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Study reveals multinational's broad economic footprint

Every one person employed by multinational giant Unilever is responsible for the support of a further 22 individuals, according to a critical study of the company’s economic footprint in South Africa. The findings are expected to create the impetus for other multinationals and large businesses to re-look how they create and share wealth.

The “Footprint” study, a critical research project carried out by Professor Ethan Kapstein of INSEAD, a leading European business school, has found that every person employed by Unilever South Africa supported another 22 up and down the supply chain. This impact on jobs is regarded as significant in South Africa, with its extremely high unemployment.Gail Klintworth and Ethan Kapstein

Unilever SA’s Gail Klintworth with Professor Ethan Kapstein

The study also found that, for every R100 of sales by the company, a further R145 of value-added is created in the wider South African economy. The associated economic activity also generated nearly one percent of South Africa’s tax revenue.

The role of multinationals, especially in developing countries, has been the subject of debate for many years. Some governments and campaigning organisations have questioned whether multinationals do more good than harm in emerging markets.

The “Footprint” study, which set out to measure Unilever’s economic impact in South Africa, is a rare study by a large company in South Africa to measure its economic influence on jobs and incomes, using an input-output analysis. The study also covered broader impacts on consumers, suppliers, the wider community and the environment.

Explaining the motivation for the study, Unilever South Africa chairman Gail Klintworth said that developing markets were a priority for the company, as they were expected to grow much faster than developed markets, and Unilever already had deep roots there.

“We have recently worked on two studies to understand our wider impacts in developing countries. The first was a joint study with Oxfam of our impact in Indonesia, followed by the second study in South Africa.

“The whole idea is to get other companies to follow this groundbreaking example and also conduct studies on their economic impact to look at where deficiencies lie. It is only through measurement that gaps can be closed, and new markets and opportunities captured.

“We believe that businesses like ours are important generators of local income and jobs. Multinationals play an important role in bringing in technology, best business practices and high standards of behaviour. But we also recognise that we can have broader social, economic and environmental impacts, both positive and negative.”

The report also gave an overview of the wider social and environmental impacts. Unilever South Africa provides comprehensive health, pension and housing benefits in addition to paying higher than the average for South African listed companies. It devotes a lot of effort to training its employees and its suppliers. And it operates to higher environmental standards than required by South African legislation, with a declining environmental footprint in terms of water use, CO2 and energy per unit of output.

Professor Kapstein also identified areas for improvement: more help to suppliers to improve their productivity and competitiveness; greater investment to improve R&D capability locally; more attention to environmental issues and especially packaging waste; and a more focused corporate social investment programme that uses Unilever’s skills.

Unilever South Africa has responded to the report by committing itself to working with key suppliers to improve their socio-economic impact; to devote more attention to energy use, water scarcity and the consumer needs of low income consumers; and to continue to build its enterprise development model in a sustainable way.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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