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Unilever’s push to promote sustainable living: laudable or self-serving?

To Milton Friedman, the American damn-the-regulators economist beloved by Margaret Thatcher and Ronald Reagan, the "one social responsibility of a business" was to increase profits—end of story. That philosophy dominated business for decades. But 10 years after Friedman went to the great stock market in the sky, more than a few companies, big and small, are taking a different view.

One of them is Unilever, the consumer products multinational that stuffs supermarket shelves with Dove, Knorr, Lipton, Hellmann's, Marmite and Ben & Jerry's. The company is a financial colossus, with a stock market value of $170 billion (U.S.) and about 170,000 employees. But under CEO Paul Polman, the Anglo-Dutch company's shareholders are no longer the overriding priority. They're now lumped in with other stakeholders along the value and supply chain, including Mother Earth, poor villages in Africa and farmers in North America.

In 2011, two years after Polman took charge at Unilever, quarterly profit reporting went out the door, all the better to focus management and shareholders on eco-friendly long-term development. In came Unilever's "Sustainable Living Plan," an ambitious, if hazy, concept that has made Polman, who considered becoming a priest before he went into business, the global high priest of corporate altruism.

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The plan's three main goals make Unilever seem more like a United Nations agency than a dividend machine. The goals are: improving the health and hygiene of a billion people by 2020; enhancing the livelihoods of millions of people through job creation, training and other social benefits; and reducing the environmental footprint in the making and use of Unilever products by half.

Polman admits the goals will be hard to achieve. Indeed, the environmental footprint goal was recently extended by a decade, to 2030. But the plan has already produced results. Unilever's carbon dioxide output per tonne of production fell by more than a third between 2008 and 2015. Waste material per tonne of production fell by 97%. Every product is being scrutinized. The PG Tips tea factory in England reduced the size of the seal at the end of each tea bag by three millimetres. Since 2015, the effort has saved 9.3 tonnes of paper.

On the social front, the Unilever factory in Khamgaon, India, sponsored the launch of a training centre for women who want to work in beauty parlours. More than 600 women found jobs or started their own shops. Alas, Unilever's efforts to persuade U.S. soybean farmers to use less water and grow crops more sustainably are still in their infancy .

In essence, Unilever is becoming a huge so-called B Corporation. B Corps are for-profit companies that make commitments to sustainability efforts, which are measured and certified by the non-profit B Lab, based in Pennsylvania. At last count, there were about 2,000 B Corps. Most of them are small, but the biggies include clothing company Patagonia, eyewear maker Warby Parker and Unilever's own Ben & Jerry's.

Another option in the United States is to become a legally entrenched benefit corporation, which is committed to social and environmental missions alongside traditional profit-making goals. Most U.S. states now have the designation. One of the highest-profile benefit corps is the crowdfunding site Kickstarter, which must now report on its social impact and weigh the social benefits of any strategic decision.

What's in it for those companies? Positive publicity is one advantage. Attracting millennials as customers, employees and socially conscious shareholders are others. Or maybe some executives really believe that sacrificing some profits is a small price to pay for a less bleak world.

Of course, Unilever's sustainability programs are partly self-serving. The tea-bag trim saved almost €50,000 in the first year and a half. The beauty parlours in India sell Unilver products. The company sponsors and promotes the UN's World Toilet Day as well, a sanitation initiative that has also helped boost sales of the company's Domestos bathroom and kitchen cleaners.

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But that's the point. Unilever is showing big companies that they can clean up their acts, at least partially, without sacrificing profits. It is also demonstrating that the distant future has some value to investors. What if global warming makes Earth almost uninhabitable in 30 years? The returns you earn now from a polluting company would be irrelevant if you have to retire in an air-conditioned, underground bunker.

Corporate social consciousness is hardly novel. A century ago, Henry Ford paid his employees high wages, which allowed them to rise out of poverty and buy cars and houses. But compared with the cult of maximizing shareholder value, as espoused by Friedman and his armies of advocates, it's revolutionary. Revolutions always start small. Maybe Unilever will provide inspiration.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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