Yahoo Finance Unilever refuses to stop selling products in Russia despite championing ‘social purpose’
The outgoing boss of Unilever has insisted it will continue to focus on "social purpose", even as he refused to immediately stop selling products in Russia.
Alan Jope, chief executive of the Marmite, Dove and Magnum owner, said it was a “false dichotomy” to suggest that being ethical was incompatible with solid financial performance, despite criticism from a major shareholder.
However, he added that the company will continue selling food and hygiene products in Russia because "exiting is not straightforward".
Mr Jope's comments came on the same day that cigarette maker British American Tobacco (BAT) said it was "hopeful" a sale of its own Russian operations could go ahead by the end of 2023.
Terry Smith, whose £22bn Fundsmith vehicle is the 15th largest shareholder in Unilever, in January accused it of “virtue signalling” instead of focusing on making money.
Smith had previously railed against the idea of Hellman's mayonnaise having a "purpose".
In a recent letter to investors, he also gave the example of body wash brand Lux, whose website states its purpose is "inspiring women to rise above everyday sexist judgements and express their beauty and femininity unapologetically".
Mr Jope said: “We are not an NGO. Everything we do is to create value for our stakeholders.
“[Purpose and sustainability] helps us take out costs from the business, reduces risk and makes us a magnet for the best talent.
“We see our commitment to sustainable business as an enhancer of strong financial performance.”
Mr Jope also defended the decision to keep doing business in Russia, after Unilever was recently named as one of a number of multinational companies still heavily involved in the country almost a year since it invaded Ukraine by campaign group the Moral Rating Agency.
He said: “Of course we absolutely condemn the war in the Ukraine as a brutal senseless unnecessary act by the Russian state.”
Unilever suspended all investments, imports, exports, advertising and marketing in Russia in 2022, but continues to sell a range of food and hygiene products there.
“Exiting is not straightforward,” said Mr Jope. “We are not trying to protect the commercial value of our business in Russia.”
He added he did not want to “abandon” approximately 3,000 employees in Russia or have its assets fall into the hands of the Russian state.
Mr Jope said that Unilever had “not been able to find a solution” for a sale of its Russian business, adding: “There is no straightforward option and simple abandonment would definitely result in more contribution to the Russian economy than the approach we are taking right now.”
Unilever warned investors on Thursday that “there is a risk” it may have to wind down its Russian business in the future, but Mr Jope said: “We haven’t started considering a writedown".
Fellow FTSE 100 business BAT said it was pushing ahead with attempts to sell its own Russian and Belarusian businesses this year. Their value has been written down significantly but still stands at £752m, according to the company's most recent public filings.
BAT, which controls almost a quarter of the Russian cigarette market, has been in talks to offload its operations for almost 12 months in the wake of Vladimir Putin’s invasion of Ukraine.
Jack Bowles, chief executive, said: “It is a complex business. We are not just a retailer selling goods over there.
“If you are just a retailer and you stop shipping, that’s easy. It can be done tomorrow.”
BAT said last March that it was in advanced talks with SNS Group of Companies – its Russian joint venture partner – to transfer its operations in the country. The deal will also include BAT’s operations in Russian ally Belarus.
In the meantime the company continues to generate revenue from Russian sales and associated tax for the Kremlin. Finance chief Tadeu Marroco said that money from sales was “ring-fenced”.
The remarks came as BAT announced a 7.7pc rise in revenue to £28bn during 2022. Sales from its alternatives arm - which includes e-cigarettes - rose 41pc to £2.9bn.
The company rewarded shareholders with a 6pc dividend increase.
Unilever reported underlying sales growth above expectations for 2022, boosted by higher prices for many of its products. It added there are likely to be further price rises ahead
The business reported underlying sales growth of 9pc for 2022, higher than the 8.2pc rise expected by analysts. Annual profit rose to €10.3bn (£9.1bn), up from €8.6bn in 2021.
Mr Jope said Unilever had only passed on 75pc of the costs it faces to consumers and asked shareholders to “bear some of the brunt” of pressures.
He said: “We are acutely conscious of the pinch households are feeling from rising costs,” he said.
Mr Jope is seeing out his last year at the helm of Unilever after announcing his retirement last September.
He will be replaced as chief in July by Hein Schumacher, who is leaving the post of chief executive at Dutch dairy company Royal FrieslandCampina.
