Our compass strategy

The volatility and uncertainty facing the world remain the ‘new normal’ and are set to last for the medium term. These ongoing pressures – economic, social and environmental – frame our approach to our business strategy and our business model.

We call our business strategy ‘the Compass’, since it sets out a constant path for Unilever for the long term. The Compass lays out our ambitious vision and purpose, and defines four ‘Winning with’ pillars within the business that will help us achieve both: brands and innovation; marketplace; continuous improvement; and people. Our performance against these pillars is explained in our Annual Report and Accounts 2012. First developed in 2009, the Compass was sharpened in 2012 but its core elements remained the same.

In 2012 we added our new purpose – “To make sustainable living commonplace”.

This builds on the original purpose of our 19th century founder, William Lever, “to make cleanliness commonplace”.

The Compass gives life to our determination to build a sustainable business for the long term and to find new ways to operate that do not just take from society and the environment. This is captured in the Unilever Sustainable Living Plan (USLP).

Our Business Strategy

Our business model is designed to deliver sustainable growth. For us, sustainability is integral to how we do business. In a world where temperatures are rising, water is scarce, energy is expensive, sanitation is poor in many areas and food supplies are uncertain and expensive, we have both a duty and an opportunity to address these issues in the way we do business.

The inputs to the model, like those of all major packaged goods manufacturers, are threefold: brands; people; and operations. These map directly on to our Compass ‘Winning with’ pillars – both continuous improvement and the market place pillars support the operations strand of the model.

The differentiator in our business model is our USLP and the goal of sustainable living. The outputs of the model are threefold: sustained growth; lower environmental impact; and positive social impact. These align directly with our vision statement.

The diagram below represents our virtuous circle of growth. It summarises, simply, how we derive profit from the application of our business model.

Our brands

Strong brands and innovation are central to our ambition to double in size. We are investing in brand equity, finding and strengthening the connections between consumers and the products they buy. Where equity is strong, we are leveraging it – creating efficiencies by focusing on fewer, bigger projects that enhance margins. And we are seeking superior products which consumers will prefer, driving profitable growth.

Our operations

On any given day 2 billion consumers use our products and we want to reach many more, by developing innovative products that address different consumer needs at different price points. To do this we use our global scale to help deliver sustainable, profitable growth by seeking to add value at every step in the value chain by enhancing product quality and customer service, and rolling out innovations faster across all markets.

Our people

Sustainable, profitable growth can only be achieved with the right people working in an organisation that is fit to win, with a culture in which performance is aligned with values. We are increasingly an agile and diverse business with people motivated by doing good while doing well. We are building capability and leadership among our people and attracting some of the best talent in the market place.

Sustainable living

For us, sustainable, equitable growth is the only acceptable business model. Business needs to be a regenerative force in the system that gives it life. For example, by reducing waste, we create efficiencies and reduce costs, helping to improve margins while reducing risk. Meanwhile, looking at more sustainable ways of developing products, sourcing and manufacturing opens up opportunities for innovation while improving the livelihoods of our suppliers.

Virtuous Circle Of Growth

Profitable volume growth

Profitable volume growth is the basis of the virtuous circle of growth. Stronger brands and innovation are the key drivers behind it. Consistently strong volume growth builds brand equity as we reach more consumers, more often.

Cost leverage + efficiency

Profitable volume growth allows us to optimise the utilisation of our infrastructure and spread fixed costs over a larger number of units produced, reducing the average cost per unit. It improves our profitability and allows us to invest in the business.

Innovation + marketing investment

Lower costs and improved efficiency enable us to strengthen our business further. New and improved products are the result of investment in R&D and, together with effective marketing, strengthen our brand equity. This results in profitable volume growth, self-perpetuating the virtuous circle of growth.

External recognition

In 2013 Unilever retained its top ranking in the latest Sustainability Leaders survey from GlobeScan/SustainAbility for the third consecutive year.

The World Environment Center awarded Unilever its 2013 Gold Medal for International Corporate Achievement in Sustainable Development. We were recognised for our commitment to advancing environmental sustainability through the Unilever Sustainable Living Plan.

Unilever won the first FTSE4Good Sir Mervyn Pedelty Award in 2012 which recognises companies that integrate environmental and social performance into business strategy. We were commended for our long-term sustainability vision and progress towards our targets.

In 2012, Unilever and our CEO Paul Polman received the C K Prahalad Award from the Corporate Economic Forum (CEF) for matching a bold vision of long term capitalism with impressive action on sustainability through our Sustainable Living Plan.

Unilever remained the top-scoring company in the Food Producers sector of the 2012 Dow Jones Sustainability Indexes (DJSI) for the 14th consecutive year and was named the Food and Beverage super-sector leader.