Unsustainable agricultural practices – Can Unilever bring a change?
With a mission to reduce the carbon footprint to half by 2020, Unilever is one of the largest users of agricultural raw materials such as palm oil and tea, materials where deforestation and habitat degradation have major issues. Is it possible for it to drive change when in no direct control?
2015 was an important milestone in the fight to eliminate deforestation.
The Sustainable Development Goals (SDGs)set out an explicit target on halting deforestation. The Paris climate agreement acknowledged the vital role that forests play in combating climate change.
Deforestation contributes up to 15% of global greenhouse gas emissions. The principal driver of deforestation is commercial agriculture, fueled by growing populations with increasing incomes, which have sent demand for key commodities soaring. Yet forests are essential for life. They sustain the livelihoods of 1.6 billion people who depend on them for food, medicines and fuel. They are also the lungs of our planet and help to regulate our climate.
Corporations control virtually every step of the food production and distribution system, which is riddled with ecologically unsustainable practices. Global giants such as Phillip Morris, United Fruit, PepsiCo, Cargill, Unilever and Nestle oversee vast portions of international agricultural production and trade. In fact, multinationals either directly or indirectly command 80 percent of the land around the world that is cultivated for export crops such as bananas, tobacco and cotton. Such agro-export “development” patterns regularly displace farmers producing food for local consumption, pushing them into situations where they must overexploit the environment to survive. The unsustainable practices also lead to deforestation and multinationals have started to realize that fast use of resources and deforestation are going to deplete the natural resources to sustain long term growth for the business unviable.
Unilever claims to be ‘among the world’s largest users of agricultural raw materials, such as tea, vegetables and vegetable oils.’ They purchase nearly 3% of the world’s palm oil production and 1% of its soy. This gives them a significant i
nfluence, but also shows the extent of change needed to transform entire systems of supply. For a long time, no regulation and guidance in these areas have led to unsustainable forestation practices which have impacted forests in Malaysia and Indonesia, the largest palm oil suppliers in the world.
Unilever’s main concern had been working conditions in his plantations. Mr. Polman (Unilever’s CEO) wants to change the entire industry. He and others have persuaded members of the Consumer Goods Forum, an industry group, to sign an agreement to shift to sustainable palm-oil production practices. In July 2012 Wilmar, the world’s biggest palm-oil trader, signed up—a step forward. But the agreement has been criticized by environmental groups such as Greenpeace for allowing too long a transition to sustainability. Worse, the big Western consumer-goods companies account for only 20% of palm-oil sales. So even if they all promise not to use palm oil from cleared forests, will they be able to stop the deforestation?
Over 90% of globally traded palm oil is now covered by no-deforestation pledges. But can these promises be turned into action? This requires a transformational change in global systems. As a step towards this Unilever has joined with Marks & Spencer and declared their intention to move towards preferentially sourcing from jurisdictions that have adequate ‘no deforestation’ policies in place, which increases production and protects the environment and communities. This enables agricultural production and human development goals to be achieved side by side.
With the focus by the UN on the SDG’s in 2015 there is a great opportunity for companies like Unilever to leverage networks and relationships to build on the initial success that they have had on the palm oil sustainability. Partnerships and networks with government, NGOs, and other alliances would be critical to make a transformative change in the commercial agricultural landscape.
But just the initiative within Supply Chain are not sufficient, to meet the carbon emissions goals it is critical for companies like Unilever to work on changing customers’ behavior. Unilever measured the carbon footprint of 2,000 products and found that on average 68% of greenhouse-gas emissions in their life cycles occurred only after they got into the hands of consumers, mostly through the energy-intensive process of heating water (e.g., for tea bags or washing powder). This requires need for innovative product and packaging solutions. Though they have had some success through the dry shampoos – which reduces the use of water, or concentrate detergents – which reduces packaging materials, there is a long way which Unilever has to cover to be able have a positive impact on climate change.
Given deforestation’s contribution to greenhouse gas emissions, it is promising that Unilever, as one of the world’s largest consumer goods companies and one of the world’s largest users of agricultural raw materials, is pushing the industry to shift raw materials procurement to providers who practice sustainable methods. A large multinational must take the lead, especially one responsible for producing 3% of the world’s palm oil and 1% of its soy. It seems, though, that effecting change across the industry requires more than actions made by individual companies, however big, or pressure from industry groups such as the Consumer Goods Forum. Perhaps regulation must be enacted, such as taxes or penalties on the production and sourcing of these raw materials when done unsustainably. In the case palm oil, Unilever would be well-positioned against its competitors, and in other raw materials categories, Unilever would be forced to adjust quickly.
I was surprised, though, to learn where most of the carbon emissions comes from. I did not realize that 68% of greenhouse gas emissions in Unilever’s products occur after they reach consumers. I had assumed that the most impactful areas for Unilever to mitigate its contributions to climate change were in supply chain and manufacturing: procuring raw materials from sustainable sources, finding efficiencies in production to reduce resource consumption, and redesigning logistics to minimize emissions from transportation of inventories. These improvements are relatively incremental compared to innovating on product and packaging, which may result in more drastic changes to operations. Furthermore, will consumers willingly adopt these product innovations? For example, will consumers be too accustomed to the way they use detergents to be willing to change their behaviors for a revamped product? Perhaps, as is alluded to in the post, Unilever must do this product category by product category. The company must do this quickly, though, if it aims to reduce its carbon emissions sufficiently.
With 68% of GHG emissions occurring after they reach consumers, Unilever has an important role to play in changing consumer behavior. The natural question is: what are all the ways in which consumers behave unsustainably with these products? Water consumption was named as one. With the amount of products that Unilever produces and sells, I wonder how much poor recycling contributes to the environmental harm. What role should Unilever take in helping consumers change their habits? After using Unilever products, my personal instinct is to throw them out because I assume that their packaging is not recyclable or compostable. Unilever should create more obvious packaging guidelines on its products as well as invest in compostable material. It should also run campaigns to ensure that consumers are educated.
This is a great post, and a very interesting and pertinent follow up to Friday’s case discussion on Ikea. It is critical that Unilever and companies like it use their influence and expertise to improve the sustainability of global supply chains; beyond the irreparable harm to forests and to indigenous populations that current practices cause, the fact is that we cannot continue with business as usual: we are degrading our natural resources — our planet — at a rate that simply can’t be sustained. I agree with you completely that Unilever can’t stop at its supply chains, and am struck by the statistic you mentioned that 68% of GHG emissions occur after Unilever’s products reach consumers. It’s easy to get discouraged reading that statistic; it’s one thing for a company like Unilever to make a strategic decision to green its own business practices, but it is quite another to incite behavior change at the consumer level, influencing the everyday practices of millions of people. As much as Unilever can do this through product innovation, the better: realistically, the less people are required to sacrifice convenience for sustainability, the better. Though as a large corporation it may be unusual, Unilever should also work to expose the realities of climate change as they relate to CPG companies, and not shy away from being provocative and holding other companies accountable. Calling out the beauty industry in Dove commercials is a start — but I would argue that Unilever could stand to be even more daring, and there is so much more the company and its brands could do to move the needle on climate change!
I enjoyed your post, I’ve actually been exposed to this topic a couple of years ago. I agree that Unilever has done tremendous progress to achieve these levels that you mention, nevertheless it is quite noticeable that it has been thanks to the immense pressure Greenpeace and social media have put on to them, see the following links for a sample of this:
https://youtu.be/odI7pQFyjso
https://www.youtube.com/watch?v=ql_QSDUbb8U
Therefore I strongly disagree they’re doing this in a proactive way, I think they’re answering to these pressures across different landscapes, but there’s still room to communicate their involvement and proposals to the consumers and the media. It is a good progress but one would think that after 8 years from that incident they would have more than 19% of their palm oil to come from physically certified sources (this is stated on their website, link: https://www.unilever.com/sustainable-living/the-sustainable-living-plan/reducing-environmental-impact/sustainable-sourcing/transforming-the-palm-oil-industry/).
I like your comment on the fact that Unilever can begin to affect consumer behavior to be more sustainable-thinking. I wonder how that will impact their brands and sales if they start using things like recycled cartons for their packaging. Are consumers ready for that change and how can Unilever convince them to make the change without impacting their revenues?
I enjoyed reading the post. I agree that Unilever should take more proactive approach to promote sustainable practices. First of all, there is a risk and uncertainty of regulations that might be enacted in future to promote sustainability. Such regulations might affect the Unilever’s suppliers with non-environmental practices, which would in turn affect Unilever’s supply chain. That is why, it is in Unilever’s best interest to decrease the risk of input supply shortage by way of promoting more sustainable practices across its supply chain. Moreover, consumer behavior is indeed becoming more environmentally friendly and companies are challenged to think new ways to adapt to the changing environment, otherwise their reputation might get damaged. One good example is Nestle, which faced reputation risk after it was found that Nestle was importing hazelnuts from certain producers in Turkey, which did use child labor. They had to invest substantially to solve this problem. Therefore, it is in the best interest of companies to take a proactive role and invest in sustainable practices as well as educate their consumers on this matter.