Shots have been fired at Unilever for its apparent ‘obsession’ with sustainability and purpose. The public denouncing from a top investor has stoked the debate around brand purpose over profit.
In an open letter to investors, Terry Smith – who controls the £28.9bn Fundsmith Equity Fund – called out Unilever for prioritizing sustainability “at the expense of focusing on the fundamentals of the business”.
Unilever kicked off its sustainable business strategy in 2009 when former boss Paul Polman introduced its Unilever Sustainable Living Plan, later to be reinforced by its current leader Alan Jope.
Industry commentators are divided over Smith’s attack, with those backing his claims saying that brands risk alienating their daily customer base, while those opposing him cite incremental consumer demand.
The Drum takes the temperatures of top marketers to see if they agree with the shareholder revolt.
Nilesha Chauvet, managing director of The Good Agency, calls Unilever’s commitment to sustainability and social impact “exemplary” and disputes Smith’s claims that it prioritizes purpose at the expense of profit.
“The notion that to achieve purpose you must compromise on profit is outdated and has been disproved time and time again,” says Chauvet. “Far from harming Unilever’s bottom line, the strategy has been enhancing investor return, and it’s having a positive impact on society and the planet. That’s what purpose is – win, win, win.”
Chauvet questions why Smith invested in Unilever knowing its commitment to the Unilever Sustainable Living Plan business strategy. She also believes the share price has fallen due to other factors: “Possibly a lack of preparation to flourish in emerging markets, keeping up with changing consumer sentiments, the rising cost of raw material – not necessarily because of its focus on purpose.”
Nikki Cunningham, managing director of branding agency Curious, says the purpose over profit debate is not “clear cut as to what should triumph”. She argues there are caveats and exceptions on both sides, but does ask the industry to consider Smith’s comments.
“Yes, defining why Hellman’s mayonnaise is the one you should choose above any other mayonnaise brand because of what it stands for is going to attract customers to some extent. But equally, some people just want to buy a reasonably-priced condiment. Sometimes, mayonnaise is just mayonnaise,” she says. “Brand purpose is something that should allow brands to translate their offering in a compelling way to their audiences. But they also shouldn’t forget to deliver on their core offer in the process.”
From a branding perspective, Cunningham says that selling requires more effort than it did 50 years ago – and purpose can lend a hand in that.
According to Thomas Kolster, a marketing expert and author of The Hero Trap, Unilever is at risk of “diluting its brand when it’s zigzagging and bandwagoning on the latest trends such as sustainability”. He says ”people don’t trust these efforts”.
He warns brands that, in the hunt for a greener image, they can neglect and alienate their daily customer base. “Should we really feel climate guilty or relieved when using detergent – or, for that matter, be faced with a multitude of gender issues?”
Kolster says the industry is witnessing a maturity of sustainability and purpose as a driver of business performance. “Purpose quickly becomes a do-good marathon that a multinational will never be able to win as there are faster runners out there in challenger brands.”
Richard Exon, the founder of Joint, says that if Smith has evidence that Unilever’s “commitment to purpose is nothing more than a cynical PR exercise, he’d be right”.
Exon’s views on ‘doing good is good for business’ contrasts with Smith’s, who sees profits dampened by purpose. He says: “Consumers need and demand that big businesses and brands help them answer the huge and increasingly urgent question: ‘How do we continue to enjoy the comforts and benefits of a modern consumer lifestyle without destroying the planet we live on and ruining the lives of others who inhabit it?’”
According to Exon, the brands that do purpose best will win in the long term: “Spoiler alert – they’ll also make more money.”