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Not long after Alan Jope, a 54-year-old Unilever lifer, took over as head of the DutchBritish consumer products giant, he announced he might divest the popular Marmite brand if it didn’t start earning its keep. He wasn’t talking about financials: Though not much of a presence in Canadian kitchens, the yeasty spread is enormously popular in the more salt-loving parts of the Commonwealth.

Rather, Marmite—along with Unilever’s Magnum line of ice cream—needed to demonstrate its ability to fit within the company’s environmentally and socially responsible world view. “Can these brands figure out how to make society or the planet better in a way that lasts for decades?” he has asked.

Jope inherited Unilever's corporate and social responsibility campaign from his predecessor,

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Paul Polman, but has doubled down on it. He inveighed against “woke-washing” and ordered up an all-brand promotional campaign. Those ads show how some of the 400 products made by the US$73-billion corporate behemoth make the planet better, with measures ranging from skinnier plastic packaging for Hellmann’s mayo to using the marketing of Ben & Jerry’s Baked Alaska ice cream to advocate against climate change.

The company casts these changes not only as a matter of altruism, but also financial growth. “The data now shows that brands with a purpose—where the brands champion and take action on a cause which has a positive impact on society or the environment—are growing faster than other brands,” says Katharine Williams, a Unilever Canada spokesperson. Last year, Unilever's 28 Sustainable Living Brands, the products with clear corporate social responsibility (CSR) goals, grew 69% faster than the rest of its business.

Unilever's stock has marched steadily north since Jope took over. But is the firm's CSR push attracting investors, or does Jope just have an understanding of how to market to the millennial consumer?

Fresh research shines a new light on the complicated dynamic between CSR and stock performance. According to Ira Yeung, an assistant professor of accounting at UBC's Sauder School of Business, a new study he has co-authored found that investors are drawn to corporate CSR initiatives, but the bump tends to be shortterm and more pronounced when society is paying more attention to CSR, like right now. There's also a feedback loop: When firms see capital markets responding positively to CSR activities, they'll increase their commitment, a dynamic that raises all the obvious questions about motivation. “Investors should be wary of companies claiming to be investing in CSR, because they may just be looking to increase the stock price,” he cautions.

A French study published in Strategic Management Journal last April added one more layer: that stock markets have “at most, limited” responses to high-profile CSR news. The study looked at when a firm was added to or removed from the Dow Jones Sustainability Indices (DJSI), arguably one of the most high-profile registers of responsible corporate citizenship. When the authors looked at a decade’s data, they found markets didn’t really care if a stock was on the DJSI.

Unilever, of course, is not alone in its desire to cast its corporate lot on the side of the angels. In late August, almost 200 prominent American CEOs signed an open letter from the Business Roundtable calling on corporations to be responsible to all stakeholders (including the Earth), not just investors.

Strategic management expert Sarah Kaplan argues in a new book, The 360° Corporation, that expecting corporate CSR to justify itself financially is asking the wrong question. “That will only take you so far,” she says. “The companies that get stuck always think of CSR as an add-on, as opposed to an essential part of the way they do business.”

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Kaplan counts herself among those who are impressed by what Unilever is trying to do and reads Jope's threat to divest Marmite as “a stake in the ground.” “It's a way to signal to the whole corporation that [Unilever's mission] matters,” Kaplan continues. “It says CSR isn't a side business; it's central to our conversation about how we make money.”


More big ideas

THE BRAIN SCIENCE BEHIND CONSUMER CHURN

In industry parlance, “churn” describes seemingly random switches in consumer preferences, like when a dedicated Coke drinker changes to Pepsi. New research suggests that even the most loyal customer will occasionally switch preferences—not for any fault on the part of the business but because of the way our brains are wired.

Researchers at the Rotman School of Management and Tel Aviv University had volunteers play a series of lotteries while lying inside a functional magnetic resonance imagery scanner, which measures neural activity. The results showed that the regions of the brain responsible for seemingly random choices are the same ones involved in rational decision making. “Since this building block of your decision-making system that has some randomness in it, then there's going to be some inherent randomness in your decisions,” says Ryan Webb, an assistant professor at Rotman.

Liza Agrba

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WHEN IT COMES TO INVENTORY, DON’T GO BY GUT INSTINCT

For retailers and wholesalers, the flow of inventory management can seriously affect profit margins. Restock too quickly, and inventory could go stale; allow shelves to sit empty, and your customers will turn to a competitor. Making these decisions based on managerial instinct can result in a large loss in profits, according to new research from the Smith School of Business at Queen’s University.

Researchers have long understood that procurement managers tend to understock.

But previous studies didn't consider a competitive environment, showing a profit loss of only 1% to 5%. The Smith researchers pitted human inventory managers against three sciencebased models—one using statistics, one based on game theory and a hybrid of the two. They found a firm relying on managerial intuition might lose 15% to 20% of its potential profits, according to Anton Ovchinnikov, a study co-author and distinguished professor of management analytics.

“Just relying on the intuition of a procurement manager will put the firm in a vulnerable position, where a firm that had implemented an analytical system could easily take advantage and earn quite a bit more money,” he says.

Liza Agrba

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