© 2007-2012 IMD – Institute for Management Development. Not to be used or reproduced without permission.
Embedding Sustainable Sourcing in Corporate Strategies: Unilever Tea
Professor Ralf W. Seifert IMD
© IMD 2007-2012 2
The Brundtland Commission
(WCED)
Global warming. Scientists agreement
1983 1988 1987
“Our Common Future”
(Elkington)
1994
Earth Summit (UNCED,
Rio de Janeiro) UNFCCC
1992 1997
ISO 14001, 1st version
2001 2003 2004 2002 2005
ISO 14001, 2nd version
sustainable development
UN World Summit (NY) MDGs
GRI: organization
ISO 14040
GRI: 1st standards
World Summit on Sustainable
Development (Johannesburg)
life cycle thinking
Life Cycle Initiative (UNEP &SETAC)
2009
Kyoto Protocol adoption
(global warming)
Montreal Protocol (ozone depletion)
1980 1990
2000 2010
Kyoto Protocol into force
Waste Electrical &Electronic Equipment
(WEEE Directive
2007
REACH, EU directive on chemicals
EU Restrictions on Hazardous
Substances (RoHS) Directive
2000
2008
Triple Bottom Line (TBL)
WBCSD (involve business in
sustainability issues)
1998
GHG Protocol Initiative
GHG Prot. Corporate Std. 1st ed
ISO 14042 ISO 14043
ISO 14041
Copenhagen Summit
1999
DJSI launch
PAS 2050 (assessment
LC GHG)
1995, Nestlé: 1st envir. report
1998, Dell: 1st envir. report
2007, Nestlé: Creating Shared
Value report
2004, Dell: Sustainability
report
2013
EU ETS 1st trading period
EU ETS 2nd period
EU ETS 3rd period
1991
NGGIP (guidelines
national GHG inventories)
1996
GRI: 2nd version
GRI G3: 3rd
version
2006
Sustainable development has been talked about for 30 years: Timeline on the attention to environmental issues
2
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And public awareness as well as reporting is increasing
1996
2000
200
1800
1600
1400
1200
1000
800
600
400
Nb.
arti
cles
0
Media Incidence of the phrase “climate
change” in the British press
Sources: http://www.guardian.co.uk/sustainability/climate-change-reporting ISO 14000—Environmental Management: www.iso.org www.globalreporting.org
2005
-
50,000
100,000
150,000
200,000
1997 2000 2003 2006
ISO 14001 certificates
-
400
800
1,200
1,600
2000 2003 2006 2009
GRI reports Average annual growth = 42%
Avg.annual growth = 51%
EMS Environmental Management
Systems
2009
ISO 14001 certificates
Sustainability Reporting
GRI reports certified (Global Reporting
Initiative)
Joana M. Comas
3
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Yet, price pressure continues to increase in food supply
Food expenditures as a percentage of disposable personal income
23.4%
9.5%
Sources: http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/Expenditures_tables/ www.redd-oar.org Roundtable for Sustainable Palm Oil: www.rspo.org
%
Demand for cheaper food:
4
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Unilever Initiative: Leapfrogging to Mainstream
Public commitment to source 100% Rainforest Alliance CertifiedTM Tea by 2015 • All tea used in PG Tips & Lipton Yellow Label tea bags in Western Europe sourced from Rainforest Alliance Certified farms within three years of announcement • All Lipton tea bags sold globally from Rainforest Alliance Certified farms by 2015
Video: Transforming the Tea Supply Chain
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Unilever Case (A) – Discussion Questions
6
What lessons can be learned from the Unilever initiative to shift its entire supply to tea from Rainforest Alliance CertifiedTM farms?
What are the opportunities, the challenges and risks posed by this initiative? Video: Interview with Paul Polman, CEO
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A leadership issue and a supply chain issue …
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How do you execute such an initiative making sure that you can balance supply and demand across regions during the rollout?
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Rainforest Alliance certified packs
TV announcement “Take a sip”
National press, radio and PR
Short movie to inform and entertain
THE CAMPAIGN
2nd phase TV “Senor Al” Promo packs
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Rainforest Alliance – Overview
Founded in 1987 2009 operating budget of $30.1 million USD Nearly 300 staff worldwide
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Rainforest Alliance Programs
Agriculture Sustainable farm management certification 1.35 million acres certified in 24 countries United Nations funding to certify 10% of global coffee supply Forestry World’s largest certifier of forest lands Certifies to the Forest Stewardship Council (FSC) standard 131 million acres certified in 66 countries Tourism Working with the UN to improve the sustainability of tourism
industry Climate Verifying forest carbon and developing methodologies for
agricultural carbon.
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Rainforest Alliance Certified: The Gold Standard of Certification Comprehensive Standard built on the three pillars
of sustainability: People, Profit, Planet.
Stakeholder input: conceived in the tropics by farmers, environmentalists and scientists; monitored by local auditors local indicators make it real.
It helps producers drive cost efficiencies, higher yields and crop quality; gives them access to value added markets to meet consumer demand for responsibly produced goods
Applicable to large plantations and small holdings. Rainforest Alliance certifies farms and producers; not companies
• 10 Principles
• 94 criteria
• 14 CRITICAL criteria
Requirement scores for Certification:
– 100% on critical criteria
– 80% overall score
– 50% minimum score in EACH of the 10 principles
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Sustainable Agriculture Network Standards
Management System Ecosystem Conservation Wildlife Protection Water conservation Working Conditions Occupational Health Community Relations Integrated Crop Management Soil Conservation Integrated Waste Management
Conservationists Scientists
Communities Industry
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Unilever Case (A) – Questions
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Can Unilever rely on the Rainforest Alliance to monitor
ongoing compliance with certification over time? How exposed is Unilever if the standard for the certification is raised?
Video:
Interview with Mercedes Tallo, Rainforest Alliance Manager
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17 The Rainforest Alliance Tea Journey
Started in 2006, now covering: •Kenya •Tanzania •Argentina •India •Indonesia •Malawi
•87,000 hectares •125,000 tonnes •170,000 workers
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• First certification in Aug 09: Momul Factory (KTDA)
• 2 other factories certified since • Total of 38,000 smallholders,
whole farm approach to certification • 8,800 hectares • 15,000 tonnes tea • 16,000 Personal Protective
Equipment sets sourced by KTDA • 25,000 tea bushes in-filled • 40,000 native trees planted
Kenya Tea Case Study
© IMD 2007-2012
• Good agricultural practices, safe use of agrochemicals and Farmer Field School (FFS) training
• 5-15% increase in yield in 4 pilot factories through better plucking and pruning techniques
• Project in place to scale-up the FFS methodology to cover every single factory in 2010, reaching 530,000 smallholders over the next few years
• Kenya Tea Development Agency: set up a new national microfinance institution to provide PPE and other inputs to farmers
Kenya Tea Case Study
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• Argentina is the largest exporter;
• 40% of production to US market
• 6,500 small growers; not organized
• 40K ha tot. production and 7K ha. certified; 2012 projection = 14K ha.
• Conservation of biodiversity ‘hotspot’ Misiones, Amazon region
• Creation of biological corridors; protection critical habitat for native
species of jaguar, tapir, anteater
• Empowerment of women; higher paying jobs
• Intercropping with yerba mate (complimentary growing cycles)
Argentina Tea Case Study
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Unilever Case (B)
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Put yourself in the shoes of Mark Birch and Michiel Leijnse. What could you do to ensure that the demand surge coming from competitors “getting on the bandwagon” would not feed on Unilever’s certified supply base.
Video: Interview with Marc Engel, CPO
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Member of the ETP Tetley Blue Rainforest Alliance
Certified in the UK and Canada by 2011.
All Tetley brands 100% Rainforest Alliance Certified by 2016.
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Tetley Initiative
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Ethical Tea Partnership
ETP: an industry association of 20 tea companies “A thriving tea industry that is socially just and environmentally sustainable”
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Summary of Lessons
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Sustainability is seen by some analysts as one of the biggest business opportunity of the 21st century.
It is clearly a supply chain issue (90% of the potential).
Engage stakeholders, suppliers and employees.
Embracers see benefits: Cost reduction and improved visibility in the SC Assurance of supply Brand reputation and right to operate
Customers are not (yet) willing to pay for eco-friendly products.
How? Execution must balance supply and demand.