A Case for Taking the Long Road
By Lindsay Cottman
Famed operatic soprano Beverly Sills used her vocal talent to sing, and to impart wise words, once musing that “there are no shortcuts to any place worth going.” While this sentiment can be applied to most aspects of life, it is particularly apropos in business.
As companies become increasingly focused on short-term earnings, leaders obsess over hitting quarterly revenue goals and pleasing shareholders. To be sure, playing the long game is no easy task.
But when brands let long-term strategic thinking fall by the wayside in favor of short-term results, they will not remain profitable for long. Eschewing such myopia by anchoring a brand to their core “why” enables businesses to scale and mature well beyond the next earnings report.
Unilever, the world’s largest consumer goods company, has been actively taking steps to invest in this kind of long-term growth. The seeds of this plan were first sown when CEO Paul Polman came on board back in 2009 when the global financial crisis had reached a fever pitch. Polman immediately rocked the boat when he announced that the company would no longer produce quarterly earnings reports. Shareholders weren’t exactly thrilled at first, but Polman remained adamant that Unilever must take a longer strategic view.
Polman wanted to weed out profit-hungry shareholders, but the full scope of Unilever’s 10-Year Sustainable Living Plan aimed to accomplish much more than that. The ambitious goals of the plan included not only doubling the company’s revenue, but also cutting their environmental footprint in half — all by the year 2020. Unilever didn’t take a profit fast approach to realize this vision. Instead, the company collaborated with government entities, NGOs, and consumers to achieve their core purpose of “improv[ing] the health and well-being of over a billion people.”
Unilever has placed this sentiment at the heart of their business model, holding their brands accountable to bringing the plan to life. Each brand under the company’s umbrella is responsible for achieving sustainability targets. At the outset of the plan’s adoption, Unilever swiftly undertook work to understand the full extent of their environmental impact. Some 1,600 products — representing about 70 percent of sales — were assessed, a new agricultural code was put in place, and 250 factories were reviewed to find the best ways to reduce waste, water and energy use.
Sanitation is another area of focus for the company. Unilever workers have travelled to India and Africa to install toilets, a commodity found to significantly reduce the spread of infectious disease — and significantly increases sales of their Domestos-brand toilet cleaner.
In the process of implementing these far-sighted changes, Polman succeeded in positioning Unilever’s brand as one that seeks to serve society. Unilever’s fruitful strategy of “doing good while doing well” sits at the core of the brand. Unilever’s “why,” which can be thought of as their purpose, or mission, is anchored by their tenets of corporate responsibility. Their “why” is simple: to make sustainable living commonplace around the world. The driving force behind Unilever’s brand story is the key to their long-term success.
Since Polman first enacted his long-term plan in 2009, the company’s growth has continued to climb year over year in tandem with their enviro-philanthropic achievements. Energy use per metric ton of production fell by almost a quarter from 2008 and 2016, contributing to savings of more than $472 million. Water use is down by even more, again slashing expenses.
Polman himself is candid about the importance of putting social initiatives front and center, telling The Atlantic, “Ultimately, the purpose of a company is to serve society, and in doing so shareholders will equally benefit over time.” Most CEOs, he claims, hold the opposite view, and believe that shareholders come first, and long-term benefits to the company will trickle down over time.
As the 2020 target draws nearer, Polman’s long-term strategy, rooted in his belief that organizations exist to serve society, is working from a financial perspective as well. Since his first year at the helm, Unilever’s annual sales have risen from $47 billion to roughly $62 billion, with the company’s earnings margin hovering at a healthy 18 percent. What’s more, shares have more than doubled over the past five years.
Based on the success of the Sustainable Living plan thus far, Unilever continues to double down on their brand story with the acquisition of brands like Seventh Generation Inc., a Vermont-based producer of eco-friendly cleaning products. Companies like Seventh Generation fall into what Unilever deems “sustainable living” brands, all of which manufacture products with purpose. And the numbers don’t lie: The company reports that these sustainable brands delivered more than 60 percent of Unilever’s growth in 2016 alone.
“There is no doubt that the Unilever Sustainable Living Plan is making us more competitive by helping us to build our brands and spur innovation, strengthen our supply chain and reduce our risks, lower our costs, and build trust in our business.” Polman stated in a press release. “It is helping Unilever to serve society and our many consumers, and in doing so, create value for shareholders.”
Standing in drastic contrast to Unilever are organizations like DuPont, who cling to short-sighted objectives that ultimately damage their prospects for long-term viability. In 2016, the company embarked on a massive layoff effort, letting go of 1,700 employees in the U.S. alone, a number equal to one-third of DuPont’s Delaware workforce, leaving remaining employees to wonder if they might be next.
The move was made in response to a not-so-veiled threat from DuPont’s fifth-largest shareholder. Hedge-fund investor Nelson Peltz and his company Trian Fund Management essentially demanded that DuPont make major budget cuts, and if they didn’t, Trian would convince other shareholders to vote out members of the company’s board.
As a result, hundreds of employees working in DuPont’s Experimental Station, the company’s research lab that over the years churned out renewable plastics and polymers, as well as revolutionary innovations like Kevlar, Neoprene, lycra, and nylon, were given the axe.
By lobbing off one of their more innovative, forward-thinking branches, the brand sent a clear message: DuPont values immediate profits (and shareholders) over long-term purpose. Period.
Science, and the meaningful change brought with it, has always been at the core of DuPont’s story. For decades DuPont was considered the end-all-be-all for young chemists on the cutting edge, and the company historically invested in these workers and the research-heavy work they conducted. Cuts to research and development which has always been at the center of DuPont’s story, hurt their employees, and their brand, all in the name of quarterly earnings.
These substantial cuts came at a cost. This shift from research to shareholder gain was evident in the job cuts, as well as in how the brand envisioned their purpose. In their 2016 annual report, DuPont noted that their R&D wing was committed to research, but also served to “drive revenue and profit growth for the company, thereby delivering sustainable returns to our shareholders.”
Although the shift from research to shareholder interest indeed benefits those stakeholders in the short-term, it comes at a greater cost to the company, and society at large. While the company might continue to be financially successful in the short-term, the lack of investment in R&D and any inspirational purpose to offer employees, the company’s long-term outlook is much less rosy.
While Unilever and DuPont represent opposing sides of the same coin, they are both proof that establishing brand identity is one thing, but maintaining it is another. Sticking to the story and keeping a steady focus on long-term initiatives, even when the temptation of instant gratification seems too good to turn down, is the surest way to build a company that keeps growing and keeps lasting.
Lindsay Cottman is an associate at Woden. Whatever your storytelling needs may be, Woden can help. Read our extensive guide on how to craft your organization’s narrative, or send us an email at connect@wodenworks.com to discuss how we can help tell your story.