Compassionate CEO: Paul Polman on repaying business’s debt to society
Unilever’s former boss wants to transform the private sector by persuading all corporate leaders to create purpose-driven enterprises. He shares his vision of a ‘net positive’ commercial world
Paul Polman is on a mission. The core message he wants to spread is that business needs to be a force for good. It should nurture nature and give back to society. Why? Because doing so is not only morally incumbent but also better for the bottom line.
“Covid has highlighted the relationships between biodiversity and human health, inequality and the economy. The pandemic’s enormous costs have demonstrated clearly that inaction is more expensive than action,” he says, adding that Earth Overshoot Day – the date each year on which we’ve consumed more resources than the planet can replenish – was 29 July in 2021. “Every day after that point, we’re stealing from future generations.”
Polman is surely the right person to rally the corporate community around the sustainability banner. For one thing, he has credibility. Having held senior roles at consumer giants Nestlé and Procter & Gamble, he became CEO of Unilever in 2009. During his 10-year tenure, it became a purpose-driven company. Its achievements ranged from cutting the amount of greenhouse gas emitted by its manufacturing processes by 65% to attaining a gender-balanced workplace in which women occupied 51% of management roles.
Since stepping down from Unilever in 2019, Polman has sought to share his experience and spread his ethos. First, he founded Imagine, a social enterprise that works with CEOs and leadership teams to “put purpose at the heart of their strategy”. Then he worked with sustainability guru Andrew Winston to write a book entitled Net Positive: how courageous companies thrive by giving more than they take, which has just been published.
Net Positive is a manifesto of sorts that outlines how businesses can “thrive by giving more than they take”.
Polman explains: “At Unilever, it wasn’t enough to say: ‘Oh, we’re feeding people.’ We also needed to tackle problems such as obesity and deforestation. We believe that the business community should take ownership of its negative effects on society. This requires a mindset shift and strong leadership.”
Such a mentality is starting to permeate the private sector, he notes. Walmart has pledged to become a “regenerative” company, for instance, while cosmetics firm Natura has set targets to protect biodiversity in the Amazon and defend human rights in its supply chain. Clothes retailer H&M is working to recycle the water it uses.
But these early adopters are too few, says Polman. “It needs all of us.”
As his book explains, a company needs to plan for the long term if it’s to go beyond CSR box-ticking and actually reverse its negative impact on the planet. This entails setting genuine goals, preferably based on scientifically backed targets; establishing a programme of giving back (Unilever has donated millions of its hygiene products to Unicef, for instance); and measuring not only financial performance, but also aspects such as employee wellbeing or, indeed, “anything the company values and wants to change”.
But most companies are still hampered by short-termism and a myopic focus on shareholder value, which often contributes to their decline, according to Polman, who points out that the average lifespan of a company listed on the S&P500 has fallen to a mere 17 years.
“A longer-term model enables companies to grow, create, reduce poverty and drive a better quality of life,” Polman argues. “If businesses want to be around in the future, they need to take care of all the stakeholders that created value, not just the shareholders.”
At Unilever, he stopped giving guidance (a company’s estimate to shareholders of its upcoming earnings), ended quarterly reporting and moved to a longer-term compensation scheme. These moves “removed constraints” and enabled the corporate communications to become more strategic, Polman says, although he notes that entrenched attitudes in the boardroom can hinder change.
“On a near-daily basis, I hear about short-term pressure coming from boards. They are there to protect the long-term viability of a company, not to optimise the returns every quarter for a few shareholders,” he argues.
Every business needs to grow, of course. But it is possible for a firm to do so without increasing its environmental footprint. Innovation is the key, says Polman, who notes that Unilever “created a 300% shareholder return, growing from $33bn to $55bn, while also reducing its material use by between 50% and 60%” while he was at the helm.
There is a large body of research evidence indicating that a long-termist, multi-stakeholder approach in business leads to superior performance, but leaders still have trouble making the case. Take the former chair and CEO of Danone, Emmanuel Faber, for instance. He had transformed the business into a purpose-driven enterprise and was investing in regenerative agriculture, yet was ousted in March by impatient shareholders, who had become dissatisfied with Danone’s performance against conventional measures.
Polman acknowledges how hard it can be to challenge the orthodoxy and accepts that it’s impossible to please everyone.
“If you run a company to satisfy every shareholder, you will run it into the ground and you will become schizophrenic,” he says. “It’s better to work proactively to attract the right investors – those that are aligned with your strategy.”
Central to the ethos that he and Winston propound in Net Positive is an understanding that CEOs cannot achieve much acting in isolation. They need to establish strong partnerships with a range of stakeholders to get things done.
“This is difficult. It takes courage to set big targets and to work with others when you’re not totally in charge,” Polman says. “It is tough to change systems, especially given the current political environment. But, where do I see this happening, I see miracles.”
One successful example of collective action he cites was the statement of support for the Cerrado Manifesto, which was written in 2017 by more than 60 Brazilian NGOs in a bid to protect biodiversity in the country’s ecologically important Cerrado region. The statement, which called on soya-bean traders to divest from the commodity wherever its production caused deforestation in the Cerrado (or face sanctions), attracted 160 corporate signatories, including Tesco and McDonald’s.
Such partnerships can also be helpful when companies face adversity. For instance, when 3G, the owner of Kraft Heinz, attempted a hostile takeover of Unilever in 2017, leaders at Greenpeace UK and the IUF, a global federation of trade unions, were among those who publicly opposed the bid.
Polman stresses that purpose-driven businesses should always speak out when they see injustices in the world, arguing that “if you’re quiet, you’re complicit”. But he accepts that the public sector can only do so much in this respect. Governments also need to stimulate innovation.
“Despite this, they often push companies in the other direction,” he contends. “A lot of spending earmarked for the green economy is now going to fossil fuels.”
Polman adds that milestone events such as the United Nations’ COP26 climate conference in Glasgow are integral to “rallying minds”, but he believes that it would be naive to expect all governments to agree on the measures they need to take to tackle the crisis.
“The world is too complicated for that,” Polman says. “What businesses can do is step up and help de-risk that political process by, for instance, supporting climate action and carbon taxes. We need to give governments the courage to set more ambitious targets.”
If business leaders truly want to live in a time when people live in harmony with the planet and each other, when resources are preserved for future generations, when the air is clean and jobs are green, “what other choice is there but to act?” he asks.
“That’s the net-positive world. It’s not a naive concept. We can do this. The production of the Covid vaccines is an example of that. We just need more people to think this way and to drive us in that direction. I want students to say: ‘I want to go to a net-positive university.’ I want CEOs to say: ‘I want to make my company net positive.’ I want people to say: ‘I want to work for a net-positive company.’”