Amid anxieties, consumers still value integrity
Unilever CEO sticks with firm’s social responsibility stance, write Thomas Buckley and Matthew Boyle
EVEN as Brexit, a contentious presidential race in the US and turmoil in emerging markets highlight fear among electorates, Unilever CEO Paul Polman says consumers and investors are increasingly attracted to brands that positively address social issues.
The UK’s vote to leave the EU mirrors support for Donald Trump’s US presidential candidacy in that both represent people “running away from something” rather than supporting a particular policy or issue, Polman says in an interview in London.
Political upheaval in Brazil, another key market for consumer goods companies such as Unilever, has added to marketers’ concerns.
Brexit is manageable and the Bank of England’s rate cut in August limited potential economic fallout, Polman says. Despite the uncertainty, UK Prime Minister Theresa May should not rush to trigger exit talks, he adds.
“Uncertainty doesn’t help us, but … buying some time and waiting for the UK to start the [Brexit] process is actually better” as it allows time for politicians to “cool down”, he says.
While Brexit and the US election campaign have fed political cynicism and populist rhetoric, Polman says consumers and investors are more attuned to corporate social responsibility, the signature issue of his eight-year tenure at the maker of Dove soaps and Ben & Jerry’s ice cream.
Brands such as Dove that address societal or environmental problems have grown 30% faster than the rest of Unilever’s business, which spans 190 countries and generated €53bn in sales in 2015, the company says. Such growth has assuaged sceptical investors who used to prefer that CEOs battle industry rivals, not climate change. BlackRock CEO Larry Fink has asked investors to focus more on the “real and quantifiable financial impacts” of environmental and social factors such as reducing carbon emissions and increasing diversity.
Ethical investing has grown to encompass 30% of assets under management, or more than $21-trillion, according to the Global Sustainable Investment Alliance.
“If you ask the investor community how much they care about environmental, social and governance issues, they will say we care a lot about it, because they see that Volkswagen wipes off 40% of its market cap, they see BP, they see Sports Direct,” Polman says, referring to cheating on emissions tests at Volkswagen, BP’s Gulf of Mexico oil spill in 2010 and concerns over working practices at UK retailer Sports Direct International.
Aside from sustainability, Polman has new opportunities and old challenges on his plate. In July he paid about $1bn for mail-order razor company Dollar Shave Club, with the hope that Unilever can expand it beyond the US and apply its direct-to-consumer subscription model to premium brands like Dermalogica skin care.
Asked why he did not buy Dollar Shave earlier for a lower price, Polman says the business was not sufficiently developed. By waiting until it had more than $100m in sales, “you
Brands that address societal or environmental problems have grown 30% faster than the rest of Unilever
ensure that what you buy has a higher probability to succeed”.
Unilever’s food-spread business, which includes Flora margarine and became a standalone subsidiary in 2014, continues to struggle. Polman put a new executive in charge in January and says he will look at all options if it fails to revive in 2016. Any change in ownership would have to deliver value for shareholders and result in a better-run business, he says.
“You could give it away and destroy shareholder value or you can make the most of it. And if you can make the most of it and convince yourself that there is someone else out there that can do it better than we do, you have to give them that opportunity. But if you sit on a declining business, that in itself is not a reason to jump ship.”
Polman has jettisoned brands that failed to appeal to many consumers in the emerging markets that account for 58% of Unilever revenue.
The Dutch executive wants to focus on brands that can create online communities highlighting social issues that interest millennial shoppers. In the US, those consumers spend a collective $600bn annually, according to professional services company Accenture.
Dove, for example, has worked to improve young women’s self-esteem by discussing conceptions of beauty, while Lifebuoy soap has sought to raise awareness of the importance of hand-washing. Companies that cannot or will not address issues like climate change are struggling, he says. “Brands that have a stronger purpose are the brands that do better.”