La Financière Responsable is a French asset manager cofounded in 2007 by Olivier Johanet (Chairman) and Stéphane Prévost (Chief Executive Officer), with specialist expertise in Environmental, Social and Governance (ESG) reporting. Its philosophy relies on long-term and stock-picking management to select European listed companies through a combination of strategic, non-financial and financial analysis, in accordance with its Integral Value Approach IVA©. Here LFR picks up what it perceives as shortcomings in Unilever’s ESG reporting:
Unilever ranks among the world’s corporate legends: the biggest consumer goods firm, with 400 brands sold in 190 companies. Dual-listed in London and Rotterdam, the firm has a proud 83-year history, during which it has mostly delighted investors, growing by acquisition and by reputation, most recently for its much-publicised commitment to reduce the environmental impact of its production and consumption processes.
However, closer analysis of its ESG (Environmental, Social and Governance) credentials indicate Unilever is still falling short in important areas. In May (2017) we noted that while the company is strong on environmental monitoring and standards, it looks much weaker on its Social reporting, with limited quantitative data available (only gender breakdown and accidents at work), and no extra information forthcoming on request.
In 2016, Unilever’s response to our pre-investment ESG questionnaire came in at 40.4%, against 60.6% for Eurostoxx 50 companies. In our view, it also failed to adequately address concerns publicly raised that year regarding forced labour and child labour in its supply chains, particularly in its Indonesian palm oil refineries.
In its 2016 Annual Report, Unilever re-affirmed its belief that the sustainable development of a society cannot be done without taking account of the interests of all of its stakeholders. The same belief drives our own investment philosophy, driven by our comprehensive IVA® analysis and Ecosocial Footprint®.
This year, we find there has been some improvement in Unilever’s Social communication. As well as gender and accidents at work data, the company is now measuring its internal job mobility rate, training hours per employee, and deaths among employees of subcontractors. However, indicators such as the rate of staff turnover, absenteeism, the severity of accidents at work, employment of people with disabilities and equal pay for men and women are still unavailable.
There is no doubt Unilever treats its shareholders well and it excels in environmental communications, but the social data in its Corporate Social Responsibility reporting remains poor. For these reasons we are not investors, but will keep the stock under review.
Paris, January 2018