Unilever’s new CEO said the consumer products company’s "aspirational" climate commitments have failed to deliver shareholder value and signaled an overhaul of the company’s sustainability strategy that will leave more decisions to brand managers.
The shift, outlined during a third-quarter financial presentation in late October, marks a sharp change in course for the U.K. company, long considered a standard-bearer in corporate sustainability. Its now-defunct Sustainable Living Plan, introduced by former CEO Paul Polman in 2010, was among the first strategies to recognize the potential materiality of environmental issues to business performance.
"Unilever’s reputation in this area is well-deserved, but … our efforts are being spread too thinly," said Hein Schumacher, who took over July 1. "We have too many long-term commitments that failed to make sufficient short-term impact, and the latter is what the world really needs right now."
The purpose of mayonnaise
Unilever sells dozens of well-known brands such as Dove, Hellman’s Mayonnaise and Vaseline, and owns several product portfolios long associated with leadership in sustainability and brand purpose, notably Ben & Jerry’s and Seventh Generation. It set science-based targets to become net zero across Scope 1, 2 and 3 emissions by 2039 and created a 1 billion euro climate and nature fund to support that effort.
But research published in May shed doubt on the U.K. company’s progress, and Unilever has been under heightened pressure to reboot its financial growth for almost two years. That scrutiny intensified after its stock hit a five-year low of $43.25 per share in October 2022. This year’s high of $55.53 per share was in May; the price was near $48 per share late last weekProminent Unilever investors, including Fundsmith CEO Terry Smith, have characterized sustainability and purpose as a distraction.
"Unilever seems to be laboring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business," he said in January 2022. "A company which feels it has to define the purpose of Hellmann’s Mayonnaise has in our view clearly lost the plot."
Schumacher said interviews with several hundred employees, senior managers, partners and policymakers in his first 90 days on the job convinced him that sustainability can be a key driver for "unmissable superiority" in certain product categories, but "I don’t think we advance the cause of purpose by force-fitting it across every brand."
Under Schumacher’s vision, sustainability will become part of a composite score by which Unilever will evaluate performance. Schumacher highlighted Unilever’s biotechnology innovation and ecodesign efforts, which he said have reduced the emissions footprint of specific products. "We’ll continue to convert our strong know-how in this area into products that mitigate or, even better, eliminate environmental impact," he said.
Details of how sustainability will be embedded in key performance indicators were not disclosed, but Schumacher said an updated climate transition action plan will be presented at Unilever’s next annual meeting. It will involve "radically focusing" the sustainability agenda and include "timebound actions for each of our business groups to help reduce our footprint on our journey to net zero," he said.
Unilever will reframe sustainability around four pillars — climate, nature, plastics and livelihoods — while giving division heads and brand managers authority to set metrics for tracking progress. Ultimately, sustainability must have "material impact" for Unilever and for the environment and societies it serves, the CEO said.
"We will do that not by setting a lot of aspirational goals that are so long term that none of us will be around to be held to account for them but instead by short-terming our work that is by making real, steady, meaningful progress on the big issues quarter on quarter, year on year," Schumacher said. "Time-bound, costed roadmaps will ensure we stay on track and we will hold ourselves accountable to targets that are explicit, stretching, transparent and measurable."
Unilever still intends to submit updated targets to the Science Based Targets initiative in 2023 for validation, a spokesperson said.
Unilever’s pivot is a "commendable step forward" that recognizes the need for corporations to accelerate action, said Ion Visinovschi, research analyst with think tank Planet Tracker. "Brand relevance and product superiority are vital attributes in driving both environmental responsibility and market growth," he said.
"I don’t see this as part of the anti-woke pushback, remotely, but a reflection of the reality that as sustainability imperatives mainstream, the shotgun approach to commitments risks attacks for greenwashing and lowered overall impact," said long-time sustainability strategist John Elkington, who consults with Unilever.
Equity analysts were less optimistic about the reboot. A research note by HSBC’s consumer category research team described the plan as similar to Polman’s agenda back in 2012. "Despite Hein Schumacher’s convincing delivery, we think that investors will want to see a lot more evidence before giving the group the benefit of the doubt," they said.