Sustainable business an executive’s primer, vol. 1 pp. 17-24. Lutz, W. & Samir, K. (2010) Dimensions of global population projection: What do we know about future population trends and structures? viewed June 4, 2014 from . Nilsson, M. et al., (2011) The missing link, Bringing institutions and politics into energy future studies, Futures, vol. 43, pp. 1117-1128. P&G Limited, sustainability performance 2014, viewed June 4, 2014 from www.pg.com/en-US/sustainability/performance/index.shtml/ Obare, G. (2013) New institution economics, vol. 1, pp. 18. Soderholm, P. et al., (2011) Governing the transition to low carbon futures: A critical survey of energy scenarios for 2050, Futures, vol. 43. pp. 1105-1116. Stern, N. (2009) A blueprint for a safer planet, Oxford, Bodley Head. Tevis, R.E (2010) Creating the future: goal oriented scenario planning, Futures. vol. 42, pp. 337-344. Tiffin, M. & Gichuki, F. (2000) Sustainable watershed management: illusion or reality, vol. 1 pp. 18. Tueth, M. (2010) ‘World scientific’ Fundamentals of sustainable business a guide for the next 100 years, vol. 1, pp. 30-32. Unilever limited, awards and recognition 2014, viewed June 4, 2014 from . Unilever Limited, History of Unilever 2014, viewed June 4, 2014 from . Unilever limited, sustainable living 2014, viewed June 4, 2014 from www.unilever.com/sustainable-living-2014/reducing-environmental-impact/waste-and-packaging/targets-and-performance/index.aspx/ Read More