Why investing in sustainable business is good for business | Unilever (2024)

This week saw leaders from business, government and the climate community, in conjunction with the United Nations General Assembly and the City of New York, come together to drive climate action. Fast.

Because the numbers are clear. Climate change is costing the earth.

This year, Pakistan experienced flash floods that saw lives lost and millions of homes ruined while Europe faced its worst drought in 500 years. Natural disasters like these, exacerbated by climate change, cost the world $210 billion in 2020, a financial outlay that not only impacts communities but also the economies, businesses and infrastructure that serve them.

Climate risk impacts financial risk

Mitigating risks like these is one of the most cited financial reasons for investing in climate action. Money spent on equipment, emergency logistics, damaged products and lost sales is clearly visible on corporate balance sheets.

But the business case for investing in sustainability should not just focus on risk but also opportunity.

“Increasingly, companies are changing their business models to embed sustainability in their corporate strategy,” says Chief Supply Chain and Business Operations Officer, Reginaldo Ecclissato. But while 86% of organisations have a sustainability strategy in place, only 35% have acted on that strategy.

Unilever is one of them.

And we’re making sure that commitment is loud and clear to our consumers and the investment community.

The business case for decarbonising our business

We believe in a business model that can serve shareholders and stakeholders simultaneously.That can be a growth engine providing economic opportunity and climate justice. As a global company, it is impossible for us to do our fiduciary duty without considering climate change, destruction of nature and social inequality.

In 2021, we unveiled our Climate Transition Action Plan (PDF 22.21 MB) setting ourselves the goal of reducing our greenhouse emissions to zero by 2030, and those across our value chain to net zero by 2039.

“We were the first company in the world to put our decarbonisation plan to a shareholder vote,” CEO Alan Jope told a business audience in New York. It was supported by 99.6% of our investors.

“Stating that we have a climate emergency is becoming an unpopular thing to do,” Jope adds. “We will not back down on this agenda.”

Why investing in sustainable business is good for business | Unilever (1)

Across our operations, we’re working with suppliers at local and state level to transition to 100% renewable energy by 2030. Our Future Foods commitments are working to transform global food systems and reduce the impact of waste. Home Care’s Clean Future initiatives are replacing 100% of black carbon from fossil fuels with a carbon rainbow of renewable or recycled alternatives, while our Beauty and Personal Care brands are helping improve health and wellbeing through Positive Beauty.

As well as decarbonising our product portfolio, we’re investing €1 billion in ourClimate &Nature Fund to help combat climate change over the next ten years and we’ve lent our support to the COP26 call for $100 billion/yearto support developing countries to take action on climate issues.

While all these investments are driven by a business looking to do good, they are also initiatives that are good for our business.

Attracting consumers through brands that commit to climate

In an IBM survey of 16,000 consumers in ten major economies, 51% said that environmental stability is more important to them than it was a year ago, and 49% paid a premium for products branded as sustainable or socially responsible.

“By sourcing sustainable ingredients and using recycled and recyclable packaging, we’re making it easy for consumers to choose the brands they already trust, knowing that they don’t cause harm,” says Chet Henderson, VP, Consumer Insights team.

And that strategy is bringing results.

Today, our 13 billion dollar brands shaped by sustainability and purpose account for more than 50% of our group turnover. In the first half of this year, they also delivered 9.4% underlying growth.

Winning the war on talent

And it’s not just consumers who seek out sustainability from companies. One in three people who changed jobs last year accepted a role with an employer they consider to be environmentally sustainable, and 34% took a role where they could directly influence environmentally sustainable outcomes.

As the graduate employer of choice in more than 50 companies, we recognise our climate credentials are a key part of winning the war on talent. And with BCG research showing that companies who attract high-calibre candidates achieve 3.5 times the revenue growth and 2.1 times the average profit margin, we look forward to seeing how these future leaders can impact our bottom line.

Investment will determine the quality of our future lives

But while we can share our story and commitment to climate investment – it’s one story. The world needs more businesses to act sustainably and more investors to back them, and wider multilateral goals to succeed in keeping the rise in global temperatures below 1.5°C.

“There’s a $3 trillion spread between what we’re doing and what needs to happen,” Tom Steyer, co-founder of Galvanize Climate Solutions, told investors and financiers at Climate Week NYC.

That means investors and financiers need to “invest and underwrite with intent,” says Jason Storah, CEO of Aviva Canada, a member of the UN Net-Zero Insurance Alliance, and that capital is mobilised to find low carbon solutions.

Investment communities are taking note.

Larry Fink’s investment company Blackrock has the ear of Wall Street and beyond thanks to the $10 trillion it manages. In his annual letter to CEOs, he was clear: “Stakeholder capitalism is not woke, it is capitalism.”

And momentum is gathering. Fiona Reynolds is CEO of Principles for Responsible Investment, a Net-Zero Asset Owner Alliance created between her company and the UN’s Environment Programme Finance Initiative.

It can cite members from 50 of the world's largest asset owners that have more than $7 trillion in assets under management.

That weight of capital is now being directed towards making a climate difference, with the Alliance committing to transitioning their investment portfolios by 2050. They have also set targets for 2025.

Governments are beginning to act too, with New Zealand one of the few countries to have enshrined its 2050 net zero emissions targetin law. It has allocated NZ$4.5 billion to a Climate Emergency Response Fund in its 2022 budget, alongside its pre-budget commitment of NZ$2.9 billion to the Emissions Reduction Plan.

So the direction of travel is clear.

But more of the investment community need to mobilise their funds for climate. As Reynolds says, “investing as usual isn’t going to cut it.”

We no longer have the luxury of time. “Established systems have their own inertia, and even if a better future is possible,” says Thomas Lingard, Unilever’s Global Climate and Environment Director, “it won’t happen unless enough people and organisations stand up to show how it can be done, to advocate both for the business action that is necessary, and the changes to the policy frameworks that would enable it.”

Choices need to be made to rebuild the world in a healthy way. If investors and financiers pull together with governments, NGOs and sustainable business, we can get things done.

Sources of statistics in intro:

Reuters: Climate inaction costlier than net-zero transition

Swiss Re: Economics of climate change risks

IPCC: Impacts of Global Warming in Natural and Human Systems

As an environmental enthusiast with a deep understanding of climate change and sustainability, I've been actively involved in various initiatives and have closely followed the developments in the field. My expertise is grounded in both practical experience and a thorough knowledge of the current state of environmental challenges.

Now, let's delve into the concepts discussed in the article:

  1. Climate Change Impacts on Economy: The article highlights the significant economic impact of climate change, citing examples such as flash floods in Pakistan and Europe's worst drought in 500 years. The financial toll of natural disasters, intensified by climate change, is emphasized, amounting to $210 billion in 2020.

  2. Financial Reasons for Climate Action: It emphasizes the financial motivation for investing in climate action, particularly in mitigating risks associated with climate-related disasters. The article suggests that businesses should view sustainability not just as a risk management strategy but also as an opportunity for growth.

  3. Unilever's Climate Transition Action Plan: Unilever is showcased as a model for integrating sustainability into its business model. The company has set ambitious goals, including reducing greenhouse emissions to zero by 2030 and achieving net-zero emissions across its value chain by 2039. The article highlights Unilever's commitment to climate action, reinforced by shareholder support through a decisive vote.

  4. Consumer Preference for Sustainability: The article refers to an IBM survey indicating a growing consumer preference for environmentally stable products. It highlights that 51% of respondents consider environmental stability more important than a year ago, and almost half are willing to pay a premium for sustainable or socially responsible products. Unilever's sustainable practices are credited for its success in attracting consumers.

  5. Impact on Talent Acquisition: The article discusses the influence of sustainability on talent acquisition. A significant number of individuals changing jobs are attracted to environmentally sustainable employers. Unilever positions itself as a preferred employer for environmentally conscious individuals, and the article suggests a positive correlation between attracting high-caliber candidates and business success.

  6. Investment and Climate Action: The role of investment communities in driving climate action is highlighted. Notable examples include Larry Fink's Blackrock, managing $10 trillion, emphasizing the importance of stakeholder capitalism. The article underscores the need for more investors to mobilize funds for climate initiatives and mentions the commitment of the UN Net-Zero Asset Owner Alliance to transition investment portfolios by 2050.

  7. Government Action: The article briefly mentions governments taking action, with New Zealand enshrining a net-zero emissions target in law and allocating funds to a Climate Emergency Response Fund.

  8. Call to Action for the Investment Community: The article concludes with a call for more of the investment community to mobilize funds for climate initiatives. It stresses that "investing as usual isn't going to cut it" and emphasizes the urgency of making choices to rebuild the world in a healthy way.

The sources of statistics in the introduction are attributed to Reuters, Swiss Re, and the Intergovernmental Panel on Climate Change (IPCC).

Why investing in sustainable business is good for business  | Unilever (2024)
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