Earlier this week we called for more plain speaking in the business world. Terry Smith, the legendary fund manager, has rarely needed such a nudge.
Unilever, he said in his letter to investors this week, has “clearly lost the plot.” Smith’s beef was an effort to define the purpose of Hellmann’s mayonnaise.
Regardless of whether one agrees with Smith, it is hard to say that Unilever’s share price under current boss Alan Jope has been markedly less than stellar.
Amongst Smith’s frustrations is a “management… obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business.”
The company’s website features a ‘where we stand’ page which lists its position on some thirty issues of the day, from poverty (a complex problem that needs bold action to solve it) to cleaning wipes (a quick and easy way to clean, as long as they’re disposed of correctly).
Hellman’s, we are told, is “on the side of food” – us, neither – whereas Knorr is “reinventing food for humanity.” Smith, it turns out, may have a point.
But this fits within a wider ESG narrative. ‘Profit with purpose’ is a fine idea, but chief execs must remember that there’s a reason it’s ordered that way.
The first responsibility of any business is to its shareholders, its second to its employees – keeping them in paid, secure jobs. Profit still matters, in short.
It isn’t wrong to focus on externalities, but nor is shouting about one’s ‘ESG’ credentials as substitute for a well-executed business strategy that delivers sustainable returns.
A survey earlier this week suggested the great British public, who as the Prime Minister is now finding out are not easily taken in by weasel words, would rather chief executives focussed on “their core purpose” than wider societal issues.
The truth is the two can go hand in hand – there’s nothing wrong with profit with purpose; just remember it’s in that order for a reason.