News today that Unilever PLC (LSE:ULVR) is facing a greenwashing probe adds unwanted extra pressure on new chief executive Hein Schumacher, who reportedly has 18 months to turn things around for the underperforming owner of Hellman's, Ben & Jerry's and Persil.
Schumacher, who was appointed in July, in October unveiled his new strategy: faster growth, greater productivity and simplicity from stepping up investment behind the company's existing ‘power brands’.
Today the UK’s competition watchdog said it will probe ‘green’ claims made by the company, based on concerns that certain products are being marketed to customers as environmentally friendly.
The probe by the Competition and Markets Authority aims to find out if Unilver is overstating how environmentally friendly certain products are through the use of vague and broad claims, unclear statements around recyclability, and ‘natural’ looking images and logos.
With shares in the company still not recovering their levels at the dawn of the Covid pandemic, and down more than a quarter from their 2019 all-time high, Schumacher is dealing with investors whose patience is wearing thin.
One of these is billionaire Wall Street activist Nelson Peltz, who last year was given a seat on the board after building up a sizeable stake, although he trimmed it earlier this year.
If he fails to deliver a return to the sort of growth that can send the stock back on the way up, Unilever's highly diverse brand portfolio, including over 400 brands from Domestos, Cif, Dove and Vaseline, to Cornetto, Magnum and Marmite, which is seen as lacking focus.
The emphasis on ESG (Environmental, Social, and Governance) initiatives that are being examined by the CMA are in fact held up by the some critics as part of the problem, as they don't seem to have stopped its brands losing market share.
Some high-profile investors, such as Terry Smith, have suggested the board have "lost the plot", as they were "obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business".
Schumacher has appeared to agree.
While Unilever's restructuring into five divisions has been seen as potentially setting up the company to be broken up, Schumacher's plan seems to be one last concerted push to avoid this fate, apart from smaller sales such as the Dollar Shave Club.
Analysts reckon he needs to show some considerable progress by next summer, with one from Barclays telling a weekend newspaper that this is "one last chance" and that the German has an "18-month window" for his current strategy before drastic alternatives are pursued.