Unilever Case Study

Case Study: Unilever 1. Evaluate the benefits and risks of Paul Polmans’ 2010 decision to implement a new strategy based on the Unilever Sustainable Living Plan? The Unilever Sustainable Living Plan had had impressive results, but it was not yet fully embraced by some parts of the organization. During the 2000s, companies started to bring attention to “global warming” but only some companies made attempts to alter their business practices to more environmentally-friendly practices, despite the costs of doing so. Polman was one of those CEOs that decided to make actual steps in this regard and announced a new corporate strategy that “aimed to double the size of Unilever’s business while simultaneously reducing its environmental footprint and increasing its positive social impact.” (pg. 3) Indeed, there are some great benefits that come with implementing USLP, starting with the recognition of the brand among environmental activists and the press. This recognition most importantly extended across the developing countries where the company had sought to increase its revenues. The United Nations also gave Unilever’s executives membership as they were recognized for working for positive social change. Indeed, showing concern for over millions of people and for the environment may result in creating a healthy brand image for Unilever. However, even though the bold environmentally-friendly initiative can greatly benefit the organization by fostering customer loyalty and appealing to those customers who are more socially and ethically conscious, there are some substantial risks that come with implementing USLP. The primary problem with implementing this transformational strategy was that it required Unilever’s businesses to make substantial upfront investments that could have yielded results only in the longer term, making this agenda very difficult and risky especially given the struggles that the organization was already facing at the time. This would also be an issue with stakeholders including shareholders as they might be reluctant to invest heavily in the project, especially because it could result in lower dividends in the first stages and due to the lack of assurance for future growth and development. Indeed, there was no assurance that such a costly initiative would actually increase customer attention and satisfaction, especially in developing countries where customers’ main concerns may be the product quality and its cost. In the case that the project did not have the expected positive appeal to the customers, the project would only create a large financial burden for the organization. To finance the project, the organization would need to cut down on other expenses, and Polman suggested cutting down executives’ salaries. Although this would entail a cost reduction overall for the company, cutting down salaries might demotivate employees and thus reduce productivity overall. Despite the positive social benefits of this initiative, Unilever must pay attention to these risks for the sake of the company. Another risk related to this initiative worth mentioning is the actual feasibility of the plan’s established objectives, which is discussed more in the next section (question 2). 2. Evaluate the effectiveness of the new strategy to date. Since introducing new policies in 2009, some positive results started showing in the subsequent years. Unilever sourced 48% of its agricultural products, a great accomplishment from the 14% in 2010. Unilever’s attempts to improve the health of a billion people actually reached 303 million customers with handwashing, safe drinking water programs and oral health. Unilever also reported its own internal greenhouse gases emissions were reduced by 40% and water use dropped by 31%. However, this progress was not achieved in the whole value chain of the business, meaning from sourcing to consumer use to disposal. By 2020. greenhouse gas emissions per customer (using Unilever products) actually increased 4 % since 2010, and water use per customer only reduced by 2%. These unappealing results seem to be partly due to the actual limited feasibility of the plan’s announced objectives. In fact, consumer use accounted for the majority of Unilever’s GHG impact and its water footprint. Although the company attempted to offset this by introducing products that would use less water (such as dry shampoos), the impact of these measures were limited and did not bring the company much closer to its GHG and water use goals. Despite the minimal impact on consumer’s use, the company reported to be on track with the USLP objectives. Regarding the company’s financial performance after the new strategy was implemented, Unilever continued to grow more than the average company in the slowing market, but its sales growth still declined from 6.9% in 2012 to 2.9% in 2014. Due to the foreign exchange impact, the company’s revenues actually decreased by 2.7% from 2013. On the other hand, investors were able to enjoy a 18% increase in total shareholders’ return. 3. What actions should the company take now? Polman had very high and optimistic expectations on the results that the initiative could achieve, but the effectiveness of the plan to date may show that the organization needs to reassess some of its objectives and priorities to achieve relevant success with the new planning strategy. It is important to accept that such targets may be too demanding and probably unrealistic, thus making huge investments with such high-achieving targets might not bring any advantage to the company’s performance. The goal of the company should be sustainability and sustainable goals that are within reach. Furthermore, Poleman’s management and administration changes combined with the new planning strategy might not be beneficial to the company’s performance both in sales growth and environmental safety objectives. For instance, Poleman wanted to cut down the salaries and overseas travel opportunities of managers in order to allocate those costs towards the costly initiative. With the goal to achieve such challenging targets, the company’s employees, especially managers and top executives, should be rewarded for their hard work and commitment to USLP objectives rather than being penalized, as demotivation of employees can have a counteractive impact on the company’s progress. Given that the more progress should be promoted in consumers’ use, the company should continue to offer more environmentally-friendly products such as minimum rinse fabric conditioners and laundry detergents that require shorter wash cycles. It is essential for the company to put emphasis on the advertising and marketing of such innovative products, in particular by educating consumers on the positive impact that these products can have on the environment. 4. Provide an implementation plan for your recommendation. Under the current circumstances, the company has to focus on its sustainability agenda and revise its targets. As previously mentioned, it is key to accept that a meaningful impact will take time to show results, so the company should partially alter their approach to this initiative and clearly communicate to management. The revised course of action should also be communicated effectively to stakeholders to ensure their contribution and support. Since consumer use has shown the least positive impact, the company should explore alternatives that can have a larger effect on consumer use. Research and innovation are key factors and may require more investment and attention. Another option would be for the company to enter partnerships with other organizations that are equally dedicated to the USLP goals to accomplish a larger scale impact on sustainability targets. For instance, the company already has a partnership with Knorr to implement a program aimed at reducing drip irrigation and drastically reducing water usage. In order to acquire effective partnerships that are most relevant to the company’s revised agenda, the company should carefully identify those external organizations that would be more valuable to partner up with, as well as communicate about these partnerships with both external and internal stakeholders. The revised agenda should reorient the metrics goals to line up with the requirements established through the partnership.