Making sustainable living commonplace

We make household brands used by 3.4 billion consumers every day.

We are 148,000 people working in factories, labs, offices and homes around the world.

We are determined to prove that our purpose-led, future-fit business model delivers superior performance.

We are Unilever.

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Unilever Annual Report and Accounts 2021

In this report

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Unilever Annual Report and Accounts 2021

At a glance

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Unilever Annual Report and Accounts 2021

2021 financial highlights

For more detail, see our Financial review on pages 36 to 43

(a)Underlying sales 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 39 to 43.

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Unilever Annual Report and Accounts 2021

Chair's introduction

Performance

Unilever’s operating performance improved in 2021, with the company recording its fastest year-on-year underlying sales growth for nine years, at 4.5%. Underlying operating profit also increased, by 2.9%. This represented a good outcome in what were unusually difficult trading conditions. Spiralling cost inflation presented the biggest challenge and impacted underlying operating margin, which was down 10bps, although the company’s determined response in landing customer price increases certainly helped to limit the impact. This ability to raise prices in a tough, inflationary environment is testament to the strength and quality of Unilever’s brands.

Unilever’s business is benefiting from the focus and investment being put behind its five Compass strategic choices – see pages 8 to 9. The Board was particularly encouraged to see Unilever’s top 13 brands – each with a turnover in excess of €1 billion – grow in aggregate last year by 6.4%, well above the company average. These brands account for 50% of Unilever’s total turnover. The focus behind key long-term growth markets is also driving improved results, with strong performances last year in the US, India and China. Together, these markets now represent 36% of Unilever’s turnover.

The good operating performance in 2021 was the main driver of earnings growth, with earnings per share (EPS) up by 5.5%.

Following the completion of the programme to buy back shares with an aggregate market value equivalent to €3 billion, the company announced a further €3 billion programme of share buybacks, which we expect to see completed over 2022 and 2023.

Portfolio

The Board is convinced that the continued evolution of Unilever’s portfolio into higher growth spaces is key to accelerating the company’s long-term growth profile and in delivering enhanced value to shareholders. To that end, unifying the Group’s legal structure in 2020 was an important milestone in allowing the Board to consider a wider range of strategic options, including scope for larger and more transformative acquisitions.

It was in this context that the Board viewed a possible acquisition of GSK Consumer Health as one route to accelerate Unilever’s presence in a very attractive part of the market. However, while there was some recognition among shareholders of the strategic merits of pursuing such a move, many voiced their strong opposition to the size and timing of such a deal. Consequently, and having listened closely to shareholder concerns, the Board and management of the company have made clear that we do not intend to pursue similar large-scale acquisitions in the foreseeable future.

Instead, the focus will be on improving Unilever’s value creation through accelerated organic growth – driven by the five Compass strategic choices. We will also continue to strengthen the portfolio through the kind of bolt-on acquisitions that have enabled Unilever to build fast-growing businesses in Prestige beauty and Functional nutrition. As part of strengthening the portfolio, last year we announced the sale

of Unilever’s Tea business, for €4.5 billion, which is expected to complete in the second half of 2022. Selective disposals of brands and assets will continue to play a role going forwards.

The Board also expects the new organisation to support growth over the coming years. Having reviewed the changes, the Board is confident they will help make Unilever a simpler, faster and more accountable business, and at lower cost.

Board composition and succession

During the year, the Board appointed Adrian Hennah and Ruby Lu as independent Non-Executive Directors, both appointments took effect from 1 November 2021. Adrian joined the Board after a long and successful executive career, most recently in the consumer goods sector. Adrian’s extensive financial experience, gained from CFO positions with leading UK-based businesses, together with his deep industry knowledge, is a major asset to the Board. The Board will also benefit enormously from Ruby Lu’s appointment. Ruby is a venture capitalist with a long and successful track record of investing in start-up businesses in China and the US, markets she knows very well.

Following the 2021 AGM, Youngme Moon stood down from her role as Senior Independent Director (SID). I want to thank Youngme for the valuable contribution she made in that role. Equally, I am delighted that Andrea Jung was appointed to succeed Youngme as SID. Andrea also took over as Chair of the Compensation Committee, in February 2021, when Vittorio Colao stepped down from the Board to join the Italian government as Minister for Technological Innovation and Digital Transition.

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Unilever Annual Report and Accounts 2021

The 2022 AGM will mark the retirement of both Laura Cha and John Rishton as Non-Executive Directors having both served for nine years. On behalf of the Board, I would like to thank them for their much-valued contribution to Unilever.

Corporate Governance

Tackling climate change is a key priority for the Group and we were pleased to put our Climate Transition Action Plan (CTAP) to shareholders for an advisory vote at the 2021 AGM. The plan sets out our climate strategy, defines our net zero and emission reduction goals, and sets out the actions we intend to take to meet them. The plan also describes how the company is integrating climate change considerations into its products and brands, as well as the role that advocacy and partnership can play in meeting goals. This was the first time a global company of our size voluntarily put its climate transition plans before a shareholder vote, and we were delighted to see it receive overwhelming backing, with over 99% of shareholders voting in favour. Work remains to be done but we do believe that the CTAP can help Unilever make an important contribution to tackling climate change while growing our brands. Read more about our progress in the CTAP Progress Report on pages 51 to 56.

Regular Board evaluation is an important element in maintaining high standards of corporate governance and Board effectiveness. In 2021, the Board conducted a thorough internal evaluation exercise. The results, which were reviewed at the November 2021 Board meeting, confirmed that the Board continues to perform effectively and with a high degree of Director engagement.

In addition to our six planned Board meetings, three additional meetings were held in 2021 to consider the Group’s portfolio and the growth opportunities within it. Non-Executive Directors also attended 14 virtual employee engagement events during the year across a wide range of the workforce. In addition, Andrea Jung attended a global town hall webcast in July 2021, providing an opportunity for all employees to engage with one of our Board members.

The evaluation and Board engagements also re-affirmed the Board’s focus on growth and portfolio strategy evolution as keys to unlocking value in Unilever.

Further detail on the evaluation process this year, together with the Board’s remit, operations and the topics regularly discussed by the Board can be found in the Governance section on pages 67 to 83.

Remuneration

During 2021, we continued to consult with shareholders on our Remuneration Policy and were pleased at the 2021 AGM to receive your strong support for the implementation of a reward framework based on a new Performance Share Plan, delinked from the annual bonus. The new Policy seeks to improve the overall effectiveness of Unilever’s incentives by helping drive sustainable long-term growth and enabling the Compensation Committee to set stretching but achievable performance targets over realistic timeframes. Further information on the Policy can be found on page 84.

Looking ahead

Trading conditions will undoubtedly be challenging throughout 2022 as the world continues to come through the effects of the Covid pandemic and all the consequent economic aftershocks – and in particular, extraordinarily high levels of cost inflation. Unilever is well prepared to meet these challenges through a combination of customer prices and the delivery of cost savings, which will help to mitigate inflationary impacts on the business. Moreover, the company enters 2022 with good momentum, and with a clear set of strategic choices that the Board is confident will help deliver another positive year of top-line growth for Unilever.

Against a particularly challenging backdrop, Unilever delivered a good set of results for 2021. This could not have been achieved without the efforts of the 148,000 people who make up this great company, some of whom it was a privilege to spend time with over the last year, albeit in most cases virtually. Their hard work, ingenuity and integrity have once again shone through and on behalf of the Board, I want to thank them for everything they have done, and continue to do, for Unilever. I also want to thank and acknowledge our shareholders and other stakeholders for their continued support.

"Unilever’s business is undoubtedly benefiting from the focus and investment being put behind its five Compass strategic choices."

Nils Andersen

Chair

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Unilever Annual Report and Accounts 2021

Chief Executive Officer's review

Context

2021 was another turbulent year for the world economy and for global markets. Output rebounded strongly, if unevenly, after the sharp Covid-related declines of 2020. However, surging demand, triggered by significant fiscal and monetary stimulus, gave rise to widespread labour shortages, supply bottlenecks and soaring energy costs, stoking significant inflationary pressures.

For Unilever, this steep rise in input cost inflation was one of the defining features of the year, impacting each of our product categories.

Performance 2021

Against this challenging backdrop, we delivered a strong set of results in 2021. Underlying sales growth of 4.5% represented Unilever’s fastest year-on-year growth in nine years, well into the upper end of our 3-5% multi-year framework. We responded to rising input costs with pricing actions, delivering underlying price growth of 2.9% for the year. While never easy, raising customer prices in response to inflationary pressures is vital and necessary if we are to preserve our ability to invest in Unilever’s brands. Underlying volume growth for the full year was 1.6%.

Growth was broad-based, with each of our three global Divisions – Beauty & Personal Care, Foods & Refreshment and Home Care – performing well. Growth was also competitive. We ended the year with 53% of the business winning market share by value, a second consecutive year of competitive growth and a marked improvement in our competitive performance from just a few years ago.

While top-line growth remains the number one priority, margin progression is also an important component of value creation. Underlying operating margin for the year was 18.4%, down 10bps on the previous year. Although pricing stepped up, it wasn’t enough to fully offset the impact of inflation across our raw materials, packaging and distribution costs.

Free Cash Flow remained strong at €6.4 billion, albeit down year-on-year versus a record delivery in 2020, when the business was focused on delivering cash in a period of huge uncertainty. For 2021, we declared a 3% increase to the full-year dividend, taking the dividend for the year to €4.5 billion.

Overall, we made good progress in 2021. Unilever’s growth momentum is building. We stepped up pricing significantly in a heavily inflationary environment while delivering strong earnings and maintaining our restored competitiveness.

Our five strategic choices

One of the most encouraging aspects of our growth in 2021 was the extent to which it followed the five Compass strategic choices we called out a year ago. These choices sit at the heart of our strategy for value creation – see pages 8 to 9.

The first of these is winning with brands and innovation, ensuring that our top brands deliver superior performance. Today, we have 13 brands with sales in excess of €1 billion. Together they make up over half of our total turnover. Last year, they grew in aggregate by 6.4%. This included some particularly strong individual performances. Dove, for example, grew by 8%, its best performance in eight years; Hellmann’s grew 11%; and our Ice Cream brands Magnum and Ben & Jerry’s each grew 7%.

Behind the success of these brands is product superiority and great innovation and we continue to step up our performance in both areas. Product superiority in tests versus Unilever’s competition is now over 70% of tested turnover, up from less than 50% in 2019, and our focus on driving bigger, better and more impactful innovation delivered over €1 billion of incremental turnover in 2021, double the delivery in 2020.

It is no surprise or coincidence that our top-performing brands also happen to be those with the most clearly defined – and powerfully articulated – commitment to purpose as a driver of brand growth.

As well as focusing on winning with our biggest and strongest brands, we have also chosen to prioritise investment in the key growth markets for the future, including most notably the US, India and China.

All three countries delivered strong and competitive growth in 2021. The US, for example, grew almost 4% on top of a record growth year in 2020, while India and China grew well into double-digits, albeit against weaker comparators.

Other markets also performed well, but not all. Indonesia, for example, a key geography for Unilever, struggled last year and was down by 7.4%. We are fully focused on restoring growth in this, our sixth-largest market.

Our next strategic choice is to invest in the capabilities needed to lead in channels of the future. Today, that means winning in eCommerce, and in 2021 we delivered another strong year, on the back of record growth in 2020. In total, the eCommerce business was up 44% with growth coming from all the main sub-channels – pure-play, omnichannel, and business-to-business (eB2B). In just five years, this channel has gone from 2% of our turnover to 13% in 2021.

Developing Unilever’s portfolio into the higher growth spaces of Hygiene, Skin care, Prestige beauty, Functional nutrition and Plant-based foods is another strategic choice. It is also one that made a meaningful contribution to performance in 2021. While organic growth is our first priority, acquisitions also play an important role. Indeed, since 2017, 93% of M&A capital has gone into either Prestige beauty, Functional nutrition or Skin care and other areas of Beauty & Personal Care. By contrast, 98% of disposals by turnover were in slower growth food segments such as Spreads and more recently Tea.

The benefits of this portfolio rotation were very apparent last year – which including eketerra will be equivalent to 17% of our

"We made good progress in 2021 and our growth momentum is building."

Alan Jope
Chief Executive Officer

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Unilever Annual Report and Accounts 2021

of delivering an improvement in underlying operating margin, having chosen – in the face of spiralling inflation – to continue investing in advertising, R&D and other long-term drivers of growth.

We will continue to take this approach in 2022, when we expect input cost inflation to ratchet up still further. This means that we expect our underlying operating margin will be down in 2022, although we anticipate that the effect of pricing action and well-established savings programmes to help reverse this decline over the course of 2023 and 2024.

Importantly, we have entered 2022 with good growth momentum and with our biggest brands, our most important markets, and our priority channel all performing strongly. The five strategic choices that we have put in place will guide us in the years ahead, and are having a positive and demonstrable impact on performance. The introduction of a new operating model during the year will help accelerate our progress still further.

Stakeholders

Together with our world-leading brands, our biggest strength remains the dedication and professionalism of our employees around the world, plus the millions more who make up Unilever’s extended family across the value chain. To all of them, I offer my sincere appreciation for their hard work and commitment over a year characterised by many challenges but also a lot of progress.

We remain fully wedded to Unilever’s multi-stakeholder model and I want to thank all of those with whom we have partnered over the last year, and all those whose needs and interests we are committed to serving. We deliberately cite the planet as one of our stakeholders and in the year of COP26, it was a source of particular pride to see Unilever – in its words and actions – living up to its ambitious climate commitments.

Finally, I want to thank and acknowledge our shareholders for their continued support of our business. We are working hard to repay that support and are fully focused on delivering long-term value for shareholders in line with our 4G growth model.

2021 turnover since 2017. Prestige beauty, for example, now a €1 billion business, grew over 20%. Functional nutrition, which includes Horlicks in South Asia as well as our largely US-based Vitamins, Supplements & Minerals (VMS) business, grew 22% in 2021 and now enjoys leadership positions across its portfolio.

Together, Functional nutrition and Prestige beauty contributed 60bps to our underlying sales growth last year.

We will go on building Unilever’s portfolio in this way, while recognising that not all acquisitions have performed equally well. Dollar Shave Club, for example, has not delivered in the way that we had hoped or expected, mainly due to changes in the economics of the direct-to-consumer model.

In considering the evolution of our portfolio, Consumer Health and Wellbeing undoubtedly represents an attractive space. It is also one in which we are increasingly well positioned. Last year, after a long period of careful review, the Board concluded that moving Unilever’s portfolio even more decisively into this area would position the company for faster growth in the coming decades. This is what lay behind confidential discussions with GSK and Pfizer about the possible acquisition of GSK Consumer Health. We listened carefully to shareholders in the wake of those discussions becoming public and heard the message that many did not support a deal on this scale at this time. We remain resolved in the direction of our portfolio evolution, but we have made clear that we do not intend to pursue similar large-scale acquisitions in the foreseeable future.

Instead, we will continue to accelerate Unilever’s growth through a rigorous focus on organic growth and by continuing to strengthen the portfolio through bolt-on acquisitions and selective disposals. Guided by our five Compass strategic choices, we are fully committed to stepping up the growth of our existing business.

We will be aided significantly in this process by our fifth strategic choice – building a purpose-led, future-fit organisation and growth culture.

Having operated for some time under a relatively heavy matrix structure, with three global Divisions and 15 regional performance management units, we are now modernising Unilever’s organisation with the introduction – from 1 July 2022 – of five Business Groups with full, end-to-end responsibility for setting strategy and for delivering results.

The five Business Groups – Beauty and Wellbeing; Personal Care; Home Care; Nutrition; and Ice Cream – will have the power to drive performance by responding more quickly and directly to the consumer and channel dynamics that are unique to their Business Group. This is a big change for Unilever, one that we are confident will result in a simpler, faster and more agile way of operating, with more focused and expert categories and with greater empowerment and accountability flowing through the business.

We are alive to the risks of a change management programme on this scale and have put in place a number of mitigating measures, including the creation of a well-resourced Transformation Office to oversee the detailed delivery of the programme in line with ambitious but achievable timescales.

Outlook – 4G Growth

Our overarching goal remains the delivery of 4G growth – that is, growth which is consistent, competitive, profitable and responsible. All four are key to our long-term value creation model. On profitable growth, in 2021 we fell short

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Unilever Annual Report and Accounts 2021

Our strategy

The Unilever Compass is our strategy to deliver growth that is consistent, competitive, profitable and responsible.

Our vision is to be the global leader

in sustainable business. We will demonstrate

how our purpose-led, future-fit business

model drives superior performance,

consistently delivering financial results

in the top third of our industry.

Our strategic choices and actions will help us fulfil our purpose and vision

Develop our portfolio into high growth spaces

Hygiene

Pages 15-16, 20, 24, 37

Skin care

Pages 15-16, 20-21, 37

Prestige beauty

Pages 15-16, 21, 36-37

Functional nutrition

Pages 15-16, 36-37

Plant-based foods

Pages 15, 22, 37

Win with our brands as a force for good, powered by purpose and innovation 

Improve the health of the planet

Pages 21, 23, 29-30

Improve people's health, confidence and wellbeing

Pages 20-21, 31

Contribute to a fairer, more socially inclusive world

Pages 21, 30

Win with differentiated science and technology 

Pages 15, 20-24

Accelerate in USA, India, China and key growth markets

Build further scale in USA, India and China

Pages 16, 36-37

Leverage emerging market strength

Pages 16, 36-37

Lead in the channels of the future

Accelerate pure-play and omnichannel eCommerce

Pages 16, 25-26

Develop eB2B business platforms

Pages 16, 26

Drive category leadership through shopper insight

Pages 25-26

Build a purpose-led, future-fit organisation and growth culture

Unlock capacity through agility and digital transformation

Pages 17-18

Be a beacon for diversity, inclusion and value-based leadership

Page 19

Build capability through lifelong learning

Page 19

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Unilever Annual Report and Accounts 2021

Operational excellence through the 5 Growth Fundamentals

1

Purposeful brands

2

Improved penetration

3

Impactful innovation

4

Design for channel

5

Fuel for growth

Our growth creates value through a multi-stakeholder model

Our Multi-year Financial Framework

Shareholders

See pages 15-17

Our people

See pages 18-19

Consumers

See pages 20-24

Customers

See pages 25-26

Suppliers & business partners

See pages 27-28

Planet & society

See pages 29-31

Competitive growth

Cash generation

Profit growth

Savings

Restructuring investment

Return on invested capital

Net debt

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Unilever Annual Report and Accounts 2021

Our strategy continued

Our Compass sustainability commitments will help us deliver our purpose and vision.

Win with our brands as a force for good, powered by purpose and innovation

Improve the health of the planet

Improve people’s health, confidence and wellbeing

Respect human rights

Respect and promote human rights and the effective implementation of the UN Guiding Principles, and ensure compliance with our Responsible Sourcing Policy

Pages 28, 31

Climate action

Pages 28, 29, 34, 51-56

Protect and regenerate nature

Pages 21, 23, 30, 34, 51

Waste-free world

Pages 21-23, 29, 34, 52-53

Positive nutrition

Pages 22, 31, 34-35

Net zero emissions across our value chain by 2039

Deforestation-free supply chain in palm oil, paper and board, tea, soy and cocoa by 2023

Halve greenhouse gas impact of our products across the lifecycle by 2030

Help protect and regenerate 1.5 million hectares of land, forests and oceans by 2030

Zero emissions in our operations by 2030

100% sustainable sourcing of our key agricultural crops

Replace fossil fuel-derived carbon with renewable or recycled carbon in all our cleaning and laundry product formulations by 2030

Empower farmers and smallholders to protect and regenerate farm environments

Communicate a carbon footprint for every product we sell

Implement water stewardship programmes in 100 locations in water-stressed areas by 2030

Supported by our €1 billion Climate & Nature Fund

100% of our ingredients will be biodegradable by 2030

€1 billion annual sales from plant-based meat and dairy alternatives by 2025-2027

Double the number of products sold that deliver positive nutrition by 2025

70% of our portfolio to meet WHO-aligned nutritional standards by 2022

95% of packaged ice cream to contain no more than 22g total sugar per serving by 2025

85% of our Foods portfolio to help consumers reduce their salt intake to no more than 5g per day by 2022

95% of packaged ice cream to contain no more than 250 kcal per serving by 2025

50% virgin plastic reduction by 2025, including an absolute reduction of 100,000 tonnes

25% recycled plastic by 2025

Collect and process more plastic than we sell by 2025

100% reusable, recyclable or compostable plastic packaging by 2025

Maintain zero non-hazardous waste to landfill in our factories

Halve food waste in our operations by 2025

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Unilever Annual Report and Accounts 2021

Win with our brands as a force for good, powered by purpose and innovation

Contribute to a fairer and more socially inclusive world

Our responsible business fundamentals

Business integrity

Safety
at work

Employee
wellbeing

Product safety
and quality

Responsible
innovation

Responsible
advertising and
marketing

Safeguarding
data

Engaging with
stakeholders

Responsible
taxpayer

Committed to
transparency

Health and wellbeing

Pages 21, 31, 35

Equity, diversity and inclusion

Pages 28, 30, 35

Raise living standards

Pages 30, 35

Future of work

Pages 19, 30, 35

Take action through our brands to improve health and wellbeing and advance equity and inclusion, reaching 1 billion people per year by 2030. We will focus on:

▪Gender equity

▪Race and ethnicity equity

▪Body confidence and self-esteem

▪Mental wellbeing

▪Hand hygiene

▪Sanitation

▪Oral health

▪Skin health and healing

Achieve an equitable and inclusive culture by eliminating any bias and discrimination in our practices and policies

Accelerate diverse representation at all levels of leadership

5% of our workforce to be made up of people with disabilities by 2025

Spend €2 billion annually with diverse businesses worldwide by 2025

Increase representation of diverse groups in our advertising

Help equip 10 million young people with essential skills by 2030

Pioneer new models to provide our employees with flexible employment options by 2030

Reskill or upskill our employees with future-fit skills by 2025

Ensure that everyone who directly provides goods and services to Unilever will earn at least a living wage or income by 2030

Help 5 million small and medium-sized enterprises grow their business by 2025

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Unilever Annual Report and Accounts 2021

Our business model

Building on our relationships and resources, our business model allows us to create sustained value for our key stakeholders.

What we depend on...

Consumer insights

We track changing consumer sentiment through our 37 People Data Centres around the world, combining social listening with traditional consumer research.

What we do...

Innovation

Our marketing and R&D teams use these insights plus the best ideas and thinking from specialists outside Unilever to develop our brands and products. We spent €847 million on R&D in 2021.

Consumer use

3.4 billion people use our products every day.

Sales

We use many channels to make our brands available to consumers in around 190 countries wherever and whenever they shop.

Marketing

We're one of the largest advertisers globally, based on media spend. Our purposeful and inclusive brands connect with consumers.

All underpinned by the management of our principal risks Pages 46 to 50

Relationships

Purposeful people

Our 148,000 talented people give their skills and time in Unilever offices, factories, R&D laboratories and tea estates – increasingly working in more flexible and agile ways. Pages 18-19

Trusted suppliers

Around 53,000 supplier partners in 150 countries source materials and provide critical services for us.      Pages 27-28 

Committed partners

Our relationships with governments, customers, NGOs and other organisations around the world help us to increase our impact. Pages 25-31

Resources

Input materials

We use thousands of tonnes of agricultural raw materials, packaging materials and chemicals for our products. Pages 29-30, 141

Financial resources

Capital from our financial stakeholders allows us to invest for the long term. Pages 144-148

Intangible assets

The strength of our 400+ brands, our R&D capabilities and intellectual property such as patents and trade marks set us apart. Pages 136-138, 172

Owned and leased assets

We occupy around 280 factories, 270 offices and 450 logistics warehouses globally. Pages 138-141

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Unilever Annual Report and Accounts 2021

Sourcing

Each year we buy raw materials and packaging materials worth €21 billion to make our products, as well as €14 billion in services (including media) to help our business run. 

Manufacturing

Our factories and third-party manufacturers turn materials into the products we sell.

Logistics

A global network of logistics warehouses deliver our products to millions of retail outlets.

The value we create for...

Shareholders

We aim to deliver consistent, competitive, profitable and responsible growth.

Pages 15-17

Our people

We aim to reward people fairly for the work they do, while helping them find their purpose so they become the best they can be at Unilever.

Pages 18-19

Consumers

We aim to provide superior-quality products and purposeful brands that take action on the issues that matter to people and planet.

Pages 20-24

Customers

We partner with large and small retailers around the world to grow our business and theirs.

Pages 25-26

Suppliers & business partners

We partner with thousands of suppliers to help innovate our products and support mutual and sustainable growth.

Pages 27-28

Planet & society

We aim to improve the health of the planet while contributing to a fairer and more socially inclusive world.

Pages 29-31

Contributing to the Sustainable Development Goals

Review of the year

Here we describe the value we created for our stakeholders in 2021, our performance and how we’re managing the key risks to our business.

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Unilever Annual Report and Accounts 2021

Shareholders

We're delivering competitive growth by focusing on our strategic choices.

2021 was an unpredictable and challenging year, with cost inflation and continued disruption from Covid-19. As Covid rates spiked and restrictions were imposed and then eased in different countries at different times, we worked to manage disruption to our supply chains, building on our experience from 2020.

Our performance in 2021

We delivered underlying sales growth of 4.5% in 2021. Our growth was broad-based, with all three Divisions growing. We achieved this while maintaining our competitiveness with 53% of our business winning share. While our pricing and savings programmes helped to offset some of the impact of mounting input costs, our underlying operating margin was down 10bps at 18.4%. Free cash flow remained healthy at €6.4 billion, albeit down from record levels last year. For more details on our performance see the Financial review on pages 36 to 43.

Five strategic choices for growth

In early 2021, we set out in detail the Unilever Compass strategy to deliver our vision. The five clear, sharpened choices we have made in our Compass strategy – portfolio, brands, markets, channels and culture – along with the continued delivery of our 5 Growth Fundamentals, have been playing an important role in building momentum across the business.

Developing our portfolio into high growth spaces

Our investments in high growth spaces continued in 2021. As well as our established businesses in hygiene and skin care where we continue to drive science-based innovation (see pages 20 to 24), we’re building sizeable new businesses in areas such as Prestige beauty, Functional nutrition and Plant-based foods, which are contributing to our growth. Our Prestige beauty business, now including the digitally-led cruelty-free Paula’s Choice brand which we acquired in 2021, delivered strong double-digit growth in 2021 and reached €1 billion turnover if we include a full year of Paula’s Choice.(a) 

Functional nutrition is another area of focus for our portfolio transformation into high growth spaces. It includes Horlicks and our Vitamins, Minerals & Supplements (VMS) brands such as Olly, Liquid I.V., and Onnit, a leading brand in the fast-growing area of nootropics, acquired in 2021. Functional nutrition grew double-digit in 2021 and reached €1.5 billion turnover if we include a full year of Onnit.(a) We're also expanding our plant-based portfolio to meet growing consumer demand – see page 22.

In November 2021, we announced that we had entered into an agreement to sell our global Tea business, now known as ekaterra, to CVC Capital Partners Fund VIII for €4.5 billion on a cash-free, debt-free basis. The transaction excludes Unilever’s tea business in India, Nepal and Indonesia as well as the Pepsi Lipton ready-to-drink tea joint ventures and associated distribution businesses. We expect to complete this transaction in the second half of 2022, subject to receiving regulatory approvals and completing works council consultation processes. Once we dispose of eketerra, our portfolio rotation will be equivalent to 17% of our 2021 turnover since 2017.(b)

Winning with our brands as a force for good, powered by purpose and innovation

We hold clear global leadership positions in seven categories; and in a further two, we lead in terms of volume sold but not yet value. We’ve stepped up our investments in science and technology to strengthen the quality and efficacy of our products – 95% of the turnover we've tested was equal or better than the main competitor product, with 71% winning outright. (c) Insights from testing help us improve product performance through innovation. Focusing our R&D activities on fewer and bigger projects is also bringing innovations to market faster. In total, our innovation programme helped to deliver €1 billion in incremental turnover in 2021 – double that of 2020. See pages 20 to 24 for more on our brands and innovation.

"We're focused on driving faster growth from our strong portfolio of brands and markets."

Alan Jope

Chief Executive Officer

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Unilever Annual Report and Accounts 2021

Our focus on winning with brands and innovation saw our 13 €1 billion brands – also among our most purposeful – grow in aggregate by over 6% in 2021. These brands now make up half of our total turnover. See pages 20 to 24 for more on brands with purpose and how we're building our marketing capability.

Accelerating in USA, India, China and key growth markets

Around 36% of our turnover is from three markets: the US, India and China. Having a strong brand and category presence here is key to our future growth, as these countries are predicted to account for well over half of global economic growth by 2030. To strengthen and expand our business in these priority markets, we’re growing our core brands, transforming our portfolio to capitalise on high growth opportunities and growing our digital and eCommerce channel presence.

US

The US is our largest market and we grew 3.7% in 2021 against a very strong prior year comparator. Delivering breakthrough technology innovations through our purposeful brands such as Dove, and scaling our recently acquired brands such as Olly and SheaMoisture, has helped to drive the growth of our US business. Data-driven customer partnerships are also unlocking further opportunities, such as exclusive bath range launches with two US retailers.

Our US business continues to benefit from our portfolio transformation into higher growth areas such as Functional nutrition and Prestige beauty – building on the strength of brands such as Liquid I.V. and Living Proof. The growth of eCommerce in the US continued in 2021 – enabled by an increased focus on innovations designed for channel and strengthened digital capabilities.

India

Our Hindustan Unilever (HUL) business is India’s largest FMCG company. We delivered a strong all-round performance, growing at 13.4%.

We’re growing our core brands by focusing on superior products and purpose. Surf excel, for instance, continued to build relevance through our iconic ‘Dirt is Good’ campaign and delivered strong performance. And Lifebuoy strengthened our market leadership as the number one soap brand in India, building on its hygiene credentials (see page 31). HUL has a strong track record of building scale in new categories through market development, by moving consumers to new products with added benefits – such as liquid detergents, functional tea with wellness benefits and body wash.

Brands such as Surf excel, Dove and TRESemmé are responding to the needs of consumers and leading premiumisation. The newly formed Premium Beauty Business unit within HUL will strengthen our presence in the fast-growing masstige beauty segment. The premium portfolio performed well in 2021.

We made significant progress on the integration of the Horlicks portfolio. Our focus now is on building category relevance and growing penetration – through innovations in the high science range, such as Diabetes Plus, as well as a step up in marketing and communications, home visits to promote products and the introduction of affordable packs.

Our eCommerce sales in India saw double-digit growth in 2021. We're also reaching more small retail stores through digital channels – our eB2B app Shikhar is now used by over 700,000 retailers. Through direct-to-consumer platforms, we’re expanding our digital footprint further. The iconic beauty brand Lakme, for instance, is the most followed Indian beauty brand on Instagram with around 30% of its sales in 2021 through digital channels.

China

China has grown into our third-largest market by fulfilling diverse and constantly changing consumer needs – doubling in size over the last decade. We grew by 14.3% in 2021.

Our success in China is built on our core brands – including Knorr, OMO, Dove and CLEAR – which are combining product superiority and brand purpose to expand penetration and sales. Transforming the portfolio is also key to unlocking future growth opportunities, such as in personal and home hygiene and masstige, and by premiumising brands such as Vaseline which has evolved from a basic body care range to cover whole body expert skin healing. We’re also expanding our Prestige beauty and VMS offerings with a selective roll-out of brands such as SmartyPants.

Sales through eCommerce in China grew double-digit in 2021. Further eCommerce growth is expected as penetration increases in lower-tier cities. Partnerships with eCommerce platforms such as JD.com and Alibaba (see page 25) and expanding reach to newer channels such as live streaming and social commerce, will continue this upward trend.

Leading in the channels of the future

We’re increasingly designing products and organising our business for eCommerce by working with partners such as Amazon and Alibaba as well as large retailers who are expanding their footprint across a range of digital commerce channels. Our eCommerce sales grew by 44% in 2021 and accounted for 13% of our total turnover – we see no sign of this shift reversing (see page 37 for a definition of eCommerce sales). We sell around 50% of our Prestige beauty products, for example, through eCommerce channels, including direct to consumer. See page 25 for more.

With our innovation and merchandising strategies firmly rooted in shopper insights, we'll continue to adapt at speed to trends, such as consumers wanting quick and delicious food delivered to their door. Our Ice Cream Now platform for instant ice cream delivery, for example, grew by 60% in 2021. We’re also increasingly using digital sales platforms with our customers, both large and small. See page 26 for more on our eB2B growth.

Shareholders continued

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Building a purpose-led, future-fit organisation and growth culture

We believe that when employees are clear on their purpose in life and how this connects to the work they do, they’re more engaged and willing to go the extra mile. Working with purpose is at the heart of our culture – see page 19. This also helps us attract the very best people, as evidenced by our status as number one FMCG employer of choice for graduates and early career talent in over 50 markets.

More agile application of technology alongside simpler ways of working will help us stay one step ahead of consumer trends. We’re continuing to speed up our ways of working, building our eCommerce capabilities and automating back-office processes – see pages 19 and 25 for examples. We’re also reskilling and upskilling our people, and embracing hybrid ways of work to prepare for the future of work – see pages 18 to 19.

In January 2022 we announced changes to our organisational model to make us a simpler, more category-focused business – see pages 6 to 7 for more.

(a)Prestige beauty and Functional nutrition turnover for 2021 calculated as if Paula's Choice and Onnit respectively, had been acquired on 1 January 2021.

(b)Portfolio rotation is the 2021 turnover from any acquisitions completed since 2017 (including a full year of turnover for 2021 acquisitions) plus the last twelve months' of turnover from our disposals since 2017 (including eketerra) as a percentage of our 2021 turnover.

(c)Based on tests of our top products in 60 countries over the past three years to benchmark product superiority (turnover weighted).

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Unilever Annual Report and Accounts 2021

Our people

Our people are the heartbeat of Unilever – when they thrive, our business thrives.

This year reinforced the importance of being a safe, inclusive and supportive place to work for our 148,000 employees. Around 90,000 people took part in our UniVoice employee survey this year. We sustained very high engagement levels – 82% in offices and 83% in factories – which places us in the top quartile for employee engagement compared to industry benchmarks.

Protecting health, safety and wellbeing

Alongside safety at work, supporting our people’s physical, mental and emotional wellbeing has never been more important.

Supporting our people through the pandemic

We’ve continued to help our people protect themselves from the virus by working to remove barriers to testing and encouraging vaccinations to keep our workplaces as safe and productive as possible. We ensured that thousands of our employees received medical care through our own facilities and healthcare resources, telehealth options or connections to community resources, and supported the colleagues and families of those we sadly lost to Covid.

We continued promoting healthy living and working for all our employees. To help people get the medical support they need, for example we now offer triage services in India and the UK. We launched a new digital tool in four countries that helps people identify their risk of type 2 diabetes, followed by a 12-month programme to reduce those risks. Participants in our Brazil and Mexico pilots have reported improvements to their quality of life and sleep, as well as less stress and time off work due to ill health.

We also intensified our focus on mental health, introducing online training in ten languages to help our people understand the impact of Covid on their mental health. More people used our Employee Assistance Programme this year, and our global network of mental health champions more than doubled to around 4,000 people. Our teams are using a new tool to assess their energy levels and better support each other. Due to these and other initiatives, the percentage of our people who feel Unilever cares about their wellbeing is rising: 85% in offices (81% in 2020) and 83% in factories (70% in 2019).

Safety at work

We continue to prioritise the safety of our people and contractors in everyday work situations – from using mechanical equipment to staying safe on the roads. Our 2021 UniVoice survey showed that over 90% of employees feel that Unilever is committed to their safety. We rolled out a new incident management tool which connects our sites around

the world on a single digital platform. We also increased resources to ensure appropriate oversight for safety.

Our Total Recordable Frequency Rate (TRFR) improved from 0.63 to 0.55 accidents per million hours worked (1 October 2020 to 30 September 2021), partly related to fewer accidents at Unilever offices due to continued working from home. Sadly however, fatalities continued to rise. In the reporting period, three contractors and four employees lost their lives. Two contractors were fatally electrocuted at one of our sites in Pakistan in one event; and a contractor in Hungary lost their life in a construction incident. Two employees were struck by lightning in separate incidents in Kenya and Tanzania. And two employees were involved in a fatal car accident in India.

When fatalities occur, our first priority is to support the emotional and physical needs of the families and team members of the individuals involved. We work with local law enforcement, communities and regulators to fully investigate the root cause and determine further preventative measures.

See our website for more on safety at work

New ways of working

The world of work is changing. Our 2021 employee survey showed that around three-quarters of our people believe we have become simpler, faster and more agile in the last 12 months. Covid-19 has been a catalyst to expand flexible and more inclusive ways of working.

We’re rethinking how we work as an employer. The fact that the satisfaction and connection levels of new employees have risen since our last pre-Covid survey is testament to the effectiveness of our evolved ways of working. So we’ve moved to a hybrid model for our office-based employees. This means thinking about work as what people do, not where they do it – with our offices as collaboration spaces and people able to work where they’ll be most effective. Our global guiding principles for hybrid working state that we expect our employees to spend at least 40% of their time in the office.

We’re also pioneering new ways of working which both unlock capacity and help individuals find a meaningful and balanced way of working. Our AI-powered internal talent marketplace, Flex, allows us to match the skills needed for projects to people, regardless of where they sit in the organisation. It helped us reprioritise more than 110,000 hours to around 1,350 critical projects in 2021. In addition we have flexible working options like job-sharing or paid learning sabbaticals. Our people now have the option to work as a contractor on a project-by-project basis through the 'U-Work' programme in seven countries. This gives them the flexibility associated with contract roles and they are paid a monthly retainer fee with a core set of benefits.

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Skills for the future

We’re creating a culture of learning across Unilever, upskilling and reskilling our people for jobs of the future. Our employees accessed the Degreed learning platform over 4.2 million times during 2021. In our latest employee survey, 83% of our people in offices and 77% of our people in factories said they believe Unilever gives them a chance to upgrade their skills for a successful future.

In 2021, we focused on building critical digital commerce skills throughout our business, including an eCommerce accelerator hub and bootcamp for our customer development teams and enhancing digital access in our factories to ensure our people have future-fit capabilities. Our Future of Work in Manufacturing programme gave frontline workers access to technology that enables shared learning on the job and better processes and communications. This is an important step towards our factories becoming the efficient digital workplaces we’ll need for our future growth.

Our ultimate goal is for no one to be left behind as the world of work continues to change. In December 2021, we held our first Future of Work conference to share our progress and learnings and build alliances with forward-thinking companies. We’re also aiming to help equip 10 million young people with essential skills for jobs by 2030 – see page 30 for more.

See our website for more on the future of work

Nurturing our growth culture

We see a human, purposeful and accountable culture that is rooted in our values as essential to our purpose-led and future-fit organisation. Using our future-fit plans, our people are shaping development and career plans based on their purpose – we've made a good start by upskilling or reskilling 7% of our people in 2021. We now have statistical evidence from ongoing research led by the London School of Economics of the link between purpose and intrinsic motivation, based on data from 3,500 employees across 14 countries.

Equity, diversity and inclusion

We also want to be a workplace in which everyone feels they belong and are able to thrive. This means creating an inclusive culture free from the barriers that limit people in reaching their true potential. We've identified four equity, diversity and inclusion priorities – gender, race and ethnicity, people with disabilities and LGBTQI+ communities. This is where we will put our global focus to address under-representation and overcome possible challenges in career progression and to foster a greater sense of inclusion. We’re building the capabilities of our business leaders and HR practitioners to support equity advocacy, diversity awareness and psychological safety in their teams.

We’re working to build a better understanding of the diversity of our workforce in order to identify specific community needs. For example, we've conducted a cultural assessment and focus groups with over 2,000 employees in Brazil, India and the UK to explore attitudes and barriers around disability inclusion in Unilever. Our LGBTQI+ employee network has increased to over 1,000 members, and we're continuing to expand it

to increase advocacy for human rights and safe havens for this community.

Our race and ethnicity strategy is focused on four markets (Brazil, South Africa, the UK and US). These are leading our work to make our recruitment practices more equitable by increasing the representation of black and brown people, building more inclusive and equitable cultures, and expanding local partnerships and advocacy.

Our gender balance at management level changed slightly in 2021, with women now accounting for 52% of all management employees. Our work continues to increase the representation of women, particularly at senior levels. This year, we reintroduced a tool that uses a mix of behavioural science and data to raise awareness of senior leaders’ hiring patterns and unconscious bias in decision-making. See page 64 for our gender balance statistics.

See our website for more on equity, diversity and inclusion

Working with integrity

Our focus is on growth in line with our values, not on growth at any cost. We review our Code of Business Principles and Code Policies every year to ensure they reflect the current operating context and the latest legal requirements. In 2021, we further strengthened our Code Policies on data security and fraud. Our zero-tolerance approach to bribery continues to be supported through mandatory training and initiatives delivered to all employees.

We train our people every year to prevent compliance breaches, and they’re able to report in confidence any concerns around business integrity through our 24/7 Speak Up platform. In 2021, we continued to simplify and improve the whistleblowing process for users through expansion of local hotlines and interpreting services.

On our website, we report the number of Code cases and subsequent actions for each of our five Code themes including countering corruption – covering amongst other things anti-bribery and avoiding conflicts of interest. This year, across all areas of our Code of Business Principles, we received 1,275 Code reports, closed 1,246 reports (including some from prior years) and confirmed 694 reports as breaches, which led to 369 people leaving the business. Our data on Code breaches provides insights into issues and where they happen so that we can prevent behaviours that lead to them.

See our website for more on business integrity

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Consumers

Our brands are evolving to meet the changing needs of consumers all over the world.

Value and values

With some countries emerging from lockdown and others living with Covid-related restrictions in 2021, many of the consumer trends we saw last year continued.

Consumers are thinking more carefully about everything from what they put in, and on, their bodies to what they use to clean their homes with. Shoppers also continue to be increasingly discerning – looking for highly effective products, with ingredients that are good for them and good for the environment. There is now compelling evidence that brands with purpose grow. Our own research shows a strong correlation between brand purpose and brand attractiveness – referred to as brand power – which in turn drives market share and growth. Other independent research from Kantar shows that the category of most sustainable shoppers who are highly concerned about the environment, is now around 1 in 5 of the global adult population – with the potential to reach 1 in 3 by 2024.

Even as some countries relaxed restrictions and people started to spend more time out of the home, online shopping and the demand for convenience stayed strong – e-everything is here to stay. Many people chose to stay home even when they had other options – continuing to cook at home instead of eating out, for example. The varying impact of the pandemic has also led to some shoppers treating themselves to more premium products while others are increasingly cost-conscious, looking for the best-performing products they can afford. Despite the price increases brought about by commodity inflation, we continued to offer value for everyone.

To capitalise on these consumer trends, we’re building our marketing capability to support the growth of our brands. We're particularly focused on digital marketing which now makes up to 40% of our media spend. And we’re harnessing new AI-powered innovation tools to spot trends early and test new product concepts. Against this dynamic backdrop, our three Divisions worked to anticipate and meet consumers’ needs with their products and purpose-led brands.

Beauty & Personal Care

We want to be the most positive beauty business in the world for people and the planet.

We believe in beauty that not only does less harm, but also does more good – beauty that’s both inclusive and sustainable. To achieve our new Positive Beauty vision, we’re using our scale to create positive change and drive growth through our big brands, impactful innovation and portfolio transformation.

Growing our core brands

Dove grew strongly this year reaching €5 billion turnover, supported by renovation of its core products, such as Dove Care & Protect which is now available in 50 countries with clinically proven, superior moisturisation. Dove also launched the premium Hair Therapy range, combining expert hair care solutions with skin care-inspired ingredients.

The pandemic has highlighted the importance of hygiene, and our brands continued to meet this need, despite the slowdown in the sale of hand sanitisers which affected the growth of Lifebuoy and Suave. Lifebuoy’s handwashing campaigns continued to raise awareness and contributed to a large increase in brand power – a measure of brand attractiveness – and its ranking as the third most chosen FMCG brand in the world by Kantar. Lux relaunched its core soap bars and body washes with superior benefits, such as long-lasting fragrance.

Rexona relaunched its core deodorant range with 72-hour non-stop protection against sweat and body odour. And our male grooming brand Axe refreshed its identity to celebrate and represent all types of attraction, in addition to a major reformulation that fights odour instead of masking it.

Impactful innovation

We’re anticipating future consumer needs by focusing our innovations on fewer projects with bigger impact. This year, we’ve scaled our industry-leading pro-lipid technology which helps to nourish skin from within. Developed by our dermatology scientists, it's now available across our biggest skin care brands such as Dove, Vaseline, and Pond’s.

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Unilever Annual Report and Accounts 2021

With over 100 patents on the human microbiome, a number of our product innovations in 2021 focused on enhancing the body’s own repair and defences by using natural ingredients. For example, our reformulated Dove Body Wash uses a gentle formulation to support a healthy skin microbiome.

We’re also dialling up our innovation partnerships to anticipate future consumer needs. The digital Uni-Excubator we launched in 2020 in China has been giving start-ups unique access to our insights and expertise in areas such as technology, sustainability and distribution networks. In return we've harnessed their skills and agility to help our brands grow. We're partnering with Alibaba’s Tmall platform which is hosting the Uni-Excubator’s flagship store, Uni-Topia Planet, showcasing exclusive new beauty and personal care products and driving sales through its channel.

Portfolio transformation

We're building a sizeable Prestige beauty business, a key part of our strategy to evolve our portfolio into high growth spaces. Prestige is growing fast, with turnover of €1 billion in 2021 if we include a full year of Paula’s Choice, a digitally led, cruelty-free skin care brand. The growth of Prestige was supported by new innovations from Dermalogica, REN – and Hourglass with a breakthrough red lipstick that offers consumers a vegan alternative to the red pigment traditionally made from crushed beetles.

Skin care grew single-digit in 2021. Potential in the category is high, but there is more we need to do to fully capitalise on the opportunity. By targeting our top markets with breakthrough innovations such as pro-lipids, as well as locally relevant brand purpose activities, we’re already seeing strong growth of brands such as Vaseline which performed strongly in 2021, supported by a number of premium innovations across skin brightening, therapeutics and hydration. Good growth also came from brands such as Pond's which continues to offer more premium ranges.

We continued to expand our presence across eCommerce channels – eCommerce sales accounted for 16% of our Beauty & Personal Care turnover in 2021. We're also looking at digital commerce and capitalising on this growth in a number of

ways. For example, through our new Positive Beauty Growth Platform which aims to partner with start-ups and scale-ups from around the world on cutting-edge projects. Our initial invitation for pitches focused on the emerging channel of social commerce – from livestream shopping to gaming. We’re now working with the shortlisted applicants to partner with our brands.

People positive

We know that consumers want health and beauty products which they feel represent them. So we’re focused on growing our global portfolio of brands that are inclusive and care for all skin, hair and body types, championing the diversity of beauty.

As well as saying ‘no to normal’, our Beauty & Personal Care brands are using their power to serve more diverse communities and break down stereotypes and prejudice. As hair can be a source of discrimination for people from different races and ethnicities, we’re working to help people make the most of all hair types. By pinpointing the proteins that differ in curly and straight hair, we were able to launch one of the first product ranges – Nexxus Curl Define in the US – which caters to each hair type's specific needs.

In line with its purpose to give people the confidence to move more, Degree piloted the world’s first prototype deodorant designed to be easier for people with disabilities to use. Alongside this, to get audiences thinking differently about sportspeople, the brand also released short films featuring diverse athletes defying stereotypes.

See page 30 for more on how Beauty & Personal Care brands worked to improve health and wellbeing and advance equity and inclusion in 2021.

Planet positive

We’re committed to doing less harm and more good for the natural world by protecting and regenerating 1.5 million hectares of land, forests and oceans by 2030. Consumers are increasingly concerned about the effect of the products they buy on the environment – and especially plastic pollution. Towards our goal to use less, better and no plastic, our oral care ranges, starting with France in 2021, began rolling out recyclable toothpaste tubes. And Dove launched 'buy once, refill for life' aluminium deodorant sticks. For more on plastic, see page 29.

"Positive Beauty isn’t just about doing the right thing for the planet, it’s also helping to grow our business too."

Sunny Jain
President, Beauty & Personal Care

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Unilever Annual Report and Accounts 2021

in all 55 markets, both in foodservice and retail. The latest addition to its meat alternatives is the Patty on the Back burger, a breakthrough plant-based burger. Not only is the burger lower in calories and fat than meat, it’s higher in fibre and iron and has similar salt levels.

Our plant-based ice cream range continued to grow with brands like Ben & Jerry’s, Magnum, Breyers, Cornetto, Carte D’Or and Swedish Glace offering non-dairy options. With Magnum’s Vegan Sea Salt Caramel winning a PETA Vegan Food Award in 2021, all the brand’s vegan flavours are now award-winning. Certified vegan non-dairy now makes up over 25% of Ben & Jerry’s pint flavours in the US.

We’re also using cutting-edge food science to find alternative proteins and new ways to cook without meat. In Argentina, Colombia and Mexico, we launched Rinde Más, a blend of herbs, spices, vegetables and protein that gives cooks an affordable way to reduce the meat in their dishes. We’ve also begun working with food-tech company ENOUGH to develop new plant-based products based on mycoprotein – from a process that uses 93% less water, 97% less feed and 97% less carbon than meat.

We were again named by investor network FAIRR as a pioneer in sustainable protein research and innovation and ranked number one in its protein transition index for 2021.

See our website for more on plant-based foods

Growing our channel footprint

We’re finding new ways to make our brands available to consumers, wherever they are. Sales through eCommerce continue to grow, and accounted for 9% of our Foods & Refreshment turnover in 2021. Our Ice Cream Now business caters to the rise of 'in-home' eating, by quickly delivering our brands to consumers in 35 countries, growing 60% in 2021. And our out-of-home professional foodservices business, Unilever Food Solutions (UFS), grew double-digit in 2021 despite the ongoing impact of restrictions. UFS is now working with cloud kitchens – commercial kitchens that prepare and cook food purely for delivery – such as Casper, a cloud kitchen pioneer in Belgium, where we provide a range of products from our Vegetarian Butcher portfolio, as well as specific ingredients and flavours.

"We’re improving the health of the planet by changing what’s on our plates."

Hanneke Faber

President, Foods & Refreshment

As part of our support for a global ban on animal testing for cosmetics, we’ve continued to work alongside regulatory authorities, NGOs and like-minded companies to share science and advocate the use of non-animal approaches for safety testing. Requests for new animal tests in Europe threaten the European Union’s ban on animal testing for cosmetics. Dove and our other 27 PETA-approved brands united with The Body Shop and animal protection organisations to campaign to save cruelty-free cosmetics. Regulatory changes in China have allowed for the import of more cosmetic products without the requirement for animal testing, meaning more consumers will be able to enjoy our beauty products.

Foods & Refreshment

We're on a mission to be a world-class force for good in food.

Our brands continue to provide great-tasting, nutritious and sustainable foods for consumers all over the world – using our world-class innovation and brand purpose to inspire change.

Irresistible innovation

During 2021 we continued to grow our core brands. Knorr, our biggest Foods & Refreshment brand grew high single-digit, supported by bigger innovations and a clear purpose. It launched its first zero salt bouillon in Europe – now available in ten markets, offering cooks unique blends of vegetables, herbs and spices, while supporting our goal to reduce salt intake. Its purpose to ‘reinvent food for humanity’, inspired the inaugural Eat for Good day, which aims to empower 'Eativists' who want to make a difference to the world through their food choices, as well as building brand awareness. And the ‘future- proof your recipe’ platform on Recipedia, where consumers can share Future 50 Foods recipe ideas, is expanding to other countries after a successful launch in Mexico.

Hellmann’s, the world’s number one mayonnaise, grew double-digit for the second year in succession. Continuing its mission to inspire 100 million people to waste less food, its 2021 Superbowl campaign led to increased brand awareness and a boost in sales. And Hellmann’s vegan mayonnaise, now available in 33 markets, launched three new flavours – Baconnaise, Chipotle and Garlic.

While varying levels of restrictions around the world affected our sales of out-of-home ice cream in 2021, our ice cream brands grew mid-single digit – as Ben & Jerry’s (now a €1 billion brand), Wall's and Magnum continued to offer much-loved favourites and new flavours, such as Magnum's Double Gold Caramel Billionaire – available in 35 markets. Not only an indulgent ice cream, it comes in 100% recycled plastic tubs developed with advanced recycling technology which is now being rolled out to other brands.

Expanding our plant-based portfolio

We continued to step up our plant-based offerings through a number of our brands. Our plant-based meat and dairy replacement business saw strong double-digit growth in 2021 in pursuit of €1 billion annual sales by 2025-2027. This was primarily driven by The Vegetarian Butcher, which is growing

Consumers continued

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Unilever Annual Report and Accounts 2021

Home Care

We're making people’s homes a better world, and our world a better home.

As we work to make the lives of the people who buy our products easier, cleaner and safer, we’re also leading our industry towards a cleaner future through the power of science and innovation. Our relentless focus on meeting consumer needs with superior products has fuelled the steady and competitive growth of many of our brands.

Powering growth through Clean Future

We know people want to clean their homes and clothes without damaging the planet. We’re making good progress in transforming some of the world's most well-known household brands to disinfect, clean, freshen up and remove stains better than ever while lowering their carbon emissions and waste, in line with our ‘Clean Future’ strategy.

Our biggest Home Care brand, Dirt is Good (also known as OMO, Surf Excel, Persil or Skip) is key to our Clean Future ambitions – and leads the transformation of our entire Home Care business. It launched a successful new liquid range that uses plant-based stain removers without compromising on performance. It’s suitable for low-temperature washing, with a lower GHG impact than laundry powders, and is packaged in mostly recycled plastic bottles.

To help reduce its use of plastic packaging, Dirt is Good also rolled out a six times concentrated OMO dilute-at-home laundry liquid in our biggest laundry market, Latin America. It quickly became a top-seller in Argentina and Brazil. Not only does this make the brand affordable to more consumers, it also uses around 70% less plastic than a conventional 3-litre bottle, and is now more biodegradable. Dirt is Good grew mid single-digit in 2021 and increased its global brand power score, also winning WARC and Effie awards for the effective communication of its brand purpose to consumers. For more on our Clean Future innovations, see pages 31 and 52.

Sunlight, one of our €1 billion brands, started to roll out a new plant-based formulation for its hand dishwash products across the world. With biodegradable active ingredients, it’s also proven to deliver a superior cleaning experience.

In 2021, we entered a multi-year partnership with Arzeda to design new enzymes for our laundry and cleaning products, including OMO, Surf and Sunlight. Applying the latest advances in digital biology, the new enzymes have the potential to significantly reduce the number of ingredients we use, while delivering superior products, new cleaning benefits and a lower environmental footprint.

See our website for more on our Clean Future strategy

A world-class force for good in food

As one of the biggest consumer goods companies in the world, with a large Foods & Refreshment portfolio, we want to use our scale and reach to transform the food system – from the fields and farms where ingredients are grown, to the packaging that keeps food fresh.

Our brands are working to protect and preserve natural habitats in the places their ingredients are produced. Knorr continues its work with farmers and growers through a new series of 50 projects. Part of our Climate & Nature Fund, it aims to establish regenerative agriculture sourcing for 80% of its key raw materials over five years. One project, for example, is using satellite data and digital sensors to help tomato farmers in the south of Spain optimise their water use and improve soil health through cover cropping. In Côte d’Ivoire, where the cocoa used by Magnum is grown by Rainforest Alliance farmers, the brand has planted 465,000 native trees and is working with farmers to tackle deforestation. For more on nature see pages 30 and 52.

We’re meeting consumer demand for more sustainable packaging by using less, better or no plastic. Many of our foods brands already use 100% recycled plastic, such as Hellmann’s and Bango. And we’re now making progress in finding better ways to overcome technical challenges with sachets that are hard to recycle, for example by bringing out groundbreaking paper-based recyclable pouches for our Colman’s range in the UK. For more on plastic see page 29.

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Unilever Annual Report and Accounts 2021

Responding to fast-changing hygiene habits

People’s hygiene habits continued to evolve during the year, and with this came unpredictable and challenging market conditions for our cleaning and disinfecting brands. In this context, we decided to evolve and expand our portfolio to continue to meet consumers’ existing and future needs.

Our leading toilet-cleaning brand Domestos now offers around-the-house disinfection with a range of sprays, foams, cleaning liquids and wipes – making these available to consumers in our top 30 markets. Lifebuoy home disinfectants, delivering 24 hours of disinfection with 100% natural cleaning ingredients, are now available in the UK, Germany, Vietnam, Malaysia and Singapore. And in Indonesia we rolled out a new antibacterial Sunlight washing-up liquid that can be used without water and rinsing.

Our air purification brand Blueair enjoyed a particularly strong year in 2021. Its latest innovation, HealthProtect, which provides protection against viruses and bacteria, supported a record year of growth for Blueair. The brand also made great strides in its Freedom to Breathe campaign which supports children’s right to clean air, after the Committee of the UN Convention on the Rights of the Child acknowledged children’s right to clean air.

Value through more convenient formats and channels

Our Home Care brands have a long track record of helping consumers access more convenient formats which offer superior benefits and create more value in the market. Our market development activities have accelerated liquid detergent growth to double-digit in most of our key developing and emerging markets. And we’re moving consumers from laundry liquids to laundry capsules, so that they get the right dose of detergent every time. Our capsules business enjoyed strong growth, gaining share in most markets. And our OMO capsules became the second most popular laundry capsules in China, ranking first in offline channels.

As more people turned to online shopping to conveniently buy their cleaning and laundry products during the pandemic, we’ve renewed our focus on growing our home care digital commerce business. We’ve also invested in a digital capability team, including a dedicated unit in the UK to create and launch ‘design for eCommerce’ innovations. Sales through eCommerce accounted for 16% of our Home Care turnover in 2021.

We continue to focus on taking unproductive costs out of our business. Our 5S programme delivered €190 million of savings, helping us to invest in future shopping channels, product formats, media, consumer needs and sustainable innovation.

"We’re radically transforming some of the most popular cleaning and laundry brands in the world to deliver great cleaning experiences with lower environmental impact."

Peter ter Kulve

President, Home Care

Consumers continued

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We work with our many retail partners to help them grow sustainably alongside Unilever.

Customers

Our products reach the hands of consumers through millions of retail outlets in around 190 countries. Our customer partners range from large traditional stores to online-only retailers, and from small family-owned shops to value retailers. As our gateway to the people who buy and use our products, these customer partners are critical to our success.

A shifting retail landscape

Our customers had to adapt throughout the year to changes in people’s buying habits as Covid-related restrictions came and went and shopping patterns shifted in different ways at different times around the world. One consistency was the ongoing growth of online retail – with consumers shopping more and more online and new groups of shoppers, such as older age groups, joining them. During the year, global supply chain and logistics challenges made it harder for retailers to predict product availability. So we focused on offering more proactive planning and strategic support and establishing new ways to help our partners of all sizes grow.

Partnering for growth

We survey our customers using the Advantage Group Survey to understand our strengths and where we need to improve. This year across the 34 markets we surveyed, we continued to improve customer satisfaction. We were told that customers value the quality of our consumer insights and that we’re improving in our service and supply. We were also rated leaders in sustainability. Based on these findings, we continue to improve our capabilities for closer collaboration, smoother processes, more powerful insights and solid business planning and execution. For instance, we're transforming our core business processes across functions by using technology and data to create a superior customer experience.

Digital acceleration

Despite the recent surge in digital commerce, only around a third of the world’s population shop online – which represents a huge opportunity for growth. We’re seeing the rise of new models like social commerce, where people shop through social media platforms, and quick commerce, where people expect to receive their orders in less than an hour. And we’re seeing continued growth through some of our biggest eCommerce partners, Amazon and Alibaba.

Our eCommerce sales grew by 44% in 2021 and now represent 13% of our turnover. We’re investing significantly in our ability to fulfil online customer orders and our own technology, skills and capabilities in digital commerce. Our aim is to be the digital commerce partner of choice, helping our customers grow in the channels of the future. The power of our brands and marketing, our inclusive content and design, the strength of our supply chain and our focus on sustainability allows us to form unique partnerships.

We’re a launch partner for Amazon as they expand into new markets – most recently Egypt and Poland where our products were available on the day of launch. As one of a select group of manufacturers in Amazon’s Tier 1 Global Vendor Program, we work closely together on retail, supply chain, media and sustainability initiatives around the world. Our offering under their Climate Pledge Friendly programme continues to expand, with over 700 items in the programme in 2021. More than half of these are certified as compact by design – lighter products that use less water and packaging, so need less energy to deliver and use. Our Amazon US Climate Pledge Friendly selection online accounted for 7% of our US eCommerce turnover in 2021 – and this will continue to be a key focus for the future.

We partner with Alibaba across 13 markets. In China, our collaboration goes beyond core commerce into digital transformation across the value chain: from suppliers to marketing to consumer recycling. In March 2021, we launched a joint innovation centre in Hangzhou, China to quickly test, refine and scale product innovations. Our strategic partnership with Alibaba’s Lazada platform has helped our products reach consumers across South East Asia since 2017. We also see huge potential in Europe through AliExpress, Alibaba’s new local marketplace.

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"In this rapidly changing environment, we are partnering with our customers big and small, digital and physical, to drive shopper loyalty and conversion."

Keith Higgins

Chief Customer Development Officer

Strategic growth for large retail partners

Most of our large retail partners are evolving from traditional ‘bricks and mortar’ stores to selling across a blend of channels (omnichannel), with digital commerce playing a significant role. This change in business model requires new ways of thinking about and reaching consumers.

The shift has led to challenges around product distribution, availability, visibility and promotion for many of our large retail customers. In 2021, we ran pilots of location-based analytics in the US, UK and Netherlands allowing us to track how our products were performing store by store to help customers meet these challenges.

We also launched a strategic growth initiative for our large retail customers. Through the Partners4Growth programme, we’re harnessing insights and foresights from our advanced shopper data analytics to help our customers create growth plans and make sure they have the right products in the right places at the right time. After piloting this approach to mutual growth with Walmart, Carrefour, Target and Ahold-Delhaize Benelux, we plan to expand to other key customers and ultimately bring all of the elements of our collaboration together in an integrated digital platform.

Closer collaboration and insight-driven initiatives like these with our most valuable customers, alongside a focus on our biggest purpose-led brands, are helping us to further accelerate mutual growth.

Helping small retailers become future-fit

We believe that by helping smaller retailers engage with the digital economy, we can help them build more resilient and profitable businesses that also grow our sales. In 2021, we expanded our e-business-to-business (eB2B) platforms co-created and owned by Unilever, such as Shikhar in India, Compra Agora in Brazil and GoToko in Indonesia, to help small retailers meet the changing needs of today’s shoppers. We've added thousands of new customers each month to reach half of the 4.7 million small stores in the Asia, Latin America and Africa markets we directly serve. They also offer many of our smaller customers access to things like extended payment terms and cashless payments that help them keep their shelves stocked and increase their profits.

We’re working with external researchers to independently assess the impact of three of our initiatives providing small- scale retailers in our value chain with access to finance, technology and training. These include Jaza Duka in Kenya, Siparis Direkt in Turkey and Kabisig Summits in the Philippines. The studies found that 68% of participants reported that their business grew as a result of being in the programmes. As the retail world moves more and more online, we’ll continue to invest in digital and financial inclusion for our small retailers everywhere. See page 30 for more on how we’re creating economic opportunities throughout our retail value chain.

Selling with purpose

With sustainability an important consideration in many consumers’ buying decisions, we’re working with our customers to deliver on our strategic priorities – such as climate action and health and wellbeing – while engaging consumers on these important issues. One example is our continued partnership with Alibaba to create China’s first large-scale closed-loop system of recycling machines. These use artificial intelligence to sort plastic packaging so that it can be fast-tracked for reuse – and consumers get ‘green points’ for their deposits, which they can use to plant trees or protect land.

Another is the Hygiene 101 sale in the Philippines with Lazada, Shopee and Grab, where popular brands such as Lifebuoy handwash and Domex cleaner were sold with hygiene tips and vouchers to help spread good habits. This was part of a bigger campaign in partnership with the Philippine Public Health Association to create better hygiene behaviours.

We’re also bringing our brands’ purposes to life in retail outlets. Through in-store campaigns and materials, we've now reached over 8 million points of sale display units.

Customers continued

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Suppliers & business partners

We’re working more closely with our many suppliers and partners around the world to deliver our strategy.

Our supplier ecosystem includes millions of people around the world – from large multinationals to start-ups and small local producers who provide us with goods and services such as raw materials, logistics, advertising, professional services and much more. We also work with a range of business partners, including industry peers, innovation agencies, universities and joint ventures, to help unlock growth and find solutions that benefit our stakeholders.

Stronger together

Covid-related restrictions continued to challenge supply chains in 2021, with lockdowns affecting our suppliers’ businesses in many parts of the world. Commodities, packaging and transport all experienced high levels of inflation. There were shortages of agricultural raw materials, such as tomatoes, soybean oil and rapeseed oil, caused by extreme weather conditions. And globally, supply chains and services were put under pressure due to labour shortages. Meanwhile, consumer demand rebounded in many areas, calling for deeper collaboration, agility and innovation with our network of partners to secure supplies and stay resilient.

To overcome these challenges, we spread production of products across our manufacturing network and held inventory closer to the consumer to ensure availability. We also enhanced our procurement approach: partnering with scoutbee, for example, to bring AI into our supplier discovery process to quicken, streamline and strengthen our search for partners – giving us a more resilient network.

Partnerships fit for the future

Our ongoing success rests on working with many innovative and purposeful businesses and offering them a great experience. We know that while our suppliers value our sustainability ambitions and the relationships they have with us, they want Unilever to be quicker, simpler and easier to work with. In 2021, we improved our partner experience through a new integrated supplier helpdesk with a single point of contact and faster query resolution times. We’ll be rolling out the helpdesk globally in 2022.

We continue to invest in technology to enhance our supply chain, with digital transformation allowing us to re-engineer production lines and apply automation and AI to be more responsive and resilient. We developed an award-winning Covid-19 dashboard which uses real-time data and machine learning to monitor and predict trends down to site level. This helped us identify and manage risks in our operations. We’ve also created a version of the dashboard to share with our supply chain partners.

Our Virtual Ocean Control Tower also proved indispensable in mitigating the effects of the Suez Canal blockage in 2021, giving us real-time visibility of sea cargo location, container details and estimated time of arrival. This helps our logistics, planning and procurement teams minimise delays and makes our cross-border supply chain more efficient and resilient.

Increases in speed and agility must not, of course, come at the expense of product quality. So we also introduced a new digital process for addressing quality defects with our raw ingredient and packaging supply partners. This is allowing us to better track, analyse and manage quality issues, and we’ll be rolling this out to all factories and supply partners in 2022. We know we need to bring more collaborative technology to our relationships with our suppliers, and are working to increase the speed and scale of platforms and processes like this one.

"Through purpose-led partnerships, we’re innovating and finding new opportunities to accelerate growth and scale industry transformation."

Reginaldo Ecclissato

Chief Business Operations Officer

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From strategy to action

Our direct suppliers are the gateway to the millions of people in our wider supply chain. So they’re critical to building a more inclusive world, slowing climate change, and protecting natural resources. We simply can’t do these things without them.

We’ve started to turn our strategy into action by working with our partners on pilots, roadmaps, capability building and information sharing. At the very end of 2020, we launched our Partner with Purpose programme to help us find innovative and impactful ways to deliver on our ambitious commitments with our supply partners and generate mutual growth.

Throughout 2021, we held a series of global and market-specific virtual events to share our strategy and commitments and recognise supplier contributions. In August, we launched our Partner Promise Programme to encourage suppliers to begin their own sustainability journeys, initially in three critical areas: climate, supplier diversity and living wage.

Reducing emissions through our supply chain

In 2020, we set out our ambition to achieve net zero emissions across our value chain by 2039.(a) This is a collective challenge, and an urgent one. Our suppliers bring critical climate action innovations to us. Through our partnership with Neste, for example, we’re exploring new sources of renewable and recycled carbon for our cleaning product formulations. In June, we joined forces with Coca-Cola and Colgate-Palmolive in AB InBev’s 100+ accelerator to push sustainable innovation in climate, water, packaging and sustainable agriculture in supply chains. We began five pilots to test innovations in sustainable packaging, water and energy – for example, converting food waste into animal feed in East Africa and repurposing brewery grains for packaging materials in China. We also take part in groups with similar ambitions, such as Transform to Net Zero and the Exponential Roadmap Initiative, to learn from others and share our own experience to help accelerate climate action in supply chains. For more on how we're working with our suppliers see page 53.

See our website for more on partnering with suppliers to deliver net zero

Dialling up diversity

Having a more diverse supply chain not only helps shape a fairer and more socially inclusive world – it allows us to unlock innovation and agility and better address the needs of our diverse consumers. Despite the volatility of the year, we made progress on our commitment to help our suppliers improve their own diversity and increase our spend with diverse suppliers. Our first step was to understand where we’re starting from and begin tracking our spend. We ran our first global survey to map our spending with diverse businesses and are now working on validating our data and assessing which procurement categories should be prioritised. Our technology partner for finding new suppliers, scoutbee, has also added

diversity to its search criteria – reinforcing this as a critical element we look for in all potential suppliers.

We expanded our supplier diversity programmes in North America and South Africa and began new ones in seven other countries – the UK, Ireland, India, Thailand, Australia, Brazil and Kenya – where we’d identified conditions for good progress. For example, in the UK we’re working with Google, Dow and WPP on an accelerator programme to empower diverse businesses. And in Kenya, we began partnering with International Finance Corporation (IFC) on Sourcing2Equal, a three-year project helping women-owned small and medium businesses access corporate procurement opportunities.

We spent €445 million with diverse suppliers in 2021, the first year of our ambitious goal to spend €2 billion annually by 2025. As a global commitment, this covers all markets – many with little or no infrastructure for supporting diverse businesses. So in 2021, we also invited 450 of our closest supply partners to commit to growing their own workforce and supplier diversity in order to start growing the demand for more diverse businesses.

Responsible sourcing

Partnerships based on clear standards of responsible sourcing strengthen our supply chain and the businesses within it. Our Responsible Sourcing Policy (RSP) sets out our commitment to conduct business with integrity, and with respect for universal human and labour rights as well as environmental sustainability. It’s a crucial part of the due diligence we undertake to identify and encourage remediation by suppliers of issues within our extended supply chain.

In 2021, the proportion of our suppliers meeting the requirements of our RSP reached 81%. Our 2021 performance is not comparable to previous years as we now include new acquisitions that are not yet fully integrated into our systems. We risk-assess our suppliers against the RSP and require those we identify as high-risk to undergo an independent audit verifying they can meet our requirements. We require suppliers to put in place corrective actions to remedy any identified non-conformances so that they can remain compliant. This year, we improved the compliance process for new suppliers by ensuring that they only work with us once they confirm they can meet the requirements of our RSP. We’re strengthening our process for existing suppliers to ensure we only raise new purchase orders for those who remain RSP compliant.

We’re launching a refreshed RSP in 2022 with an expanded focus on climate and nature – and a new requirement for suppliers to pay a living wage, which will be introduced progressively across different portfolios until it is mandatory for all by 2030 – see page 30 for more on living wage.

See our website for more on responsible sourcing

(a)The definition of ‘net zero’ is outlined in our Climate Transition Action Plan. See page 53 for further details on the scope of this goal.

Suppliers & business partners continued

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Planet & society

Our business simply will not prosper without a healthy planet and society.

Our approach to sustainability continues to recognise the interconnection of the planet and society – and that sustainable business can be a driver of business performance.

Improving the health of our planet

As the UN announced ‘code red for humanity’ in 2021, the urgency of our work to tackle climate change, reduce plastic waste and protect nature has never been greater.

Climate action

We put our Climate Transition Action Plan (CTAP) to a shareholder vote at our AGM in May 2021. The plan received overwhelming support, with 99.59% of votes in favour. For more detail on progress against our CTAP during 2021 and our Task Force on Climate-related Financial Disclosures (TCFD) statement, see pages 51 to 62.

See our website for more on climate action

A waste-free world

We’re making progress towards our ambitious goals around virgin plastic reduction, recycled plastic use, making our packaging recyclable, and collection and processing of plastic. However, we know there is still a lot more to do. In just three years, we've increased our use of recycled plastic to approximately 17% of our total packaging portfolio (July 2020 to June 2021 – the reporting period for all our plastic metrics). Our end of 2021 forecast was around 20%, putting us well on track to meet our commitment of at least 25% recycled plastic by 2025.

Many of our brands are now using high levels of recycled plastic in their packaging. In 2021, Hellmann’s launched 100% recycled packaging in almost two-thirds of its markets. In Europe, Knorr has introduced bouillon tubs and lids made from 100% recycled material, Swedish Glace now offers its plant-based ice cream in food-grade and freezable recycled plastic tubs, and Persil comes in lighter bottles made with 70% recycled plastic. Dove uses 100% recycled plastic in its bottles in Europe and North America (where technically feasible) and 98% of its new refillable deodorant packaging in the US is made from recycled plastic.

Due to our step up on recycled plastic, we've reduced our total virgin plastic packaging footprint since 2018 by around 16% to 599,000 tonnes. We have more projects than ever exploring

less or no plastic. We’re working with Pulpex to create the first- ever paper-based laundry detergent bottle, piloting this with OMO in Brazil. And we’re expanding our in-store refill programmes, now in 11 countries, including refill stations in Asda and Co-op stores in the UK, and vending machines in India for Surf Excel, Comfort and Vim refills.

Currently, 53% of our packaging is recyclable, reusable or compostable. This is our actual recyclability rate (which is based on the EMF Global Commitment definition of 'recyclable'), which is significantly less than the 70% of our packaging portfolio that is technically recyclable with existing technology. This gap is an industry-wide challenge and is primarily driven by a lack of collection and recycling infrastructure. We’re working with local governments and partners to close this gap, while we continue to deploy new materials and technologies. For instance, Signal, Pepsodent and Closeup are shifting to fully recyclable toothpaste tubes. In 2021 we rolled out recyclable flexibles in North America for Dove and Love Beauty and Planet. And in Vietnam, we launched a trial of recyclable sachets for CLEAR shampoo, with the aim of collecting and recycling the sachets for other uses.

We’re also ramping up our collection and processing of post- consumer plastic waste. Our business in India was one of the first to help collect and process more plastic than it sold, and we have roadmaps for achieving this in other markets. We have more work to do to scale up our collection efforts. Industry partnerships will be key, such as our work with Mars, Mondelēz, Nestlé, PepsiCo and UK retailers to incentivise the recycling of flexible packaging. In the US, we've made a $15 million investment in the Closed Loop Partners’ Leadership Fund to help improve recycling. Advocacy is an important part of our plastics strategy. In January 2022, alongside more than 70 other businesses, we called for an ambitious and legally binding UN treaty to tackle plastic pollution on a global scale, similar in intent to the Paris Agreement.

See our website for more on plastic

We’re also focused on reducing food waste. We’re using predictive analytics and automation to better manage stock as well as apps to help chefs and caterers become more aware of food waste. Hellmann’s continues its efforts to cut waste in homes and hospitality. Its #MakeTasteNotWaste campaign encourages quick and easy ways to use up leftovers, reaching more than 150 million people around the world. Hellmann’s grew double-digit in 2021. See page 52 for more on food waste.

See our website for more on food waste

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Planet & society continued

Protect and regenerate nature

We continue to work towards a deforestation-free supply chain for palm oil, paper and board, tea, soy, and cocoa. We’ve made progress in moving our sourcing footprint to areas of lower risk of deforestation. We’re working towards reporting of low-risk deforestation volumes from 2022 and independently verified deforestation-free volumes from 2023. Our efforts in tackling deforestation and sustainable sourcing have been recognised by CDP, through our inclusion on the A List for Forests in 2021.

During the year, we strengthened our contractual framework with key suppliers in palm and soy so we are working on aligned commitments. We created independent verification protocols and piloted these in our sourcing of palm oil, cocoa, and soy. We also expanded the coverage of our palm oil monitoring platform, which uses satellite imagery and geolocation data to measure deforestation in our supply chain. And along with NASA, Google, and others, we developed the Forest Data Partnership to collect data on forests and ecosystems.

Our People & Nature Policy enhances our supplier requirements around no deforestation and human rights for our key commodities. We also published our Regenerative Agriculture Principles, guiding our suppliers and farmers, including smallholders, on how to nourish soil and water, capture carbon and restore land. By the end of 2021, we had 53,000 hectares under protection and regeneration in partnership with others. Brands like Knorr are playing a leading role in driving our regenerative agriculture programmes (see page 52).

Water is essential for our business – the crops we grow, how we make our products, and how consumers use our brands. We’re expanding our focus on water beyond our factory gates, starting with 12 factories in a number of water-stressed countries. We’re also working with the 2030 Water Resources Group to address water security for consumers in Bangladesh, India, Brazil, South Africa and Vietnam. Ensuring our Home Care and Beauty & Personal Care products are biodegradable is another key part of our approach to water stewardship. We’re working with suppliers and innovation partners to find alternative biodegradable ingredients that don’t compromise on product performance. See page 23 for more.

See our website for more on nature and water

A fairer, more inclusive world

We’re helping to build more resilient and equitable communities by raising living standards, advancing equity, diversity and inclusion and preparing people for the future of work.

Raising living standards

Since 2020, we’ve continued to pay all our employees a living wage, and in 2021 were awarded our first global independent accreditation as a living wage employer from the Fair Wage Network.

In 2021, we made a groundbreaking commitment that everyone who directly provides goods and services to us will earn at least a living wage or living income by 2030. We’re starting with our manufacturing and agriculture supply chain, where workers tend to be the most vulnerable. We’re engaging our teams in the four markets with the biggest gap between the legal minimum wage and living wage in our supply chain. And we’ve begun engaging with our suppliers to understand their living wage position and how best to support and engage them.

In addition, we know there are many barriers to small businesses thriving, such as lack of access to skills, finance and technology. We’ve launched new programmes to move towards our goal to help 5 million small and medium-sized businesses in our retail value chain grow by 2025, reaching 1.2 million in 2021.

See our website for more on raising living standards

Equity, diversity and inclusion

Our research shows that more progressive advertising has the potential to deliver 74% better brand power – a key measure of consumer attraction for brands. Through our Act 2 Unstereotype programme, we're integrating more diverse and inclusive thinking at every point of our marketing – to ensure it reflects the diversity of society. For examples of how our brands are working to shape a fairer and more inclusive world, see pages 21 and 31, and for diversity and inclusion in our workforce and supply chain, see pages 19 and 28.

The future of work

We’re working to help young people find their purpose and match it with skills that will prepare them for the future of work – giving us access to talented young workers. Our LevelUp programme in South Africa for example, aims to break barriers to employment through purpose workshops, digital learning, mentoring and work experience. For more on how we’re preparing our own people for the future of work, see pages 18 to 19.

See our website for more on the future of work

Improving health, confidence and wellbeing

Our brands continued their work to promote health and wellbeing, inclusive beauty and positive nutrition – finding ways to power growth through purpose.

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Health and wellbeing

Covid has brought the importance of hygiene into sharp relief. Lifebuoy's purpose is preventing illness and saving lives through handwashing with soap. Its H for Handwashing education campaign has been teaching children about the importance of handwashing since its launch in 2020. And the Hygiene & Behaviour Change Coalition created by Lifebuoy, Domestos, the UK government and others has equipped many more to practise better hygiene. Lifebuoy also began offering free doctor teleconsultations on pack and through its communications across India, Indonesia, Bangladesh, Pakistan and Vietnam. Our Pepsodent/Signal toothpaste brand also expanded its oral health services in Indonesia by providing free dental consultations via WhatsApp during Covid-19 restrictions, with other markets to follow in 2022. We see access to healthcare services as an important way to grow household penetration of our brands by providing vital services to communities.

Our brands also expanded their efforts to improve confidence and wellbeing. Rexona deodorant extended its Breaking Limits programme to help young people in Brazil, the US and the UK overcome barriers to being active – funding community sports projects and access to coaches. Sunsilk continued its work to empower girls and young women through its Explore More programme with Girl Rising, which has reached more than 56,000 young people from underserved communities in six countries. Our brand-led initiatives helped to improve health and wellbeing and advance equity and inclusion for almost 700 million people in 2021.

See our website for more on improving health and wellbeing

Positive nutrition

We’re continuing to increase the nutritional value and reduce salt, sugar and calories in our foods and refreshments. 63% of our portfolio met our WHO-aligned nutrition standards. Fortifying foods with micronutrients is another long-standing priority, now linked to our goal to double the number of products sold that deliver Unilever's standards for positive

nutrition by 2025 – including impactful amounts of vegetables, fruits, protein and fibre as well as micronutrients. At the end of 2021, 41% of our products delivered positive nutrition (per serving), keeping us on track towards our goal – see page 35 for more including our progress in reducing salt, sugar and calories.

We’re using our voice to push for a sustainable food system, for example at the UN Food Systems Summit in 2021 where we called for a move to more plant-based proteins and more action on food loss and waste. We know there is more to do, but we’re proud that our efforts are being recognised. We ranked first in the World Benchmarking Alliance’s Food and Agriculture Benchmark and number two in the global Access to Nutrition Initiative (ATNI) Index, which ranks the nutrition programmes of the top 25 global food and beverage manufacturers.

See our website for more on positive nutrition

Respecting and promoting human rights

Respect for human rights is at the heart of our business and the responsibility of every person in Unilever. We work with suppliers, peers, industry bodies, trade unions and civil society to address human rights impacts so that everyone connected to our value chain is treated with respect, dignity and fairness.

In support of our commitment to respect and promote human rights and the effective implementation of the UN Guiding Principles, in 2021 we created a framework to enable us to address human rights issues consistently and effectively. We're using it to define a theory of change, and action plans which include capability building and impact assessment metrics to measure progress. We used the framework to implement capability building on responsible recruitment for our suppliers – which includes an e-learning platform and toolkit – and our procurement teams.

Our Human Rights Reports explain our progress and the due diligence we've undertaken in tackling the many human rights challenges such as forced labour, gender-based violence and living wages.

We continued to work on women’s inclusion and safety in agriculture, manufacturing and last-mile distribution. We'll be introducing safety frameworks in priority regions and making sure our direct suppliers have policies and processes in place to support inclusion and address sexual and gender-based violence.

See our website for more on human rights

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Our performance

Financial performance

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*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 39 to 43.

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Non-financial performance

We're at the early stages of delivering against our Compass commitments. Further commentary can be found on pages 18 to 31.

Our performance continued

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†        This metric was subject to external independent limited assurance by PriceWaterhouseCoopers LLP (‘PwC’) in 2021. For PwC's 2021 Limited Assurance report and the 2021 Unilever Basis of Preparation for assured metrics see www.unilever.com/planet-and-society/sustainability-reporting-centre/independent-assurance.

◊        This metric was subject to external independence limited assurance by PwC in 2020. For details and 2020 Basis of Preparation, see www.unilever.com/planet-and-society/sustainability-reporting-centre/reporting-archive.

Δ      This metric was subject to external independence limited assurance by PwC in 2019. For details and 2019 Basis of Preparation, see www.unilever.com/planet-and-society/sustainability-reporting-centre/reporting-archive.

(a)Restated 2020 and 2019 figures due to a change in alignment of our renewable electricity reporting with the updated RE100 guidance. See page 51 for more information.

(b)This is a new metric which reflects the revised scope of our sustainable sourcing programmes. Previously reported sustainable sourcing metrics are not comparable.

(c)For the vast majority of products in scope, we have used the actual weight of plastic packaging sold to calculate this metric. For the remainder, we estimate the weight using the average packaging weight of similar products.

(d)For our 2018 baseline, we calculated the weight of plastic packaging sold for around half of products in scope. For the remainder, we estimated the weight of packaging sold by extrapolation using sales volumes.

(e)Refers to ‘actual recyclability’ of plastic packaging, meaning that it is both technically possible to recycle the material; and that there are established examples to recycle the material in the region where it is sold.

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Financial review

2021 performance

The Group generated turnover of €52.4 billion, operating profit of €8.7 billion, net profit of €6.6 billion and free cash flow of €6.4 billion.

Turnover increased 3.4%. Underlying sales growth was 4.5%, there was a net positive impact of 1.3% from acquisitions and disposals and a negative currency impact of 2.4% driven by weakening of currencies in our key markets such as US, Turkey, Brazil and India. The growth was competitive and was delivered through focus on our strategic choices. Our thirteen €1 billion brands grew 6.4%. The US, India and China, three of our key growth markets, grew at 3.7%, 13.4% and 14.3% respectively. Our underlying sales growth in eCommerce(a) was 44%. The major challenge of 2021 was the significant rise of input costs. We responded with pricing actions, delivering underlying price growth of 2.9%. Covid-19 continued to impact the operating environment, with new variants resulting in restrictions in some of our key markets which impacted consumer and channel dynamics.

Acquisition and disposal activities made a positive contribution of 1.3% to turnover. Our 2021 acquisitions included Paula's Choice and Onnit, helping to re-shape our portfolio into the high growth spaces of Prestige beauty and Functional nutrition respectively. On 18 November 2021, we entered into an agreement to sell our global tea business, ekaterra, to CVC Capital Partners Fund VIII for €4.5 billion on a cash-free, debt-free basis. More details on acquisitions and disposals are in note 21 on pages 161 to 163.

Emerging markets underlying sales grew by 6.7%, driven by India and China. Latin America grew high-single digit, led by price. South East Asia declined following tough Covid-19 restrictions throughout the year. Developed markets underlying sales grew by 1.5% led by a competitive performance in US. Europe grew slightly from both price and volume.

Operating profit was €8.7 billion which included €0.9 billion of non-underlying items, primarily restructuring costs and acquisition and disposal related costs. Restructuring costs of €0.6 billion are comprised of supply chain optimisation projects to improve gross margin and improve network agility, and organisational change projects to reduce overheads.

Underlying operating profit was €9.6 billion, an increase of 2.9%. This included an unfavourable currency impact of 4.3%. Underlying operating margin decreased by 10bps. Gross margin decreased by 120bps reflecting very high inflation in raw material, packaging and distribution costs globally. Brand and marketing investment and overheads contributed 90bps and 20bps to underlying operating margin respectively. There was an improvement in underlying operating margin when excluding currency impact. In line with our multi-year financial framework, we delivered savings of €2 billion and our profit growth was ahead of our underlying sales growth on a comparable basis.

Free cash flow was €6.4 billion compared to €7.7 billion in the prior year. Low levels of capital expenditure and favourable working capital movements in 2020 were not repeated.

(a)eCommerce sales are defined as online sales made by Unilever to our consumers or customers either directly or through platforms as well as an estimate of our brands' sales through our customers' own websites.