Unilever was ranked as an industry leader in the 2018 Dow Jones Sustainability Index. In the FTSE4Good Index, it achieved the highest environmental score of 5. It led the list of Global Corporate Sustainability Leaders in the 2017 GlobeScan/SustainAbility annual survey for the seventh year running, and achieved four A ratings across Climate Change, Water, Forests and Supplier Engagement in CDP’s 2018 Global Supply Chain Report. Unilever has pledged to become carbon-positive in its operations by 2030 and to ensure that 100% of its plastic packaging is fully reusable, recyclable or compostable by 2025.
These goals stem from the Unilever’s belief that businesses must operate with purpose embedded in their strategy, serving their shareholders and wider society. This philosophy is part of the company’s heritage, which dates back to Lord Lever, who created Sunlight soap not to maximize quarterly profits but to address the issues of hygiene at that time. Today, Unilever’s purpose — to make sustainable living commonplace — is consistent with the changing attitudes and expectations of its consumers, and the company believes this is the best long-term way for the business to grow.
To ensure that Unilever’s investor engagement and disclosures reflect this, the company has taken the following steps over the last 10 years: stopping quarterly guidance and reporting; linking compensation to the Unilever Sustainable Living Plan; actively seeking long-term shareholders; broadening the company’s communication to include nonfinancials; running its own pension plan for the long term; and participating in broader coalitions to drive change.
Unilever’s peers have taken similar steps, but there remains an urgent need for companies to be able to articulate the value they create for all stakeholders in a standardized, meaningful way so that the financial markets can properly measure this broader approach to value creation.
Until companies can find a way to do this, the increasing pressure for them to maximize shareholder value will continue to distract CEOs from doing what they should be doing — promoting innovation, renewing their strategy and taking care of their stakeholders.
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- There is agreement across the investment chain about what additional information would be useful to differentiate a company’s ability to deliver long-term value; however, the devil is in the details of how, when and where this information is provided.
- As more data becomes available, there will be new ways to measure the way that companies create value; it is important that Unilever only pushes for disclosures that can be interpreted meaningfully.
Unilever will continue the work it has been doing to improve its nonfinancial disclosures. The key focus will be to move toward standardized frameworks and metrics. For example, when the company first launched its Unilever Sustainable Living Plan eight years ago, Unilever was a front-runner in disclosing performance against a series of social and environmental targets. Now, the company will leverage more standardized frameworks — including those of the Sustainability Accounting Standards Board and the Global Reporting Initiative, as well as the UN Sustainable Development Goals — that are available.
Unilever requires further collaboration, at scale, to get to the point that it can report intangibles in a truly comparable way. The company will continue to participate in broader coalitions to create a tipping point.
Unilever Sustainable Living Plan
One of the clear recommendations coming from the asset owners and the asset managers was to ensure that all nonfinancial disclosures were clearly anchored back to strategy and performance and grounded in narrative.
- Improving the health and well-being of more than 1 billion people
- Halving its environmental footprint
- Enhancing livelihoods for millions
- More growth — from brands that keep up with the changing attitudes and expectations of Unilever’s consumers
- Lower cost — through reduced waste, energy and packaging
- Less risk — securing a sustainable supply of critical raw materials such as palm oil and tea
- More trust — particularly among consumers, employees, investors and governments
In 2014, the company integrated the key sustainability metrics into its annual report and accounts. Unilever is continuously improving its disclosures; adhering to the principles of the Global Reporting Initiative Standards; and providing an annual update on how the company’s everyday business operations are reflecting the UN Global Compact’s 10 principles on human rights, labor, environment and anti-corruption. Since 2017, the company has incorporated progress against the USLP into executive compensation.
The company will increasingly look to ensure that the metrics disclosed through its Unilever Sustainable Living Plan are comparable and linked back to widely adopted frameworks such as the UN Sustainable Development Goals.
For more information on the USLP, visit www.unilever.com/sustainableliving/.
Unilever Human Capital Agenda
Over the last year, Unilever has stepped up its human capital disclosures, and as a result, the company already discloses the majority of the metrics recommended by the EPIC Human Capital Deployment working group.
- Going beyond employee engagement — The company analyzes the results of employee surveys against business performance to identify the underlying drivers of growth. Unilever uses these insights to ensure that it focuses on the interventions that not only improve engagement but have the biggest impact on business performance.
- Optimizing the retention strategy — Unilever proactively manages attrition by identifying the factors that cause people to leave and using these to predict future attrition, allowing the company to intervene where appropriate.
- Talent deployment — The company identified the 300 most valuable roles based on impact to company performance and strategy. This allows Unilever to fill these roles with key talent, ensuring that the best and brightest employees can have the greatest impact.
Recognizing that this is a key area of focus for asset owners and asset managers, Unilever will increasingly share what it is doing with its investors and welcomes more questions and engagement in this space.