Why Unilever supported Russia for so long

At the Moral Rating Agency, we pressured the group to get out of Russia for more than two years. The company has finally confirmed it has exited with a reported £400 million plus in its pocket, in a sale to a Russian billionaire who specialises in picking up businesses on the cheap from pressured Western sellers.

The MRA had revealed that Unilever’s business was propping up the Russian economy and treasury to the tune of half a billion pounds a year. We converted this figure into ‘war currency’ to highlight that it was enough to pay for a thermobaric rocket every nine days or an Iranian drone every 17 minutes. This is why the MRA has been shining the light on Unilever in particular.

It is good news of course. However, with Unilever, ‘every silver lining has a cloud’: huge damage has been done to Ukraine, while simultaneously the Putin dictatorship has been strengthened by a company that is sitting pretty in the democratic world. Unilever gets no medal from the MRA for dancing with the devil for two and a half years.

So, what on earth was going on in the company’s calculating mind?

On the face of it, Unilever’s decision to keep supporting the Russian economy after Putin’s invasion of Ukraine should have been a ‘no brainer’ of what not to do. The damage to its hundreds of brands from its billions of consumers should have been enough to force corrective action from day 1 of the invasion.

Indeed, the company that proved to be stubborn and greedy might have been expected to have suffered brand damage on a scale to regret. However, Unilever has been lucky: its billions of consumers didn’t all know about the company’s support for Russia and, anyway, they didn’t know all the brands the company owns. Otherwise, Unilever would have never dared do what it did.

While Unilever certainly worried about brand risk, that doesn’t of course mean the company has a moral bone in its body. Unilever doesn’t care a bean, except to count its own beans. Unilever was simply weighing up the trade-off between keeping ill-gotten profits on the one hand and protecting profits from being eroded by brand damage on the other. Make no mistake, profits were on both sides of Unilever’s deliberations.

The MRA has put a valuation on Unilever’s Russian assets at £2 billion, based on the huge profits minus future repatriation risk. Our estimate compares to the £0.4 billion reported sale price. We reconcile the gap with this formula:

Brand risk = £0.4 billion sale price - £2 billion valuation

This means that Unilever is putting a £1.6 billion negative value on the embarrassment of continuing to dance with the devil.

At the MRA, we have tried to fan Unilever’s fears in this equation by keeping the spotlight on. Post-sale, we will maintain Unilever in our ‘indelible ledger’ of companies that stayed in Russia long after the invasion.

Note that there is no moral component included in the Unilever formula, such as the downside of supporting a dictatorship or the upside of caring for the invaded people of Ukraine. It is a formula of pure greed because brand damage is money.

The situation evolved for Unilever like this. The company waited two and a half years during which the value of its Russian business declined to a level where £0.4 billion was enough to cover the shortfall between the profits it would be giving up and the brand damage to its profits. So, Unilever is paying £1.4 billion to look less bad.

Had there been fuller transparency of Unilever’s Russian complicity and the brands owned by the group, Unilever would have pulled out of Russia immediately after Putin invaded Ukraine. Despite our efforts, this continuing lack of transparency relieved some pressure on the greedy corporation.

Unilever’s exit announcement included the excuse that delays were caused by changing brands to Cyrillic typeface. Much better to have left Russia with shelves of unbranded products. The real reason was that it got enough money. The excuse was just another example of it spinning wheels and moralwashing its support for Russia, dragging it into a vortex of immorality with every spin, in a debacle we call 'Unilever-gate'.

Although Ukraine has been the principal loser, this doesn’t mean Unilever has not also suffered. The company’s global brand has certainly taken a hit and, in the end, Unilever anyway had to release the Russian business from its greedy claws. Finally, the deal is a huge loss on its pre-invasion value. So, we see that greed doesn’t pay.

Mark Dixon founded and runs the Moral Rating Agency (moralratingagency.org), which aims to get companies out of Russia, Russia out of Ukraine, Putin out of Russia, and dictatorships out of the world.