20-F 1 d836658d20f.htm 20-F 20-F
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Washington, D.C. 20549



(Mark one)  

Date of event requiring this shell company report

For the transition period from                  to                 

Commission file number 001-04546



(Exact name of Registrant as specified in its charter)



(Jurisdiction of incorporation or organization)

100 Victoria Embankment, London, England


(Address of principal executive offices)

R Sotamaa, Chief Legal Officer and Group Secretary

Tel: +44(0)2078225252, Fax: +44(0)2078225464

100 Victoria Embankment, London EC4Y 0DY, UK

(Name, telephone number, facsimile number and address of Company Contact)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class


Trading Symbol(s)


Name of each exchange on which registered

Ordinary shares, nominal value of 3 1/9 pence per share    ULVR    New York Stock Exchange*
American Depositary Shares (evidenced by Depositary Receipts) each representing one ordinary share of the nominal amount of 3 1/9p each    UL    New York Stock Exchange

*Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:


Title of each class


2.1% Notes due 2020

1.8% Notes due 2020

2.75% Notes due 2021

4.25% Notes due 2021

1.375% Notes due 2021

3.0% Notes due 2022

2.2% Notes due 2022

3.125% Notes due 2023

3.25% Notes due 2024

2.6% Notes due 2024

3.1% Notes due 2025

3.375% Notes due 2025

2.0% Notes due 2026

2.9% Notes due 2027

3.5% Notes due 2028

2.125% Notes due 2029

5.9% Notes due 2032


Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The total number of outstanding shares of the issuer’s capital stock at the close of the period covered by the annual report was: 1,168,530,650 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:

Yes         No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

Yes         No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes         No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes         No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer          Accelerated filer         Non-accelerated filer         Emerging Growth Company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act.

*The term ‘‘new or revised financial accounting standard’’ refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP    International Financial Reporting Standards as issued by the International Accounting Standards Board    Other

If ‘Other’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17         Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes         No

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This document may contain forward-looking statements, including ‘forward-looking statements’ within the meaning of the United States Private Securities Litigation Reform Act of 1995. Words such as ‘will’, ‘aim’, ‘expects’, ‘anticipates’, ‘intends’, ‘looks’, ‘believes’, ‘vision’, or the negative of these terms and other similar expressions of future performance or results, and their negatives, are intended to identify such forward-looking statements. These forward-looking statements are based upon current expectations and assumptions regarding anticipated developments and other factors affecting the Unilever Group (the ‘Group’). They are not historical facts, nor are they guarantees of future performance.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Among other risks and uncertainties, the material or principal factors which could cause actual results to differ materially are: Unilever’s global brands not meeting consumer preferences; Unilever’s ability to innovate and remain competitive; Unilever’s investment choices in its portfolio management; the effect of climate change on Unilever’s business; Unilever’s ability to find sustainable solutions to its plastic packaging; significant changes or deterioration in customer relationships; the recruitment and retention of talented employees; disruptions in our supply chain and distribution; increases or volatility in the cost of raw materials and commodities; the production of safe and high quality products; secure and reliable IT infrastructure; execution of acquisitions, divestitures and business transformation projects; economic, social and political risks and natural disasters; financial risks; failure to meet high and ethical standards; and managing regulatory, tax and legal matters.

These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Further details of potential risks and uncertainties affecting the Group are described in the Group’s filings with the London Stock Exchange, Euronext Amsterdam and the US Securities and Exchange Commission, including in the Annual Report on Form 20-F 2019 and the Unilever Annual Report and Accounts 2019.

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Table of Contents

Annual Report on Form 20-F 2019

This document is made up of the Strategic Report, the Governance Report, the Financial Statements and Notes, and Additional Information for US Listing Purposes.

The Unilever Group consists of Unilever N.V. (NV) and Unilever PLC (PLC) together with the companies they control. The terms “Unilever”, the “Group”, “we”, “our” and “us” refer to the Unilever Group.

Our Strategic Report, pages 1 to 46, contains information about us, how we create value and how we run our business. It includes our strategy, business model, market outlook and key performance indicators, as well as our approach to sustainability and risk. The Strategic Report is only part of the Annual Report and Accounts 2019. The Strategic Report has been approved by the Boards and signed on their behalf by Ritva Sotamaa – Group Secretary.

Our Governance Report, pages 47 to 77 contains detailed corporate governance information, our Committee reports and how we remunerate our Directors.

Our Financial Statements and Notes are on pages 78 to 142.

Pages 1 to 162 constitute the Unilever Annual Report and Accounts 2019 for UK and Dutch purposes, which we may also refer to as ‘this Annual Report and Accounts’ throughout this document.

The Directors’ Report of PLC on pages 47 to 59, 78 (Statement of Directors’ responsibilities), 108 (Dividends on ordinary capital), 121 to 127 (Treasury Risk Management), 148 and 152 (Post balance sheet events) and 160 (Branch disclosure) has been approved by the PLC Board and signed on its behalf by Ritva Sotamaa – Group Secretary.

The Strategic Report, together with the Governance Report, constitutes the report of the Directors within the meaning of Article 2:391 of the Dutch Civil Code and has been approved by the NV Board and signed on its behalf by Ritva Sotamaa – Group Secretary.

Pages 163 to 178 are included as Additional Information for US Listing Purposes.


You can find more information about Unilever online at


LOGO    www.unilever.com

For further information on our sustainability activities and performance visit





The Annual Report on Form 20-F 2019 along with other relevant documents can be downloaded at


LOGO    www.unilever.com/ara2019/downloads

In this report

Strategic Report

How our strategy is delivering value for our stakeholders




At a glance

Chairman’s introduction      4  
Our Board of Directors      5  
Chief Executive Officer’s Q&A      6  
Unilever Leadership Executive      7  

Our strategy

Our fast-changing world      8  
Our strategy      9  
Our value creation model      10  

Our stakeholders

Stakeholder review:      12  



Our People









Our performance      22  
Financial review      24  
Our risks      33  
Non-financial information statement      46  

Governance Report

How we’re running a responsible and effective business



Corporate Governance      47  
Report of the Audit Committee      54  
Report of the Corporate Responsibility Committee      56  
Report of the Nominating and Corporate Governance Committee      58  
Directors’ Remuneration report      60  

Financial Statements

Our full financial results and notes for the year



Statement of directors’ responsibilities      78  
Independent auditors’ report      79  
Financial statements      87  
Notes to the consolidated financial statements      91  
Group companies      153  
Shareholder information      161  
Index      162  
Additional information for US listing purposes      163  



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Purpose-driven performance

One in three people around the world use our brands every day. With this reach comes responsibility – and opportunity. That’s why we’ve made it our purpose to make sustainable living commonplace. To help people live well within the limits of the planet. This isn’t just something we say – it steers our decisions and shapes our actions, at every level of the business.

Our focus on purpose goes back to the days of one of our founders, William Lever, well over 100 years ago. It’s part of Unilever history, and it’s integral to our future. This is why we want all our brands to take a stand, and act, on the big social and environmental issues facing the world. We believe we’ll be a better and more successful business by following this path.

To truly make sustainable living commonplace, we have to be fit for the future. This means anticipating the significant changes which are shaping our industry. Becoming fully digitised, lower cost, faster acting and more agile. Using our scale and influence to create positive change well beyond Unilever. Expanding into high-growth markets with superior products that are good for both people and the planet. And continuing to attract the very best people into a diverse, inclusive and flexible working culture.

  Purpose-led, future-fit





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At a glance


As one of the world’s largest and oldest consumer goods businesses, we’re on a mission to make sustainable living commonplace.





  A truly global business


Our brands are available in over 190 countries.





people use our

products every day













retail sales

outlets in our

distribution chain

of turnover in     

emerging markets




  Using our scale for good

We have ambitious time-bound sustainability goals which are delivering significant impact.



people helped to

improve their health

and hygiene since 2010




    of agricultural
       raw materials
      sustainably sourced



renewable grid

electricity in

5 continents


Read more about society and the planet on pages 18 to 19.

  Strong brands with purpose

Our 400+ household brands help people feel good, look good and get more out of life.





of brands

with purpose







with turnover of more    

than €1 billion in the year    



13 of the

top 50



of brands in top 1 or 2

market positions

FMCG brands*     


Read more about our brands and consumers on pages 14 to 15.



  Powered by our people

Our purposeful and inclusive culture attracts and keeps the very best.






gender balance

in management






of our leaders

are local





Number 1

FMCG graduate

employer of choice

in 52 markets

Read more about our people on pages 16 to 17.



Based on market penetration and consumer interactions (Kantar Brand Footprint report).


Based on a total management population of 15,028 Unilever employees.



2   Annual Report on Form 20-F 2019

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Strategic Report    LOGO






  Financial highlights



What we stand for:


Making sustainable living commonplace.

  €52.0 billion

What we offer:


Beauty & Personal Care, Foods & Refreshment,

Home Care


€6.1 billion

free cash flow*

Read more about our brands and consumers on pages 14 to 15.

  €4.2 billion
  dividends paid
  underlying operating margin*
  operating margin



  Beauty & Personal Care




What we stand for:



Beauty that cares for people, society and our planet.


€21.9 billion turnover


Our largest categories:


Deodorants, Haircare, Skin care, Skin cleansing



42% of total turnover



A selection of our brands:



Axe, Clear, Dove, Lifebuoy, Lux, Pond’s, Rexona,
Signal, Suave, Sunsilk, TRESemmé, Vaseline


52% of total operating profit




  Foods & Refreshment




What we stand for:



Taste good. Feel good. Force for good.


€19.3 billion turnover


Our largest categories:



Ice cream, Savoury, Dressings, Tea


37% of total turnover


A selection of our brands:



Ben & Jerry’s, Breyers, Brooke Bond, Heart (Wall’s), Hellmann’s, Knorr, Lipton, Magnum, Pukka,

Sir Kensington’s, Unilever Food Solutions

  32% of total operating profit



  Home Care




What we stand for:



Making your home a better world.

Making our world a better home.



€10.8 billion turnover


Our largest categories:


Fabric solutions, Home and hygiene




21% of total turnover


A selection of our brands:


Cif, Dirt is Good (Omo, Persil), Domestos, Seventh
Generation, Sunlight



16% of total operating profit

Read more about our Divisions on pages 14 to 15.



Free cash flow and underlying operating margin are non-GAAP measures. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on page 27.


Annual Report on Form 20-F 2019   3

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Chairman’s introduction


Our new Chairman reflects on a year of positive value creation, changes to the Board and the steps being taken to accelerate growth in 2020 and beyond.





Having served on the Board for five years, I am already well aware of Unilever’s reputation as a purpose-driven company, one founded on strong values, wonderful brands and a talented and committed workforce. It was an honour therefore to have been asked to become your Chairman in November 2019 and since then I have continued to work with the Board and the Unilever Leadership team to support the Group’s ambitions. On behalf of the Board, I would like to thank my predecessor, Marijn Dekkers, for his strong leadership as Chairman and for his support in helping to ensure a seamless transition.

2019 Performance

Unilever delivered another year of positive value creation in 2019, driven by a continuing balance of underlying sales growth, improved profitability and strong cash generation.

Underlying sales growth fell slightly short of the company’s targeted range of 3-5%, which while disappointing, could be explained in part by a significant slowdown in some of Unilever’s high-growth markets. Some of these economic headwinds will continue throughout 2020, but clear plans are in place – which the Board has reviewed – to accelerate the rate of Unilever’s growth in 2020 and beyond.

Board composition and succession

The Board appointed Alan Jope to the role of CEO on 1 January 2019 and Alan was duly elected as an Executive Director at the 2019 AGMs. The Board fully endorses the strategy Alan has set out to ensure that Unilever is purpose-led and future-fit, a strategy that at its heart believes sustainable business drives superior performance, creating long-term value for our stakeholders.

I was delighted that you also elected Susan Kilsby as a Non-Executive Director at the 2019 AGMs in May, with her appointment taking effect on 1 August 2019. Susan has extensive Board experience as a non-executive in global consumer goods, financial and pharmaceutical sectors, and possesses deep international banking, financial and M&A experience.

Sadly, on 31 August 2019, Mary Ma, one of our Non-Executive Directors, passed away after a short illness. Mary was a highly committed and capable Director who put her expertise and experience at the service of Unilever and is greatly missed.


During 2019 we continued to consult with shareholders on our Remuneration Policy, particularly for the Executive Directors, and set in motion the consultation process for implementing our Remuneration Policy in 2020.

With the aim of maintaining the high levels of support from shareholders at the 2019 AGMs for the implementation of our Remuneration Policy, we continued constructive engagement with both our investors and proxy voting agencies on how we intend to evolve the implementation of our Directors’ Remuneration Policy.

Corporate Governance

Recent revisions of Corporate Governance Codes applicable to Unilever expanded on the long-standing requirements for directors to remain mindful of the duties they have to consider the many stakeholders who have an interest in our business.

A particular stakeholder focus for the Board during the year was our workforce. As a result, NEDs conducted a number of workforce engagement events to assess employee sentiment. Four face-to-face events were held in Brazil and the UK, allowing for open discussions on issues important to our people. The Board believes that an open, authentic and agile culture at all levels of Unilever fuels personal and business growth. The Board will therefore continuously monitor the culture within the organisation, whether during Board visits, through workforce engagements or by continuing to engage regularly with the Unilever Leadership Executive and other Unilever managers. Further information on our engagement with Unilever’s employees can be found on page 48.

In 2019, we took further steps in our commitment to be at the forefront of good governance by cancelling the NV preference shares. We also initiated the termination of the depositary receipt structure for the NV ordinary shares which took effect on 28 June 2019.


Our Board evaluation in 2019 was externally facilitated and the results were discussed at the January 2020 Board meeting. The Board continues to operate in an effective manner overall, and reflecting on the lessons learnt by the Board in the previous year the Board agreed, in particular, in the evaluation discussions to maintain strong focus on organic growth, portfolio evolution, leadership talent, and organisation.

Each Board Committee also performed its own self-evaluation, agreeing areas where it could enhance its effectiveness further. These are described within each Committee Report.

Looking ahead

The Board fully supports the strategy Unilever is following, including the strategic review of the tea business, and is confident that everything possible is being done to help accelerate top-line growth in 2020. The Board’s confidence also derives from the high calibre of Unilever’s management. We look forward to working with Alan Jope and his team in helping to ensure Unilever remains a long-term, sustainable growth company.

During its various visits last year to Unilever’s operations, including in Brazil and the United States, the Board was able to witness first-hand the passion and commitment of Unilever’s hard-working employees. On behalf of the Board, I want to thank all of the 150,000 employees of Unilever for their efforts in 2019, and also acknowledge our appreciation for the continuing support of the Group’s shareholders.



4   Annual Report on Form 20-F 2019

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Our Board of Directors

Our Non-Executive Directors bring diverse experience to the Board’s strategic discussions and decision-making.






Annual Report on Form 20-F 2019   5

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Chief Executive Officer’s Q&A


Alan Jope answers questions on our performance in 2019, our Compass strategy, and other highlights and challenges of the year.





How do you see the current state of the world and the impact on Unilever’s markets?

There’s no doubt that conditions are challenging right now. Sluggish economies and a high degree of geopolitical uncertainty are inevitably impacting consumer confidence and spending, which in turn is intensifying competition in the retail sector. However, Unilever has now been around for 90 years and so we are very accustomed to operating through downturns and periods of uncertainty like this, and indeed emerging stronger. Moreover, all our competitors – big and small – face the same challenges.

The key in this environment is to remain relevant to the consumers you serve. For us, that comes down to two things. First, earning trust by operating a responsible, multi-stakeholder business model. And second, harnessing advances in science and technology – and especially digital – in ways that allow us to reach and delight consumers in new and ever more inventive ways. We are firmly focused on both.

The recent outbreak of Coronavirus (COVID-19) is clearly concerning and we are monitoring developments very closely. The safety and well-being of our people has been the overriding priority. We are also doing all we can to ensure business continuity and our teams are working tirelessly to help mitigate the risks. Inevitably, however, there will be an adverse impact on the business although the extent is not yet clear.

As you look back, how do you reflect on Unilever’s business performance in 2019?

It was a mixed performance. Our profitability was good with a healthy improvement in underlying operating margin, strong free cash flow delivery of more than 6.1 billion and cash flow from operating activities of 10.6 billion. This is important because our model is predicated on being able to re-invest in the long-term health of the business, while also paying out a competitive annual dividend.

On the flip side, growth is also a key driver of value creation and our underlying sales growth performance fell slightly short of expectations, at 2.9%, which was naturally disappointing. Turnover increased 2.0% to 52.0 billion. While growth was hindered by a marked slowdown in some of Unilever’s high growth markets like South Asia and West Africa, these markets all remain very attractive long-term prospects for us. We are

confident therefore of restoring underlying sales growth to Unilever’s 3-5% multi-year range.

What were the highlights for you of 2019?

A strong performance in the emerging markets – growing at over 5% – was an undoubted highlight. We also grew across each of our three global Divisions, which was encouraging and reflects the inherent strengths of our brands and our portfolio. Our Home Care Division had a particularly strong year, growing by more than 6%, driven by some great innovations and an intensifying focus around ‘green cleaning’. The performance of our recently acquired prestige beauty brands – which grew double-digit – was also a highlight, further establishing Unilever as an important player in this highly attractive and fast-growing segment of the market.

We have set out some very ambitious goals for Unilever. We want, for example, to be a global leader in sustainability; to be the world’s best marketing company; and to be an organisation that stands as a beacon for diversity and inclusion. Seeing Unilever recognised in 2019, therefore, as a leader in multiple external benchmarks, including the GlobeScan Sustainability Leaders Survey (for the ninth consecutive year); the World’s Most Effective Marketing Company; and as recipient of the prestigious Catalyst Award (for the company which has done most to accelerate the progress of women through workplace inclusion), were all special moments – as well as a spur to increase our efforts still further in these important areas.

Where do you feel the company could have done better?

In markets as dynamic and fast-moving as ours, speed is essential, both in seizing opportunities to meet changing consumer preferences but also in responding when our business is under competitive challenge. While we do this well on many occasions and in many parts of the world, we haven’t yet developed the consistency of response that I am looking for everywhere, and this was apparent in 2019. We made some important organisational changes during the year – including flattening our market structure under a newly created Chief Operating Officer position – which I am confident will help to make Unilever a faster and even more operationally effective business.

As far as our global Divisions are concerned, while it was an excellent year as mentioned for Home Care, our Beauty & Personal Care and Foods & Refreshment Divisions both fell short of expectation – with underlying sales growth at 2.6% and 1.5% respectively – and so this is where we will be looking to accelerate growth most specifically in 2020.

In the area of diversity, we reached an important milestone in 2019 on our journey to become a gender-balanced organisation. Our management population is now made up of just over 50% women. Pleasing as this is, the overall figure masks the fact we haven’t yet made the progress we want at the most senior levels of the company, where women are still under-represented. This is very much a job half-done therefore and something I intend to make a personal priority in 2020.

What steps are you taking to accelerate growth?

We’re doing a lot. I’ve already mentioned speed. There are two other areas I would highlight. First, we are putting a heightened level of focus around some proven growth fundamentals, which we are confident will accelerate our top-line performance. These include making our innovations even more impactful; building our presence in faster-growing retail channels, like e-commerce; ensuring that more and more of our brands have a clearly articulated purpose that resonate with consumers; and driving our savings programmes further to help fuel the many growth opportunities we have.

The second relates to our portfolio. We have made significant changes over recent years, acquiring businesses in new parts of the market and disposing of businesses such as Spreads. The overall effect has been to improve Unilever’s exposure to faster growing markets, those that offer better long-term prospects for value creation. We will continue that process, evaluating our portfolio rigorously against a range of exacting criteria. It is in that context that we have announced a strategic review of our global tea business, which has a large footprint in the slower growing black tea segment and a history of being dilutive to Unilever’s overall growth and margin. We will explore all options, with an open mind and with the intention of sharing the conclusions of the review by the middle of 2020.

How are you planning to take forward Unilever’s commitment to social and environmental sustainability?

Under the Unilever Sustainable Living Plan (USLP) we have developed an enviable reputation for leadership on these issues. We now mean to build on that, not least because many of the challenges the world faces – like the climate crisis or growing inequality – are becoming ever more pressing.

We will do this by embedding sustainability in a new purpose-led, future-fit Unilever Compass strategy, and in two principal ways. First, we will continue to use our size and scale to help drive change through our extended value chain. A great example last year was the ambitious commitment we made to address the issue of plastic packaging by halving our use of virgin plastic and by helping to collect and process more plastic packaging than we sell, both by 2025.

Second, we will make our product brands even more prominent vehicles for driving social and environmental change. Many of our brands already do this, to great effect, but we now intend to make it an integral feature of every brand. We know that it works and that it also helps to drive growth. Last year, our most purposeful brands grew faster than the rest of the portfolio. Unilever’s brands touch the lives of two and a half billion people every day so the opportunity for us to influence behaviour and drive positive change is enormous.

I am very proud of all the women and men of Unilever – and the millions more we partner with throughout the value chain – who work so hard every day to bring these commitments to life and who are determined to show that Unilever can remain a force for good in the world.



6   Annual Report on Form 20-F 2019

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Unilever Leadership Executive (ULE)

Our executive management team is responsible for the day-to-day running of the business and the execution of our strategy, making sure we’re purpose-led and future-fit.






Annual Report on Form 20-F 2019   7

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Our fast-changing world


We operate in a complex and volatile world. Our strategy is constantly evolving to adapt to the trends and forces shaping our markets and impacting our stakeholders.



Overview of our industry

As a leading global consumer goods company, we’re part of one of the world’s largest, most competitive and fast-moving industries. Yet, these are volatile and uncertain times. According to the World Bank, global growth decelerated markedly in 2019, with continued weakness in global trade and investment affecting both developed and developing and emerging economies. Geopolitical tensions and climate concerns are increasing the uncertainty. Conditions like these create challenges for companies and brands of all types.

Amongst the economic uncertainty, new technologies are changing the landscape of the consumer goods market, bringing opportunities to brands and consumers alike. Consumers are shopping through more diverse channels and smaller local brands are increasingly meeting shoppers’ needs.

As the global economy and the channel landscape evolve, we must be agile and responsive to capitalise on the opportunities. And by staying close to consumers and their needs we can ensure our business continues to grow, while having a positive impact on people and the planet.

The key trends affecting our stakeholders and our markets are outlined below.



  Environment and society under stress    




Digital and technology revolution


We’re in the midst of an environmental crisis. Our planet is heating, species are dying out at an unprecedented rate, and our rivers and oceans are filling with plastic. Global heating is placing an increasing strain on food, water and other resources – and rising migration is expected to put new pressures on cities, people, societies and governments.


As both younger and older generations call for businesses and politicians to do more, only international co-operation and bold action from businesses and brands will start to create the systemic change needed to protect our planet. The cost of inaction far outweighs the cost of action.


Related principal risks: Climate change, Plastic packaging, Ethical (pages 36 and 39)


For more on our response see pages 18 to 19.



Technology continues to change the fabric of life and business. Enhanced AI, robotics and the internet of things (IoT) are reshaping how people live, work and interact with the world – and with brands. Intelligent technologies are optimising manufacturing and agriculture, connecting global businesses like ours inside and out, and changing how people shop.


Digital channels bring opportunities for more targeted marketing, deeper engagement and stronger connections between brands and consumers all over the world. Yet, with access to richer data and more intelligent analytics come risks and concerns around data security and privacy – businesses need to collect and use data in responsible ways.


Related principal risks: Business transformation, Supply chain, Customer, Systems and information (pages 36 to 38)


For more on our response see page 15.



  Living differently




The future of work


Societies are becoming more diverse and fragmented. We’re seeing, for example, growing splits between generations, socio-economic groups and political affiliations. As people increasingly interact with each other and with businesses online, consumers are making more decisions based on their values. They’re also using both on- and offline channels to find better, more personalised products and services more easily and quickly.


In this new digital media and retail landscape, brands have to be visible, convenient and part of the conversation – taking a stand and action on the issues people care about. The fragmentation of consumer expectations and retail channels creates both challenges and opportunities for companies like Unilever.


Related principal risks: Brand preference, Economic and political instability, Portfolio management (pages 35 and 38)


For more on our response see pages 14 to 15.


The pace of change is affecting not only how people live, but how they work. Businesses of all types are becoming less hierarchical, more automated and more digital. As new roles and ways of working emerge, people increasingly need different skills – and they’re also demanding more flexibility from employers.


Companies that offer more varied types of employment can therefore attract the best people, while being more agile. But alongside flexibility, employees of all ages are increasingly looking for a fair, inclusive and purposeful place to work where they can be themselves and continue to learn.


Related principal risks: Talent, Business transformation (pages 37 to 38)


For more on our response see pages 16 to 17.


8   Annual Report on Form 20-F 2019

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Our strategy

A belief that sustainable business drives superior performance lies at the heart of the Unilever Compass – our strategy to create long-term value for our stakeholders.







Annual Report on Form 20-F 2019   9

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Our value creation model


Our business model describes how we operate to create sustained value for our stakeholders.







10   Annual Report on Form 20-F 2019

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Annual Report on Form 20-F 2019   11

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Stakeholder review


Stakeholders are at the heart of our strategy and business model. Engaging with them helps us to understand their evolving needs and informs our strategic decision-making.



Our multi-stakeholder model

We’ve identified six stakeholder groups critical to our future success: consumers, our people, society (including suppliers), the planet, customers and shareholders. The stakeholder review on pages 14 to 21 provides an overview of how we’ve created value for our stakeholders in 2019 and some of the benefits we’ve gained as a business from nurturing these vital relationships.

Unilever has a dual-headed structure and is subject to Dutch, UK and US governance requirements as set out in the Governance Report on pages 47 to 78. Under the Dutch requirements, directors are responsible for weighing up the interests of stakeholders, with a view to ensuring long-term value creation and the continuity of the company. Under section 172 of the UK Companies Act 2006 (‘Section 172’) directors must act in the way that they consider, in good faith, would be most likely to promote the success of their company. In doing so, our Directors must have regard to stakeholders and the other matters set out in Section 172. Pages 12 and 13 comprise our Section 172 statement, which describes how the Directors have had regard to these matters when performing their duty.

In light of our purpose and our strategy to create long-term value as set out on page 9, our Directors take steps to understand the needs and priorities of each stakeholder group and do so via a number of mediums, including by direct engagement or via their delegated committees and forums. The relevance of each stakeholder may change depending on the matter at hand. In line with the Dutch requirements and the UK Companies Act 2006, below we provide a high-level summary of the concerns of our stakeholders and how our Directors engaged with them and had regard to their interests when setting Unilever’s strategy and taking decisions concerning the business in 2019.








A good understanding of people’s needs is critical to our long-term success.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

As the ultimate user of our products, consumers continue to look for quality products that are convenient and good value – and increasingly want more natural ingredients and less packaging and waste. We also know that brands that demonstrate a meaningful purpose create conversations and brand loyalty, particularly among younger generations.    Through our Consumer Carelines we had over three million interactions through calls, emails, letters, social media and webchats. We also consulted with almost two million consumers this year through regular surveys using partners like Kantar, Nielsen and Ipsos. Unilever Leadership Executive (ULE) members spoke directly to consumers when visiting markets, and our leadership received regular updates and recommendations based on consumer insights.   

Our Board and ULE members are regularly informed of consumer needs, preferences and concerns – and consider these when making decisions. The agenda for our leadership forum was shaped by a piece of work called the Fundamentals of Growth, based entirely on consumer insights. The findings from consumer surveys help us define and refine the unique purpose of our brands.


For more on consumers see pages 14 to 15.







Our people

Without talented and committed employees, we could never deliver on our ambitions.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

Our employee surveys tell us that Unilever people tend to have a sense of personal purpose and believe they can live their purpose at work – helping them to go the extra mile. While most employees think we have the right strategy in place to win, they also want to see faster action and decision-making across the business. Our people would also like a continued push towards diversity, particularly at the most senior levels.    Our annual UniVoice survey, available in 48 languages, gives employees at all levels the chance to share views with line managers, colleagues and leadership. In 2019, we had an 82% response rate. Every month we also run smaller pulse surveys to collect real-time insights on key issues.   

In an October meeting, our Board discussed how best to nurture a more flexible, agile culture. The Board looks at the UniVoice findings each year, and reviewed this year’s in November. We also held a series of meetings with a cross-section of employees, where non-executive Board members talk about important topics from the UniVoice survey. In 2019, there were two meetings in the UK and two in Brazil to discuss purpose, talent development and sustainability.


For more on people see pages 16 to 17 and 48.








We depend on people and communities all over the world to help source, make and sell our products.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

Equality and inclusion, human rights within our operations and supply chain, and health and wellbeing are important issues for our stakeholders. Water scarcity and climate change are also challenges for many people in developing and emerging markets – reflecting the interconnectivity between the environment and society.    Our leadership engage with NGOs and policymakers to drive system change. Our ULE members, including those on the Board, each own relationships and advocacy around key issues. Our Chief Supply Chain Officer, for example, is part of the World Economic Forum (WEF) community focused on supply chains. This year, as part of our issues prioritisation (materiality) process, we evaluated a range of inputs from stakeholders to understand the most pressing societal issues and where we can make a difference.   

The Board’s Corporate Responsibility Committee (see pages 56 to 57) meets four times a year to discuss sustainability issues of strategic importance. Our USLP Advisory Council – seven independent external specialists in sustainability – also guide and critique the development of our strategy. They met with members of the ULE during the year to share insights on supply chain and human rights.


For more on society see page 18.




12   Annual Report on Form 20-F 2019

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We rely on nature for many ingredients and raw materials.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

Awareness of the environmental impact of human activity on the planet is growing. Top concerns include plastic waste, climate change and water scarcity. Loss of biodiversity is also rising up the agenda. We’re seeing growing movements for change around the world, as well as a real desire for businesses to limit their use of plastic and take bold action on climate.    Our Board and ULE members have responsibility for key environmental issues: our CEO works with the Ellen MacArthur Foundation and the WEF on driving the circular economy, for example. Our ULE members attend meetings, sit on boards, sponsor key workstreams and make sure we have strong and mutually beneficial relationships with our partner organisations. This year, our CEO attended the UN General Assembly’s Climate Week in New York. As part of our issues prioritisation (materiality) process, we analysed insights from stakeholders to make sure we’re focusing on the most important environmental issues.   

The Board’s Corporate Responsibility Committee and USLP Advisory Council (see Society on page 18) discuss key environmental issues. In 2019 the USLP Advisory Council met with members of the ULE to share insights on plastic. Environmental issues form part of our boardroom and ULE discussions and decision-making. Our ambitious new goals around plastic are a good example: our leadership will oversee how these are being delivered, both across our business and through our partnerships. During 2019, there were a number of discussions around the development of our Compass strategy, including our climate goals.


For more on the planet see page 19.








We depend on many types of retail partners all around the world to sell our products.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

In developing and emerging markets, the small retailers we partner with are increasingly seizing the opportunities of e-commerce. And our larger retail partners are looking to become more competitive in online channels, as well as against discount stores offering convenience and very low prices. Retailers want products that are suitable for each sales channel, whether premium or online. They also want more sustainable products that will help them differentiate their offering.    Our larger retail partners have direct channels into us. We actively manage these relationships through our specialist Customer Development team. In 2019, we discussed a range of sustainability issues with our customers. Through Unilever’s digital e-commerce apps, we receive direct feedback from the smaller local stores we partner with to help improve our service to them.   

Our Board and ULE were involved in approving the strategy to digitise small stores and related investments. In a number of markets, such as India and Indonesia, we’ve introduced smartphone apps so that retailers can place product orders directly – and we’re refining these based on user needs. In response to customer feedback, we’ve introduced retail programmes around the world focused on reducing plastic and food waste. We’re also designing products appropriate for each channel, which will help our customers differentiate themselves.


For more on customers see page 20.








As owners of our company and providers of capital, shareholders are instrumental to our growth.


Interests and concerns


How we engaged in 2019


Considerations and outcomes

As well as ongoing interest in our performance and growth, we’ve been having conversations with shareholders around our acquisitions and disposals strategy, our corporate structure, capital allocation and our use of plastic and palm oil – reflecting a growing interest in sustainability issues.    We speak directly to shareholders through investor events, meetings and calls with shareholders, quarterly results broadcasts and conference presentations. Our ULE members attend investor events, and senior leaders and our Board speak directly to shareholders at investor meetings on a broad range of issues. This year, we had focused meetings with shareholders on remuneration, held a sustainability event for investors and issued a webcast on palm oil.   

Shareholder feedback – particularly around dividends, our merger and acquisitions strategy and our corporate structure – forms a part of boardroom conversations. After each quarterly market update, our CEO shares feedback with the Board. In 2019, Vittorio Colao, Chair of the Compensation Committee, discussed shareholder concerns around remuneration with the Board and wrote to shareholders explaining subsequent changes to remuneration. These were published in our remuneration report and put to shareholders for voting.


For more on shareholders see page 21.




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Stakeholder review continued



LOGO   Consumers
  We know that people value price, quality, convenience – and increasingly sustainability – when it comes to the things they buy.




Understanding people’s needs

Consumer preferences are constantly changing. To make sure we’re ahead of the curve, we listen for signals that predict the next ‘big thing’ using data and advanced analytics. In our 30 People Data Centres around the world, we analyse millions of enquiries our Consumer Carelines receive each year and the conversations about our brands online. The insights we get drive the innovation and marketing of our 400+ brands – and, above all, help us give people the products they want.

We know that people want healthier and more natural products for themselves and their families, with fewer chemicals. At the same time, concerns around waste, plastic and climate change are growing – consumers are looking for eco-friendly products that are easy to buy and use, yet still effective. Alongside concern for the planet, people are increasingly shopping through multiple channels and, in pursuit of convenience, buying more online.

So we’re continuing to make our products healthier and more sustainable, as we have done for years. This means innovating existing brands, developing new brands and sometimes adding to our portfolio through acquisitions. Here we explain how each of our three Divisions worked to meet consumer needs in 2019.

Beauty & Personal Care

We believe in beauty that cares for people, society and our planet.

Caring for people

Demand for more natural and holistic approaches to beauty and wellness continues to grow, and so too does our portfolio meeting these needs. Love Beauty and Planet, for example, which first launched in North America in 2018, is now widely available across Europe, Asia and Latin America. Consumers in Europe can now also enjoy Schmidt’s Naturals, a recently acquired US personal care brand. Many of our established brands are also offering more natural products. Lifebuoy now has soap bars with green tea, charcoal and sea minerals, and Signal toothpaste has a new Natural Elements range.

We’re also creating more effective products using ground-breaking innovations. In 2019, Rexona brought out a Clinical Protection range that’s three times stronger than ordinary antiperspirants and can last for over 96 hours. It’s now available in four markets. We expanded our therapeutics offering to consumers in 2019, by acquiring Fluocaril and Parogencyl, well-known oral care brands endorsed by health professionals which are sold primarily in pharmacies in France and Spain.

Our prestige brands continue to meet the growing demand for premium beauty. In 2019, we added two new brands to our portfolio: Garancia, a French derma-cosmetic brand offering 38 premium facial and body skincare products, and Tatcha, a leading prestige skincare brand in North America, which is inspired by Japanese beauty rituals.

Consumers are increasingly looking for personalised experiences and products. All Things Hair, our online resource for hair inspiration and styling tips, now gives US consumers personalised recommendations based on digital consultations using AI. And St Ives launched a face mist range with fragrance designed to boost mood, with a marketing campaign delivering audio messaging relevant to the time of day.

Caring for society

Our Beauty & Personal Care brands are taking a stand and acting on social issues all over the world. Take Sunsilk, our haircare brand, which is on a mission to open up possibilities for young women. Its Together We Rock movement is designed to inspire women between 16 and 24 to support each other and feel more able to pursue their dreams. Meanwhile, Dove launched project #ShowUs to shatter beauty stereotypes by building the world’s largest photo library created by women and non-binary people – in partnership with Getty Images, Girlgaze and women everywhere. More than 5,000 images are already in the library, presenting a more inclusive vision of beauty to advertisers and media of all types.

CLEAR introduced a cutting-edge resilience programme, the Resilience Bootcamp, aimed at helping young people overcome social anxiety and unlock their full potential. And Dove Men+Care and Promundo are working together to improve men’s access to and uptake of paternity leave.

Caring for our planet

Plastic is a growing concern for consumers, and we’re working hard to make our products use less, better or no plastic. Dove, for example, announced ambitious plans for doing all three across its product range, including moving to 100% recycled bottles by the end of 2019 (see page 44 for more details). All Things Hair successfully piloted refill stations for shampoo and conditioner in the Philippines, and Signal launched our first sustainable bamboo toothbrush. We pioneered a new technology which has made our black TRESemmé and Axe bottles recyclable in most markets. At the World Economic Forum, we announced that six of our brands – Dove, Rexona, Axe, Love Beauty and Planet, REN Skincare and Signal – will begin to use the new global Loop system by TerraCycle, for refilling and reusing containers.

We’re creating products that are better for the planet in other ways. We’ve brought out a new ‘no-rinse’ conditioner in the US, the good stuff, which saves 420 litres of water per bottle. And after certifying Dove as cruelty-free in 2018, animal rights organisation People for the Ethical Treatment of Animals (PETA) has now certified three more of our brands: Love Beauty and Planet, St Ives and Simple.

There’s still much to do as we expand our portfolio of eco-friendly products. But we are taking steps in the right direction.


Foods & Refreshment

We have a responsibility to make brands that not only taste and feel good, but that are a force for good.

Our new state-of-the art Global Foods Innovation Centre located at Wageningen University in the Netherlands – the leading global agri-food research hub – is helping us to quicken the pace of innovation to improve the health of both people and the planet. Through our partnerships in this ‘Silicon Valley of food’ and around the world, we’re encouraging the wider food chain to become healthier and more sustainable, faster.

Plant-based foods

In 2019, we stepped up the availability of our plant-based products including Magnum Vegan, Ben & Jerry’s Dairy-free, Cornetto Vegan, Hellmann’s Vegan Mayonnaise and Sir Kensington’s Vegan range. To help improve biodiversity, Knorr joined forces with the World Wildlife Fund on a global campaign to promote Future 50 Foods, and offered new plant-based recipes to consumers around the world. We also partnered with Burger King to launch the new Rebel Whopper featuring vegan Vegetarian Butcher patties in more than 25 countries across Europe, the Middle East and Africa. Thanks in part to these efforts, investor network FAIRR ranked Unilever as among the best prepared companies for the shift towards plant-based proteins.

Better for people and the planet

This year, we further reduced the salt, sugar and calories in our products, and added even more fortified ingredients (see page 18 for more on this work). We also continued to increase the amount of sustainable ingredients in our brands: as of 2019, 98% of the key vegetables and herbs we buy (around 90% by volume) used in Knorr and other brands were sustainably sourced.

Reducing plastic packaging and food waste continues to be an important priority. We were the first major foods brand to introduce 100% recycled plastic packaging in Hellmann’s jars in Mexico and Bango bottles in Indonesia. Hellmann’s in the US has also committed to use recycled plastic materials for all its mayonnaise and mayonnaise plastic dressing containers by 2020. We were the first major ice cream brand to use compostable ice cream tubs in Italy and piloted the first ever ‘wrapperless’ ice cream on Solero multipacks. We also expanded our range of biodegradable teabags and introduced the first 100% recyclable Knorr soup pouches in Turkey.

Anytime, anywhere

We’re also making our brands more widely available. Our Unilever Food Solutions business – serving professional customers and restaurant operators – continued to grow, serving chefs around the world. IceCreamNow, our instant ice cream delivery service in partnership with a host of online delivery companies, expanded to 35 countries around the world.



14   Annual Report on Form 20-F 2019

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Almost half of our Division’s sales are now in emerging markets, where we’re working to meet the needs of people at all income levels. In 2019, we saw more and more consumers buying our products in India, China, Indonesia and the Philippines.

Every brand a movement

Our mission goes beyond providing delicious, healthy and sustainable products – we want our brands to take a stance and real action on the things that really matter.

In 2019, Ben & Jerry’s continued their long tradition of climate activism, joining the youth-led climate strike in September. The brand also launched Justice ReMix’d to fight for criminal justice reform in the US, and continued to campaign for refugee and LGBTQ rights. Lipton Tea launched its global You.Me.Tea.Now campaign to combat loneliness by encouraging more quality connections in people’s daily lives.

Hellmann’s, with its Real Taste, Less Waste programme, has been running educational campaigns to rescue leftover food from being wasted. In Canada, for example, its Real Food Rescue project is redistributing surplus food to people in need, as well as encouraging consumers to reduce their own food waste and to recycle. And Unilever Food Solutions’ Fair Kitchens programme continued to inspire a new kitchen culture, where staff happiness is just as important as diners’ satisfaction.

Activities like these don’t just benefit people and the environment, they raise the profile of our brands among consumers. For instance, the markets in which Brooke Bond activated its campaign around mental health and disability grew faster than those where it was not activated in 2019. And in the wake of Knorr’s Future 50 Foods campaign in Belgium, we saw a 10% rise in sales.

Home Care

We want to make people’s homes a better world, and to make our world a better home.

Serving the changing consumer

People increasingly want cleaning products that are better for them, their home and the planet – without sacrificing quality or convenience. Across our R&D centres, including our Materials Innovation Factory at the University of Liverpool, we’re working with innovation partners to develop cutting-edge cleaning technologies. Our aim is to create a portfolio of brands that are sustainable by design – fit for a water-scarce, low-carbon world. This means more biodegradable products that are milder on skin while better at cleaning, and that use renewable or recycled ingredients. It also means more eco-friendly products with fewer chemicals, as well as more concentrated products that have a lower carbon footprint due to less water being transported.

Take the relaunch of Omo in Brazil which was one of the highlights of our year. This relaunch included the arrival of our new formulation of Omo Perfect Wash which is more compact, concentrated and effective, leaving no residue on clothes. Bottles now contain 15% recycled plastic, and the smaller box size for the same number of washes means a reduced carbon footprint. In 2019, we also introduced Seventh Generation’s Ultra Concentrated detergent: eight times more concentrated than the original formula, and in a 100% recycled bottle with an exact dose technology in the cap. And we rolled out Love Home and Planet in the US and China: plant-based, independently certified cruelty-free and vegan home care products, including a dry wash spray for clothes that helps minimise energy and water use.

In 2019, we rolled out other new packaging formats to help reduce our use of plastic, including refills. Cif ecorefill, for example, is a 10x concentrated cleaner made with 75% less plastic that consumers attach to their Cif spray bottles and dilute at home. This means they can use a single bottle for life. In Chile, people can get refills of Omo detergent and Quix dishwashing liquid from dispensers in electric tricycles that deliver in Santiago neighbourhoods. Quix, which launched in July, uses a world-first technology to create a new cleaning agent that is 100% biodegradable and renewable, while being ultra-mild on hands.

Making our world a better home

Our Home Care brands stepped up their purpose-led activities in 2019. Cif created clean-up campaigns both online and on the streets, leading neighbourhood activities across Italy, Poland, Hungary and Romania. Seventh Generation continued its campaign against climate change by working with the Sierra Club to increase the uptake of renewable energy across US cities. The brand also closed its US office to join the global climate strike in September and donated its advertising airtime

We’re innovating

within existing brands,

developing new brands

and adding to our

portfolio through




during the week to help amplify the movement’s message. And Domestos has built on its partnership with Unicef, which helped more than 11 million people (between 2012 and 2019) access better sanitation and hygiene.

Designing for channel

We’re working to make sure we’re offering our products to consumers in the right places. E-commerce is a key channel so we’re designing our products for home delivery – making sure our packaging fits through a letter box, for example. And we’re expanding our Home Care offerings for growing markets such as DIY stores and mid-sized professional cleaning firms. In Brazil, Omo continued to free people from doing their laundry with its Omo Express pick and wash service.

The Cif online engagement across Europe is just one example of how we’re using digital channels and content to reach more people in more places and better understand our consumers. There’s also Cleanipedia, our online resource for cleaning tips, which attracts over 63 million visitors per year. And in Brazil, Comfort sponsored a 13-part TV series encouraging people to get more from their clothes and support more sustainable fashion. By growing our digital marketing capacity, we’re sharing more relevant and meaningful content with consumers, having more conversations with them and using the insights we gather to enhance our activities and brands.

Innovations and activities like these are just some examples of how, in all three of our Divisions, we’re meeting changing consumer demands. To see how the divisions performed in the year, see pages 23 to 25.



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Stakeholder review continued



LOGO   Our people
  As the world of work changes, we’re determined to be a company where talented people with purpose can grow both themselves and our business.




The changing world of work

There are many facets to today’s evolving workplace. With automation and digital transformation, employees have opportunities to reinvent themselves and learn new skills. People want and need more flexibility from employers – freelance and remote working is on the rise, and jobs for life are increasingly rare. The combination of an ageing population and reduced retirement provision means that people are working for longer. And more and more people of every age want a meaningful job that chimes with their values.

As we make our business fit for growth now and in the future, there’s no more important place to start than with our own people. Put simply, the quality of our people and the quality of our business are one and the same.

The belief that people with purpose thrive is at the heart of our business strategy. So we’re creating a workplace and culture that will make it easier for our employees – all 150,000 of them around the world in factories, R&D labs, offices and tea plantations – to work in ways that suit their individual lives and values. Here we outline how we’re adapting to these changes, while ensuring a safe workplace and a future-fit culture.

Reshaping how we work

To meet people’s changing needs and continue to attract the best, we’re moving beyond traditional employment models and ways of working. In doing so, we need to make sure our people stay safe, healthy and fulfilled at work. In 2019, we’ve taken some big steps forward.

More flexible and agile working

Continuing to be an industry-leading business and employer means moving to faster, smarter ways of working at all levels of our company. So we’re evolving our culture to encourage more agility and accountability.

Our new Flex Experiences platform offers employees the chance to share their talent and experience with people on other teams and in other countries. Live in 20 business areas, so far it has reached over 40,000 people in more than 100 countries and unlocked over 100,000 hours of new career experiences and learning. We’re also changing how we manage performance – encouraging employees to set goals throughout the year to encourage more innovative, entrepreneurial ways of working.

In 2019, we had 30 agile teams on pilot projects around the business. So far, the results have been positive: working in this way not only improves people’s speed and agility but helps them to feel more engaged. So, we’ll be taking what we learn from these pilots to the wider business.

We believe that allowing people to work flexibly will help us continue to attract talented employees and future leaders – as well as people in the open talent economy such as contractors, consultants and independent project workers. It will also make us a more

inclusive employer – giving more options to people with disabilities, family commitments or other time pressures. By moving beyond the typical 9 to 5 employment model, we’re opening up, enhancing and future-proofing Unilever.

Lifelong learning

Learning is another critical aspect of people’s fulfilment and Unilever’s long-term commercial success. Ongoing learning is particularly important as we move to more digitally enabled and agile ways of working. We’re aiming to become an organisation where learning is baked into every role – and where relevant and effective training is available to people when they need and want it.

We’re using digital platforms to give people control of their own learning. In 2019, more than 54,000 employees used Degreed, our online learning platform which holds over two million pieces of content in a variety of formats and in 20 languages. And over 18,000 employees learned new digital skills like agile methods, data analytics and sustainability through our Power Up programme.

Digitalisation, automation and the changing world of work affect people in different ways, depending on their roles. We see it as our duty to make sure our people, wherever they work, are equipped for the future. In 2019, for example, we committed to working with the European Works Council on a Framework for the Future of Work. Every employee will be invited to draw up an upskilling, reskilling or an employability plan, so that they are ready to adapt to the changing shape of work in the years ahead. Where we make changes resulting in job losses, we ensure that our people are similarly equipped. For example, we put in place a major programme, including support for setting up small businesses, to ensure the people affected by automation in our tea plantations in Kericho, Kenya could successfully move from job to job.

Listening to our people

To continue to be an attractive employer, we need to understand how our employees experience Unilever every day – and, crucially, to turn these insights into action. So we gather real-time data on topical issues through monthly pulse surveys and other crowdsourcing tools. More than 22,000 people gave feedback in 2019.

Alongside this, we run a more extensive survey, UniVoice, once a year. This year, 82% of those invited to respond did so, reaching around 90,000 employees, including plantation workers, for the first time. Encouragingly, we saw improvements in our scores across the board. Overall engagement – the headline key metric in the survey – was up 2%, at 77%. Pride in Unilever (87%), our approach to diversity and inclusion (79%), business integrity (81%) and sustainability (77%) stood out as strengths. There was also a 10% increase in the number of people who believe Unilever cares about their wellbeing, to 73%. And 78% of our employees also said we have the right strategy to win.


The survey also highlighted areas to improve. For example, while our scores on how quickly we respond to changes in the market have improved, half of employees think our competitors are faster. Clearly this is a priority as we develop a growth culture, supported by more agile ways of working. Furthermore, one third of respondents were doubtful that anything would happen as a result of their feedback to the survey. To address this, we have asked the head of each business unit to review their own results and commit to a clear action plan.

As an external benchmark, we also look at how people rate us on Glassdoor, a jobs and recruitment site. December 2019 figures show that 84% would recommend us to a friend and 93% approve of our CEO. Our rating remains well above the site average.

Our people have opportunities at townhall meetings and webcasts to ask management about the financial and economic factors affecting our performance. At these regular events, the ULE discusses our quarterly performance and strategy, among other things.

Acting with integrity

One other essential aspect of listening to our employees is giving them a platform for reporting concerns around business integrity, such as anti-bribery and corruption which we simply do not tolerate. We have clearly defined principles around ethics and integrity (our Code Policies) that apply to all of our employees – and we communicate these each year through mandatory online training modules and a business integrity pledge.

We do all we can to help people feel comfortable and secure in reporting breaches of business integrity and offer a 24-hour whistleblowing line over the phone or online. In 2019, we received 1,575 reports from whistleblowers. Of these, we closed 1,410 and confirmed 733 as breaches, which led to 413 people leaving the business. Please see page 33 for more on how we manage risks around business integrity.




response rate to our

2019 UniVoice survey



Safety at work

The safety of our people and those who work with us is paramount. Our Total Recordable Frequency Rate (TRFR) was up in 2019 (1 October 2018 to 30 September 2019) to 0.76 accidents per million hours worked, from 0.69 in 2018. Our 2019 TRFR includes for the first time all



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acquisitions which operate as decentralised business units, as we now have processes in place to collect the data. After a spike in the first six months, when injury rates went up partly due to the inclusion of decentralised business units, the following six months showed substantial incident rate reduction, in line with our year-on-year declining trend. This trend reinforces the confidence that our leadership, programmes and systems will drive further improvement in the years to come. We’re committed to achieving our ‘vision zero’ strategy and will continue to seek improvements that make people safer.

During the same reporting period, regrettably there were four fatalities at work in Latin America involving two employees and two contractors. Two of these were traffic accidents and two happened in factories. This year we introduced a one-hour stand-down across all of Unilever’s operations globally for fatalities which happen while at work, with a ULE member or country General Manager travelling to the location of the fatality to review the case and learnings. We also held safety events involving all third parties – in manufacturing, logistics and distribution – to ensure stronger implementation and monitoring of safety standards. These efforts run alongside the regular communications and reinforcement of our safety standards at all levels of our company.

Evolving our culture

We’re working to build a more open, authentic and agile culture at all levels of Unilever, to fuel personal and business growth.

Purpose first

We believe that if people feel they can be true to their purpose while working with us, we’ll be able to achieve more together. Through our People with Purpose programme, we’re aiming to work with every employee to help them define their purpose and find a way to reach it in their working life. More than 48,000 people have discovered their purpose since 2015. And it’s making a difference: our UniVoice survey showed that 92% of people who have been through the programme feel they can put more into work because they understand their purpose.

Fit for the future

To become a more agile organisation, we need to simplify and flatten our internal structures – and to work in more networked ways. We also need to encourage people to make smarter decisions faster, and with customers and consumers front of mind. The tone set by our leaders is important. The ULE is using tools like Yammer to have real – and real-time – conversations with employees. And when we launched our new strategy, we asked our entire organisation for ideas for how to bring the strategy to life. More than 47,000 employees from 80 countries contributed 2,100 ideas, with over 17,000 people voting for their favourites. Three of these ideas have received investment and are now being explored.

We also recognise that to evolve our culture, our leaders need a more empowering mindset. So we’ve rolled out new Standards of Leadership which define the expected behaviours of our people in all our countries. In 2019, we put almost 3,000 people through an intensive self-reflective leadership programme. We’re also working on personalised development plans for our next generation of potential ULE members.

One of the biggest validations of our focus on culture and purpose is the simple fact that people want to work with us. In 52 markets, we’re the number one FMCG graduate employer of choice. And more than eight million people follow us on LinkedIn, making us the most followed FMCG employer.

Our belief that people with purpose thrive is underpinned by our values set out on page 9. Our Board is responsible for assessing and monitoring these values and our culture. To gain insight, aspects of culture and our values are regularly analysed by the Board using multiple sources, including the results of the UniVoice survey, the main way in which we monitor our culture, business integrity reports (see page 56), interaction with senior management and workforce and health and safety data. At meetings in October and November 2019 respectively, the Board discussed with members of the ULE how best to nurture a culture of flexibility and agility and the results of the UniVoice survey.

A workplace for everyone

Becoming a truly diverse and inclusive organisation – one where everyone feels they can bring their whole self to work – is a priority for us. This is not just the right thing to do. It also benefits business, as diversity leads to better innovation and performance.

We’re making good progress at management level. Women held 51% of our managerial roles as of December 2019 and our efforts have been recognised – we were featured in the Bloomberg Gender Equality Index in 2019. Despite this, there is still work to be done to ensure a balanced representation of women at senior management level and above. Among the various initiatives to address this, we have two targeted programmes to develop our senior women and create a healthy pipeline of talent.

We’re encouraging gender equality in other ways. For example, we have deeply embedded flexible ways of working across the organisation. Recognising the importance of supporting parents, we have a global paid maternity leave policy of 16 weeks and a global paid paternity leave policy of three weeks.

We’re committed to gender equality and fairness in the workplace, based on equal pay for equal work and achieving greater gender balance. Pay and overall reward is gender neutral, with any differences between employees in similar jobs reflecting performance and skill. Gender pay gaps can develop where there is a representational imbalance between genders. Our Framework for Fair Compensation has been instrumental in helping us review the average pay differences between genders at both a country level, and at each work level within each country. We continue to improve our gender balance, and relevant gender pay gaps, at various levels and in various countries throughout the business. As part of our Framework’s living wage element, we are committed to pay a living wage to all our direct employees. We are already paying at or above a certified living wage in most places and are actively working through the small number of remaining issues which are in areas with complex pay arrangements.

Becoming a more attractive workplace to people with disabilities is another priority. We’re focusing on building accessibility and breaking down barriers in this area, as well as on creating an inclusive culture. To show our commitment, we’ve set ourselves a target for people with disabilities to represent 5% of our workforce by 2025.

We’ve also been working to remove limiting stereotypes from our culture so that employees can be themselves at work. Building on our efforts to break down stereotypes in advertising, our #Unstereotype the workplace initiative has been running for two years. Since 2018, we have been rolling out #Unstereotype bootcamps and customised training to minimise unconscious bias and how to break down stereotypes in 40 countries.

Our aim is simple: to be a diverse and inclusive workplace where people with purpose thrive.

     2019     2018  
  Gender statistics          Female                   Male           Female                   Male  
  Board      5       8       5       8  
       (38%     (62%     (38%     (62%
  Unilever Leadership Executive      4       8       4       7  
  (ULE)*      (33%     (67%     (36%     (64%
  Senior management      15       59       17       64  
  (reporting in to ULE)      (20%     (80%     (21%     (79%
  Management      7,620       7,408       7,336       7,552  
       (51%     (49%     (49%     (51%
  Total workforce      53,469       96,398       53,465       101,383  
       (36%     (64%     (35%     (65%



at 20 February 2020 (the latest practicable date for inclusion in this report), there were four females and nine males on the ULE.

Note: Employees who are statutory directors of the corporate entities included in this Annual Report and Accounts: 493 (68%) males and 232 (32%) females (see pages 154 to 160).



Annual Report on Form 20-F 2019   17

Table of Contents




Stakeholder review continued



LOGO   Society
  Businesses that serve society today will be those that thrive in the future. Our scale give us an opportunity to create a better world and a stronger business.




Creating positive change

Our impact on society starts, of course, with our contributions as an employer, taxpayer and buyer of goods and services – amounting to around 34 billion in 2019. But we both need and want to do more. Our Unilever Sustainable Living Plan (USLP) gives us a framework to better the health, wellbeing and livelihoods of millions around the world. Progress against our key 2020 targets is on page 22, and we’re currently developing goals beyond 2020.

We can improve people’s lives directly through our products. We can create broader change by putting our influence and resources behind things that matter, often in partnership with others such as projects supporting the UN Sustainable Development Goals (SDGs). And our household name brands are changing things for the better.

Better health and wellbeing

One of our big goals is to help more than one billion people improve their health and wellbeing by 2020. Many of our brands do this directly, while others do it through partnerships working to make it easier for people to live healthy lives.

Improving hygiene and sanitation

Around 2.3 billion people still have no access to basic sanitation, while 844 million are without safe drinking water. Diarrhoeal diseases are the third leading cause of child mortality globally and around half of the world’s population suffers from untreated tooth decay. We’re working hard to change these numbers. By the end of 2019, we’d reached 1.3 billion people through our activities to encourage behaviours like handwashing with soap and better oral care, and to create better access to clean toilets and safe drinking water.

Since 2010, for example, Lifebuoy has reached over 1 billion people in its efforts to improve handwashing habits, including 587 million through TV reach. We’re working in partnership with organisations such as Gavi to promote vaccination and handwashing, and the Power of Nutrition to give women in rural India advice through their mobile phones about their children’s health, including handwashing. In India, we opened two more Suvidha centres in partnership with HSBC to give people access to clean water, sanitation and laundry facilities bringing the total to three, with two more under development. And, both through its partnership with Unicef and the Cleaner Toilets Brighter Futures programme, Domestos is improving access to toilets for school children (see page 15).

Healthier eating

The world’s food system carries a double burden: almost two billion people are overweight, while 821 million people are malnourished. ‘Big food’ is seen by many as the problem. We’re determined to be part of the solution.

So we’re continuing to reduce the sugar, salt and saturated fats in our foods – 56% of our portfolio (out of our target of 60% by 2020)

meets our Highest Nutritional Standards based on globally recognised dietary recommendations. We’re also putting clearer nutrition labelling on our products. In 2019, 98% of our Foods & Refreshment portfolio had full nutrition labelling in line with our product labelling criteria (based on global sales from 1 April 2019 to 30 June 2019), and we’re working towards 100%. And, our brands are offering more fortified foods as part of our wider ambition to provide 200 billion servings by 2022 that contain at least one of the following key micronutrients: iron, iodine, zinc, vitamin A or D.

We believe that plant-based diets are essential for a sustainable food system and will be critical for slowing global heating. So we expanded our range of vegan and vegetarian options in 2019, including the newly acquired Vegetarian Butcher (see page 14 for more). And, through a three-year partnership with the World Wildlife Fund launched in 2019, Knorr is promoting 50 plant-based foods (see page 14).

Improving physical and mental health

We have a responsibility not just to help our employees improve their health and wellbeing (see page 16), but to encourage people everywhere to look after their physical and mental health. Dove’s Self-Esteem Project, for example, has reached over 60 million young people in 142 countries – including 21 million through a specially commissioned cartoon series designed to improve body confidence, which was aired in 12 markets. Lipton Tea launched its new Quality Connections programme in 2019, while Brooke Bond continues its campaign to break stereotypes around mental health and disability. And Clear, our anti-dandruff haircare brand, is tackling social anxiety and building young people’s resilience.

Enhancing livelihoods

Our activities touch the lives of millions, both directly and indirectly. We have a responsibility to protect their rights and help them live well.

Championing human rights

Our Responsible Sourcing Policy sets standards on human and labour rights for our suppliers. In 2019, 70% of our procurement spend was through suppliers meeting these requirements. We have due diligence procedures to identify human rights risks in the supply chain including third-party audits. We aim to support suppliers to find solutions to identified issues, especially where these affect workers’ human and labour rights.

To further embed a culture of respect and promote human rights, in 2019 we created and began to roll out an internal business and human rights training programme. We also carried out external, independent Human Rights Impact Assessments in Guatemala, Thailand and Turkey. We continued to partner with UN Women, publishing Implementation Guidance for the Global Safety Framework


We’re creating broad change by putting our influence and resources behind projects that support the UN SDGs.



and working with our tea suppliers in Kenya, Tanzania and India to improve women’s safety. And we continued to focus on the rights of migrant workers, including no payment of recruitment fees, by taking part in multi-stakeholder initiatives such as the Consumer Goods Forum, Leadership Group for Responsible Recruitment and Responsible Labour Initiative. We also published a full list of our tea suppliers in 21 countries to help consumers make more informed choices about the products they buy.

A fairer world for women

One of the most powerful ways to improve the livelihoods, health and wellbeing of everyone is to create more opportunities for women. So we’re investing in women across our value chain – employees, farmers, small retailers – giving them business opportunities and access to training, finance and technologies.

We put our influence as an advertiser behind the #Unstereotype initiative to encourage a move away from unhelpful portrayals of gender. Many of our brands are pushing for greater gender equality through their brand purpose and partnerships, such as Sunsilk and Girl Rising in Indonesia, Philippines and Argentina, Sunlight and UN Women in Indonesia, and TRESemmé and ICRW in the UK. We’re also continuing to partner with UN Women to improve the safety of women in agriculture, especially on our tea plantations.

More inclusive business

We want to unlock the potential of the millions around the world who help source, make and sell our products – growing our business and theirs. For example, through the CEO Partnership, we have projects in Kenya, India and Pakistan with credit and insurance providers such as Mastercard, AXA and Telenor to deliver digital credit and payment services to small retailers. And we continue to expand our Shakti programme, which gives women in rural communities in countries such as India and Nigeria the opportunity to earn an income by selling our brands.

Our work also extends to the smallholder farmers we depend on for key crops. For example, in Madagascar, Wall’s is working with NGOs to help families earn a sustainable living from vanilla farming. Across all our smallholder programmes, we’ve helped more than 793,000 smallholder farmers access initiatives aiming to improve agricultural practices.



18   Annual Report on Form 20-F 2019

Table of Contents
Strategic Report    LOGO



LOGO   Planet
  We’re living in a climate emergency. As the planet continues to heat, we need to protect the natural resources we depend on to grow our business.




Business needs a healthy world

To create the change needed to counter the rapid warming and degradation of the environment, we have to radically overhaul entire systems. Our activities (see pages 10 to 11) impact the environment, mainly through the use of water, energy and land as well as the production of waste and greenhouse gas emissions. Taking action on these issues is not only the right thing to do – it also helps our business as consumers choose brands which align with their values and concerns. Our Environmental Policy outlines our responsibilities to the environment and is, among other things, implemented through the USLP.

Our environmental targets were ground-breaking when we set them in 2010, because they considered the wider value chain, including consumer use. In some areas of the wider value chain, such as lessening consumer waste, we’ve made good progress – in others, such as reducing consumer greenhouse gas and water use, we haven’t done so well. This is disappointing, but we’re using what we’ve learned to refine our strategy. Having launched new goals for plastics in October 2019 (described below), we’re in the process of setting new sustainability goals for beyond 2020. These will both challenge us and, we hope, encourage others to act faster. As we’ve learnt from the last nine years of the USLP, partnerships are key.

Tackling climate change

This year we reaffirmed our science-based commitments through the UN’s Business Ambition for 1.5°C campaign. We’re taking action across our value chain.

Reducing carbon emissions

We’ve made significant progress in our own operations. Reducing emissions means reducing energy. By the end of 2019 we had reduced energy from our factories by 29% per tonne of production compared to 2008, avoiding costs of around 733 million in the process. We continue to use an internal price on carbon to fund energy projects. See page 40 for more details. Since 2008 we’ve reduced CO2 emissions from energy per tonne of production by 65%. We’re also finding ways to replace fossil fuel energy with renewable energy. As of September 2019, 100% of our grid electricity was from renewables across five continents. And 24 manufacturing sites achieved carbon neutral status. We’re now using solar power in 20 countries and are pushing for regulatory changes to move more swiftly away from fossil fuels.

However, around 65% of our carbon footprint comes from consumers using our products. So halving our total emissions footprint depends on two main things: changes in consumer behaviour and renewable energy becoming more widely available. We’ve made some progress by influencing behaviour through product design, but we need to go faster. So we’re developing our products to use less carbon – introducing more concentrated liquids for example – and joining the RE100 global campaign for better access to renewable energy for all.

Where water is becoming scarcer, we’re developing products which use less water, while encouraging people to do laundry on shorter cycles.

Ending deforestation

In 2010, as a member of the Consumer Goods Forum, we committed to achieving zero net deforestation associated with our four most important deforestation risk commodities by 2020: paper and board, palm oil, beef and soy. For these commodities, we use additional verification on top of our existing sustainability certifications to address the environmental and social issues associated with these particular crops. Specifically, our accelerated activities will include: enhancing our efforts around traceability and transparency using advancements in technology; inclusion of smallholders in our value chain particularly in countries such as Indonesia to help them increase crop productivity and diversify income; and simplifying our approach to sourcing.

Despite our efforts over the past decade, commodity-driven deforestation remains a serious challenge in many parts of the world. We cannot solve deforestation without wholesale transformation of supply chains towards more sustainable models of production. This is why we are working with governments, other businesses, civil society and local communities to tackle the causes of deforestation.

Rethinking plastic

While plastic does have a role to play in the economy, it does not belong in the environment. Its impact has rightly become a huge concern. With consumer expectations and legislation changing fast, we have to rethink both the design of our products and our business model to build a circular economy – one where we not only use less plastic, but where the plastic we do use can be reused, recycled or composted.

Since 2010, our total waste footprint per consumer use has reduced by 32% – partly through better product design and recycling infrastructure. But we need to do more, and more quickly. So in October 2019, we announced a new ambition to halve the use of virgin plastic in our packaging by 2025 and to collect and process more plastic packaging than we sell by 2025. This will mean exploring new product designs that use more refills, recycled materials, or no plastic at all. And it will mean continuing to invest in infrastructure – expanding our partnerships with waste management companies like Veolia and with household recycling services like Wecyclers in Nigeria.

We’re already making progress. In 2019, nine of our brands registered their interest in participating in a pilot of the TerraCycle Loop refill and reuse scheme in the US and France, with five already launched on the platform. And, we’re bringing more recycled plastic into more of our product packaging, while exploring other options such as glass jars for Knorr soups and sustainable paper for Carte d’Or ice creams.


grid electricity from

renewables on 5 continents



Innovation with others, plays a big part. For example, we’re working with Ioniqa, a Dutch start-up, to develop a technology that breaks down plastic to make it more recyclable. And we’re investing in solutions – through Circulate Capital’s Ocean Fund, for example, which is working to reduce plastic pollution in South and South East Asia.

Protecting nature through sustainable sourcing

We use many different raw materials to make our products. Sustainable sourcing and sustainable agriculture are vital to maintaining the supply of these natural resources while also feeding the world’s growing population.

Our Sustainable Agriculture Code lays out standards for the suppliers of our biggest commodities such as palm oil, soy, paper and board – as well as crops such as sugar, tea and vegetables – to farm in ways that sustain the soil, use less water and fertiliser, protect biodiversity and improve people’s livelihoods. In 2010 we set a target to source all our raw materials sustainably. 62% of all agricultural raw materials were sustainably sourced in 2019, compared to 14% in 2010. For the 12 key ingredients that make up around two-thirds of our total volume of agricultural raw materials, 88% were sustainably sourced.

Pushing for system change

The radical changes needed can only be made through co-operation – across borders and between boardroom tables. So we’re working closely with organisations such as the Ellen MacArthur Foundation to push towards a circular economy. And we’re lending our voice to calls for connected approaches, such as the Nature Based Solutions Manifesto for natural solutions to climate change. We are all in this together, and we still have much to do.

See page 22 for details on our progress against key USLP targets and pages 40 to 45 for more on how we manage risks and opportunities from climate change and plastic packaging.



Annual Report on Form 20-F 2019   19

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Stakeholder review continued



LOGO   Customers
  With our many customers, from e-commerce marketplaces to family-owned stores, we’re pioneering new ways of selling to grow both our business and theirs.




The changing world of our customers

We partner with 25 million retail sales outlets in our distribution chain in over 100 countries, with 60% in developing and emerging markets. We work closely with our customers to grow both their sales and ours while spreading the positive impact of our purpose-led brands. This could mean collaborating on a new product launch or purpose campaign, or recommending the right range of products based on our consumer insights.

The retail world is changing fast. People no longer just shop in one place – they’re using a variety of channels, both online and off, and expect a seamless experience throughout. In developing and emerging markets, we’re seeing a move towards e-commerce and convenience stores – and in the developed world, towards these as well as discount channels. So, it’s becoming even more important to adopt a successful multi-channel approach – offering the right products at the right prices in the right places.

Reinventing retail

We’re evolving how we sell to make sure we have the right presence in growing channels such as health & beauty, out of home and e-commerce. We’re also partnering with small and larger retailers to create more growth opportunities.

Growing e-commerce

The forecast for global e-commerce growth was 20% for 2019. Unilever’s e-commerce sales grew 30%, accounting for 6% of our turnover (including sales to consumers both by Unilever and by retailers via their e-commerce platforms). While this pace is fast compared to the market, we need to go faster, partnering with customers who share our aim to grow across e-commerce channels. This year we worked closely with Alibaba, JD.com and other online retailers as part of the one-day Double 11 Chinese shopping gala. Among other things, this involved an interactive on- and offline shopping experience promoting premium products such as Love Home and Planet and Lux botanical shower gels.

We’re also partnering with large retailers like Tesco, Carrefour and Walmart on omnichannel – across channel – sales models to make sure they reach consumers, however they choose to buy. Our aim is to build a balanced e-commerce model that includes e-commerce retailers, bricks and mortar online sales, and direct-to-consumer businesses.

Partnering for growth

Supporting our big box retail partners to develop better in-store experiences and more digital options is a key part of our approach. We’re partnering with retailers such as Woolworths (Australia) and Target (US) to create more inspiring shopping experiences through more personalised and effective promotions – developing a new in-store experience for Target’s beauty offering, for example. And we’re creating joint business plans, for example with Coles (Australia) we’ve developed our offer of protein, low calorie, vegan and natural ice creams to focus on these high-growth markets.

Empowering small retailers

Digitising the sales value chain so that small retailers can order our products 24/7 is key to building direct relationships, providing growth opportunities for us and our customers.

In Indonesia for example, we’ve introduced a self-ordering smartphone app and phone ordering option for small stores. In Brazil, we’ve developed a small retailer e-commerce platform for buying our products, and have 200,000 registered stores so far. And in India, we launched the Shikar app so that traders can place orders without waiting for distributors to visit their stores. We’re also exploring new finance models such as micro-credit partnerships – with Mastercard in Kenya and Telenor in Pakistan – that help smaller retailers access loans to buy stock (see page 18).

Selling with purpose

We work with our customers to make our brands with purpose more visible – wherever shoppers are. We want to engage consumers on all shopping channels to inspire them to buy, consume and act more sustainably – which also leads to more sales and income for our customers. One way we do this is by bringing our brands to life in stores. We’ve partnered with Walmart in the US and Puregold in the Philippines, for example, to educate people on recycling and plastics reduction to help drive behavioural change through Unilever brands.

Part of selling with purpose is expanding our reach through last-mile and micro distribution models. Programmes like Shakti, through which more than 100,000 women are selling direct to homes and in villages in rural areas of 5 countries, and I’m Wall’s, which has created new livelihoods for thousands of micro-entrepreneurs in over 20 countries, are helping us expand our reach and make a difference to people’s lives. For more on small-scale retailer programmes see page 18.

We’re also making a difference to the planet through a raft of initiatives to reduce and reuse plastics in stores. We’re trialling refill stations with customers in the US and Europe, for example, and are working to expand these programmes. For more on how we’re tackling plastic packaging, see page 19.


retail sales outlets in our distribution chain



Fitter for the future

Alongside working with our customers to help them become more fit for the future, we’re adapting our own ways of working. By becoming more integrated and digital, we’re finding ways to make our operations smarter and quicker. We’re assessing and refining our key processes and are using AI to become more efficient and effective with our customers – for example, through more dynamic resource planning and better promotion.

By relentlessly focusing on customers, consumers and channels, we can make sure our distribution platforms are primed for the evolving shopping habits of people all over the world.



20   Annual Report on Form 20-F 2019

Table of Contents
Strategic Report    LOGO



LOGO   Shareholders
  We’re working to create sustainable long-term value for our shareholders by evolving our portfolio to higher growth segments and transforming our business.




Our performance in 2019

We delivered underlying sales growth of 2.9%, balanced between price and volume. As we announced in our sales update in December, this means that we fell slightly short of delivering within our multi-year range of 3-5%.

Our underlying sales growth was driven by a strong overall performance in our emerging markets, up 5.3% and with a good balance between volume and price. Our businesses in South East Asia, particularly Philippines, Indonesia and Vietnam, performed well, as did North Asia. Latin America returned to growth and our Brazilian business also grew well, in an environment which is improving but remains challenging. These gains were, however, offset by difficulties in other emerging markets, including an economic slowdown in South Asia and tough trading conditions in West Africa and the Middle East.

Delivering strong growth continues to challenge us in developed markets, where we see low consumer confidence and a deflationary retail environment. Sales growth in our European business decreased by 0.6%, while in North America we saw modest growth, helped by a good performance in Deodorants and some good momentum in the second half from Dressings.

In our Divisions, Beauty & Personal Care grew

2.6%, led by strong, double-digit growth from Prestige. Deodorants and Skin Care performed well, but growth was weak in Hair Care. It was another good year for Home Care, growing by 6.1% with strong contributions from Fabric Solutions, Fabric Sensations and Home & Hygiene. Foods & Refreshment delivered growth of 1.5%, in a year which saw subdued demand for black tea, and a significant slowdown in the European ice cream market.

Our bottom-line performance was good, with underlying operating margin progressing 50 basis points to 19.1%. The improvement was driven by higher gross margins, a result of strong delivery from our 5S savings programme. In addition, free cash flow was up 0.7 billion to 6.1 billion, thanks to an improvement in underlying operating profit.

Purpose-led performance

As well as expecting consistent financial returns, shareholders today are increasingly interested in the environmental, social and governance (ESG) aspects of business that are so essential to delivering value. Our long-term commitment to ESG is encapsulated in the Unilever Sustainable Living Plan. Our focus and progress on becoming a more sustainable business helped us once again come top of our sector in the Dow Jones Sustainability Index in 2019.

We’re more determined than ever to show that our purposeful approach to business fuels strong performance. The numbers prove it – over the last few years we’ve seen significantly higher growth from our brands with purpose.


underlying sales growth in 2019



That’s why we’re working to ensure that each of our brands has a clear purpose. As well as our brands taking a stand on issues, we’re setting bold goals and taking action on the many environmental and social challenges faced by society, such as plastic and climate change. See page 19 for more.

Accelerating our growth

As we strengthen our foundations to deliver long-term superior value, accelerating growth is our top priority. We’re doing this by evolving our portfolio of brands to higher growth segments. This means renovating our existing brands to meet emerging trends, creating new brands (such as Love Home and Planet), and making acquisitions in fast-growing segments like plant-based foods and prestige beauty. Over the last five years we’ve acquired over 30 businesses, including nine in 2019. In January 2020 we announced that we will be conducting a strategic review of our global tea business as we continue to evolve our portfolio to higher growth spaces.

Many of our recent acquisitions are growing in double digits, including our Prestige portfolio, Seventh Generation and Sir Kensington’s. However, some, such as Blueair, haven’t performed as expected in recent years. The aquisition of Horlicks is likely to complete in the first half of 2020.

We’re also capitalising on market potential. With 60% of our business in developing and emerging markets, we have an unmatched footprint in high-growth markets. In 2019, 19 of our emerging markets delivered more than 100 million in turnover, with 17 delivering more than 500 million. We’re also building a strong presence in markets of the future, such as Ethiopia and Myanmar. The key to winning in many of these places – and indeed in all our markets – is digitising our route to market and having a strong presence in channels such as e-commerce, as discussed on page 20.

Sustainable growth is fuelled by our savings initiatives. We have an everyday commitment to running the business efficiently, using savings to invest in growth areas of the future and in better products and brands. This, in turn, increases our margins. Our three main savings programmes – ZBB, 5S and our Change Programme – have delivered over 6 billion of savings since 2017.

Transforming for success

Our new leadership team is driving our transformation for future success: cementing purpose at the heart of our business strategy, while simplifying our organisational structure. To help us shape a faster, more responsive business, we’ve reinstated the Chief Operating Officer role and simplified our structures in Europe, South East Asia and Australasia. These actions are all part of building a culture of growth at Unilever: becoming a more agile organisation that makes smarter decisions faster, and with consumers and customers front of mind – see pages 14 and 20 for more.

The transformation is underpinned by technology, which is making a difference at every stage of our operations. It’s helping to improve our sourcing of raw materials, for example we’re exploring the potential of AI to calculate ideal harvest times and increase productivity at our tea plantations in Kenya. And it’s creating new efficiencies in our manufacturing operations – at the end of 2019, 31 of our sites were streaming live data using a ‘digital twin’, which tracks physical conditions and uses machine learning to analyse data and optimise processes, reducing both waste and energy used. We plan to connect another 40 sites in 2020.

We’re also building digital relationships with our customers and creating better, more cost-effective models of service – for more on this, see page 20. We’re getting even closer to consumers by using advanced analytics to understand trends on social channels and through our Consumer Carelines. The insights we gain are enabling us to be in the right places at the right times with the right products. Digital activities like these make our investments more effective, help us develop more powerful innovation capabilities and ensure we are more responsive to consumer trends.

In summary, we are focused on accelerating growth while continuously transforming our organisation to be future-fit. Our purpose-led business model remains key to delivering superior long-term value.




cost savings since 2017







Annual Report on Form 20-F 2019   21

Table of Contents



Our performance


We measure our success by tracking both non-financial and financial key performance indicators that reflect our strategic priorities.



Non-financial performance


     Target        2019     2018     2017  

  Improving health & wellbeing

  Big Goal: By 2020 we will help more than a billion people take action to improve their health and wellbeing. See page 18.




Health & hygiene Target: By 2020 we will help more than a billion people to improve their health and hygiene. This will help reduce the incidence of life-threatening diseases like diarrhoea.


On ground reach:

615 million




On ground reach:

570 million




On ground reach:

523 million







TV reach:

710 million








TV reach:

670 million





TV reach:

78 million



Nutrition Target: By 2020 we will double (i.e. up to 60%) the proportion of our portfolio that meets the highest nutritional standards, based on globally recognised dietary guidelines. This will help hundreds of millions of people to achieve a healthier diet.

     60%         56%       48%       39%  

  Reducing environmental impact

  Big Goal: By 2030 our goal is to halve the environmental footprint of the making and use of our products as we grow our business. See page 19.




Greenhouse gases Target: Halve the greenhouse gas impact of our products across the lifecycle (from the sourcing of the raw materials to the greenhouse gas emissions linked to people using our products) by 2030 (greenhouse gas impact per consumer use).+

     (50%)         2%       6%       9%  

Target: By 2020 CO2 emissions from energy from our factories will be at or below 2008 levels despite significantly higher volumes (reduction in CO2 from energy per tonne of production since 2008).**

     £145.92         50.76       70.46 D      76.77  

Water Target: Halve the water associated with the consumer use of our products by 2020 (water impact per consumer use).

     (50%)         1%       (2%)       (2%)  

Target: By 2020 water abstraction by our global factory network will be at or below 2008 levels despite significantly higher volumes (reduction in water abstraction per tonne of production since 2008).**

     £2.97         1.58       1.67 D      1.80  

Waste Target: Halve the waste associated with the disposal of our products by 2020 (waste impact per consumer use).

     (50%)        (32%)       (31%) D      (29%)  

Target: By 2020 total waste sent for disposal will be at or below 2008 levels despite significantly higher volumes (reduction in total waste per tonne of production since 2008).**

     £7.91         0.30       0.23 D^      0.18  

Sustainable sourcing Target: By 2020 we will source 100% of our agricultural raw materials sustainably (% of tonnes purchased).

     100%        62%       56%       56%  

  Enhancing livelihoods

  Big Goal: By 2020 we will enhance the livelihoods of millions of people as we grow our business. See page 18.



  Fairness in the workplace Target: By 2020 we will advance human rights across our operations and extended supply chain, by:


•  Sourcing 100% of procurement spend from suppliers meeting the mandatory requirements of the Responsible Sourcing Policy (% of spend of suppliers meeting the Policy).

     100%        70%        61% D       55%  

•  Reducing workplace injuries and accidents (Total Recordable Frequency Rate of workplace accidents per million hours worked)**.

               0.76 ¤      0.69 D       0.89  
  Opportunities for women Target: By 2020 we will empower 5 million women, by:


•  Promoting safety for women in communities where we operate.

•  Enhancing access to training and skills (number of women).

•  Expanding opportunities in our value chain (number of women).

















•  Building a gender-balanced organisation with a focus on management
(% of managers that are women)**.

     50%        51%       49% D       47%  
  Inclusive business Target: By 2020 we will have a positive impact on the lives of 5.5 million people by:


•  Enabling small-scale retailers to access initiatives aiming to improve their income (number of small-scale retailers).





















•  Enabling smallholder farmers to access initiatives aiming to improve their agricultural practices (number of smallholder farmers).





















Baseline 2010 unless otherwise stated


Key Non-Financial Indicators.

PricewaterhouseCoopers assured in 2019. For details and 2019 basis of preparation see www.unilever.com/investor-relations/annual-report-and-accounts/


PricewaterhouseCoopers assured in 2018. For details and 2018 basis of preparation see www.unilever.com/sustainable-living/our-approach-to-reporting/reports-and-publications-archive

PricewaterhouseCoopers assured in 2017. For details and 2017 basis of preparation see www.unilever.com/sustainable-living/our-approach-to-reporting/reports-and-publications-archive


The number of people reached through TV advertisements and programmes aimed at encouraging health and hygiene behaviour change (‘TV reach’) was only measured for our Oral Care brands in 2017. Lifebuoy and Dove started measuring TV reach in 2018 and 2019 respectively.

During 2017 and 2018 we amended how we assessed compliance with the Responsible Sourcing Policy, hence year-on-year data is not comparable.


Around 568,000 women have accessed initiatives under both the Inclusive Business and the Opportunities for Women pillars in 2019.

(  )

Brackets around environmental targets indicate that our aim is to reduce our greenhouse gas, waste and water footprints. Brackets around the corresponding actuals indicate that we have reduced our footprints by the numbers quoted.


Target approved by the Science Based Targets Initiative.


Restated from 0.20 kg/tonne of production due to a classification error during the data reporting process.


2019 Total Recordable Frequency Rate (TRFR) includes for the first time all acquisitions which operate as decentralised business units, as we now have processes in place to collect the data. Had we included these acquisitions in 2017 and 2018, our reported TRFR would have been approximately 6% higher in each year.


22   Annual Report on Form 20-F 2019

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Financial performance


             2019     2018     2017  
                   (Restated )(a)                  (Restated )(a) 





  Turnover growth

  Turnover growth averaged 1.6% over five years

     2.0%       (5.1%     1.9%  

  Underlying sales growth*

  Underlying sales growth averaged 3.3% over five years

     2.9%       3.2%       2.8%  

  Underlying volume growth*

  Underlying volume growth averaged 1.4% over five years

     1.2%       1.9%       0.8%  

  Operating margin


     16.8%       24.8%       16.7%  

  Underlying operating margin*


     19.1%       18.6%       17.7%  

  Free cash flow*

















  Cash flow from operating activities
















  Cash flow (used in)/from investing activities














  Cash flow (used in)/from financing activities

















  Beauty & Personal Care

















  Turnover growth

     6.0%       (0.3%     2.6%  

  Underlying sales growth

     2.6%       3.4%       2.9%  

  Operating margin

     20.7%       20.2%       20.0%  

  Underlying operating margin

     22.7%       22.0%       21.3%  

  Foods & Refreshment

















  Turnover growth

     (4.6%     (9.9%     (0.4%

  Underlying sales growth

     1.5%       2.2%       2.1%  

  Operating margin

     14.6%       36.0%       16.3%  

  Underlying operating margin

     17.5%       17.7%       16.8%  

  Home Care

















  Turnover growth

     6.9%       (4.2%     5.6%  

  Underlying sales growth

     6.1%       4.7%       4.4%  

  Operating margin

     12.7%       11.7%       11.0%  

  Underlying operating margin

     14.8%       13.3%       12.4%  




Restated following adoption of IFRS 16, see note 1 and note 24 for further details, and the change in treatment of hyperinflationary economies in underlying sales growth, see page 29 for further details.


Key Financial Indicators.

Underlying sales growth, underlying volume growth, underlying operating margin and free cash flow are non-GAAP measures. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of the business, please refer to our commentary on non-GAAP measures on pages 27 to 32.


Annual Report on Form 20-F 2019   23

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Financial review




2019 performance

The Group generated turnover of 52.0 billion, operating profit of 8.7 billion and net profit of 6.0 billion.

Turnover growth at 2.0% was lower than underlying sales growth of 2.9% reflecting a negative impact of the spreads disposal partially offset by a positive impact from currency.

Emerging markets performed well with underlying sales growth of 5.3% but developed markets declined by 0.5% mainly as a result of difficult and deflationary conditions in Europe. Overall underlying sales growth was slightly below expectation due to slow down experienced in the last quarter. Price growth decelerated in the fourth quarter as a result of pricing reductions in India and low inflation in Turkey. Africa declined due challenges in West Africa where there were distributor stock resets in Ghana and Nigeria.

Argentina’s and Venezuela’s hyperinflationary conditions persisted during 2019 and Zimbabwe also became hyperinflationary during the year. In our calculation of underlying sales growth we exclude price growth in excess of 26% in hyperinflationary economies. See pages 28 to 29 for more details.

Nine business acquisition deals were completed during the year spanning across all Divisions and the global Alsa baking and dessert business was sold in the first half of the year. More details on acquisitions and disposals are in note 21 on pages 134 to 136.

Within non-underlying costs, during the year the Group spent 1,159 million (2018: 914 million) on restructuring; both supply chain optimisation projects to improve gross margin and organisational change projects to reduce overheads. Supply chain activities were concentrated in the manufacturing and logistics networks, particularly in Europe and the Americas. Change projects in the markets were focused on transforming the organisation to make it future-fit and digitally enabled, as well as reducing the overhead base in businesses impacted by the spreads disposal.

Highlights for the year ended



Beauty & Personal Care



Foods & Refreshment



Home Care

















Turnover ( million)            21,868        20,624                19,287       20,227                10,825        10,131                51,980        50,982  
Underlying sales growth^ (%)      2.6        3.4          1.5       2.2          6.1        4.7          2.9        3.2  
Underlying volume growth (%)      1.7        2.5          (0.2     1.3          2.9        2.3          1.2        1.9  
Underlying price growth^ (%)      0.9        0.9          1.7       0.9          3.1        2.4          1.6        1.2  
Operating profit ( million)      4,520        4,165          2,811       7,287          1,377        1,187          8,708        12,639  
Underlying operating profit ( million)      4,960        4,543          3,382       3,576          1,605        1,344          9,947        9,463  
Operating margin (%)      20.7        20.2          14.6       36.0          12.7        11.7          16.8        24.8  
Underlying operating margin (%)      22.7        22.0          17.5       17.7          14.8        13.3          19.1        18.6  

Return on assets (%)

     124        117                61       58                99        86                89        82  



Restated following adoption of IFRS 16 and the change in treatment of hyperinflationary economies in underlying sales growth. See note 1, note 24 and pages 28 to 29 for further details.


Wherever referenced in this announcement, underlying sales growth and underlying price growth do not include price growth in excess of 26% per year in hyperinflationary economies. See pages 28 to 29 on non-GAAP measures for more details.

Relative size of Divisions




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Divisional review

Beauty & Personal Care

TURNOVER grew by 6.0% coming from underlying sales growth of 2.6%, a favourable currency related impact of 2.4% and a positive contribution of 0.9% from acquisitions.

Deodorants delivered strong, broad-based growth, supported by double digit growth from Dove. The Rexona Clinical range, with patented anti-perspirant technology to better serve consumer needs, and Dove’s zero aluminium range performed well. Growth in skin cleansing was muted by price reductions as a result of lower commodity prices. Dove’s growth in skin cleansing was supported by microbiome-friendly innovations. Growth was weak in hair care with high competitive intensity in the US and continued pressure from local players in China. Japan and Europe also underperformed. In skin care, Pond’s and Vaseline continued to perform well, with on-trend innovations such as Pond’s Glow Up cream. We expanded into white space markets with our Simple brand, which is now in 30 markets, including Turkey and the Gulf region. Oral care grew slightly and natural variants such as charcoal, aloe and clove drove growth in Smile.

Prestige brands continued to deliver double digit growth, with strong performances from brands such as Dermalogica, Hourglass and Living Proof. Carver Korea and Sundial had a more challenging year. We added to our prestige portfolio by acquiring Garancia, a French derma-cosmetic brand, and Tatcha, a modern skincare brand rooted in classical Kyoto rituals.

UNDERLYING OPERATING PROFIT increased by 417 million to 4,960 million. Turnover growth and underlying operating margin improvement added 274 million and 143 million respectively. Underlying operating margin improvement of 70bps was driven by efficiencies in brand and marketing investment and overheads from the zero-based budgeting programme. Non-underlying costs of 440 million were slightly higher than last year; most were related to the ongoing restructuring programme. Operating Profit increased by 355 million.

Foods & Refreshment

TURNOVER declined by 4.6% reflecting the disposal of the spreads business in the second half of 2018. The net impact of acquisitions and disposals on revenue was a reduction of 6.9% whilst underlying sales growth was 1.5% and currency movements had a favourable impact of 1.0%.

Ice cream grew, however volumes declined due to a strong comparator from a particularly good European summer in the prior year. Growth was supported by plant based and ‘better for you’ offerings, including Magnum vegan and Ben & Jerry’s lighter Moophoria variants. Tea also had price-led growth with declining volume due to subdued consumer demand for black tea in developed markets. Premium black tea, black tea in emerging markets and fruit and herbal variants, including our premium herbal brand Pukka, performed well. In dressings, Hellmann’s grew, with the US business returning to growth in the second half of the year. The Hellmann’s vegan mayonnaise variant is now on shelves in over 20 countries while Sir Kensington’s premium ranges of mayonnaise and salad dressings grew strongly in the US, with the brand now more than doubled in size since the acquisition. Price-led growth in savoury was supported by Knorr’s portfolio in scratch cooking and the launch of snacking ranges which address the convenience trend. Savoury declined in Europe, most notably in Germany as a result of the loss of a key customer for a period of time, sales to this customer have now resumed The newly-acquired brand The Vegetarian Butcher entered a partnership with Burger King® to offer the Rebel Whopper® across 25 countries in Europe.

UNDERLYING OPERATING PROFIT decreased by 194 million to 3,382 million. Turnover and underlying operating margin decline contributed 166 million and 28 million respectively. Underlying operating margin decreased by 20bps as a result of a lower gross margin from weak pricing and higher supply chain costs. The non-underlying costs of 571 million in the year were related to additional restructuring within the business following the spreads disposal in 2018. Operating Profit decreased by 4,476 million which was primarily due to last year’s operating profit including a 4,331 million profit arising from the sale of the spreads business.

Home Care

TURNOVER grew by 6.9% largely coming from underlying sales growth of 6.1% and a favourable currency impact of 0.4%.

Home and hygiene performed well, benefitting from products such as Cif surface sprays with natural cleaning ingredients. Hand dish wash saw continued growth momentum, with good performance from Sunlight with recycled packaging, as well as white space launches in Brazil with Brilhante and in China with Omo. Format premiumisation continued to be a growth driver in fabric, with good growth in liquids and capsules. Laundry brand Seventh Generation, based on renewable plant-based ingredients, grew strongly. Fabric performance was supported by ongoing market development driven growth in India, where we also launched premium detergent brand Love & Care. In China we successfully launched Love Home & Planet. Home Care turnover in Africa was lower than expected and declined driven by a reduction in both volume and price.

UNDERLYING OPERATING PROFIT increased by 261 million to 1,605 million. Turnover growth and underlying operating margin improvement added 92 million and 169 million respectively. Underlying operating margin improvement of 150bps was driven by a strong gross margin improvement and lower overheads. Gross margin improved due to strong pricing and positive mix. Non-underlying costs of 228 million primarily related to restructuring programmes. Operating Profit increased by 190 million.


Annual Report on Form 20-F 2019   25

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Financial review continued





Cash flow

Cash flow from operating activities was up by 1.0 billion mainly driven by working capital improvement in 2019 compared to the prior year which was impacted by the disposal of spreads. Gross margin improvement had a favourable contribution a result of strong delivery from 5-S savings programmes. Overheads and brand and marketing efficiencies also had a favourable contribution as a result of our zero-based-budgeting programme.



  € million






Operating profit                8,708       12,639  
Depreciation, amortisation and impairment      1,982       2,216  
Changes in working capital      (9     (793
Pensions and similar obligations less payments      (260     (128
Provisions less payments      7       55  
Elimination of (profits)/losses on disposals      60       (4,313
Non-cash charge for share-based compensation      151       196  

Other adjustments

     2       (260
Cash flow from operating activities      10,641       9,612  
Income tax paid      (2,532     (2,294
Net capital expenditure      (1,429     (1,424

Net interest and preference dividends paid

     (548     (461
Free cash flow*      6,132       5,433  
Net cash flow (used in)/from investing activities      (2,237     4,644  
Net cash flow (used in)/from financing activities      (4,667     (12,113



Restated following adoption of IFRS 16. See note 1 and note 24 for further details.


Certain measures used in our reporting are not defined under IFRS. For further information about these measures, please refer to the commentary on non-GAAP measures on pages 27 to 32.

Net cash outflow as a result of investing activities was 2.2 billion compared to an inflow of 4.6 billion in the prior year which included 7.1 billion from the disposal of spreads business.

Net outflow from financing activities was 4.7 billion compared to 12.1 billion in the prior year. 2018 included 6.0 billion relating to repurchase of shares. In 2019 borrowings net of repayments was 1.4 billion higher than the prior year.


Balance sheet



  € million






Goodwill and intangible assets                31,029        29,493  
Other non-current assets      17,347        16,140  
Current assets      16,430        15,478  
Total assets      64,806        61,111  
Current liabilities      20,978        20,150  
Non-current liabilities      29,942        28,844  
Total liabilities      50,920        48,994  
Shareholders’ equity      13,192        11,397  
Non-controlling interest      694        720  
Total equity      13,886        12,117  
Total liabilities and equity      64,806        61,111  



Restated following adoption of IFRS 16. See note 1 and note 24 for further details

Goodwill and intangible assets increased to 31.0 billion (2018: 29.5 billion) mainly as a result of acquisitions which contributed 1.2 billion and favourable currency impact of 0.5 billion driven by strengthening of the US Dollar and Pound Sterling.

In current assets, cash and cash equivalents increased by 1.0 billion. The increase is primarily due to strong cash delivery in several countries which will be used to repay short term debt in due course.

Current and non-current financial liabilities increased by 1.5 billion as a result of commercial paper issue and bank borrowings.

The net pension plan deficit was lower than prior year by 0.7 billion as gains from investment performance exceeded the increase in liabilities.

Movement in net pension liability

The table below shows the movement in net pension liability during the year. The decrease from 0.9 billion at the beginning of the year to 0.2 billion at the end of 2019 was primarily due to good investment performance offsetting an increase in liabilities as interest rates fell.



      € million


1 January      (874
Current service cost      (216
Employee contributions      17  
Actual return on plan assets (excluding interest)               2,385  
Net interest cost      (30
Actuarial loss      (1,967
Employer contributions      401  
Currency retranslation      85  
Other movements(a)      3  
31 December      (196



Other movements relate to special termination benefits, changes in asset ceiling, past service costs including losses/(gains) on curtailment, settlements and other immaterial movements. For more details see note 4B on pages 98 to 103.



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Finance and liquidity

Approximately 1 billion (or 24%) of the Group’s cash and cash equivalents are held in the parent and central finance companies, for maximum flexibility. These companies provide loans to our subsidiaries that are also funded through retained earnings and third party borrowings. We maintain access to global debt markets through an infrastructure of short and long-term debt programmes. We make use of plain vanilla derivatives, such as interest rate swaps and foreign exchange contracts, to help mitigate risks. More detail is provided in notes 16, 16A, 16B and 16C on pages 121 to 127.

The remaining 3.2 billion (76%) of the Group’s cash and cash equivalents are held in foreign subsidiaries which repatriate distributable reserves on a regular basis. For most countries, this is done through dividends free of tax. This balance includes 146 million (2018: 154 million, 2017: 206 million) of cash that is held in a few countries where we face cross-border foreign exchange controls and/or other legal restrictions that inhibit our ability to make these balances available in any means for general use by the wider business. The cash will generally be invested or held in the relevant country and, given the other capital resources available to the Group, does not significantly affect the ability of the Group to meet its cash obligations.

We closely monitor all our exposures and counter-party limits. Unilever has committed credit facilities in place for general corporate purposes. The undrawn bilateral committed credit facilities in place on 31 December 2019 were $7,865 million.

Contractual obligations at 31 December 2019



€ million




1  year
Due in
Due in
Due in
5 years
Long-term debt      26,095        4,074        4,902        4,394        12,725  
Interest on financial liabilities      3,677        494        802        673        1,708  
Lease liabilities      2,279        432        694        433        720  
Other lease commitments      223        69        74        37        43  
Purchase obligations(a)      361        213        118        29        1  
Other long-term commitments      1,137        578        453        84        22  
Other financial liabilities      206        125        24        57        -  
Total      33,978        5,985        7,067        5,707        15,219  



For raw and packaging materials and finished goods.

Further details are set out in the following notes to the consolidated financial statements: note 10 on pages 111 and 112, note 15C on pages 119 and 120, note 16 on pages 121 to 123 and note 20 on page 133. Unilever is satisfied that its financing arrangements are adequate to meet its working capital needs for the foreseeable future. In relation to the facilities available to the Group, borrowing requirements do not fluctuate materially during the year and are not seasonal.


Non-GAAP measures

Certain discussions and analyses set out in this Annual Report and Accounts (and the Additional Information for US Listing Purposes) include measures which are not defined by generally accepted accounting principles (GAAP) such as IFRS. We believe this information, along with comparable GAAP measurements, is useful to investors because it provides a basis for measuring our operating performance, and our ability to retire debt and invest in new business opportunities. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our operating performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Wherever appropriate and practical, we provide reconciliations to relevant GAAP measures.

Explanation and reconciliation of non-GAAP measures

Unilever uses ‘constant rate’ and ‘underlying’ measures primarily for internal performance analysis and targeting purposes. We present certain items, percentages and movements, using constant exchange rates, which exclude the impact of fluctuations in foreign currency exchange rates. We calculate constant currency values by translating both the current and the prior period local currency amounts using the prior year average exchange rates into euro, except for the local currency of entities that operate in hyperinflationary economies. These currencies are translated into euros using the prior year closing exchange rate before the application of IAS 29.

The table below shows exchange rate movements in our key markets.


      Annual average
rate in 2019

Annual average

rate in 2018

Brazilian real (1 = BRL)      4.367        4.282  
Chinese yuan (1 = CNY)      7.725        7.807  
Indian rupee (1 = INR)      78.812        80.730  
Indonesia rupiah (1 = IDR)      15863        16831  
Philippine peso ( 1 = PHP)      58.112        62.379  
UK pound sterling (1 = GBP)      0.880        0.884  
US dollar (1 = US$)      1.120        1.185  

In the following sections we set out our definitions of the following non- GAAP measures and provide reconciliations to relevant GAAP measures:

  underlying sales growth;
  underlying volume growth;
  underlying price growth;
  non-underlying items;
  underlying earnings per share;
  underlying operating profit and underlying operating margin;
  underlying effective tax rate;
  constant underlying earnings per share;
  free cash flow;
  return on assets;
  net debt; and
  return on invested capital.


Annual Report on Form 20-F 2019   27

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Financial review continued







Underlying sales growth

Underlying Sales Growth (USG) refers to the increase in turnover for the period, excluding any change in turnover resulting from acquisitions, disposals, changes in currency and price growth in excess of 26% in hyperinflationary economies. Inflation of 26% per year compounded over three years is one of the key indicators within IAS 29 to assess whether an economy is deemed to be hyperinflationary. We believe this measure provides valuable additional information on the underlying sales performance of the business and is a key measure used internally. The impact of acquisitions and disposals is excluded from USG for a period of 12 calendar months from the applicable closing date. Turnover from acquired brands that are launched in countries where they were not previously sold is included in USG as such turnover is more attributable to our existing sales and distribution network than the acquisition itself.

Previously, USG was calculated on a different basis as explained on treatment of hyperinflationary economies in underlying sales growth section below. 2018 and 2017 comparative numbers have been restated for the new basis.

The reconciliation of USG to changes in the GAAP measure turnover is as follows:


2019 vs 2018 (%)   

Beauty &

      Personal Care


Foods &


Turnover growth(a)      6.0       (4.6     6.9       2.0  
Effect of acquisitions      0.9       0.6       0.3       0.7  
Effect of disposals      -       (7.5     -       (3.0
Effect of currency-related items,      2.4       1.0       0.4       1.5  
of which:         

Exchange rate changes

     1.7       (3.5     (0.3     (0.7

Extreme price growth in hyperinflationary markets(b)

     0.6       4.7       0.7       2.2  

Underlying sales growth(b)

     2.6       1.5       6.1       2.9  
2018 vs 2017 (%)                                 
Turnover growth(a)      (0.3     (9.9     (4.2     (5.1
Effect of acquisitions      3.9       0.8       0.5       2.0  
Effect of disposals            (7.2     (0.2     (3.0
Effect of currency-related items,      (7.2     (5.8     (8.8     (7.0
of which:         

Exchange rate changes

     (8.1     (47.7     (9.1     (29.4

Extreme price growth in hyperinflationary markets(b)

     1.0       79.1       0.4       31.7  

Underlying sales growth(b)

     3.4       2.2       4.7       3.2  
2017 vs 2016 (%)                                 
Turnover growth(a)      2.6       (0.4     5.6       1.9  
Effect of acquisitions      1.8       0.2       3.1       1.3  
Effect of disposals      (0.1     (0.8     (0.2     (0.4
Effect of currency-related items,      (1.9     (1.8     (1.7     (1.8
of which:         

Exchange rate changes

     (1.9     (4.3     (1.7     (2.8

Extreme price growth in hyperinflationary markets(b)

     -       2.5       -       1.1  

Underlying sales growth(b)

     2.9       2.1       4.4       2.8  



Turnover growth is made up of distinct individual growth components, namely underlying sales, currency impact, acquisitions and disposals. Turnover growth is arrived at by multiplying these individual components on a compounded basis as there is a currency impact on each of the other components. Accordingly, turnover growth is more than just the sum of the individual components.


Underlying price growth in excess of 26% per year in hyperinflationary economies has been excluded when calculating the underlying sales growth in the tables above, and an equal and opposite amount is shown as extreme price growth in hyperinflationary markets.


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Treatment of hyperinflationary economies in underlying sales growth

Previously Underlying Sales Growth (USG) excluded all price growth from countries where the impact of consumer price inflation (CPI) rates had escalated to extreme levels. There were two countries where we had determined extreme levels of CPI existed. Price growth in Venezuela has been excluded from USG since Q4 2017 and price growth in Argentina has been excluded from USG since Q3 2018. This approach was adopted for Argentina in 2018 as it was considered that hyperinflationary conditions would only exist for a short while and thus all price movements would be related to hyperinflation.

Following a review during 2019, we now consider that hyperinflationary conditions are likely to persist for some time and thus price growth will represent both hyperinflationary price growth plus normal pricing actions. As a result, our definition of USG has been updated to include price growth in markets deemed to be hyperinflationary economies, up to a maximum of 26% per year (equivalent to approximately 2% per month compounded). Inflation of 26% per year compounded over three years is one of the key indicators within IAS 29 to assess whether an economy is deemed to be hyperinflationary.

The change is intended to ensure our reporting provides a more realistic representation of underlying performance. Price increases in hyperinflationary economies reflect normal pricing actions that relate to fluctuations in demand, changes in commodity and other operating costs and tactical steps to drive competitiveness, in addition to the exceptional pricing actions taken to respond to hyperinflationary conditions. The new USG definition aims to include these normal pricing actions but excludes the exceptional pricing actions that give rise to the extreme impact that results from hyperinflation.

Also, as a consequence of this change, we are providing a breakdown of the impact of currency-related items on turnover. Whilst previously the devaluation of the currency and all price growth in hyperinflationary economies were grouped under “exchange rate” (now called “currency-related items”), we are now breaking this down between:


exchange rate changes (including the devaluation of hyperinflationary currencies); and


extreme price growth in hyperinflationary economies (i.e. price growth that is not included in underlying price growth).

The table below show the impact of this change on USG, UPG and currency-related items on the previously reported numbers:


     2018            2017  

Underlying sales growth and

underlying price growth (%)


     Beauty &
      Foods &
         Total               Beauty &
      Foods &
Previously reported                    
Underlying sales growth      3.1       2.0       4.2       2.9          2.9       2.7       4.4       3.1  
Underlying price growth      0.6       0.7       1.9       0.9                1.5       3.0       2.3       2.3  
Underlying sales growth      3.4       2.2       4.7       3.2          2.9       2.1       4.4       2.8  
Underlying price growth      0.9       0.9       2.4       1.2                1.5       2.3       2.3       2.0  

Currency related changes (%)


Previously reported                    
Currency related items      (7.0     (5.6     (8.3     (6.7        (1.9     (2.4     (1.7     (2.1
Of which:                    

Exchange rate changes


Extreme price growth in hyperinflationary markets

Currency related items      (7.2     (5.8     (8.8     (7.0        (1.9     (1.8     (1.7     (1.8
Of which:                    

Exchange rate changes

     (8.1     (47.4     (9.1     (29.4        (1.9     (4.3     (1.7     (2.8

Extreme price growth in hyperinflationary markets

     1.0       79.1       0.4       31.7                -       2.5       -       1.1  


Annual Report on Form 20-F 2019   29

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Financial review continued








Underlying price growth

Underlying price growth (UPG) is part of USG and means, for the applicable period, the increase in turnover attributable to changes in prices during the period. UPG therefore excludes the impact to USG due to (i) the volume of products sold; and (ii) the composition of products sold during the period. In determining changes in price we exclude the impact of price growth in excess of 26% per year in hyperinflationary economies as explained in USG above.

Underlying volume growth

Underlying volume growth (UVG) is part of USG and means, for the applicable period, the increase in turnover in such period calculated as the sum of (i) the increase in turnover attributable to the volume of products sold; and (ii) the increase in turnover attributable to the composition of products sold during such period. UVG therefore excludes any impact on USG due to changes in prices.

The relationship between USG, UVG and UPG is set out below:


            2019 vs
             2018 vs
             2017 vs

Underlying volume growth (%)

     1.2        1.9        0.8  

Underlying price growth (%)

     1.6        1.2        2.0  

Underlying sales growth (%)

     2.9        3.2        2.8  

Refer to page 24 for the relationship between USG, UVG and UPG for each of the categories.

Non-underlying items

Several non-GAAP measures are adjusted to exclude items defined as non-underlying due to their nature and/or frequency of occurrence.

  Non-underlying items within operating profit are: gains or losses on business disposals, acquisition and disposal related costs, restructuring costs, impairments and one-off items within operating profit.
  Non-underlying items not in operating profit but within net profit are: net monetary gain/(loss) arising from hyperinflationary economies and significant and unusual items in net finance cost, share of profit/(loss) of joint ventures and associates and taxation.
  Non-underlying items are both non-underlying items within operating profit and those non-underlying items not in operating profit but within net profit.

Refer to note 3 for details of non-underlying items.

Underlying operating profit and underlying operating margin

Underlying operating profit and underlying operating margin mean operating profit and operating margin before the impact of non-underlying items within operating profit. Underlying operating profit represents our measure of segment profit or loss as it is the primary measure used for making decisions about allocating resources and assessing performance of the segments.

The Group reconciliation of operating profit to underlying operating profit is as follows:



     € million









Operating profit      8,708        12,639       8,957  
Non-underlying items within operating profit (see note 3)      1,239        (3,176     543  
Underlying operating profit      9,947        9,463       9,500  
Turnover      51,980        50,982       53,715  
Operating margin      16.8%        24.8%       16.7%  

Underlying operating margin

     19.1%        18.6%       17.7%  



Restated following adoption of IFRS 16. See note 1 and note 24 for further details.

Further details of non-underlying items can be found in note 3 on page 96 of the consolidated financial statements.

Refer to Note 2 on page 94 for the reconciliation of operating profit to underlying operating profit by Division. For each Division operating margin is computed as operating profit divided by turnover and underlying operating margin is computed as underlying operating profit divided by turnover.

Underlying earnings per share

Underlying earnings per share (underlying EPS) is calculated as underlying profit attributable to shareholders’ equity divided by the diluted combined average number of share units. In calculating underlying profit attributable to shareholders’ equity, net profit attributable to shareholders’ equity is adjusted to eliminate the post-tax impact of non-underlying items. This measure reflects the underlying earnings for each share unit of the Group.

Refer to note 7 on page 107 for reconciliation of net profit attributable to shareholders’ equity to underlying profit attributable to shareholders’ equity.

Underlying effective tax rate

The underlying effective tax rate is calculated by dividing taxation excluding the tax impact of non-underlying items by profit before tax excluding the impact of non-underlying items and share of net profit/(loss) of joint ventures and associates. This measure reflects the underlying tax rate in relation to profit before tax excluding non-underlying items before tax and share of net profit/(loss) of joint ventures and associates.

Tax impact on non-underlying items within operating profit is the sum of the tax on each non-underlying item, based on the applicable country tax rates and tax treatment. This is shown in the table:


           € million




Taxation      2,263       2,572  
Tax impact of:     

Non-underlying items within operating profit(b)

     309       (259

Non-underlying items not in operating profit but within net profit(b)

     (196     (29
Taxation before tax impact of non-underlying      2,376       2,284  
Profit before taxation      8,289       12,360  

Non-underlying items within operating profit before tax(b)

     1,239       (3,176

Non-underlying items not in operating profit but within net profit before tax(c)

     (32     (122

Share of net (profit)/loss of joint ventures and associates

     (176     (185

Profit before tax excluding non-underlying items before tax and share of net profit/(loss) of joint ventures and associates

     9,320       8,877  

Underlying effective tax rate

     25.5%       25.7%  



Restated following adoption of IFRS 16. See note 1 and note 24 for further details.


Refer to note 3 for further details on these items.


Excludes 3 million (2018: 32 million) gain on disposal of spreads business by the joint venture in Portugal which is included in the share of net profit/(loss) of joint ventures and associates line. Including the gain, total non-underlying items not in operating profit but within net profit before tax is 35 million (2018: 154 million). See note 3.

Constant underlying earnings per share

Constant underlying earnings per share (constant underlying EPS) is calculated as underlying profit attributable to shareholders’ equity at constant exchange rates and excluding the impact of both translational hedges and price growth in excess of 26% per year in hyperinflationary economies divided by the diluted average number of ordinary share units. This measure reflects the underlying earnings for each ordinary share unit of the Group in constant exchange rates.



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The reconciliation of underlying profit attributable to shareholders’ equity to constant underlying earnings attributable to shareholders’ equity and the calculation of constant underlying EPS is as follows:



    € million


Underlying profit attributable to shareholders’ equity(b)      6,688       6,345  

Impact of translation from current to constant exchange rates and translational hedges

     13       46  

Impact of price growth in excess of 26% per year in hyperinflationary economies(c)

     (108     (10

Constant underlying earnings attributable to shareholders’ equity

     6,593       6,381  

Diluted combined average number of share units (millions of units)

     2,626.7       2,694.8  

Constant underlying EPS ()

     2.51       2.37  



Restated following adoption of IFRS16. See note 1 and note 24 for further details.


See note 7.


See pages 28 and 29 for further details.

Free cash flow

Free cash flow (FCF) is defined as cash flow from operating activities, less income taxes paid, net capital expenditure and net interest payments. It does not represent residual cash flows entirely available for discretionary purposes; for example, the repayment of principal amounts borrowed is not deducted from FCF. FCF reflects an additional way of viewing our liquidity that we believe is useful to investors because it represents cash flows that could be used for distribution of dividends, repayment of debt or to fund our strategic initiatives, including acquisitions, if any.

The reconciliation of net profit to FCF is as follows:


            € million








Net profit      6,026       9,788       6,456  
Taxation      2,263       2,572       1,670  

Share of net profit of joint ventures/associates and other income from non-current investments

     (176     (207     (173

Net monetary gain arising from hyperinflationary economies

     (32     (122     -  

Net finance costs

     627       608       1,004  

Depreciation, amortisation and impairment

     1,982       2,216       2,025  

Changes in working capital

     (9     (793     (68

Pensions and similar obligations less payments

     (260     (128     (904

Provisions less payments

     7       55       200  

Elimination of (profits)/losses on disposals

     60       (4,313     (298

Non-cash charge for share-based compensation

     151       196       284  

Other adjustments

     2       (260     (153
Cash flow from operating activities      10,641       9,612       10,043  
Income tax paid      (2,532     (2,294     (2,164
Net capital expenditure      (1,429     (1,424     (1,621

Net interest payments

     (548     (461     (420
Free cash flow      6,132       5,433       5,838  

Net cash flow (used in)/from investing activities

     (2,237     4,644       (5,879

Net cash flow (used in)/from financing activities

     (4,667     (12,113     (2,020



Restated following adoption of IFRS16. See note 1 and note 24 for further details.

Net debt

Net debt is a measure that provides valuable additional information on the summary presentation of the Group’s net financial liabilities and is a measure in common use elsewhere.

Prior to this quarter, all financial asset derivatives were current financial assets and so reduced net debt. Following a recent review we now also have financial asset derivatives that are non-current in nature. As all of these derivatives relate to financial liabilities, we continue to exclude them for the purposes of our net debt calculation and have expanded our definition to reflect this.

Net debt is now defined as the excess of total financial liabilities, excluding trade payables and other current liabilities, over cash, cash equivalents and other current financial assets, excluding trade and other current receivables, and non-current financial asset derivatives that relate to financial liabilities.


            € million




Total financial liabilities      (28,257     (26,738
Current financial liabilities      (4,691     (3,613
Non-current financial liabilities      (23,566     (23,125
Cash and cash equivalents as per balance sheet      4,185       3,230  
Cash and cash equivalents as per cash flow statement      4,116       3,090  
Add bank overdrafts deducted therein      69       140  
Other current financial assets      907       874  
Non-current financial assets derivatives that relate to financial liabilities      114        
Net debt      (23,051     (22,634



Restated following adoption of IFRS16. See note 1 and note 24 for further details.

Return on invested capital

Return on invested capital (ROIC) is a measure of the return generated on capital invested by the Group. The measure provides a guide rail for long-term value creation and encourages compounding reinvestment within the business and discipline around acquisitions with low returns and long payback. ROIC is calculated as underlying operating profit after tax divided by the annual average of: goodwill, intangible assets, property, plant and equipment, net assets held for sale, inventories, trade and other current receivables, and trade payables and other current liabilities.


        € million 2019      million 2018
Underlying operating profit before tax(b)      9,947       9,463  

Tax on underlying operating profit(c)

     (2,536     (2,432
Underlying operating profit after tax      7,411       7,031  
Goodwill      18,067       17,341  
Intangible assets      12,962       12,152  
Property, plant and equipment      12,062       12,088  
Net assets held for sale      81       108  
Inventories      4,164       4,301  
Trade and other current receivables      6,695       6,482  

Trade payables and other current liabilities

     (14,768     (14,457
Period-end invested capital      39,263       38,015  
Average invested capital for the period      38,639       38,749  
Return on average invested capital      19.2%       18.1%  



Restated following adoption of IFRS16. See note 1 and note 24 for further details.


See reconciliation of operating profit to underlying operating profit on page 30.


Tax on underlying operating profit is calculated as underlying operating profit before tax multiplied by underlying effective tax rate of 25.5% (2018: 25.7%) which is shown on page 30.



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Financial review continued






Return on assets

Return on assets is a measure of the return generated on assets for each division. This measure provides additional insight on the performance of the divisions and assists in formulating long-term strategies with respect to allocation of capital across divisions. Division return on assets is calculated as underlying operating profit after tax for the division divided by the annual average of: property, plant and equipment, net assets held for sale (excluding goodwill and intangibles), inventories, trade and other current receivables, and trade payables and other current liabilities for each division. The annual average is computed by adding the amounts at the beginning and the end of the calendar year and dividing by two.



€ million

Beauty &
          Personal Care


€ million

Foods &


                  €  million



                       € million



Underlying operating profit before tax      4,960       3,382       1,605       9,947  
Tax on underlying operating profit      (1,265     (862     (409     (2,536

Underlying operating profit after tax

     3,695       2,520       1,196       7,411  
Property plant and equipment      4,382       5,336       2,344       12,062  
Net assets held for sale      5       63       10       78  
Inventories      1,793       1,698       673       4,164  
Trade and other receivables      2,817       2,484       1,394       6,695  
Trade payables and other current liabilities      (5,941     (5,588     (3,239     (14,768
Period end assets (net)      3,056       3,993       1,182       8,231  
Average assets for the period (net)      2,985       4,146       1,204       8,335  
Division return on assets      124%       61%       99%       89%  
2018 (Restated)(a)                                 
Underlying operating profit before tax      4,543       3,576       1,344       9,463  
Tax on underlying operating profit      (1,168     (919     (345     (2,432
Underlying operating profit after tax      3,375       2,657       999       7,031  
Property plant and equipment      4,336       5,473       2,279       12,088  
Net assets held for sale      1       25       -       26  
Inventories      1,736       1,762       803       4,301  
Trade and other receivables      2,319       3,024       1,139       6,482  
Trade payables and other current liabilities      (5,478     (5,984     (2,995     (14,457
Period end assets (net)      2,914       4,300       1,226       8,440  
Average assets for the period (net)      2,887       4,564       1,155       8,606  
Division return on assets      117%       58%       86%       82%  



Restated following adoption of IFRS 16. See note 1 and note 24 for further details.

Other information

2018 financial review

The financial review for the year ended 31 December 2018 can be found on pages 20 to 26 of our Annual Report and Accounts on Form 20-F filed with the United States Securities and Exchange Commission on 11 March 2019.

Accounting standards and critical accounting policies

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the EU and IFRS as issued by the International Accounting Standards Board. The accounting policies are consistent with those applied in 2018 except for the recent accounting developments as set out in note 1 on pages 92 to 93. The critical accounting estimates and judgements and those that are most significant in connection with our financial reporting are set out in note 1 on pages 91 to 92.

Auditors report

The independent auditors’ report issued by KPMG Accountants N.V. and KPMG LLP on the consolidated results of the Group, as set out in the financial statements, were unqualified and contained no exceptions or emphasis of matter. For more details see pages 79 to 86.


32   Annual Report on Form 20-F 2019

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Our risks





Our risk appetite and approach to risk management

Risk management is integral to Unilever’s strategy and to the achievement of Unilever’s long-term goals. Our success as an organisation depends on our ability to identify and exploit the opportunities generated by our business and the markets we are in. In doing this we take an embedded approach to risk management which puts risk and opportunity assessment at the core of the Boards agenda, which is where we believe it should be.

Unilever’s appetite for risk is driven by the following:

  Our growth should be consistent, competitive, profitable and responsible.
  Our actions on issues such as plastic and climate change must reflect their urgency, and not be constrained by the uncertainty of potential impacts.
  Our behaviours must be in line with our Code of Business Principles and Code Policies.
  Our ambition to continuously improve our operational efficiency and effectiveness.
  Our aim to maintain a single A credit rating on a long-term basis.

Our approach to risk management is designed to provide reasonable, but not absolute, assurance that our assets are safeguarded, the risks facing the business are being assessed and mitigated and all information that may be required to be disclosed is reported to Unilever’s senior management including, where appropriate, the Chief Executive Officer and Chief Financial Officer.


The Boards assume overall accountability for the management of risk and for reviewing the effectiveness of Unilever’s risk management and internal control systems.

The Boards have established a clear organisational structure with well defined accountabilities for the principal risks that Unilever faces in the short, medium and long term. This organisational structure and distribution of accountabilities and responsibilities ensure that every country in which we operate has specific resources and processes for risk reviews and risk mitigation. This is supported by the Unilever Leadership Executive, which takes active responsibility for focusing on the principal areas of risk to Unilever. The Boards regularly review these risk areas, including consideration of environmental, social and governance matters, and retain responsibility for determining the nature and extent of the significant risks that Unilever is prepared to take to achieve its strategic objectives.

Foundation and principles

Unilever’s approach to doing business is framed by our Purpose and values (see page 9). Our Code of Business Principles sets out the standards of behaviour that we expect all employees to adhere to. Day-to-day responsibility for ensuring these principles are applied throughout Unilever rests with senior management across categories, geographies and functions. A network of Business Integrity Officers and Committees supports the activities necessary to communicate the Code, deliver training, maintain processes and procedures (including support lines) to report and respond to alleged breaches, and to capture and communicate learnings.

We have a framework of Code Policies that underpins the Code of Business Principles and sets out the non-negotiable standards of behaviour expected from all our employees.

For each of our principal risks we have a risk management framework detailing the controls we have in place and who is responsible for managing both the overall risk and the individual controls mitigating that risk. Our assessment of risk considers both short and long term risks, including how these risks are changing, together with emerging risk areas. These are reviewed on an ongoing basis, and formally by senior management and the Boards at least once a year.

Unilever’s functional standards define mandatory requirements across a range of specialist areas such as health and safety, accounting and reporting and financial risk management.


Unilever operates a wide range of processes and activities across all its operations covering strategy, planning, execution and performance management. Risk management is integrated into every stage of this business cycle. These procedures are formalised and documented and are increasingly being centralised and automated into transactional and other information technology systems.

Assurance and re-assurance

Assurance on compliance with the Code of Business Principles and all of our Code Policies is obtained annually from Unilever management via a formal Code declaration. In addition, there are specialist awareness and training programmes which are run throughout the year and vary depending on the business priorities. These specialist compliance programmes supplement the Code declaration. Our Corporate Audit function plays a vital role in providing to both management and the Boards an objective and independent review of the effectiveness of risk management and internal control systems throughout Unilever.

Boards’ assessment of compliance with the risk management frameworks

The Boards, advised by the Committees where appropriate, regularly review the significant risks and decisions that could have a material impact on Unilever. These reviews consider the level of risk that Unilever is prepared to take in pursuit of the business strategy and the effectiveness of the management controls in place to mitigate the risk exposure.

The Boards, through the Audit Committee, have reviewed the assessment of risks, internal controls and disclosure controls and procedures in operation within Unilever. They have also considered the effectiveness of any remedial actions taken for the year covered by this Annual Report and Accounts and up to the date of its approval by the Boards.

Details of the activities of the Audit Committee in relation to this can be found in the Report of the Audit Committee on pages 54 to 55.

Further statements on compliance with the specific risk management and control requirements in the Dutch Corporate Governance Code, the UK Corporate Governance Code, the US Securities Exchange Act (1934) and the Sarbanes-Oxley (2002) Act can be found on page 53.



Annual Report on Form 20-F 2019   33

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Our risks continued






Viability statement

The Directors have reviewed the long-term prospects of the Group in order to assess its viability. This review incorporated the activities and key risks of the Group together with the factors likely to affect the Group’s future development, performance, financial position, cash flows, liquidity position and borrowing facilities as described on pages 1 to 32. In addition, we describe in notes 15 to 18 on pages 116 to 132 the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risk.


In order to report on the long-term viability of the Group, the Directors reviewed the overall funding capacity and headroom available to withstand severe events and carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. This assessment also included reviewing and understanding the mitigation factors in respect of each principal risk. The risk factors are summarised on pages 35 to 39.

The viability assessment has three parts:


First, the Directors considered the period over which they have a reasonable expectation that the Group will continue to operate and meet its liabilities;


Second, they considered the current debt facilities and debt headroom over the viability period, assuming that any debt maturing can be re-financed at commercially acceptable terms; and


Third, they considered the potential impact of severe but plausible scenarios over this period, including:


assessing scenarios for each individual principal risk, for example the termination of our relationships with the three largest global customers; the loss of all material litigation cases; a major IT data breach, reputational damage from not progressing against our plastic packaging commitments, and the lost cost and growth opportunities from not keeping up with technological changes; and


assessing scenarios that involve more than one principal risk including the following multi risk scenarios:


Multi risk scenarios modelled


Level of severity reviewed


   Link to principal risk

Contamination issue with one of our products leading to lower sales of products of this brand and the temporary closure of our largest sourcing unit.


   A fine equal to 1% of Group turnover was considered along with damage to our largest brand and disruption to supply chain.   

•  Safe and high-quality products

•  Brand preference

•  Supply chain


Major global incident affecting one or more of the Group’s key locations resulting in an outage for a year in a key sourcing unit and significant water shortages in our key developing markets.

   The complete loss of all of our turnover in our largest geographic market was considered along with destruction of a key sourcing unit and reduced demand for our products that require water.   

•  Economic and political instability

•  Supply chain

•  Climate change

Lack of progress against our plastic packaging ambitions and the loss of our three largest customers.

   Significant reputational damage was considered with the impact of losing our three key customers.   

•  Plastic packaging

•  Brand preference

•  Customer





Firstly, a three-year period is considered appropriate for this viability assessment because it is the period covered by the strategic plan and it enables a high level of confidence in assessing viability, even in extreme adverse events, due to a number of factors such as:


the Group has considerable financial resources together with established business relationships with many customers and suppliers in countries throughout the world;


high cash generation by the Group’s operations and access to the external debt markets;


flexibility of cash outflow with respect to significant marketing programmes and capital expenditure projects which usually have a two to three year horizon; and


the Group’s diverse product and geographical activities which are impacted by continuously evolving technology and innovation.


Secondly, the Group’s debt headroom and funding profile has been assessed:


the Group has a healthy balance of short-term and long-term debt programmes, with repayment profiles ensuring short-term commercial paper maturities do not exceed 0.5 billion in any given week and long-term debt maturities do not exceed 4 billion in any given year; and


the Group has $7.865 billion of committed credit facilities with a maturity of 364 days which are used for backing up our commercial paper programmes.


Thirdly, for each of our 14 principal risks, worst case plausible scenarios have been assessed together with multiple risk scenarios. None of the scenarios reviewed, either individually or in aggregate would cause Unilever to cease to be viable.


On the basis described above, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.


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Principal risk factors

Our business is subject to risks and uncertainties. On the following pages we have identified the risks that we regard as the most relevant to our business. These are the risks that we see as most material to Unilever’s business and performance at this time. There may be other risks that could emerge in the future. Our principal risks include risks that could impact our business in the short-term (i.e. the next two years), medium term (i.e. the next three to ten years) or over the longer term (i.e. beyond ten years).

The most significant emerging risk is the ongoing outbreak of the Coronavirus (COVID-19). We are monitoring the situation carefully as it evolves to understand the potential impact on our people and our business. Based on the current position there will be a significant impact on the short-term performance of our Chinese business in 2020, in particular our food service business. There may also be impacts in other countries although the extent is not yet clear. We are taking all necessary steps to protect our people and mitigate the risk to our business.

Our principal risks have not fundamentally changed this year. We no longer show Sustainability as a specific standalone risk reflecting the ongoing integration of sustainability into our business and a realisation over the last couple of years that we need to be more granular in explaining what is meant by a sustainability risk and have hence separated out specific sustainability risks, notably Climate Change and Plastic Packaging. This year we are also separating out a risk with respect to Inequality, which was previously included in our overarching Sustainability risk and is now included within our Ethical risk. In addition, we have reassessed our Financial risks and believe our principal risk in this area should focus more on the changing global tax landscape and its impact on our business, and less on the risks related to our pension liabilities as we have made progress in ensuring stability in our pension funding and do not consider the current risk level to be material at this time.

As well as identifying the most relevant risks for our business we reflect on whether we think the level of risk associated with each of our principal risks is increasing or decreasing. There are three areas where we believe there is an increased level of risk:


Plastic Packaging: the pressure to reduce the use of plastic, particularly single-use plastic, continues to gain traction with both our consumers and customers, coupled with the rise of countries considering taxes on plastic packaging;


Customers: the retail landscape continues to evolve with a significant proportion of category growth coming from e-commerce and other new channels, so we need to adapt our business models and develop relationships with new customers and make sure our products are appropriate for these channels; and


Business Transformation: the pressure to digitise our business to generate efficiencies and to allow our people to focus on driving growth continues; a significant transformation programme is underway and our ability to effectively manage these transitions is a key short-term risk.

If the circumstances in these risks occur or are not successfully mitigated, our cash flow, operating results, financial position, business and reputation could be materially adversely affected. In addition, risks and uncertainties could cause actual results to vary from those described, which may include forward-looking statements, or could impact on our ability to meet our targets or be detrimental to our profitability or reputation.


 Nature of risk


Brand preference

Our success depends on the value and relevance of our brands and products to consumers around the world and on our ability to innovate and remain competitive.

Consumer tastes, preferences and behaviours are changing more rapidly than ever before. We see a growing trend for consumers preferring brands which both meet their functional needs and have an explicit social purpose.

Technological change is disrupting our traditional brand communication models. Our ability to develop and deploy the right communication, both in terms of messaging content and medium is critical to the continued strength of our brands.

We are dependent on creating innovative products that continue to meet the needs of our consumers and getting these new products to market with speed.

Risk change since last year: No change



Portfolio management

Unilever’s strategic investment choices will affect the long-term growth and profits of our business.

Unilever’s growth and profitability are determined by our portfolio of divisions, geographies and channels and how these evolve over time. If Unilever does not make optimal strategic investment decisions, then opportunities for growth and improved margin could be missed.

Risk change since last year: No change





Annual Report on Form 20-F 2019   35

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Our risks continued







 Nature of risk


Climate change

Climate change and governmental actions to reduce such changes may disrupt our operations and/or reduce consumer demand for our products.

Climate change is occurring around the world which may impact our business in various ways. It could lead to water shortages which would reduce demand for those of our products that require a significant amount of water during consumer use. It could also lead to an increase in raw material and packaging prices or reduced availability. Governments may take action to reduce climate change such as the introduction of a carbon tax or zero net deforestation requirements which could impact our business through higher costs or reduced flexibility of operations.

Increased frequency of extreme weather (storms and floods) could cause increased incidence of disruption to our manufacturing and distribution network. Climate change could result therefore in making products less affordable or less available for our consumers resulting in reduced growth and profitability.

Risk change since last year: No change



Plastic packaging

We use a significant amount of plastic to package our products. A reduction in the amount of virgin plastic we use, the use of recycled plastic and an increase in the recyclability of our packaging are critical to our future success.

Both consumer and customer responses to the environmental impact of plastic waste and emerging regulation by governments to tax or ban the use of certain plastics requires us to find solutions to reduce the amount of plastic we use; increase recycling post-consumer use; and to source recycled plastic for use in our packaging. We are also dependent on the work of our industry partners to create and improve recycling infrastructures throughout the world.

Not only is there a risk around finding appropriate replacement materials, due to high demand the cost of recycled plastic or other alternative packaging materials could significantly increase in the foreseeable future and this could impact our business performance. We could also be exposed to higher costs as a result of taxes or fines if we are unable to comply with plastic regulations which would again impact our profitability and reputation.

Risk change since last year: Increase




Successful customer relationships are vital to our business and continued growth.

Maintaining strong relationships with our existing customers and building relationships with new customers who have built new technology-enabled business models to serve changing shopper habits are necessary to ensure our brands are well presented to our consumers and available for purchase at all times.

The strength of our customer relationships also affects our ability to obtain pricing and competitive trade terms. Failure to maintain strong relationships with customers could negatively impact our terms of business with affected customers and reduce the availability of our products to consumers.

Risk change since last year: Increase





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 Nature of risk



A skilled workforce and agile ways of working are essential for the continued success of our business.

With the rapidly changing nature of work and skills, there is a risk that our workforce is not equipped with the skills required for the new environment.

Our ability to attract, develop and retain a diverse range of skilled people is critical if we are to compete and grow effectively.

This is especially true in our key emerging markets where there can be a high level of competition for a limited talent pool. The loss of management or other key personnel or the inability to identify, attract and retain qualified personnel could make it difficult to manage the business and could adversely affect operations and financial results.

Risk change since last year: No change



Supply chain

Our business depends on purchasing materials, efficient manufacturing and the timely distribution of products to our customers.

Our supply chain network is exposed to potentially adverse events such as physical disruptions, environmental and industrial accidents, trade restrictions or disruptions at a key supplier, which could impact our ability to deliver orders to our customers.

The cost of our products can be significantly affected by the cost of the underlying commodities and materials from which they are made. Fluctuations in these costs cannot always be passed on to the consumer through pricing.

Changes in trade relationships between Europe and the UK as a result of Brexit could give rise to both a supply and cost issue.

Risk change since last year: No change



Safe and high quality products

The quality and safety of our products are of paramount importance for our brands and our reputation.

The risk that raw materials are accidentally or maliciously contaminated throughout the supply chain or that other product defects occur due to human error, equipment failure or other factors cannot be excluded.

Labelling errors can have potentially serious consequences for both consumer safety and brand reputation. Therefore on-pack labelling needs to provide clear and accurate ingredient information in order that consumers can make informed decisions regarding the products they buy.

Risk change since last year: No change



Systems and information

Unilever’s operations are increasingly dependent on IT systems and the management of information.

The cyber-attack threat of unauthorised access and misuse of sensitive information or disruption to operations continues to increase. Such an attack could inhibit our business operations in a number of ways, including disruption to sales, production and cash flows, ultimately impacting our results.

In addition, increasing digital interactions with customers, suppliers and consumers place ever greater emphasis on the need for secure and reliable IT systems and infrastructure and careful management of the information that is in our possession to ensure data privacy.

Risk change since last year: No change






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Our risks continued







 Nature of risk


Business transformation

Successful execution of business transformation projects is key to delivering their intended business benefits and avoiding disruption to other business activities.

Unilever is continually engaged in major change projects, including acquisitions, disposals and organisational transformation, to drive continuous improvement in our business and to strengthen our portfolio and capabilities. Continued digitalisation of our business models and processes together with enhancing data management capabilities is a critical part of our transformation.

We have an extensive programme of transformation projects. Failure to execute such initiatives successfully could result in under-delivery of the expected benefits and there could be a significant impact on the value of the business.

Risk change since last year: Increase



Economic and political instability

Unilever operates around the globe and is exposed to economic and political instability that may reduce consumer demand for our products, disrupt sales operations and/or impact the profitability of our operations. Adverse economic conditions may affect one or more countries within a region, or may extend globally.

Government actions such as foreign exchange or price controls can impact on the growth and profitability of our local operations.

Unilever has more than half its turnover in emerging markets which can offer greater growth opportunities but also expose Unilever to related economic and political volatility.

Risk change since last year: No change



Treasury and Tax

Unilever is exposed to a variety of external financial risks in relation to Treasury and Tax.

The relative values of currencies can fluctuate widely and could have a significant impact on business results. Further, because Unilever consolidates its financial statements in euros, it is subject to exchange risks associated with the translation of the underlying net assets and earnings of its foreign subsidiaries.

We are also subject to the imposition of exchange controls by individual countries which could limit our ability to import materials paid in foreign currency or to remit dividends to the parent company.

A material shortfall in our cash flow could undermine Unilever’s credit rating, impair investor confidence and restrict Unilever’s ability to raise funds. In times of financial crisis, there is a further risk that we may not be able to raise funds due to market liquidity.

We are exposed to counter-party risks with banks, suppliers and customers which could result in financial losses.

Tax is a complex and evolving area where laws and their interpretation are changing regularly, leading to the risk of unexpected tax exposures. International tax reform remains a key focus of attention with the OECD’s Base Erosion and Profit Shifting project, and the Digitalising Economy Project, and further potential tax reform in the EU.

Risk change since last year: No change






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 Nature of risk



Unilever’s brands and reputation are valuable assets and the way in which we operate, contribute to society and engage with the world around us is always under scrutiny both internally and externally.

Acting in an ethical manner, consistent with the expectations of customers, consumers and other stakeholders, is essential for the protection of the reputation of Unilever and its brands.

A key element of our ethical approach to business is to reduce inequality and promote fairness. Our activities touch the lives of millions of people and it is our responsibility to protect their rights and help them live well. The safety of our employees and the people and communities we work with is critical. Failure to meet these high standards could result in damage to Unilever’s corporate reputation and business results.

Risk change since last year: No change



Legal and regulatory

Compliance with laws and regulations is an essential part of Unilever’s business operations.

Unilever is subject to national and regional laws and regulations in such diverse areas as product safety, product claims, trademarks, copyright, patents, competition, employee health and safety, data privacy, the environment, corporate governance, listing and disclosure, employment and taxes.

Failure to comply with laws and regulations could expose Unilever to civil and/or criminal actions leading to damages, fines and criminal sanctions against us and/or our employees with possible consequences for our corporate reputation. Changes to laws and regulations could have a material impact on the cost of doing business.

Risk change since last year: No change






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In focus: Climate change

Unilever advocates for policies that advance the goal of the Paris Agreement on Climate Change to limit the increase in the global average temperature to well below 2°C, and ideally no more than 1.5°C, above pre-industrial levels by the end of the century. We believe this means achieving a net zero emissions world by 2050.

To achieve the goals of the Paris Agreement, we recognise the importance of disclosing climate-related risks and opportunities in line with the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD). This will enable market forces to drive efficient allocation of capital and support the transition to a low-carbon economy.

In this Annual Report and Accounts, we continue to integrate climate-related disclosures throughout the Strategic Report narrative. In recognition of the growing significance, and our increasing understanding of the impacts of climate change on our business, we have also summarised in this section the key risks and opportunities arising from climate change, including the potential impacts on our business.


The Boards take overall accountability for the management of all risks and opportunities, including climate change (see page 33). Our Chief Executive and Executive Board member, Alan Jope, is ultimately responsible for oversight of our climate change agenda. The Boards are supported by the ULE. During 2019, the USLP Steering Team was fully integrated into the main ULE agenda to reflect the integration of sustainability into our business strategy. The ULE meet monthly to discuss key strategic matters. During 2019, there were a number of agenda items on topics related to climate change including our climate goals.

A number of other specialist governance groups are in place to support our climate agenda, including:

  Energy Board: Drives delivery of our carbon positive ambition at corporate and country level and leads strategic partnerships and policy on renewables. Chaired by our Chief Supply Chain Officer, Marc Engel.
  Sustainable Sourcing Steering Group: Supports our strategy focusing on long-term, sustainable access to our key crops. Chaired by our Chief Procurement Officer, David Ingram.
  Water Board: Steers our strategy and targets on water, focusing on driving water-smart innovations for business growth. Chaired by our Home Care Category President, Peter Ter Kulve.

Remuneration linked to achievement of sustainability and climate change targets is a key part of our governance. For management employees – up to and including the ULE – incentives include fixed pay, a bonus as a percentage of fixed pay and a long-term management co-investment plan (MCIP) linked to financial and sustainability performance. The Sustainability Progress Index accounts for 25% of the total MCIP award and includes consideration of progress against our manufacturing scope 1 and 2 greenhouse gas and sustainable palm oil targets, which among others, underpin our climate strategy. See pages 60 to 77 for more on MCIP including the role of the Board’s Remuneration Committee and Corporate Responsibility Committee in determining the MCIP award each year.

Strategy and risk management

Climate change has been identified as a principal risk to Unilever which has the potential to impact our business in the short, medium and long term. The physical risks and opportinities that we face from climate change include extreme weather and water scarcity. The transition risks and opportunities include changing consumer preferences and future policy and regulation.

The process for assessing and identifying climate-related risks is the same for all principal risks and is described on page 36. For each of our principal risks we have a risk management framework detailing the controls we have in place, who is responsible for managing both the overall risk and the individual controls mitigating it. We monitor risks throughout the year to identify changes in the risk profile.


We regularly carry out climate-related risk assessments at site level, supplier-level, as well as innovation-project level. Management of climate related risks is distributed throughout the organisation depending on where the risk resides. For example, climate risks in relation to commodities in the supply chain are managed by our procurement team who are responsible for buying commodities.

Understanding financial impact: scenario analysis

This section explains how scenario analysis helps us to understand the potential impact of climate change on our business in 2030 to inform our strategy and financial planning.

To further understand the impact that climate change could have on Unilever’s business in the future, we performed a high-level assessment of the impact of 2°C and 4°C global warming scenarios. The 2°C and 4°C scenarios are constructed on the basis that average global temperatures will have increased by 2°C and 4°C in the year 2100. Unilever believes the world should seek to limit global temperatures to 1.5°C above pre-industrial levels. However, in line with guidance we have modelled scenarios based on 2°C and 4°C scenarios.

We focused the assessment on our business in 2030 assuming that we have the same business activities as we do today. While we understand that policy risk and physical impact can happen simultaneously, we made the following simplifying assumptions:

  In the 2°C scenario, we assumed that in the period to 2030 society acts rapidly to limit greenhouse gas emissions and puts in place measures to restrain deforestation and discourage emissions (for example implementing carbon pricing at $75-$100 per tonne, taken from the International Energy Agency’s 450 scenario). We have assumed that there will be no significant impact to our business from the physical ramifications of climate change by 2030 – i.e. from greater scarcity of water or increased impact of severe weather events. The scenario assesses the impact on our business from regulatory changes.
  In the 4°C scenario, we assumed climate policy is less ambitious and emissions remain high so the physical manifestations of climate change are increasingly apparent by 2030. Given this we have not included impacts from regulatory restrictions but focus on those resulting from the physical impacts.

We identified the material impacts on Unilever’s business arising from each of these scenarios based on existing internal and external data. The impacts were assessed without considering any actions that Unilever might take to mitigate or adapt to the adverse impacts or to introduce new products which might offer new sources of revenue as consumers adjust to the new circumstances.

The main impacts of the 2°C scenario were as follows:

  Carbon pricing is introduced in key countries and hence there are increases in both manufacturing costs and the costs of raw materials such as dairy ingredients and the metals used in packaging.
  Zero net deforestation requirements are introduced and a shift to sustainable agriculture e.g. Climate Smart Agriculture, puts pressure on agricultural production, raising the price of certain raw materials.

The main impacts of the 4°C scenario were as follows:

  Chronic and acute water stress reduces agricultural productivity in some regions, raising prices of raw materials.
  Increased frequency of extreme weather (storms and floods) causes increased incidence of disruption to our manufacturing and distribution networks.
  Temperature increase and extreme weather events reduce economic activity, GDP growth and hence sales levels fall.

Our analysis shows that, without action, both scenarios present financial risks to Unilever by 2030, predominantly due to increased costs. However, while there are financial risks which would need to be managed, we would not have to materially change our business model. The most significant impacts of both scenarios are on our supply chain where costs of raw materials and packaging rise, due to carbon pricing and rapid shift to



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sustainable agriculture in a 2°C scenario and due to chronic water stress and extreme weather in a 4°C scenario. The impacts on sales and our own manufacturing operations are relatively small.

We have therefore developed and piloted an approach to assess the impact of climate change on our key commodities, including soy and black tea.

Assessing the impact on soybean oil

We selected soy based on its importance to Unilever (large purchased volume), it being a high-profile crop in the countries where it is grown and the availability of good historical price data and suitable climate models.

We developed a methodology which combined forecasting future yields and quantifying the impact on commodity prices of soybean oil. The forecasting of future yields was performed using a combination of crop specific and climate change models. The price model used a range of supply and demand drivers to determine the impact of changes in yield from direct risks of climate change, isolating other factors such as acreage and technology on price. Three modelling steps were performed:

  Yield estimation: We analysed multiple crop and climate models to provide a forecast range of expected yields in key growing regions.
  Price relationship: An econometric model was developed, based on an analysis of the soybean oil market and historical trends, to estimate the impact of climate-induced yield changes on future prices. This model considered the importance of co-products e.g. soybean meal, substitution potential e.g. with sunflower oil and industrial uses of soybean oil, as well as the impact of yield on price.
  Impact estimation: Future yields and price impacts were then translated into an estimated financial exposure from climate change for our business, using our forecast procurement volumes.

Our pilot analysis showed that soybean yields may increase over the 2030 and 2050-time horizon and that subsequent lower prices may then lead to small potential reductions in our procurement spend on soy. While the results may indicate a low financial risk to our business, we need to consider a wider range of risk factors when determining our strategic response. Indirect risks from climate change, such as extreme weather events or external policy response and adaptation could also have an impact but were not included in our modelling. Furthermore, these pilot results are specific to soy and can’t be applied to other crops.

Assessing the impact on black tea

We are the world’s biggest tea company and buy around 10% of the world’s black tea. We worked with the Potsdam Institute for Climate Impact Research to develop suitable crop models for black tea yield predictions. Our modelling considers a range of scenarios and impacts on crop yield and this drives variability in outcomes that we observe. This enabled us to assess the direct risks from climate change on black tea by following the same approach used for soy in 2018. We similarly sought to isolate the impact of yield changes on prices from other important factors such as acreage, farming technology, tea quality, extreme weather events and man-made factors such as elections, unrest and governmental policy.

However, unlike soy, the black tea market is highly fragmented, lacks liquidity and does not operate as one global market. This required us to conduct an analysis of individual countries to identify the risks Unilever is exposed to in each. We selected our four key black tea sourcing countries for the analysis: Argentina, India, Kenya and Turkey.

The different market dynamics in each country presented separate challenges and risks. Each country has also been affected by different evolutions in acreage growth and farming technologies, which at an overall level, have influenced black tea production and resulted in an overall, global increase in tea yields over time.

Our analysis of the direct effects of climate change showed that yields for each country and scenario range from a predicted decrease to a predicted increase, indicating some exposure to risk. However, on average, yields are predicted to increase. This average increase in yields, however, is much

smaller than the anticipated significant effects of acreage growth and improvements in farming technologies. Associated price reductions are expected in most scenarios over a 30-year horizon. The overall risk to Unilever of average, direct climate change impacts is therefore relatively low.

However, there are some specific risks to Unilever. At an individual country level, there is a risk of a reduction in yields in 2030 in a 2°C scenario in Kenya, and in 2050 in a 4°C scenario in Argentina. The plateauing of yields in Kenya is a specific risk to Unilever if additional acreage is not made available as a result of government or land use change policies, which consequently limits future production. There are also some small price risks in Kenya and Argentina.

Our analysis also implied that the impact from climate change on average yields may be less significant than the impact of extreme weather events and man-made factors, which can affect black tea production and prices respectively. These events can result in much larger than average impacts in individual years, but the frequency and nature of these events cannot be accurately predicted.

The quality of black tea, excluded from our analysis, was found to have a larger impact on price than yields, especially in India. The expected water scarcity and temperature stress in 2°C and 4°C scenarios, could change the average black tea quality, leading to potential future price risks. The lack of appropriate substitutes further increases the risk profile surrounding tea. While the overall risk to Unilever of direct climate change impacts on black tea is relatively low, the country specific risks and the uncertainty of impacts from other significant factors will require further analysis and individual action plans to be defined/refined for each country.

Managing physical risks and opportunities

Our scenarios assess the potential impact of climate change over the long term on key commodities. However, we also face physical climate change risks and opportunities in our supply chain and direct operations over the short and medium term – notably from the effects of extreme weather and water scarcity.

Extreme weather

Unilever’s business depends on purchasing materials, efficient and uninterrupted manufacturing and the timely distribution of products to our customers. Both the increased frequency of extreme weather events and changes to weather systems could cause disruption across our value chain. While the frequency and extent of extreme weather is hard to predict, we monitor changing weather patterns on a short-term basis and take action to mitigate any negative affects.

Operating costs and commodity prices can be impacted by extreme weather caused by climate change. To mitigate this we have contingency plans to secure alternative key material supplies at short notice, for example during extreme weather events, to transfer or share production between manufacturing sites and to use substitute materials in our product formulations and recipes. Commodity price risk is actively managed through forward buying of traded commodities and other hedging mechanisms. Trends, including weather patterns, are monitored and modelled regularly and integrated into our forecasting process. Our Sustainable Agriculture Code promotes the principles of Climate Smart Agriculture to our suppliers and includes practices that sustainably increase the productivity and resilience to extreme weather.

Extreme weather also has the potential to impact Unilever operations and assets, including our inventory of products as well as owned property which could suffer physical damage or loss. We use sustainable building standards such as BREEAM or LEED for new developments to future proof our assets and reduce obsolescence. For instance, our newly opened Foods Innovation Centre in the Netherlands attained BREEAM outstanding, meaning it met stringent climate adaptation measures.



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Water stress

Household water scarcity caused by climate change is another physical risk, which is exacerbated by population growth and urbanisation. During periods of drought consumers may reduce their use of certain products including laundry detergents, shampoos and conditioners, and toilet cleaners as they are unable to access water to use them or experience declining water quality which limits their enjoyment and/or efficacy. While the overall impact of water stress on our sales, from both policy and physical impacts, was not found to be significant in our scenario analysis at a global level within the 2030 time horizon evaluated, the impacts we see in the short term tend to be more local.

We are investing in new products and formulations that work just as well with less water, poor quality water or no water, with a particular focus on household cleaning, skin cleansing, oral and hair care. Many of our Beauty & Personal Care and Home Care products now have fast-rinse technology as standard, using less water or low temperature washing. We have also developed dry shampoos (e.g. TRESemmé) and ‘leave in’ conditioners (e.g. Dove).

Managing transition risks and opportunities

The transition to a low-carbon economy presents a number of risks, but also opportunities for Unilever over the short and medium term – notably from changing consumer preferences and future policy and regulation.

Changing consumer preferences

Unilever’s growth and profitability is determined by our portfolio, geographical and channel presence and how these evolve over time in response to consumer demand. Failure to pre-empt or respond to changing consumer preferences could impact our growth.

We’re developing our product portfolio to offer products with a lower carbon footprint. For example, we have been shifting our Home Care laundry portfolio towards concentrated liquid laundry detergent formats for a number of years. Brands such as Persil, Omo and Surf Small & Mighty and Seventh Generation’s EasyDose enable people to wash their clothes at lower temperatures, reducing GHG emissions by up to 50% per load. Concentrated detergents also mean that we can fit doses for more washes into smaller bottles, reducing the water used at manufacturing facilities and hence the emissions associated with transportation and packaging.

The next portfolio shift, in line with changing consumer preference, will future proof our Home Care brands to ensure they continue to deliver superior cleaning, while being kinder to the environment. This will include, for example, using a new generation of ingredients which deliver superior performance at lower dosage resulting in GHG savings.

Consumers in a number of markets are increasingly adopting plant-based diets which have a lower GHG footprint than meat-based diets. According to our Lifecycle Analysis, our GHG emissions from animal-based agriculture (including fats and proteins), is relatively low, accounting for around 7.5% of our Foods & Refreshment GHG footprint, and 2.5% of Unilever’s total GHG footprint. A recent FAIRR report also noted that Unilever had the lowest exposure to GHG emissions from animal agriculture in the sector. It also identified us as the best prepared food company for the plant-based boom. We have a range of vegan and vegetarian variants and continue to actively promote vegetarian and vegan recipes (see page 14).

To capitalise on the future revenue opportunities, our M&A strategy aims to acquire new businesses which serve specific consumer segments such as sustainability conscious consumers. A number of our recent acquisitions, including Pukka Herbs, Sundial, Mae Terra, Seventh Generation, and OLLY Nutrition, are recognised as B Corps – meaning they have met stringent environmental and social criteria as laid out in the B Corp impact assessment. For example, Seventh Generation advocates for renewable energy and is taking action to decarbonise its own business and Pukka Herbs has its own science-based zero carbon goal.

Future policy and regulation

Current and emerging laws and regulations have the potential to impact financial performance as governments may take action, such as the

introduction of carbon taxes or zero net deforestation policies.

Our business is heavily dependent on forests for key commodities. We’re one of the largest end-users of palm oil in the FMCG sector and we also buy other commodities associated with a risk of deforestation, including soy and paper and board. In 2010, together with other organisations in our industry, we committed to achieving zero net deforestation associated with four commodities (palm oil, soy, paper and board and beef) by 2020. Despite our efforts over the past decade, commodity-driven deforestation remains a serious challenge in many parts of the world. We’re taking a number of steps to eliminate deforestation from agricultural commodity supply chains. Firstly, we are transforming our own supply chains by making sure the palm oil, soy, paper and board, and tea we buy is both traceable and certified as sustainable. Secondly, we are working with governments and other partners to ensure that deforestation gets the political attention and financial resources it needs. In particular, we are focused on helping reduce deforestation in key regions of South-East Asia, South America, and West and Central Africa. We’re also using our networks and relationships to help tropical forest countries access large-scale, performance-based payments for emissions reductions from forests.

We consider the impact of possible future mandatory carbon pricing in key countries which could result in increases in both manufacturing costs and the costs of raw materials such as ingredients and packaging. To mitigate this, in 2016, we implemented an internal price on carbon as part of the business case appraisal for large capital expenditure projects. This did not change behaviour as we expected since energy costs – and therefore carbon costs – were largely immaterial to the capital costs over the assessed period. As a result we took the decision to end this shadow carbon pricing approach and instead applied a novel approach of internally taxing the notional capital expenditure budgets of our three divisions based on the emissions from the prior year, to raise a clean-tech fund. So far, over 120 million has been allocated to this fund for energy, waste and water saving projects. Since January 2018 our internal price of carbon for this fund has been 40 per tonne.

Our climate targets are one of the ways we mitigate the risk of future policy and regulation. In 2019, we announced that our factories, offices, R&D facilities, data centres, warehouses and distribution centres across five continents are now powered by 100% renewable grid electricity.

Metrics and targets

We have been measuring and reporting on our energy and water consumption and carbon emissions since 1995. The USLP includes a number of stretching targets which relate to climate risks and opportunities across our value chain. Performance against key targets can be found on page 22 with commentary on page 18 and 19. Our website contains detailed commentary on our USLP targets as well as actions we are taking to achieve them. Two of our GHG reduction targets are recognised as science-based:

  Halve the greenhouse gas impact of our products across the lifecycle by 2030 (this is aligned with our USLP full value chain target and covers all the phases across the lifecycle of our products: ingredients/ raw materials, manufacturing, distribution, retail, packaging, consumer use and disposal).
  Reduce scope 1 and 2 greenhouse gas emissions by 100% from our own operations by 2030 (this is aligned with our ambition to become carbon positive in our manufacturing, where the majority of our scope 1 and 2 emissions occur).

We’ve created a detailed plan to annually assess the feasibility for Unilever to reach our target to halve the greenhouse gas impact of our products across the lifecycle by 2030, taking both external transitions towards a low-carbon economy as well as the latest available data and assumptions about our GHG footprint into account. See page 22 for our latest progress against these targets and page 19 for commentary. Our ability to meet our climate-related targets partly depends on changes in the energy markets worldwide, such as the rate of installation of renewable electricity in many countries and the availability of purchase power agreements. We are also dependent on countries implementing their Paris commitments and in



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raising the ambition of those commitments. We need policy and regulation which drive decarbonisation at scale, reducing costs, increasing speed and making the ‘well below’ 2 degree scenario more likely. We have a role to play to help shape the policy and regulation required and we are working collaboratively with partners, suppliers and other organisations to achieve our ambition including with organisations such as We Mean Business coalition, the United Nations Global Compact, the World Economic Forum and the World Business Council for Sustainable Development.

GHG emissions by activity

In line with the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 our GHG emissions are set out below. Each year PwC assure selected manufacturing environmental metrics including carbon emissions from energy use and energy use per tonne of production. In 2019 PwC also assured the GHG impact of our products across the lifecycle. The GHG data below relates to emissions during the 12-month period from 1 October to 30 September. This period is different from the Strategic Report, Directors’ Report and Financial Statements which are calendar year.


                       2019                      2018  
Manufacturing (scope 1 and 2)(a)      
Scope 1 (tonnes CO2)      607,829        711,875  
Scope 2 (tonnes CO2)(b)      361,669        726,167  

Total Scope 1 & 2 (tonnes CO2)(b)

     969,498        1,438,042  
Intensity ratio (kg CO2 per tonne of production)(c)      50.76        70.46  

Total energy (MWh)

     6,648,048        7,196,599  
Non-manufacturing (scope 1 and 2)(a) (d)      
Scope 1 (tonnes CO2)      18,843        20,052  
Scope 2 (tonnes CO2)(b)      48,490        100,924  

Total Scope 1 & 2 (tonnes CO2)(b)

     67,333        120,976  

Total energy (MWh)

     462,670        499,446  

Upstream and downstream of Unilever operations

(scope 3)


Total scope 3 (tonnes CO2e)

     58,558,031        59,250,469  
Top 3 scope 3 by emission source:      

Consumer use (tonnes CO2e)(e)

     39,730,116        39,895,946  

Ingredients and packaging use (tonnes CO2e)(f)

     14,448,186        14,985,897  

Distribution and retail use (tonnes CO2e)(g)

     4,379,729        4,368,626  



For Scope 1 and 2 we report our CO2 emissions only but not other GHG emissions as these are considered to be not material. For Scope 3 we report our GHG emissions (eg CO2, CH4, N2O) in terms of CO2 equivalents. Carbon emission factors are used to convert energy used in our operations to emissions of CO2. Carbon emission factors for fuels are provided by the Intergovernmental Panel on Climate Change (IPCC). We report our emissions with reference to the latest Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (GHG Protocol).


Carbon emission factors for grid electricity calculated according to the ‘market-based method’ are supplier-specific emissions factors reflecting contractual arrangements with electricity suppliers. Where supplier-specific emissions factors are not available, carbon emissions factors reflect the country where each operation is located and are provided by the International Energy Agency (IEA).


For manufacturing we have selected an intensity ratio based on production. This aligns with our long-standing reporting of manufacturing performance. Emissions from the combustion of biogenic fuels (biomass, fuel crops etc) within our operations are reported separately to other Scope 1 and 2 emissions, as recommended by the GHG Protocol, and excluded from our intensity ratio calculation. The data also excludes Scope 3 emissions (including consumer use of our products) which we report as part of our Unilever Sustainable Living Plan.


Includes operations, distribution facilities, research laboratories, marketing and sales offices (excludes warehouses and administration offices).


We measure the full GHG footprint of our product portfolio and annual sales using an LCA method compliant with the ISO 14040 standard. We measure the consumer use phase using a combination of primary habits data and on pack recommendations of use combined with lifecycle inventory data. We measure a representative sample of products across 14 countries which account for around 60-70% of our annual sales volume.


We use a combination of external lifecycle inventory databases (secondary data) and supplier specific data (primary data eg for surfactants, perfumes and some of food ingredients) to measure the GHG emissions of purchased ingredients and packaging materials used in the production of our products.


Downstream distribution is calculated using average distances and modes of transport derived from data collected from our distribution network and logistic providers.

Streamlined Energy and Carbon Reporting

We have decided to voluntarily comply with the UK government’s Streamlined Energy and Carbon Reporting (SECR) policy a year early. The table below represents Unilever’s energy use and associated GHG emissions from electricity and fuel in the UK for the 2018 and 2019 reporting years (1 October to 30 September), with scope calculations aligned to the Greenhouse Gas Protocol. The scope of this data includes 8 manufacturing sites and 11 non-manufacturing sites based in the UK. The UK accounts for 5% of our global total Scope 1 and 2 emissions, outlined in our mandatory GHG reporting also on this page.


UK operations                     2019                      2018  
Biogas (MWh)      17,045        15,958  
Natural gas (MWh)      238,081        278,849  
LPG (MWh)      866        1,513  
Fuel oils (MWh)      580        648  
Coal (MWh)      0        0  
Electricity (MWh)      195,796        196,965  

Heat and steam (MWh)