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ANNUAL REPORT AND ACCOUNTS 2014STRATEGIC REPORT
MAKING SUSTAINABLE LIVING COMMONPLACE
NEW DOVE BOTTLES – LESS PLASTIC, LOWER COSTS
In 2014 Unilever launched a newly developed
packaging technology for Dove Body Wash bottles
that uses 15% less plastic. Projected cost savings for
the whole portfolio are €50 million. This is another
substantial step towards the USLP target of halving
Unilever’s waste footprint by 2020.
The MuCell® Technology for Extrusion Blow
Moulding was created in partnership with two
packaging suppliers – ALPLA and MuCell Extrusion.
By using gas-injection to create gas bubbles in the
middle layer of the bottle wall, it reduces the density
of the bottle and the amount of plastic required.
The technology represents a breakthrough for
Unilever and the industry. With up to 59 million
Dove Body Wash bottles sold across Europe, thes.b.polo
new technology will save approximately 180 tonnes
of plastic a year overall. A full roll-out across every
Unilever product and packaging format could save
up to 27,000 tonnes of plastic per year.
Unilever has waived exclusivity rights from
1 January 2015, so that other manufacturers
can also use the technology.
Our clear Purpose helps us to remain distinct in the eyes of consumers, retailers and suppliers.
It also means we can set an ambitious Vision – to double the size of the business whilst reducing our environmental footprint and increasing our positive social impact.
To meet our growth ambition we invest  in people whose talent will help us win through our brands and innovation, unrivalled execution in the market place and a relentless focus on continuous improvement for greater efficiency. Our environmental and social ambitions  are driven through the Unilever Sustainable Living Plan (USLP), which has economic benefits and operates across all our brands, markets and our entire value chain.Even when markets are tough we cannot ignore sustainability. If we
did, this would diminish the future resilience of Unilever for its long-term shareholders. We would miss out on the growing consumer preference for goods that do not damage the environment or exploit people.Chairman’s statement 2Chief Executive Officer’s review 4Our performance 7About us 8Our markets 12How we create sustainable value 14 –Our business model 14 –Our strategic focus 15Delivering value for our stakeholders 17 –Our consumers 18 –Society 22 –Our people 25 –Our shareholders 28 –Financial review 2014 31Our principal risks 36Summary remuneration report 38Shareholder information 40
This Strategic Report has been approved by the Boards and signed on their behalf by Tonia Lovell – Group Secretary.CONTENTS UNILEVER HAS A SIMPLE PURPOSE – TO MAKE SUSTAINABLE LIVING COMMONPLACE. WE SEE  IT AS THE BEST, LONG-TERM WAY FOR OUR BUSINESS TO GROW.
OUR ANNUAL REPORT AND ACCOUNTS 2014 IS IN TWO PARTS:
OUR STRATEGIC REPORT The Strategic Report contains information about us, how we make money and  how we run our business. It includes our strategy, business model, markets and  Key Performance Indicators, as well as our approach to sustainability and risk.
GOVERNANCE AND FINANCIAL REPORT The Governance and Financial Report contains detailed corporate governance information, how we mitigate risk, our Committee reports and how we remunerate  our Directors, plus our Financial Statements and Notes.ANNUAL REPORT AND ACCOUNTS 2014
Y ou can find more information about Unilever online at www.unilever . For the latest information on the USLP visit www.unilever/sustainable-living . Our Strategic Report and Governance and Financial Report, along with other relevant documents, can be downloaded at www.unilever/ara2014/downloads .
ONLINE Our entire business would rely on increasingly rare and expensive raw materials, pushing up our costs. Without more efficient use of energy our production costs would increase while we would  miss considerable savings from more sustainable packaging and less waste.We would also risk the disapproval of governments, regulators and NGOs,  and our brands – Unilever’s crown jewels – could suffer reputational damage, representing serious economic loss  to the business.
That’s why sustainability is at the heart  of everything we do to ensure we have a viable long-term business that is attractive to investors.
1Unilever  Annual Report and Accounts 2014Strategic Report Our Purpose
OVERVIEW
Tough economic and financial headwinds with continued competitive intensity made 2014 one of the most challenging years that the industry and Unilever have faced for some time. A slowdown in the growth of emerging markets proved a testing environment while consumers in developed markets continued to show caution. Volatile currencies were a further negative.
However, Unilever’s business model  and strategy proved robust, delivering a competitive performance with underlying sales growth ahead of the market and solid margin expansion. Our growth model is based on a leaner, more agile Unilever and consistency of delivery in this more volatile market is key. The Boards remain convinced that a clear, purpose-driven business model is the best way for Unilever to continue generating sustainable, long-term returns for all stakeholders, including our shareholders, as proved by a year of strong, dependable cash flow and steadily increasing dividends. The full year dividend paid in 2014 rose to €1.12, a 7% increase on 2013.
HIGHLIGHTS
For me, the Boards’ highlights of 2014 were:DEEP UNDERSTANDING
OF THE BUSINESS
Investing in people and in innovation is crucial in this tough environment. To that end, the Boards were pleased to spend time at Unilever’s new state-of-the-art training facility in Singapore, and to see first-hand the high-quality innovations being developed for the Refreshment category at Unilever’s global R&D laboratory in Colworth, UK.
The volatile currency environment made our review of the Group’s treasury operations particularly pertinent. The Boards also spent time assessing the quality of talent management and Unilever’s competitive environment. Broad exposure to senior managers in 2014 allowed the Directors to gain a deeper understanding of the business and helped in the wider strategy discussions.
I AM PLEASED TO REPORT THAT 2014 WAS ANOTHER YEAR  OF PROGRESS FOR UNILEVER ACROSS A NUMBER OF FRONTS DESPITE A DIFFICULT ENVIRONMENT FOR THE BUSINESS.STRATEGIC DISCUSSIONS The Boards held in-depth discussions with management on strategy and portfolio development with particular attention to changing market dynamics especially in emerging markets. Despite the short-term challenges, the Boards believe the growth story in these markets remains intact.  The challenges in developed markets  are no less important; one response to
which is our new Baking, Cooking and Spreading Business Unit in Europe and North America. The Boards also reviewed the progress made under the Unilever Sustainable Living Plan (USLP). The Directors are confident that the USLP remains hugely relevant in addressing today’s global challenges and will continue to be a long-term driver of profitable growth for Unilever.BOARD COMPOSITION  AND SUCCESSION We continue to work on succession planning for both the Boards and management, and thorough processes are in place.Our Directors bring complementary and relevant skills to the Boards. In addition to wide global experience, these skills include expertise on finance and accounting, consumer markets, science and technology, customers and marketing as well as government and legal experience. I’m delighted that Feike Sijbesma has joined the Boards with effect from  1 November 2014. Feike, who has a wealth  of experience as a sustainable business leader and in finance, food and nutrition, has already added considerably to the Boards’ discussions. DIVERSITY Over 40% of our Non-Executive Directors are now women. This is not surprising for a Group that has long understood the importance of diversity within the workforce and wider value chain. The progress made in employee diversity over recent years has been among the best in our sector and led to widespread external recognition. UNILEVER’S AUDITOR Our shareholders appointed KPMG as our new auditor at the AGMs in May 2014 and  a smooth and well managed transition has been completed.BOARD EFFECTIVENESS Our Board evaluation in 2014 was externally facilitated and the
results were discussed at the November 2014 Board meeting.  The Boards continue to function well with good leadership and competent and engaged members. Good progress has been made on the actions agreed in previous evaluations. The actions agreed by the Boards in the 2014 evaluation included the continued focus on overall strategy, portfolio management, and succession  and induction planning.SHAREHOLDER AND  STAKEHOLDER ENGAGEMENT In May 2014 we bought out certain third party rights that were convertible in 2038 into over 70 million PLC ordinary shares. This simplified Unilever's capital structure and enhanced core earnings per share.  In addition, in 2014 we rolled out a new employee share scheme to align our employees’ interests with those of shareholders.Unilever values open, constructive  and effective communication with shareholders. In 2014, I again met with principal shareholders in Europe and  the US. Together with management,  we explained our strategy to shareholders through meetings, conferences and at our  annual investor event. In line with the focus on simplification in  the business, the Boards have decided to simplify the 2015 AGMs. We will revert  to holding the NV and PLC AGMs on consecutive days and will host our AGMs at Unilever offices in the Netherlands and the UK. More information can be found within  the NV and PLC AGM Notices which will be published on 17 March 2015.2Unilever  Annual Report and Accounts 2014Strategic Report Chairman’s statement