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Unilever's Supply Chain Shows The Importance Of Sustainability

A commitment to sustainability has seen it reach the pinnacle of supply chain management

21Nov

On 2 September 1929, soap manufacturers Lever Brothers and margarine producers Unie signed an agreement to create Unilever. Since then, the organization has grown into the fourth largest consumer goods company in the world, with net sales of roughly $58.34 billion. It has over 400 brands spanning food, beverages, cleaning agents, and personal care products, and its wares can be found in over 190 countries. As a result, Unilever sources raw materials from 10,000 suppliers worldwide and up to 100,000 non-production suppliers. This is a huge undertaking and it is necessary that its supply chain be among the best in the world to function successfully. Fortunately, it is. Unilever has topped Gartner's annual Supply Chain Top 25 list for the last two years and it is a matter of time before it joins the likes of Amazon and Apple in its 'Supply Chain Masters' category.

This excellence is the result of a clearly defined global strategy alongside effective and robust processes that ensure it is executed perfectly. Unilever embraces collaboration with supply chain partners and is always first to adopt the latest technology. It was one of the first to introduce RFID technology to track products throughout the chain and it was early to harness data analytics to optimize operations. It has also been one of the first to research blockchain as a way to track and manage their incredibly complex supply chains, joining Walmart, leading grocery company Kroger and suppliers like Nestle, and Tyson Foods in a widespread test that will help the companies and IBM hone the technology's wider implementation.

However, while its forward-thinking in these areas has been vital in making its supply chain so effective, what really sets the company apart is its commitment to sustainability.

Neil Humphrey, Unilever’s senior vice president of supply chain for Europe, notes that, 'In the supply chain at Unilever, our purpose is to deliver sustainable and profitable growth. We are looking beyond financial results to our impact on the world around us, from reducing our environmental footprint to improving the livelihoods of small farmers and the communities in which we operate.' This is an attitude that comes down from the very top, with CEO Paul Polman making sure it is embedded in the company's operations. When he took charge 2009. He immediately scrapped the CSR department and made it the mission of all Unilever’s 169,000 employees to incorporate their extensive social commitments in their business targets. They also appointed a Chief Sustainability Officer to head up a division devoted to sustainable strategy.

Unilever has implemented a number of eye-catching policies in their hunt for sustainability. They have stopped outsourcing logistics and brought it in-house. Unilever is in the process of in-sourcing services that have been done by 3PLs to reduce carbon and costs, with Neil Humphrey arguing that, 'We have the scale and capabilities to improve our service costs while taking one in five trucks off the road in Europe.' More than this, an effective sustainable supply chain requires total alignment, which means all partners must be willing and able to embrace the same commitment. This means ending relationships with those who don't conform to the same principles, and working closely with governments to get an idea of working conditions, as well as startups who introduce new innovations that drive sustainability. For example, in 2015, Unilever issued its first human rights report, finding that its contractors in India were rife with poor health and safety conditions, workers were underpaid, and barely any of the cases were being resolved - just 13%. The company worked with NGOs and union officials to review its factory workers’ wages globally and introduce more stringent requirements for suppliers

These initiatives have been highly effective. Every year, Oxfam publishes Behind the Brands, an assessment of the sustainability policies of the 10 biggest food producers in the world. Unilever has topped the list since 2015. In global environmental disclosure platform CDP's annual tracker of the largest, most environmentally impactful companies are responding to climate change, Unilever and beauty giant L’Oréal lead the way with As across all three categories. Unilever also recently scored a third-place spot on Carbon Clear’s Taking Stock of Sustainability index for sustainability reporting and became one of the first members of the EV100, an initiative encouraging global business commitments on electric transport. And the public has noticed, with Unilever ranking 38 this year on Fortune’s list of the World’s Most Admired Companies Top 50 All-Stars, up from 41 in 2016. It’s the sixth straight year Unilever has made the list, which is determined by surveying thousands of executives and analysts.

It is not just awards that Unilever has garnered, though. The commitment to sustainability also makes sound business sense. Numerous surveys now show it is what consumers want, and it is also helping to cut costs. According to Accenture, nearly 40% of members of the UK-based Carbon Disclosure Project supply chain program have reported financial savings as a result of their emissions reduction activities, while over a third have benefited from new revenue streams or from savings gained from their suppliers’ carbon reduction activities.’ Bloomberg, meanwhile, found that, ‘stocks of companies that take climate change seriously beat the wider market by almost 10%’. Furthermore, the 187 companies rated by the non-profit Carbon Disclosure Project’s as on the ’A List’ when it comes to fighting climate change, saw their stock prices outperform the Bloomberg World Index by 9.6% between 2010-14. Graeme Pitkethly, CFO at Unilever, explains that, 'Being a sustainable business goes hand-in-hand with being a successful business, as we drive profitable growth for our brands, save costs, reduce risk and fuel innovation. Transparency and reporting are more important than ever before, not only to ensure trust among employees and consumers, but also for our investors. Unilever is one of the first companies to commit to implementing the recommendations of the Task Force on Climate-Related Financial Disclosures. If markets are to operate efficiently, we must be transparent to help them evaluate companies’ risks and opportunities to make better decisions for the long term.' It is not easy to put public good ahead of profit, but it has made Unilever's supply chain lauded, and is certainly something others should look to emulate.

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