Sunday, April 28, 2013

SUSTAINABILITY SPECIAL...Sustainable Biz Still Miles to Go Before Unilever Can Cheer



Sustainable Biz  Still Miles to Go Before Unilever Can Cheer

FMCG Co has succeeded in sourcing raw materials sustainably, but is yet to make a big impact in waste, water and greenhouse gases


    In 2010, Unilever, the €51-billion consumer goods major, laid down a path to become a more responsible corporate citizen in what products it made, how it made them and how consumers used them. The second progress report of the Unilever Sustainable Living Plan, released worldwide on Monday, shows the company has achieved significant milestones in areas like sourcing raw materials, but is struggling to make a big impact in waste, water and greenhouse gases.
Sustainable sourcing of raw materials is the one area where Unilever has shown tangible results in 2012. According to the company, 100% of its palm oil is now sourced ‘sustainably’, three years ahead of schedule. What this means is that each of its palm oil suppliers meets 11 requirements, certified by an independent agency, such as not employing child labour, providing fair wages, and minimising use of water and pesticides.
Unilever has also made significant progress in sourcing tea (Lipton brand, 75%), cocoa (Magnum brand, 64%); its Indian arm, Hindustan Unilever (HUL), procures 60% of tomatoes in its Kissan brand of ketchup from sustainable sources, for which it has joined hands with the Maharashtra government to work with 618 farmers.
Unilever’s goal is to source 100% of raw materials sustainably by 2020. In 2012, that figure was 36%, up from 24% in 2011. “This (the sustainability drive) will enable us to decouple business growth from resource use and re-couple it with societal good,” Nitin Paranjpe, CEO of HUL, told ET a day before the report’s release.
It also makes for good business. For example, since 2008, Unilever has saved €300 million in costs through eco-efficiency programmes in manufacturing operations, which is part of a plan to halve its environmental footprint by 2020. Initiatives ranged from small actions like ensuring lights are turned off to larger investments such as biomass boilers.
But, along with tangible successes, there are challenges. The biggest challenge is how to change consumption habits of its consumers. For example, laundry and bathing account for 77% of Unilever’s water footprint. But consumers are still using the same amount of water while using a Unilever soap or detergent as they were in 2010. “One of the things we realised is that changing human behaviour is not easy,” says Paranjpe.
Towards this end, the company is stepping up efforts to find new business models to drive product innovation and research. For example, its detergent Comfort One Rinse reduces the water needed for laundry and performs well in shorter wash cycles. Another innovation, a dry shampoo, launched in the UK and the US, encourages people to wash their hair with hot water less often. Sales of dry shampoo grew 19% in 2012.
In order to drive consumer adoption of such products, Unilever entered a partnership with UK retail chain Tesco called ‘a better future starts at home’, wherein it offers consumers advise on sustainable living and promotions on sustainable products.
In India, HUL has a similar tie-up with Walmart, where it incentivises customers to bring back recyclable packing to the store in return for a discount coupon. Further, it is now converting used packaging material waste to fuel, through a pyrolysis process. “We have tied up with cement companies (to burn the waste in cement kilns) for this and are working with technology partners to convert packaging material to fuel,” says Paranjpe. Hindustan Unilever is also working on replacing furnace oil in its factories with fuel from packaging waste, also a cheaper alternative.
When it comes to raw material sourcing, a challenge before Unilever is to ensure continuity in good practices among vendors and suppliers. So, during an audit, when the company found one of its largest palm oil producers in Indonesia erring on this front, Unilever snapped ties.
The emerging business environment made it easier to do so. “Today, there is enough sustainable palm oil in the market, which has brought down the premium on sustainable palm oil to $2 per tonne from $8 per tonne,” says Paranjpe.
Three years ago, Unilever was one of the founding members of the round table on sustainable palm oil set up in 2004; according to Paranjpe, most companies today are sourcing from suppliers adopting these standards.
This is raising standards and making it more commonplace. “Only when more and more companies do it will it have an impact on the world’s problems,” he adds. Now, Unilever is working on tracing the palm oil back to the plantation on which it is grown. The new target is to source all palm oil from certified ‘traceable’ sources by 2020.
Even investors are slowly taking note of a sustainability mindset. “There is a bucket of investors looking to invest in such companies,” says an analyst with a foreign bank, requesting anonymity. “The perception is sustainable business practices are becoming a necessity; if they weren’t, then their profits could be lower.”
“It is definitely benefiting the company (being sustainable), but it will become more apparent over a longer time,” feels Sumantra Sen, CEO of Responsible Investment Research Association, a non-profit. “Two years on, we are starting to see how our (sustainability) plan is contributing to our business success. Why will any investor or shareholder not like it?” says Paranjpe.
AHONA GHOSH ET130423

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