Aurora Magazine

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“There is a commercial reason why we believe that a fair living wage is not a cost but an investment.”

Amir Paracha, CEO, Unilever Pakistan, speaks to Aurora about his organisation’s Fair Living Wage, the economy and the trend towards buying local.
Published 15 Jan, 2024 10:33am

AURORA: We last had a formal interview in June 2020 in the middle of the Covid lockdown. In many ways, Covid was a defining moment for businesses the world over. Three years on, what were the lasting lessons of the pandemic?
AMIR PARACHA: The pandemic was a blessing in disguise. As far as Unilever is concerned, it made us put humanity before commercial imperatives and taught us to lead with care, compassion and empathy. We learned how to build business through conscious capitalism rather than cold-blooded capitalism. Unilever is as old as Pakistan. We have been here since 1948 and during this time we have talked about our presence, our operations and our brands. When Covid arrived we said to ourselves the country needs us, and we made a pledge that we would make our contribution in terms of vaccines, PPE and many other things. We changed our tagline from Unilever in Pakistan to Unilever for Pakistan – and by just replacing ‘in’ with ‘for’, made a huge difference internally. People felt connected; they felt that they were doing more than just a job. It became a mission and a duty to serve people. We were perceived not as just a commercially driven company but one with a larger purpose. Despite the lockdown, our factory workers came to the production line because at that point soap was the only deterrent against Covid and our salesforce was constantly in the market stocking soap. In Pakistan, we are the largest company that makes soap, and it was not about selling, it was about rendering a service. We were the first brand to run an agnostic ad campaign urging people to buy any soap because saving lives was more important. When the pandemic ended and things started to ease, we saw how for the first time our people had felt emotionally connected to the company, and we felt that we had to keep this spirit alive. So we decided to stick with ‘Unilever for Pakistan.’ Then the question was what would be the manifestation of ‘Unilever for Pakistan’ after Covid? There were three roads: protecting the planet, propagating healthier eating or protecting livelihoods. We opted for protecting livelihoods.

A: This was the subject of your Independence Day campaign?
AP: Yes. We started this initiative in 2021. To be a company that is focused on providing a fair living wage.

A: Was this a local initiative or a global one?
AP: The idea was there at the global level, but it was not integral to the overall strategy or a rallying cry for everyone in the organisation. We wanted to make it a rallying cry. We set a target that by 2025 all our people – approximately 90,000 – would be earning a fair living wage. Predominantly, they are people who are not on our books; those on our books – 700 permanent employees – are already on a fair living wage. It is more about the factory workers who are third-party workers and the salesforce who are employed by our distributors. Let me add that in doing this we are not led by a desire to be ethically compliant; we are led by a commercial case. There is a commercial reason why we believe that a fair living wage is not a cost but an investment.

A: What is a fair living wage conceptually and in monetary terms?
AP: That people should earn enough to have a buffer against any emergency or unaccounted expense. It provides people with a dignified living so that without having to borrow they can survive. The Government of Pakistan has set the minimum wage at Rs 32,000 per month, and a fair living wage today would be around Rs 60,000. Families in Pakistan need Rs 60,000 to have a decent life; one that is free from worries about managing school fees or paying for medical expenses or the rent.

A: What would be the commercial case?
AP: In 2013 when I was in sales, my attrition rate was 40% – meaning that over a two-year period, the entire workforce changed. We discovered that there is a direct correlation between the more experience a person has, the better the results they produce – and this convinced us that we needed to find ways to retain them. The fact was that they were paid so little, that if offered an extra Rs 500 they would quit. We decided to double their salary over the next three years and take care of their medical and education expenses. In three years, the attrition went down from 40 to four – and sales went up. A direct correlation. So when people say that a fair living wage is an ethical consideration, my response is, on the contrary, it is a commercial one. Unilever is a for-profit organisation and we look at it as an investment. We have also taken the concept to other industries and we have formed an industry coalition. To date, it comprises 11 companies and they made a pledge to take their workforce to the fair living wage. But it is a journey and you can’t do it overnight. In fact, the idea is starting to become a movement and there is now an understanding of the concept across industry. For Unilever Pakistan it is not about being the biggest or the most successful company anymore, we want to be the most soulful company of Pakistan – and we have done very well commercially in the last three to four years. People come to Unilever beyond purely commercial reasons. They come because it gives them purpose; that they are performing a service for the country and its people.

A: How does it work in practice? As it also involves third-party workers, does this mean an entity other than Unilever will have to absorb an increase in their HR overheads?
AP: There are two ways to do it. You grow fast enough and create enough leverage within the system to partially self fund it. Or you start a massive saving programme within the company. We have taken McKinsey on board to work on identifying savings. We are a big operation and there is a lot of wastage. We are extracting that wastage without creating any additional cost pressure on ourselves or our partners. The idea is to do it in a way that does not increase the cost of doing business, otherwise, you become uncompetitive and in this game you have to stay competitive. Of course, it is easier said than done. It has to be done very intelligently and the entire organisation has to be galvanised. This is a four year journey and we are doing this in a way that ensures the company remains competitive and profitable. It is about putting together a road map. The concept rests on two metrics. Ability to pay and willingness to pay. In this respect, there are four kinds of organisations. Organisations that are able to pay but are not willing. Organisations that are willing but not able. Organisations that are able and willing. Organisations that are neither able nor willing. We are trying to engage with organisations to at least come up to a level of willingness. If I broaden the canvas to the country level, the reality is that inequality of income in Pakistan is highly concentrated. According to our Human Development Index, inequality has gone up; we were 120 out of 160 countries; today we are 151. But the situation can be improved with a fair living wage. When incomes go up, living standards go up, and when they go up, people buy more products more often. It’s like a boomerang. When the overall prosperity of the country goes up, the companies operating in the country benefit.

A: Why did you decide to publicise this initiative now?
AP: Because we have stress tested the idea for the last three years. Now when people ask me questions about it, I can give answers with conviction.

A: How was this initiative received by other companies?
AP: I received a lot of flak in the initial days. I went on a talk show and spoke about it and a post appeared on social media saying: “Amir Paracha, CEO, Unilever said that the country should move away from minimum wage to fair living wage,” and it went viral. So much so, that at some social gatherings, people came up to me to say that I was creating a big problem for them by making such statements. My answer is that I was speaking for my company. Nevertheless, people are starting to accept the idea. This is why I don’t call this an initiative, but a movement. It may take another five or 10 years in Pakistan for it to gain not just acceptability but adoption. This is a long-term movement, not a flash in the pan.

A: Is the industry coalition of 11 companies as committed to the idea as you are?
AP: Many of them have shown willingness and taken some steps. Will they continue to stay invested? I don’t think I am in a position to comment, but at least they have endorsed the concept.

A: At the global level, how invested is Unilever in this programme? I ask because what happens if and when Amir Paracha moves on; what are the chances of the next CEO bringing the same commitment you are displaying to the project?
AP: Number one, Unilever has clearly said that improving overall livelihoods across their entire end-to-end value chain is a big part of their agenda – with the caveat that whatever is done, it has to be commercially viable, because we are answerable to our shareholders. Number two, every Unilever company has its own P&L to manage and as far as Unilever globally is concerned, if we can manage our P&L, stay profitable and at the same time implement this initiative, we can go ahead. This means Unilever Pakistan had to work out its financial model and make the business case. To your question about what happens if and when I leave, my hunch is that given that we have institutionalised this programme all the way down to the lower rank of the organisation; even were I to move away, it will sustain itself. One of the reasons why people work for Unilever is because this is a company that has a larger purpose than selling soap or ice cream. Millennials want to join an organisation that is driving a social cause; they demand that the organisation they work for has a position on social issues. It is becoming integral to any commercial organisation to take a position on a social cause.

A: What are your thoughts about the current economic crisis?
AP: I am an optimist, and the last three months have been better than the preceding six. I don’t see any reason why Pakistan cannot come out of this crisis, although we have never been in a crisis as bad as this one. Before we were able to get funding from somewhere, but this time it is another story. I think this could well be the best thing to have happened, because we have had to manage on our own – and we have. However, to get out of this crisis for good, we need to take some structural decisions. We need to depoliticise the economy.

A: How difficult has it been to maintain market share in the face of heightened inflation?
AP: In a high inflation situation, consumers either down-trade or they downgrade.

A: What is the difference?
AP: Downgrade is when a Surf Excel consumer starts to use Rin, or if they already use Rin, they downgrade to Sunlight – so we have three tiers. Similarly, we have TRESemmé, Dove, Sunsilk and Lifebuoy. Consumers can easily downgrade because these brands are all doing the same job but at different price points. Down-trade is when a Surf Excel user down-trades from a one kilo pack that costs Rs 600 to a Rs 100 pack every week, rather than paying Rs 600 in one go.

A: Which one is more common?
AP: The downgrade. This is how we hold on to our category franchise, if not the brand franchise. We have enough brands within each category for consumers to move down. This has been our strategy and the reason why FMCG companies are usually called all-weather companies – boom or bust, we manage to keep consumers afloat.

A: To what extent is Unilever affected by the trend to buy local?
AP: In the past, we used to have what was called the pipeline economy, whereby a brand owned the entire process from end-to-end. They manufactured, marketed and sold the product – it was a pipeline. Today we have a platform economy and everything is more democratised. If you want to launch your own shampoo, you can buy the formulation off the shelf. So a lot of local brands are coming up and consumers are moving to them because they are good brands – especially because they think they are good value for money rather than a way of supporting the local economy. In fact, multinational brands support the economy more, because they conduct their business in the most responsible way possible. Be it the value system, the working conditions or paying taxes. Looked at from that lens, multinationals do business a lot more responsibly, and I think they have paved the way for local companies to come up to that level.

A: What leadership skills should the CEO in the age of the Millennials and Gen Z possess?
AP: When I started my career 27 ago, it was the era of command and control and a leader had to have charisma and awe. Today this has turned into trust and inspire. It is about humility, relatability and ease and access. It has been a tectonic shift. Today, rather than dictate, you have to inspire people to follow a vision – and then you trust them. Trust that they will work towards realising that vision. Start-ups are a great example. The humility young entrepreneurs bring to their task of building and scaling up a company. They are the leaders of the future and Millennials are inspired by such personalities and that is how to lead into tomorrow.

Amir Paracha was in conversation with Mariam Ali Baig. For feedback: