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Unilever

Special Report

Taking responsibility

August 2012

Achieving profitable yet responsible growth is possible, even in a difficult economic environment, says Arijit Ghose, Unilever’s managing director for the Gulf and customer development Head MENA


by Mark Lazell
mark.lazell@tradearabia.net

Open the cupboard and pull out an everyday consumer product, and there’s a reasonable chance that it bears the name of Unilever, the Anglo-Dutch food and cosmetics giant.

The organisation’s brand reach is impressive. According to the company, an estimated two billion consumers in 190 countries use a Unilever product on any given day. Consumers worldwide buy some 170 billion Unilever products every year.

This broad reach means many things, and not just as a strategic marketing mechanism for future brand development. As household brands, Unilever has long recognised their potential for communicating with end users on a range of issues, including those related to sustainability.

The organisation, which employs about 170,000 around the world including a sizeable yet relatively low profile in a Gulf region served by a Dubai headquarters, has for many years been attempting to capitalise on strong brand recognition to influence consumer behaviour, in keeping with its own stated aims of achieving profitable yet sustainable business growth.

The Gulf region, with a rapidly growing, young indigenous populations coexisting with large expatriate populations, presents an intriguing and complex test bed for Unilever’s corporate social responsibility efforts. These efforts seek to raise awareness of and change in consumer habits in a number of key areas, with priority currently being given to basic health and hygiene and the responsible use of water resources.

For Arijit Ghose, Unilever’s managing director for the Gulf and Customer Development Head for the Middle East and North Africa (MENA), addressing two key social issues affecting this region is a significant yet not insurmountable challenge.

He tells The Gulf from his Dubai office that the company seeks consistent and competitive yet responsible growth in a uniquely challenging landscape.

“This region has enormous environmental challenges, especially with regards to water, energy, education, basic health and hygiene awareness,” he says.

Ghose says changing consumer habits is not necessarily about making drastic lifestyle adjustments. Often, he notes, simple education about an issue is sufficient to turn awareness into some form of positive action.

“For example, fitting a simple water aerator which costs just a few dirhams, onto a tap head, can lead to water savings of almost 25 per cent,” he explains.

Well aware that it cannot drive change alone, Unilever routinely partners with local authorities, ministries and municipalities across the Gulf, complementing national awareness campaigns whose impact can best be described as mixed.

Of the many causes Unilever seeks to address, the issue of basic hygiene is one of the most pressing in a region where a staggering four in every five children between the ages of six and 13 suffer from tooth decay.

“Just by educating how to brush teeth we can make a big difference,” says Ghose. “We aim to reach out to two million schoolchildren in the Arabian Gulf by 2015.” Last year and in 2010, Unilever covered about 300,000 children. This year it is targeting another half a million, he adds.

Helping reduce the region’s notoriously high water consumption – according to Ghose, every person in the UAE consumes 550 litres of water per day on average, and in Qatar about 400 litres per day, compared with a global average of about 160 litres – may prove tougher.

The scale of the problem is illustrated in terms of household consumption. Ghose points out that globally, about eight per cent of all water is consumed domestically. In the UAE, this rises to 24 per cent, and in Dubai a somewhat worrying 60 per cent.

For Unilever, the majority of whose brands are associated with water use, this is a statistic which places unusual responsibilities upon its shoulders. But because it is able to communicate directly with consumers through its products, it believes it has a unique opportunity to influence behaviour, even if consumers are currently, through low tariffs, not incentivised to curb water use.

“The default mode when brushing teeth is to leave the tap running. By turning off the tap you save 11 gallons of water. As marketers we can change habits through our brands, for example by raising awareness [of responsible consumption] through our toothpaste products,” Ghose explains.

Despite its size and brand reach and recognition, Unilever’s influence on consumer behaviour remains limited, however. Recently, the company conducted a study on the lifecycle of various brands in its portfolio which together comprise 70 per cent of its business.

The results, Ghose says, found that only five per cent of the total lifecycle of any given product is under Unilever’s direct control – during the manufacture, warehousing and transportation phases.

“The fact that ninety five per cent of the lifecycle is out of our control magnifies the challenge we face because we also want to drive change in the 95 per cent we don’t,” he says.

A Unilever veteran whose career up the corporate rungs started in 1984 in India, subsequently moving on to China, Vietnam and Singapore prior to his appointment in the Gulf, Ghose believes it is incumbent upon large organisations to set examples for their stakeholders to follow – the classic CSR principle.

For its part, Unilever has set out a number of goals to be achieved between now and 2020. According to Ghose, one of the main objectives will be to double business while reducing environmental impact by 50 per cent over the next eight years, and is driving change internally in various ways to achieve this, he says.

“Since 2005 for example we have been seeking to reduce emissions at our manufacturing sites [in the Gulf]. By 2010 [the last time data for the Gulf region was published] energy use had decreased 41 per cent, carbon dioxide emissions had decreased 25 per cent, water usage had decreased about 22 per cent, and waste had decreased by about 32 per cent,” he explains.

Ghose admits that even by setting and meeting ambitious sustainability goals, winning over stakeholders in a region as demographically diverse as the Gulf is a long-term challenge, but one which can use other global experiences as a reference point.

“The call to action – turning awareness into action – is not as sophisticated in this region as in the developed world,” he acknowledges.

That said, Unilever is already turning the Gulf’s youthful demographic in its favour thanks to the deep penetration of digital media among that segment of the population, which helps spread messages via the social media through which its brands interact and are marketed.

“If you reach one child, that child influences another five people at home, so the magnifying effect is huge,” Ghose explains.

Recently, Unilever launched its Sustainable Living Plan, a definitive document which encapsulates its long-terms sustainability objectives and which it hopes will be a catalyst of positive change around the world.

“The Sustainable Living Plan is a platform for delivering mega change, because corporate social responsibility programmes as such cannot deliver change alone,” says Ghose.

“CSR is about giving a hungry person a fish to eat. The Sustainable Living Plan is about teaching that person to fish,” he explains.

According to Ghose, the overarching global goals of the Sustainable Living Plan are to help more than one billion people around the world take action to improve their health and wellbeing, halve their environmental footprint across the full product lifecycle (not just what is under Unilever’s control), and enhance the livelihoods of hundreds of thousands of people throughout what it terms its ‘value chain’ by 2020, in addition to sourcing its agricultural raw materials sustainably.

Under the umbrella of this plan, the organisation claims to have already achieved several interim milestones. Unilever says 10 per cent of its agricultural products were sustainably sourced by 2010, and says it is on track to achieve 30 per cent this year. By 2015, it expects this figure to be 50 per cent, rising to a hugely ambitious 100 per cent by 2020.

“Sustainability is defined not only how the crop is planted and harvested but also the way the plantation workers are treated – do they have education, or do they have health clinics?” says Ghose.

While such initiatives taking place far from home may mean little to Gulf consumers, the Sustainable Living Plan also aims to benefit local communities in this region, according to Ghose. Over the last two years, for example, Unilever has been working with the Dubai Foundation for Women and Children, through which the organisation is providing vocational training to victims of domestic violence. Supported by the Ruler of Dubai, Shaikh Mohammed bin Rashid al Maktoum, the initiative aims to restore confidence and self esteem to victims in what remains a conservative society.

Unilever also collaborates with government authorities, municipalities and ministries across the region to raise awareness.

“They [the partners] are conscious of the scale of the challenge we face collectively,” says Ghose.

“Most of the water used in this region comes from desalination plants, which are huge energy consumers. We speak to various municipalities, water authorities and utilities around the region, such as Dubai Electricity and Water Authority and Saudi Arabia’s national water company,” he adds.

To highlight the potential of such partnerships, Unilever recently signed a memorandum of understanding with Saudi Arabia’s national water company. One day soon, both parties hope to positively influence 25 per cent of Saudi households on the correct use of water through the agreement, according to the Unilever executive.

By promoting social conscience, large organisations are well aware that their actions are seen by some critics as paying mere lip service to their broader obligations. While the bottom line inevitably remains the single most important deliverable for a corporation, Ghose argues that Unilever is living proof that it is possible to undertake massive sustainability programmes even in the throes of a global economic slump.

In its report for the 2011 financial year, the company announced it had “successfully accelerated its growth” while continuing “the steady and sustainable expansion of operating profit.” According to the report, global sales rose 6.5 per cent in the year, compared with 4.1 per cent in 2010. Global turnover, meanwhile, rose five per cent year-on-year to 46.5 billion euros ($56.3 billion).

“If we talk about teaching people to fish, and empowering communities, we ultimately believe it [corporate social responsibility] is good for us as a business,” says the executive, who confirms that there has been no cut in funding for Unilever’s sustainability initiatives around the world.

“For all the work we are doing in this area, we know there is a payback, which for example could be in terms of establishing customer loyalty to our brands. It cannot just be accounted for in balance-sheet terms,” Ghose concludes.

Financial overview 2011

2011 2010 % change
Turnover (€ million) 46,467 44,262 5%
Operating profit (€ million) 6,433 6,339 1%
Profit before tax (€ million) 6,245 6,132 2%
Net profit (€ million) 4,623 4,598 1%
Diluted earnings per share (€) 1.46 1.46 0%

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