Creating & sharing wealth

Creating value

Employees, governments, investors and many others in the communities where we operate benefit economically from our activities. In 2006, out of €39.6 billion sales income (turnover), we spent over €28.2 billion with suppliers and so created €11.4 billion value added through our operations.

Our employees gained the largest share, earning €5.4 billion or 46.8% of the total. The providers of capital who finance our operations gained the second-largest share, from dividends paid. This group includes both individual shareholders as well as large holdings by pension funds on behalf of individual policyholders. Total shareholder return, which reflects the value of dividends and changes in share price, is calculated on a three-year rolling basis. By the end of 2006, it was 10.9%, ranking us 13th against a peer group of 20 international consumer goods companies.

Unilever Group distribution of cash value added 2006

The share for governments represents direct corporation tax alone, and does not include taxes collected by local operating companies on sales nor those paid by them on purchases and wages. Only our voluntary contributions to charities and not-for-profit groups are shown in the community share.

Turnover, operating profit, employees, purchases & value added 2006

Creating wealth

Our operations also create value in the countries where we source our raw materials and manufacture and market our products. The proportion of added value we create locally is highest in developing and emerging markets. While only 27.4% of our sales are created in Asia and Africa, 51% of our employees are in these countries and 29.6% of goods and services are purchased by these regions.

We expect to see a growing share of our sales being generated in developing and emerging markets, as population and purchasing power grow in countries such as China and India. Our deep roots and early engagement in these markets have given us valuable experience in meeting the needs of consumers at the 'base of the economic pyramid'. Whether it is through innovative distribution channels or finding ways to lower the price of our products, our success will depend on new and different models of doing business.

One example is Shakti (see below), a direct-to-consumer sales distribution network established by Hindustan Lever to reach millions of consumers in remote villages in India. A similar initiative involving over 3,000 women entrepreneurs is gathering pace in Bangladesh. Via an agreement with CARE Bangladesh, it will empower another 2,000 rural women through Project Aparajita. In addition to recruiting and training women, CARE will also monitor and evaluate the programme to get a better understanding of its impacts.

In Kenya, Unilever has teamed up with over 30 companies as part of the Business Alliance against Chronic Hunger, to help the Kenyan government take action against hunger in rural areas using business-based solutions. The partnership will seek to buy local farmers' produce, help them find new markets and add value to their produce, thereby generating a sustainable source of income.

Project Shakti

Shakti taps into women's self-help groups and has proved highly successful for both our Indian company Hindustan Lever and women entrepreneurs.

By the end of 2006, the Shakti network had grown to over 30 000 micro-entrepreneurs selling products in 100 000 villages across 15 states in India.

Extending our understanding

In 2005 we published a joint study with Oxfam GB and Novib (Oxfam Netherlands) to explore the links between international business and poverty reduction, focusing on our operations in Indonesia. This found that the potential poverty reduction impacts of a company like Unilever are spread across the full breadth of its 'value chain'. Unilever Indonesia continues to build on the lessons learnt and works directly with local farmers to secure supplies of black soya beans for its Kecap Bango soya sauce. Starting with just 12 farmers in 2001, the programme now covers 5 000 farmers and 600 hectares. It provides a guaranteed market for these farmers as well as interest-free start-up loans and technical assistance and training.

Since 2006 we have been working with the European business school INSEAD to study the social, economic and environmental footprint of our South African company. By strengthening the scope and methodology used in Indonesia, this research will move us closer towards developing a tool for local companies to map and assess their sustainability impacts.

Transfer pricing & tax policy

National governments are concerned about how multinational companies account for the value of sales between their operating subsidiaries, as 'internal' prices can be set artificially low to reduce profits in high-tax countries. Our worldwide policy is based on the 'arm's-length' principle, in keeping with guidelines developed by the OECD.

Our Code of Business Principles requires Unilever companies to comply with the laws and regulations of the countries in which they operate, and this applies just as much to taxation as to any other issue. Our Code also encourages our businesses to represent their views on the formulation and administration of tax laws either directly or through trade associations and similar bodies. In order to create and preserve value, we will seek to minimise our tax liabilities while complying with all applicable laws.