Unilever investors seek ESG reassurances in McCormick food deal

Some Unilever investors ​are pressing for the giant food entity created by a $65 billion deal with McCormick to adopt the standards on ‌forestry and sustainabilty more broadly that the UK consumer products company has promoted.

The second largest food transaction to date that was announced in March will combine the Unilever division with McCormick’s into one company that includes brands such as Hellmann’s mayonnaise and Cholula hot sauce.

McCormick will take on oversight of a business nearly twice its current size and with a more complex global ​supply chain that will bring challenges linked to agriculture, commodities and small-scale farming.

Given Unilever’s historically leading position on sustainability, some investors are keen ​for reassurance its standards will be maintained.

“We will be seeking assurances about the intention of the combined company to uphold ⁠and build upon best practice with regard to deforestation-free sourcing of commodities,” said Vemund Olsen, senior analyst at Norwegian asset manager Storebrand, a top-100 investor in ​Unilever and a McCormick shareholder according to LSEG data.

CAREFUL SOURCING AND COMPLAINT SYSTEM

Those practices include not sourcing from deforested or converted land along the supply chain, having ​a public system for complaints, and ensuring full traceability of commodities to plantations, he added.

A spokesperson for Frankfurt-based Union Investment, a top-40 investor in both companies, according to LSEG data, said it would seek transparency “about how it integrates sustainable practices moving forward”.

Under U.S. rules, Hunt Valley, Maryland-based McCormick is not required to disclose the same detailed sustainability information that UK-based Unilever ​faces in Europe.

Companies with significant European operations are expected to comply with EU‑level sustainability reporting rules. But that compliance may take years, leaving a transition ​period where disclosure standards depend largely on company commitments.

“If Unilever-McCormick decide to turn their backs (on sustainability), this could create significant risk for shareholders and the new entity,” said Cailin Dendas, ‌environmental health ⁠program senior coordinator at shareholder group As You Sow.

“We saw this happen when Kellanova separated from Kellogg in 2023 and dropped its pesticide commitments, among other sustainability goals.”

Mars, which acquired Kellanova last year, said environmental impact is assessed alongside business performance when making acquisitions.

“As integration progresses, Kellanova will be incorporated into Mars broader sustainability commitments, including our Net Zero Roadmap and sustainability governance frameworks,” a Mars spokesperson said.

Unilever will be the biggest investor in the new company with a near ​10% stake and four board directors. But ​smaller shareholders will have limited ability ⁠to directly influence the board.

Asked whether Unilever would leverage its shareholding in McCormick to push the spice maker into living up to Unilever’s standards, a company spokesperson told Reuters: “We are working closely with McCormick ahead of the completion of the ​transaction to support the transition of our Foods‑related sustainability programmes and commitments.”