Systems Change Blog and insights Unilever versus Kraft/Heinz: Competing Models of Capitalism For all sorts of reasons, the way people feel about corporate sustainability is influenced disproportionately by how well Unilever is seen to be doing through its Sustainable Living Plan. You can see why. The Unilever Sustainable Living Plan (USLP) is one of the most ambitious, one of the most integrated, and one of the most significant in terms of beneficial impacts – both environmental and social – and has been for a long time. So when Kraft/Heinz announced a bid to take over Unilever back in February, a frisson of horror ran through the sustainability community. For most people in our world, Kraft is viewed with extreme suspicion, as a rapacious, unaccountable, profit-maximising company, representing much of what’s bad with contemporary capitalism. Kraft’s takeover of Cadbury in 2010 was pretty brutal, and the speed with which it then reneged on various promises made during the takeover battle triggered intense resentment. Happily, the Unilever Board persuaded enough investors that the Kraft/Heinz bid did not represent a good deal for them over the long term, however much of an instant uplift they might have got. With the prospect of an extremely hostile and unpleasant campaign looming, the bid was rapidly withdrawn. But in some ways, that was just the start for the Unilever Board, especially with strong rumours circulating that Kraft/Heinz might come back later in the year, even better prepared and even more aggressive. This led to the Unilever Board undertaking a deep review of business strategy and future growth prospects, agreeing a share buy-back, a new target for significantly higher margins by 2020, and a variety of other measures to reassure shareholders. This was all well received by shareholders, with the share price ending above the price that Kraft/Heinz had offered. Inevitably, throughout those weeks, the USLP slipped onto the back burner. Indeed, there were fears that the need to make the company even more profitable and ‘efficient’, from a shareholder point of view, would take the wind out of its sustainability sails. So there was a heightened level of curiosity at this year’s event launching Unilever’s 2016 Sustainable Living Plan update on 18th May. All previous events have been very upbeat, celebratory affairs (perhaps too much so in retrospect), which would have been all wrong after such a difficult time. But that didn’t stop Paul Polman, Unilever’s CEO, delivering a pretty stirring defence of Unilever’s model of creating value for its shareholders, pointing out that any shareholder who’d put £1 into the company in 1986 would have £86 today – roughly four times more than the average FTSE shareholding during the same period of time. And he couldn’t have been more specific about the scale of the potential disaster averted had the Kraft/Heinz bid been successful – trenchantly describing those leading the bid as the equivalent of ‘barbarians at the gate’! This ‘contrast and compare’ process, between two radically different models of capitalism, has some very real significance for all of us. When the USLP was launched in 2010, it was against the backdrop of an extraordinarily ambitious commitment by Paul Polman to double the size of the company by 2020, with an emphatic assertion that this kind of growth (almost all of which is being generated in developing and emerging countries) could only be achieved if the whole sustainability agenda (nutrition, hygiene, water, carbon, women’s empowerment, smallholders, waste etc) could be successfully mainstreamed across the entire company. In other words, good returns for shareholders as well as significant sustainability outcomes for people and planet. Mutually reinforcing priorities, over the long term, in contrast to the Kraft/Heinz model where they’re seen as mutually exclusive, so ruthless is the focus on short-term gain. The 2016 USLP Report is good – succinct, to the point, and still demonstrating that things are moving in the right direction, with 80% of the targets on track for the 2020 deadline. But much more interesting for those attending was a new publication, ‘Making Purpose Pay’. It was only three years ago that Unilever started to deconstruct its financial data to highlight the difference between what are described now as its ‘Sustainable Living Brands’ and all the rest of the brand portfolio. Of the top 40 brands, 18 are now in that ‘sustainable living’ category, and what really matters is that these brands (such as Dove, Hellman’s, Lifebuoy, Ben and Jerry’s etc) are growing 50% faster than the rest of Unilever’s brands – a figure which is itself up 10% from a 40% outperformance in 2015. What’s more, the combined growth of Unilever’s Sustainable Living Brands accounted for an impressive 60% of total business growth last year. Could there possibly be a more powerful ‘up yours’ to the asset-stripping, profit-maximising money men behind the Kraft/Heinz bid? Unilever obviously keeps a pretty close eye on why consumers are beginning to use their purchasing power so much more purposefully. And some of the new research in this report is also pretty intriguing, in terms of demonstrating that this is a growing trend, not a fad. 10,000 ‘heads of households’ were interviewed in Turkey and the UK, with additional research done in Brazil, India and the USA: ‘The results were astonishing. They not only show that the majority of people genuinely do care about sustainability, they bust the myth that this is still a niche issue. What the study showed was that over half of all consumers already buy or want to buy sustainably; one in three (33%) already purchases products with sustainability in mind, and a further 21% do not currently, but would like to.’ I’m usually pretty cynical about consumer polls, but such findings are still pretty remarkable. It’s also the case that there’s more of that kind of default cynicism here in the UK than in almost any other country. In answer to the yes/no prompt, ‘I feel better about myself when I buy products that I know are sustainable or better for the environment’, only 53% of people responded positively in the UK, compared to 85% in Turkey, 85% in Brazil and 88% in India. Even the USA came in at 78%! Looking at these figures, outside the UK, why would a company whose growth prospects are mostly in developing and emerging countries give even a moment’s thought to the idea of compromising on its sustainability commitments? And that in turn has huge implications for today’s ‘future of capitalism’ debate: it’s impossible to exaggerate just how important it will be to defend that sustainability-friendly growth strategy against the marauding mercenaries of the Kraft/Heinz model of capitalism that in many ways now poses the greatest single threat to the future of humankind.