Understanding Our Economic Impacts

There is a long-standing debate on how large multinational companies contribute to local economies and the lives of ordinary people.

An important contribution

Do large multinationals such as Unilever make life better for ordinary people? Do they help create economic prosperity, especially in developing countries? Or do they extract wealth from poorer countries for the benefit of shareholders in developed nations? These are just some of the issues that academics, campaigning organisations, governments and business have debated for many years.

Our evidence suggests that business plays a vital role, generating wealth and jobs around the world, transferring technology, and training and developing people.

We believe Unilever’s deep roots in emerging markets mean we can make a valuable contribution to economic development in these countries.

Can we prove it?

This is very difficult. Yet in 2005 we set out to work with Oxfam – a campaigning NGO which can be one of our fiercest critics – to see the extent to which it is true that our business can contribute to poverty alleviation. We focused on our business in Indonesia.

Through this study and follow-up studies in South Africa and Vietnam, we now have a better understanding of our economic footprint in these countries. The studies found that our local businesses do make a significant contribution to the local economy through jobs and economic activity. But it also highlighted ways in which we could do more to enhance our impact on poverty, employee skills development and small-scale suppliers, to mention just a few.

For example, one of the most effective ways to make a difference is by ensuring our products are more affordable and more accessible for consumers. We also have a large supply and distribution chain which employs many thousands of people. Finding new ways of working with such business partners can help us grow our business and make a sustainable contribution to economic development.

We are now drawing these lessons into our work to support smallholder farmers and micro-enterprise models in our supply and distribution chains.

Oxfam has also drawn on the learning from our work together to develop its Poverty Footprint tool. The tool has been designed to provide a measurable methodology for companies to evaluate and influence their impacts on people and communities, specifically in terms of poverty. It aims to identify five social impact metrics:

  • diversity and gender equality (eg equal rights, protection of cultural identity)

  • sustainable livelihoods (access to jobs and credit)

  • health and well-being (eg access to health care and education)

  • empowerment (eg the right to organise and unionise)

  • stability and security (eg ability to deal with a personal or natural disaster, crime or violence).

Creating value

As well as the 174,000 people that we employ directly, our business generates economic benefits for many different stakeholders around the world.

Our products are on sale in over 190 countries. This generates income and sustains employment for the many retail customers and distributors who bring our brands to consumers.

We rely on many suppliers around the world to provide the inputs for our business. In 2013, out of our sales income (turnover) of €49.8 billion, we spent €35.7 billion on purchasing goods and services, including €20.2 billion on raw materials, packaging and goods for resale from over 10,000 suppliers. We also buy many different types of non-production goods from around 160,000 suppliers.

Subtracting our purchases of goods and services from our turnover leaves €14.1 billion as the cash value our operations added in 2013.

The chart below shows how the value added was distributed among different stakeholders.

Our employees gained the largest share, earning €6.2 billion of the total. The providers of capital who finance our operations gained the second-largest share at €3.5 billion, with €1.8 million going to governments in corporation tax.

Unilever Group distribution of value added (2013)

Total cash value added distributed:

14,137

100.00%

Employees

6,194

43.8%

Governments

1,805

12.8%

Providers of capital

3,541

25.0%

Local communities

65

0.5%

Invested in business for future growth

2,532

17.9%