Unilever Exceeds 30% Sustainable Supply Chain, but is Still Failing

On April 22, while most of the world will be celebrating Earth Day, the sustainable business community will probably be occupied with an event that might be no less important – the release of the annual Unilever Sustainable Living Plan progress report. I know I will be very curious to learn how the plan, which transformed Unilever into an advanced sustainable business lab, has been working for the company in the last year.

This week, we got a first peek into the report when Unilever announced it is sourcing more than a third of its agricultural raw materials sustainably, having made significant progress towards its target of 100 percent by 2020. “With 36 percent now sourced sustainably, it has exceeded the interim milestone of 30 percent it set for itself in 2010 when launching the Unilever Sustainable Living Plan."

In addition, Unilever reported an increase in its annual sales to $65.5 (€51) billion in 2012. “Taken together,” the company explains, these achievements “represent significant milestones on the way to realising Unilever’s vision of doubling the size of its business whilst reducing its environmental footprint and improving its positive social impact.”

So, should we buy nice organic champagne to celebrate with Unilever on April 22? Well, not so fast. Looking more closely at the challenge Unilever took upon itself when it began the Sustainable Living Plan, one can see that as impressive as these achievements might be, Unilever still has a lot of work to do to prove that this plan is a success rather than a failure.

You might wonder why I would even consider calling a $65 billion company sourcing already more than a third of its agricultural raw materials sustainably a failure. The answer is very simple – Unilever Sustainable Living Plan is not just about meeting sustainable goals, but also about inspiring other companies to follow suit. As Unilever’s CEO, Paul Polman, wrote in last year’s progress report, “But if we achieve our sustainability targets and no one else follows, we will have failed.”

While there are some companies that take similar steps, so far most companies haven’t really done much to ensure their agricultural raw materials are sourced sustainably. There are various reasons why most companies fail to follow the leadership of Unilever, but rather than looking at other companies, one can actually find some of the answers at no other than Unilever itself. Here are few examples:

Connecting the dots

Marc Engel, Unilever’s Chief Procurement Officer is quoted in the company’s press release saying, “Climate change, water scarcity, unsustainable farming practices and rising populations all threaten agricultural supplies and food security. Half of the raw materials Unilever buys are from the farming and forestry industries, so ensuring a secure supply of these materials is a major business issue.” Yet, reading the release, I couldn’t find examples connecting the dots between making the agricultural supply chain more sustainable and becoming more “climate proof.”

How does the fact that Unilever has purchased its first ever Bonsucro sustainable sugar credits in Brazil, and has become the first ever Bonsucro member to obtain these worldwide, help the company to reduce its climate risks? Or, how does having all palm oil covered by GreenPalm certificates and “working towards the new commitment to 100% certified sustainable palm oil which is traceable back to the plantations on which it is grown,” help Unilever to address water scarcity? If these initiatives reduce business risks, it should be very clear how they do so.

Metrics

I have a feeling companies might be more interested in what Unilever does if the company presented its achievements using plainer language. For example, last year Paul Polman estimated, according to BusinessGreen, that  climate change impacts were already costing the company $257m (€200m) a year. This is a substantial impact that even a large company like Unilever can’t ignore, but what steps has it taken to increase the sustainability of its agricultural supply chain help to reduce this risk? This is not clear.

If Unilever would add to its report how “a collaboration with Symrise, one of the world’s largest vanilla suppliers, has led to Unilever’s first Rainforest Alliance (RA) certified vanilla beans,” and an estimate of how much this collaboration has reduced its risks, I’m positive that more companies (as well as Unilever’s stakeholders) will be able to understand the benefits of such initiative.

Causation

Unilever proudly reports in the release that its sales rose to $65.5 billion in 2012. If you add this fact to its sourcing more agricultural raw materials, you get the feeling that this is evidence proving that “sustainable, equitable growth is the only acceptable model of growth” as Polman wrote last year in the progress report.

The problem is that right now, it’s not clear if what we see is just correlation or also causation. Unilever still needs to prove that its efforts on the supply chain contribute to the increase in sales. Unilever reports on one opportunity that came up out of these efforts (new Knorr soup promoting tomatoes as sustainably grown in accordance with the Unilever Sustainable Agriculture), but this just anecdotal evidence. Other companies will need more than that to be convinced to adopt this strategy.

[Image credit: Unilever]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and Parsons the New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.