[Solution]Unilever Case Prompts

write 3.5 pages Only use those readings I list in the prompt as sources, no any other outside sources.   Students will read the Unilever…

write 3.5 pages
Only use those readings I list in the prompt as sources, no any other outside sources.
 
Students will read the Unilever case to write a short paper; these papers should be no more than 1,000 words and should incorporate learnings from other course materials and experiences. Cases are chosen to reinforce relevant reading assigned thus far. Therefore, it is recommended that you read the case write-up questions first, the assigned text and articles next, and then write up the case.
 
Unilever Case Prompts
 
What actions should the company take now? Which of the three options identified at the end of the case would you recommend management take and why? How would you go about implementing your recommendation?
 
Other readings you have to read first:
https://hbr.org/2015/05/what-is-strategy-again
Johnson et al (2016) – Red Bull Case Study (HBS – 12p)
Ghemawat & Rivkin (2014) – Competitive Advantage (HBS – 29p)
https://www.weforum.org/agenda/2019/04/business-case-for-diversity-in-the-workplace/
Alcacer (2015) – Competing globally – (HBS – 38p)
https://new-ideo-com.s3.amazonaws.com/assets/files/pdfs/IDEO_HBR_DT_08.pdf
https://static1.squarespace.com/static/57c6b79629687fde090a0fdd/t/605946fe112632197cd8c58a/1616463615221/Design+Project+Scoping+Guide+V7.pdf
Sarasvathy (2008) – What makes entrepreneurs entrepreneurial (HBS – 9p)
 
 
 

9 – 9 1 6 – 4 1 4 R E V : A U G U S T 2 4 , 2 0 1 6
Emeritus Professor Christopher A. Bartlett prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2015, 2016 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
C H R I S T O P H E R A . B A R T L E T T
Unilever’s New Global Strategy: Competing through Sustainability
In January 2015, CEO Paul Polman announced Unilever’s financial results for 2014. (See Exhibit 1.) It was hardly a celebration. Despite outperforming competitors, the company’s 2.9% sales growth was its lowest in a decade, and had actually slowed to just 2.1% in the final quarter. The gloomy results were due to depressed growth in the developed world reinforced by shrinking demand in emerging markets, long the engine of Unilever’s growth. But more disturbing than the 2014 results was the news that Polman was not predicting significant improvement in market conditions in 2015.
This already challenging situation was complicated by the fact that the company was in the midst of implementing a transformational strategy driven by the Unilever Sustainable Living Plan (USLP). Despite its impressive results to date, this bold initiative had not been fully embraced by some parts of the organization. One problem was that in order to achieve the expected long-term positive impact, USLP’s shift to a sustainability-focused strategy typically required Unilever’s businesses to make significant upfront investments that could be recouped only in the longer term. In an operating environment that Polman characterized as having “more headwinds than tailwinds,” some wondered how far he could push this transformational strategic agenda at such a difficult time.
Complicating the issue was the fact that despite making good progress, USLP was well off-target on two key metrics. While reporting a 40% reduction in its own internal greenhouse gases (GHG) emissions and a 31% drop in its water use, Unilever was far short of objectives that encompassed its whole value chain, from sourcing to consumer use and disposal. In fact, against its target to halve the entire environmental footprint of making and using Unilever products by 2020, GHG impact per consumer had actually increased 4% since 2010, and water use per consumer had fallen by only 2%. Even some USLP supporters wondered if it was time to reassess some of its goals and priorities.
It was a complex set of challenges that Polman and his top team faced. Until now, the company had been able to deliver on both its financial expectations and its environmental and social commitments. The question was, could it continue that delicate balancing act into the future.
 

 
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Behind the Change: Unilever’s Rich History
When he became Unilever’s CEO, Polman realized that, as the first outsider ever brought in to lead this venerable consumer goods giant, he needed to understand the company’s rich cultural values as well as its long history of adaptive struggle. Both factors, he knew, would shape his options.
Birth and Evolution: From Global Growth to Static Stall
Unilever traced its origins to three family businesses of the late 19th century. In the Netherlands in the 1870s, two butter merchants, Jurgens and Van den Berg, both decided to expand into margarine, a new butter alternative. A decade later in the north of England, William Lever started making an inexpensive household soap that he hoped could reduce sickness and disease in the crowded cities of the Industrial Revolution. These young companies first encountered each other on global commodity markets as they sought out sources of their common ingredient, palm oil.
Their initially benign relationships deteriorated when the Dutch diversified into soap making and built factories in England. Lever countered by launching a brand of margarine. But after Jurgens and Van den Berg merged to create Margarine Unie, Lever initiated negotiations that eventually evolved into a merger agreement in 1927. On January 1, 1930, Unilever was established, pursuing William Lever’s founding belief that a business would prosper only if it operated ethically and responsibly—a philosophy he described as “doing well by doing good.”
After surviving the 1930s depression, Unilever saw its overseas operating companies (OpCos in company terminology) become increasingly independent during World War II. In the postwar consumer boom, OpCos used that independence to respond to fast-growing local markets, driving Unilever’s growth through the 1950s and 1960s. But the company over-diversified, and declining profitability led to many restructurings, with much of that effort focused on offsetting the OpCos’ power with business-oriented teams called Category Coordinations. In the 1990s, three decades after making these changes, management still struggled to balance the Categories’ quest for global and regional efficiencies with the OpCos’ responsiveness to national markets. The resulting slow and adversarial decision-making process led to stagnant growth.
In 2004, as market share and financial performance continued to deteriorate, the company issued its first-ever profit warning. Four years later, ongoing profitability declines led a major trade magazine to report, “P&G has powered ahead of Unilever over the past five years.”1 Finally, for the first time in Unilever’s history, the board decided to bring in an outsider to lead the company.
New CEO, New Directions
In January 2009, when Paul Polman became Unilever’s new CEO, observers expected a major shakeup. More than just an outsider, the 52-year-old Dutchman had been a competitive adversary. In 27 years at Procter & Gamble, he had reached P&G’s most senior levels before joining Nestlé in 2006 as CFO. While familiar with Unilever, he was not bound by its established practices or its embedded assumptions. Indeed, he took on his new role ready to challenge much of the conventional wisdom.
Shaking the Tree: Challenging the Culture, Changing the Team
Assuming leadership in the midst of a global financial crisis and with Unilever’s stock price declining 35% in the previous year, Polman’s actions confirmed his belief in the motto “never waste a
 

 
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crisis.” In his first meeting with financial analysts, he told them he would no longer provide earnings guidance or publish full quarterly reports. (“I figured I couldn’t be fired on my first day,” he said.2) When the share price fell a further 8%, he attributed the decline to hedge funds that he claimed “would sell their own grandmothers if they thought they could make money.”3
He reinforced his message to the investment community by noting his hierarchy of stakeholders: “We need to know why we are here. The answer is, for consumers not shareholders. If we are in sync with consumer needs and the environment in which we operate, and take responsibility for society as well as our employees, then the shareholder will also be rewarded.”4
To shake up a culture he saw as “internally focused and self-serving,”5 Polman froze salaries and cut overseas travel. He then initiated a management shakeup, replacing the Chief Financial Officer, the Chief Marketing Officer, and the Global Head of Foods, Home, and Personal Care. Within a year, he had changed a third of the top 100 executives.
Redefining the Strategy: Committing to Sustainability
While he was tightening operations and making structural and personnel changes, Polman was also preparing a radically new corporate strategy. One of his first commitments was to double the size of Unilever’s business. He felt that 80% of the growth needed to meet that target of €80 billion in revenues would come from developing countries—markets that already accounted for more than half of the company’s sales, a larger share of those markets than any of its competitors.
But the big surprise was in how the new CEO planned to achieve that growth. “We think that businesses that are responsible and actually make contributing to society a part of their business model will be successful,” he said.6 So he announced a “Compass Vision” that aimed to double the size of Unilever’s business while simultaneously reducing its environmental footprint and increasing its positive social impact. The boldness of the commitment took many by surprise.
In November 2010, the company unveiled the USLP—the key to achieving its new Compass Vision. (See Exhibit 2.) The plan had three goals for 2020: to help a billion people improve their health and well-being, to halve the environmental footprint of making and using Unilever products, and to enhance the livelihoods of those in its value chain. Far from a PR-driven corporate social responsibility program, USLP was introduced as a core strategy that Polman believed would stimulate growth, cut costs, engage consumers, and motivate employees. He saw it as fully aligned with Unilever’s commercial interests and its mission of “doing well by doing good.”
What made USLP unusual was its breadth. The commitment not only applied to every Unilever business, function, and country under its direct control, but also extended across its value chain and over the product life cycle. This ambitious scope was revealed in an analysis at that time showing that Unilever’s own manufacturing activities generated less than 5% of its products’ total greenhouse gas (GHG) footprint. Its suppliers contributed 21%, and consumers of its products accounted for 70%. Accepting responsibility to halve that entire footprint represented a huge undertaking.
Communicating the Vision: Aligning Support, Allaying Skepticism
Because management had been developing USLP parameters for more than a year before the initiative was formally announced, its detail was well defined. The three core goals were expanded into seven commitments (“pillars” in Unilever terminology) and further broken into more than 50 specific, measurable targets (e.g., to source 100% of palm oil from certified sustainable sources, to reduce salt to a recommended 5 grams a day, etc.). The broad goals and specific targets not only gave
 

 
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credibility to Unilever’s new corporate purpose “to make sustainable living commonplace,” but were also translated into its operating business model that it depicted as “A Virtuous Circle of Growth” with sustainable living at its core. (See Exhibit 3.)
Polman knew that USLP required a radical new way of thinking not only from Unilever’s 165,000 employees, but also by the 5 million people in its supply chain, and eventually by the 2 billion people worldwide who used one of its products on any given day. It was a huge task, and internally the new strategy was greeted with nervous anticipation. While the idea of doubling revenues seemed exciting, some found USLP’s less familiar environmental and social goals harder to grasp. Having seen several previous corporate initiatives bloom and die, many adopted a “wait and see” attitude.
Externally, press reaction was a mixture of cautious admiration, lingering doubt, and outright skepticism. A column in Marketing Week, a generally sympathetic industry publication, reflected some of the questions and concerns expressed elsewhere: “So what makes the Unilever sustainability program so high risk? First, the sheer ambition of the targets compared with the relatively achievable goals of enhanced quarterly earnings or brand share. . . . The second caveat is that there are inherent contradictions between the conventional marketing objectives and the sustainability targets.”7
A Financial Times columnist was more blunt and direct: “I listened for something I wasn’t hearing. Where were the figures on cost savings? Where were the promises about results flowing to the bottom line?”8 The journalist concluded, “Mr. Polman’s appeal to shareholders to take the long view is admirable, but I felt nervous about his own long-term prospects. Even the most patient investor eventually needs a decent return.”
Implementing USLP: From Aspiration to Action
Polman understood that it was one thing to create a bold vision, and quite another to implement it—particularly as an outsider upsetting the comfortable status quo. Indeed, when asked about his biggest risk, the new CEO replied, “The biggest challenge, to be honest, is surviving the transition.”9
Leveraging History, Building Momentum
Unilever’s “doing well by doing good” philosophy meant that the seeds of USLP were planted in fertile soil. In 2006, its Corporate Social Responsibility (CSR) group had initiated “brand imprint” workshops to help all brand leaders examine the environmental, social, and economic impact of their brands. After reviewing working conditions and environmental practices on its tea plantations, for example, Lipton invited the Rainforest Alliance to certify its tea as sustainably grown and responsibly sourced. And Lifebuoy soap responded to the UN’s Millennium Development Goals by committing to positively affect the health and hygiene of a billion people through handwashing education.
Realizing that not all brand managers had responded to the “brand imprint” initiative, Unilever’s category heads commissioned a team to measure the environmental footprint of the company’s entire product portfolio. Karen Hamilton, the leader of the team, recalled the outcome: “By 2009 we had identified the major sources of our greenhouse gases, water and waste. This was soon after Paul became CEO and just before the UN’s 2009 Copenhagen Climate Change Conference, so the data became vital input for the change that followed.” But while the study’s recommendations provided a strong basic platform, Polman knew he would need a lot more support to implement USLP.
 

 
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Consolidating Power, Focusing Responsibility
Rather than giving USLP oversight responsibility to Unilever’s CSR office, in 2010 Polman named Keith Weed to a new role he created on the Unilever Leadership Executive (ULE), combining the role of Chief Marketing Officer (CMO) with responsibility for the leadership of both Communications and Sustainability. In addition to heading the marketing function, the CMO would also coordinate the development and implementation of the new USLP sustainability strategy. (See Exhibit 4.) Weed described how he saw the role: “In many companies, the head of sustainability is a guy with a beard and sandals urging people to save the planet. We wanted to signal that sustainability was not about ‘corporate social responsibility’ as an isolated activity. It was everyone’s responsibility. So we abolished the CSR office to underline our belief that marketing and sustainability were two sides of the same coin. It was a belief [that] became reflected in our strategy.”
Weed’s elevation to the ULE gave him a seat at the table where strategy was discussed, and where the company’s heads of categories, countries, and functions became aligned around future priorities. “Beyond that level, gaining acceptance was tough,” Weed acknowledged. “We realized that it was going to take a long time to embed something on this scale deeper in the organization.”
The new CMO’s implementation task was greatly facilitated by his inheritance of an established 12-person corporate sustainability group, most with deep operating and marketing backgrounds. Hamilton, VP of Sustainable Business since 2008, recalled the change: “We had been working on measuring our environmental footprint for a couple of years. But after Paul joined, we started getting a lot more attention from the ULE leadership team. They asked us about environmental targets and metrics, but they were particularly interested in what USLP would mean for the business.”
Simultaneously, an intensive communication campaign began. Internally, the new CEO and his management team held meetings, hosted forums, and visited operations to outline the vision, answer questions, and celebrate early achievements. Externally, Polman gave interviews to the media, met with analysts, and spoke at meetings from UN conferences to the World Economic Forum at Davos. Within a year, few in the business world were unaware of Unilever’s USLP strategy.
Delivering Results, Confronting Shortfalls
By late 2013, Polman was generally satisfied with USLP’s progress in its first three years. He was particularly pleased with the imagination and passion shown by the supply chain function, whose early embrace of the new strategic challenges had resulted in positive change on many fronts ranging from implementing sustainable sourcing policies to championing smallholder farmers. In addition to dramatically reducing Unilever’s environmental footprint, such actions also played a lead role in creating a platform on which brand management could build consumer-facing claims. These achievements were highlighted in Unilever’s annual report and also celebrated in a separate USLP report that was published annually beginning in 2011.
Three years into USLP’s rollout, Unilever sustainably sourced 48% of its agricultural products, up from 14% in 2010. The company was also on track to meet the goal of doubling the proportion of its food products meeting the highest globally recognized nutritional standards, with 31% of the portfolio by volume already meeting that standard. And its efforts to improve the health of a billion people had reached 303 million with handwashing, oral health, and safe drinking water programs.
Indeed, of USLP’s more than 50 specific defined targets, at the end of 2013 only five were regarded as being “off-target.” But of those, two were of particular concern: GHG emissions and water usage. Rather than shrinking, over the previous two years, Unilever’s GHG footprint per consumer use had
 

 
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actually increased by 5%, while its water impact had grown by 15%. Given the size and environmental sensitivity of these shortfalls, they clearly represented major stumbling blocks to the achievement of the USLP goal of halving Unilever’s environmental impact.
Having accepted responsibility for the whole value chain of its products, USLP’s early analysis had calculated that consumer use accounted for 68% of Unilever’s GHG impact and 85% of its water footprint. Unsurprisingly, the majority of both off-target metrics was due to consumers’ use of hot water for bathing, hair washing, and laundry. The discouraging increase in these two key metrics was due to two main factors—the impact of acquiring Alberto Culver’s shower and hair products in 2011 and Unilever’s lack of progress in reducing the impact of consumer use.
Redoubling its efforts, management underlined the need for impactful innovations. The company introduced laundry detergents that required shorter wash cycles, minimum rinse fabric conditioners, and dry shampoos. The latter, for example, were sold in 10 countries under brands including Dove, Suave, TRESemmé, and VO5. But despite data indicating that dry shampoo users replaced wet shampoos 60% of the time, management recognized that it could only achieve its ambitious GHG and water usage objectives by changing other energy-efficiency variables, particularly those affecting domestic hot water use. And so they tried. For example, in one multicountry experiment, Unilever offered low-flow showerheads and aerators as an incentive with the purchase of its shampoos.
But the impact of such innovations was limited, and management understood that much bigger initiatives were needed to meet its GHG and water use targets. So management committed to using Unilever’s influence to reduce carbon intensity in the energy supply infrastructure. Company representatives became active in a variety of industry and government organizations to influence public policy, measure environmental footprints, and develop uniform reporting standards.
As anti-smoking and seatbelt education programs had shown, however, changing ingrained habits took decades. As this reality became clearer, some began questioning whether some of USLP’s bold 2020 objectives were simply unrealistic. Polman disagreed.
Reinforcing the Mission: New Leaders, New Initiatives
Although USLP’s early successes were impressive, the top ULE team felt that many had been achieved by picking “low hanging fruit.” Despite strong results in manufacturing efficiencies, sustainable sourcing, and some brands with existing USLP-linked programs, they were concerned about a lack of initiative, innovation, and even engagement in other parts of the organization. They felt a need to reinforce the resources and capabilities dedicated to supporting USLP.
New CSO: Refreshing USLP’s Mandate
In 2012, when Gail Klintworth was appointed Chief Sustainability Officer, she identified several impediments to implementation: some people were unclear about their roles, others viewed USLP as a separate initiative that was unconnected to their strategy, and a good number were concerned about the cost of shifting to a sustainability-based strategy.
Everyone was very familiar with success stories such as Lifebuoy, the venerable soap brand that had built a successful business on the promise of improving family health. But they also knew that by shifting promotional expenditures from TV advertising to handwashing education programs in
 

 
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schools, Lifebuoy had to be willing to extend the payback on its marketing investments by several years.a Many marketing managers felt they could not do so and still meet their budget targets.
Convinced that her small corporate team had to become catalysts to help businesses recognize the feasibility and potential of change, Klintworth launched an initiative she called “USLP Refresh.” Assigning leaders for each of USLP’s seven pillars, she charged them with working with category and brand teams to evaluate their business models, connect them with resources, and help build the capability to take action. They reviewed three levels of sustainability-linked opportunities: “must do” initiatives critical to the business (e.g., reducing fat, sugar, and salt content); growth or cost-cutting opportunities (e.g., new products to respond to water scarcity in developing countries); and opportunities where Unilever could take leadership on important environmental or social issues (e.g., managing its supply chain to help close human rights gaps).
In a typical example, the designated leader for sustainable sourcing met with the Knorr soups and sauces team to review how USLP-linked opportunities could support their business objectives. The team agreed to explore new opportunities for sustainable sourcing that could also cut costs, drive growth, or reduce risk. After setting a baseline of current performance versus target metrics, the team developed a program for tomatoes, Knorr’s largest vegetable purchase. Implementing the program, they found that drip irrigation could halve water consumption, improve yields, and lower fertilizer and pesticide use. To spread such practices, Knorr established a €1 million annual Sustainability Partnership Fund to support best practices on “landmark farms” from which other growers could learn. By 2013, the program boosted Knorr’s purchase of tomatoes from sustainable sources to 84%.
New Marketing SVP: Linking Brands to Purpose
While Klintworth’s team was implementing USLP Refresh, Marc Mathieu, the newly recruited Senior Vice President of Marketing, initiated a program he called “Crafting Brands for Life” (or CB4L for short). With an objective of closely linking brand strategy to USLP principles, CB4L had three principles: “We put people first, recognizing them as individuals, not just consumers,” said Mathieu. “Then we aim to build ‘brand love’ so people identify with our brands, not just purchase our products. And finally, we want to unlock the magic—not just the logic—in our execution.”
To implement CB4L, he rolled out a series of 1½-day workshops designed to engage Unilever’s 6,000 marketers on how their brands were linked to USLP. Using prepared frameworks, they debated how to develop not just a brand position, but also a brand purpose that could be embedded into their strategy. The “Brand Key” that had long defined each brand’s competitive positioning was adapted to become a “Brand Love Key” that embodied what the brand stood for.
The CB4L workshops were followed by “Brand Deep Dives” to engage marketers with end-users in their homes. Unlike typical focus groups, these were a series of two-hour conversations to explore the human themes that connected the individual to the brand, and how it fit into their lives. “People today expect transparency and real-time engagement with their brands,” said Mathieu. “To develop a personal relationship with end users, the role of marketing has to change from creating a myth and telling it to finding a truth and sharing it.”
Through this process, many more brands linked their strategies to USLP priorities. For example, the laundry brand Persil (sold in other countries as Omo, Skip, Surf, and Rinso) was no longer built on the platform that “Persil Washes Whiter” but instead had developed a Brand Love Key linked to a
a For a detailed description, see Christopher A. Bartlett, “Unilever’s Lifebuoy in India: Implementing the Sustainability Plan,” HBS No. 914–417 (Boston: Harvard Business School Publishing, 2016).
 
http://en.wikipedia.org/wiki/Soup
http://en.wikipedia.org/wiki/Condiment

 
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mother’s strong interest in her child’s development. Building on research showing that hands-on play and trial-and-error discovery were vital to a child’s development, the brand built its strategy around a “Dirt Is Good” campaign. This reversed the traditional fear-based laundry detergent advertising message that dirt was bad. Instead, it projected a positive life-celebrating message inspiring mothers to encourage their children to play outside, explore, and get dirty, knowing that it was good for their development, and that Persil/Omo would remove the stains. (See Exhibit 5.)
But Mathieu acknowledged that some brands were “more challenging” than others. For example, Axe, the very successful men’s deodorant had been built on macho themes of helping men attract women. To reposition Axe as a product with a positive societal impact was proving difficult. “The question we eventually will have to ask is whether we ask each category to identify a few flagship brands and allow other brands not to participate,” said Mathieu. “Or might you risk becoming only as strong as your weakest link? Some have even proposed divesting such nonconforming brands. It’s an open debate.”
New VP of Social Impact: Broadening USLP’s Ambition
Meanwhile, UN Secretary General Ban Ki-moon had invited Polman to join the board of the UN Global Compact, an initiative designed to commit global businesses to the environment, human rights, and anti-corruption actions. He also appointed the Unilever CEO to an elite group of 27 global leaders—the only corporate representative invited—to advise on a Post-2015 Development Agenda, a vital initiative to follow the UN’s Millennium Development Goals that would expire in 2015.
In part influenced by discussions in these forums, Polman began to feel that Unilever was focused on environmental goals more than on a social agenda, and urged his team to consider expanding USLP’s commitments. To lead this new emphasis, the company brought in Marcella Manubens as its first VP of Social Impact and charged her with implementing the UN Guiding Principles on Business and Human Rights by expanding on USLP’s existing “Enhancing Livelihoods” pillar.
In 2013, her focus led to three new USLP commitments: to drive fairness in the workplace (e.g., 100% of procurement from suppliers committed to promoting fundamental human rights by 2020), to advance opportunities for women (e.g., empower 5 million women both inside and outside Unilever by 2020), and to develop inclusive business (e.g., positively affect 5.5 million people by improving the livelihoods of smallholder farmers, small-scale retailers, and young entrepreneurs by 2020). To some, USLP’s expansion from seven to nine pillar commitments seemed a stretch. Just as they were grappling with the first round of objectives, a new set of challenges had been added to the agenda.
Adapting and Adjusting: Transformational Partnerships
Beyond these structural changes, USLP’s implementation also benefited from an ongoing process of learning and adaptation. For example, the company’s continuing struggle to meet GHG and water usage targets reinforced the belief of the ULE leadership team that many USLP objectives could not be achieved without changes in the wider system. The expanding commitments that followed led to a significant evolution in Unilever’s sustainability agenda.
New Partnerships: Collaborating for Change
Since the outset, Unilever had understood that it could not achieve its bold objectives by itself. Indeed, in the very first USLP Progress Report, Polman had emphasized, “Delivering these commitments won’t be easy. . . . We will have to work in partnership with governments, NGOs,
 
https://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/environment.html
https://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/humanRights.html
https://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/humanRights.html
https://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/anti-corruption.html

 
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suppliers and others to address the big challenges that confront us all. Ultimately, we will only succeed if we inspire billions of people around the world to take the small, everyday actions that add up to a big difference—actions that will enable us all to live more sustainably.”10
Over time, partnerships became embedded in USLP’s implementation. For example, Unilever’s “Partner to Win” program resulted in hundreds of agreements being signed with scores of suppliers, many linked to sustainable sourcing. Unilever also brought sustainability programs to consumers by partnering with retail chains like Tesco and Walmart. And it created entirely new initiatives such as “innovation eco-systems” based on open innovation teams with academics and small and medium- sized enterprises.
Beyond such partnerships in its own value chain, the company also took leadership roles in industry organizations such as the Consumer Goods Forum, the Tropical Rainforest Alliance, and the World Business Council for Sustainable Development. It also partnered with scores of NGOs including Oxfam, Unicef, Save the Children, WWF, and Rainforest Alliance. And it had dozens of collaborative programs with governments at national and local levels worldwide.
Rather than being peripheral, many of these partnerships played key roles in developing USLP strategies. For example, in early 2013, when Oxfam advised the new VP of Social Impact of its plans to investigate labor practices in Vietnam, the company welcomed its involvement and opened the organization to a full review. Despite Unilever paying above Vietnam’s legal minimum wage, the study found that its factory wages were below the international poverty level. Rather than challenging or ignoring the report, the company engaged the findings and used the criticisms to review working conditions in its factories worldwide. The Oxfam spokesman described Unilever’s response as “the most transparent and forward thinking example I’ve seen.”11
Strategy Adjustments: Leading Systemwide Transformational Change
Although partnerships proved effective, it became clear that the company would need even more support to meet its goals. It was time for a new emphasis that management first outlined in the 2013 USLP Progress Report: “We have been asking ourselves how we can make a bigger difference to those big issues that matter most to our business. . . . We are only one company among many and the change needed to tackle the world’s major social environmental and economic issues is big and urgent. . . . What’s really needed are changes to the broader systems of which we are a part.”12
Behind this announcement was a commitment for Unilever to take a leadership role to make a “transformational impact” in key areas relevant to its businesses. While not giving up on its USLP agenda, management decided that in order to achieve its goals, it had to leverage its scale, its influence, and its resources to bring about a market transformation and engage other companies to take broader responsibility.
This expansion of the sustainability agenda put new demands on the Chief Sustainability Officer (CSO) role, and the decision was taken to divide it in two. While most of the corporate sustainability group remained focused on the internal agenda under Sue Garrard as Senior Vice President for Sustainable Business Development, Jeff Seabright was recruited as the company’s new CSO. As Garrard’s staff worked on accelerating the integration of sustainability into all aspects of Unilever’s business, especially its brand portfolio, Seabright and his small team focused on three objectives at the core of Unilever’s new externally oriented, transformational change agenda. (See Exhibit 6.)
The first target for transformational change was deforestation, chosen because Unilever was a major buyer of palm oil, a key driver of the problem. Beyond its own commitment to source 100% of
 

 
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its palm oil from certified and traceable sources by 2020, management committed to lead worldwide efforts to eliminate deforestation by working with governments, NGOs, and others in the industry. In September 2014, it led members of the Consumer Goods Forum at the UN Climate Summit in New York in obtaining the commitment of 170 governments, companies, and NGOs to cut forest loss by half by 2020, and eliminate it completely by 2030.
Unilever’s second transformational agenda priority was to champion sustainable agriculture and the development of smallholder farmers. Again, the company wanted others to join it in making sustainable agriculture mainstream while enhancing the livelihoods of smallholder farmers. In one initiative, it partnered with Solidaridad to improve the lives of a million smallholders in developing countries by offering them training and funds to grow sustainable tea, cocoa, sugar, and other crops.
The third area in which Unilever believed it could lead changes in the broader system was in improving health and hygiene, particularly for the 2.5 billion people without access to adequate sanitation or safe drinking water. Taking its expertise in consumer behavior change, the company partnered with governments, NGOs, and other companies to leverage its initiatives in handwashing, sanitation, and safe drinking water, tied to brands such as Lifebuoy, Domestos, and Pureit. In one initiative, Unilever partnered with NGOs, social entrepreneurs, academics, and other businesses to create the Toilet Board Coalition, whose mission was to develop commercial, scalable toilet facilities for the world’s 2.5 billion people without adequate sanitation. And it trained entrepreneurs to supply, install, and maintain 50,000 toilets in India and Vietnam by 2015.
Looking Back to Look Ahead: Next Steps
In early 2015, four years into USLP’s implementation, Polman and his ULE leadership team were pleased with progress and with the process that had helped the company’s sustainability strategy to adapt and improve. But they wanted to evaluate whether further adjustments were needed, particularly in light of current operating conditions.
Sustainability as Strategy: Measuring the Impact
From the outset, Polman had visualized USLP at the core of Unilever’s strategy—driving growth, cutting costs, reducing risks, stimulating innovation, inspiring employees, and engaging consumers. But these were assertions rather than proven outcomes, and some still viewed USLP mainly in corporate social responsibility terms, and remained skeptical that its benefits exceeded its costs.
To respond, the SVP of Sustainable Development, the CSO, and the Group Financial Controller all committed to developing tools that could measure the business impact of the USLP strategy. Beginning in 2014, they subjected all Unilever products to an analysis not only to determine their growth rate and profitability, but also to show if they had contributed measurably to USLP objectives. It required a huge effort, but was felt to be worthwhile if it could remove skepticism and help expand the integration of the sustainability agenda into more business strategies.
One outcome of the analysis was the identification of what the group called “sustainable living brands”—those whose product not only contributed to one or more USLP goal (e.g., sustainably sourced, reduces environmental impact, makes a health contribution, etc.), but also whose brand built on a sustainable living purpose (e.g., positioned to engage consumers to take sustainable behavior). Of Unilever’s top 30 brands, 11 were classified as “sustainable living brands.”
 

 
Unilever’s New Global Strategy: Competing through Sustainability 916-414
11
In April 2015, the analysis was complete, and the company announced that it now had evidence that integrating sustainability into its business strategy was driving growth, reducing costs, and increasing business resilience. Indeed, it found that its “sustainable living brands” accounted for half the company’s growth and had grown at twice the rate of the rest of the business.13
Performance to Date: Achievements and Challenges
However, as all ULE members knew, the future of USLP depended on how the total business was performing. In reporting on Unilever’s 2014 results, Polman proudly highlighted that the company had continued to grow ahead of its slowing markets worldwide, that it had recorded its fifth consecutive year of top- and bottom-line growth, and that cost savings programs had lifted core operating margins from 14.1% to 14.5%, continuing the upward trend from 13.6% in 2009.14
When asked what pleased him most about those results, the CEO identified the ability to deliver them while balancing the needs of multiple stakeholders. Not only had investors been rewarded with an 18% rise in total shareholder return, but employee engagement scores tracking job satisfaction, pride, loyalty, and so on were also very strong at 75%, well ahead of the 63% level of 2009. (The high scores were validated by Unilever’s third-place position on LinkedIn’s list of “The World’s Most In- Demand Employers in 2014,” just behind Google and Apple, and ahead of Microsoft, Facebook, and Amazon.15) Furthermore, Unilever’s sustainability record was recognized by its continued inclusion in the Dow Jones Sustainability Index, as well as by its position as number one on the 2014 list of “Sustainability Leaders” in GlobeScan’s annual survey of worldwide sustainability experts.16
However, Polman also expressed concern about the business environment, characterizing it as “volatile and complex . . . with more headwinds than tailwinds.”17 Developed markets had stalled and emerging market growth slowed. So, despite gaining share by growing faster than its markets, Unilever’s underlying sales growth rate declined from 6.9% in 2012 to 4.3% in 2013 and just 2.9% in 2014. And due to foreign exchange impact, its 2014 revenues were actually down 2.7% from 2013. Indeed, after years of seeing its shares outperform its key competitor P&G, by 2014 Unilever’s stock price growth seem to have stalled. (See Exhibit 7.)
In the company’s 2014 USLP Progress Report, Polman again reported strong results before recognizing some concerns. The company reported “on-track” performance on seven of its nine USLP pillars, with detailed results showing that 12 of 67 specific metrics had already been achieved, 48 were tracking to plan, and only 7 were off plan. (See Exhibit 8.)
Yet, once again, the CEO was transparent about the shortfalls. He acknowledged that because both of the “off-track” USLP pillars were linked to consumers’ use of its products, they would be hard to fix. In contrast to a goal of halving its environmental footprint, in part due to its merger and acquisition activity, Unilever’s GHG impact per consumer use had actually increased by 4% since 2010, and consumer water use impact had been reduced by only 2%.
Decision Time: Possibilities and Priorities
Looking back over the previous four years, Polman’s top ULE team realized how far Unilever’s sustainability strategy had come. Yet, while the company’s overall vision remained clear, and its commitment stayed constant, USLP’s implementation had been characterized by continuous adaptation, adjustment, and learning. So, once again, they had an opportunity to assess where their future priorities should lie, and whether further adjustments might be necessary.
 

 
916-414 Unilever’s New Global Strategy: Competing through Sustainability
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There certainly was no shortage of views within the company—from those who were deeply committed to others more generally skeptical. To the former, this was the time to double down and make an even stronger effort to achieve USLP’s objectives by 2020. Now that evidence existed supporting the business value of the sustainability agenda, they felt that management should push lagging parts of the business to increase the number of “sustainable living brands” in the portfolio.
To achieve that objective, they felt the new metrics offered an opportunity to evaluate and reward managers on their effectiveness in meeting USLP goals. Because this had previously been difficult to do, current evaluations and rewards were biased toward financial performance. But recently, parts of the organization had experimented with holding managers as accountable for their sustainability objectives as for their financial targets. Some felt it was time to expand that practice companywide.
However, others worried that because “strong headwinds” were slowing growth, shrinking margins, and depressing the stock price, the company should hunker down and show financial restraint. Their concern was that creating “sustainable living brands” typically involved significant upfront investment to shift the brand positioning and implement the product or process changes needed to deliver on environmental and social goals. They felt that the current environment did not support making such large investments that promised mostly long-term payoffs. In their view, this might be the time to scale back and acknowledge that despite the company’s best efforts, some objectives like reductions in GHG and water usage were beyond its reach.
Still others believed that Unilever should pivot toward its transformation agenda and focus on building external partnerships to support and amplify the company’s good work over the past four years. In this view, management should acknowledge that while Unilever would not meet its GHG and water usage objectives through internal efforts, its leadership in forging partnerships to reduce global deforestation could well achieve those goals through different means.
These were large and complex questions facing Polman and his ULE team. At a minimum, they had to decide what, if any, fine-tuning adjustments needed to be made in its USLP strategy. But they also recognized that Unilever could well be at a major inflection point in the program. The question was, where to next?
 

 
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916-414 Unilever’s New Global Strategy: Competing through Sustainability
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Exhibit 2 Unilever’s Compass Vision and USLP Goals
Source: USLP, Summary of Progress, 2014 (“Scaling for Impact”), p. 5.
 

 
Unilever’s New Global Strategy: Competing through Sustainability 916-414
15
Exhibit 3 Unilever’s Virtuous Cycle Business Model
Source: Unilever, 2014 Annual Report, p. 14.
 

 
916-414 Unilever’s New Global Strategy: Competing through Sustainability
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Exhibit 4 Unilever Corporate Organization Chart
Source: Casewriter’s representation.
 

 
Unilever’s New Global Strategy: Competing through Sustainability 916-414
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Exhibit 5 Persil/ Omo “Dirt Is Good” Campaign
Source: Company documents.
 

 
916-414 Unilever’s New Global Strategy: Competing through Sustainability
18
Exhibit 6 Unilever’s Transformational Change Priorities
Source: USLP, Summary of Progress, 2014 (“Scaling for Impact”), p. 11.
 

 
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916-414 Unilever’s New Global Strategy: Competing through Sustainability
22
Endnotes
1 David Benady, “Will putting a P&G man in charge work for Unilever?,” Marketing Week, September 10, 2008.
2 Paul Polman and Adi Ignatius, “Captain Planet,” Harvard Business Review, June 2012.
3 Kamal Ahmed, “Davos 2011: Unilever’s Paul Polman believes we need to think long term,” Telegraph, January 15, 2011.
4 Andrew Saunders, “The MT Interview: Assuming his new role in the midst of a global recession,” Management Today, March 1, 2011.
5 Saunders, “The MT Interview.”
6 Polman and Ignatius, “Captain Planet.”
7 Stuart Smith, “Is Unilever’s sustainability drive a hostage to fortune?,” Marketing Week, December 9, 2010.
8 Michael Skapinker, “Corporate plans may be lost in translation,” Financial Times, November 22, 2010.
9 Polman and Ignatius, “Captain Planet.”
10 Paul Polman, Introduction, “Unilever Sustainable Living Plan: Small Actions, Big Difference,” Unilever 2011 document, p. 3.
11 Tim Smedley, “Unilever’s labour practices in Vietnam found wanting by Oxfam report,” http://www.theguardian.com/ sustainable-business/blog/unilever-labour-practices-vietnam-oxfam-report, accessed April 2, 2015.
12 USLP, 2013 Report, p. 14.
13 “New Unilever report points to success in all target areas,” Guardian online, May 13, 2015, http://www.theguardian.com/sustainable-business/unilever-partner-zone/2015/may/13/new-unilever-report-points-to- success-in-all-target-areas.
14 Unilever, 2014 Annual Report, p. 7.
15 “The World’s 100 Most InDemand Employers: 2014,” LinkedIn, https://www.linkedin.com/indemand/global/2014, accessed January 15, 2015.
16 “The 2014 Sustainability Leaders: A GlobeScan Survey,” GlobeScan, http://www.globescan.com/component/edocman/?view=document&id=103&Itemid=591, accessed May 20, 2015.
17 Unilever, 2014 Annual Report, p. 4.
 
http://www.theguardian.com/sustainable-business/blog/unilever-labour-practices-vietnam-oxfam-report
http://www.theguardian.com/sustainable-business/blog/unilever-labour-practices-vietnam-oxfam-report
http://www.theguardian.com/sustainable-business/unilever-partner-zone/2015/may/13/new-unilever-report-points-to-success-in-all-target-areas
http://www.theguardian.com/sustainable-business/unilever-partner-zone/2015/may/13/new-unilever-report-points-to-success-in-all-target-areas
https://www.linkedin.com/indemand/global/2014
http://www.globescan.com/component/edocman/?view=document&id=103&Itemid=591

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