Unilever’s willingness to set themselves specific and quantifiable targets makes this a defining moment in the sustainability revolution

16 11 2010

A recent Harvard Business Review article argued that we are currently experiencing an industrial transformation – the sustainability revolution – to rival that of the major industrial transitions of recent times like globalisation, and the information age.

All periods of dynamic change are punctuated by defining moments, and one that comes to mind for me when thinking about sustainability was a week in 2007 when Tesco and Marks&Spencer vied to out-do each other when announcing comprehensive agendas for organisational change on sustainability – this was the birth of M&S’s Plan A, a detailed set of over 100 targets to be achieved by 2012.

The past week is perhaps another “moment” that people will look back on when telling the story of the sustainability revolution. Last week FMCG giant P&G announced a comprehensive package of sustainability targets and yesterday Unilever Chief Executive Paul Polman, joined by two of the intellectual architects of the sustainability revolution Jonathan Porritt and John Elkington, outlined Unilever’s sustainability strategy for the next ten years with some eye-watering commitments the organisation has set itself to achieve by 2020.

I came to the event in Unilever’s London HQ with three questions at the front of my mind: would there be anything new today? Was it real or just greenwash? And what might the broader implications be for others?

Unilever already has a strong pedigree on sustainability, this is the organisation that has been improving health and wellbeing for over a century with products like lifebuoy soap and Flora/Becel margarine. In 1997 Unilever worked with WWF and others to create the Marine Stewardship Council, and in 2007 made commitments to sustainably source all its palm oil, and all the black tea in Lipton and PG Tips, by 2015 – not insignificant commitments from an organisation that buys 3% of the world’s palm oil and 12% of the world’s black tea. Hence the first question I came with: would there be anything really new today? Would the announcement live up its billing as a step change or would it just be more of what we’ve heard before?

Well, what I think stands out Unilever’s announcements – like M&S’s Plan A a few years ago – is how comprehensive these commitments are, how long term they are, and how specific and quantifiable they are. Yes, Unilever has been able to showcase some great examples of sustainable behaviour from some of its brands in the past, but yesterday they announced targets that mean all brands right across their portfolio will be meeting a consistent level of performance. In aggregate, the announcements appear to represent a genuine effort to transform markets because of the influence they will have on the decisions others will make, rather than just window dressing to defend corporate reputations as earlier generations of corporate responsibility activities have often done. To give a flavour of yesterday’s announcements, they included commitments to:

  • Help 1 billion people improve their hygiene habits by 2020, and bring safe drinking water to 500 million people by 2020
  • Double the proportion of the food portfolio that meets particularly stringent nutritional standards
  • Halve the greenhouse gas impact of Unilever products across their lifecycle by 2020 (including the impact of production of raw materials and use by the consumer) as a contribution to meeting the United Nations requirement to reduce greenhouse gas emissions by 80% by 2050
  • Source 100% of agricultural raw materials sustainably by 2020, addressing both environmental impacts and livelihoods of producers and workers (moving beyond just palm oil and tea to all Unilever’s top ten agricultural raw materials – paper&board, soy, sugar, fruit&veg, sunflower, rapeseed, dairy and cocoa – and beyond)

The second question I came with was: how credible would this set of announcements be? It all might sound good, but was it about real change or just good PR?

This question was put to Polman in a variety of ways, and his answers were interesting. At one point, citing Stephen Covey’s Seven Habits of Highly Effective People, Polman argued “It’s difficult to talk yourself out of things you’ve behaved yourself into” – from small and pioneering first steps, Unilever has been taking bigger and bigger steps towards systemic change over more than a decade, which has created its own momentum within the organisation which will be hard to reverse and gives Polman confidence that the organisation will step up to the challenge these new targets represent.

Polman gave a wry smile when the point was made that CEO’s terms in office are becoming shorter and shorter, and change on this scale required more than just CEO leadership, it required a fundamental change in organisational culture. Ashridge Business School’s research lends weight to this argument: 92% of the CEOs and senior executives participating in Ashridge’s 2009 study with the United Nations and EABIS believe that change in organisational culture is required to effectively meet the challenges and opportunities of sustainability. That study documented some of the very specific steps that Unilever has been taking to provoke and accelerate culture change through a range of interventions led by the HR function, including innovative leadership development programmes, and the ‘brand imprint’ workshops led by Unilever’s in-house marketing academy for example. Ashridge is hosting a major conference on sustainability and organisational change in June 2011 that will explore these trends in greater detail.

A number of other challenges were made during the Q&A to Unilever’s central thesis that it was possible to double the size of the business at the same time as reducing material consumption.

On the barriers presented by the investment community, Polman was bullish: ‘We know this is the right way to manage our business for the long term, if you buy into this, come invest in us, if you don’t, then don’t’ was the gist of his response.

On consumers: “Consumers do want us to be taking this approach, even more so in developing countries which is where our future growth will come from, and the major retailers as market gatekeepers are really driving change through the whole supply chain. The trick is to innovate to be able to meet this demand without increasing price”.

On the role of government: “We can’t wait for governments to fix these problems, witness the failure of Copenhagen. Industry needs to step up”.

On integration with broader corporate strategy, Polman talked about the role of sustainability specialists in the due diligence process during acquisitions: “Will new acquisitions fit with this new business model in the long term is the key question we will be asking of them” he argued.

It wasn’t all plain sailing, there was some visible squirming when directly asked for the second time how much of Unilever’s marketing budget would be spent on promoting behaviour change rather than selling more products, and there wasn’t a good answer to a question about whether Unilever was really challenging the underlying ideology of consumerism that has dominated commercial thinking for half a century. But to be fair Unilever was upfront about many of the unknowns still to be navigated on the road ahead and overall this came across as both a sincere commitment, and one backed up with real intent.

So what, then, of my third question: what are the broader implications of all this? What are the implications for other organisations? It seems to me to be this: yesterday we saw another clear signal that lends credence to the notion that markets are changing, the rules of competition are changing, and a handful of organisations are playing a leading role in defining what these markets and rules of competition are going to look like in the near future. If you’re not already seriously engaged in this agenda for real change, you need to be.

What will be the next defining moment in the sustainability story? I think we’ll continue to see leaders in different sectors stepping up and announcing similar kinds of substantial long term targets for change that will signal the direction of change in their sectors. How soon, then, before we see coalitions of organisations from the same sector making joint declarations on long term targets for their sector as a whole?

Matt Gitsham is Director of the Centre for Busieness and Sustainability at Ashridge Business School


Leadership development at the sharp end

15 04 2010

I recently led an observation for one of our case studies in the ‘Leading Organisations of Tomorrow’ project and thought I’d share my initial personal reflections on the experience.

‘Leading Organisations of Tomorrow’ is the working title of a research project being led by three of Ashridge’s research centres – the Centre for Research in Executive Development, the Ashridge Leadership Centre, and the Ashridge Centre for Business and Sustainability. We’re looking at eight examples of innovation in leadership development within major organisations to understand things like why did the organisation do this? Why did they do it the way they did it? What did they learn about what works well? And what kinds of impact did the interventions have? Each of these interventions included some focus on developing leaders capable steering and stewarding their organisations through the changing context of leadership in the twenty-first century.

The research involves interviews with key individuals within each of the organisations, as well as a sample of participants in each case. Where possible, we will also be observing programmes in practice to get a first hand perspective.

I joined for a few days participants in the middle of a two-week leadership programme organised for a family-owned Singaporean-based company employing around 6000 people across East Asia. The first part of the programme involved an intense week of classroom-based work in Hong Kong. I then joined the participants as they travelled to one of the company’s own palm oil plantations in East Kalimantan on the island of Borneo in Indonesia. Here participants were challenged to apply new thinking in practice with a live project to develop a management plan for this new investment that would develop a management approach combining economic success with sustainable livelihoods for local communities and sustainable stewardship of natural resources. The participants were tasked with preparing a plan and presenting it to the organisations’ senior management team, who were flying in for the final day of the programme.

I joined the participants as they engaged with the local management and toured the newly established plantation. We also engaged with local workers and their families in their homes, and other families living in local villages. Some things that really struck me were the complexity of power relations in the local villages, and the potential for these to be impacted by the coming of the plantation. I was also struck by the simplicity of the lives of families living in the villages, the sense of hope they had around new opportunities from the plantation, but also their fears around lack of health protection and education for their children. Workers and their families living on the plantation itself spoke about their isolation, and that it was impossible for them to get their kids to school as the nearest schools were too distant – but that this was an improvement on what their lives had been like before.

I was also really struck by the extent of environmental degradation across Borneo as a whole, where around two thirds of the primary rainforest has been cleared over the past 20-30 years – far more than I had imagined. This company is not destroying primary forest, which is illegal, but has been sanctioned by the government to clear secondary forest to establish the plantation, along with countless other companies across Indonesia. This company should be applauded for its aspiration to cultivate palm oil in the most sustainable way possible, but again I was struck by the scale of the challenges in meeting this aspiration – palm oil, one of the principle vegetable oils, is an ingredient in just about every food product you can imagine. But palm oil plantations are nearly always monocultures, with major biodiversity impacts, displacing forests which provide all of us with tremendously important ecosystem services, not least the role they play in the global climate. Indonesia is the world’s third largest carbon dioxide emitter (after the China and the US) principally because of the rate of deforestation. And that’s before we even mention orang-utans.

As well as experiencing these things first hand, it was also fascinating to talk with the programme participants about how they were experiencing this. On walking away from talking with one family in their simple home, a participant said to me that they had been sceptical about the programme initially, but talking with these families was having a real personal impact – ‘Those could have been my kids running around in there, this gives me a completely different context to the decisions I make back in head office, I now have a personal connection with the people who will be impacted by those decisions’

Ashridge faculty will be conducting interviews with a sample of these participants in three-four months time to explore their reflections on impact and value of the experience to them and their organisation. We’ll report back from this and the other cases over the coming months.

The Leading Organisations of Tomorrow project will share a draft report at a major event hosted by Ashridge in central London on October 14th. The final report will be published at the end of 2010 and a more in depth book exploring the key themes of the work will be published in 2011.