Greenhouse gases

Climate change is one of the greatest challenges we face as a society and it is already wreaking havoc. Fires in the Amazon, California, Indonesia and most recently Australia are serving as a totemic reminder of the fragility of our ecosystems faced with a changing climate.

Since the Paris Agreement in 2015, science has shown that limiting global average temperature rise to no more than 1.5⁰C is far preferable if we are to avoid the worst forecast effects of climate change. But this means rapidly accelerating progress towards a net zero emissions world by 2050. It requires systemic change and resource mobilisation – at a speed and scale never seen outside wartime.

Of the environmental risks identified by the World Economic Forum in its annual Global Risk Report (PDF | 5.19 MB), five can be linked to climate change: extreme weather events, climate action failure, natural disasters and biodiversity loss and human-made environmental disasters. The risks presented by climate change cross the boundaries between nations, continents, industries and societies, such as food and water crises, and large-scale involuntary migration.

We advocate for policies that advance the goal of the Paris Agreement – limiting global temperature rises to no more than 2⁰C, and ideally 1.5⁰C, by the end of the century. Taking action against the risks of climate change is a necessity. For Unilever, this means transforming diets, transforming agricultural production and ending commodity-driven deforestation associated with the production of tropical commodities, accelerating the use of renewable energy and electric vehicles to reduce carbon dioxide and nitrous oxide from energy, and finding new solutions to propellants and refrigerants that currently use super-pollutant hydrofluorocarbons (HFCs).

The greenhouse gases (GHG) pillar of our Unilever Sustainable Living Plan (USLP) contributes to a number of the UN Sustainable Development Goals (SDGs), primarily: Affordable and Clean Energy (SDG 7); Climate Action (SDG 13) and Life on Land (SDG 15).

Climate change and the devastation it causes matter to our business and our consumers. Unchecked, climate change threatens to disrupt agricultural value chains, threaten food security, increase water scarcity and act as a downward pressure on global growth.

The business case for climate action is clear. Key benefits to our company include lower operational costs and greater resilience in our energy supply, as well as improving the security of supply of our raw materials due to changing rainfall patterns and extreme weather events. By proactively cutting our greenhouse gas (GHG) footprint, we also reduce our exposure to increasing environmental regulation and taxes.

We’re combining actions to change our own business and value chain, with collective efforts and advocacy to help achieve the wider systems changes needed to create a zero-carbon world.

Our climate strategy is focused on a number of areas:

Reducing emissions in our supply chain

Around 24% of our GHG footprint comes from raw materials for ingredients and packaging. Mitigating the physical impacts of climate change is critical because we depend on raw materials sourced from countries that are particularly vulnerable to rising sea temperatures and changing weather patterns. An important step in mitigating this risk was the launch in 2018 of the renewed Sustainable Agriculture Code (SAC 2017) (PDF | 8MB), which has guidance on all aspects of Climate Smart Agriculture.

Our commitment to source commodities like palm oil, soy and paper & pulp sustainably is helping to avoid emissions from deforestation from agricultural commodity supply chains. Limiting average global temperature rise to 1.5°C will be impossible without a major role for nature-based solutions. The ‘natural technology’ of forests is currently the only proven means of removing and storing atmospheric carbon dioxide at meaningful scale, and restoration of carbon-rich peatlands offers the chance to rapidly reduce land based GHG emissions.

We’re especially focused on breaking the link between palm oil production and habitat loss. As the world’s largest single buyer of palm oil – 3% of global production each year – we try to use our scale to transform the industry and make sustainable palm oil the norm. We’re also encouraging the entire industry, including growers, traders, manufacturers and retailers to set and meet high standards of palm oil production, extending beyond current certification schemes.

In particular, we are focused on helping catalyse transformative change at the landscape or jurisdictional level in South-East Asia; and on ensuring – through our networks and relationships – that large-scale, performance-based payments for emissions reductions from forests are available to tropical forest countries.

Reducing emissions in our operations

Our own factories and sites are the parts of our value chain 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.

Our Foods & Refreshment Division has prioritised reducing greenhouse gas emissions from ice cream freezers since 2008. As the world’s largest producer of ice cream, we have committed to accelerating the roll-out of freezer cabinets that use more climate-friendly natural (hydrocarbon) refrigerants.

Reducing emissions through product innovation

Climate change and waste are two of the biggest environmental challenges the world is facing. We’re working to tackle them by changing the way we source, make and distribute products. But consumption habits – how people use products at home – are just as important.

A shift to vegetarian and veganism is helping to reduce emissions. The business opportunity for natural and plant-based foods and beverages – as well as hygiene and cleaning products – is significant as consumer demand is growing. We have a range of vegan and vegetarian variants for our Foods & Refreshment brands such as our 100% vegan Magnum ice cream.

Our Home Care and Beauty & Personal Care brands are also taking action. For example, our Cif Power & Shine ecorefills, launched in 2019, attach to current Cif Power & Shine bottles. It’s designed to be diluted in people’s homes so 97% less water is transported. More products fit onto pallets and 87% fewer trucks are needed, cutting GHG emissions. And our concentrated liquid laundry detergents from brands such as Persil, Omo, Surf Small & Mighty and Seventh Generation’s ultra-concentrated EasyDose™ enable people to wash their clothes at lower temperatures and reduce GHG emissions by up to 50% per load.

Through our eco-design programme, we’re reformulating products to use fewer but higher performing ingredients. We’re taking this approach in both laundry powders and liquids to reduce the levels of conventional surfactant – our most GHG intensive class of ingredients – by up to 50%. Our phosphate reduction has reduced CO₂ emissions by up to 50% per single use by consumers. And we’re continuing to investigate technologies that could help us create more zero-phosphate products in the future.

66% of our GHG footprint occurs when people use our products at home. So we’re using our knowledge and resources in innovation and R&D to bring people the products they enjoy but which also respond to the challenge of climate change, while creating business growth opportunities.

Advocacy and partnerships to drive systems change

Tackling climate change requires transformational changes to the broader systems in which we operate. For this, we need ambitious government policy that creates the right context for change and business action. It’s critical that organisations from all sectors work in collaboration, partnering on projects and initiatives.

We need continued leadership from businesses, governments, cities, states and regions to continue the virtuous cycle of action and ambition. We call this virtuous circle an “Ambition Loop”. This means continued leadership on deforestation, corporate commitments to action, such as science-based targets and zero pledges, policy reform to level the playing fields for renewable energy and financial disclosure and innovation to allow markets to correctly price risk and allow capital to flow to more sustainable investments.

We support the advocacy work of the We Mean Business coalition and are actively involved in a number of other business-led initiatives such as WBCSD’s Low Carbon Technology Partnership Initiatives, RE100 which campaigns for renewable energy, the Tropical Forest Alliance, the HRH The Prince of Wales’s Corporate Leaders Group and the B Team. We have publicly supported calls for carbon pricing and are a member of the Carbon Pricing Leadership Coalition, hosted by the World Bank.

We are signatories of the Caring for Climate initiative, led by the UN Global Compact together with UNEP and the Secretariat of the UNFCCC, which aims to shape the engagement of businesses with climate change. We are committed to engaging responsibly to help shape climate policy through positive lobbying and regularly review our trade association memberships to ensure alignment with our internal policy positions on climate change. In the last few years, incompatible trade association positions on climate change has been a factor in our decision to revoke membership of at least one trade association.

We recognise the importance of disclosing climate-related risks to, and opportunities for, our business. We have, therefore, adopted the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), of which our Chief Financial Officer, Graeme Pitkethly was the Vice-Chair, to aid understanding of the impacts of climate change on our business.

To understand these impacts, we performed a high-level assessment of the impact of 2°C and 4°C global warming scenarios in 2030. For more details on our scenario analysis, see pages 40–43 of our 2019 Annual Report & Accounts (PDF | 8MB). We analysed the potential material impacts on Unilever’s business arising from each of these scenarios based on existing internal and external data.

The impacts were assessed without considering any actions that Unilever might take to mitigate or adapt to the adverse impacts, or to introduce new products which might offer new sources of revenue as consumers adjust to the changing circumstances.

Without action, both scenarios present financial risks to Unilever by 2030, predominantly due to increased costs. However, while there are financial risks which would need to be managed, we would not have to materially change our business model. The most significant impacts of both scenarios are on our supply chain where costs of raw materials and packaging rise due to carbon pricing and a rapid shift to sustainable agriculture in a 2°C scenario and due to chronic water stress and extreme weather in a 4°C scenario. The impacts on sales and our own manufacturing operations are relatively small.

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

Assessing the climate change impact on soybean oil

During 2018, we developed and piloted an approach to assess the impact of climate change on two of our key commodities: soy and black tea. We selected soy based on its importance to Unilever (large purchased volume), with it being a high-profile crop in the countries where it is grown, and the availability of good historical price data and suitable climate models.

We developed a methodology which combined forecasting future yields and quantifying the impact on commodity prices of soybean oil. Our pilot analysis showed that soybean yields may increase over the 2030 and 2050-time horizon and that subsequent lower prices may then lead to small potential reductions in our procurement spend on soy. While the results may indicate a low financial risk to our business, we need to consider a wider range of risk factors when determining our strategic response.

Assessing the climate change impact on black tea

We’re the world’s biggest tea company and buy around 10% of the world’s black tea. We worked with the Potsdam Institute for Climate Impact Research to develop suitable crop model for black tea yield predictions. Our modelling considers a range of scenarios and impacts on crop yields, which drives variability in the outcomes we saw. This meant we could assess the direct risks from climate change on black tea by following the same approach we used for soy in 2018.

However, unlike soy, the black tea market is highly fragmented, lacks liquidity and does not operate as one global market. So, we conducted an analysis of individual countries to identify the risks we’re exposed to in each. We selected our four key black tea sourcing countries for the analysis: Argentina, India, Kenya and Turkey. Our analysis of the direct effects of climate change showed that yields for each country and scenario range from a predicted decrease to a predicted increase, indicating some exposure to risk.

While the overall risk to Unilever of direct climate change impacts on black tea is relatively low, the country specific risks and the uncertainty of impacts from other significant factors will require further analysis and individual action plans to be defined/refined for each country.

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

Two of our GHG reduction targets are recognised as science-based by the Science Based Targets Initiative:^**

• Halve the greenhouse gas impact of our products across the lifecycle by 2030 (this target covers all the phases across the lifecycle of our products: ingredients/raw materials, manufacturing, distribution, retail, packaging, consumer use and disposal).
• Reduce scope 1 and 2 greenhouse gas emissions by 100% from our own operations by 2030 (this is part of our ambition to become carbon positive in our manufacturing by 2030).

We have continued to develop products with a lower GHG impact, however the GHG impact of our products across their full lifecycle has increased by around 2% since 2010.^†* This is a slight improvement from 2018, when our GHG impact per consumer use was up 6% compared to 2010.

Our perspective

The increase is due to mix effects as well as acquisitions and disposals. For example, our 2019 footprint shows reductions in GHG emissions from our increased use of renewable energy in our factories and sustainable product innovations. Portfolio changes have also reduced our GHG emissions, such as the disposal of some foods that require cooking. However, these GHG reductions have been negated by our Beauty & Personal Care Division, which has expanded in hair and skin cleansing products via acquisitions.

Our measured GHG footprint in the 14 key countries across our value chain is around 60 million tonnes CO₂e, an increase of 15% compared to 2010. However, our turnover has increased at 18% compared to 2010 – higher than our GHG emissions have grown, which is an indication of decoupling. As we make progress towards our 2030 GHG reduction commitment, we expect the extent of decoupling to accelerate.

We are having more success in areas that we can directly control. Although our factory sites achieved our CO₂ reduction from energy target in 2016 – four years ahead of schedule – they are continuing to cut CO₂ emissions from energy. Compared to 2008, CO₂ emissions from energy in our factories have fallen by 65%^† per tonne of production. In 2019, 85% of all grid electricity used in our manufacturing operations was generated from renewable resources.

We continue to reduce GHG emissions from refrigeration through the ongoing roll-out of climate-friendly ice cream freezer cabinets, which use hydrocarbon refrigerants rather than hydrofluorocarbon (HFC) refrigerants. We’ve rolled out over 2.9 million climate-friendly ice cream freezer cabinets. And, finally, in 2019 we achieved our transport target a year ahead of schedule when our CO₂ emissions intensity from transport improved by 41.2% since 2010.

We’ve created a detailed plan to annually assess the feasibility for Unilever to reach our target to halve the greenhouse gas impact of our products across the lifecycle by 2030. This considers both external transitions towards a net zero carbon economy as well as the latest available data and assumptions about our GHG footprint. CDP is the world’s largest disclosure platform of environmental data for investors. In 2019, we achieved a place on its ‘A List’ for climate change and forests (which was conducted through the lens of three commodities: palm oil, soy and timber).

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.

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 the electricity used to heat water, including the hot water used by our consumers, significantly contributes to GHG emissions.

We have a role to play to help advocate for policy and legislation which accelerates the transition to a low-carbon economy. Strong policy measures and carbon pricing – applying a cost to each tonne of carbon emitted is one of the most effective ways to encourage investment in low-carbon solutions – are needed to accelerate the transition. The removal of fossil fuel subsidies is also essential, as subsidies act as negative carbon prices.

* 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.

** 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 reduce scope 1 and 2 greenhouse gas emissions by 100% from our own operations by 2030.

^† Independently assured by PwC