Greenhouse gases

Following the Paris Agreement, nearly 200 countries are pressing ahead with low-carbon reforms, helping to open around $23 trillion in opportunities for climate-smart investments by 2030. The key to transforming the current high-carbon infrastructure into a low-carbon one, is systems change.

The risks presented by climate change cross the boundaries between nations, continents, industries and societies. SDG 17 – partnerships for the goals – is critical to unlocking progress to the other 16 SDGs. Businesses, governments and citizens all have a role to play but fundamental to creating systems change is collaboration, which is why we’re prioritising advocacy and partnerships with others.

This has led us to work on issues ranging across our entire value chain, from combating deforestation and improving the carbon footprint of our agricultural supply chain, to designing more products with a lower GHG impact for people to use at home.

27% of our GHG footprint comes from raw materials for ingredients and packaging. Impacts of climate change on agriculture will be different in different parts of the world. An important step in our sustainable sourcing programme will be the launch in 2018 of the renewed Sustainable Agriculture Code, which has guidance on all aspects of Climate Smart Agriculture.

In the middle of our value chain are our own factories and sites - the parts of our business over which we have the greatest control. We've committed to becoming carbon positive in our operations by 2030. That means 100% of our energy will come from renewable sources - and we intend to directly support the generation of more renewable energy than we need for our own operations, making the surplus available to the markets and communities in which we operate.

Technology and innovation are playing a critical part in addressing climate change - and in opening up the opportunities for business that a low-carbon economy will bring. Over 60% of our GHG footprint occurs when consumers use our products in their homes. To reduce this, we’re using our knowledge and resources in innovation, and Research and Development, to bring people products they enjoy but which come with lower GHG impacts.

A growing number of investors demand more information on how companies are addressing the effects of climate change, and we recognise the importance of disclosing climate-related risks and opportunities. Adopting the TCFD recommendations is an important step forward in enabling market forces to drive efficient allocation of capital and support a smooth transition to a low-carbon economy.

Within the scope of our business, climate change touches everything we do, and a wide range of our USLP activities address it. We’ve integrated climate-related disclosures throughout our Annual Report and Accounts 2017 (PDF | 3MB) and within the Reducing Environmental Impact sections - Greenhouse Gas, Water, Waste, and Sustainable Sourcing – of our Sustainable Living Report 2017.

Our pillar commitment is to halve the GHG impact of our products across their lifecycle by 2030. This commitment is a science-based target, which is in turn supported by our carbon positive science-based targets. These are defined as "in line with the level of decarbonisation required to keep the global temperature increase below 2°C compared to pre-industrial temperatures"*** - which underpins the Paris Agreement.

To understand the financial risks that climate change could have on our business, we’ve performed a high-level assessment of the impact of 2°C and 4°C global warming scenarios in 2030. We’ve identified the material impacts on Unilever’s business from each of these scenarios, based on existing internal and external data. We are taking action to address our climate change risks in line with the output from the scenario analysis, as well as benefiting from any opportunities these changes could present across our value chain.

The main impacts of the 2°C scenario:

• Carbon pricing is introduced in key countries and hence there are increases in both manufacturing costs and the costs of raw materials such as dairy ingredients and the metals used in packaging.
• Zero net deforestation requirements are introduced and a shift to sustainable agriculture puts pressure on agricultural production, raising the price of certain raw materials.

The main impacts of the 4°C scenario:

• Chronic and acute water stress reduces agricultural productivity in some regions, raising prices of raw materials.
• Increased frequency of extreme weather (storms and floods) causes increased incidence of disruption to our manufacturing and distribution networks.
• Temperature increase and extreme weather events reduce economic activity and gross domestic product (GDP) growth, hence sales levels fall.

The results of the scenarios analysis confirm the importance of doing further work to ensure that we understand the critical dependencies between climate change and our business. And ensure we have action plans in place to help mitigate these risks and prepare the business for the future environment in which we will operate.

To tackle climate change, we've adopted a combined approach of making changes to our own business - aimed at reducing the emissions over which we have most control - while joining collective efforts and advocacy to help achieve the wider systems changes needed to create a low-carbon world. Our work includes:

• Our Climate Smart Agriculture programme, aimed at helping the farmers and businesses in our supply chain reduce their GHG emissions
• Our carbon positive targets, which including using 100% renewable energy in our operations by 2030
• Using internal carbon pricing mechanisms to drive change in our business
• Collective action to eliminate deforestation from global supply chains
• Switching to energy efficient ice cream freezers
• Designing products with lower GHG impacts.

We will halve the greenhouse gas impact of our products across the lifecycle by 2030.**

In addition, in our own operations, we will become carbon positive by 2030 by eliminating fossil fuels from our energy mix and switching to 100% renewable energy. We also intend to directly support the generation of more renewable energy than we consume, making the surplus available to the markets and communities where we operate.

We've cut CO₂ from energy by 47%^† per tonne of production in our operations and continued to develop products with a lower GHG impact, however the GHG impact of our products across their full lifecycle has increased by around 9%† since 2010.**

Underlying sales growth over the same period was 33.1%, so it is encouraging to see that we are decoupling our value chain GHG impacts from our business growth. The increase in GHG emissions per consumer use is mainly driven by our Personal Care business which has expanded in hair and shower products via acquisitions.

The momentum behind climate action is continuing to grow. More investors are factoring carbon resilience into their decisions. And according to research we conducted in 2016 (PDF | 2MB), consumers are increasingly looking for sustainable companies and products. We believe the transition to a lower-carbon model for economies and societies can be made - but there's no doubt challenges remain.

The amount of available renewable energy is increasing, and the costs are falling rapidly. But, much of the world's infrastructure remains reliant on fossil fuels. For example, that means that the electricity used to heat water, including the hot water used by our consumers, significantly contributes to GHG emissions.

To reach our 2030 commitment of halving the GHG impact of our products across the lifecycle by 2030, we’re dependent on a wide range of external factors, such as the energy efficiency of consumer appliances, and the carbon intensity of the energy supplied to people’s homes – as well as consumer behaviour.

We believe that carbon pricing is a fundamental part of the global response to climate change and without it, the world is unlikely to meet its GHG reduction targets. We have publicly supported calls for carbon pricing and are a member of the UN Global Compact’s (UNGC’s) Caring for Climate Campaign and The Carbon Pricing Leadership Coalition, hosted by the World Bank. We have implemented the UNGC’s Business Leadership Criteria on Carbon Pricing and in 2018, we increased our internal price of carbon to €40 per tonne.

* Two of our targets were approved by the Science Based Targets Initiative (SBTi) in 2017. We set our first science-based target in 2010, to halve the greenhouse gas impact of our products across the lifecycle by 2030. The second science-based target was introduced in 2015, aiming to source 100% of our energy across our operations from renewable sources by 2030.

** Our environmental targets are expressed against a baseline of 2010 and on a 'per consumer use' basis. This means a single use, portion or serving of a product.

***As described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5).

^†Independently assured by PwC