Unilever(UK)(UL) - 2022 Q4 - Annual Report

FORM 20-F Filing Information This section details Unilever PLC's Annual Report on Form 20-F for fiscal year 2022, including SEC filing specifics and registered securities SEC Filing Details This section identifies the document as an Annual Report on Form 20-F for the fiscal year ended December 31, 2022, filed with the United States Securities and Exchange Commission by Unilever PLC - The document is an Annual Report on Form 20-F for the fiscal year ended December 31, 2022[3] - Unilever PLC is incorporated in England and is a well-known seasoned issuer[4][7] Registrant Information & Securities Unilever PLC's contact information is provided, along with details of its registered securities, including ordinary shares and American Depositary Shares listed on the New York Stock Exchange, and various notes due between 2023 and 2097. The total number of outstanding shares at year-end 2022 was 2,629,243,772 - Unilever PLC's contact person is Maria Varsellona, Chief Legal Officer and Group Secretary, based in London, UK[4] Securities Registered on New York Stock Exchange | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :----------------------------------------------------------- | :---------------- | :---------------------------------------- | | Ordinary shares, nominal value of 3 1/9 pence per share | ULVR | New York Stock Exchange* | | American Depositary Shares (evidenced by Depositary Receipts) each representing one ordinary share of the | UL | New York Stock Exchange | - The total number of outstanding shares of the issuer's capital stock at the close of the period covered by the annual report was 2,629,243,772[7] Strategic Report Overview This section outlines the report's structure, including forward-looking statements, key components, and a detailed table of contents Cautionary Statement This section contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially. Key risks include consumer preferences, innovation, portfolio management, climate change, supply chain disruptions, raw material costs, IT infrastructure, and geopolitical events like the Russia-Ukraine war. The Group disclaims any obligation to update these statements - The document contains forward-looking statements, identified by words like 'will', 'expects', 'anticipates', and 'intends'[13] - Material factors that could cause actual results to differ include Unilever's global brands not meeting consumer preferences, ability to innovate and remain competitive, investment choices in portfolio management, effect of climate change on business, ability to find sustainable solutions to plastic packaging, significant changes or deterioration in customer relationships, recruitment and retention of talented employees, disruptions in supply chain and distribution, increases or volatility in raw material and commodity costs, production of safe and high-quality products, secure and reliable IT infrastructure, execution of acquisitions, divestitures and business transformation projects, economic, social and political risks and natural disasters, financial risks, failure to meet high and ethical standards, and managing regulatory, tax and legal matters[13] - A number of these risks have increased due to the current Russia-Ukraine war[13] - The Group expressly disclaims any obligation to publicly release updates or revisions to forward-looking statements, except as required by law[13] Report Structure & Content This Annual Report on Form 20-F 2022 is composed of the Strategic Report (pages 1-76), the Governance Report (pages 77-131), Financial Statements and Notes (pages 133-213), and Additional Information for US Listing Purposes (pages 226-235). The Strategic Report covers strategy, business model, market outlook, KPIs, sustainability, and risk - The document is comprised of the Strategic Report (pages 1 to 76), the Governance Report (pages 77 to 131), the Financial Statements and Notes (pages 133 to 213), and Additional Information for US Listing Purposes (pages 226 to 235)[18][19][20] - The Strategic Report includes information on Unilever's strategy, business model, market outlook, key performance indicators, sustainability approach, and risk management[18][19][20] Table of Contents The detailed table of contents outlines the report's structure, covering the Strategic Report, Governance Report, Financial Statements, and additional information, with specific page references for each section and sub-section, including business group reviews, performance metrics, and risk management - The table of contents provides a comprehensive overview of the report's structure, including sections on Strategic Report, Our Performance, Our Principal Risks, Governance Report, and Financial Statements[25] - Key sections include detailed reviews of five Business Groups (Beauty & Wellbeing, Personal Care, Home Care, Nutrition, Ice Cream), financial and non-financial performance, and climate-related disclosures[25] About Unilever This section provides an overview of Unilever's global presence, 2022 financial highlights, and its Compass strategy for sustainable growth and organizational structure Unilever at a Glance Unilever is a global consumer goods company with over 400 brands, serving 3.4 billion people daily. In 2022, it achieved strong top-line growth of 9.0% in underlying sales, with turnover crossing €60.1 billion. The company emphasizes a multi-stakeholder business model, leveraging its diverse workforce, consumer insights, impactful innovations, resilient supply chain, world-class manufacturing, agile customer operations, and purposeful marketing to create value - Unilever is one of the world's largest consumer goods companies, with over 400 brands used by approximately 3.4 billion people daily[26][30] 2022 Financial Highlights | Metric | 2022 Value | 2021 Value | | :---------------------- | :--------- | :--------- | | Turnover | €60.1bn | €52.4bn | | Underlying sales growth | 9.0% | 4.5% | | Operating margin | 17.9% | 16.6% | | Underlying operating margin | 16.1% | 18.4% | | Dividends paid | €4.3bn | €4.5bn | | Free cash flow | €5.2bn | €6.4bn | - Unilever's business model focuses on creating value through its diverse and talented people (127,000 employees in ~100 countries), cutting-edge consumer and customer insights (300M+ personalized digital experiences), impactful innovations, a resilient supply chain (€41.3bn spend on raw materials and services), world-class manufacturing (730 factories), agile customer operations (45M customer orders processed annually), and effective and purposeful marketing (€7.3bn spend on Brand and Marketing Investment)[30][32][34][35][37][38][39][40][42][43] - Brands with purpose and product superiority are shown to unlock accelerated growth[30][32][34][35][37][38][39][40][42][43] The Unilever Compass Strategy for Sustainable Growth Unilever's Compass strategy aims for sustainable growth by making sustainable living commonplace, delivering winning performance as a global leader in sustainable business. The strategy focuses on building a high-growth portfolio across five Business Groups, winning with superior products, innovation, and purpose, accelerating in key markets (USA, India, China), and leading in future channels through operational excellence and a growth-focused, purpose-led organization - Unilever's purpose is to make sustainable living commonplace, with a vision to deliver winning performance by being the global leader in sustainable business[46][47] - The strategy involves building a high-growth portfolio across five Business Groups: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream[48][49][50] - Key strategic pillars include winning with brands powered by superior products, innovation, and purpose; accelerating in key markets (USA, India, China); and leading in future channels (e.g., digital commerce, top customers)[48][49][50] - Operational excellence is driven through five growth fundamentals: purposeful brands, improved penetration, impactful innovation, design for channel, and value[48][49][50] - This is supported by a growth-focused and purpose-led organization and culture, driving climate action, reducing plastic, regenerating nature, and raising living standards[48][49][50] Our Compass Organisation Unilever's new Compass Organisation, operational since July 1, 2022, is designed to be simpler, faster, and more accountable, structured around five distinct Business Groups (Beauty & Wellbeing, Personal Care, Home Care, Nutrition, Ice Cream). Each Business Group has end-to-end responsibility for strategy and P&L, supported by a lean Corporate Centre and a highly skilled Unilever Business Operations team that provides supply chain expertise, technology, and enterprise services - The new Compass Organisation, implemented on July 1, 2022, is structured around five Business Groups: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream[52][279] - Each Business Group has end-to-end responsibility for strategy, performance, and P&L, incorporating geographical Business Units[51][54][271][272][279][280] - The organization is supported by a lean Corporate Centre for global strategy and functional expertise, and a technology-driven Unilever Business Operations team for cost-efficient, resilient, and sustainable operations[51][54][271][272][279][280] - This new model aims to enhance speed, focus, and accountability, leveraging global scale while empowering category-focused teams[51][54][271][272][279][280] Review of the Year This section presents the Chair's and CEO's statements, a group financial review, and detailed performance of each business group, alongside updates on people, culture, and sustainability initiatives Chair's Statement The Chair's statement highlights Unilever's strong all-round performance in 2022, with 9.0% underlying sales growth despite a challenging macroeconomic environment and record input cost inflation. Strategic decisions, including responsible price increases and portfolio transformation towards faster-growing categories like Prestige Beauty and Health & Wellbeing, contributed to resilience. The new Compass Organisation is expected to drive future growth and efficiency. Leadership changes include the retirement of CEO Alan Jope and the appointment of Hein Schumacher - Unilever delivered a strong all-round performance in 2022, with underlying sales up by 9.0% in a challenging macroeconomic environment[57] - Strategic price increases and higher savings helped protect performance and allowed continued investment in brand, marketing, and R&D[58][59][60][61] - Underlying operating profit slightly improved to €9.7 billion, despite a decline in operating margin due to material inflation[58][59][60][61] - A €3 billion share buyback program was announced for 2022-2023, with €1.5 billion completed in 2022, alongside €4.3 billion in dividends paid[63][64][65][66] - Portfolio transformation over five years rotated 17% of brands into faster-growing categories; Prestige Beauty and Health & Wellbeing are now €1 billion businesses with double-digit growth[67][68] - The new Compass Organisation, structured around five Business Groups, aims for a simpler, more transparent, and category-expert business model, showing increased speed of decision-making in early implementation[67][68] - Nelson Peltz joined the Board in July 2022, and Hein Schumacher was appointed as the new CEO, effective July 1, 2023, following Alan Jope's announced retirement[71][72][73][74] Chief Executive Officer's Statement The CEO's statement characterizes 2022 as a volatile year marked by permacrisis, including Covid lockdowns, climate change impacts, and the Russia-Ukraine war, leading to soaring material costs (€4.3 billion inflation). Despite this, Unilever achieved 9.0% underlying sales growth, its fastest in years, driven by pricing (11.3%) with modest volume decline (2.1%). Growth was broad-based across all five Business Groups and emerging markets, with digital commerce growing 23%. The new Compass Organisation is expected to accelerate growth and enhance competitiveness, while sustainability efforts continue to drive value creation - 2022 was a volatile year with 'permacrisis' conditions, including Covid lockdowns, climate change impacts, and the Russia-Ukraine war, leading to €4.3 billion in material cost inflation[81][82][83] - Unilever achieved 9.0% underlying sales growth, driven by 11.3% price growth and a modest 2.1% volume decline, demonstrating brand strength and execution quality[84][85][86] - Turnover increased by 14.5% to over €60 billion for the first time, partly due to currency movements (+6.2%)[88] - Growth was broad-based across all five Business Groups, with 14 brands exceeding €1 billion turnover, growing 10.9% and representing 53% of the business[91][92][93] - Emerging markets grew 11.2%, despite challenges in China due to lockdowns[94] - Underlying operating margin was 16.1%, with absolute underlying profit at €9.7 billion, and free cash flow at €5.2 billion[95][96] - The new Compass Organisation, a major shake-up, aims for greater category expertise and responsiveness, with Business Groups having strategic freedom and leveraging 'One Unilever' scale[95][96] - Sustainability is a core driver of value creation, evidenced by growth from purposeful brands, cost efficiencies from eco-measures, reduced risk in water-stressed areas, and talent attraction[97][98][99][104][105] Group Financial Review In 2022, Unilever achieved a turnover of €60.1 billion, a 14.5% increase, with underlying sales growth of 9.0% driven by 11.3% price growth. Operating profit reached €10.8 billion, including a €2.3 billion gain from the Tea business sale, while underlying operating profit was €9.7 billion, a slight increase of 0.5%. Gross margin decreased by 210bps due to record input cost inflation. Free cash flow was €5.2 billion, and diluted EPS increased by 29% to €2.99, largely due to the Tea business disposal - Unilever's 2022 turnover reached €60.1 billion, a 14.5% increase, with underlying sales growth of 9.0% (11.3% price growth, 2.1% volume decline)[107][108] 2022 Financial Performance Highlights | Metric | 2022 Value | 2021 Value | | :----------------------------------- | :--------- | :--------- | | Turnover | €60.1bn | €52.4bn | | Underlying sales growth | 9.0% | 4.5% | | Underlying price growth | 11.3% | 2.9% | | Underlying volume growth | (2.1)% | 1.6% | | Operating profit | €10.8bn | €8.7bn | | Underlying operating profit | €9.7bn | €9.6bn | | Operating margin | 17.9% | 16.6% | | Underlying operating margin | 16.1% | 18.4% | | Free cash flow | €5.2bn | €6.4bn | | Diluted earnings per share | €2.99 | €2.32 | | Underlying earnings per share | €2.57 | €2.62 | - Operating profit was €10.8 billion, including a €2.3 billion gain from the sale of the Tea business[107][109][110] - Underlying operating profit increased by 0.5% to €9.7 billion, but underlying operating margin decreased by 230bps due to raw material, packaging, processing, and distribution cost inflation[112][113][114][115] - Digital commerce sales grew to 15% of overall sales, and €1 billion+ brands (53% of turnover) delivered 10.9% underlying sales growth[116] - Emerging markets grew 11.2% (13.5% price, 2.0% volume decline), while developed markets grew 5.9% (8.4% price, 2.3% volume decline)[116] - Free cash flow was €5.2 billion, with €1.5 billion in share repurchases completed as part of a €3 billion program, and €4.3 billion in dividends paid[116] - Portfolio reshaping continued with the sale of the Tea business and acquisitions like Nutrafol, positioning Unilever in higher-growth areas like Prestige Beauty and Health & Wellbeing[116] Business Group Review The Business Group Review provides a detailed look into the performance of Unilever's five new segments: Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. Each group demonstrated unique growth drivers and challenges in 2022, navigating high inflation and market dynamics through strategic pricing, innovation, and portfolio adjustments. Key themes include premiumization, digital commerce expansion, and purpose-led brand initiatives, all contributing to the overall Group's resilience and strategic transformation Beauty & Wellbeing The Beauty & Wellbeing Business Group, accounting for 20% of Unilever's turnover and 24% of underlying operating profit, achieved 7.8% underlying sales growth in 2022. Growth was driven by price increases in Hair Care and Skin Care, with modest volume declines. Prestige Beauty and Health & Wellbeing categories saw double-digit growth, supported by acquisitions like Nutrafol and strong digital commerce performance. The strategy focuses on purposeful brands, science-backed innovations, and premiumization Beauty & Wellbeing Performance Highlights (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :------------------------ | :--------- | :--------- | | Turnover | €12.3bn | €10.1bn | | Turnover growth | 20.8% | 11.6% | | Underlying sales growth | 7.8% | 8.5% | | Operating margin | 17.6% | 21.1% | | Underlying operating margin | 18.7% | 22.1% | - Beauty & Wellbeing represents 20% of Unilever's total turnover and 24% of its underlying operating profit[122][123] - Hair Care and Skin Care categories delivered price-led growth with modest volume declines[133] - Health & Wellbeing and Prestige Beauty categories grew double-digit, contributing €1.3 billion and €1.2 billion in turnover respectively[136][137] - Acquired a majority stake in Nutrafol, a premium hair wellness brand, building on expertise in beauty and hair[140][141] - Digital commerce accounts for about half of all Prestige Beauty portfolio sales, with strong growth in China[143][144] - Purpose-led brands like Dove and Vaseline continue to drive inclusive beauty and skin health initiatives[145][146][147][148] Personal Care The Personal Care Business Group, contributing 23% of Unilever's turnover and 28% of underlying operating profit, achieved 7.9% underlying sales growth in 2022. Skin Cleansing, Deodorants, and Oral Care all saw high single-digit to double-digit growth, primarily driven by strong pricing. The strategy focuses on innovation to premiumize the portfolio, leveraging global brands like Rexona and Dove, and expanding digital commerce, especially in China. Purpose-led initiatives by brands like Lifebuoy, Pepsodent, and Dove continue to promote health and wellbeing Personal Care Performance Highlights (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :------------------------ | :--------- | :--------- | | Turnover | €13.6bn | €11.7bn | | Turnover growth | 15.9% | (2.3)% | | Underlying sales growth | 7.9% | 0.3% | | Operating margin | 16.6% | 19.9% | | Underlying operating margin | 19.6% | 21.3% | - Personal Care accounts for 23% of Unilever's total turnover and 28% of underlying operating profit[150][151] - Skin Cleansing grew high single-digit, Deodorants delivered double-digit growth, and Oral Care grew high single-digit, all driven by pricing[161][162] - Innovation, such as Rexona's 72-hour protection deodorant, is key to premiumization and category leadership[164][165] - Digital commerce grew 21.7% and accounts for 12.6% of Personal Care turnover, with China being the largest digital commerce market (52% of sales)[166][167][168] - Brands like Lifebuoy reached 647 million people through hand hygiene campaigns, Pepsodent expanded teledentistry, and Dove continued body confidence programs[170][171][172] - Operating profit decreased by 3.1% to €2.3 billion, but underlying operating profit increased by 6.9% to €2.7 billion, driven by savings and mix benefit from Deodorants[174][175][176][177] Home Care The Home Care Business Group, representing 21% of Unilever's turnover and 14% of underlying operating profit, achieved 11.8% underlying sales growth in 2022. Fabric Cleaning saw double-digit growth, while Fabric Enhancers and Home & Hygiene grew high and low single-digit respectively, all primarily driven by pricing. The 'Clean Future' strategy emphasizes premiumization, science-backed innovations (e.g., plant-based ingredients, concentrated formats), and sustainability, including a €115 million joint venture with Genomatica for plant-based ingredients. Digital commerce is a key channel for premium products, and Unilever Professional (UPro) grew 32% Home Care Performance Highlights (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :------------------------ | :--------- | :--------- | | Turnover | €12.4bn | €10.6bn | | Turnover growth | 17.3% | 1.1% | | Underlying sales growth | 11.8% | 3.9% | | Operating margin | 8.6% | 12.2% | | Underlying operating margin | 10.8% | 13.4% | - Home Care accounts for 21% of Unilever's total turnover and 14% of underlying operating profit[179][180] - Fabric Cleaning achieved double-digit growth, Fabric Enhancers grew high single-digit, and Home & Hygiene grew low single-digit, all price-led[189][190][191] - Premiumization is a core strategy, with success in India and China through laundry capsules and fragrance beads[192][193] - Digital commerce accounts for 17% of Home Care sales, particularly strong in China, US, and UK[194][195] - Unilever Professional (UPro) grew 32% in 2022, doubling turnover in three years, by expanding into professional cleaning markets[196][197] - The 'Clean Future' innovation program drives product superiority and sustainability, including a €115 million joint venture with Genomatica for plant-based ingredients[204][205] - Operating profit declined by 17.8% to €1.1 billion, and underlying operating profit declined by 5.2% to €1.3 billion, due to high input cost inflation[206][207] Nutrition The Nutrition Business Group, representing 23% of Unilever's turnover and 25% of underlying operating profit, achieved 8.6% underlying sales growth in 2022. Scratch Cooking Aids delivered mid-single-digit growth, while Dressings and Plant-Based Meat grew high double-digit. The sale of the Tea business transformed the portfolio, allowing focus on high-growth areas. Operating profit increased significantly by 113.7% to €4.5 billion, largely due to the Tea business sale, though underlying operating profit decreased by 3.0% to €2.4 billion due to inflation Nutrition Performance Highlights (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :------------------------ | :--------- | :--------- | | Turnover | €13.9bn | €13.1bn | | Turnover growth | 6.1% | 4.9% | | Underlying sales growth | 8.6% | 5.5% | | Operating margin | 32.4% | 16.1% | | Underlying operating margin | 17.6% | 19.3% | - Nutrition accounts for 23% of Unilever's total turnover and 25% of underlying operating profit[209][210] - Scratch Cooking Aids delivered mid-single-digit growth, Dressings and Plant-Based Meat grew high double-digit[221] - The Tea business sale to CVC Capital Partners Fund VIII was a major portfolio transformation[223] - Unilever Nutrition and Ice Cream achieved €1.2 billion in sales from plant-based products in 2022, with a revised goal of €1.5 billion by 2025[224][225] - Hellmann's and Knorr delivered robust growth, focusing on core ranges and plant-based innovations[226][227][228] - Digital commerce accounts for 10% of Nutrition's sales, with B2B digital commerce being a key driver for Unilever Food Solutions[230] - Operating profit increased by 113.7% to €4.5 billion, primarily due to a €2.3 billion gain from the Tea business sale[232][237][238](index=238&type=chunk][239][240] - Underlying operating profit decreased by 3.0% to €2.4 billion due to high inflation[232][237][238](index=238&type=chunk][239][240] Ice Cream The Ice Cream Business Group, representing 13% of Unilever's turnover and 9% of underlying operating profit, achieved 9.0% underlying sales growth in 2022. Out-of-home sales saw competitive double-digit growth, while in-home grew mid-single-digit. Digitalization is a key driver, with the ICNOW fast delivery service growing 30% and expanding to over 40 countries. The strategy focuses on premiumization, innovation (e.g., Magnum Remix, vegan products), and simplification. Sustainability efforts include piloting warmer freezer temperatures to reduce GHG emissions and promoting sustainable cocoa sourcing Ice Cream Performance Highlights (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :------------------------ | :--------- | :--------- | | Turnover | €7.9bn | €6.9bn | | Turnover growth | 14.8% | 3.2% | | Underlying sales growth | 9.0% | 5.7% | | Operating margin | 9.8% | 12.1% | | Underlying operating margin | 11.7% | 13.9% | - Ice Cream accounts for 13% of Unilever's total turnover and 9% of underlying operating profit[241][242] - Out-of-home sales achieved competitive double-digit growth, while in-home grew mid-single-digit[251][252] - ICNOW, the fast ice cream delivery service, grew 30% in 2022 and is now available in over 40 countries[253][254] - Magnum grew double-digit with innovations like Magnum Remix, and Cornetto relaunched in China targeting Gen Z[255][256] - Sustainability initiatives include piloting warmer freezer temperatures (-12°C instead of -18°C) to reduce energy consumption by up to 30%, and non-dairy, plant-based ice cream representing 8% of turnover[261][262][263] - Operating profit decreased by 6.8% to €776 million, and underlying operating profit decreased by 3.5% to €919 million, due to extreme inflation in commodities and energy costs[265][266][267][268] Our People & Culture Unilever's 2022 people agenda focused on embedding the new Compass Organisation to maximize talent and diversity, fostering a high-performance culture. Employee engagement remained high (81% in offices, 84% in factories). New 'Agile' ways of working and Objectives & Key Results (OKRs) were introduced to enhance speed and decision-making. The company is committed to equity, diversity, and inclusion, with 31% senior female representation and a goal of 5% workforce with disabilities by 2025. Initiatives include reskilling employees for future-fit skills, providing flexible employment, and promoting employee health and wellbeing, alongside a strong safety-first culture and a robust Code of Business Principles - The new Compass Organisation aims to make Unilever simpler, faster, more agile, with greater category focus and accountability, leveraging global scale through a 'One Unilever' model[271][272][279] - Employee engagement remained high in 2022, with an Engagement Index of 81% in offices and 84% in factories[273][274] - New 'Agile' ways of working and Objectives & Key Results (OKRs) are being implemented to drive faster, more impactful decisions[275][276] - The company is fostering a 'human, purposeful and accountable' high-performance culture, linking individual performance to business outcomes[277][278] - Senior female representation reached 31%, and the company aims for 5% of its workforce to be people with disabilities by 2025[283][284] - Initiatives include reskilling/upskilling 15% of employees with future-fit skills, expanding flexible employment practices, and partnering with UNICEF to equip 10 million young people with work skills by 2030[285][286][288][289][290][291](index=291&type=chunk] - Employee wellbeing is a priority, with an 82% satisfaction score, and programs focusing on psychological safety and physical health ('Healthier U')[292][293] - A strong safety-first culture is maintained, with a Total Recordable Frequency Rate (TRFR) of 0.67 accidents per million hours worked in 2022 (up from 0.55 in 2021)[296][297][298](index=298&type=chunk][299][300][301] - The Code of Business Principles ensures integrity, with 554 confirmed breaches in 2022 leading to 314 employee departures[302] Planet & Society Unilever's Compass strategy positions sustainability as a commercial driver, with targets across climate action, nature protection, and waste reduction. Progress in 2022 included a 68% reduction in Scope 1 and 2 GHG emissions since 2015, a 13% reduction in virgin plastic use since 2019, and 21% recycled plastic in packaging. The company aims for deforestation-free supply chains by 2023 and to collect/process more plastic than it sells by 2025. Efforts also extend to positive nutrition, reaching 667 million people through health and wellbeing programs, and promoting equity, diversity, and inclusion through advertising and supplier diversity - Unilever's Compass strategy integrates sustainability as a commercial driver, with targets across climate action, nature protection, and waste-free world initiatives[304][305] - Climate action targets include net zero emissions by 2039, halving GHG impact of products by 2030, and zero emissions in operations by 2030[305][307] - Scope 1 and 2 GHG emissions reduced by 68% since 2015[309][310][311] - Nature protection goals include deforestation-free supply chains for key commodities by 2023 and regenerating 1.5 million hectares of land/oceans by 2030[314][315] - 81% of key agricultural crops were sustainably sourced in 2022[316][317] - Waste-free world targets aim for 50% virgin plastic reduction by 2025 (achieved -13% by 2022), 25% recycled plastic by 2025 (achieved 21% by 2022), and collecting/processing more plastic than sold by 2025 (achieved 58% by 2022)[318][319][320][321][322][323](index=323&type=chunk][324][325][326](index=326&type=chunk][327][328] - Positive nutrition targets include €1.5 billion in plant-based sales by 2025 and doubling positive nutrition products by 2025[331][332] - 64% of products met WHO-aligned nutritional standards in 2022[333][334] - Health and wellbeing programs reached 667 million people in 2022 through brands like Dove and Lifebuoy[336][337][338](index=338&type=chunk][339][340] - Equity, diversity, and inclusion efforts include increasing diverse representation in advertising and aiming to spend €2 billion annually with diverse businesses by 2025 (achieved €818 million in 2022)[342][343][344](index=344&type=chunk][345][346][347](index=347&type=chunk][348][349](index=349&type=chunk] - The company is committed to ensuring a living wage or income for direct goods/services providers by 2030 and helping 5 million SMEs grow their businesses by 2025 (reached 1.8 million in 2022)[350][351][352](index=352&type=chunk][353] Planet & Society: Climate Transition Action Plan This section details Unilever's Climate Transition Action Plan progress, including GHG emission reductions and investments, and its TCFD statement on climate governance, strategy, and risk management Climate Transition Action Plan Annual Progress Report Unilever's Climate Transition Action Plan (CTAP) outlines its strategy to achieve net zero GHG emissions by 2039. In 2022, Scope 1 and 2 operational emissions decreased by 13% (68% since 2015), while total value chain emissions per consumer use decreased by 5% (19% since 2010). However, overall GHG emissions (excluding indirect consumer use) increased by 2% due to raw materials and direct consumer use. The company is investing in renewable/recycled ingredients, deforestation-free supply chains, low-carbon dairy, and energy efficiency, supported by a €1 billion Climate & Nature Fund - Unilever's Climate Transition Action Plan (CTAP) aims for net zero GHG emissions across its value chain by 2039[357][403] - Scope 1 and 2 GHG emissions from operations reduced by 13% in 2022 (68% against a 2015 baseline)[359][360] - Full value chain Scope 1, 2 and 3 GHG emissions per consumer use reduced by 5% in 2022 (19% against a 2010 baseline)[361][362] - Overall GHG emissions (excluding indirect consumer use) increased by 2% in 2022, primarily due to raw materials (59% of emissions) and direct consumer use[363][364][365][366] - Investments include a €115 million joint venture with Genomatica for plant-based ingredients and €59 million for Unilever Oleochemicals facility upgrades to source deforestation-free palm kernel oil[368][369][370][371][372][373](index=373&type=chunk][374][375][376][377][378][379](index=379&type=chunk] - 93% of electricity was from renewable sources in 2022, up from 86% in 2021[380] - Food waste in operations reduced by 17% against a 2019 baseline[382][383] - Logistics emissions reduced by 7% versus 2020, and ice cream retail emissions decreased by 5% due to energy-efficient freezers and grid decarbonization[385][386][387][388](index=388&type=chunk][389][390](index=390&type=chunk] - Pilots for 'warming up' ice cream freezers from -18°C to -12°C showed up to 30% energy savings[391][392](index=392&type=chunk][393][394](index=394&type=chunk] - The Climate & Nature Fund has spent and committed over €200 million by end of 2022[396] Task Force on Climate-related Financial Disclosures Statement Unilever's TCFD statement details its governance, strategy, and risk management related to climate change. The Board and its subcommittees oversee climate risks and opportunities, with remuneration linked to climate goals. Scenario analysis for a 1.5°C warming world identifies regulatory (carbon tax, land use, product composition, EPR), market (energy prices, commodity volatility), and physical (water scarcity, extreme weather) risks, as well as opportunities in plant-based foods and energy transition technologies. Quantitative assessments show potential financial impacts, emphasizing the need for proactive mitigation - Unilever's climate governance structure involves the Board, subcommittees (Corporate Responsibility, Audit, Compensation, Nominating and Corporate Governance), ULE, and specialist teams[424][425][426][427][431][432](index=432&type=chunk] - Remuneration for management employees, including the ULE, is formally linked to performance against climate change goals via the Sustainability Progress Index (SPI)[429][430] - Climate change is identified as a principal risk, with increased risk levels in 2022 due to slow climate action and increased physical risks[435][436] - Scenario analysis for a 1.5°C warming world identifies significant regulatory risks (carbon tax, land use, product composition, sourcing transparency, EPR), market risks (energy transition, commodity volatility), and physical environment risks (water scarcity, extreme weather events)[439][440][441][442](index=442&type=chunk][443][444][445] - Opportunities include growth in plant-based/lab-grown foods and investment in energy transition technologies[448] - Quantitative assessments project potential financial impacts on profit, with carbon tax and land use regulations having significant negative impacts, while plant-based foods offer substantial revenue opportunities[450][451][452](index=452&type=chunk][453] - The analysis suggests policy interventions and socio-economic trends are the most significant drivers of impact, and proactive transformation is crucial to mitigate risks and seize opportunities[455] Our Performance This section details Unilever's 2022 financial performance, including group and business group results, and non-financial progress across planet health, people's wellbeing, and social inclusion Financial Performance Unilever's financial performance in 2022 was marked by strong turnover growth of 14.5% to €60.1 billion, driven by 9.0% underlying sales growth. Operating profit increased to €10.8 billion, but underlying operating margin decreased to 16.1% due to high input costs. Free cash flow was €5.2 billion, a decrease from the prior year. Diluted EPS rose 29% to €2.99, largely due to the Tea business disposal. The balance sheet shows increased goodwill and intangible assets from acquisitions, and a reduction in net debt to €23.7 billion Unilever Group Performance Unilever Group achieved a 14.5% turnover growth and 9.0% underlying sales growth in 2022. Operating margin was 17.9%, while underlying operating margin decreased to 16.1%. Free cash flow stood at €5.2 billion, and diluted EPS was €2.99 Unilever Group Performance (2022 vs 2021) | Metric | 2022 Value | 2021 Value | | :----------------------------------------- | :--------- | :--------- | | Turnover growth | 14.5% | 3.4% | | Underlying sales growth* | 9.0% | 4.5% | | Underlying volume growth* | (2.1)% | 1.6% | | Operating margin | 17.9% | 16.6% | | Underlying operating margin* | 16.1% | 18.4% | | Free cash flow* | €5.2bn | €6.4bn | | Cash flow from operating activities | €10.1bn | €10.3bn | | Net cash flow (used in)/from investing activities | €2.5bn | €(3.2)bn | | Net cash flow (used in)/from financing activities | €(8.9)bn | €(7.1)bn | Business Group Performance All five Business Groups demonstrated turnover growth in 2022, with Home Care leading at 17.3% turnover growth and 11.8% underlying sales growth. Nutrition showed the highest operating margin at 32.4%, significantly impacted by the Tea business disposal. Beauty & Wellbeing and Personal Care also reported strong turnover and underlying sales growth, while Ice Cream maintained 9.0% underlying sales growth despite margin pressures Business Group Performance (2022 vs 2021) | Business Group | Metric | 2022 Value | 2021 Value | | :---------------- | :------------------------ | :--------- | :--------- | | Beauty & Wellbeing | Turnover | €12.3bn | €10.1bn | | | Turnover growth | 20.8% | 11.6% | | | Underlying sales growth | 7.8% | 8.5% | | | Operating margin | 17.6% | 21.1% | | | Underlying operating margin | 18.7% | 22.1% | | Personal Care | Turnover | €13.6bn | €11.7bn | | | Turnover growth | 15.9% | (2.3)% | | | Underlying sales growth | 7.9% | 0.3% | | | Operating margin | 16.6% | 19.9% | | | Underlying operating margin | 19.6% | 21.3% | | Home Care | Turnover | €12.4bn | €10.6bn | | | Turnover growth | 17.3% | 1.1% | | | Underlying sales growth | 11.8% | 3.9% | | | Operating margin | 8.6% | 12.2% | | | Underlying operating margin | 10.8% | 13.4% | | Nutrition | Turnover | €13.9bn | €13.1bn | | | Turnover growth | 6.1% | 4.9% | | | Underlying sales growth | 8.6% | 5.5% | | | Operating margin | 32.4% | 16.1% | | | Underlying operating margin | 17.6% | 19.3% | | Ice Cream | Turnover | €7.9bn | €6.9bn | | | Turnover growth | 14.8% | 3.2% | | | Underlying sales growth | 9.0% | 5.7% | | | Operating margin | 9.8% | 12.1% | | | Underlying operating margin | 11.7% | 13.9% | Additional Financial Disclosures This section provides detailed financial disclosures, including cash flow, balance sheet, and non-GAAP measures. Cash flow from operating activities decreased slightly due to unfavorable working capital. Net cash flow from investing activities turned positive (€2.5 billion) due to the Tea business sale. Goodwill and intangible assets increased by €1.9 billion, mainly from the Nutrafol acquisition. Net debt decreased to €23.7 billion. The report also defines and reconciles non-GAAP measures like underlying sales growth, operating profit, and free cash flow, which are crucial for understanding business performance - Cash flow from operating activities decreased by €0.2 billion to €10.1 billion, primarily due to a €0.4 billion unfavorable working capital movement (increased inventories)[484][485][486] - Net cash flow from investing activities was €2.5 billion (vs. €(3.2) billion in 2021), driven by €4.6 billion from the Tea business sale, partly offset by €0.8 billion for Nutrafol acquisition[487][489][490][491](index=491&type=chunk][492][493](index=493&type=chunk] - Net cash flow used in financing activities was €(8.9) billion, mainly due to higher net repayment of borrowings (€3.1 billion), partially offset by reduced share buybacks (€1.5 billion)[494][502][503](index=503&type=chunk] - Goodwill and intangible assets increased by €1.9 billion to €40.5 billion, driven by the Nutrafol acquisition (€1.2 billion) and positive currency impact[506][508](index=508&type=chunk] - Net debt decreased to €23.7 billion from €25.0 billion in 2021[511][512] - Pension assets net of liabilities remained in surplus at €2.6 billion (down from €3.0 billion in 2021), with both assets and liabilities reducing due to higher interest rates[513][516](index=516&type=chunk] - The report defines and reconciles non-GAAP measures such as underlying sales growth, underlying operating profit, free cash flow, and underlying earnings per share, emphasizing their importance for performance analysis[518][519](index=519&type=chunk][521][522](index=522&type=chunk][524][527](index=527&type=chunk][528][529](index=529&type=chunk][530](index=530&type=chunk][531][532](index=532&type=chunk][534][535](index=535&type=chunk] Non-Financial Performance Unilever's non-financial performance in 2022 demonstrates progress across its sustainability targets. The company reduced operational GHG emissions by 68% since 2015 and achieved a 19% reduction in GHG impact per consumer use since 2010. Efforts in waste reduction led to a 13% decrease in virgin plastic use and 21% recycled plastic in packaging. In positive nutrition, 64% of the portfolio met WHO-aligned standards, and plant-based sales reached €1.2 billion. The company also made strides in equity, diversity, and inclusion, spending €818 million with diverse businesses and reskilling 15% of its workforce Improve the Health of the Planet Unilever made significant progress in improving the health of the planet in 2022. Operational GHG emissions were reduced by 68% since 2015, and the GHG impact of products across the lifecycle decreased by 19% since 2010. The company achieved 81% sustainable sourcing for key agricultural crops and implemented 8 water stewardship programs. Virgin plastic reduction reached 13% (vs. 2019 baseline), recycled plastic in packaging was 21%, and 55% of plastic packaging was reusable, recyclable, or compostable. Additionally, 58% of plastic sold was collected and processed, and food waste in operations decreased by 17% Planet Health Performance (2022 vs 2021) | Metric | Target | 2022 Value | 2021 Value | | :------------------------------------------------------------------ | :--------- | :--------- | :--------- | | Zero GHG emissions in our operations by 2030 (% change since 2015) | -100% | -68% | -64% | | Halve GHG impact of our products by 2030 (% change since 2010) | -50% | -19% | -14% | | Help protect and regenerate 1.5m hectares by 2030 (hectares) | 1.5m | 0.2m | 0.1m | | 100% sustainable sourcing of key agricultural crops (% purchased) | 100% | 81% | 79% | | Implement water stewardship programmes in 100 locations by 2030 | 100 | 8 | - | | 50% virgin plastic reduction by 2025 (% change vs 2019 baseline) | -50% | -13% | -8% | | 25% recycled plastic by 2025 (% of total used in packaging) | 25% | 21% | 18% | | 100% reusable, recyclable or compostable plastic packaging by 2025 | 100% | 55% | 53% | | Collect and process more plastic than we sell by 2025 (% of tonnes) | 100% | 58% | - | | Maintain zero non-hazardous waste to landfill in our factories | 0% | 0% | 0% | | Halve food waste in our operations by 2025 (% change since 2019) | -50% | -17% | -4% | Improve People's Health, Confidence and Wellbeing In 2022, Unilever continued its commitment to improving people's health, confidence, and wellbeing. The company achieved 48% of servings sold delivering positive nutrition, and 64% of its portfolio met WHO-aligned nutritional standards. Plant-based product sales reached €1.2 billion, contributing to the €1.5 billion target by 2025. Additionally, 94% of packaged ice cream contained less than 250 kcal per serving, and 89% had no more than 22g total sugar per serving. Brand-led programs reached 667 million people, promoting health and wellbeing People Health & Wellbeing Performance (2022 vs 2021) | Metric | Target | 2022 Value | 2021 Value | | :------------------------------------------------------------------ | :--------- | :--------- | :--------- | | Double products delivering positive nutrition by 2025 (% of servings) | 54% | 48% | 41% | | 70% of portfolio to meet WHO-aligned nutritional standards by 2022 | 70% | 64% | 63% | | 95% of packaged ice cream < 22g total sugar per serving by 2025 | 95% | 89% | 89% | | 95% of packaged ice cream < 250 kcal per serving by 2025 | 95% | 94% | 94% | | 85% of Foods portfolio to help reduce salt intake to 5g/day by 2022 | 85% | 82% | 81% | | €1.5bn sales from plant-based products by 2025 | €1.5bn | €1.2bn | - | | Reach 1bn people per year through brands by 2030 | 1bn | 667m | 686m | Contribute to a Fairer and More Socially Inclusive World Unilever is actively working towards a fairer and more socially inclusive world. In 2022, the company spent €818 million with diverse businesses, progressing towards its €2 billion target by 2025. It also helped 1.8 million SMEs grow their businesses, aiming for 5 million by 2025. Furthermore, 15% of employees were reskilled or upskilled with future-fit skills, contributing to the 100% target by 2025 Social Inclusion Performance (2022 vs 2021) | Metric | Target | 2022 Value | 2021 Value | | :------------------------------------------------------------------ | :--------- | :--------- | :--------- | | Spend €2bn annually with diverse businesses worldwide by 2025 | €2bn | €818m | €445m | | Help 5m SMEs to grow their business by 2025 (number of SMEs) | 5m | 1.8m | 1.2m | | Reskill or upskill our employees with future-fit skills by 2025 (% of employees) | 100% | 15% | 7% | Additional Non-Financial Disclosures This section details Unilever's compliance with mandatory reporting requirements, including Section 172 of the UK Companies Act 2006, Streamlined Energy and Carbon Reporting (SECR), and EU Taxonomy disclosures. It highlights engagement with key stakeholders (shareholders, employees, consumers, customers, suppliers, planet & society) and provides workforce diversity statistics. The SECR shows UK energy use and GHG emissions, while EU Taxonomy disclosures indicate that none of Unilever's turnover or operating expenditure is currently classified as 'aligned,' though 17.7% of capital expenditure is 'eligible' but not yet aligned - Unilever's Section 172 statement outlines engagement with six key stakeholder groups: shareholders, our people, consumers, customers, suppliers & business partners, and planet & society[548] Workforce Gender Diversity (as at 31 December 2022) | Work Level | Female | Male | Unspecified | | :-------------------------- | :----- | :--- | :---------- | | Board | 38% | 62% | 0% | | Unilever Leadership Executive | 23% | 77% | 0% | | Senior management | 31% | 69% | 0% | | Management | 54% | 46% | 0.1% | | Total workforce | 36% | 64% | 0.06% | UK Operations Energy Use (2022 vs 2021) | Energy Source (kWh) | 2022 Value | 2021 Value | | :------------------ | :------------ | :------------ | | Biogas | 13,520,000 | 10,025,000 | | Natural gas | 242,688,000 | 226,110,000 | | LPG | 937,000 | 1,411,000 | | Electricity | 107,309,000 | 171,897,000 | | Heat and steam | 255,480,000 | 192,738,000 | | Total UK energy | 362,788,000 | 364,635,000 | | Total UK Scope 1 emissions (tonnes CO2) | 39,545 | 45,740 | | Total UK Scope 2 emissions (tonnes CO2) | 0 | 0 | - None of Unilever's 2022 turnover or operating expenditure is classified as 'eligible' or 'aligned' under the current EU Taxonomy[569][570][571][572](index=572&type=chunk] - 17.7% of Unilever's 2022 capital expenditure is classified as EU Taxonomy-eligible, but none is yet classified as 'aligned' due to insufficient detailed documentation[569][570][571][572](index=572&type=chunk] Our Principal Risks This section outlines Unilever's risk management approach, identifies principal risk factors (including increased economic, political, and climate risks), and presents the Directors' viability statement Our Risk Appetite and Approach to Risk Management Unilever's risk management is integral to its strategy, aiming for consistent, competitive, profitable, and responsible growth. The Board holds overall accountability for risk management, supported by a clear organizational structure and well-defined accountabilities across Business Groups and countries. The approach is embedded in daily operations, guided by the Code of Business Principles, and includes continuous assessment of short-term, long-term, and emerging risks, with assurance provided by Corporate Audit - Risk management is integral to Unilever's strategy, aiming for consistent, competitive, profitable, and responsible growth[573][585] - The Board has overall accountability for risk management, with clear accountabilities across Business Groups and countries[575][576][577][578](index=578&type=chunk] - Unilever's approach is embedded in operations, guided by the Code of Business Principles, and supported by a network of Business Integrity Officers[579][580][581][582](index=582&type=chunk] - Risk assessment considers short-term and long-term risks, including emerging areas, reviewed at least annually by senior management and the Board[583] - Corporate Audit provides objective and independent review of risk management and internal control effectiveness[584] Principal Risk Factors Unilever identifies several principal risks that could impact its business, with increased levels of risk noted for economic and political instability, business transformation, and climate change in 2022. Other key risks include brand preference, portfolio management, plastic packaging, customer relationships, talent retention, business operations (supply chain, raw material costs), product quality and safety, IT systems and information security, treasury and tax, ethical standards, and legal and regulatory compliance. Emerging risks include biodiversity loss and the failure to keep pace with AI advancements - Three principal risks saw an increased level in 2022: Economic and political instability (due to geopolitical tensions, supply chain pressures, inflation, Russia-Ukraine war), Business transformation (Compass reorganisation, core process transformation), and Climate change (slow action, increased physical risks, global energy crisis)[589][591](index=591&type=chunk] Principal Risk Factors and Level of Risk (2022) | Risk Factor | Level of Risk | | :------------------------------ | :------------ | | Brand preference | No change | | Portfolio management | No change | | Climate change | Increase | | Plastic packaging | No change | | Customer | No change | | Talent | No change | | Business Operations | No change | | Safe and high-quality products | No change | | Systems and information | No change | | Business Transformation | Increase | | Economic and political instability | Increase | | Treasury and Tax