Unilever Sustainability Platform Is Unsustainable

Submitted by T. Leeves

Unilever Sustainability Platform is Unsustainable

At some point near the end of the last century the leaders of major U.S. manufacturing firms began to ponder the idea they had a social responsibility to the world at least as important as the need to increase value for shareholders. It’s not exactly clear when it started but what began as a way to curry favor with a customer base newly empowered to care about bigger things has today become something of a religion in executive suites from New York to Los Angeles.

Being known as a company that cares is almost as important – in a global marketing and image sense – as it is to be recognized as a brand name that equates to products of quality, value, and a general level of excellence.

Unilever CEO Paul Polman is one of those corporate leaders who apparently swear by this philosophy. Some have called him the poster child for corporate social responsibility. As he sees it, multi-national corporations like the one he heads need to put environmentally sustainable practices ahead of shareholder profits and provide developing nations with economic opportunities they might not otherwise enjoy.

His attitude is more than vaguely paternal in a nobles oblige kind of way. It’s actually the formula for a new colonialism in which the 21st century corporate masterclass overseas a vast domain throughout the developing world from inside the safety and comfort of opulent boardrooms located in some of the world’s most important financial centers.

Nonetheless Polman has his supporters, and in unlikely places. The U.N. Secretary General has him working to promote the organization’s international sustainability goals. He’s co-chair of the B-20 Food Security Task Force. He’s everywhere, selling the idea sustainability works as a corporate model because, as he puts it, his personal mission as CEO “is to galvanize our company to be an effective force for good.”

Its good public relations, the kind you can’t pay for in the United States, but it is also directly contradicts how Unilever has been behaving as a corporate citizen in the developing world. Over the last few years it’s been accused of:

  • Paying only lip service to allegations of systemic sexual harassment by Unilever employee’s on its Kenya tea plantations;
  • Delaying a settlement over allegations of mercury poisoning in India for 7 years;
  • Gouging developing world partners in India, South Africa and elsewhere by doubling or tripling royalty fees.

At the same time Unilever carries the enormous burden of maintaining staff and executive salaries in two of the most costly cities in the world, London and Amsterdam, in two expensive currencies. Instead of investing in human capital in the developing world Polman has further consolidated staff and operations in this first-world first structure, and then looked outward for the money to maintain it.

He may claim that’s sustainable but others would disagree. Most see it as being about more than planting trees and other feel good corporate endeavors. Sustainability is about jobs for local workers in developing countries at wages allowing them to care for their families. Fundamentally, that’s the most impactful effort towards sustainability a corporation can make. Yet as the costs of maintaining dual company headquarters and an expensive corporate structure continue to rise, Polman has leaned harder on developing country partners for cash, mostly in the form of increased royalty fees that local companies pay for the right to manufacture Unilever products. You cannot have your cake and eat it too.

In 2015 the Indian company Hindustan Unilever saw its royalty fees increase by more than 100 percent. Polman called this “no big deal”. Credit Suisse predicted that this change made by Unilever could lower India’s net profit by as much as 6% in 2015. In South Africa, Unilever tried a similar tactic, attempting to gouge local partners by tripling fees in 2015. The companies impacted have sued to stay this increase, but Unilever is expected to move forward with it this month anyway, as it comes under increasing pressure to show profits.

This is not sound business practice; it’s gouging -- with an eye towards short-term profits instead of sustainable, long-term growth which benefits both the developed and developing world. Possibly to distract attention from that reality Unilever planted over 150,000 trees about a month later all across South Africa and pledged to plant one million over the next three years.

Now, unfortunately, the pressure is on Polman to improve the bottom line after his bid to takeover Kraft Heinz failed. Unilever’s shareholders want better forecasts not better press releases. According to Chairman Marjin Dekkers, "In the immediate future, we are fully engaged in the recently announced comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders." This has apparently forced the sale of Stork butter and Flora margarine brands – which provide a quick cash fix for unsustainable business decisions but doesn’t solve any of the long term problems.

The American press loves Polman’s sustainability initiatives. The workers who make up the company’s global supply chain are somewhat less enthusiastic. The corporate culture needs to change. Walking away from this South Africa royalty fee increase is a good place to start.