'From Promise to Action on Net Zero' is a series of publications and events exploring how companies are translating net zero emissions goals into practice. This interview presents one of our discussions with senior executives responsible for delivering on their companies’ climate ambitions.
Consumer goods company Unilever is widely recognized as a global leader on sustainability and climate change. The Unilever Sustainable Living Plan was launched in 2010 with a focus on improving the health and wellbeing of people, reducing environmental footprint, and enhancing livelihoods for millions. The company recently announced plans to achieve net zero emissions from all products by 2039 and 100 percent renewable energy across its operations by 2030.
Emily Farnworth, Global Director of Low Carbon Economy Transition at ERM, recently spoke with Marc Engel, Chief Supply Chain Officer at Unilever, who leads Unilever’s key initiatives to reduce the company’s global carbon footprint to find out the secret of their success.
Emily Farnworth: What does a net zero goal mean for Unilever?
Marc Engel: For Unilever, the drivers behind net zero are all about responding to the climate crisis and creating a socially inclusive world. As a company, we care about improving the health of the planet for citizens of society.
In a net zero environment, the social component and the regeneration of nature are closely linked together.
We realize we need to get through the COVID-19 crisis, but we also need to show our understanding that climate change and social inequality are still important, and that we still have net zero as a global goal.
Our internal driver is business with a purpose, but there are also external factors. Brands with a purpose grow faster. But having a purpose is not possible if we don’t care about the health of our planet and the citizens of our society.
The notion that the benefit of the product is only for the individual is changing as consumers are driving businesses to be more socially and environmentally responsible. As a result, those companies that are leading in sustainability are gaining more preference from customers, investors, and employees, and this is a way that they will remain ‘future fit.’
Business needs to go first to raise the ambition to reach net zero by 2050.
What response do you see from your consumers in relation to your net zero ambition?
There are two consumer groups that are most engaged with the topic. We find that millennials are much more aware, and they follow brands that are more sustainable as long as no additional cost is incurred.
Generation Z is totally driven by sustainability, and this steers their buying decisions. Sustainability is the price of relevance; without this, you’ll lose Gen Z’s attention. The baby boomers are disinterested, and Generation X is only just starting to get it.
Another indicator of changing attitudes has been a major shift in talent acquisition trends, where employees and potential candidates want to see a bigger purpose from the company. This is a marked change from ten years ago.
What are the critical steps you have taken to achieve your net zero goal?
We are taking a clear four-part approach to putting our net zero action plan into place.
We started from the inside out. We’ve been taking action since 2018, and our carbon footprint has shrunk by about 70 percent in our internal operations.
However, our operations are only 5 percent of our total carbon footprint. The majority of emissions come from across our value chain, which includes Scope 3 upstream and downstream. About 30 percent of our total carbon footprint is from our customers. Upstream, we have a greater influence on our suppliers, but downstream we have far less influence on how our customers use our products.
With electricity we have reached a tipping point for renewable power. We see that the market is there and progress has been made.
There is no excuse for any company not to convert to green energy now – everyone should be able to do that across markets.
In 2016, we implemented an internal carbon price. Based on the factory footprint, we were able to calculate the cost of carbon and put that into an investment fund to make energy savings. Energy used per metric ton of product was reduced by 26 percent.
The more challenging part in our operations has been converting out of gas. We are converting a lot to biomass, but we need to make sure we’re not contributing to a problem here. Financial payback on energy savings projects is very good usually – typically under two or three years.
What has enabled you to make progress?
Unilever is driven to reach our net zero target, and we recognize that there are some key critical aspects to being successful.
Ten years ago, we made the commitment to our Unilever Sustainable Living Plan. Back then, we didn't know how we would achieve it, and no other company our size had launched such an ambitious plan.
What has worked well is making the commitment and trusting that our managers would develop creative solutions that will be financially viable in terms of costs and paybacks.
Unilever also has a CEO who really believes in this commitment. Commitment from the top is essential, and you need to live and breathe the commitment from the top level to make it work.
Sometimes the younger generation has a greater understanding of the value of innovation, but without top level commitment, it’s difficult to move. It should be seen as an investment with a return, not merely a cost.
What challenges do you anticipate you might face as you continue to push to net-zero?
We have had a smooth ride on progress through our operations for the past 12 years. It has been great to cut emissions in our operations, but only three to five percent of our total emissions has been reduced.
Our suppliers also need to be on the net zero journey.
Unilever wants to see the carbon footprint noted on the invoices, just like we see nutritional information noted on consumable products.
Consumers also need net zero behaviors in their own life which is a big challenge. Part of this is having more awareness about the day-to-day choices they make and understanding how these choices impact the carbon footprint.
With 48,000 suppliers on the journey to a bigger goal, they have a large implementation challenge to declare a footprint on everything. They need to know what interventions to make, what responsibilities to take, and what resources are needed to understand the interconnection.
We need to help suppliers understand that it's not a cost, it's an investment, and how implementation will make them more competitive.
This becomes a balance between the carrot and the stick, and involves business development, working together, and giving credit publicly to those who do it.
There are many initiatives focused on reducing carbon emissions in the digital tech world. Partnerships with organizations such as the World Business Council on Sustainable Development are essential. The cost to go it alone would be prohibitive for Unilever, and for success we need the support of many.
What is your advice to other companies that are currently going through this process?
As a first step, I advise companies to map their own carbon footprint. Artificial intelligence is getting better at accurate extrapolation to help with this.
Also, look for easy strategies for saving energy - the cheapest and cleanest options are sometimes not those in use, and you will quickly get pay back from energy cost savings. Once you’ve done it yourself, you're more credible talking to your suppliers when you need them to do the same.
Develop products that are green and that don’t compromise on functionality. Provide consumers with the benefit that by using the product, they will save time and lower their carbon footprint – it’s important to marry the two. Consumers won’t purchase the product without the benefit, so create a way to promote time and convenience while reducing energy consumption.
Looking ahead to 2040-2050, what are your biggest challenges and opportunities?
One of our biggest opportunities and challenges is the need to finish off the deforestation work and look at regeneration of nature as it is part of our net zero strategy.
Alternative fuels are also important. There is a particular view on the role of hydrogen and what it will be. It is very influential. We are in the process of switching to electric vehicles as part of our commitment to the EV100 initiative. Options for short-range distances are great, but not great in the long-distance range, as it’s not obvious where we need to go there.
Another challenge for Unilever is in the reformulation of our products such as laundry products. We also use a lot of plastic, which comes from petrochemicals. This will be a challenge for us in the next ten years. It is a big part of our journey.
What role do partnerships play?
Unilever has had success with EV100, RE100, and other coalitions where we can work with others to find solutions for electric vehicles and renewable power. Microsoft is helping us map our data, but turning it into useful insight is difficult.
There is a very big market for the type of consultancy provided by ERM. We are seeing there is sometimes a lack of ownership around how to implement strategies that are developed at a high level. Consulting on the technical implementation is a big part of partnership.
Collaboration is what the world needs. The alignment of climate, nature, and social livelihoods – these three things are difficult to mind map but are vital.