Download Unilever`s Current Strategy on Sustainability

University of Hertfordshire
Business School
MBSP0194 – Evaluating Strategic Marketing
Assignment No. 1
Unilever –
A Critically Reflective and Scholarly
Perspective on Sustainability in the Extraction
of Talc for Cosmetic Products
Authors
Student Number
Hand In Date
Course
Tutor
Word Count
Sarah Mellon & Fabio Oliveira
06144782 & 06132095
24th November 2006
MSc Strategic Marketing
Chris Brown
2066
Introduction
The concept of sustainability centres itself on economic development being mindful
of its surroundings, embracing issues such as environmental concerns, global
warming and energy (Brundtland Report, 1987), in order that future generations
needs are not compromised by the activities carried out today (WCED 1987).
According to Nigel (1998), sustainable development is a social and institutional
response to the environmental (or ecological) dimension of global change.
Sustainability as a market concept
The public has been pressuring governments and companies to reduce the levels of
pollution and detrimental activities that have an impact upon the environment.
According to Nigel (1998), the pressure for sustainable development has been
brought about by two distinct problems. The first concerns the resource and energy
demands of industrial activity in developed and rapidly industrialising economies.
The second problem is the cycle of poverty, mainly experienced in developing
countries. The costs of continuing devastation and pollution are increasing annually
from the global economy and industries.
These pressures have led to companies adopting the concept of ‘corporate social
responsibility’ (CSR) in order for many to ameliorate their public image. Davis
(2006) suggests that CSR requires integrity to be sustainable so the image projected
must be consistent at all levels of the organisation, the community and society.
Unilever’s Sustainability Strategy
Due to their power of being such a large multinational, Unilever, one of the world’s
largest consumer goods companies, with ranges of foods, household and personal
care products, has a lot of pressure to perform business in a socially responsible
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manner. Perhaps due to this, Unilever widely promotes their strong focus on
sustainability. They have also established a mission to attain sustainable growth in
order to achieve better results for their stakeholders, as declared in the company’s
statement:
“As a multi-local multinational we aim to play our part in addressing global
environmental and social concerns through our own actions, and working in
partnership with stakeholders at local, national and international levels”.
They carry out sustainable activities in all three aspects of sustainability including
environmental, economic and social projects (Veleva, 2003). Some of the projects
they have been involved in include the cleaning of rivers in Indonesia, helping to
combat HIV/AIDS in Kenya, helping to tackle climate change with the researching
into advanced refrigeration, and sustainable fishing in South Africa (Unilever, 2006).
In 2001, Unilever spent 57million euros on community projects (BBC, 2002). These
efforts towards sustainability have seen their food production businesses at the top of
the Dow Jones Sustainability Index (DJSI), and also being ranked third in the 100 top
companies that ‘count for corporate responsibility’ (Foodproductiondaily.com, 2004).
These measures, as well as Unilever’s own voluntary measurements should ensure, as
Veleva (2003) discusses, that ‘progress is actually being made rather than just being
talked about’, as well as helping create a very positive company image.
These actions taken by Unilever appear to show their great concern in the sustainable
development of their business. There are however many other possibilities to explain
their reasoning behind the extent of their action. One possibility is the increased
public concern for the environment, which has led to the recent concept of ‘green
marketing’ (Prothero, 1996), which could explain Unilever’s motives. Unilever uses
this idea to help establish superior customer value, as they are seen as having the
highest standards of responsible and sustainable behaviour. However critics believe
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that these reports and projects embarked on by companies are only ‘greenwash’, in
order to improve their public image (Veleva, 2003). This could be why they are
under a great deal of pressure from watchdogs, and environmental groups such as
Friends of the Earth and Greenpeace. Smith (1990) explains that this ‘pressure group
activity has led to the boycott of products both for environmental and social reasons’,
therefore outlining one of Unilever’s motives for acting in a sustainable manner, in
order to avoid any bad press which could lead to the boycott of their products.
Furthermore, Unilever’s sustainability strategy benefits the company, as being the
leader of the industry on the DJSI has led to an increase in investments. This
investment is linked to the increase in shareholder value, as according to Dow Jones
(2006), leaders of this index usually ‘show superior performance and favourable
risk/return profiles’, so would therefore be more favourable to invest in.
Unsustainable Practices
Despite the aforementioned efforts, Unilever has been the subject of bad press for
several unsustainable practices. For example, the dumping of mercury toxic waste
into Indian rivers, child labour in developing countries, and the illegal mining of talc.
Unilever, as well as a number of other companies in the cosmetics industry, including
Avon, and Johnson & Johnson, have been found to be involved in purchasing
illegally mined talc from suppliers in India. Talc is one of the ingredients that make
up several of their cosmetics products. Its purpose is to give cosmetics stability,
texture, skin adhesion, slip and water resistance (Golcha Group, 2005) and it can be
found in skincare products such as makeup and soap, including Unilever’s range of
Dove products.
The use of talc as raw material for manufacturing cosmetics by the extraction of
soapstone has had a great impact on the environment, devastating huge areas,
including natural sanctuaries, such occurred in 2003 in the Jamwa Ramgarh Wildlife
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Sanctuary in Rajasthan, India. This area is a protected nature reserve, however it was
found that local companies had nevertheless been allowed to operate in an
unsustainable manner (Environmental Investigation Agency, 2003). According to
Friends of the Earth (2003), these operations are threatening tiger habitats, increasing
their vulnerability to local extinction, as well as destroying the forest and watersheds
which has negative effects for the local people. Furthermore, talc has been seen to be
toxic, a skin irritant, and has been linked to cancer in the press (Cancer Research UK,
2006). This process therefore appears to come under ‘Level 3 – Facility Effects’ of
The Lowell Centre Indicator Hierarchy, meaning that this activity has environmental
impacts (Veleva, 2003). It is important for Unilever to use this indicator in order to
help achieve more sustainable production systems, particularly as there is a strong
link with using these indicators to resulting in improved performance (Gahin et al,
2002).
For a company that appears to have such a strong stance on sustainability, this
behaviour certainly does not agree with the definition of sustainability, as it is
‘compromising the ability of future generations to meet their own needs’ (WCED,
1987) with the destruction of the protected environment. Furthermore, it is important
to note that Unilever reached the top of the DJSI in the food production category, it
does not reflect their sustainability performance in the personal care market, therefore
perhaps they are not putting as much effort into this area.
An increasing number of consumers are looking at more natural, ethical products, and
‘have become very sceptical about the behaviour of companies’ (Aiking, 2004).
Therefore, it is recommended that Unilever adopt more sustainable practices to
‘satisfy the growing environmental concerns of humanity’ (Johri, 1996). If an
alternative, more sustainable product/process is not used, it may well damage
Unilever’s reputation and decrease the level of superior customer value that they
provide, which will have an adverse impact on their competitive advantage.
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Research has been undertaken for the purpose of this assignment, in order to find a
more sustainable ingredient or way of extracting this ingredient, which will not have
such an affect on its local environment. One problem however might be that talc is
relatively cheap for the multinationals to purchase, therefore any alternatives must
take this into consideration. However this cost saving would be a lot less than the
incalculable value of a tarnished public image, and as Schlegelmilch (1996) suggests,
a growing number of consumers are more willing to pay higher prices for green
products, therefore higher costs could be accounted for.
Product concept and the initial marketing brief
In general, the cosmetics industry is investing in sustainable projects, and has a clear
interest to do so. Unilever invests great sums of money in sustainability, and has key
performance indicators in chemical oxygen demand, water, energy, CO2 from
energy, hazardous waste, boiler/utilities and Ozone-depleting potential.
One alternative researched for this project is the use of Nylon-12, a synthetic
substance that could be an excellent substitute to the natural talc powder in cosmetics.
Similar to talc, this substance also has tremendous absorbent powers. It remains on
the skin’s surface to absorb skin oil as it is secreted, making the skin’s surface
imperfections less apparent. Nylon-12 is an artificial substance that can be produced
by the plastic industry with sustainable manufacture process and can be more easily
monitored and measured than mineral extraction. Some cosmetics company such as
Procter & Gamble and Revlon are already using this substance in their products.
There are many advantages for the Cosmetics industry to change the ingredients of
their products from talc to Nylon-12. The industry will reduce the risk of future
shortages and the impact on the environment. According the Industrial Mineral
Association, the use of non-renewable resources may mean that these will not be
available for future generations, and extractive operations can have a lasting negative
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impact on the environment if not managed efficiently. Moreover, mining remains
one of the most hazardous occupations – causing more fatalities than other
occupations (IEE, 2001).
Impact on the different business processes, and Issues to Implementing these
Changes
Unilever appears to be committed to managing their social and environmental
impacts responsibly, working in partnership with stakeholders and contributing to
sustainable development. The mission that determines the strategies and positioning
in the marketplace, suggests that Unilever role is to add vitality to life with brands
that help people feel good, look good and get more out of life.
Unilever uses target scorecard measurements to evaluate indicators such as chemical
oxygen demand, hazardous waste, water, energy, and CO2 from energy and
Boiler/utilities. Moreover, Unilever acts together with all the stakeholders involved
in the process. Their strategy to be the ‘multi-local multinational’ determines how
they are effectively competing, and delivering superior customer value through the
analysis of the external environment, identifying the key value generators, applying
the necessary modifications and alterations in the products and communication, and
the efficient management of the supply chain (Kotler, 2002). Furthermore, a
marketing strategy which includes environmentally-friendly packaging and ecolabelling must be at the heart of any company’s forward planning. This is where
environmental differences will be communicated and where a company’s
commitment will often be judged (Welford et al, 1993).
The development and delivery of this modification requires the commitment of
application from R&D, marketing, suppliers, and manufacturers. Therefore the
following recommendations have been proposed:
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R&D evaluation and analysis of the impacts in the manufacturing process,
with an external benchmark;
-
Marketing and manufacturing departments working together with the
suppliers, to analyse and evaluate the impact of production in terms of
quantity, costs and process alterations.
-
Marketing and Public Relations evaluating the impact in local communities
where the talc suppliers are operating, in terms of unemployment and
environmental recuperation.
-
Learning and understanding the outcomes and communicating to the
community, employees and suppliers.
-
Understanding the customers values and applying this in the development of
the products.
-
Communicate changes to the customers through alterations in the packaging.
Internal marketing is another relevant aspect for achieving the success of this
alteration. Internal Marketing has come to be seen as a mechanism for reducing
departmental and inter-functional friction, as well as overcoming resistance to change
(Ahmed, 2004).
Conclusion
In conclusion, it is vital that companies explore sustainable development and
corporate social responsibility, in order to attempt to increase their competitiveness
and to improve their superior consumer value offering. This will reflect the growing
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concern among consumers about environmental issues as they are becoming
increasingly suspicious of multinationals’ activities.
Another important aspect concerns the investigation of companies’ relationships. The
company should understand their role as a part of one whole system where its
responsibility includes the management and monitoring of their partners’ activities,
including their suppliers, employees, and other commercial partners.
In conclusion, companies should place a strong emphasis on sustainability,
incorporating it as part of their corporate culture. They should also work with their
partners to develop new strategies to reduce their impact on the environment, in order
to increase their competitiveness in line with consumer’s increasing environmental
concerns, improve their public image, and to prevent any further depletion of the
external environment.
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Bibliography
Journals:
Aiking, H, & J de Boer. (2004) ‘Food sustainability’. British Food Journal. 106 (5)
pp.359-365
Gahin et al. (2002) ‘Do indicators help create sustainable communities?’. Local
Environment. 8 (6) pp.661-666
Johri, L.M & K Sahasakmontri. (1998) ‘Green marketing of cosmetics and toiletries in
Thailand’. Journal of Consumer Marketing. 15 (3) pp.265-281
Prothero, A. (1996) ‘Environmental decision making: research issues in the cosmetics
and toiletries industry’. Marketing Intelligence & Planning. 14 (2) pp.19-25
Schlegelmilch, B et al. (1996) ‘The link between green purchasing decisions and
measures of environmental consciousness’. European Journal of Marketing. 30, (5)
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Smith, N. (1990) ‘Morality and the Market: Consumer pressure for corporate
accountability’. Journal of Economic Psychology. 11 (4) pp.633-634
Veleva, V et al. (2003) ‘Indicators for measuring environmental sustainability’.
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