There were a lot of questions surrounding Unilever’s future strategy when, back in February 2023, the FMCG giant announced Hein Schumacher would become its new chief executive.
Would underperforming food assets be sold – or spun off – or would any disposals be more piecemeal? Would sustainability be as central to Unilever’s strategy and future direction under Schumacher as it was under his two predecessors, Alan Jope and Paul Polman?
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We got an answer to the first question last month when Unilever set out plans to exit ice cream and, on Friday, it became clear Schumacher’s stance on ESG would be different to the two men he succeeded.
The Knorr and Hellmann’s maker has dialled down some of its sustainability targets in order to become more focused on “allocating resources”, Schumacher said. Unilever has changed some of its targets on its use of plastic, support for SMEs and promoting the living wage in the supply chain.
Unilever has long been seen as at the vanguard of companies that have sought to embed sustainability at the core of their overall business strategy.
However, most notably during Jope’s time at the helm, Unilever faced some stinging criticism in City circles over what some argued was an over-emphasis on ESG over the company’s financial performance.
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By GlobalDataTwo years ago, Terry Smith, the founder and CEO of the London-based investor Fundsmith Equity, attracted headlines for his argument Unilever was “obsessed with publicly displaying sustainability credentials” at the expense of “focusing on the fundamentals of the business”.
Smith’s most eye-catching line on Unilever’s strategy – “a company which feels it has to define the purpose of Hellmann’s mayonnaise has, in our view, clearly lost the plot” – stirred opinions that backed or opposed his view but, either way, seemed, in some quarters, to stick. Unilever, some argued, was too focused on ESG.
On Friday, looking at the business as a whole, Schumacher described three “key shifts” Unilever is taking under a “growth action plan” the former FrieslandCampina chief has put in motion since taking the hot seat last year.
Unilever will be “more focused in allocating our resources towards our biggest sustainability priorities; be more urgent in driving actions towards our long-term ambitions; [and] be more systemic in our advocacy to address the enablers and blockers of progress outside of our direct control”, Schumacher said.
“We have learned from experience that we need to be more focused in our allocation of resources to make tangible progress on the big, complex challenges we face,” he added.
“Our updated commitments are very stretching but they are also intentionally and, unashamedly, realistic. We want to set sustainability ambitions which are credible, which we believe we can deliver against, and which have real positive impact.”
After previously pledging to cut the use of virgin plastics by 50% by 2025, Unilever has now downgraded that goal, aiming for a 30% reduction by 2026 and 40% by 2028.
A commitment to make all of Unilever’s packaging recyclable, reusable or compostable by 2025 has now been pushed back to 2030 for rigid materials and 2035 for flexible components.
Meanwhile, a pledge to foster a living wage for all of Unilever’s direct suppliers by 2030 has been brought forward to 2026 but amended to cover only 50%.
Earlier this month, the group outlined new goals on emissions, including near-term Scope 3 greenhouse gas (GHG) reduction targets for the first time.
Perhaps cognisant of the criticism from some investors about Unilever’s ESG strategy, in a joint statement Schumacher and chair Ian Meakins said: “We consulted our largest shareholders on the topic. We were pleased that the key elements of the plan – the new higher ambition near-term Scope 3 GHG reduction targets, the continued focus on absolute emissions reductions rather than carbon offsetting, and the shift to focus on the specific Scope 3 emissions which we believe we can influence – were widely welcomed.”
That said, the revised targets on areas including plastics and the living wage have attracted criticism.
“Climate change and plastic pollution are not going away anytime soon and huge food companies like Unilever will also feel their very real-world impacts. The commitments that they decided to weaken were designed to tackle some of the most important material challenges for the sector,” Nusa Urbancic, the CEO of the Changing Markets Foundation NGO, tells Just Food.
“In my opinion, Unilever should be strengthening their actions by setting robust targets for methane emissions, as part of its climate target, strengthening their plastic commitments by dropping polluting sachets and advocating for deposit return systems and other types of progressive legislation.”
Not all of the reaction has been entirely negative.
Elsewhere, Ken Pucker, Professor of the Practice at The Fletcher School at Tufts University, reflected on comments Schumacher made in October last year. The Unilever chief said the company did not want to “force fit” what he described as “a social or environmental purpose” unnecessarily.
“To not force fit purpose is wise. The company remains a top quartile sustainability exemplar,” Prof. Pucker wrote on LinkedIn.
However, he added: “Unilever’s recalibration highlights the overwrought praise and criticism directed at sustainability [and] demonstrates that non-financial targets carry far less weight than financial goals and can be revised without consequence.”
And perhaps that lies behind some of the criticism Unilever is facing over its decision to roll back some of its targets. With the company held up as one of the corporate poster children on ESG, how might its decisions resonate in boardrooms where companies are reviewing their own goals, or where the commitment to action has historically been less secure?
On Earth Day, that will leave many with plenty to ponder.
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