Unilever CEO Paul Polman, talks about why consumers will no longer tolerate businesses that behave in unjust or unfair ways.
Who would have thought even a few years ago that one of the world’s most powerful chief executives would be advocating a transformation in society far more radical than any mainstream politician.
Paul Polman, the CEO of Anglo-Dutch consumer giant Unilever, whose brands include Dove, Persil, Bertolli, Flora and PG Tips, says the political and economic systems are failing and that capitalism needs to be reframed to work for the common good.
He says too many companies have prospered at the expense of society and nature, and that business now has to learn to be successful while contributing to society and supporting ecosystems and biodiversity.
“We do not have to win at the expense of others to be successful,” he says. “Winning alone is not enough it’s about winning with purpose.”
He acknowledges the Occupy Wall Street movement for exposing the inequalities in society, warning that this is just the tip of the iceberg and that companies that fail to respond to the social and environmental challenges of our age, are at risk of being put out of business.
“The Occupy Wall Street movement sends out a very clear signal,” says Polman. “If you look out five or 10 years, which is my job, the power is in the hands of the consumers and they will not give us a sense of legitimacy if they believe the system is unfair or unjust. Some companies that miss the standards of acceptable behaviour to consumers will be selected out.
“I am not advocating communism or trying to turn the world into a kibbutz. Some people sometimes accuse me of being a socialist but I am a capitalist at heart. But what I want is a sustainable and equitable capitalism. Why can’t we have that as a model?”
Polman is acknowledged as one of the leaders of a small but growing band of progressive companies that believe humanity is heading for disaster unless politicians, companies and civil society join forces to respond to the challenges of social injustice, climate change, resource scarcity, ecosystem degradation and biodiversity loss.
“We have increasing income disparity within the developed world. We have a political system that barely functions after the economic and financial crisis. So continuing the way we are going is simply not a solution and increasingly consumers are asking for a different way of doing business and building society for the long term together.”
Unilever’s Sustainable Living Plan
Polman believes in walking his talk and last year launched the company’s Sustainable Living Plan, which covers all brands and 180 countries where Unilever operates, as well as its total supply chain, including the impacts of its consumers.
Unlike many other companies that concentrate on their environmental footprint, Unilever’s plan also incorporates the other two pillars of sustainability; social, and economic.
The plan seeks to double sales and halve the environmental impact of its products over the next 10 years. There is also a commitment to improve the nutritional quality of its food products – with cuts in salt, saturated fats, sugar and calories – and link more than 500,000 smallholder farmers and small scale distributors in developing countries to its supply chain.
At the heart of Polman’s thinking is the desire to show the Sustainable Living Plan is not just about doing good but about good business. By providing a concrete example of the business case for sustainability, he hopes it will convince other companies to follow suit and help convince the investment community to move away from their obsession with short-termism.
“If we hit all our targets on this plan, but no-one else follows suit, we will have failed miserably,” says Polman. “We are trying to show that you can be successful as a business and at the same time show the financial community this should be one of the better drivers for their investments.
“We are growing and our share price is doing well. So we will gain credibility. The more we can reinforce that link and show it to others, the more we can be a galvaniser in this world for good. That is what success will look like.”
Reconnecting business to a sense of purpose
At the root of his philosophy, and what drives him, is a recognition of the importance of reconnecting business to a sense of purpose beyond just making money and getting bigger.
“If you believe in something you have to fight for that and have the courage to take the tougher decisions that come with it,” he says “Having a deeper purpose to what we do as people makes our lives more complete, which is a tremendous force and motivator.
“What people want in life is to be recognised, to be part of, to grow and to have made a difference. That difference can come in many forms; by touching someone, by helping others, by creating something that was not there before.
“To work for an organisation where you can leverage this and be seen to be making a difference; that is rewarding.”
The importance of collaboration
Polman has a missionary zeal about the potential to create a better world and often works 15 plus hours a day to not only embed sustainability at the heart of Unilever’s business but also to encourage a more collaborative approach with companies, NGOs and institutions like the World Bank and the United Nations: “I only do things I am passionate about otherwise I am wasting my time,” he says the development of coalitions is essential, he believes, because change needs to come at a systemic level, which needs all major players in society to commit to change.
He cites as examples his work with UN Secretary-General Ban Ki-moon to see how business can work more effectively with the global institution, and the creation of the Consumer Goods Forum, which has agreed amongst other things to stop buying palm oil, paper, soya or beef from illegally forested areas by 2020.
Part of his thinking behind the Sustainable Living Plan was to set such ambitious targets that the company would be forced to work in partnership with others if it were to have a hope of meeting them.
“We cannot do it alone,” he says. “We have to work together. People felt uncomfortable about this inside the company, and to some extent also my board. People were concerned about what would happen if we miss the targets and saying to me that I will not be here anyway in 10 years time.
“I got all that stuff but the response overall was positive as this is the response of a human company. We do not know all the answers, we cannot do it all on our own.
“We have to play at a different level of co-operation. I think one of the main reasons is that people are understanding that international institutions and governments are not designed for all the answers.
“By making sustainability a strategy and operating model it opens doors that are beyond peoples’ imagination. We have a unique opportunity because people are realising the world is inter-dependent. In the past we might not have talked to Greenpeace or WWF, but now we are now on the phone with them every week.
“Who will refuse that journey, who will refuse to jump on the train for a better world. I ask people what is the alternative? Why would I distrust anyone who wants to work with us to achieve that, including the Occupy Wall Street movement.”
Why are so few companies embedding sustainability?
So why is it that so few other business leaders are taking the issue of sustainability into the heart of their organisations?
Polman points out that the average tenure of a CEO is only three years so there is often little motivation to take on the challenge and that most business leaders are fixated at the moment with getting through the current economic turmoil.
He also highlights the increasing complexity of the world which creates a feeling of disempowerment.
Polman says: “I use the term VUCA to describe the world – volatile, uncertain, complex and ambiguous. It is very difficult for people to get a total picture. The food, water, energy nexus is so inter-related that it is for most people too difficult to know where to start and where to end.”
Another concern for Polman is the motivation of the financial community. In fact Polman famously stopped quarterly reporting and drew a line in the sand by making it clear he wanted investors who were interested only in supporting the long-term health of the company.
The role of government
He believes government has a role to play here and argues for a progressive taxation system for share ownership, pointing out that equities in FTSE100 companies are held for on average just eight months.
“Most of the trading is done in nano seconds by people that you call my shareholders but who would move anywhere if they can make a quick return,” he says.
“Governments can think about frameworks to encourage longer term thinking. There could be different share structures where dividends attract a higher tax rate depending on how long you hold shares. There are options if you really want to address that issue.
“The quarterly cycles and reporting requirements, we really have to challenge those. This is the right time to do that.”
Polman says CEOs on their own cannot significantly influence the financial markets, and given that Unilever is a consumer goods company, it makes more sense to focus the company’s attention on changing the behaviour of its two billion customers, who account for the majority of the company’s environmental footprint.
“For a CEO to move the investment community is a tall order,” he says. “We are a company focussed on the consumer so we have a lot to do there.”
The role of consumers
One aspect is to encourage customers to use resources more efficiently, such as taking shorter showers and washing clothes in lower temperatures. The other is encouraging them to switch to more sustainable products.
Polman says some clear lessons have already been learnt, such as consumers will not buy ‘green’ products unless their performance is as good and they do not have to pay a premium: “If our sustainable Lipton tea does not taste good or is too expensive, they will not buy,” says Polman.
But he believes we are now entering a new era when consumers will stop buying products from companies they see are not behaving responsibly.
“Are consumers prepared to pay for sustainable tea or not – we have gone past that at 100mph,” says Polman. “The question now is are they prepared to buy from companies that are not being responsible. Consumers recognise they can drop a company instantly.
“Companies should use this knowledge to act as a force for good, become part of the responsible movement. This is not utopia, it is enlightened self interest.”
The role of progressive regulation
Polman, like other business leaders, is frustrated by the lack of clear incentives to support the transition to a sustainable society, and is a firm believer in progressive regulation that is based on incentives.
“To move things forward like carbon reduction, it would help for governments in Europe to be clear on whether they support a 30% or 40% reduction goal – and we have made it clear we don’t mind the 40% goal – but if there is not a clear framework, companies won’t invest because capital decisions take a long time.
“Business needs frameworks. I am a free enterprise person but that is not the only solution. A system where you can have positive reinforcement for the long term is more effective than rules and regulations. If I had to run my company with bibles of guidelines I would not be in business long term.
“The financial crisis of 2008 was as much a crisis as ethics and a unique opportunity to develop frameworks for the longer term.”
Polman acknowledges there is a new generation of CEOs, brought up in the 1960s, who have a more rounded view of the role of business in society.
But he believes previous generations would also have responded to the challenges facing the world “because the clarity of the issues we are facing now are so transparent. When we went into the Second World War, the business leaders combined took a decision for the greater good of the UK to fight for freedom and when they came out, to get the economy back on track. When the challenges are big enough people respond in a responsible way.”
How Unilever is embedding sustainability
It’s one thing a CEO putting his weight behind a leading-edge sustainability strategy, but how is Unilever embedding this across a company with nearly 170,000 employees operating in 180 countries, owning hundreds of brands and directly touching the lives of 5-6 million people across its supply chain.
Polman points to the importance of preparing the groundwork before going public, Cancelling quarterly reporting and changing the way employees are incentivised were two key ways of moving the company away from concentrating on the short-term. Measurement of impacts has also been critical in understanding where the company’s key impacts are and being able to set intelligent targets for improvement.
“In any company, you have to go back to what drives people. Making more money or being bigger means less and less,” he says.
“Brands with a purpose and that are values-led over time are going to be by definition more successful.
“We embed the three pillars of sustainability into our strategy, our key performance indicators, how we reward people. Our buying people have KPIs on the percentage of sustainable sourcing, we measure how many small-holder farmers we employ, we measure the full impact of water, carbon, packaging, waste, of all of our products and reward our people for moving in the right direction.”
Polman is delighted by the way staff have responded, although more work needs to be done to push change down into the middle management layers.
The engagement score in the regular staff survey leaped by 10 percentage points after the Sustainable Living Plan was launched. Polman says this shocked the survey company because they had never seen this level of change before.
“The real breakthrough is feeling it not just in the head but also in the heart and we do a lot of storytelling around that. Every country I visit I go to consumers and retailers to look at the impact of our products, the contribution our products make to society.
“People rally to this – some more than others – but it is at a critical mass.”
Reasons to be optimistic
While some people worry that the pace of change is far too slow to address the scale of problems the world is facing, Polman cautions against pessimism and suggests that the foundations for transformation are being put in place.
In the corporate world, he points to the growing number of companies reporting on their impacts and disclosing their carbon emissions and he points to the rapid growth of socially responsible investment funds in the financial markets. Beyond that he says investment banks are coming together to help halt illegal deforestation and that they are starting to think about their business models, although he recognises they are doing this under pressure from critics rather than voluntarily.
Within the field of corporate responsibility, Polman is considered to be the most influential advocate for challenging the status quo and showing that business as usual is not an option.
But he brushes aside this reputation and points out he could not have taken the position he does if the values of responsibility were not already embedded in the company’s culture.
“Don’t personalise this because this company has been a force for good,” he says. “I have the benefit of having the size of this company but there are lots of unsung heroes who do not have the resources of Unilever.
“What we are trying to do is nothing special. We are seeking to stay close to society to guarantee our future.”
Article as written in The Guardian, U.K., November 21, 2011