How Unilever’s Sustainability Strategy Went Wrong and What Business Leaders Can Learn From It
When sustainability ambition outpaced customer value and performance discipline.
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For more than a decade, Unilever was held up as the gold standard of sustainable business. It was global, profitable, admired, and unapologetically ambitious about its social and environmental role. In boardrooms, business schools, and executive programs (including our own at IMD), Unilever was regularly cited as proof that companies could “do well by doing good.” That reputation did not emerge by accident. Under former CEO Paul Polman, Unilever positioned itself as a pioneer of purpose-driven capitalism, embedding sustainability deep into its strategy and culture. The company attracted talent, won accolades, and for a time delivered strong financial performance alongside bold environmental and social commitments.
Yet in recent years, a more sobering picture has emerged. Unilever’s growth faltered, its share price stagnated, and investor patience wore thin. What had once been framed as a competitive advantage increasingly looked like a strategic distraction. The company’s new leadership has since walked back several of its most ambitious commitments around sustainability, conceding that the promised link between purpose and performance had not materialised as expected. Unilever’s experience does not suggest that sustainability is a mistake. But it does illustrate how even the most well-intentioned strategies can go wrong when they lose sight of customers, trade-offs, and value creation. For executives navigating today’s sustainability backlash, the lessons are both timely and uncomfortable.
The rise of an icon
Unilever’s sustainability journey began in earnest in 2009, when Paul Polman took over as CEO. On his first day, Polman scrapped quarterly earnings guidance, arguing that short-term financial pressure undermined long-term value creation. The following year, he launched the Unilever Sustainable Living Plan (USLP), one of the most ambitious corporate sustainability programs ever attempted. The plan set out a sweeping agenda. Unilever would decouple growth from environmental impact, halve the footprint of making and using its products, improve the livelihoods of hundreds of thousands of people across its supply chain and, along the way, double the size of the business. These were not incremental goals. They reflected a conviction that consumer preferences were shifting decisively toward ethical, responsible products, and that companies aligning with those values would be rewarded with growth and loyalty. Sustainability, in this view, was not a cost or constraint, but a growth engine. For a time, the evidence seemed to support the thesis. Unilever reported that its “sustainable living brands” were growing significantly faster than the rest of the portfolio. The company topped global sustainability rankings year after year and became a darling of ESG-minded investors and policymakers alike. From the outside, it appeared that Unilever had cracked the code.
When purpose outran performance
But strategic narratives are only as strong as their long-term results. After Polman stepped down in 2018, Unilever’s performance became increasingly volatile. Revenue growth slowed, margins came under pressure, and the share price drifted. By the early 2020s, investor frustration was hard to miss.
Some critics were blunt. Terry Smith, CEO of Fundsmith and one of Unilever’s largest shareholders, accused the company of prioritizing sustainability “virtue signaling” over product quality and competitiveness. He raised uncomfortable questions like ‘does Helmann’s mayo really need a purpose?” His comments were deliberately provocative but they forced a rethink. Our research suggests that Unilever’s problem was not sustainability per se, but how it pursued it. Sustainability had become a dominant managerial mindset rather than a disciplined strategic choice. The company accumulated a growing number of long-term commitments, targets, and partnerships, many of which were only loosely connected to what customers actually valued or were willing to pay for.
Sustainability goals multiplied across brands and geographies, often without clear prioritization or accountability. The result was strategic diffusion: attention was spread thinly, trade-offs were obscured, and core consumer value fundamentals – price, performance, convenience – received less focus than they required. At the same time, market conditions shifted. Inflation and cost-of-living pressures made consumers more price-sensitive, not less. In many categories, Unilever’s more overtly “sustainable” brands struggled to compete with cheaper private labels and fast-moving challengers. Good intentions did not translate into pricing power.
A strategic reset
When Hein Schumacher took over as CEO in mid-2023, he moved quickly to recalibrate. Company-wide sustainability targets were scaled back or revised. Responsibility for sustainability metrics was pushed down to divisions and brand teams, rather than imposed centrally. Schumacher was unusually candid about the rationale. Sustainability goals, he told investors, had become too aspirational and too diffuse. Sustainability is important but not before “unmissable product superiority.” The current Unilever CEO, Fernando Fernandez, seems to subscribe to these ideas too. This was not a rejection of sustainability, but a rejection of the assumption that more sustainability automatically leads to more value.
What executives should take away
Unilever’s experience offers several lessons for leaders grappling with how to position sustainability in their own strategies.
First, sustainability is not a substitute for strategy. It cannot compensate for weak product positioning, unclear differentiation, or cost disadvantages. Customers may express concern for social and environmental issues, but in most categories they still prioritize price, quality, and convenience. Second, ambition must be matched with focus. Chasing too many sustainability targets dilutes managerial attention and obscures trade-offs. Companies need to choose where sustainability genuinely creates customer value, and where it does not.
Third, purpose does not eliminate accountability. Long-term commitments are meaningful only if they are tied to near-term decisions, incentives, and performance metrics. Otherwise, they risk becoming symbolic rather than strategic. Finally, doing good and doing well are not automatically aligned. Sometimes they reinforce each other. Often they do not. Pretending otherwise is not visionary — it is irresponsible.
In our forthcoming book, Clean Winners: Sustainability Strategy That Puts Customers First (Harvard Business Review Press, March 2026), we argue that the next phase of sustainability strategy will belong to companies that treat sustainability not as an ideology, but as a customer value challenge: where can environmental or social benefits be delivered in ways that customers genuinely value and that businesses can profitably sustain? Unilever’s story matters because it shows what happens when that discipline is lost and why getting it right is now more important than ever.
For more than a decade, Unilever was held up as the gold standard of sustainable business. It was global, profitable, admired, and unapologetically ambitious about its social and environmental role. In boardrooms, business schools, and executive programs (including our own at IMD), Unilever was regularly cited as proof that companies could “do well by doing good.” That reputation did not emerge by accident. Under former CEO Paul Polman, Unilever positioned itself as a pioneer of purpose-driven capitalism, embedding sustainability deep into its strategy and culture. The company attracted talent, won accolades, and for a time delivered strong financial performance alongside bold environmental and social commitments.
Yet in recent years, a more sobering picture has emerged. Unilever’s growth faltered, its share price stagnated, and investor patience wore thin. What had once been framed as a competitive advantage increasingly looked like a strategic distraction. The company’s new leadership has since walked back several of its most ambitious commitments around sustainability, conceding that the promised link between purpose and performance had not materialised as expected. Unilever’s experience does not suggest that sustainability is a mistake. But it does illustrate how even the most well-intentioned strategies can go wrong when they lose sight of customers, trade-offs, and value creation. For executives navigating today’s sustainability backlash, the lessons are both timely and uncomfortable.
The rise of an icon
Unilever’s sustainability journey began in earnest in 2009, when Paul Polman took over as CEO. On his first day, Polman scrapped quarterly earnings guidance, arguing that short-term financial pressure undermined long-term value creation. The following year, he launched the Unilever Sustainable Living Plan (USLP), one of the most ambitious corporate sustainability programs ever attempted. The plan set out a sweeping agenda. Unilever would decouple growth from environmental impact, halve the footprint of making and using its products, improve the livelihoods of hundreds of thousands of people across its supply chain and, along the way, double the size of the business. These were not incremental goals. They reflected a conviction that consumer preferences were shifting decisively toward ethical, responsible products, and that companies aligning with those values would be rewarded with growth and loyalty. Sustainability, in this view, was not a cost or constraint, but a growth engine. For a time, the evidence seemed to support the thesis. Unilever reported that its “sustainable living brands” were growing significantly faster than the rest of the portfolio. The company topped global sustainability rankings year after year and became a darling of ESG-minded investors and policymakers alike. From the outside, it appeared that Unilever had cracked the code.
When purpose outran performance
But strategic narratives are only as strong as their long-term results. After Polman stepped down in 2018, Unilever’s performance became increasingly volatile. Revenue growth slowed, margins came under pressure, and the share price drifted. By the early 2020s, investor frustration was hard to miss.
Some critics were blunt. Terry Smith, CEO of Fundsmith and one of Unilever’s largest shareholders, accused the company of prioritizing sustainability “virtue signaling” over product quality and competitiveness. He raised uncomfortable questions like ‘does Helmann’s mayo really need a purpose?” His comments were deliberately provocative but they forced a rethink. Our research suggests that Unilever’s problem was not sustainability per se, but how it pursued it. Sustainability had become a dominant managerial mindset rather than a disciplined strategic choice. The company accumulated a growing number of long-term commitments, targets, and partnerships, many of which were only loosely connected to what customers actually valued or were willing to pay for.
Sustainability goals multiplied across brands and geographies, often without clear prioritization or accountability. The result was strategic diffusion: attention was spread thinly, trade-offs were obscured, and core consumer value fundamentals – price, performance, convenience – received less focus than they required. At the same time, market conditions shifted. Inflation and cost-of-living pressures made consumers more price-sensitive, not less. In many categories, Unilever’s more overtly “sustainable” brands struggled to compete with cheaper private labels and fast-moving challengers. Good intentions did not translate into pricing power.
