Defining our material issues

An issue is material to Unilever if it meets two conditions. Firstly, it impacts our business in terms of growth, cost, risk or trust. And secondly, it is important to our stakeholders – such as consumers, customers, employees, governments, investors, NGOs and suppliers. In determining if an issue is material, we also consider whether it is aligned with our Vision and Purpose, brand portfolio and geographical footprint; its potential impact on our value chain (PDF | 415KB); and the degree to which we can affect change.

We use our materiality assessment to identify priority sustainability issues across our value chain. Materiality helps to inform the development of the Unilever Sustainable Living Plan (USLP) and ensures we report on the issues of most interest. We update our assessment every two years to make sure it reflects changes in our business and the external environment.

Find out more in our interactive materiality matrix, which shows the results from our 2017/18 assessment.

Every business is impacted by macro forces. These are the trends and events that are shaping our world. We monitor these trends to make sure our strategy and plans are fit for the future and to assess their impact on our material issues. Our latest macro forces analysis shows four distinct, but overlapping, shifts that will affect business and society over the next decade:

Slow growth and volatility are creating a world where international growth and political leadership fragment. Income and political polarisation within countries is set to increase, threatening the progress of globalisation and free trade.

The impact of water scarcity and climate change will be increasingly visible. Momentum for action will gather pace, building on the Paris Agreement.

The rapid development of new technologies – such as artificial intelligence (AI), robotics, voice technology and virtual reality – will open further opportunities for connection, automation and value creation, and pose new risks around security and privacy. Data and the Internet of Things will continue to disrupt traditional business models, using technologies such as blockchain and increasingly sophisticated smart devices.

Societies are becoming more diverse with fragmented identities, changing lifestyles and new everyday behaviours. Millennials and Generation Z are having a powerful influence on cultural norms, such as diversity and gender. Older generations have a strong economic influence, and this will increase as the population ages. Migration is having a profound effect on national identity.

This year, we have not presented specific macro forces – such as demographics, emerging markets and the global economy – in our materiality matrix, as they cut across multiple issues. We believe this gives greater focus to the issues that Unilever can directly influence. Many of the macro trends that were in our 2015 materiality matrix are captured as Principal Risks in our 2018 Annual Report and Accounts (PDF | 4MB).

Every two years, we conduct a materiality assessment to help ensure our strategy is focused in the right areas, to assess the changing sustainability landscape and to understand and prioritise the issues that matter to our business and our stakeholders. We use our materiality assessment to help us to evolve our strategy and tailor our reporting so that it aligns with the interests and needs of our stakeholders, as well as those of the company.

We have used our materiality process to inform the development of the USLP from its inception:

• 2009–2010: when we first developed the USLP, our materiality assessment helped determine which issues to include, set targets for and report on.
• 2013: our in-depth materiality review (PDF | 327KB) resulted in significant changes in the USLP, expanding our commitments on labour rights, women, inclusive business and smallholder farmers. Forum for the Future – the non-profit organisation – updated our external trends analysis, which we reviewed against our current and future business growth strategies. The results of this exercise identified 15 material issues.
• 2015: our materiality review (PDF | 137KB) validated that we had the most important issues reflected in the USLP. It revealed an increasing number of material issues due to rising stakeholder expectations and a growing business case.

The performance targets and indicators that we include in our online Sustainable Living Report reflect the outcomes of our materiality process. We don’t have targets or external performance indicators for every material issue. Some are addressed outside of the USLP, such as Ethics, Values & Culture which we manage through our Code of Business Principles and Code Policies (PDF | 3MB), and Animal Testing & Welfare which is managed through our Safety & Environmental Assurance Centre (SEAC).

We also report on some material issues that are not contained in our USLP but are of interest to stakeholders, such as Trusted Products & Ingredients which is managed at a category level and through our Trust in Ingredients initiative. As we have various audiences and communications channels, we address many of these issues outside of our annual reporting cycle.

Our most recent materiality assessment, conducted in 2017 to cover the reporting periods of 2017 and 2018, was designed to inform the development of the USLP beyond 2020. It highlighted new and emerging issues, and provided a fresh check on whether we are focusing on the right areas.

To ensure a best practice approach and objectivity, the assessment was supported by Corporate Citizenship – a global business consultancy specialising in sustainability. It included an in-depth analysis of business impacts and used data and insights to gauge the relative importance of each issue to our stakeholders. Our six-stage process is detailed below:

We refreshed and consolidated the list of sustainability issues and topics deemed to be directly relevant to Unilever across our value chain. We identified a long list of 177 sustainability topics, which were categorised into 24 distinct issues as shown on our matrix. We define an ‘issue’ as a risk or opportunity to Unilever from the internal or external operating environment.

Where appropriate, we updated the labelling of certain issues and topics to provide clarity and to reflect commonly accepted language. You can find more detail on the issues and topics in the following PDFs:

• A full list of the 177 topics (PDF | 516KB) which underpin the 24 issues.
• A graphic showing the relevance of material issues across different stages of our value chain (PDF | 635KB).

Our long list included new issues and topics, reflecting changes to the sustainability landscape over the past two years. These were identified by researching emerging sustainability trends, macro forces, competitor practices and global standards.

We subsequently categorised the issues according to our USLP Big Goals: Improving Health & Well-being, Reducing Environmental Impact and Enhancing Livelihoods. Issues that did not align with our Big Goals were either categorised as Responsible Business Practices or Wider Sustainability Topics.

Issue identification aligns with our yearly review of Principal Risks which we include in our Annual Report and Accounts. All issues that are captured on our materiality matrix relate to one or more of our Principal Risks. More information on our material issues can be found across our Sustainable Living Report and other sections of our website.

We assessed each topic’s impact on the business and importance to our stakeholders.

• Impact on the business (X-axis) was determined using Unilever’s Sustainable Business Value Framework. Each topic was assessed according to its potential to positively or negatively impact on growth, cost, risk and trust – with a corresponding score awarded depending on whether this was deemed to be high, medium or low. We also looked at the relevance of an issue to the United Nations Sustainable Development Goals (PDF | 506KB) (SDGs), particularly those where we can make the greatest contribution.
• Stakeholder importance (Y-axis) was determined using research and analytics on consumers, customers, NGOs, investors, suppliers and employees. Each topic was analysed according to its importance to stakeholders, with a corresponding score awarded depending on whether this was deemed to be high, medium or low.
• The prioritisation exercise resulted in two scores for each issue – one for impact on the business and one for stakeholder importance. These were plotted on a draft materiality matrix which formed the basis for the engagement during Phase 3.

The draft materiality matrix was reviewed and refined through a series of interviews with a cross-section of external and internal stakeholders.

• External interviews were conducted with a small group of Unilever stakeholders including WWF, WBCSD, The Climate Action Group, Natural Capital Coalition, UNPRI and SYSTEMIQ.
• Internal interviews were conducted with Unilever employees across a range of global functions (Sustainable Business, Risk Management, Supply Chain, R&D, Finance, Investor Relations, Customer Development) and our Divisions (Beauty & Personal Care, Home Care, Foods & Refreshment).

The matrix was reviewed by the Sustainable Business Team and presented to our USLP Steering Team for validation and approval. The Steering Team includes nine members of the Unilever Leadership Executive.

Our 2017/18 materiality assessment confirmed that there is strong alignment between our most material issues and those which are addressed through the USLP. All but two of our nine most material issues – Ethics, Values & Culture and Trusted Products & Ingredients – are directly addressed by commitments in the USLP. While targets on these issues are not explicit in the USLP, both are managed as part of company and category strategies.

The insights gathered from the materiality assessment – including rising public concern on issues such as climate change, packaging & waste and nutrition & diets – were used as an input to a number of internal conversations on the future of the USLP beyond 2020.

We commissioned further desk-based research into our nine most material issues to understand how our current USLP might develop in the future in line with science-based limits and social norms. We are using the insights from this work to inform the future development of the USLP.

This year, for the first time, we mapped our material issues to the UN Sustainable Development Goals (SDGs). This shows where we are taking action on the SDGs through the USLP. The relevance of our material issues to the SDGS can be seen in this graphic (PDF | 506KB).

We communicate the outcomes of the assessment on our 2017/18 materiality matrix, highlighting our most material issues and their relative significance to the business and our stakeholders.