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Evaluating a company's impact (the case of Unilever)

A deep dive into Unilever's environmental and social impact

Today’s newsletter is brought to you by Economist Impact - empowering businesses, governments, and foundations to catalyse change and enable progress.

This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

Unilever

This week we dive deep into Unilever’s environmental and social impact.

Unilever is one of the world’s leading consumer goods companies, offering beauty and wellness, personal care, home care, nutrition, and ice cream products.

Some interesting facts:

  • Unilever was formed in 1929 through the merger of Margarine Unie, a Dutch margarine company, and Lever Brothers, a British soapmaker. The merger was motivated by the companies' shared need for vegetable oils, a key ingredient in both margarine and soap production.

  • The company’s products are used by 3.4 billion people every day across over 190 countries. This extensive reach means that one in two people around the world uses a Unilever product daily.

COMPANY’S IMPACT

Unilever’s overall impact score

Unilever has a general impact score of +1.35(on a scale from -5 to +5). Its impact is spread across 13 UN Sustainable Development Goals (SDGs) and 12 topics, split between positive and negative analyses.

In the socio-economic sphere,

the company has a huge impact, with its products used by approximately 42% of the world’s population. Unilever’s diverse product portfolio spans several categories, including food and refreshment, home care, and beauty and personal care, impacting the health and hygiene of billions of people daily. The company also has a significant economic and social impact through its annual spending of over $40 billion on its 57,000+ suppliers andhas provided access to sanitation to over 1 billion underserved people through its products and partnerships. Generally, its most sold products are also more affordable than those of competitors. As of 2024, it employs 128,000  people and provides salaries above the industry and country average. When it comes to gender equality, the company hasn’t achieved gender parity at any level, except for its board of director roles.

A study assessing 38,176 products from 25 different global food manufacturers revealed only 18% of Unilever's food products meet healthy standards, while 17% of the company’s food sales came from healthy products. Out of the 25 companies assessed, Unilever was ranked in 17th place regarding its healthy products portfolio. Some of the company’s suppliers were also found to have poor labor practices and Unilever itself classified 7,880 of its 56,531 suppliers (14%) as high-risk regarding modern slavery.

Environmentally,

Unilever emits over 57 million tonnes of CO2equivalent annually (2022), equal to the emissions of 15 coal plants for a year. The company also withdraws approximately 28 million m3 of water annually, 49% in high or extremely high water-stressed areas. Additionally, it generates approximately 750,000 tonnes of waste (recovers 97% of it) anduses almost 700,000 tonnes of packaging (mainly plastic), thus contributing to plastic waste, as 91% of plastics worldwide end up in landfills. It also sources about 2.2 million tonnes of raw materials (palm oil, soy, cocoa, etc.), which require hundreds of thousands of hectares of land for cultivation, thus contributing to land degradation.

*The impact score is current as of July 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.

ESG VS IMPACT SCORE

What is Unilever’s ESG rating?

For comparison, Unilever has an AAA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Unilever’s impact scores by SDG

Now, back to Unilever’s impact score:

Positively (and by weight), the company scores the highest in Good Health and Well-being SDG (+1.86), followed by No Poverty (+3.16), and Partnership for the Goals (+3.15).

Negatively, the company scores the worst in Responsible Consumption and Production SDG (-1.69), followed by Climate Action (-3.28),and Decent Work and Economic Growth(-0.98).

*the analysis takes into account the weight of the SDGs

Unilever also positively and negatively influences two SDGs (3 - Good Health and Well-being and 8 - Decent Work and Economic Growth). For example, it positively impacts Good Health and Well-being by providing health and hygiene products to billions of people every day. However, on the downside, only 18% of its products meet healthy standards.

CONCLUSION

Final words

So, Unilever’s key social and environmental impact lies in …

its role in providing products that fulfill people's health and hygiene needs. Alongside serving 42% of the world’s population in over 190 countries, the company also provides thousands of jobs, empowers thousands of suppliers and farmers in its supply chain, impacts millions of people through its initiatives, and pays billions in taxes.

On the contrary, Unilever has a negative impact through its massive emissions, water use, and waste production. Additionally, some of the company’s suppliers engage in poor labor practices, and a large percentage of its sales come from unhealthy products.

Its positive +1.35 score is a balance of all of these factors and topics.

If you’d like to delve deeper into Unilever’s impact, you can explore it here.

Next week, we will analyze the impact ofthe world's leading tobacco company, Philip Morris International.🚬

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

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