Unilever's Retreat: Abandoning the Quest to 'Save the World' Amidst 'Virtue-Signalling' Controversy

Unilever’s Shift: From 'Saving the World' to Profit Focus Amidst 'Virtue-Signalling' Backlash

Unilever, the consumer goods titan behind beloved brands like Marmite, Dove, Magnum, and Ben & Jerry’s, has taken a decisive step away from its previous commitment to social and environmental causes. Faced with criticism from investors accusing the company of excessive "virtue-signalling," Unilever has opted to prioritize profits over perceived activism.

Chief Executive Hein Schumacher, who assumed leadership in July, emphasized a strategic shift, stating, “I’m not going to shout that ‘we’re saving the world’, but I want to make sure that in everything that we do, that it is indeed better.” This pivot entails revising green targets and abandoning certain diversity pledges to align more closely with shareholder interests.

Among the changes, Unilever has scaled back ambitions to reduce plastic usage, improve land health in its supply chain, and ensure living wages for all supply chain workers. Additionally, promises such as increasing disabled employee representation and supporting diverse businesses have been scrapped entirely. Plans to reduce food waste have also been shelved.

Schumacher emphasized a new direction focused on impactful initiatives rather than broad commitments, stating, “We want to set sustainability ambitions which are credible, which we believe we can deliver against, and which have real positive impact.” This marks a departure from previous leadership, particularly under Alan Jope and Paul Polman, who championed purpose-driven branding for each product.

The criticism from investors, including Terry Smith of Fundsmith, underscored concerns that Unilever's emphasis on activism was overshadowing its core business objectives. The company’s share price decline over the past five years further fueled demands for a strategic reassessment.

This latest move by Schumacher to address investor unease follows last year’s abandonment of the strategy to imbue every product with a purpose. While Unilever remains committed to sustainability, its approach now emphasizes credibility, deliverability, and tangible positive outcomes.

The evolution of Unilever’s strategy reflects a balancing act between societal expectations, shareholder demands, and the imperative of maintaining business viability in a competitive market landscape.

Unilever Adapts Sustainability Targets Amidst Market Realities

In response to shifting market dynamics and investor expectations, Unilever has recalibrated its sustainability targets, aiming for a balance between ambition and feasibility. Some adjustments include scaling back plans for reducing virgin plastic usage and slightly revising goals for sustainable sourcing of key crops.

The original target of halving the use of virgin plastics by 2026 has been revised to a one-third reduction, reflecting a pragmatic approach to the challenge. Similarly, the objective of sourcing 100% of key crops sustainably by 2026 has been adjusted to 95%, acknowledging the complexities of global supply chains.

Other targets have been subject to timeline extensions, recognizing the need for additional time and resources to achieve desired outcomes. For instance, the commitment to achieving 100% reusable, recyclable, or compostable plastic packaging by 2025 has been postponed until 2030 for rigid plastics and 2035 for flexible plastics.

Roseanna Ivory, a fund manager at Abrdn, a significant investor in Unilever, expressed some disappointment with the adjustments but noted that the company's overall commitment to sustainability remains steadfast. She highlighted the retention of decarbonization targets and the continued commitment to making all plastic reusable, recyclable, or compostable, albeit with extended timelines.

Ivory also acknowledged the challenges posed by a higher inflationary environment, which may impact the company's ability to execute on its targets originally set in a different economic and political context. This recognition underscores the need for flexibility and adaptability in pursuing sustainability goals amidst evolving external factors.

In conclusion, Unilever's recalibration of its sustainability targets reflects a pragmatic response to changing market conditions and investor expectations. While some adjustments may disappoint stakeholders, the company's underlying commitment to sustainability remains resolute. By retaining key decarbonization objectives and reaffirming its dedication to making plastic packaging more environmentally friendly, Unilever demonstrates a continued focus on driving positive impact. However, the challenges posed by a shifting economic landscape underscore the need for flexibility in goal-setting and a recognition of the complexities inherent in achieving sustainable business practices. As Unilever navigates these challenges, its ability to adapt and innovate will be crucial in advancing its sustainability agenda while delivering value to shareholders and stakeholders alike.