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Introduction

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
Company with a heritage of over 80 years in India and touches the lives of two out of three
Indians. Hindustan Unilever Limited (HUL) is an Indian consumer goods company based
in Mumbai, Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67%
controlling share in HUL as of March 2015 and is the holding company of HUL. HUL's
products include foods, beverages, cleaning agents, personal care products and water
purifiers.

HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan
Lever Limited, as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co.
Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and employs over 16,000
workers, whilst also indirectly helping to facilitate the employment of over 65,000 people.
The company was renamed in June 2007 as "Hindustan Unilever Limited".

Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and
its products are available in over 6.4 million outlets in the country. As per Nielsen market
research data, two out of three Indians use HUL products.

HUL is the market leader in Indian consumer products with presence in over 20 consumer
categories such as soaps, tea, detergents and shampoos amongst others with over 700 million
Indian consumers using its products. Sixteen of HUL's brands featured in the ACNielsen
Brand Equity list of 100 Most Trusted Brands Annual Survey (2014), carried out by Brand
Equity, a supplement of The Economic Times.

The "most trusted brands" from HUL in the top 100 list (their rankings in brackets) are:

Lux (6)

Surf Excel (7)

Clinic Plus (8)

Rin (13)

Lifebuoy (15)

Close up (21

Pond's (22)

Pepsodent (24)

Fair & Lovely (29)

Dove (30)

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Sunsilk (34)

Vim (48)

Wheel (67)

Vaseline (70)

Pears (78)

Lakme (91)

The latest launches for Hindustan Unilever include: Knorr Chinese Noodles, Schezwan and
Hot & Spicy, Lakme Absolute Sculpt Range, Lakme Lip Love, Magnum Choco Cappuccino
and Axe Gold Temptation.

Values and Principles


The Corporate Purpose of HUL states that "the highest standards of corporate behaviour
towards everyone we work with, the communities we touch, and the environment on which
we have an impact."

Always working with integrity

HUL claims that they conduct operations with integrity and with respect for the many people,
organisations and environments their business touches.

Positive impact

They aim to make a positive impact in many ways: through brands, commercial operations
and relationships, through voluntary contributions, and through the various other ways in
which they engage with society.

Continuous commitment

They claim they are also committed to continuously improving the way they manage
environmental impacts and are working towards our longer-term goal of developing a
sustainable business.

Setting out our aspirations

Their Corporate Purpose sets out aspirations in running their business. It's underpinned by
Code of Business Principles which describes the operational standards that everyone at
Unilever follows, wherever they are in the world. The Code also supports their approach to
governance and corporate responsibility.

Working with others

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They say they want to work with suppliers who have values similar to their own and work to
the same standards they do.

Apart from laying down such comprehensive values and principles, the company has been
caught in some ethical issues which are described below:

ETHICAL CONCERNS RELATING TO HUL

1. Mercury Poisoning

Hindustan Lever Ltd (HLL) was a subsidiary of Unilever Plc and manufactured mercury
thermometers for the European and the US market, among others. The factory was located in
Kodaikanal (Tamil Nadu State) in Southern India. The production of mercury thermometers
was not HLLs core business. In January 2001, it was decided to dispose of the factory by the
end of that year. This particular division of the chemicals factory was originally held onto due
to the importance the Indian government placed on the export potential of the product. The
thermometers were manufactured in separate units of the factory. In the first, glass cases were
made and in the second the cases were filled with mercury and sealed. Both processes
generated wastes. It was particularly the waste products of the second process which could be
hazardous to humans and nature. The Board of HLL set down strict procedures for recycling
clean and mercury containing wastes. In March 2001, however, violations of the rules were
detected. According to Greenpeace India, 7.4 tonnes of mercury-contaminated wastes were

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found on and around the factorys premises (Werner and Weiss, 2002: 287). Mercury is a
toxic metal and in humans it can harm the liver, kidneys and brain. On 7 March, Greenpeace
India blockaded the premises in the nature reserve Kodiakanal, as well as the entrance to
HLLs thermometer factory. In reaction to a letter from Greenpeace, the spokesperson of
Unilever acknowledged the companys responsibility. The production and sale of mercury
thermometers had been prohibited in the Netherlands in 1998. Greenpeace and Tamil Nadu
Alliance Against Mercury (TAAM) demanded that Unilever apply the same standards
worldwide and stop using and selling mercury products. In addition, Greenpeace demanded a
public apology for exposing all factory employees to the toxic substance. Greenpeace
accused Unilever of negligence and employing double standards. According to the
environmental organisation, companies can no longer get away with employing double
standards in a world that is getting smaller.

In 2008 protest actions in India and other countries intended to urge the company to take its
full responsibility regarding the spoiled environment and the affected stakeholders again
fueled the controversy around this issue. As regards environmental damage for instance
pressure from CSOs resulted in Hindustan Unilever Limited (HUL) sending 300 kgs of
mercury contaminated earth to the US for treatment. However the company refuses to clean
up a far larger amount of other mercury that is still present in the soil and water of
Kodaikanal. According to the Corporate Accountability Desk (CAD) a grass roots group from
India: HUL has managed to lobby the Tamilnadu Pollution Control Board to lower the
trigger levels for clean up from 10 mg/kg (which is the Dutch soil clean-up standard for
residential areas) to 25 mg/kg displaying its racist outlook on clean-up requirements. Earlier,
in 2002, the TNPCB had observed that 25 mg/kg was too high, and that in the absence of an
Indian standard, the Dutch standard (because Unilever is a Dutch company) should be used.
This order was reversed after Unilever used a pliant research organisation (National
Environmental Engineering Research Institute) to "convince" the Board that 25mg/kg is good
enough for India. CAD will challenge this decision in the TNCPB and elsewhere.

Investigation
According to Greenpeace, employees were inadequately protected against the mercury wastes
during the cleanup actions carried out by Hindustan Lever Ltd 7 and protesting Greenpeace
India activists were threatened during a visit to the polluted area in April 2001. Kodaikanal
residents, former employees and Greenpeace demanded that the company offer its apologies
and accept responsibility for all the damage to the environment and humans due to its
outright irresponsible conduct. According to Greenpeace, (former) employees at the
thermometer factory suffered serious health problems as a result of the companys double
standards. Unilever in the Netherlands certainly would not approve of the working conditions
and environmental standards in India, which once again proved that companies often needed
an incentive from civil society to prompt them to adopt socially responsible policies. The
pressure group insisted that Unilever prove that the health complaints of (former) employees
were unrelated to mercury exposure. An environmental impact assessment and medical
examinations were subsequently carried out by URS. On 28 May 2001, it concluded that no
diseases had been identified that suggested mercury poisoning. All employees at the factory
were examined and the results were presented to several institutions, including the TNPCB,
the All India Institute of Medical Sciences, the Indian Association of Occupational Health
(India) and even the Dutch TNO.

Social plan

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On 20 June 2001, Unilever decided to shut down the factory for good. Unilever never issued
a press release, given that returns of this factory were relatively insignificant compared to the
rest of the Group. By way of compensation, the factorys 130 employees were offered a job at
another Unilever factory in Kandla, retaining full pay. This factory, however, was located
some 1000 kilometres from Kodaikanal. The employees rejected the offer and insisted on a
decent social plan instead of a transfer. In the wake of consultations between Hindustan Lever
Ltd (HLL), employees and the local authorities, a more acceptable social plan was agreed. All
130 employees made use of the offer and left HLL to remain in Kodaikanal.

DEMONSTRABLE INDICATORS OF REPUTATIONAL DAMAGE

Consumer market
Since the factorys product did not form part of Unilevers core business, it is difficult to
determine whether consumers actually turned their backs on Unilever as a result of the issue.
Given that the name Unilever is nowhere to be found in shops, consumers are less inclined
to act on reports about an invisible manufacturer of, for example, Dove soap and Ben &
Jerrys ice cream. Moreover, media reports had been scant. The companys turnover increased
annually. In the first half of 2002, six months after the mercury factory was closed down, the
turnover of HLL exports and non-core businesses declined by 35,5 per cent and 54.6 per cent,
respectively. Surplus stocks from the export division were disposed of in the course of 2002
in accordance with Unilevers strategic plan to restrict itself to core business activities. In
2001, the turnover of the chemical products division, which the mercury thermometer factory
formed part of at the time, declined by 34 per cent compared to 2000.

Capital market
In asessing whether capital markets responded to the allegations, we will use the only date on
which the issue received media publicity. The price movements of the Unilever share on the
AEX Index (Amsterdam) was analysed. On 20 June 2001, the first and only report about the
issue appeared in the Dutch media: Unilever closes down factory. 14 The figure below shows
the price movements of the Unilever share at the time the allegations were published.
On the day of publication, the share price barely moved. Investors hardly had time to respond
to the report that day since it appeared in the evening newspaper, the NRC Handelsblad. The
AEX Index, by contrast, showed a decline 0,8 per cent. The next day, the share price
increased by 1,6 per cent and two days after the newspaper report, its value increased by
another 0.7 per cent. Two weeks after the article appeared, the average market value in
Amsterdam was almost four per cent higher than two weeks earlier and on the
London stock exchange it was almost five per cent higher. This was equivalent to a market
value increase of approximately 1.5 billion euros. It is not possible to determine whether
capital markets actually rewarded the decision to close the factory.

Labour market
Gauging the effect on the labour market is equally problematic. One hundred and thirty
employees were out of a job. The unanimous decision of the existing employees to accept the
social plan rather than a job elsewhere in the company can be interpreted as a loss of
confidence in the company. However, it could also indicate the lack of mobility of Indian
employees, which renders reputational damage less plausible. In the home country, the
Netherlands, indications of reputational damage on the labour market could not be discerned.
The annual corporate image research conducted by Intermediair (Intermediair, 2002) shows
that in 2000 2002, Unilever maintained a relatively stable position among the top ten

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employers of highly educated people in the Netherlands. Although Unilever suffered a minor
decline in status in 2001, it is not necessarily linked to the mercury affair.

DEMONSTRABLE INDICATORS OF DISCIPLINING

The approach adopted by the Board of Unilever can be described as one of bridging. An
investigaton was launched at the subsidiary immediately after the first allegations were made
and Unilever took a number of (disciplining) actions in response to mitigate the damage.

Acknowledged responsibility for pollution and launched an investigation.


Closed down mercury factory and offered employees alternative job or social plan.
Launced a clean-up and soil decontamination project in accordance with international
standards.
Installed filters to collect mercury residues in contaminated rain and groundwater during the
monsoon season. The filters remained in place until the entire area surrounding the factory
was declared clean.15
Revised Code of Business Principles in April 2002

These initiatives are in line with the Global Compact principles which Unilever endorses.
Even the accusing parties acknowledge this.16 Unilever already had a code of conduct
Code of Business Principles which contains guidelines for working conditions (safe and
healthy worldwide) and the environment (operating in an environmentally responsible
manner).
Moreover, Unilever already had its code of conduct at the time of the mercury scandal and
was a respected member of the UN Global Compact.
In reaction to this information Unilever commented largely by revering to a public statement
that can be found on the HUL website8 which sheds no new light on the findings above.

2. Precarious and deteriorating working


conditions for Pakistani Lipton Tea factory
workers
In October 2008 over 700 contract agency workers at Unilever's Lipton tea factory in
Khanewal, Pakistan launched a campaign for permanent jobs with a mass protest action on
October 16. According to an IUF9 description of the situation: There are 745 workers
making Lipton tea, but only 22 have permanent jobs while the other 723 are casual workers.
These 723 workers have been employed indirectly though labor hire agencies on a temporary
basis for an average of 15 years, and some as long as 25 years. Coming to work everyday not
knowing if there's work and if there isn't then go home again with nothing, no pay at all. [..]
The 22 permanent workers are paid a base wage of 18,000 Rupees (176) per month. This is
the lowest level on their wage scale. In contrast the 723 contract agency workers are paid the
legal minimum wage of 6,000 Rupees (59) per month. This equal to 33% of the lowest wage
paid to permanent workers. In contrast to the permanent workers the 723 contract agency
workers receive no other benefits such as bonus, paid leave, sick leave, overtime pay rates,
and are not entitled to join the union at the Unilever factory.
According to the IUF, casualisation by Unilever has struck Lipton Factory workers before:
Until 31 August 2008 Unilever had a second Lipton factory in Pakistan located in Karachi.
This factory employed 122 permanent workers and 450 casual workers. But that was still too
many permanent workers for Unilever! So the plant suddenly closed and production was
100% outsourced. The local company that now produces Lipton branded tea products in

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Karachi under licence from Unilever employs 800 workers. ALL of these 800 workers are
casual! So now these Unilever Lipton jobs are 100% outsourced.

Company comment

In reaction to the information in the section above Unilever comments:


Unilever Pakistans use of workers, that are employed through third party service providers,
is consistent with local employment law and practice. Unilever Pakistan is in no way unique
for having out-sourced some of its packing and non-core business operations. They ensure
that their service providers comply with minimum wage, social security and retirement
contribution requirements.
A similar reaction was also send to supporters of the reply to the casual-T campaign and
other international solidarity actions eg. by the Tropical Commodity Coalition and Tradecraft.
It is misleading in the sense that nearly all of its tea packing jobs is outsourced in Pakistan.
Moreover, if tea-packing is not core-business for a tea company or tea-packers as companies
like Unilever are also referred to, what is?

3. Hypocrisy
Unilevers subsidiary in India, Hindustan Lever Limited (HLL), markets Fair & Lovely Skin
Cream and Lotion, the largest selling skin care product in India. Fair & Lovely is being
promoted as a fairness face cream that will lighten your dark skin. Through their
advertisements, Hindustan Lever spreads the message that a light skin is better than a dark
skin.
Unilever aggressively markets skin-bleaching products in Asia using racial stereotypes. This
contrasts with the progressive image the firm has cultivated in America for Dove Soap. The
stock is vulnerable to brand erosion as this hypocrisy is exposed.
Skin-bleaching products comprise a $10-billion global industry, and these cosmetics are
marketed heavily by Unilever, an Anglo-Dutch multinational. (Unilever PLC trades in the
U.K. under the ticker UL, while its Dutch counterpart trades under the ticker UN.) Skin-
bleaching products are used to lighten the skin, a controversial practice that has been linked
with health hazards and with harmful racial stereotypes. Unilever markets its skin-bleaching
products aggressively in Asia, and the ads contrast sharply with those in America. For
example, Dove Soap has created a Campaign for Real Beauty to build self esteem for girls
and women around the world.
The key point for Unilever is that skin-whitening creams are fundamentally different than
tanning creams due to Indias history of caste and colonialism. The products are even more
problematic when viewed in a global context, given the practice of slavery in the Americas,
and the ongoing racism faced by people of color throughout the world.

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