Monday, October 7, 2019

CEO Daily: Unilever's Plastics Pledge

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October 7, 2019

Good morning. David Meyer here in Berlin, filling in for Alan.


Unilever is one of the world’s most prolific producers of what becomes plastic trash, so it’s heartening to see that the domestic goods company intends to halve the amount of new plastic it uses in its products by 2025.


Around a third of the reduction will come from simply using less plastic of any kind in its packaging. The rest will be down to recycled plastic, and non-plastic alternatives—though CEO Alan Jope said in a BBC interview that too much glass means a bigger carbon footprint on the logistics side. Unilever’s target is notably more aggressive than rival Procter & Gamble’s plan to halve its own plastic use by 2030.


So what prompted this latest episode in Unilever’s sustainability drive, which was famously championed by former CEO Paul Polman? According to Jope, it comes down to customer expectations—specifically, the “purpose and sustainability” demands of millennials and the younger Generation Z.


“This is part of responding to society but also remaining relevant for years to come in the market,” Jope said in the BBC interview. “We profoundly believe that sustainability leads to a better financial top and bottom line.”


There are certainly good reasons to believe that. As research showed earlier this year, strong corporate citizens generally have better-performing stocks over the long term—and environmental performance is a strong driver of higher net margins.


Unilever itself said last year that its “sustainable living brands” (including Vaseline, and Ben and Jerry’s) were growing almost 50% faster than the rest of the business, while delivering the lion’s share of its turnover growth.


But that said, some continue to call for a complete phase-out of plastics, rather than just a reduction.


For example, read this piece by Allbirds co-founders Tim Brown and Joey Zwillinger, which went up on Fortune.com this morning. “Recycling plastic is a decent solution, but based on fundamentally backward logic,” they write. “We shouldn't glamorize recycling because it finds new uses for a bad material. Instead, we need to stop using the bad material in the first place.”


More news below.


David Meyer
david.meyer@fortune.com
@superglaze


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TOP NEWS


GM Strike


GM's longest-running strike seems set to continue after talks—in the words of the UAW union's top negotiator—took "a turn for the worse." There had been hopes on Friday of a weekend breakthrough. GM spokesperson: "We continue to negotiate in good faith with very good proposals that benefit employees today and builds a stronger future for all of us." Wall Street Journal


Houston Rockets


Daryl Morey, the general manager of the Houston Rockets, has apologized after tweeting support for pro-democracy protestors in Hong Kong. The now-deleted tweet upset the authorities in China, where the U.S. National Basketball Association does big business. Morey: "I have always appreciated the significant support our Chinese fans and sponsors have provided and I would hope that those who are upset will know that offending or misunderstanding them was not my intention." CNBC


HSBC Cuts


HSBC may slash as many as 10,000 jobs as part of a cost-cutting drive under interim CEO Noel Quinn. The banking giant's headcount currently runs to around 238,000. The Financial Times reports that high-paid roles will be targeted, and that Quinn's predecessor, John Flint, was ousted partly because he didn't make difficult job-cut decisions. FT


Glyphosate Trials


Bayer has announced the delay of a pending, Roundup-related U.S. lawsuit against it. The case of Winston v. Monsanto was due to commence next week but is now postponed until next year at least, which means the focus this year is now firmly on Bayer's appeals against three glyphosate rulings that have already gone against it. Reuters



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AROUND THE WATER COOLER


Broadcom Measures


We have written before about the rare "interim measures" that the EU's antitrust authorities has been threatening to impose on Broadcom. The FT now reports that they will be levied this month, forcing the U.S. chipmaker to change its allegedly anti-competitive behavior even before a formal finding that it has broken EU competition rules. FT


Market Correction


JPMorgan Chase analysts reckon the current market correction is about halfway done. Cross-asset fundamental strategy chief John Normand: "Since corrections tend to be largest when markets are expensive and over-owned and when market depth is poor, these indicators give a sense of vulnerability even if they cannot anticipate the timing of a random shock…Entering October, vulnerabilities were moderate rather than high." Bloomberg


Japan Display


Japan Display, which makes currently-unfashionable liquid crystal displays and is therefore unprofitable, hopes to secure $468 million in desperately-needed funding by the end of the month. The Apple supplier says there's still a lot of demand for cheap phones that use LCD displays rather than the more vibrant organic light-emitting diode (OLED) screens. Reuters


Wealth Taxes


The New York Times has an interesting piece on how, while it wasn't true a decade ago (when Warren Buffett claimed as much) that the wealthy pay a lower tax rate than the middle class, it is true now. In fact, last year was the first on record in which the 400 wealthiest Americans paid a lower total tax rate than any other income group. NYT


This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.


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