Credit: Andrea Allen/Flickr

Can Unilever's sustainability drive survive slowing demand?

The consumer products giant's turnover dipped 2.7% thanks to problems in Russia and China.

by Jack Torrance
Last Updated: 16 Oct 2015

It’s hard not to respect the work of Unilever’s chief executive Paul Polman. His determination to make the company, which manufactures everything from Marmite to Dove soap and Persil detergent, more sustainable is nothing if not bold. Since landing the top job in 2009 the former Nestle exec, who once trained as a priest, has introduced the Unilever Sustainable Living Plan; a comprehensive programme that goes way beyond the hat-tip most businesses give to CSR.

As well as reducing the company’s impact on the environment, the plan commits Unilever to improving nutrition, making business more inclusive and diverse and improving the world’s hygiene. It’s easy to write this off as just a wall of greenwash, but in a survey of sustainability experts last year, almost one in three said that Unilever was the leader in integrating sustainability into its business – far and away above any other company.

The real question is whether Polman can continue to convince investors of its feasibility in the long term. Today Unilever announced 2014 was its worst year of sales growth in years. Total turnover dipped 2.7% and underlying sales were up 2.9% - lower than the 3.1% analysts were expecting. This was partly down to slowing growth in emerging markets, where Unilever sells more than half of its wares.

Despite the low growth, net profits were up 5%, thanks to a cost-cutting drive. Unilever sold its Slimfast, Ragu and Bertolli brands and cut 1,400 jobs last year. Polman says he expects growth to be challenging in 2015 as well, so cuts are likely to continue (no sainthood for him then). There are rumours it could consider offloading its poorly performing margarine division, although Unilever denies this.

Polman is giving no hints his mission could be under threat. ‘The Unilever Sustainable Living Plan continues to underpin all aspects of our business model from the way we source materials through to our product innovations,’ he said.

‘Our activities enhance our reputation and corporate brand. They are well recognised and an important way of reducing cost and risk in increasingly well-informed and challenging societies.’

That’s all well and good, but what do investors think? Today shares dipped as low as 2,661p, but have since rallied to 2,699.5p, 1% down on yesterday’s close.  Polman’s probably safe for now, but he will need to demonstrate the long-term value of the sustainability plan to keep shareholders happy.

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