Unilever faces fresh criticism as “international sponsor of war” amid ongoing presence in Russia

06 Jul 2023 --- The National Agency on Corruption Prevention (NACP) of Ukraine has added Unilever to its International Sponsors of War list. This is due to the food and personal care giant’s “ongoing presence in Russia and its significant taxes to the Russian state budget.” In response, Unilever highlights the complexity of exiting Russia while continuing to “condemn the war as a brutal and senseless act by the Russian state.”

“We understand why there are calls for Unilever to leave Russia. We also want to be clear that we are not trying to protect or manage our business in Russia. However, for companies like Unilever, which have a significant physical presence in the country, exiting is not straightforward,” reads the company’s statement.

However, Oleksandr Novikov, head at NACP believes that: “Unilever cannot say it is opposed to the war while at the same time contributing to Putin’s war machine. We have added them as an International Sponsor of War because their hundreds of millions in tax contributions to the Russian state are helping to fund its attacks on Ukraine and could be indirectly funding a mercenary criminal group.”

“Unilever has a new CEO, Hein Schumacher. It needs a new start and to live up to its human rights values. Unilever must leave Russia now or history will record its complicity.” 

Nevertheless, Unilever states that its focus is ensuring the well-being of its Ukrainian employees and their families, including helping them find safety in nearby countries and setting up accommodations in the west of Ukraine for those who have chosen to stay. 

“We have also donated more than €15 million (US$16.3 million) of support and essential Unilever products to the humanitarian relief effort,” highlights the company.

Implications of the list
The “International Sponsors of War” listing is monitored daily by the London Stock Exchange Group, owners of Refinitiv. “The listed entities will be included into the World-Check database as appropriate to protect the financial sector from accomplices of the Russian war,” explains War & Sanctions, the biggest global database of sanctions following the Russia-Ukraine war. 

The project is supported by the Ministry of Foreign Affairs Ukraine and the National Agency on Corruption Prevention.

“Unilever Rus LLC paid about US$50 million in taxes to the budget of the Russian Federation in 2022,” says NACP.“Ukraine does not control the enforcement – the global community acts as the judge, jury and executioner.” Therefore, being added to the list is reputational only. War & Sanctions aims to publicize the list of individuals and companies that “abet” Russia’s aggression on Ukraine, to add pressure “so that it would be reputationally unprofitable.”

NACP flags that with over 3,000 Unilever employees in Russia, it is running a significant operation that has increased its revenue and profit since the full-scale invasion of Ukraine. 

Unilever’s robust performance
NACP underscores that Unilever profits in Russia doubled from 4.8 billion rubles (€56 million or US$60.8 million) in 2021 to more than 9.2 billion rubles (€108 million or US$117.2 million) last year – an increase of 91%.

“Thanks to the significant amount of profit obtained, LLC Unilever Rus managed to increase its capital to 34.5 billion rubles [US$369 million] in 2022 from 25.3 billion rubles [US$270 million] in 2021 – an increase of 37%,” highlights NACP.

“Unilever Rus LLC paid about US$50 million in taxes to the budget of the Russian Federation in 2022. This strong performance is part of its global growth in 2022.”

Moreover, Unilever’s revenue surged to €60.1 billion (US$65.3 billion) – a 14.5% increase. 

“Unilever’s sales grew across all categories with the biggest increase in cosmetics sales (+20.8%),” adds NAPC.

In 2022, the Russian business accounted for 1.4% of Unilever’s turnover and 2% of its net profit, which in 2022 increased by 24.9% compared to 2021 and amounted to €8.03 billion [US$ 8.7 billion].”

This year, Unilever delivered a year of “strong topline growth” through price increases. The company is a significant leader in the market of food products and household chemicals, owning more than 400 brands and 280 production enterprises. Brands include Ben & Jerry’s, Axe, Knorr, Sunsilk, Lipton, Persil and Walls.Unilever will allow the business to run in Russia with constraints.

Fulfilling promises?
The NACP notes that after Russia’s invasion of Ukraine, Unilever “promised” to suspend all imports and exports with the nation and stop all media and advertising spending.

“Yet it continues to operate at a large scale with enterprises in Omsk, Yekaterinburg, St. Petersburg and Tula continuing their work, offices still running operational activities and ensuring the presence of brands in shops,” says the agency.

However, Unilever says differently:

“Since March 2022, we have ceased all imports and exports of our products into and out of Russia and stopped all media and advertising spending. We have also ceased all capital flows into and out of the country.”

Yet, the company continues to supply its everyday food and hygiene products made in Russia to people there.

Meanwhile, the company invested €20 million (US$21.3 million) in a personal care production facility in the Kyiv region of Ukraine, expressing its “long-term commitment to the country.” Construction will start this year, with the factory expected to open next year.

Blocks in exit
Unilever has shared three primary options for assessing its future business in Russia. The first option is to shut down its Russian business, which employs approximately 3,000 people across four manufacturing sites and a head office.

“However, it is clear that were we to abandon our business and brands in the country, they would be appropriated – and then operated – by the Russian state. In addition, we do not think it is right to abandon our people in Russia,” justifies Unilever.

Another option would be to sell its Russian business. However, the company faces the obstacle of the “Russian state potentially gaining further benefit” while not being able to safeguard its people.

The last option would be to allow the business to run with constraints placed last March.

“To be clear, none of these options are desirable. Nevertheless, we believe the third remains the best option, both to avoid the risk of our business ending up in the hands of the Russian state, either directly or indirectly and to help protect our people,” reads Unilever’s statement.

By Venya Patel