Defining our material issues

An issue is material to Unilever if it meets two conditions. Firstly, it impacts our business significantly in terms of growth, cost or risk. And secondly, it is important to our stakeholders – such as investors, society (citizens, NGOs, governments), consumers, customers (retailers), suppliers and our employees – and they expect us to take action on the issue. In determining if an issue is material, we consider our impacts across the value chain.

We use our materiality assessment to identify priority sustainability issues across our value chain. Over the last decade, materiality has helped to inform the development of the Unilever Sustainable Living Plan (USLP). More recently, it has helped ensure we report on the issues of most interest to our stakeholders. We update our assessment each year to make sure it reflects changes in our business and the external environment.

Every business is impacted by macro forces. These are the trends and events that are shaping our world and the role of business within it. 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.

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.

Each year, 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.
• 2017-2018: our materiality assessment (PDF | 365KB) highlighted the growing importance of environmental issues to our business and stakeholders, such as packaging & waste, and climate change.
  

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 & Integrity which we manage through our Code of Business Principles (PDF | 6MB) and Code Policies, 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 Transparency which is managed at a division 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 was conducted in 2019 and early 2020 to cover the reporting period of 2019 as well as early 2020. It has highlighted new and emerging issues, and provided a fresh check on whether we are disclosing information and being transparent in the right areas.

To reflect the dynamic and ever-changing sustainability landscape, we have redesigned our materiality process and methodology. We have designed a process which can be repeated more frequently to provide us and our stakeholders with more granular insights into the changing sustainability landscape and how this affects our business.

Our new methodology has more rigorous scoring thresholds so we can gain a nuanced understanding of which issues most impact our business and are most important to our stakeholders. And instead of relying on interviews with a small number of representative stakeholders, we are harnessing big data through an AI powered materiality tool and using the extensive stakeholder insights available to us from within our business – for example data from our global Consumer Marketing Insights Team.

To ensure a best practice approach and objectivity, our methodology was independently critiqued by DNV GL – a global business consultancy specialising in sustainability. We conducted an in-depth analysis of business impacts and used data and insights to gauge the relative importance of each issue to our stakeholders. Our five-stage process is detailed below:

We refreshed and consolidated the list of sustainability issues and topics that are directly relevant to Unilever across our value chain. We identified a long list of 169 sustainability topics, which were categorised into 19 distinct issues as shown on our matrix. We define an ‘issue’ as a either a current or potential business impact from the internal or external operating environment.

Where appropriate, we updated the labelling of certain issues and topics to provide clarity and to reflect emerging language around new issues. Full list of the 169 topics (PDF | 216KB) which underpin the 19 issues is available.

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 Issues.

Issue identification aligns with our yearly review of Principal Risks which we include in our Annual Report & Accounts (PDF | 7.49 MB).

Our Principal Risks have not fundamentally changed in 2019. We no longer show sustainability as a specific standalone risk reflecting the ongoing integration of sustainability into our business and a realisation over the last couple of years that we need to be more granular in explaining what is meant by a sustainability risk. Consequently, we have separated out specific sustainability risks, notably climate change and plastic packaging. In 2019, we also separated out a risk with respect to inequality, which was previously included in our overarching sustainability risk and is now included within our ethical risk.

We assessed each issue's impact on the business and importance to our stakeholders.

• Impact on the business (X-axis on the matrix) was determined using Unilever’s Sustainable Business Value Framework. Each issue was assessed high, medium or low according to its potential to positively impact on future growth over the next 0-5 years and the net positive impact on future costs over the same time period. We also considered whether the issue had been identified as a principal risk as part of our Board’s annual identification of corporate risks.
• Stakeholder importance (Y-axis on the matrix) was determined using research and analytics on the concerns of investors, society (citizens, NGOs, governments), consumers, customers (retailers), suppliers and our employees. Each topic was high, medium or low according to its importance to stakeholders.
• The prioritisation exercise resulted in two scores for each issue – one for impact on the business and one for stakeholder importance.
• Using the AI powered materiality tool, we also benchmarked our material issues globally against hundreds of other FMCG companies, thousands of mandatory and voluntary ESG reporting regulations as well as millions of sustainability news articles and social media posts.
• The data from the materiality tool was combined with the manual scores for each axis to create the matrix.

The draft materiality matrix was reviewed and refined through a series of interviews with a cross-section of internal stakeholders. Internal interviews were conducted with Unilever employees across our three global divisions and multiple business functions. The matrix was presented to senior management for validation and approval.

Our 2019/20 materiality assessment confirmed that there is strong alignment between our most material issues and those which are addressed through the USLP.

All but one of our six most material issues – trusted products & ingredients transparency – are directly addressed by commitments in the USLP. While targets on this issue are not explicit in the USLP, it is managed as part of company and divisional strategies.

One of the objectives for redesigning our materiality methodology was for the process to provide greater insights. The insights gathered from this materiality assessment – such as increasing stakeholder concern on issues such as climate change and packaging & waste – are helping to shape our disclosure and transparency on material issues, and inform strategic discussions.

We communicate the outcomes of the assessment on our 2019/20 materiality matrix in our 2019 Sustainable Living Report, highlighting our most material issues and their relative importance to the business and our stakeholders.