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In typical forthright fashion, longtime fund manager Terry Smith has done his bit to lift the mid-winter gloom in London with an attack on the consumer goods company Unilever. Prompted by the multinational’s failed bid for pharmaceutical company GSK’s consumer health division, Smith — in a letter to investors in his asset management company Fundsmith — criticized chief executive Alan Jope and other senior managers for concentrating on sustainability principles at the expense of improving the operating performance. In a much-quoted aside, the letter, co-written by Fundsmith’s head of research, Julian Robins, and seen by the Financial Times, said: “A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot.
This looks like a cheap shot. As a former Unilever executive points out in a letter, also published in the FT, it is “an easy sound bite.” The point is not that the Unilever managers — like some latter-day hippie philosophers — are seeking to find the meaning in mayonnaise, but that the company is trying to achieve the sort of performance required by increasingly demanding activist investors at the same time as demonstrating the commitment to wider interests associated with Jope’s predecessor, Paul Polman. Business has, of course, always required balancing different interests. However, that is especially true now that environmental, social and governance (ESG) issues have become not just rallying cries for concerned consumers but important measures of success for many institutional investors — if not Mr Smith and his colleagues.
The episode coincides with the publication of a new edition of a book — Business on a Mission — that is devoted to the tricky matter of helping organisations prosper in the face of increasingly serious challenges. Subtitled “How to build a sustainable brand,” it is written by Andy Last, co-founder of salt, a communications agency that is now part of MullenLowe, and a fervent believer in the power of business to do good. Indeed, the book does not even really explore whether this is appropriate. As Last writes early on, “all businesses at their core do have to serve society. Businesses ultimately have to sell products or services to people, and people are society. Businesses have always had to have a social mission in that sense.”
He grew up close to Port Sunlight, in the north-west of England, which was the original home of the soap business that was created in the nineteenth century by William Hesketh Lever and became part of what is now Unilever. Lever was one of those Victorian industrialists who, while becoming extremely wealthy, was driven by a desire to make people’s lives better, both through particular products and how they treated their workforces. (Port Sunlight included a village where the workers lived.)
One of the products that emerged from Port Sunlight was Lifebuoy, an affordable soap designed to be used by Liverpool’s people to wash themselves and so protect themselves from cholera and other prevalent diseases. For many years, it disappeared from British shopping baskets, but in 2006 Last, who by then had Unilever as a client, visited a hand washing project being run in a deprived part of Nairobi, Kenya and saw how the same product was still being used to combat disease. The project has been described as “the best social program ever.” Yet, in Last’s view, it is successful not because it is good example of what used to be termed corporate social responsibility but because it is both good business and good for society. In the five years from 2008 the Lifebuoy business more than doubled in value and in so doing helped more than a billion people develop better handwashing habits, he says. And in a further twist, when the pandemic refocussed attention on washing hands in 2020, Lifebuoy returned to the UK as a cheap and simple solution to the problem.
For Last, this story and others like it clearly demonstrate that social purpose is central to building sustainable brands. And his book offers practical tips from the front line about how to make that connection. But at its heart is a critique of how the interests of business and society diverged in the late twentieth century as a result of two key factors — an increasing focus on purely fine uncial aspects of managers’ performance and a breakdown in society in that as businesses became more global they ceased to have a close connection with their communities and those that supplied them. Only through the greater transparency provided by social media are companies being forced to deal with issues in suppliers who would previously been unseen by customers.
In a sense, then, although there are helpful acronyms and other pointers designed to provide the much-needed purpose, the book is a call for return to basics. Last writes: “People like William Lever never talked about doing good or giving back to society. He was a businessman. He wouldn’t have disagreed with Milton Friedman’s argument that managers have one responsibility and one responsibility only: namely, to do the bidding of their employers, and ultimately the owners of the business. That there is no such thing as a separate corporate social responsibility. But Lever and others like him recognised that the sustained success of their businesses depended on the social context. That their businesses existed only in that context, and that the more opportunities they could harness for society the more successful their businesses would be.”
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