Unilever

Unilever demonstrates it is a leader in the space by taking a dual approach to portfolio diversification. There is no material change in the company’s acknowledgement of the materiality of the issue. Moreover, the company understands the connection between protein diversification and carbon abatement, although it has not quantified its potential emission reductions. Unilever fulfilled its promise to expand its high-level scenario analysis to include a 1.5°C warming trajectory. The company understands the mitigation potential of alternative proteins in the supply chain. In its CTAP climate strategy. It concluded that such a figure is not necessary to justify the integration of sustainable proteins into its climate strategy nor to progress against its climate ambition. It stated there are enough external studies which show the benefits of plant-based alternatives vs meat/dairy. Hence, the company is not planning to disclose a carbon abatement figure that calculates the potential carbon abatement of substitution, specifically for dairy in ice cream and animal-derived ingredients in dressings, where animal-derived ingredients are substituted. Unilever is assessing the resiliency of its supply chain. Within plant-based specifically, the company is looking at other sources of plant-based protein (beyond soya and pea) that can be used to increase the toolbox of the different non-dairy proteins in its products. It also uses multiple suppliers in multiple geographies not to be dependent on one source. The company hopes to be able to track and report more detailed data on its sourcing in the future. The results published in its annual report from the expanded scenario analysis identified an opportunity for growth in the plant-based food category; it showed potential annual revenue of €0.5 billion by 2030, €1.7 billion by 2039, and €6.4 billion by 2050. This calculation considers that the product mix remains constant, thus no substitution from current animal-derived towards plant-based rather the standalone growth of plant-based products. The company has started addressing dairy after being identified as one of the main contributors to scope 3 emission. It confirmed conducting an internal deep dive analysis and is working on finalising the dairy strategy/roadmap, of which Ben and Jerry’s pilot project is the first step.

The company is on track with its portfolio diversification strategy, its strategy has not changed significantly, and we expect it to continue in its trajectory in the next 12-18 months. The company has made progress in sustainable sourcing of dairy and reported improvement for most of its sustainable sourcing commitments. Portfolio transformation continues to be at the core of its climate strategy. The company did not report a specific sales figure on its commitment to grow the sales of its plant-based meat and dairy portfolio. Yet, it indicated strong double-digit growth in 2021, primarily driven by The Vegetarian Butcher brand. During the meeting with investors, the company highlighted that this sales target drew significant attention despite being a small part of the “Future Food” ambition. The company did not report the status of its target to have 20% of its total ice-cream portfolio as non-dairy, by 2030. Overall, Unilever is confident it will achieve its plant-based sales goal; however, the company acknowledged that it is behind in meeting the Unox brand target to grow its range of meat substitutes by 100% by 2025. Unilever is setting up a suite of Lighthouse Programmes to trial implementation of the Regenerative Agriculture Principles (RAP). Simultaneously, it will continue to use SAC2017 as the basis for the sustainable sourcing programme. As part of its sustainable sourcing strategy, and following 2020 publication of the RAP, Unilever launched a due diligence phase of Climate and Nature fund together with AXA and Tikehau Capital to fund regenerative agriculture projects providing raw inputs for Knorr, among other brands. Projects funded are expected to reduce GHG emissions and water use while improving biodiversity, soil health and livelihoods. Most of Unilever’s exposure to animal ingredients is to dairy for its ice cream business. The company is currently developing a GHG reduction roadmap for dairy. This approach is built of three elements: (1) improve current dairy into low carbon dairy, (2) limit the amount of dairy used, where the company is combining animal and alternative ingredients to produce hybrid products and (3) replacing dairy with non-dairy. To achieve low carbon dairy, the company started with a pilot project in the Ben and Jerry’s brand; the brand is collaborating with its dairy partners to reduce GHG emissions by 50% at the farm level by 2024. This project, formerly known as “Mootopia”, covers 15 farms. Unilever shared its plans to scale this project to other parts of the supply chain. Unilever does not provide the carbon abatement potential of its dairy initiatives. It shared that this is due to limited data, yet it highlighted its decarbonisation roadmaps are end to end; hence for ice cream, they are looking into increasing the temperature of the ice cream supply chain and more efficient freezer cabinets. The company's umbrella ambition is to be net-zero by 2039 across all three scopes; Unilever believes this will require the development of future technologies and a transition to large-scale regenerative agriculture, among other tools that are still being tested and developed. The company has interim targets to ensure long-term ambitions; it is on track to reach the 2030 Scope 3 target but acknowledges that the most significant challenge will be post-2030. Its current Scope 3 emissions target is not aligned with a 1.5°C warming trajectory; the company is aware that standards have risen hence it will adjust the target to 1.5°C and share an update on the next reporting cycle. Regarding health and nutrition, a shareholder resolution coordinated by Share Action was filed for the 2022 AGM and then withdrawn as the company stated it would publish a nutrition assessment by volume of product and by sales revenue on an annual basis. Unilever’s new health targets, and its updated “Future Foods” commitments, will be published by October 2022. Targets and progress disclosed: • Company-wide target: sustainably sourcing 100% of its key agricultural crops (% purchased). In 2021, it did not achieve its target; it reached 79%. • Company-wide target: protect and regenerate 1.5 million hectares of land, forests, and oceans by 2030. By the end of 2021, the company reported 53,000 hectares. • Company-wide target: get 70% of products to meet WHO-aligned nutritional standards by 2022. In 2021 it reported 63%. • Business unit target: 85% of the Food & Refreshments (F&R) portfolio must adhere to a maximum salt content (5 gr per day) – including plant-based products. For 2021, it reported 81%. • Knorr Brand targets: get food that is good for people and the planet onto 7 billion plates by 2025. 50% of Knorr’s portfolio will be plant-based, and 25% will contain Future Foods by 2025. The company did not report progress on these brand targets. • Business unit target: reaching 54% of products sold that deliver positive nutrition by 2025 (% of servings sold). It reported 41% in 2021. Positive Nutrition standards and its commitment aim to increase the offering of nutritious plant-based products by promoting and tracking the increase of vegetables, wholegrains, pulses, legumes, nuts and seeds ingredients and micronutrients essential for a healthy plant-based diet in Unilever’s products.

The company continues to be a leader in the product portfolio by investing in the R&D of this category and addressing nutrition and processing concerns of the plant-based products under its principle to be “boldly healthier”. We expect this trajectory to continue for the next 12-18 months. The company is actively expanding its portfolio of 'plant-based products by design' products or items that are vegan in composition but not explicitly advertised as plant-based alternatives (e.g., flavoured mayonnaise or salad dressings). These products allow the company to increase its plant-based portfolio without alienating consumers. Its product portfolio continued to expand. For example, Hellmann’s vegan mayonnaise is now available in 33 markets and launched three new flavours –Baconnaise, Chipotle and Garlic. The ice-cream range continued to grow with non-dairy offers under brands like Ben & Jerry’s, Magnum, Breyers, Cornetto, Carte D’Or and Swedish Glace. Addressing the nutrition concerns of the plant-based meat alternatives, the company has reformulated and fortified with micronutrients. For example, in the last year The Vegetarian Butcher has renovated several of its core products significantly improving the nutritional profile specifically on Salt and Saturated Fatty Acids (SAFA) and has an on-going renovation program for the remaining core products. Also, in 2021 Knorrox launched products to help address local micronutrients deficiencies of zinc and iron. The Vegetarian Butcher has continued to expand plant based product options aiming to have Nutriscore of A or B. Relative to the animal-derived products, its alternative products are higher in fibre, lower in SAFA, similar in protein and iron levels and fortified with vitamin B12. The company applies this nutrition for both for the retail and food solutions business units foods. Key stats for 2020 versus 2021, for food service portfolio: • Nutriscore A/B: 67% (+8% vs 2020) • HNS compliant: 29% (+100% vs 2020) • Positive Nutrition 87% (first time measured) For retail portfolio: • Nutriscore A/B: 82% (+5% vs 2020) • HNS compliant: 19% (+100% vs 2020) • Positive Nutrition 91% (first time measured) The company is also supporting the diversification of ingredients for its alternative proteins, to diminish the reliance on a few crops. For example, in some European countries, Knorr, introduced dishes made with buckwheat, spelt, and wild rice. Unilever is continuously looking at novel proteins that could be used to expand the plant-based product lines. The company reported that its partnerships with Algenuity and ENOUGH have progressed; they are working on plans for potential new product launches in 2023-2024, across meat analogues and scratch cooking categories, in different geographies. The company continues to tap into reformulation to limit or eliminate unnecessary animal-derived ingredients. For example, in Sweden, it launched a reformulation programme for certain products with plant-based dairy powder instead of skim milk powder, intending to reduce GHG emissions. The company notes that the scale and continuation of this program will depend on consumer response and uptake. Moreover, it is beginning to reformulate the add-ins of its ice cream ingredients (i.e., sauces, chocolate, confectionery, etc.) to be plant-based by design; this reduces animal products' content, even in dairy-based ice creams. In terms of cross-sector collaboration, the company has increased participation on plant-based research and is part of the following consortiums; Giant Leaps (Gap Resolution in Safety, nutritional, allergenicity, and environmental assessments to promote alternative protein utilization in the dietary shift) starting in September 2022, TKI projects PlantPROMISE and Improving plant-based meat analogues by evaluating effects on human health, Wageningen University & Research (WUR) Plant Meat Matters, Lowlands Festival activation on plant-based, and WBCSD’s Food Reform for Sustainability and Health FReSH. On its acquisitions, the company reported that The Vegetarian Butcher brand is growing in all 55 markets, both in food service and retail. Yet, the company did not report growth or total revenues for 2021.

The company continues to focus on normalising the dietary shift. It actively incorporates consumer insights around how to talk into a specific market’s ears; promotions seek to be culturally appropriate and familiar to customers. For example, not drawing too much attention to the fact that products are plant-based in marketing or clearly labelling them as “vegan” would avoid alienating the broader base of consumers. Where Unilever did not have a prior presence, it launched new products as “plant-based by design” from the start. For example, Hellmann's full portfolio was launched as egg-free in India. This allows Unilever to expand its plant-based presence without labelling items as vegan. Nonetheless, the company continues to work on labelling to highlight product carbon footprint and health characteristics. It stated that it could not provide a timeframe on eco-labels for products, as disclosures will consider the external progress in the definition and application of eco-labelling. Yet it shared that it continues to be involved in several pilots, including Foundation Earth in the UK, which are likely to shape national discussions on how best to provide information to consumers on a consistent and comparable basis. Moreover, the company has carried out Life Cycle Analysis (LCA) of plant based-products to promote their environmental dimension. For example, The Vegetarian Butcher brand conducted Life Cycle Analyses on three of its main products. A similar analysis was done for the launch of Knorr’s meal makers in Germany. The company also reported that the number of products carrying the EVU (Vegetarian) logo increased by a third. From ~3000 products in 2020 to ~ 4000 in 2021. The company reported that it is working with others across the value chain to standardise data collection protocols and communication frameworks regarding its ambition to communicate the carbon footprint of every product they sell. In its CDP report, the company measures approximately 3,000 products across 14 countries, representing approximately 60-70% of annual sales volume. Unilever's partnership with Burger King and The Vegetarian Butcher has been successful; the company shared that 1 out of 3 whoppers sold in Belgium are plant-based. However, it is difficult to measure the success or ROI of resources dedicated to consumer engagement campaigns for plant-based products and alternative proteins with the current company’s disclosures without metrics such as marketing spending for plant-based proteins/products relative to dairy and other animal proteins or overall marketing spending for F&R. Nevertheless, the company reported the outcome achieved from the consumer engagement initiative with Albert Heijn (based on an annual qualitative survey), as an increase in the number of people who eat sustainably from 45% in 2016 to 61% in 2020. In scratch cooking Knorr is launching nutritious and convenient products that allow to recreate traditional/popular recipes. For example, in NL Knorr launched Lekker Vega! range that includes Chilli sin carne and Spaghetti with lentils. Plant-based specific marketing campaigns include: Hellmann’s 2022 Veganuary campaign in the UK and the US, Magnum’s launch of mini Magnum vegan in Veganuary 2022, Knorr’s ‘plant friendly pizza ‘Plizza’ in the US, China, Indonesia in February 2022, The Vegetarian Butcher launched a plant-based cookbook in NL in 2021, and will publish an English version in October 2022 in the UK. The Vegetarian Butcher’s products were sold at the Butcher’s counter in Carrefour France. Though its Knorr brands, the company is promoting that wholesome, nutritious food should be accessible and affordable to all, hence the brand runs consumer education campaigns around the world (i.e., Vietnam eating with enough vegetables, amongst others). Also, there is an increasing number of campaigns promoting plant-based recipes and swaps of meat ingredients like the UK’s ‘Cheat on Meat’, Thailand’s ‘Eat good for Wednesdays’, and Germany’s ‘Vegetables instead of Meat’. In its discussion with investors, Unilever stated that the company is incorporating this into its core marketing campaigns rather than allocating a specific budget of marketing spend for plant-based. Unilever is hesitant to set input KPIs for plant-based marketing because it does not see them as effective use of human resources, yet it believes in setting strong output KPIs. The company flagged that one of the significant challenges it faces with its plant-based products and consumer engagement is the cultural context of the market. In some countries, there are regulations on labelling dairy/meat alternatives. For example, ice cream has a standard of identity in many markets, which means that to label a product as 'ice cream', it must contain dairy. In those markets, Unilever must brand its non-dairy items as specifically 'vegan' or 'plant-based' to avoid using less attractive language such as 'frozen dessert', which can be an obstacle to attracting a broader consumer base that does not necessarily identify or seek “vegan” products.

The company did not have significant changes, and we do not expect this to change in the next 12-18 months. It did not disclose sales figures for meat and dairy alternatives nor provided Scope 3 emission disaggregation to understand which supply chains within purchased goods and services generate the most emissions. Investors want progress indicators related to the overall sales of the F&R division reflecting the impact of the long-term composition of its overall product portfolio and procurement strategy. Hence, the company needs to provide more holistic metrics for the Future of Food ambition that support investors’ understanding of how Unilever is bending the sales curve of dairy and meat products significantly away from Business-as-usual and toward a substantial overall plant-based food and alternative proteins pathway. However, none of the company’s portfolio diversification metrics currently showcases the impact on overall portfolio composition, including plausible displacement of existing animal-derived products and ingredients. Nevertheless, it indicated strong double-digit growth in 2021, primarily driven by The Vegetarian Butcher brand. Unilever will start to report sales form plant-based products in the next Annual Report. The company is not disclosing its “Positive nutrition” figure, which is the total sales of Unilever’s products containing plant-based meat and dairy alternatives. The definition of positive Nutrition are products delivering a meaningful amount of nutrients to encourage like vegetables, fibre, and micro nutrients like vitamin A, D, Iodine or mineral like Fe and Zn. The company disclosed at the brand level that more than 50% of total GHG from Ben & Jerry’s brand is linked to dairy. It declared that certified vegan non-dairy makes up over 25% of Ben & Jerry’s pint flavours in the US. From information disclosed in the 2021 annual report, 99% of total GHG emissions are Scope 3, and 23% of total emissions are linked to “Ingredients and packaging”, the second largest source of GHG emissions for Unilever. However, the company does not further disaggregate providing absolute or relative emissions that evidence the most carbon-intensive ingredients; this makes it difficult to understand how the company’s mitigation initiatives impact GHG emissions from purchased goods.

The company did not participate in the technical round table. The company agreed to a dialogue with investors and met with the coalition as it did last year. The company provided detailed responses to the coalition’s questions on the call, answered investors’ follow-up questions, and provided feedback on the final assessment.