Unilever chief executive Paul Polman stands to reap rich rewards if his strategy based on sustainability pays off, but the risks are high.
Ogilvy & Mather, which has just wrested the Unilever corporate brand development account from Fallon, will shortly unveil the fruits of its labour. New agency, new agenda – and top of that agenda is Unilever’s recently announced ten-year sustainability programme.
Sustainability, it’s now clear, is the yardstick by which Paul Polman’s tenure as chief executive of Unilever will be measured.
Nothing in Polman’s previous career as a long-serving Procter & Gamble executive, or finance director of Nestlé, suggested he was going to be the man to ring the changes, not only at Unilever but in the wider corporate world. Yet, against the odds, he has been the one to embark on a visionary strategy that brings with it the potential for huge rewards, but also huge risk. Whatever the eventual outcome, it will impact both the marketing and investment communities.
There has been much talk of the Triple Bottom Line of People, Planet and Profit since it was first coined by SustainAbility’s John Elkington – the doyen of corporate social responsibility – in 1998. Marks & Spencer’s Plan A, launched in 2007, is rightly regarded as a milestone because it commits the company to long-term sustainability goals that can be objectively gauged. But the Polman initiative goes well beyond that.
First, it’s easy to underestimate what a risk Polman is taking with the investment community, which continues to be obsessed by short-term earnings performance. Most chief executives report a singular lack of interest in sustainability from investors and analysts, according to a recent survey of 766 CEOs commissioned by Accenture. Only 12% say they are under any pressure to do something about the issue.
And yet, one of the first things Polman did when he took over at Unilever was to decouple the assessment of its stock market performance from quarterly earnings, and replace it with topline revenue growth. We can now see that he was laying the ground for something much more ambitious: the framework for a longer term ROI programme that would be capable of benchmarking a ten-year sustainability strategy.
Plenty of CEOs moan about the burdens of investors’ short-termism, but few do anything about it. Polman has been quite uncompromising, telling investors who don’t like the ride to get off. The City is prepared to go along with that for the moment because he has delivered six quarters of earnings growth. But what if that growth stalls?
It’s easy to underestimate what a risk Polman is taking with the investment community, which continues to be obsessed by short-term earnings performance
Similarly risky is his approach to marketing strategy. Polman has demonstrated admirable clarity of vision in not only elevating his chief marketing officer to the Unilever board, but in making him responsible for communications and sustainability in addition to the more conventional aspects of marketing.
Not even that academy of marketing Procter & Gamble, which recently announced its own comprehensive sustainability programme, has done this. Instead, P&G put its strategy in the hands of a dedicated director for global sustainability, Peter White.
The benefits of joined-up thinking at Unilever are obvious, if that thinking pays off. Equally, it is apparent that two people who have attached their reputation to the sustainability programme will be in the firing line if it does not – Polman himself and CMO Keith Weed. There will be no one else to blame.
So, what makes the Unilever sustainability programme so high-risk? First, the sheer ambition of the targets (compared with the relatively achievable goals of enhanced quarterly earnings or brand shares). Within ten years Unilever has publicly committed itself to source 100% of its agricultural products sustainably; halve the environmental footprint of its products throughout the cycle, from suppliers, to plant, to consumers; and help 1 billion people improve their health. Even Polman admits he does not know, at this point, how the company will achieve all these objectives. They are going to be very difficult to stage-manage.
The second caveat is that there are inherent contradictions between the conventional marketing objectives of an FMCG company like Unilever and its sustainability targets. How much of the $4.8bn annual marketing budget, which is ultimately consecrated to selling more product to consumers, will be diverted to promoting behavioural change that encourages them to consume less? This is an uncomfortable area that raises questions about the very nature of consumer society and it potentially exposes Unilever to the charge of hypocrisy.
It’s one thing to wholeheartedly promote premium detergents that do the washing cycle at 15 degrees centigrade in mature Western markets – and another in emerging markets, which already account for half of Unilever’s profits, new to the joys of unsophisticated consumerism. We can already see an element of these tensions in the positioning of certain Unilever brands. At one end of the scale we have thoughtful, authentic Dove. At the other the brazen attractions of Lynx and Fair & Lovely, the skin whitening cream that does a nice little trade with Indian women.
With all this at stake, you might ask yourself why Polman hasn’t opted for a quieter, more conventional corporate life. I suspect the answer is he feels he has no choice. In the longer run, companies that do not combine the 3BLs, as they are called, will lose competitive advantage. Even if investors are not pushing him down this path just yet, market gatekeepers such as Tesco and Walmart certainly are.
Still more revealing of his personal motives, however, is this extract from a recent interview he gave: “Facebook, with 500 million users, is the third biggest nation in the world after China and India, and it can mobilise millions of people. We are just listening to consumers, staying close to give them what they are asking for.” Social media’s power to punish, as well as to reward, is quite extraordinary.
Stuart Smith is consultant editor at Marketing Week.