Making Progress Toward Sustainability: A Unilever Case Study

Coal demand and global greenhouse gas emissions broke records in 2024.

What does that say about the trillions of dollars directed at sustainable investment strategies since 2019?

For one thing, we believe it highlights a shortcoming of many sustainability strategies: They often invest in companies that have already achieved significant progress in meeting sustainability goals while excluding those that haven’t.

American Century Investments’ Global Value Transition* strategy takes a different approach by engaging with companies to drive their business models toward greater sustainability. We believe this can better achieve real-world outcomes by helping guide companies on their journeys to sustainability instead of rewarding those that have already arrived.

Unilever is one such company. In our view, this global producer of food and other consumer products, renowned for brands such as Dove^® Chocolate and Ben & Jerry’s ice cream, stands out for its advancements in environmental practices, social initiatives and governance standards.

Unilever’s Commitment to Sustainable Packaging for Consumer Products

By their very nature, consumer products like a bottle of soap or a carton of ice cream require single-use packaging. If the packaging can’t be composted or recycled, it usually ends up in a landfill, an incinerator, or the ocean. As one of the world’s largest consumer products companies, Unilever has contributed significantly to waste pollution through its packaging.

In 2019, Unilever announced a commitment to reduce its use of new plastic, accelerate its use of recycled plastic, and collect and process more plastic than it sells. Specifically, the firm set a goal to halve its use of virgin plastic and use at least 25% recycled plastic in its packaging by 2025.

By the end of 2023, Unilever had reduced its use of virgin plastic by 18% compared to its 2019 baseline, and 22% of the company’s global product portfolio used recycled plastic.

Reducing plastic use has clear environmental benefits and hasn’t hurt Unilever’s bottom line. Sales grew 15% from 2019 to 2023. Studies show that as consumers become more conscious of the environment and the impacts of their buying decisions on the world around them, they will become more keen on buying from companies with better environmental performance.

Cutting back on plastic may also help reduce Unilever’s legal and regulatory risks.

For example, the New York attorney general sued PepsiCo in November 2023 for allegedly causing widespread plastic pollution in the Buffalo River, threatening water quality and wildlife. This action came after regulators collected trash at 13 spots along the river and found that Pepsi-related products accounted for the highest proportion of the waste.¹

Purported greenwashing was the focus of a recent complaint the European Consumer Organization and its member affiliates filed with the European Commission. The complaint targets Coca-Cola, Nestle and Danone for allegedly making misleading claims about their bottled water packaging. The consumer protection group disputes the companies’ assertions of “100% recyclable” or “100% recycled,” further stating that the use of green imagery “may even give the impression that the bottles would have a positive impact on the environment.”²

We believe avoiding legal and regulatory actions like these would benefit the environment and the company’s financial performance.

Expanding Healthy Food Choices for Health-Conscious Consumers

About one-third of Unilever’s sales come from food products such as ice cream and mayonnaise. If not enjoyed in moderation, these foods aren’t particularly healthy.

In recent years, Unilever has moved toward healthier versions of its offerings. In 2022 the company announced new goals and nutritional targets as part of its Positive Nutrition Action Plan. Figure 1 shows the targets and progress for each of these goals as of 2023.

Figure 1 | Unilever Aims to Improve the Nutritional Quality of Its Products

^{Source: Unilever.}

From a financial perspective, we believe offering healthier foods can help Unilever tap into the growing demand for more nutritious and plant-based products. Many of Unilever’s food products are ultra-processed foods, which have been the focus of criticism for their potential health risks.

In a recent survey, more than two-thirds of respondents (67%) said they are willing to pay more for healthier, ultra-processed foods. Millennials, Gen Z adults and parents with children at home are particularly interested in trying and paying for healthier, ultra-processed foods.³

A healthier food portfolio may also help insulate the company from the potential consequences of weight-loss drugs as their use becomes more widespread.

Unilever’s Governance Reforms and Strategic Decisions

In 2021, Unilever tried to buy pharmaceutical giant GlaxoSmithKline’s consumer health division in a deal that made investors recoil. When the financial press caught wind of the $68 billion buyout offer, the deal’s structure caused a sell-off in Unilever stock, and analysts reacted with bewilderment about Unilever’s strategy.⁴

The proposal died under its own weight, but that wasn’t the end of the story. Led by activist investor Nelson Peltz, Unilever replaced its management team and part of its board of directors for considering a deal widely seen as a risky strategy.

From a governance standpoint, these actions demonstrated the company’s desire to avoid transactions that could potentially dilute shareholder value.

How Unilever Maintains Resilience Amid Economic Challenges

We believe these reforms only add to the company’s positive attributes, including a durable and resilient business model that may be less prone to the effects of economic downturns.

In our view, Unilever illustrates the potential that the Global Value Transition strategy seeks — companies progressing toward sustainability that could deliver results for shareholders.