This is How Unilever Can Increase Profits While Saving the World From Plastic
A letter to Alan Jope, Richard Slater, Rebecca Marmot, and John Coyne
Unilever is now in the position where its near-term future growth will largely depend on what happens in emerging markets. In 2019 these markets accounted for 60% of global turnover and much higher growth (5.3%) than the company experienced as a whole (2.9%) that year.
Much of this future growth will result from the expansion of the sachet economy among the 3 billion rural consumers presently underserved in Asia and Africa. Nineteen percent of Unilever’s products are sold in sachets. In India and South-East Asia as much as 95% by volume (60% by value) of industry sales are in sachet packaging. (Sachets are single-serving size, multi-laminate pouches. Think hotel shampoo.)
At present however, sachets are essentially unrecyclable at any meaningful scale. A pilot sachet recycling plant was built in Indonesia in 2018 but is no longer mentioned in Unilever’s annual reports. Raw material supply seems to be the bottleneck (per. comm. with CreaCycle GmbH).
This over-reliance on sachets exposes Unilever to significant reputational and regulatory risk. Strong sales growth in emerging markets will stress over-burdened waste management infrastructure throughout South and South-East Asia, resulting in plastic leakage into already heavily polluted environments, causing reduced tourism potential, flooding, increased disease burden, and crop and livestock damage.
Rising pollution levels of easily identifiable, branded packaging will raise the ire of governments and citizens around the world who are becoming more sensitive to environmental and social issues. This will exacerbate several principal business risks identified by Unilever in their recent annual reports including: plastic packaging pollution, legal/regulatory issues, and talent acquisition and retention.
Sachet packaging is not going away. It is an 8 billion dollar industry with an expected CAGR of 6% for 2019–2027. It is hugely popular in emerging markets for providing highly-desired consumer products at affordable prices. Unfortunately it will not be recycled to any great extent any time soon. Nor will it quickly be supplanted by alternative materials such as seaweed (although this is coming). Nor can we expect a sudden and extensive upgrading of waste infrastructure in the same markets where thin-film packaging pollution is expected to soar.
In order for Unilever to mitigate at least 3 of its principal risks it will have to be proactive with this problem. I believe the focus should be on the creation of a system that completely removes all thin-film plastic packaging waste from the waste stream at the household level. And the best way to do that is to provide a financial incentive, also at the household level.
I believe there is a way to effect considerable change at very little cost, resulting in significant long-term benefits to local residents, vendors, the environment, and Unilever.
Here is how it might work in Sidoarjo, East Java, a regional center for plastic recycling and the home of Unilever’s pilot sachet recycling plant:
- Leveraging Unilever’s Shakti distribution model, saleswomen visit homes selling their Unilever wares and buying any thin-film packaging waste that has been collected by the household from their own homes and the local environment.
- For each kilogram collected the householders are paid with a (physical) token indicating that the bearer of said token is responsible for the permanent removal of 1 kg of pollution and its associated potential harm to the environment.
- The tokens are redeemable at participating vendors, who are free to set token value and conditions of use as they see fit. The tokens never expire, and will circulate forever among willing consumers and retailers, increasing local economic activity (and thus living standards).
- Householders are not required to buy anything from the Shakti saleswomen in order to sell their waste. Token redemption need not be limited to Unilever brands only. By broadening the ecosystem of willing participants, a greater amount of goodwill (and brand exposure) can be generated for Unilever.
- The waste is processed at local waste banks and diverted to Unilever’s sachet recycling plant. Any unwanted waste is heat-compressed into blocks and sequestered, either permanently, or sold as chemical or energy feedstock as those markets become available.
In this system all the actors are incentivized. Households extract value from at-hand waste in and around their homes. Vendors who sign on will enhance their eco-reputations and acquire more custom. The clever ones will find dozens of ways (beyond simply raising prices) to reduce their financial exposure. (e.g. tokens usable only during off-peak hours, on selected products). The local environment will be noticeably cleaner. Unilever’s sachet recycling plant will get sufficient feedstock to operate. Local governments will appreciate growing economies and reduced landfill stress.
And as the ecosystem of the willing expands, the environment keeps getting cleaner, households keep getting richer, the economy keeps getting bigger, and everybody will know what company is driving all these changes.
By undertaking such a project Unilever can accomplish one of their key sustainability goals — the removal of more plastic packaging waste than they sell (690,000 tonnes / year); they can enrich the lives of their present (and future) customers in emerging markets; and they can generate an enormous amount of global goodwill.
(Image credit: Ikhlasul Amal CC BY-NC 2.0)