One trope in the environmental/sustainability world is quoting Kermit the Frog’s song “It’s Not Easy Being Green.” It is overused, but true. As ESG and climate concerns grew in recent years, it became common for companies to make grandiose environmental or climate commitments, only to backtrack later when they realize those “stretch goals” were not achievable. One major consumer goods company has now pivoted from aspiration to reality – offering other companies a learning moment. According to a piece in Financial Times:
“The chief executive of consumer goods giant Unilever has admitted the company underestimated how hard it would be to meet environmental targets, saying the company’s new laxer ESG goals aimed for ‘realism’ instead. Unilever announced last week that it was introducing a more ‘focused’ ESG strategy, which included extending deadlines and reducing the scale of environmental targets. A previous goal to reduce use of virgin plastics by 50 per cent by 2025 was changed to a 30 per cent cut by 2026, while a plan to use 100 per cent reusable, recyclable or compostable plastic packaging by 2025 was also extended to 2030 and beyond.
Talking to journalists following a first quarter trading update on Thursday, chief executive Hein Schumacher said that far from being a cost-cutting exercise, the new strategy was about adjusting targets to what the company could achieve, and admitted that in some cases, ‘we were simply not ready’.
‘When the initial targets were set, we may have underestimated the scale and complexity of what it takes to make that happen,’ he said. ‘We are now in a better position to give you a feasible target on plastic. It doesn’t mean we are reducing our investment on the matter’…
Under previous chief executive Alan Jope, Unilever, which makes brands including Hellmann’s mayonnaise and Magnum ice creams, came under attack from investors over what they believed was a disproportionate focus on corporate ‘purpose’, at the expense of financial performance.”
Unilever isn’t the first company to pull back on environmental goals and commitments, but it may be one of the highest profile. The lesson is that you can’t (or shouldn’t) abandon business fundamentals to chase ESG. Purpose and ESG need to be carefully considered, vetted and constructively criticized internally – with a clear understanding of how they relate to company financials. Otherwise, those initiatives become a cost with no return and your company reputation in the market and with investors may suffer.
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