Do Green Company Acquisitions Make Multinational Corporations More Sustainable?

It’s almost seems inevitable these days that the popular small eco-conscious company will eventually end up as a subsidiary of a multinational corporation. In the past two decades, more than 13 small companies that gained global notoriety through their “local” sustainability values have been bought by big, mainstream corporations – and often, by corporations that didn’t get their start using the same eco-conscious sourcing.

Companies like Burt’s Bees, Tom’s of Maine, Ben & Jerry’s and Seventh Generation have all been bought out in recent years by multinationals like Unilever, Kraft and Clorox.

Even though such buyouts can mean better marketing opportunities for the indie brand (and sometimes, as in the case of Kashi Cereals, new product lines), the new affiliation doesn’t always sit well with consumers. Devoted customers can see a sale as a “sellout” of values, rather than a mark of the product’s success. Case in point is Burt’s Bee’s CEO John Replogle’s famous admission that when consumers accused him of selling out to Clorox in 2007 for $193 million, he personally replied to each and every complaint.

These days a growing number of brand buyouts are being arranged with stipulations that allow the niche label to maintain some autonomy. Contracts, like the one executed between Ben & Jerry’s and Unilever in 2000 for $326 million can come with stiff restrictions. The ice cream company agreed to the sale on the condition that the board would remain autonomous, would include Ben Cohen and Jerry Greenfield (who launched the company in the 1970s) and that Unilever would not interfere in how the product is made.

But do such marriage agreements always work as well as they are expected? And why would multinationals with a long track record of brands and international successes, benefit from assuming the cost of a heady startup with very particular customers and visionary leaders that may not see eye-to-eye with the corporation?

And just as intriguing, why would a small startup that grounded its notoriety on the premise that it is “different” from big brands, want to join the pack? Could such assumptions of partnership actually work?

That last question was the subject of a report published some seven months after Unilever purchased Seventh Generation, Inc, a company largely known for its environmentally friendly home care products. As Professor Andrew Hoffman points out in his report, Seventh Generation and Unilever: Would Acquisition Affect Sustainability (ERB Institute), that Unilever came to the table with its own sustainability goals in progress. Purchasing Ben & Jerry’s and Seventh Generation appeared to complement those aspirations, which included reducing its environmental impact through sustainable sourcing and other goals.

For Unilever, notes Hoffman, who is the Holcim (US) Professor of Sustainable Enterprise at the University of Michigan, the purchase would open a door to markets normally held by its rival, P&G. But just as important, it would allow it to “meet rising demand for high-quality products with a purpose.”

And, like its earlier acquisition of Ben & Jerry’s, it would embolden Unilever’s sustainability image.

For Seventh Generation’s stakeholders however, the sale was an auspicious way of adding more clout to its activism and more recognition to its brand.

“As a Global 500 company, Unilever’s influence could be what Seventh Generation’s #ComeClean campaign was missing,” writes Hoffman. The company hoped that Unilever’s backing could eventually help ensure the passage of the Cleaning Product Right to Know Act 2016 in Congress. The measure, which Seventh Generation stockholders supported, called for more transparency in the production of cleaning products.

However, the bill never made it out of the House Committee on Energy and Commerce. But Unilever’s purchase of Seventh Generation did help to accomplish a second goal, which was to expand the company’s international reach and its brand recognition as “a disruptor in the U.S. [home care] marketplace.”

Hoffman’s report was published less than a year after the purchase took effect, while the transition was still taking shape But he points out that even Ben & Jerry’s buyout, which was portrayed in the media as a compatible partnership of ideals, faced ideological and functional challenges. Ice cream plants were closed and staff were let go in an effort to cut costs after the purchase, even though Ben & Jerry’s had gone on the record to say that the buyout would protect jobs.

Still, that’s not to say such mergers don't promote sustainability efforts. After the acquisition, Ben & Jerry’s went on to become the first Certified B Corporation in Unilever’s long list of companies -- and the first subsidiary of a corporation with such certification.. Seventh Generation, which had been certified since 2007, became Unilever's second.

Such successes may have also rubbed off on Unilever’s own sustainability consciousness. According to the Certified B Corporation blog, Unilever was already considering participating in the organization’s MPM Advisory Council in 2015, shortly before it purchased Seventh Generation.

As Eyal Shimoni, chief technology officer for the Israeli conglomerate Strauss Foods recently pointed out, it’s innovative collaboration between companies that often forges the best path to sustainability.

 

Flickr image: Steve Depolo