Unilever has come under fire from one of its biggest shareholders, Terry Smith, for its grandstanding on social issues. Is the criticism fair?
- Smith accused Unilever of being obsessed with “publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business.”
- ESG has become trendy and companies are keen to shout about their social credentials.
- But with metrics and definitions still loose, companies need to make their actions clear.
When does corporate social responsibility become pointless virtue signalling? Terry Smith, chief executive of Fundsmith, this week accused Unilever of being obsessed with “publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business.” He pointed out that Unilever had the worst performance of any of the Fundsmith consumer staples holdings and put the blame squarely at the door of the management team.
He added: “(while) the most obvious manifestation of this is the public spat it has become embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank . . . there are far more ludicrous examples which illustrate the problem”.
Certainly, a cursory glance at Unilever’s most recent press releases suggests social responsibility is high on the management team’s agenda. The group has developed a ‘Positive Beauty Growth Platform’, while its LUX brand campaign focuses on everyday sexism. The latest annual reports talk of ‘impactful innovation’.
There are probably a number of elements at work: ESG has become trendy and companies are keen to shout about their social credentials. As yet, there are only loose definitions on the ‘social’ element of ESG, though an EU social taxonomy is coming down the pipe. In the absence of clear targets and definitions, companies need to undertake a bit of virtue-signalling to keep their ESG-aware pension and insurance fund investors onside. Once there are proper metrics some of this may ebb.
Equally, the consumer has become a sensitive creature and it can be difficult to ensure that offense is not being given or taken. Consumer-facing brands are front and centre of public opinion. It is perhaps more plausible than Smith thinks that a bunch of key customers will stop eating Marmite because Unilever is selling Ben & Jerry’s on the West Bank. Such is the power of social media to destroy reputations and the delicacy of a new generation of consumers.
Unilever was still showing underlying sales growth of 4.4% for 2021 in its November statement in spite of a background of rising prices and higher taxes. This doesn’t seem too awful, even if the management team has fallen prey to a bit of wokery. Consumer companies have it tough. Perhaps Smith should go easy on them.