REV: DECEMBER 21, 2011
REBECCA M. HENDERSON
Sustainable Tea at Unilever
To survive and prosper over the long term, learn how to adapt your business model by making it servant to society and the environment. Not the other way around.
— Paul Polman, CEO, Unilever
In 2010 Unilever announced its commitment to a new “Sustainable Living Plan”, a document that set wide-ranging company-wide goals for improving the health and well-being of consumers, reducing environmental impact, and, perhaps most ambitiously, sourcing 100% of agricultural raw materials sustainably by 2020. Such a goal implied a massive transformation of a supply chain that sourced close to 8 million tons of commodities across 50 different crops. Unilever CEO Paul Polman believed that the company’s ambitious goals could drive savings, product innovation, and differentiation across the company’s portfolio of products. But more importantly, it would create a company better suited to survive in the future which Polman envisaged:
This is a world that is challenged. When you look at the interdependent challenges that we face on food security, poverty reduction, sustainability of resources, climate change, and social, economic, environmental development, these challenges have never been greater. And I believe that these pressures will only increase as 2 billion more people enter this world and many aspire to increase their living standards. 1
The changes happening at Lipton, Unilever’s €3.5 billion tea brand, were an important cornerstone of Unilever’s plan. For over five years, Michiel Leijnse, the global brand director for Lipton Tea, and the Unilever Procurement team had led the transformation of the Lipton brand and its supply chain towards a goal of 100% sustainable sourcing. Approximately 25% of all Unilever tea now came from Rainforest Alliance Certified farms and real gains had been made in the social, environmental and economic sustainability of tea production. The scale of Unilever’s mainstream partnership approach was unprecedented in the beverages industry, where “ethical” brands had failed to grow beyond niche market positions. Unilever’s goal was to have all of the tea in Lipton teabags sourced from Rainforest Alliance Certified farms by 2015, and to have every kilogram of Unilever tea sustainably sourced by 2020. Michiel Leijnse was confident that these goals could be achieved but the business faced two critical issues as they worked to make them a reality.
The first issue was how Unilever could transform a supply chain that was not only geographically very diverse but also highly fragmented. Unilever bought tea from all producing regions, and in many markets the majority of production was contro lled by smallholders who sold their tea at open auctions. Unilever and the Rainforest Alliance had successfully certified Unilever’s own tea estates ________________________________________________________________________________________________________________ Professor Rebecca M. Henderson and Research Associate Frederik Nellemann (MBA 2011) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
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Sustainable Tea at Unilever