At the end of last month, Unilever delivered a masterclass for all ESG professionals. A well thought through commitment to delivering a living wage, not just for its own employees but also for those at the further reaches of its supply lines.
It was a perfectly executed piece of ESG brand-building, and, for those of us who have watched the company evolve, something of a ‘wake-up call.’ It is so beyond the usual corporate “greenwash,” and fits well into a new growing political consensus in the dawning post-Covid world.
When I cut my teeth as an investment analyst covering Unilever, the immense behemoth conglomerate was “conservative,” “safe,” “predictable” – dare one say, perhaps even a little “boring.” Innovation was confined to new soup commercials. So, when it swallowed the iconic Ben & Jerry’s ice cream brand in 2000, I wondered whether the smaller, socially progressive, company would be able to “keep the faith.”
Ben & Jerry’s, founded by Ben Cohen and Jerry Greenfield, had always been different. Early on, their corporate mission statement committed to three goals: to run a financially successful company, to make the world’s best ice cream, and to “make the world a better place.” They made sure their dairy farms didn’t use hormones and went to court to be able to label their ice cream as hormone-free. They monitored their environmental impact, long before it was fashionable to do so, and pioneered “fair trade.” When they took $326 million from Unilever, was that the first of the three corporate principles trumping the last one?
Well, I am pleased to report the opposite. The Unilever acquisition was handled very carefully (Indiana law professors Antony Page and Robert Katz have even written a paper on it). A separate board was created to avoid corporate “cultural contamination” and to set aggressive social impact targets. By 2015, Director of Social Mission, Rob Michalak, was able to tell the New York Times: “we are doing more now…than we ever have.” Apart from cage-free eggs, this meant joining the ground-breaking “B Corporation” initiative and, nota bene, offering even its lowest paid workers at least twice the national minimum wage.
As Michalak states, Ben & Jerry’s is “always going to the uncomfortable edges of advocacy and activism” and this remains the case today. This week they walked straight into the middle of the ‘Defund the Police’ controversy calling “to make it easier to sue cops who abuse their authority.”
Indeed, if anything the “contamination” (maybe we should say “education”) has gone the other way. Ten years ago, I was surprised to see the old Unilever Chief Executive drink a glass of Thames Water (rather him than me) and launch the company’s Sustainable Living Plan. The last decade has seen ESG principles triumph at the company. In October, the new Chief Executive Alan Jope argued that Unilever must act fast to get ahead of the legislative curve and to deliver on the “triple bottom line.”
“Triple bottom line” – sound familiar?
This is the background to last week’s announcement. The company declared “our ambition is to improve standards for low-paid workers worldwide.” And “we will therefore ensure that everyone who directly provides goods and services to Unilever earns at least a living wage or income by 2030.” The beautifully-crafted PR roll out got widespread coverage and was backed up by no less a figure than Gabriela Bucher of Oxfam who praised this “important step.” Unilever’s move became the talk of the (virtual) Davos World Economic Forum.
Consider October’s commitment to getting “ahead of the legislative curve” and what the new US administration is doing. Unilever is run from London where the Conservative government has been surprisingly committed to raising the minimum wage, which as the Financial Times observes “it has done so aggressively since 2016.” After twelve years of inaction (when the UK has increased its minimum by 50%) the US is now about to do something similar under President Biden.
There is an intellectual climate in the Anglo-Saxon world that is questioning “smash and grab” capitalism, something long familiar to European readers. In his upcoming book “Why you won’t get rich – How capitalism broke its contract with hard work"” Robert Verkaik, the author, catalogues a new world of “economic shame” and “in-work poverty” in which so many are struggling: “Amazon warehouse workers living in tents, nurses turning to foodbanks” and even ”higher up the ladder…barristers take home less than the minimum wage, and doctors (are) starting out with £100,000 student debts on salaries lower than the national average.”
These arguments are even stronger in the United States, and are expressed in a different way, as “a betrayal of the American Dream.” This is why Joe Biden is taking such decisive action, pushing for a $15 Federal minimum wage – taking up what was once seen as a maverick cause championed by Bernie Sanders on the left of his party. It is the culmination of a movement for reform that began with the famous 2012 strike of New York fast food workers. One worker, Pamela Waldron spoke then of how she was earning just $7.75 an hour, with her hours limited to twenty a week. Try living in New York on $8,000 a year.
This crisis of capitalism has been created by the enormous asset price inflation we have seen in recent years, driven by Quantitative Easing seeking to salve the Great Recession and now the Global Pandemic. The ratio of global assets to GDP has roughly doubled in the last thirty years – from three times to six. This is having enormous consequences.
Companies, and investors, must be aware of this new climate, and have a vital role in ensuring political reforms reach beyond domestic labour markets.
Consider what is going on in India. Her vast agricultural sector of 157 million hectares produces enormous quantities of produce for national and global markets. Its 146 million producers cannot be left to market forces – they are simply too small to survive price fluctuations. 86% of farms are less than two hectares. Until now, the Indian Government has operated a guaranteed price structure that is convoluted, but has worked. In a misguided reform Narenda Modi’s Hindu nationalist Government is tearing up this arrangement. Thousands of terrified farmers have camped outside Delhi for months, and last week stormed the Red Fort in pure desperation. One farmer pleaded “if we do not protest…our children will die of hunger.”
Legislative action in this case has not helped – in fact it has been a disaster; imposed on a suspicious and vulnerable community. Could corporate action play a better role?
Unilever has 60,000 suppliers worldwide from small farmers to major companies. And where it is leading others are following (competitor Danone has committed to becoming a “B Corporation” by 2030).
Bloomberg’s Businessweek once asked “Is Unilever the last good company?” Maybe it should have read – “the first?”
Christopher Walker is a writer on business and politics. He sat for several years on the asset allocation committee of a major asset manager.