Understanding our economic footprint
'Measuring Unilever's Economic Footprint: The Case of South Africa' is a study by Professor Ethan Kapstein, focusing on Unilever's impact throughout the South African economy. It is part of an ongoing effort by Unilever to understand its economic, social and environmental impacts on the countries in which it does business.
Authored by INSEAD Professor Ethan Kapstein and discussed at the World Economic Forum in Davos in January 2008, the report builds on an earlier study undertaken by Unilever Indonesia with Oxfam GB and Oxfam Novib (the Netherlands) that focused on Unilever's role in poverty reduction.
Data and analysis from Unilever South Africa and the South African government were used to estimate the company's impact on issues such as private sector investment, household income, employment and government revenue. The report was scrutinised by two reference groups including national and international academics, government advisors, business associations and NGOs.
Key findings
Unilever South Africa has been operating in South Africa for more than a century. It ranks among the country's top 40 companies, generating approximately R8.5 billion in sales in 2005 (the year the study focused on), while employing just over 4,000 people. The findings showed that Unilever South Africa is responsible for a number of important economic effects (based on 2005 data):
- Unilever South Africa generates more than R32 billion for the South African economy, and supports approximately 100,000 jobs.
- For every person employed directly by Unilever South Africa, another 22 people depend on the company for some part of their livelihood. This represents 0.8% of total South African employment.
- The report shows that the majority of these jobs are in the retail sector, for example the network of distributors, wholesalers and retailers that Unilever South Africa depends on to get its products to consumers.
- The direct and indirect contribution of Unilever South Africa on government tax revenues totals R4 billion, equivalent to almost 0.9% of all government revenue.
- The economic value added to the economy by Unilever amounted to R12.5 billion in 2005, around 0.9% of the country's GDP. For every R100 of sales revenue, R145 was added to the country's GDP.
In addition to analysing Unilever South Africa's economic footprint, the report provided an overview of the company's broader social and environmental impacts. The report showed that the company has adopted international environmental standards that meet, and often exceed, those found domestically. Its social investment initiatives and efforts to promote black economic empowerment further influence the country's economic and social well-being.
Recommendations
The report suggests a number of ways in which Unilever South Africa could further support the South African economy:
- Seek to ensure that its local suppliers receive the ongoing training and support needed to maintain and improve their productivity to remain competitive in the world economy.
- Continue to provide the training that workers require to improve their skills.
- Consider more targeted community investments that focus on the areas in which the company possesses a sustainable competitive advantage.
- Continue to reduce its environmental footprint, particularly with respect to packaging.
- Continue to promote research and development in South Africa.
- Maintain an ongoing dialogue with the South African government to ensure a regulatory environment that promotes private sector investment, without which the country will not be able to generate economic growth and reduce poverty, inequality and unemployment.
What did we learn?
According to Gail Klintworth, then Chairman of Unilever South Africa, the report highlighted little-understood areas such as direct and indirect economic impacts. This has already prompted action inside the company, including investment in training and improving the competitiveness of suppliers.
The South Africa and Indonesia reports have provided us with useful insights on our business impacts. We now have a robust methodology for analysing our economic impacts and have learnt additional lessons, such as the importance of gathering stakeholder views on performance. We are communicating the lessons learned to other Unilever operating companies, and encouraging them to better understand their impacts on society. We have also been sharing the lessons externally with key stakeholders.
"International companies can have positive and negative economic, social and environmental impacts. When managed responsibly, the private sector has an important contribution to make to sustainable development. Only by understanding their impacts can companies enhance and improve them", said Santiago Gowland, then Global Corporate Responsibility Director, Unilever. "Professor Kapstein's work has added to our global corporate responsibility objective of deepening the understanding of our business impacts and their strategic relevance for our business and for society at large."
André Fourie, CEO, National Business Initiative, SA and South African Reference Group Member for this study commented, "The scope and depth of Unilever's economic 'footprint' demonstrates the value of large corporations to the country, the economy and the broader society."