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Unilever's New Global Strategy: Competing through Sustainability

Unilever's New Global Strategy: Competing through Sustainability ^ 916414

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Publication Date: November 20, 2015

Source: Harvard Business School

The Inside the Case video that accompanies this case includes teaching tips and insight from the author (available to registered educators only). Teach this case online with new suggestions added to the Teaching Note. In January 2009, when Paul Polman was appointed CEO of Unilever, he inherited a company in long-term decline at the beginning of a major global financial crisis. As the first outsider ever recruited to lead the company, Polman lost little time in challenging the existing strategy and organization. But the biggest change he made was to introduce the Unilever Sustainable Living Plan (USLP), a commitment that placed three "sustainability" goals at the core of the company's strategy: to help 1 billion people improve their health, to halve the environmental footprint of making and using Unilever products, and to enhance the livlihood of those in its value chain. The case describes how the new CEO then had to convince skeptical internal and external stakeholders why a struggling company in a tough competitive environment should embrace such bold nonfinancial goals. It then follows how he translated his radically different vision into strategies and priorities that could be implemented by a global company with 170,000 employees. In the process, the case explores how Unilever's top team had to adapt and adjust is structures, systems, processes, people and culture in order to implement USLP. The case concludes as Polman and and his top team face some key decisions in 2015. Should they double down on their original 2020 US LP objectives? Should they scale back in the face of some strong economic headwinds? Or should they pivot to a new transformational strategic agenda? This case is accompanied by a Video Short that can be shown in class or included in a digital coursepack. Instructors should consider the timing of making the video available to students, as it may reveal key case details.

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• Assignment: RC TOM Challenge 2017

Unilever: The Problem of Water

Water is the elixir of life. How can one of the world’s largest companies help save the world?

We experience climate change primarily through water [1] . It affects both our supply and demand of water. On the supply side, we suffer from the unpredictable quantity and declining quality of freshwater. Receding glaciers or longer dry periods affect seasonal water flows and reduce the amount of water flowing through rivers, cutting off drinking water and water for industrial use. Rising surface temperatures can cause toxic bacteria in water to proliferate, reducing the quality of the water. On the demand side, farmers may demand more water for irrigation due to rising temperatures. [2]

By 2025, two-thirds of the world’s population will not be able to access as much water as they need [3] . The Water Resources Group projects that the global demand for freshwater will exceed supply by 40% in 2030 [4] , if business and consumers carry on with today’s consumption practices.

The Unilever Sustainable Living Plan

Unilever is one of the world’s largest Consumer Packaged Goods companies, with businesses in Personal Care, Household, Foods and Refreshments (beverages and ice cream). With worldwide reach in all countries but six, and a supply chain touching 7,600 suppliers [5] , its businesses have a huge global footprint.

Pathways to Just Digital Future

In 2010, Unilever’s chief executive, Paul Polman, declared that Unilever would double the size of the business while halving its environmental footprint by 2020 [6] . One of the key metrics Unilever tracks as part of the Unilever Sustainable Living Program is water use, which they aim to halve by 2020 [7] . While the business has not yet doubled (EUR 52.7bn TO in 2016 [8] , against EUR 40bn in 2009 [9] ), the company has made some progress in reducing water use. Unilever directly or indirectly uses water at four different points in their value chain.

As of 2016, their water impact through consumer use has decreased by 7% since 2010 [10] . The launch of Comfort One-Rinse laundry detergent in India in 2012 [11] remains one of the strongest product-based initiatives in developing markets. In developing markets, 40% of household water used is used in washing clothes [12] . With Comfort One-Rinse, consumers only need one bucket of water instead of three to rinse out the detergent [13] . As Unilever launches the product in new regions at a measured pace, more needs to be done to accelerate the reduction of consumers’ water consumption in the short-to-medium term.

Unilever has been working with suppliers to reduce water consumption through promoting drip irrigation. This method involves supplying water to crops through tubes in small quantities, reducing surface runoff and water waste, and promises to reduce water use by 50% [14] . Conversion will take time given the costs and process changes involved, and we will likely only see improvements in the medium-to-long term.

Unilever seems to have made the most palpable reduction in water extraction in their manufacturing operations, likely due to the level of control they have over their own processes. They have used 18.7mn fewer cubic meters of water compared to 2008 levels, representing a 37% reduction [15] . They expect 2020 levels of use to be below 2008 levels, despite an increase in production volume [16] . Although we are unclear of the impact of this on water use in their entire value chain, this is still a commendable improvement and reinforces their commitment to saving water despite not hitting consumer targets.

Recommendations

The biggest gaps Unilever is facing are reducing the bulk of water used by consumers and suppliers. Unilever can further drive this agenda through:

• Developing more product innovations to reduce water usage
• Speeding up changes to suppliers’ processes to reduce water consumption

More studies should be conducted to identify other areas in which consumers use a disproportionate amount of water, e.g. while bathing or cooking. A low-hanging fruit for Unilever is to extend the use of One-Rinse technology to shower products, in the hope that consumers will take shorter showers and hence, use less water. All water-saving products should be accompanied by clear usage instructions so consumers know they don’t have to spend as much time rinsing themselves as before.

Agriculture is still the world’s largest withdrawer of freshwater and contributor to wastewater, consuming 38% and contributing 32% in the form of waste [17] . While we wait for drip irrigation to slowly pervade supplier practices, perhaps there is a way for Unilever to encourage suppliers to collect excess runoff water and channel it back into the current irrigation system. Unilever could speed up the process by setting targets for suppliers to meet in terms of water savings, and incentivize them by recognizing them as “preferred suppliers” or through monetary awards.

Eliciting behavior and system changes in consumers and suppliers takes years, and perhaps this is why Unilever is still far from its target. Is education enough to get consumers to change their water consumption? How can we get suppliers to convert their practices quickly?

Word Count: 796

[1] UN Water, “Climate Change Adaptation: The Pivotal Role of Water,” http://www.unwater.org/publications/climate-change-adaptation-pivotal-role-water/ , p. 5, accessed Nov 2017.

[3] UN Water, “Water and Climate Change,” http://www.unwater.org/water-facts/climate-change , accessed Nov 2017.

[4] The Water Resources Group, “Briefing report prepared for the World Economic Forum Annual Meeting” (2012), http://www3.weforum.org/docs/WEF/WRG_Background_Impact_and_Way_Forward.pdf , p. 17, accessed Nov 2017.

[5] Vivienne Walt, “Unilever CEO Paul Polman’s Plan to Save the World,” Fortune.com, February 17, 2017, http://fortune.com/2017/02/17/unilever-paul-polman-responsibility-growth/ , accessed Nov 2017.

[6] Unilever, “About our Strategy,” https://www.unilever.com/sustainable-living/our-strategy/about-our-strategy/ , accessed Nov 2017.

[7] Unilever, 2016 Annual Report, p. 13, https://www.unilever.com/Images/unilever-annual-report-and-accounts-2016_tcm244-498880_en.pdf , accessed Nov 2017.

[9] Unilever, 2010 Annual Report, p. 23, https://www.unilever.com/Images/unilever-ar10_tcm244-421849_en.pdf , accessed Nov 2017.

[11] Unilever, “Helping consumers save water,” https://www.unilever.com/sustainable-living/reducing-environmental-impact/water-use/helping-consumers-save-water/#244-423666 , accessed Nov 2017.

[14] Unilever, “Working with suppliers & farmers to manage water use,” https://www.unilever.com/sustainable-living/reducing-environmental-impact/water-use/working-with-our-suppliers-and-farmers-to-manage-water-use/#244-423668 , accessed Nov 2017.

[15] Unilever, “Reduce water abstracted by manufacturing sites,” https://www.unilever.com/sustainable-living/reducing-environmental-impact/water-use/#244-503774 , accessed Nov 2017.

[17] UNESCO, “Wastewater, The Untapped Resource” (2017), http://unesdoc.unesco.org/images/0024/002471/247153e.pdf , p. 9, accessed Nov 2017.

Student comments on Unilever: The Problem of Water

Thanks, Larissa. Enjoyed reading this! I think Unilever and Paul Polman have been great beacons for driving sustainable supply chain practices and corporate focus on sustainability. Polman’s shift to reporting every 6 months instead of every quarter remains one of the more awesome ways I’ve seen a company begin to focus on longer-term performance. In short, love it!

How likely do you feel it is that Unilever will hit its goal of doubling the business and halving the environmental footprint by 2020? With only two years remaining, I don’t think its going to happen. Much of this comes down to the difficulty you note in changing behaviors of ~7,600 suppliers across the globe. With that in mind and the clock ticking, it feels like both of your options 1 & 2 won’t get the company there. I wonder if it’d be better for Unilever to double down in specific sectors or product categories (like detergents, as you note) to show that the goals are possible in some areas of the business? Would there be specific sectors where there is a concentrated number of suppliers that Unilever has some serious influence over? I could envisage a scenario in which Unilever can have disproportionate impact in some areas and thus have something remarkable to show for its efforts by 2020 rather than good but effectively failing results across the board.

Thank you Isabelle for this very insightful article on one of the most pressing (and often most insufficiently covered) global issues. The fact that, according to the Water Resources Group, the global demand for freshwater will exceed supply by 40% already in 2030 (!), should be a major alarm signal for humanity and all multinationals to engage and reduce the end-to-end water consumption of their supply chains.

While Unilever has clearly initiated strong efforts this respect, as outlined by you, I think a case study analysis of Nestle, one of the other leading companies worldwide with respect to water footprint, can also be very helpful for Unilever’s continuous optimization. For example, Nestle engages actively in reducing water usage at their suppliers’ farms in developing countries by i) teaching improved water usage practices and ii) connecting farmers with advanced seeds manufacturers (e.g. Syngenta) reducing the required water usage of growing plants. In addition, Nestle also has built “Zero water factories (e.g. in Brazil) allowing the company to extract and use water from milk through a process of evaporation”[1] which is then subsequently re-used in factories for cleaning and cooling processes. As outlined by you, water reduction is a slow process as it requires many different adjustments across an entire supply chain. However, the urgency on this topic leaves no other option than to engage immediately and decisively.

________________ [1] Nestle, Creating Shared Value and meeting our commitments 2016 (Feb 2017)

Thanks for sharing – I agree with you and other commenters that Unilever’s commitment to this cause is commendable. As I think about reducing water usage, there are two sets of people that Unilever can influence: suppliers and end customers. On the supplier side, I support your recommendation that Unilever choose “preferred” suppliers – Unilever definitely has the scale / buying power to convince suppliers to reduce water consumption. They should also work with suppliers to figure out which actions are most effective and share these best practices across the supplier base.

I think the consumer side is more difficult because Unilever has to fundamentally change customer behavior, which is deeply ingrained (i.e., decade-long habits). The product innovations you mentioned (detergent or shampoo formulations) could alter behavior in emerging markets. However, I think they would be less effective in developed markets, where access to water is not an issue. I’d be curious to see what types of actions will create meaningful impacts in developed markets.

Finally, I wonder if Unilever can market its sustainability mission more effectively. I was unaware that Unilever was focused on this before reading your article, and now I want to buy more Unilever products! I think a lot of consumers care about supporting sustainable products and it would be a really effective way to differentiate Unilever’s brand.

It’s interesting to learn about Unilever’s efforts in this area of adapting ecologically sustainable practices. As your article and the comments point out, the target Unilever is striving for might be unrealistically aspirational given where they are seven years into the decade. However, their progress so far is indeed praise-worthy. I would like to highlight two aspects on this issue with respect to the two sides of the value chain:

1. Customers: The most tangible way for CPG companies is probably through their advertising. I wonder if Unilever will start emphasizing the environment-friendliness of its products in their promotions on print and digital media. This presents a critical trade-off that a company needs to decide on – whether to focus on the real value-add the product offers the consumer versus the social benefit of being an environmentally savvy global citizen. Every second of the consumer’s time-share and mind-share that Unilever spends spreading the awareness around water-conservation is a second less in highlighting why the product is great.

2. Suppliers: Unilever’s sustainability efforts on the supplier side have been limited only to the agricultural raw materials and the company has conveniently ignored talking about industrial raw materials altogether. This concerns me about whether this entire initiative is actually genuine. The industrial raw materials that Unilever uses in its products, such as soda ash for laundry detergents, chemicals used in soaps, crude oil derivatives used as material bases in several of their products, etc., use enormous amounts of water in their production / refining processes. Given the commoditized nature of some of these raw materials, it is easy for the suppliers to focus solely on cost reduction rather than using environmentally sustainable processes. It will be interesting to see if Unilever takes some measures to enforce water-conservatism in this part of the supply chain as well.

I really enjoyed reading your analysis of looking at the water problem from the customer and supplier sides of a large multinational company, Unilever. I believe that large corporations play an increasingly crucial role in resolving some of the world’s pressing challenges. That is the trick of being part of the supply chain system – all players need to be on board. To answer your last questions:

1) Education is necessary to get consumers change their water consumption, but I don’t think it is enough. Behavior change is one of the most difficult things to do and it takes extremely large amounts of time, costs and commitments. That’s why I think engaging large companies is a key because it not only has sufficient resources to keep investing in the mission but also has technologies to creatively alter consumer patterns. As you mentioned, Unilever should commit to more product innovations to reduce water usage without making consumers start the practice on their own.

2) I think big companies also have power to get suppliers convert their practices quickly. There are more they can do than selecting “preferred suppliers” or offering monetary awards as you suggested. For example, big companies can help finance suppliers to convert their practices or put in joint efforts to work on the conversion together.

Thank you for writing this! It’s really interesting to read about such a massive company adopting really aggressive and optimistic targets in light of climate change, although I share Pranay’s concerns about whether Unilever will enforce these goals up the supply chain.

One thing that seems like a broad concern as companies adapt to climate change is that their incentives are sometimes misaligned with consumers. For instance, you suggest extending the use of One-Rinse technology to shower products. While this certainly makes sense from an ecological perspective, consumers might be resistant to adopting these technologies if they prefer taking long showers. In contrast, it makes sense that drip agriculture might be more aligned with farmers’ incentives, as it lowers costs.

In addition to Pranay’s concerns about early suppliers in the supply chain, I’d be curious to explore how Unilever is viewing the risks of pushing more eco-friendly products on a consumer base that hasn’t fully acknowledged the scope of climate change.

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Unilever’s New Global Strategy: Competing through Sustainability Harvard Case Solution & Analysis

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Unilever’s New Global Strategy: Competing through Sustainability Case Study Solution

Accelerated change program evaluation.

As such, after three days the takeover approach of Kraft Heinz (US$139.1 billion) which is a food conglomerate backed by Warren Buffet and three Brazilian billionaires  to Unilever in order to become public, the takeover bid has been rejected by Unilever due to the fact that it seems no merit neither strategic nor financial for the shareholders of Unilever.

The top management of the company has discussed various reasons due to which the takeover would not benefit the company. It has been argued by the top management that the proposal would most likely undervalued the business as a whole as well as it would deliver little strategic and financial benefit for the long term opportunity for the shareholders and a company.

There are two reasons due to which the Kraft Heinz takeover approach has been brushed off by Unilever. The group management of consumer group has argued that offering “substantially undervalued” knorr soup maker and magnum ice cream at the price to earnings (P/E Ratio) of 19.1 times.

Kraft Heinz has been focusing on cost reduction so that it would be able to generate earning growth on immediate basis, but without substantially investing in the organic growth, its model depends on the merger and acquisitions M&A for the purpose of fueling the continued returns. Last week, speaking at the Consumer Analyst Group of New York investor conference, Graeme Pitkethly, a CEO at Unilever has explained that there are two different approaches which can be deployed to increase the shareholder’s value or he presented accelerated change program according to which the model of attractive return on invested capital, compounding return on investment, as well as robust balance sheet gives flexibility for merger and acquisition (M&A). This approach is inherently sustainable in long run and it can also generate high returns.

On the other hand, the next approach is to rely on leverage for generating the strong growth in earnings in short run, but without basis of strong organic growth, this approach depends on the portfolio expansion and repeated portfolio change. Also, the Unilever has put its major emphasis on merger and acquisition on expanding the personal care business through acquisition strategy which includes purchasing Dollar Shave Club. In a result, the increasing proportion of sales generated by Unilever comes from its personal care brands. The 28% revenue is generated by group in 2008 and grown to 38 percent in 2016. Another aggressive approach to cost is zero based budgeting program that has driven the tremendous and valuable insights into Unilever business.

In my opinion, it is to state that the senior executive team had made right decision at time and found a sustainable balance between stakeholder interest & shareholder interest. It is due to the fact that the accelerated change programs have bring innovation closer to customers and supported the ability of the company to roll out the products at speed while the global teams of the company are remained concerted on strategic launches. In addition to this, the company has business model that generated unlevered and high returns on its investment via building brand strength and compelling organic growth through sustained technical, investment, and benefit led innovation through R&D and an improvement approach to cost, the company surely do more to communicate the value creation from its existing and better strategic plans.

Alternatives:

For Unilever, its CEO is the great source of motivation with ability to turn issues into solutions. In context to the case, three alternatives have been suggested which are analyzed below on the basis of their pros and cons of the shortfalls faced by Unilever.

Increased sustainable living brands:

Production and addition of sustainable living brands in the portfolio with ability to contribute more than one goal of Unilever Sustainable Living Plan and with a purpose of sustainable living.

• Brands with sustainable products have proven to be a potential key in the growth of organization.
• It significantly increases overall relation amongst portfolio of brands and key goals of Unilever.
• Focusing on production and addition of sustainable brands will provide Unilever with a competitive advantage among its rivals in the market.
• With increase concern over environment sustainability, products of Unilever will be greatly appreciated by its customers.
• Retention of employees with increase in the attraction of customers towards Unilever’s products giving rise to sales.
• Changes in the production process to meet the standards and goals of Sustainable Living Plan will require significant increase in investment.
• Confirmation of goals match up will be hard for Unilever to configure for certain brands.

Build External Partnership:

Pivoting in the direction of agenda of transformation with focus on building external relations in order to support and amplify the work of organization.

• Building partnerships will allow Unilever with the benefit of shared cost and responsibilities in managing operations.
• With shared responsibilities, the outcome of the product will be efficient and will have a positive effect on the community.
• Partnership allows each partner to use their specialized resources in as many effective manner as they can.
• It is important while building partnership that their culture match with one another as well as their views considering the Unilever Sustainable Living Plan.
• Difference in views or ineffective way to drive operations might result in potential disputes among them.
• Both partners will be equally responsible in joint liability.

Get remaining two pillars on track:

Use of seven pillars on-track out of nine needs to get the remaining two pillars on track as they are affecting the performance of the organization and sales.

• Focusing all the pillars of sustainability will completely meet the goals of Unilever’s Sustainable Living Plan.
• As there has been increase in the emission of greenhouse gases, while focusing on all pillars impact of Greenhouse gases and use of water is to be reduced.
• Improvement in each pillar of Unilever Sustainable Living Plan will effectively improve overall efficiencies.
• It seems difficult to fix the habits of consumers as it is directly related to the mental ability of the consumer to shift its focus to something unusual to them.
• It is a time consuming approach to be adopted as satisfying and convincing anyone on what you are saying is right is somehow challenging.
• It will significantly not be an immediate source to generate potential profit rates.

Analysis of each alternative option that was needed to be considered has been done on the basis of their pros and cons. Therefore, in increasing sustainable living brands in portfolio only some changes will be required in changing the production process. Whereas, building partnership has many issues related to culture and views of the organization and the management in driving processes. Similarly, getting focus on retaining of remaining two pillars is a time consuming process and convincing people to follow their set standards is a challenge in itself. Therefore, option is best suited to be implemented…………

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Yeah. So, Paddy, I have to ask, I have to start by asking you, what's your job? Because your title's very lofty. It basically calls you a visionary. You are the VP of Global Learning and Future of Work. So what do you do?

I've got a funny answer to that question. Since the pandemic, and obviously, been working a lot from home, and I work in a slightly open area, so my wife gets to hear a little bit of what I'm talking about. She seems to think that what I do is laugh a lot and chat a lot to people. So that's what-

Kind of like we're doing today. So she's listening in…

She says, "When do you do some real work?" But yes, I guess what I do is work with a really passionate, dedicated team of people who are looking at how are we preparing our organization, and our people in particular, for a future that is very different to what we've been experiencing in our traditional work models up to this point. You mentioned ChatGPT as well. I mean, that really is the talk of the town at the moment. And I guess we've been thinking for a bit of time, as Bill mentioned, about the impact of things like that on our business, and trying to get on the forefront of what's our response to that. So I wouldn't quite say visionary. I think, at this stage in business and what's going on, it's quite hard to be truly visionary, but trying to stay one or two steps slightly ahead of what's going on in the world of work, that's, I guess, what my job's all about.

Yeah. That's great. For our listeners who... I think most people have heard of Unilever, but for people who aren't really aware of the scope and scale of Unilever, can you describe the business for us a little bit?

Yes. So we're a fast moving consumer goods business. So most of you will probably interact with one of our brands or products every day. In fact, we say that we serve 3.4 billion people every day. That's how often someone buys one of our products or uses one of our products. We've got about 400 brands in 190 countries across the world, ranging from global brands like Dove, Sunsilk, Hellmann's, Rexona, all the way through to what we call local jewels like Marmite in the UK, which is one of those brands that you either love it or hate it.

How big is the workforce at Unilever?

The workforce is about 149,000 people who are directly employed by us. But we always often speak about how we have an extended workforce of around 3 to 5 million people, who if you ask them who they work for, they would say Unilever, even though they're actually employed by someone else.

Yeah. So we know Unilever well at Harvard Business School. We've had lots of cases written on over the years by our faculty, and we've actually talked about it on Cold Call before, particularly, the focus on sustainability. Unilever really stands out in this regard. And I wonder if you could talk a little bit about how important this is to the culture at Unilever.

It is. I can't tell you how important it is. In fact, when Paul Polman, previous CEO, came into the organization in 2009, he launched the Unilever Sustainable Living Plan in 2010. And he did this beautiful job when he launched it of reminding us that sustainability has been part of Unilever since day one. When Lord Leverhulme started selling Sunlight soap, his mission was to make cleanliness commonplace. That was back in the late 1800s. And what Paul did beautifully is he then simply shifted that a little bit and said, "We are now here to make sustainable living commonplace, because now we impact so many more people and so many more homes. If we can help every consumer out there make more sustainable choices with how they eat, how they clean, how they use plastic, how they use water, then we can have a massive impact, positive impact, on the planet and society, and that's good for business." That was the business model that we've ascribed to. So we hire on it. We are tracked on it. We develop on it. It's definitely part of the way things get done here.

Bill, let me turn back to you for a second. The FMCG sector is fast moving, as it indicates. What are some of the forces that are putting pressure on that particular sector these days?

Yeah. The case outlines three forces, and let me walk through those and also say a little bit of, before I do that, why we think this sector's amazing to watch. If you want to have a kind of front row seat as to how the future of work may play out in other sectors, I often direct them towards the fast moving consumer good sector because the technology forces, the demographic forces, the gig workplace force that we'll talk about are all happening already. They're deep into this sector, so we can learn a lot from it. So the first one is clearly technology that links through all the way to our opening conversation. There's many ways in which the touch points between consumers and the outlets and last mile delivery and drones possibly dropping off future packages reverberates all the way up through the supply chain to Unilever and its suppliers above. A simple kind of easy metric is, think about the speed that we now demand or expect of our package delivery. It's no longer that we're going to go to the store and pick this up and the store can replenish itself over a week-long horizon. It's going to be, I just pressed the button in the app and I'm expecting it in the next five minutes to be handed to me. That puts a lot of demands on how an organization needs to function, and also increase the expectation about the customization and the personalized products that consumers will require. So the technology requires Unilever to think differently. The second is a broader force, but equally as impactful, and even more predictable for the future, which is the role of aging populations and demographic change in the workplace that is quite different than the workplace of the 20th century, where many of the large companies today kind of got their grounding. One of the early kind of points that it makes is that, in the UK, about a third of the workforce currently is over the age of 50, and that's true in most every advanced economy, as well as also, increasingly across East Asia and elsewhere, that we have older populations. We have workforces that are going to span many more generations in the workplace. And then the third one, which in our project, Managing the Future of Work, we think of as kind of an outcome of tech and demographics coming together is the gig workplace. Paddy talked about the extended workforce beyond Unilever, and the case tries to unpack some of the ways they're approaching bringing people to work that aren't the traditional full-time jobs that most companies got built up around. And the gig workplace is activated by that technology that lets us schedule and involve people in gig works. And also, as we think about low unemployment rates and older populations and tacked out and so forth, the degree that we can, as a company, attract in people that are currently not working or at the edge of working and tempt them to come work for us on projects is a very valuable labor supply to these organizations.

Paddy, you're in it, literally. So what are you seeing as some of the things that have shifted over time?

So when I started, I'm going to give my age away here a little bit, but back in the 1990s, I remember us talking a lot about, how could we get direct to the consumer? Back in those days, we sold everything through big box retail, and it was all about maintaining those relationships, making sure you had great store shelf positioning and great relationships with those buyers. One of the most massive shifts is that direct to consumer is the channel now. Bill spoke about how we all just order stuff off Amazon directly. We don't have any advantage anymore in terms of getting to consumers. You and I, any little startup, can throw some ads on Instagram, speak to a few influencers and start sending their products out. So the whole game has changed in terms of how are we reaching people.

And I can already imagine, just based on the examples you've both given, I'm already seeing areas where there would be churn in the workforce around some of these developments. So let's talk a little bit about Unilever's Future of Work plans. And there's a framework that goes along with it. I wonder if you could describe that and talk about the three pillars that support that framework.

Yes, our three pillars are: change the way we change, ignite lifelong learning, and redefining the Unilever system of work. And I'll explain a little bit about each of those. So changing the way we change. The first one is, what we've realized is that change is continuous. Disruption is continuous in our organization. It's not about standalone moments where we see that, oh, we need to shut down a factory or change something because of a dramatic shift. Change is happening all the time. All of our factories are rapidly automating all of our office processes, so we can't stick to the old traditional model of change, which was a very slow moving consultative approach, and also, where management held its cards close to its chest until sort of the last moment and then announced, "This is happening." We've realized that, really, to be true to our purpose around making sustainable living commonplace, we need to enter into a far more open, early, proactive dialogue with our people around the change that's affecting our organization, and how to help start preparing them well in advance of any actual impact on them in terms of how they can prepare for that change. So that's the first one, changing the way we change. The second one around igniting lifelong learning is about engaging with our people to make sure that they're all equipped to thrive, both now and into the future, and that we are showing them a bit of what that future looks like and where they need to be focusing their attention. And then the third, redefining the whole system of work is a bit of what Bill was mentioning earlier. Here, we really want to embrace this notion of accessing talent rather than owning talent. We've felt that if we just keep on trying to hold onto all our FTEs and compete against everyone else with talent, we are never going to have the people and the skills in our organization that we need to take us forward into the future. So we really want to redefine new models of working, so it's not just you're either fixed or you're a gig worker, but how can we find some flex in the middle that helps people transition out of this traditional life cycle of work, the kind of 40-hour, 40-week, 40-year traditional employment pattern, and help get them future fit for a hundred year life, where they may want to slowly move into retirement, where they may want to spend some time looking after their kids, where they may want to set up their side hustle. How do we create that sort of flexibility?

There's definitely, and understandably, a lot of emotion involved with some of these things. And I'm wondering if maybe you could give our listeners a sense, based on all the research you've done in the initiative, about what kinds of jobs are going to go away, and what kinds of skills you think are going to be most important for people to think about in the future?

Well, Brian, I come back with, that we don't think of jobs really going away. And I think it's important to instead think of jobs as a collection of tasks. And certain tasks will be taken over by the machine and require less human input, as the technology gets more advanced. And that could be in a very manual kind of sense. It could also be with ChatGPT in a more cognitive relationship. And perhaps, the thing that we're experiencing right now that's very front and center in the world of work is, lots of ways that technology is coming in towards more cognitive tasks that are complex, they're non-routine. They were not able to be done by the computer before, but artificial intelligence machine learning and so forth are able to take those off. So if you think about how supply chain forecasting will happen at Unilever, that's going to be done in a fundamentally different way than it would've been even 10 years ago.

But we always think about new tasks emerging, and it's hard to predict exactly what those tasks will involve. When you think about the skills, we know that having digital fluency and also social skills are the two biggest things that you can put money on, bank on, those being important enough for the future. But there's also going to be judgment, and there's going to need to be innovativeness. So even if the computer starts to do a really good job at predicting about how salespeople should arrange the shelves or how they should approach consumers, you still have to think about, as an organization, what data are we feeding into the system? And where could Unilever develop a proprietary data advantage? And how would we collect those data streams and put them into it? So the technology will be there, it's going to take over evermore parts of work as it has been for 150 years at this point, but there'll also be places where humans will be complementing and helping to achieve the goals of the company.

So that's an optimistic viewpoint, Paddy. And I'm wondering what the response is from people when you start to talk about these ideas with them. And how do you move them beyond just their own insecurity and concern for themselves, to really embrace learning new skills and thinking about a different way of working in the future?

This is a fundamental dilemma facing us, Brian. I'm so glad you asked me that question. And whilst I don't know if we've cracked it, I think we've got a really good hypothesis around what helps this. One of the things we know is, the way not to motivate people to learn new skills is to tell them, "You better re-skill or the robots are going to take your job away." So we've taken the view that if we can help people to discover their purpose, what makes them unique, how do they approach work in their own way, and then start from that point and say, "Okay, when you are at your best, you are doing these things. How do we make sure that you are developing the skills in line with that, that are going to keep you future fit in an environment that is changing around you in terms of the nature of your job and how you work?" And we've found that when people come from that place of purpose, they do feel far more agency over it. They are far more motivated to learn new skills, to continue to be relevant, but it's coming from a much more positive place. It's not coming from that fight or flight or freeze sort of mode. It's coming from a place of agency. And in fact, we partnered with some academic institutions to measure the impact of starting people thinking about purpose and then creating future fit plans from there. And we've found that it does lead to people being 25 percent more engaged in thinking about the future, in going the extra mile, in having this intrinsic motivation to take it on. And they're 22 percent more productive, which is another great benefit to us.

Yeah. So, Bill, we've been through situations like this before. If you look back over the long arc of history, we've had movement from an agrarian society to an industrial society. We've had manufacturing sector turned on its head when a lot of manufacturing jobs have gone overseas. And I think each time we've done that, there's been a portion of the workforce that's just not been able to make the leap to the new mode of doing things. Unilever is talking about ensuring that 80 percent to 100 percent of their workforce can be transitioned in the right way. Is that too big of a promise to make?

Well, to their credit, I believe they stayed at the pretty top end of that range so far. And I think the workshops and so forth that Paddy just outlined are best in class for trying to stay up there. I do think, Brian, you see organizations, and I'm spanning out from Unilever at this point, that are trying to set a new contract with workers, both explicitly and implicitly, that says, "Our part of the bargain is, we're going to give you great clarity as to what roles we see the company needing in the future, and help you kind of think about where you are today and what you would need to acquire skill-wise to get to that future point. And we're going to give you the platform to acquire those skills. But your part of the bargain has to be to put the time and the investment in to be having those skills when that time comes." And so I think we're seeing a shift in a bit of the, we want to be a great place for you to have worked and developed your career, but we're not going to be guaranteeing a lifelong employment. We're going to focus on the skills that are needed and help you make the investments and choices that should be made.

Yeah. And what does that start to look like at Unilever, Paddy? What are some of the ways that you're sort of redefining the systems of work there?

So one of the big initiatives that we've undertaken was this whole idea of, how do we help people create more flexibility in their roles, so that they can discover new ways of working, discover new skills, grow in new and different ways? And I mentioned to you earlier that we thought there's this sort of gridlock that, on the one hand, you've got full-time employees, you've got lots of security, but no flexibility in terms of how and where they work. And on the other hand, you've got gig workers, freelancers, lots of flexibility, but not much security in terms of guaranteed income. And we've set ourselves a challenge of, how do we create this responsible alternative to the gig economy? And our idea was something called U-Work. U-Workers no longer have a job title. They work on gigs and projects in Unilever, but they are still 100 percent Unilever employees. They are not gig workers, so they're not contractors or anything. In fact, they're an internal pool of contractors, if you like, but they remain Unilever employees. They get a guaranteed retainer. They get a package of social care, pension benefits, healthcare benefits. And they get a learning stipend. But in return for that, they then only need to work on projects. They can set up their own business on the side. They can look after their kids or aging parents, or they can gradually move into retirement. And I think it's this kind of thing that we need to continue to explore, as we see in the impact of automation and digitization, and also this trend or this desire for people to have more flexibility to choose how and when they work.

Yeah. It actually sounds kind of appealing. So you also get variety that goes along with that. You get to move from one project to another, and you're not sort of locked in on the same kinds of things, all the time.

And, Brian, the one thing, just to emphasize on that, people get very locked into the thing of, ah, does someone have the skill I need for the job? In fact, what we found is, one of the most important skills is knowing the organization. So U-Work is great because they are Unilever employees. They know the organization. They know how to get things done in Unilever. And we must never underestimate the power of that skill

Bill, it seems like anytime that we enter into one of these huge labor market transitions, manufacturing jobs, take it on the nose. And so I'm wondering, as you think about the implications for jobs in the future, what are the implications for manufacturing specifically?

Well, I think, Brian, we're already been seeing that in motion for a while. Manufacturing has been at the forefront of technology adoption for decades. I think time will tell how it will continue to evolve. I would anticipate more skilled, more advanced, more technology enabled, but there could also be some interesting twists. It's not the current case study that we're talking about, but there's another case study at Harvard Business School, done by Raj Choudhury, our colleague, with Unilever that's about remote manufacturing. So how can the remote workforce be connected into the manufacturing sector? So we'll see a lot of innovation towards the future.

And how is Unilever thinking about that, Paddy?

So actually, the whole genesis of this future of work framework was done together, well, co-created together with our European Works Council actually, so our manufacturing representatives coming together with management to think about, how is the future of work impacting the manufacturing environment? So actually, our whole framework came from them. So we very much see this as a critical way of addressing the impact of digitization and automation in the manufacturing environment. We've found some fantastic examples where we've started people thinking about their roles in future. And what we've found is, there's quite a strong correlation between some of the skills our manufacturing workers have and lab assistants in our R&D labs. And funnily enough, we tend to have quite big R&D centers right next to our factories. So we've seen quite a bit of movement of people being able to re-skill from manufacturing environment into R&D labs in a way, a more sustainable future environment, all because they've identified, what's the work that they really enjoy doing, what are they really good at, and then what are the skills required to go into the future?

Yeah. That's a huge win-win, right? For the worker and for the firm.

This has been a great conversation. I've really enjoyed it. I'm wondering if... I've got time for one question for each of you left here. So I'm going to start with you, Paddy. How is Unilever going to know if they're succeeding in this? Is there a sort of an end game in mind here?

The big goal is obviously that we are proving that our sustainable business model is more effective than others in terms of driving superior performance. So the big number is still, how are we doing as an organization? I would say the key input metrics are things like, how well are we able to re-skill our people for the future? We really believe that re-skilling is the way forward. We know it's cheaper than recruiting from outside. It's better for our people. It's a way of getting people who know our business to continue to do good things. So we do measure that. How many people are we helping to transition? And then it's about, how attractive do we continue to be as an employer for new recruits and for the people within our organization? So we'll track the traditional input metrics like engagement, attrition, our employer brand, how well people are collaborating going forward.

Yeah. It sounds like you're off to a fantastic start. Bill, I'll give you the last words, since you wrote the case. If there's one thing you'd like people to remember about this case, what is it?

Well, let me go back. We started with the cold call, so let me tell you how I end the class. There's a video of one of Paddy's colleagues, Nick Dalton, who is quoting President Kennedy, who was in turn quoting an Irish writer named Frank O'Connor. And Kennedy was speaking about the space mission, and Frank O'Connor was describing, as a kid, when they would come to this orchard wall that was too high for them to climb over. They had no idea how they were going to do it. They would take their hats and they would throw them over the orchard wall, so that they just committed themselves to figuring it out. And Nick basically thought of the Unilever program as a bit of, "We're throwing our hat over the wall. We don't know exactly how we're going to climb over this future of work wall, but we know we must do it. And this is our public commitment to making that happen." And the thing I'd come back to listeners around this is, the future of work is scary. And we talked about job transitions and how quickly the new technologies are coming. This time last year, we had no thought of ChatGPT as being part of this Cold Call podcast, but now, it's what we lead with. And so, hopefully, people can unfreeze a little bit and can start thinking about, regardless of what the twists and turns may lie ahead, they need to begin a journey with their employees. And Unilever is showing, here's how we're approaching that. Now, let's all work on it together.

Yeah. Well, I suspect I'm not alone when I say we're rooting for you. We hope that you get this right. There's a lot at stake.

Thanks, Brian.

Thank you both for joining me.

If you enjoy Cold Call , you might like our other podcasts, After Hours , Climate Rising , Deep Purpose , Idea Cast , Managing the Future of Work , Skydeck , and Women at Work . Find them on Apple, Spotify, or wherever you listen, and if you could take a minute to rate and review us, we'd be grateful. If you have any suggestions or just want to say hello, we want to hear from you. Email us at [email protected] . Thanks again for joining us. I'm your host, Brian Kenny, and you've been listening to Cold Call , an official podcast of Harvard Business School and part of the HBR Podcast Network.

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• August 2019 (Revised April 2020)
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Transforming Hindustan Unilever

• Format: Print
• | Language: English
• | Pages: 18

About The Author

Krishna G. Palepu

Related work.

• September 2019
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Transforming Hindustan Unilever, Video Supplement

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Study on On-Line Monitoring Technique and Case Study of Pump-Storage Turbine Headcover Bolt Axial Load

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This work is based on the principle of acoustoelasticity of metallic materials, systematically studied the headcover bolt axial load on-line monitoring, the method of calibration technique based on ultrasound transit time difference and temperature, and case study. By analytical calculation, test, and finite element analysis (FEA), derived the coefficients of acoustoelasticity and temperature, and investigated the bolt thermal stress and the temperature correction method. A scheme for the on-line monitoring of pump-storage turbine headcover bolt axial load is given, providing a reference for important bolt axial load monitoring of hydropower units.