Challenge: Rising Operating Costs
Climate change has been a long debated topic dating back to the 1800s. It was not until around 2005, however, that it gained widespread scientific consensus1. Its effects are now outpacing projections and the consequences are, and will continue to be, wide spread affecting industries from water, forestry and energy to consumer products, tourism and insurance. Unilever, the world’s third largest consumer goods company, is no exception. They have already experienced climate change’s wrath in the form of increased operating costs2. Given their vast portfolio of products and brands including Dove, Ben & Jerry’s and Lipton, they are exposed to many of the risks that climate change poses. Natural disasters, droughts, heat waves, forest fires and rising sea levels all damage food chains and ecosystems and put Unilever’s supply chain at risk3.
Unilever estimates that they are already incurring annual costs linked to the effects of climate change of about $300m per year3. Additionally, if no action is taken, it is estimated that consumer goods industry profits could disappear in about 30 years4. Unilever refuses to let this happen.
Current Solutions: Unilever Flights Back with a Big Goal
Unilever has long been proactive in the fight back against climate change and is not slowing down. They understand their contributions to the problem and believe that the cost of inaction will prove greater than the cost of acting now2. They have a big goal: “By 2030 our goal is to halve the environmental footprint of the making and use of our products as we grow our business5” To achieve this, they have five main focus areas:
- Eliminate Deforestation: Attain zero net deforestation associated with four commodities (palm oil, soy, paper and board, and beef) by 20206
- Develop Sustainable Agriculture: Source all agricultural raw materials sustainably by 2020 to reduce risk in raw material supply chain7
- Change Consumer Behavior: Encourage consumers to use of less water and energy and increase their tendencies to recycle5
- Increase Eco-efficiency of Manufacturing and Distribution: Target 100% of electricity purchased from the grid to be from renewable sources5
- Advocating for Public Policy: Establish partnerships to affect policy change5
While their end goal is based in 2030, they have already made great headway:
- Packaging: Developed eco packs which use up to 70% less plastic and reduce greenhouse gases3
- Agriculture: Sustainably source over 90% of 13 most used vegetables in Knorr products3
- Energy: Use renewable sources of energy for factories in Europe and North America3 and reduced CO2 emissions from energy 39% per ton compared to 20085
- Water: Reduced water abstraction by 37% per ton compared to 20085
- Waste: Reduced total waste sent for disposal by 97% per ton compared to 2008 and in over 600 sites, achieved zero non-hazardous waste to landfill5
- Formed Partnerships: Developed partnerships and ways of working with other companies to reduce business’ footprint; currently partner with organizations such as World Business Council for Sustainable Development, World Economic Forum, Consumer Goods Forum, United Nations Global Impact, Global Commission on the Economy and Climate, Corporate Leaders Group on Climate Change and Business for Innovative Climate & Energy Policy. These companies are working to reduce business’ emissions and are working with policy makers to pass legislation that will positively impact climate change3.
- Reduced Costs: Avoided costs of over €600 million since 20085
Additional Opportunities for Unilever to Fight Climate Change
While Unilever is already taking the crucial steps to combat climate change, there are additional things they can be doing:
Educate Supply Chain: They should consider putting more pressure on their entire supply chain to become more sustainable and reduce environmental impact. Many companies within the supply chain may not be large enough to dedicate the resources require to understand climate change’s effects on the business and actions necessary to combat it. Unilever can help them understand the cost saving and long term benefits of taking action.
Educate the Consumer Products Industry: Again, given that they are a bigger player and have the resources to perform the research, they can put together a guide of ways to reduce your footprint in the consumer products industry. It can be shared with smaller companies that may not have the funds to do similar research.
Encourage Consumers in New Ways: This can be achieved through packaging that is very clear on how to recycle. For example, packaging may say “Compost your wrappers, help prevent a natural disaster.” This may evoke consumers to be more aware of the effects of climate change, encourage them to change their behaviors and inform them of the emphasis Unilever is placing on sustainability.