Critical Evaluation of Unilever Through Value Creation and Embedding Sustainability

This essay will analyse a specific case - Unilever based on the sustainability theory. In addition, this section also uses levels of value creation to appraise consumer good producer of Unilever.

Using sustainable value model and levels of value creation to evaluate Unilever

Analysis the case of Unilever by sustainable value model

According to Unilever sustainable living plan (2015), Unilever played a dramatic part in UN Sustainable Development Goals (SDGs) and in COP21. Because it was the first company to create a stand-alone human rights report using the UN Guiding Principles Reporting Framework, it announced their new goal to become ‘carbon positive’ in their productive process by 2030. Unilever as a classic example of sustainable consumer goods producer that create value both for stakeholder and shareholders. There is a five-year partnership with the International Fund for Agricultural Development (IFAD) that will use their specialized knowledge in sustainable agriculture and lead small-scale farmers and rural enterprises into markets and train them to sustainable agriculture best practice. Rural people can get proper job, but above all, they get out of poverty, while producers can reduce cost, because 60% of agricultural raw materials are renewable, and environmental stakeholders applauds that end hunger, achieve food security and increase nutrition. Unilever have reduced the plastic used for the bottles by up to 15%, such as its Sustainable Living brand-Domestos, customers prefer them because they are lighter to carry and maintain their strength, while retailers like them because they save around 1, 000 tonnes of plastic a year, and environment stakeholders applaud the reduced plastic resin.

Discuss Unilever environmental and social value applying the 1+7 value model

Unilever creates sustainability and social value at the same time that it builds its brands and its businesses. It will be discussed by 1+7 value model.

Level 1, There are three areas in which mitigating environmental risks can create significant value both for shareholders and stakeholders. Firstly, proactively prepare for catastrophic events in order to reduce the probability of a disaster. Secondly, reduce remediation fees by managing remediation projects ahead of schedule. Thirdly, pursuing lower product liability insurance by limiting environmental risk exposures for employees, contractors and customers. sustainable ways bring positive business consequence, for instance, by 2015, Unilever had 60% of agricultural raw materials were sustainably sourced, it helped to mitigate risk from future supply chain associated with climate change and long-term sourcing of raw materials.

Process cost reduction (level 2) mainly refers that using less material and energy for per unit of production and cut quantity of waste. The cost of remediation is higher than pollution prevention. Unilever has prevented more than €600 million from water, waste and energy efficiencies across their global factory network since 2008. Unilever also have made a contribution in reducing CO2 emissions from energy in the process of manufacture since 2008, achieving a 39% reduction per tonne of production by 2015.

In level 3-Product differentiation, company provide environmental preferable products while consumers prefer green products and service. Green product and brand differentiation exist in Unilever, according to an interview with Lesley Thorne, Global Sustainability Manager which about sustainability at Unilever, a Sustainable Living brand both have a clear purpose that contributes to a social or environmental concern and the product itself also need to achieve one or more of the targets. For example, Dove has a purpose that consumers can reach up to over 15 million while its new introduce compressed aerosol deodorants have same function, but it has become smaller half than before. This innovation cuts the carbon footprint per can by about 25%.

In level 4, technology invocation creates new market and develops new business based on sustainability. Wining with brand and innovation of Unilever though development and research on new product, such as home and personal product and also food and beverage. In addition, Unilever Indonesia promoting their goods by direct marketing to the public and guarantee the quality in real condition. Besides that, Unilever Indonesia also boost the volume growth in the island outside Java.

In level 5, companies can protect and enhance the brand based on environmental and social strategies, because the brand have loyal customers, supplier’s choice and attract investors. Paul Polman, CEO of Unilever, he thinks that company should have more responsibility for business operates to create a virtuous circle which will ultimately benefit the consumer, rather than customer bear the cost alone. For example, Unilever is more concentrated on the introduction of detergents, its product wash at lower temperatures, so they not only conform to the low carbon life and also keep with the aspiration of Unilever Sustainable Living Plan, customer enjoy lower transport costs, lower packaging costs, and the whole value chain benefits.

Level 6, companies attempt to influence industry standard with their favour of regulation over the competitor. Unilever Sustainable Living brands and transformational change agenda are all ways in which they are embedding commitment to respect human rights in the process of operations as well as with suppliers and other business partners. In 2015, they published the first human rights report using the UN Guiding Principles Reporting Framework. Therefore, they trained 860 employees as human rights ambassadors, and 19, 000 people on ending sexual harassment and related topics. They built the Rin Career Academy in order to helps women to obtain educational chance to improve their spoken English, personal skills while in Brazil women are improving the entrepreneurship skills needed to start their own business.

Level 7- radical innovation, which process innovation create value delivered to customers. Through the Unilever Sustainable Living Plan, Unilever will achieve the transformational change through their brands, innovation, sourcing and operations. In general, their fundamental change to whole systems, not simply incremental improvements. They are making effort in three major areas, firstly, eliminating deforestation from commodity supply chains by 2020 in order to help against from climate change. Secondly, making sustainable agriculture, and so increase food yields and enhance the livelihoods of smallholder farmers, in particular, Unilever has greatly raised women’s status. Empowering women is critical to eradicating poverty and accelerating global development. Thirdly, working towards universal access to safe drinking water, sanitation and hygiene.

The idea of embedding sustainability

The ES Cloud offer a way to map that Unilever know who they are and what is their mission. According to an interview with Paul Polman, CEO of Unilever, he argued that people are increasingly questioning that short-term maximization of shareholder wealth is a concept deeply entrenched in business practice. In other words, company single focus on shareholders, then it may not be around for long. Unilever are focusing insistently on improving the lives of consumers in a sustainable and equitable way. Unilever believes growth and sustainability are not in conflict. If Unilever Sustainable Living Plan do well, shareholders will be rewarded, while it can help to create a sustainable living commonplace for consumers. Unilever through reducing waste, raw materials and energy use, they create efficiencies and cut costs, it helps to increase our margins. They have achieved cumulative cost decreased over €600m through eco-efficiency in their factories since 2008. Embedding sustainability will not help Unilever be seen as green responsible, but it can improve its competitive positioning, for example, their waste manufacturing projects alone has contributed around €250 million of cost benefits and created hundreds of jobs. Sustainable Living brands accounted for approximately half of their growth in 2015 and grew faster than the rest of their business. Sustainability creates innovation opportunities, it pushes Unilever to re-think product design how to use limited resources to address specific social and environmental issues. It opens up new markets and let their brands to connect with consumers in different ways to meet their changing needs. combat climate change. In November 2015, Unilever announced that they will become carbon positive in the process of operations by 2030, and they will 100% of the energy used within their manufacture from renewable sources by 2030, and generate more renewable energy than they consume. They will devote themselves to lower greenhouse gas (GHG) impact from sourcing, manufacturing and innovation, as well as persistent efforts to eliminate deforestation from their supply chains.

Unilever faces challenges and exists problem

Unilever still face challenges and exist some major problems. In an uncertain and unstable world, the vast majority of the targets are in normal operation, however, achieving these target need time cost, in other words, Unilever cannot prove directly. In other words, they need to modify and adapt to the development of sustainable market. An increasing people around the world are leaving the farming sector to work in other industries, and fewer young people are choosing farming as a career. Therefore, Unilever faces the challenge from supplies of agricultural raw materials. Unilever Sustainable Living Plan contributes to the climate and development challenge and add value to their business, however, they have to seek to co-operate with government and NGOs.