How Companies Need to Think about the Future. The Case of Unilever.
Philip Kotler
Unilever is an Anglo-Dutch company founded by William Lever in 1870. Lever defined the mission of Lever Brothers “to make cleanliness commonplace and lessen the load for women.” In trying to make life easier for women, Lever could be seen as an early feminist.
Today Unilever is 151 years old. Like any long surviving company, Unilever showed that it could ride through both good and bad times.
I have followed Unilever’s recent history during the brilliant leadership of CEO Paul Polman (2008–2018). Paul became CEO in 2008 with the aim of bringing Unilever into the 21st century. He was far ahead of other CEOs in his thinking about “What is the purpose of a company.” He didn’t think that the purpose of Unilever should be to maximize annual profits for the shareholders. That was the purpose of most CEOs, who literally and enthusiastically adopted U.of C. Professor Milton Friedman’s position. Polman was aware that many groups are impacted, favorably or unfavorably, by a company’s activities. He was also troubled by the looming social problems of poverty, hunger, social unrest, crime, and climate change, all of which affect directly or indirectly the success of companies.
Rather than ignore these problems and pursue short run profit maximization, Pohman wanted to look ahead and develop a long run program for building a sustainable and profitable Unilever. During his Unilever leadership, he contributed many ideas.
The company should serve and fairly reward all the major stakeholders of Unilever, not just the shareholders. Unilever uses a seven stakeholder model ordered according to the importance of each stakeholder group: Consumers, Customers, Business partners (mainly employees), Suppliers, Agencies, Communities, the Planet, and Shareholders. By paying attention to the first six groups, Polman believes that the seventh group, shareholders, will be rewarded even more than if Unilever only paid attention to maximizing the payoff to the shareholders.
Polman believed in the critical importance of every company pursuing sustainability as well as profits. The climate change problem was real. The planet was destined to get warmer and suffer from a growing number of floods, hurricanes, typhoons, and major fires unless the use of fossil fuels and carbonization could be limited. Companies must set sustainability goals as well as profit goals. As a result, Polman implemented an ambitious Sustainable Living Plan which aimed to double the company’s growth, halve its environmental impact and triple its social impact. The plan succeeded, with Unilever’s annual sales rising from $38 billion to more than $60 billion during his management. Unilever became a beacon for other CEOs who needed evidence that there was no tradeoff between sustainability and financial performance. He showed that a company could deliver better financial outcomes through a multi stakeholder responsible model.
Polman’s financial achievement was remarkable because Unilever is a publicly traded company with shareholders eager for a good return. On Polman’s first day as CEO, he announced he would no longer be issuing quarterly share guidance and reports, to break free of the tyranny of short-termism. Over his tenure, Unilever delivered a total shareholder return of 290%.
Polman spoke on the importance of attracting people who are purpose-driven and attracted to the mission of the company. He wanted to recruit talented and purpose-driving people. He knew that young people want to work for companies that are conducting themselves to high social and environmental standards. He wanted Unilever to be a magnet for the best. Unilever became a consumer company of choice for young people leaving colleges in 52 or 54 countries. The company believes that 75% of the people that came in, came in because of the Unilever Sustainable Living plan. Attracting the best people certainly gives Unilever a competitive advantage.
Polman believed that every Unilever brand needed to define its purpose and its value proposition. Polman asked each brand team to develop and pursue a thoughtful purpose for their brand that goes beyond just selling it. He wanted brand management to do good deeds, not just set good goals. Polman also wants Unilever brand managers to pay close attention to product and packaging issues. Packaging, especially plastic packaging, is becoming a major issue.
Here are the purposes of some of Unilever’s top brands. (1) Lifebuoy. Lifebuoy is a soap whose aim is cleanliness and hygiene. One of its larger goals is to save the lives of kids under the age of five who often get sick from polluted water, food, or air. Its immediate purpose is to get children to wash their hands regularly. (2) Dove. Dove helps women give good personal care to their skin. The brand has done a lot to help all Unilever women customers to feel beautiful. The Campaign for Real Beauty aims to help young girls raise their self-esteem. Their broad mission is people and planet-positive beauty. (3) Domestos. Domestos is a toilet cleaner that fights for decent sanitation for all. Domestos campaigns for cleaner toilets around the world. (4) Ben & Jerry’s. Ben and Jerry’s has a reputation for making excellent ice cream. They built an unassailable reputation fighting for climate change, LGBTQI rights, and racial justice. They also give away a percentage of their profits to needy communities.
A company that cares about environmental and social issues will inevitably get involved in political issues such as inequality and racial justice. Companies need to take a stand. The company should avoid party politics but be ready to side with favorable public policies. Why is it important for a company to take a stand on societal and environmental issues? First, brands that do this outgrow other brands. There is a gigantic body of evidence that profits come more from value creation than from margin improvement. Second, a company can find ways to take out much cost through sustainable sourcing. There’s an initial cost, but over time, cost savings occur and these drive growth. Third, investing in sustainability reduces the risk of being left behind. Fourth, there is no healthy Unilever on an unhealthy planet. Unilever sales are often lower because of extraordinary typhoons in Southeast Asia and the Philippines, fires in Australia or the West Coast. Unilever’s CMOs need to learn how to integrate purpose and sustainability into brand propositions. Ultimately, Unilever is making a business case, not just supporting a moral imperative.
Each of Unilever’s divisions, and not only each Unilever brand, needs to be crystal clear on their contribution to sustainability. Unilever calls its foods division its Future Foods which develop foods on a more sustainable and plant-based food system. And Unilever’s home care business runs”’ a platform called Clean Futures, which states that “we will replace 100% of the chemicals in our cleaning business that are sourced from fossil fuels, with carbon that comes from renewable or recycled sources. Each division is absolutely crystal clear on their contribution to sustainability.
Marketing needs to play a critical role as a business partner, not a functional leader. Good marketers are curious about the world around them, genuinely interested in people. Marketing requires a combination of left and right brain skills, a ruthless focus on consumers and not the competition. Too many marketers get distracted in war gaming and keeping up with the competition. Marketers today have to be massive systems thinkers. Several things are happening in the world that marketers need to follow. (1) The economic power shift east and south. It’s not going to be about Western Europe and North America. The East is where the action is. (2) The bio economy. Marketers must understand renewable bio resources, epigenetics, microbiomes, and longer lifespans. It’s going to really change how people behave and think. (3) Technology, including AI, robotics, nanotech, connected world, all of that’s changing marketing.
In the future, fewer companies will be standalone companies. Companies will be networks of value exchange. Rigid hierarchies will fall apart. Companies will consist of agile teams, working on specific problems and then moving on. There will not be standalone R&D Labs. They will be replaced by collaborative networks of invention. Our employee’s will not all come to a fixed office. It will be hybrid working.
Today Unilever’s new CEO, Alan Jope, even runs a global town hall. Every Tuesday, at lunchtime, 7,000 or more employees will listen. He gives a 5–10 minute talk and then he features someone like Unilever’s chief medical officer. The next 40 minutes brings something like 400 questions and they are listened to and some are voted on.
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