Why firms should invest in sustainability

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Unilever, the European consumer products company, recently announced the first annual results of its Sustainable Living Plan aimed at improving efficiency in the full cycle of its product line – from production through consumption. Jan Zijderveld talks about how the plan – launched in 2010 – has changed the firm’s outlook.

Jan Zijderveld is president of Unilever’s Western Europe operations. The following is an excerpt from a wide-ranging, 40-minute interview with EurActiv’s Timothy Spence.

What is the Sustainable Living Plan?

A couple of things. First of all, the world is facing many, many challenges. We have a population of 7 billion people and growing, we have a billion people who are hungry, we have a billion people who are overeating, we’ve got food shortages, global warming, we’ve got plenty of problems. And what we see is that the traditional institutions that used to look after these sorts of things – governments – actually are failing to pull it together, whether it was the Copenhagen accord or any of these other big events.

That’s one element. The second element is that companies like ours have said we need to find a new way, we need to continue to grow, we need to deliver the numbers because that’s what we’re in business for, but with all these challenges that the world faces - basically due to scarcity, scarcity of water, scarcity of food – we need to take our responsibility and need to develop a new business model.

Last year, we launched what we called the Unilever Compass which is basically putting a stake in the ground and saying what do we have to do as a business. And we said we are going to double the business – we were at the time just under €40 billion - while at the same time halving our environmental impact.

So we have to decouple growth from the impact on the environment. And that really is a switch in our heads to say – I’ll use the term ‘from scaring to caring for the world’ – and seeing it as an opportunity.

Rather than always saying that the world is doomed, we have a whole lot of problems, we have to start saying … if we start looking at this way, there are many opportunities. And that’s really where the Compass and the Unilever Sustainable Living Plan came from. We can grow, and we can grow through also being sustainable and doing it in a responsible way and driving the business forward. …

So we made a commitment … to halve [the environmental footprint], that is our first big goal. The second big goal is to help one billion people to improve their livelihoods. And that really is about seeing – especially in the emerging world but also to some extent in the developing world – how can we help people who want to improve their lives, who want the basic necessities that we’ve got used to in the West …

And the third big goal is get all our agricultural produce from sustainable sources. Now if you think about all the stuff we buy, half of it comes from agriculture and forestry. That half, the whole lot of it, by 2020 we want to get from sustainable sources, certified sustainable sources.

So these are the big three goals: halving our footprint, helping one billion people, and sustainable raw materials. And those are really the underpinnings of the sustainable living plan as it is.

How do you define sustainability?

The key issue is different by different industries and different raw materials. … So in most of the cases we’re trying to work with other industries as well as NGOs to come to a definition of sustainable tea, or what’s the definition of a sustainable palm oil, because originally all the palm oil came from deforestation. Then what are the criteria that you set in terms of worker relations, so we try with third parties and the industry to define exactly what is sustainability.

Can you give me an example …

The Rain Forest Alliance on sustainable tea. I think there are 11 dimensions in the Rain Forest Alliance on Sustainable Tea, which are absolutely clear, and they order third-party audits on a plantation according to these [criteria]. We have a climate element, a social element and an economic element.

You always try to get the key people involved in the definition of sustainability as well as a level of commitment of all the stakeholders, because if you in the end define it so tightly or so difficulty that no one wants to participate, it also doesn’t achieve anything. So we have much more about getting an agreement of what a definition of sustainability is, and then moving ahead and then over time you can always improve on them, but you’ve got to get going on the journey.

One of your hoped-for outcomes at Rio [the UN Conference on Sustainable Development] is some sort of international target for sustainable development. Is that something that something all industries are looking for, or is that unique to you?

It’s more about a lesson of effective management. If you want to achieve something in life, you’ve got to set end goals but also milestones, otherwise it remains talk. So we really feel that if the world is committed to something, you’ve got to put a stake into the ground and to say, ‘this is what we believe in and this is what we want to achieve’, and then you set milestones on the way there.

But if you don’t do that, how do you measure success? How do you know how well you’re doing? How do you hold people accountable for achieving or not achieving it?

So we feel also in Rio, or on these big debates, that you have to put a stake into the ground with some targets and with some ambition in there with interim milestones, otherwise it remains nice speeches and nice words.

You look at our sustainability report, you’ve got over 60 KPIs [key performance indicators] with real numbers and commitments, and this is the first year now that we have reported back on those 60 KPIs. We want people to participate in the debate, and help us. We’re doing quite well here, and by the way this is difficult. …

Where are you not doing well?

Where we’re doing we well is on the raw material part, and in our manufacturing. Where we are learning is in education, the helping of one billion people, so we’re getting there but it’s a bit difficult.

Where we are finding the toughest is the change of behaviour, because over 60% of the [environmental] footprint comes from the way you shower or the way your clothes get washed, and telling you to have a shorter shower – or asking you to have a shorter shower or wash your clothes at a lower temperature or to encourage you to use products with less salt - is quite difficult.

Consumers have habits. We have to find ways either to make it [conservation] more attractive, incentivise them, or make it easy for them. So that’s where the tough bit happens and that’s where the difficulty changing millions of people in the way they use our products is quite tough.

You mentioned that your goal is to double sales while halving the total footprint of the company. You are saying there is profit in efficiency?

Oh, absolutely. If you think about old generation CSR [corporate social responsibility] and new generation CRS … old generation CSR is I run my company, I expect to maximise profit, and I had a good year I sent some flowers to a charity and write a cheque. This was the do-gooder way, but when times got tough you stop doing it.

But what we’ve said is we can’t go on like this, we have to find a new business model, we have to redefine how we run this business because eventually we will run out of resources in this world to run companies like Unilever and to give consumers the goods and service they want.

So first we need take responsibility, but secondly once you start thinking about [it] … In many cases, when you starting thinking about it differently, you come up with new ideas, new products, new benefits that actually the consumer likes.

On the other side, if you reduce waste, you reduce packaging thickness or you concentrate your products, you also save money. It’s also fair to say, on the other hand, buying sustainable palm oil costs us more money, buying sustainable tea is a little bit more expensive than normal tea. So on the whole, we think it will all work out because we believe in this, we feel this is the right thing to do for our business, this is what the consumer expects from us, this is what the consumer wants us to do and this is where we feel that business like ourselves will make a difference in the future.

Something may be a bit more expensive, some things will be cheaper and more importantly, we will see when we start thinking about this increasing new growth opportunities that the consumers will reward us for.

So we see it as a growth platform, which is the other unique bit, whereas most people don’t see that yet – they see it as an add-on. We put it into the heart of our business, who we are, what we stand for, what we believe in.

Some companies would say, ‘we just want to make a profit. Let the policymakers worry about whether there is enough food or water in the world’. Are other companies looking at what you are doing and seeing this as you see it – as a growth opportunity and not just a marketing gimmick?

Increasingly so. Unilever, certainly in our industry, is a thought leader. But it’s also fair to say many of the big companies are thinking what they should do. …

Thinking long-term, where this world is going, increasingly what you see is that thought-leading companies are saying we need to take up responsibility [more]. And that is from all the angles because for and foremost, the conscientious consumer – the more developed, the more education, the more conscientious – wants to buy brands from a company that makes it – do they have everything solved, no, but do they try to solve some of the world’s problems , yes.

The second thing, increasingly the customers want it, so the Tescos, the Carrefours of this world, they are also increasingly thinking the governments are not going to solve them, the NGOs are often too narrow-minded and don’t have in the end the power to be able to get things done – they can raise issues but they can’t change issues.

So in the end what you start seeing is that businesses increasingly say, well actually we are global, we are more long-term focussed than politicians because we’ve been in business over 100 years, and we’d like to be in business in 100 years time, we have a long-term focus. …

In the end, we think that is how we will make a profit: because in the end the consumer will reward us, the customer will reward us, our employees will reward us … and we will grow faster and we will make more money and then the shareholder will reward us.

We’ve turned the whole thing upside down. So rather than short-term profits – we’ve dropped quarterly reporting, only [every] six months, because we want to get a longer term vision – and we’re going to focus on doing the right thing. Running this business for the long-term for the consumers and for this planet, and so that we are in business in 100 years time on a planet that is successful. And we hope and are convinced that it will pay off.

That’s the switch that as an organisation we’ve made, and we will encourage more and more organisations to do the same thing for our children. I’ve got two kids and you want your children to live in a world where you still breathe the air and drink the water in 20 or 30 years time.

Is the EU and institutions doing enough to help this business approach to sustainability?

No, I think they are not thinking about this hard enough. If you look at the Copenhagen [climate] debate [in 2009], Europe was sidelined. In the end there was a side deal between Obama and China and Europe was sitting there looking at it and saying, what is going on? It was quite sad to see what happened there.

In the world there’s a mess of voids: you’ve got the emerging world driving to improve their living standards and doing it quite successfully, and in Europe as a whole could really be a thought leader and say how do we build a better planet for ourselves.

But that requires leadership from individuals in Europe to say what does that mean – that means a partnership between companies, the governments and the NGOs to create the climate to be able do these things and to put in place policies that support the stuff that we’re doing, and making it easier to innovate in these areas and to move forward in these areas.

Everyone supports it, but not enough people are doing anything and I think Europe, and especially here in Brussels, they could really help that.

Specifically, when you go to Rio+20, Europe should speak with one voice and should set some milestones and some targets and some ambitions that by 2020. We want to reduce CO2, we want to reduce poverty, and we to drive these targets and lobby around the world. That is what Europe could uniquely do. The question is will they do it.

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