Correction: An earlier version of this article stated that KKR “has not made its sustainability approach known.” In fact, KKR has committed to following Unilever’s responsible sourcing policies, and to work towards 100 percent sustainable palm oil sourcing by 2019.
As reported by Chain Reaction Research, on December 15, 2017, Unilever announced that is selling its Baking, Cooking, and Spreads division (BCS) to private equity group KKR for a reported USD 8.04 billion. Unilever stated it intends to return the net cash realized to shareholders, unless other alternatives arise.
The BCS division was considered an important pillar of Unilever’s sustainability brand, as it was responsible for 25 percent of Unilever’s total 2016 expenditures on sustainable agriculture raw materials. Unilever uses palm oil in many of its other division such as home and personal care, which means that Unilever’s sustainability profile depends not just on its former BCS division.
Overall, in 2016, Unilever bought 10% of the world’s certified sustainable palm oil. While under Unilever’s management, the BCS division held a global leading position with its approach to sustainable sourcing of agriculture products not associated with material human rights abuses and deforestation. Its responsible sourcing policy – or No Deforestation, No Peat, No Exploitation (NDPE) policy – was considered best in class.
As a result, KKR now owns Unilever’s global sustainability leadership position. In announcing the purchase, KKR state that their intention is to follow Unilevers policies, saying that “we look forward to deploying our global network and operational expertise to support the business’s growth ambitions, while continuing to follow Unilever’s responsible sourcing policies, including working towards the goal of sourcing 100 per cent sustainable palm oil by 2019.”
Unilever Had Committed to Maintaining Responsible Sourcing Policies Through BCS Division Purchase
In 2016, Unilever stated that 51% of its agriculture-based raw materials were sustainably sourced. They traced their universe of mills associated with 73 percent of their core volumes. This put Unilever on a path to reach their 2019 target – pushed forward from 2020 earlier this year – for purchasing 100 percent physically certified palm oil.
On August 23rd , Unilever stated to Chain Reaction Research that it intended to find a buyer for its BCS division with a strong commitment to sustainability:
“Unilever strongly believes that a sustainable and responsible long-term approach goes hand in hand with long-term business success. One of the main reasons Unilever resisted the Kraft Heinz bid earlier this year was to ensure Unilever stay true to its values. The Unilever Sustainable Living Plan is at the heart of this…
…Unilever will not sell the spreads business to any party who Unilever would consider to be disreputable. Unilever is acutely aware that, regardless of price, this would be bad business and would cause substantial damage to our reputation.
Unilever believes that sustainability differentiates their spreads business and is therefore attractive to potential buyers. As a matter of policy, Unilever never comments on any specific terms and conditions relating to any sale or demerger of assets from the Unilever Group.”