Unilever U-turn? Multinational faces criticism after ESG strategy rethink

24 Apr 2024 --- Unilever has revealed plans to scale back some of its sustainability targets, including more responsible packaging, backing for SMEs and support for the living wage, in a move that has drawn criticism from NGOs. The FMCG giant’s CEO, Hein Schumacher, said in a recent statement that the company would be more focused on allocating resources to its biggest sustainability priorities. 

“The reality is that Unilever’s sustainability agenda covers a wide range of issues,” he said. “But 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.”

The owner of leading food brands like Hellmann’s, Knorr and Ben & Jerry’s has downgraded its goal to cut virgin plastic by 50% by 2025, now aiming for a 30% reduction by 2026 and 40% by 2028. Also, its commitment to make all of its packaging recyclable, reusable or compostable by 2025 has been pushed to 2030 for rigid materials and 2035 for flexibles.

Moreover, while the company brought forward its target to foster a living wage for all its direct suppliers from 2030 to 2026, it has been amended to cover only 50% of these suppliers. Reports also suggest that the company has dropped a pledge to provide €2 billion (US$2.14 billion) annually to SMEs, although this is yet to be confirmed.

In a statement shared with Food Ingredients First, Unilever says: “Our updated commitments are very stretching, but they are also intentionally and, unashamedly, realistic.”

“We are determined that Unilever will deliver against them, just as we are determined to perform against our financial goals. We want to set sustainability ambitions which are credible, which we believe we can deliver against, and which have a real positive impact.”

“At Unilever, we want to do fewer things and with greater impact. Our refreshed sustainability agenda — with more focus, urgency and systemic change — is no exception.”

Good business or doublespeak?
The updated ESG targets have drawn criticism across the industry. Circuthon Consulting founder Paul Foulkes-Arellano says this announcement amounts to “management doublespeak from Unilever” and accuses the company of becoming “a pariah on environmental matters since [former CEO] Polman left.”

When Schumacher was announced as CEO in February 2023, investors wondered whether he would prioritize ESG targets to the same extent as his predecessors, Alan Jope and Paul Polman.Unilever CEO Hein Schumacher: “We want to do fewer things and with greater impact. Our refreshed sustainability agenda is no exception.”

Some financial analysts had accused Unilever of an over-emphasis on sustainability. In 2022, Terry Smith, the CEO of UK-based Fundsmith Equity, claimed the company was “obsessed with publicly displaying sustainability credentials” and failing to “focus on the fundamentals of the business.”

Unilever’s current CEO, who has already revealed plans to exit the ice cream market, wants to reorientate the company around shorter-term ESG goals.

“While rigorous and science-based long-term commitments are fundamental, we also need to ensure we deliver now. That’s why we are also short-terming our approach — ensuring we are clear about the immediate steps we have to take and hard-wiring them into the strategic cycles that most companies plan around,” he said in the statement.

“This is where capital allocation is made, trade-offs are agreed and people are being held accountable. In this way, sustainability benefits from the whole might of the company and the sense of urgency with which the rest of the business is typically managed.”

However, Foulkes-Arellano is not convinced by the new focus.

“It is no surprise that one of the world’s biggest plastic polluters is under investigation by the UK government’s Competition and Markets Authority for greenwashing,” he tells Food Ingredients First.

“Meanwhile, the company is losing facings at Tesco to two burgeoning refill brands, Wild and Fussy, who have dared to do what Unilever only dabbled with.”

Our sister platform, Packaging Insights, has explored the fallout from Unilever’s revised packaging targets in more detail.Unilever’s pledge to make all of its packaging recyclable, reusable or compostable by 2025 has been pushed to 2030 for rigid materials and 2035 for flexibles.

Supply chain lessons
Unilever’s CEO says the company will not be successful in reaching its ESG goals, which cover a wide range of issues, without more focus on resource allocation. He gives the example of a goal set in 2020 to achieve a deforestation-free supply chain in palm oil, paper and board, tea, soy and cocoa.

“Here, we allocated substantial resources over several years to tackle the challenge in its multiple dimensions: support smallholder farmers, improve cultivation practices, ensure traceability and transparency in the supply chain, build our own processing facilities, innovate alternative materials through cutting-edge science and reformulate thousands of product lines to reduce or eliminate their dependency on forest-risk commodities.”

“This focused approach has been instrumental in helping us to achieve 97.5% deforestation-free order volumes by the end of 2023.”

“It’s the type of approach we intend to replicate.”

Climate targets
Earlier this year, Unilever announced plans to reduce its absolute operational GHG emissions (Scope 1 & 2) by 100% by 2030 from a 2015 baseline and absolute Scope 3 energy and industrial GHG emissions by 42% by 2030 from a 2021 baseline.

The corporation also aims to reduce absolute Scope 3 forest, land and agriculture GHG emissions by 30.3% by 2030 from a 2021 baseline.

By Joshua Poole