Forging partnerships to create a tipping point in sustainability

Forging partnerships to create a tipping point in sustainability

Paul Polman, who was chief executive of Unilever for 10 years, until January 2019, has been widely hailed as one of the most visionary corporate leaders in the decade since the global financial crisis. His pledge to put sustainability and long-term value creation at the forefront of Unilever’s business model was initially greeted with investor skepticism but has since come to be recognized as a landmark strategic decision, prompting some businesses to rethink their social license.

While at Unilever, Polman pioneered innovative approaches to the sourcing of raw materials and packaging of goods, developed new relationships with suppliers, produced healthier products, and improved conditions for workers. He used the size and scale of Unilever to drive transformative changes beyond his company. His most eye-catching move was to stop providing quarterly guidance and move to a long-term multistakeholder model of value creation. Yet far from hurting Unilever’s share price performance over time — as some suspected would happen — he turned the company around, delivered 10 years of consistent top- and bottom-line growth, and delivered a total shareholder return from 2009 until late 2018 of nearly 300 percent. That compared with 131 percent for the U.K.’s FTSE index (Unilever shares are listed on the London Stock Exchange).

Polman, who spent most of his early career at Unilever’s U.S. rival Procter & Gamble and later Nestlé, also led Unilever’s expansion into emerging markets. The maker of Dove soap, Persil washing powder, Hellmann’s mayonnaise, and Lipton tea now derives 60 percent of its sales from emerging markets — up from 47 percent when he took over.

After stepping down from Unilever, the 63-year-old Dutch national continues to work with a variety of organizations. He is cofounder and chair of Imagine, an activist corporation and foundation that promotes implementation of global goals through transformational leadership. Polman is also chair of the International Chamber of Commerce and the B Team, and vice-chair of the United Nations Global Compact.

In recognition of his commitment to a more responsible way of doing business, Polman was appointed to the UN Secretary-General’s high-level panel to help develop sustainable development goals (SDG). He was also reappointed as an SDG advocate to continue his work in making the business case for the 2030 development agenda. This includes engaging with global organizations and across industry sectors to build coalitions that drive system-wide change.

Polman recently sat down with us for the PwC podcast series “Transformation Talks.” The following has been adapted from that conversation.

S+B: Purpose is a word associated strongly with you: purpose for yourself, for Unilever, for industry, for the environment, and for society. Where does your sense of purpose come from?
POLMAN: A sense of purpose is a continuous development based on many of the things that happen to you in your life or work. In my case, I was born just after the Second World War. My parents were deprived of their education because of the war. All they were focused on was trying to ensure that there was peace moving forward, that their children got the education that they were deprived of, and that we had a better life than what they had to deal with. So, they were very much focused on the common good, and putting the interest of others ahead of their own. They met in scouts, so were great lovers of nature and preserving the planet as well.

Then, during your lifetime, things happen to you by choice or by accident that form you, and form your opinions about things, and your purpose gets sharpened over the years. Ultimately, you get to a point where you discover that you have to put the interest of others ahead of your own interest. And if you are in a position to do that and help others, then that’s a very sweet spot to be in.

S+B: What’s kept you true to your purpose when you are being challenged?
POLMAN: Keeping the bigger picture in mind that we are here to help the underserved and to ensure that this world needs to function for everybody. The reason I stayed at Unilever for 10 years was definitely the company’s credo, but also to use the company’s size and scale to have impact well beyond the company itself.

It has been a tremendous help being part of a company that reaches 2.5 billion people a day, with products that are in eight out of 10 households globally. The opportunity to touch more people than any government in the world is obviously an enormous force, if used for good.

The broader purpose that Unilever put out there of decoupling its growth from environmental impact and increasing its overall social impact is broadly embraced — especially by the millennial generation, which stands to be more purpose-driven than others. So, actually, the convincing is not the most difficult part. The difficult part is when you have your challenging choices, and a time line, and a sense of impatience that might not fully match up.

S+B: Millennials may get it, but maybe not some of your stakeholders back in 2009. How did you convince them, and how can business leaders make that case now?
POLMAN: The first thing is to make the case that your company is at the service of society, which I think is probably the only way you can run companies if you want to be around longer-term. Then you have to define for yourself where you can make your biggest contributions. You have to ask yourself, “What is our reason for being?”

The average life span of a publicly traded company in the U.S. has dropped during my lifetime from 67 years to 17 years. I think one of the main reasons for that has been the myopic focus on shareholders and the increasing short-termism that has crept in.

Some companies have tried to compensate for their own successes by moving somewhat into corporate social responsibility or philanthropy and other things, but ultimately this all falls into the “less bad” category, and clearly we are beyond the point that the world can afford that. So companies need to think hard about having a positive impact.

If they do think about these models, then their development agenda is one of opportunity, and there is probably a bigger market out there waiting for them. And, actually, a very profitable market. Getting companies into this shift in mind-set from moving from CSR to what I call RSC — the “responsible social corporation” — is perhaps a big step, but very rewarding.

S+B: So it is moving social responsibility from being on the edge of the business to being embedded as a principle and philosophy.
POLMAN: Right. And to keep it simple, in human language, from being a net taker to a net giver. Some people think greed is good, and some in the financial markets even more so. But generosity always wins long term.

Companies are a mere reflection of the human beings that make up that company. There is no reason companies can’t be more human either, and we somehow forgot that. Bringing companies back to humanity is what business leadership is all about: making positive contributions, trying to do that little bit more every day. This guarantees not only your company’s long-term reason for being, but also your financial success.

Fortunately, it’s possible to prove increasingly that where companies run a more responsible business, and are more environmentally and socially responsible, then investors in them who follow the environmental, social, and corporate governance principles get higher returns. Unfortunately, I think we have waited too long to address some of these burning issues. We are at the point right now where the cost of not acting on issues like poverty or food waste or climate change is actually higher than the cost of acting — hence the attractiveness of the financial proposition.

S+B: When you instituted this line of thinking at Unilever, you were going against the prevailing wisdom or practice at the time. What was the hardest part of that?
POLMAN: When I became CEO, it was the height of the financial crisis. What we saw was that as a result of the crisis, most of the companies were hunkering down with cost-saving programs. We put out a strategy that was one of growing the company and having a broader impact — environmental, social, and economic — and so our strategy was probably differentiated from the rest.

I wanted to be anchored firmly in the United Nations development goals, and we could not do that with a myopic focus on quarterly reporting, so one of the first things I had to do was not only send a signal but create space for people. We abolished quarterly reporting, we abolished analyst guidance, and we sent a clear signal that we were there for the longer term. That obviously attracted a lot of skeptics and cynics. The stock price actually went down 8 percent, because people thought bad news would be coming if we did these things. But, bit by bit, we gained credibility.

The most difficult thing when putting such measures in place is internally getting everybody on board and aligned, and also providing the capabilities to deal with some of these tensions, these trade-offs, the things that you can’t handle right away, but might do later.

S+B: This was a pretty bold thing for a company to do, to strike out on its own.
POLMAN: Many of the objectives we set were so audacious that from the beginning we made clear that we did not have all the answers, could never meet them alone, and that they needed to involve partnerships. And these partnerships required trust and transparency. That’s difficult even for companies like Unilever.

One of the reasons we put 50 targets out there was to create that trust and transparency, but also to get to the bigger changes of impact, for humanity. Even a company like Unilever alone could not do that. So the bigger challenge has been how to drive these more transformative changes beyond the company, to get industries aligned. How do you move a whole industry out of deforestation? How do you move a whole industry to a circular economy? How do you get out of the plastic issues that we see now? No individual company can do that alone. It is necessary to form alliances, increasingly with government, civil society, and the private sector. It is obviously hard work, but it is an absolute must if we want to solve the issues that we are currently facing: poverty, food insecurity, and climate change. Any of these are one of the biggest intergenerational crimes we are about to commit, and they are not proprietary to any company. In this we are together, and if we don’t solve these issues together, none of us will benefit, and it’s obvious that we’re seeing the symptoms of that on a daily basis. So, asking how can we broaden that circle and create a tipping point is very much on my mind.

S+B: You’ve talked about partnerships. What should the private sector itself be doing to move us toward a more sustainable future?
POLMAN: I was very fortunate that at that time UN Secretary-General Ban Ki-moon asked me to be the business representative on a high-level panel that was established in July 2012 to develop the sustainable development goals, and that gave me a lot of oxygen. I connected to a lot of the issues that we needed to address if we were to overcome the shortcomings of our global scorecard. The more I learned about that, the more I also thought, “Well, isn’t it the responsibility of the private sector and brands in particular to be solution providers?”

Governments are clearly paralyzed in today’s environment. That’s a reality that we can be cynical or bitter about, but it’s better to be realistic about it. Increasingly, you need the private sector to help unlock that political process. The funds that I needed in order to implement a sustainable development agenda to alleviate poverty are way beyond the means of any government.

You need the private sector to step up, and it’s in the interest of the private sector. When it does that, it not only gets validity, or the reputation to attract the right people: it might even discover that it can lower costs and risk and create enormous opportunities. When you have 2.5 billion people not having access to sanitation and hygiene, that’s an enormous opportunity. When 826 million people still go to bed hungry, that’s an enormous market in the making.

S+B: How do you get trust with accountability in all of this?
POLMAN: The answer first and foremost is transparency. If you can create transparency, you actually drive behavior. Behind the Unilever “Sustainable Living Plan,” we put 50 targets, for example, on waste reduction, inclusivity, greenhouse gases, sustainable sources, and we published these targets, and that created the trust.

If you want to get sustainability ingrained into the values of a company, you have to drive behavioral change, and you don’t do that with just setting simple targets. Many companies set targets on diversity, for example, and quotas. In my 10 years at Unilever, we moved from having 37 percent women managers to half. Our board is now half female. But diversity has never been done with quotas. It was done by all buying into the fact that we should treat everybody with dignity and respect. A conviction that diverse organizations simply perform better. You make it a totally inclusive program. The more you do that in a transparent way, the more you drive that behavior automatically. If the systems are fair and you provide transparency, it actually drives behavior.

S+B: How do you empower your leadership team to accomplish this?
POLMAN: As soon as you dive deep into something, people think you are micromanaging. If you are too far above and do the strategic things only, people think you are too far removed from the business. It’s difficult to find that balance. But I think a good leader needs to be a “T-shaped” leader, being able to go up and down into the organization and also be broad. By broad, I mean really being able to work in the partnerships that go well beyond your company.

You need to be able to have an enormous appetite for the detail, especially in consumer goods. You need to drive that sense of urgency, to make that purpose come alive with storytelling, for example. Then, I think, you need to have that broader picture.

I am a big proponent of managing energy, not time. I think it’s very important that people get oxygen. Oxygen can come from different things. Obviously, we encourage people to read books, to participate in outside activities, to form alliances. I could never be a total slave to any corporation, for that matter.

S+B: If you were coaching a new CEO in a large organization, what would you tell her or him to focus on first?
POLMAN: Fortunately, I come from a part of the country in the Netherlands where we keep both feet on the ground. So my first advice would be: Be a human being. Then the second thing is to ask: What is your purpose? I’ve talked to so many CEOs and companies, and my first question always is, “What’s the purpose of your company?” If you can’t verbalize the purpose of your company, what’s the purpose of having these companies there in the first place?

Then, once you define your purpose, you have to live up to it. To run an insurance company whose people would not sell any of its policies to their own mother or their own spouse is not very useful, or to run a bank that drives people into poverty by mis-selling or misrepresenting some of its financial packages is not very useful.

Then the last thing is probably a positive attitude. Climbing a mountain is never smooth. You need some plateaus or some bumps to hold on to. So, the best way to endure all of that is to keep a positive attitude. So: purpose, passion, positive attitude — and stay human.

Published at Wed, 14 Aug 2019 05:00:00 +0000