Towards Integrated Thinking At Unilever

This article first appeared on Towards Sustainable Business and is republished with permission. Carol Adams is a Director of Integrated Horizons.

Paul Polman, Unilever’s CEO, has made a clear connection between long term business success and tackling social and environmental issues:

“… the biggest challenge is the continuing threat to ‘planetary boundaries’; resulting in extreme weather patterns and growing resource constraints. These have increasing impact on our business… We remain convinced that businesses that both address the concerns of citizens and the needs of the environment will prosper over the long term… As… [the Unilever Sustainable Living Plan] becomes embedded, there is growing evidence that it is also accelerating our growth.” Annual report and accounts 2012 p 4.

There are a number of things in Unilever’s annual reports that make the company stand out as a leader in connecting business success and value for investors with value for society.  The 2013 annual report succinctly captures the moral and business imperative for integrated thinking: “Business needs to be a regenerative force in the system that gives it life” (page 8).  And Unilever’s vision is to double the size of its business while reducing its environmental footprint and increasing its positive social impact.

Its annual reports set out, up front, financial performance and growth measures alongside key social and environmental measures.

The simple pictorial representation of its business model puts its Sustainable Living Plan (which quantifies 2020 environmental footprint targets) right at the centre of everything it does.

The 2013 annual report provides a comprehensive analysis of key risks to value creation using a multiple capital approach – that is, it considers risks associated with society, relationships, the environment, intellectual capital and its people.  This demonstrates that risk identification processes involve a broad analysis of contextual factors.

Included amongst the various governance committee reports is one from the Corporate Responsibility Committee, rarely included in an annual report.

Critical to integrating sustainability into strategy, planning and decision making is incorporating it into remuneration and performance management.  Unilever’s annual reports demonstrate real leadership here in stating that social responsibility and performance against the Unilever Sustainable Living Plan is considered in determining rewards.

Unilever’s 2013 annual report makes a link between its customer base being predominantly female and its work on equal opportunities (page 16).  Female consumers have an interest in how women are treated at work. At 40% (page 6) the proportion of female non-executive directors is well above average. And 42% of Unilever’s managers are women (page 3).

There is room for improvement of course, but not the purpose of this article to set out where.  But I will mention a comment that particularly jarred – reference to the Dove brand “promoting self-esteem among young girls and women” (page 7).  There’s a bit more to it than this Unilever, particularly in your markets where violence against women and unequal opportunities are rife.

The International <IR> Framework has been criticised by some for focussing on value to investors, rather than value for society or stakeholders.  Unilever believes that the two are connected and has taken more steps than most to integrate social responsibility and environmental sustainability into the way it does business.

The links between value for investors and value for others are made in the International <IR> Framework in paragraphs 2.4 – 2.7:

“2.4 Value created by an organization over time manifests itself in increases, decreases and transformations of the capitals caused by the organization’s business activities and outputs. That value has two interrelated aspects – value created for: The organisation itself which enables financial returns to the providers of capital; Others (i.e. stakeholders and society at large).

2.5   Providers of financial capital are… also interested in the value an organization creates for others when it affects the ability of the organization to create value for itself…

2.6   The ability of an organization to create value for itself is linked to the value it creates for others…

2.7   …This includes taking account of the extent to which the effect on the capitals have been externalised…”

Too few companies explicitly recognise or acknowledge this. Unilever is a leader.

Contact Integrated Horizons if you would like to discuss integrated reporting.