(Bloomberg Businessweek) -- As chief executive officer of Unilever, Paul Polman transformed the sprawling maker of Dove soap, Knorr stock cubes, Cif cleaning sprays, and Hellmann’s mayonnaise into a test bed for the idea that companies can benefit from affiliation with social causes, such as improved hygiene or better access to toilets. While investors and analysts were initially skeptical, Polman was ultimately lauded for redefining the corporation as something more benign than a purely profit-driven enterprise, even as margins edged up slightly from the midteens to almost 20% during his tenure. Now, Alan Jope, the Scotsman who succeeded Polman in January, is amping up the strategy.
To set Unilever apart and combat what Jope calls “woke-washing”—the social responsibility equivalent of bogus “greenwashing” campaigns aimed at appearing environmentally conscious—he’s raising the volume on the message. In an effort to transform hundreds of products such as Tresemmé shampoo and Marmite yeast spread into beacons of justice and empowerment, Jope has ordered executives to assign a clear, specific mission to each. “We are committed to all our brands having a purpose—we will give them time to identify what this is and how they can take meaningful action,” he says.
The new CEO says that aligning each brand with a specific concern, rather than a wider abstraction of purpose at the parent company, will reinforce credibility. The 28 brands Unilever counts as “purposeful” contributed almost two-thirds of revenue and drove 75% of sales growth in the first half of 2019. These include Dove, which focuses on improving women’s self-esteem and has been celebrated for its “Real Beauty” campaign showcasing female bodies of all shapes and sizes; Lifebuoy soap, which teaches children handwashing techniques in emerging economies to reduce the 5 million premature deaths a year from infectious diseases related to poor hygiene; and Ben & Jerry’s ice cream, which seeks to raise awareness about climate change with its Baked Alaska flavor. “If a brand can’t find its purpose,” Jope says, “we may sell it.”
Shoppers are turning increasingly to products with images that extend beyond generating shareholder , and shareholders are asking companies to consider their wider raison d’être. Brand consultant Kantar expects purposeful brands to grow at twice the rate of those without any higher-order societal aim. In January, Larry Fink, the CEO of $6.5 trillion asset manager BlackRock Inc., wrote in an annual letter to business leaders that “purpose is not the sole pursuit of profits, but the animating force for achieving them.” He knows the danger: With shares of companies such as Exxon Mobil Corp. and BP Plc trailing the wider market as investors have shifted toward businesses focused on renewables, BlackRock lost more than $90 billion on big oil investments over the past decade, according to the Institute for Energy Economics and Financial Analysis.
The report is “meaningless” because a majority of BlackRock’s equity holdings are via funds that seek to replicate the performance of major stock indexes, while investments focusing on environmental, social and corporate-governance issues are among its fastest growing, a representative for the firm said by email.
In consumer goods, a lack of purpose can foreshadow irrelevance. In February ketchup maker Kraft Heinz Co., which long championed extreme frugality at the expense of feel-good marketing (and which unsuccessfully tried to buy Unilever for $143 billion in 2017), took a $15 billion writedown on the of has-been brands. Some of these, such as Oscar Mayer hot dogs and Velveeta processed cheese, have lost ground to new fare that’s considered better for the planet, such as plant-based meat and cheese. And companies that try to invigorate old-line names with social cred can be met with ridicule if they do so clumsily. In January razor maker Gillette donated $1 million to charities that combat toxic masculinity, but an ad unveiling the campaign has been panned for leaning on lazy stereotypes and commercializing the #MeToo movement; it’s gotten almost twice as much negative feedback on YouTube as positive. While many people buy goods simply to fill a need, about 60% of consumers—particularly millennials—“really care about the product’s wider mission, such as shampoos engineered to require less water” and are willing to pay a premium, says London Business School professor Alex Edmans, who aggregated a series of consumer studies to come to his conclusions.
Unilever has even had problems with brands that it holds up as exemplary. Two years ago, Dove was excoriated for introducing shower gel bottles in shapes that caricatured female bodies. Shortly thereafter, the brand came under fire for an ad depicting a black woman morphing into a white one. The company had intended it as a celebration of diversity, but many observers deemed it racist. Hellmann’s was derided as a bully in 2014 when Unilever sued the maker of an eggless variant called Just Mayo, accusing it of false advertising—a blemish the company is seeking to soothe with a campaign in Canada aimed at tackling food waste. And Fair & Lovely, a line of skin-whitening creams sold in India, has been criticized for suggesting that fairer complexions are more desirable.
While sales grew by about 25% to €51 billion ($57 billion) during Polman’s decade at the helm, Unilever’s profitability has lagged behind that of rival Procter & Gamble Co. Jope says his campaign can supercharge growth and boost profits, asserting that a stable of purposeful brands will resonate with shoppers and offset declining demand for run-of-the-mill products such as Breyer’s ice cream, which has fallen behind low-calorie upstarts like Halo Top. “Our whole business is about staying relevant,” Jope says. “If what people want is more environmentally sound products, remaining relevant requires us to respond to that.”
©2019 Bloomberg L.P.
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