Former Unilever CEO Paul Polman Says Aiming for Sustainability Isn’t Good Enough—The Goal Is Much Higher – HBR.org Daily

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Former Unilever CEO Paul Polman Says Aiming for Sustainability Isn’t Good Enough—The Goal Is Much Higher  HBR.org Daily

Paul Polman, former CEO of Unilever, challenges business leaders to ask themselves if they care about the world’s problems — and if they do, how far are they willing to push their companies to help solve them?

HBR editor in chief Adi Ignatius sat down with Polman, whose new book is Net Positive: How Courageous Companies Thrive By Giving More than They Take, in the fourth episode of our new video series “The New World of Work,” to talk about:

  • How leaders can drive ambitious sustainability agendas
  • The importance of corporate transparency in building trust
  • How employees can force change from within, as customers and society apply pressure from without.

Aiming for sustainability is not enough, Polman says. “Companies are starting to understand that you need to be restorative, reparative, regenerative.”

“The New World of Work” explores how top-tier executives see the future and how their companies are trying to set themselves up for success. Each week, Ignatius interviews a top leader on LinkedIn Live — previous interviews included Microsoft CEO Satya Nadella and former PepsiCo CEO Indra Nooyi. He also shares an inside look at these conversations —and solicits questions for future discussions — in a newsletter just for HBR subscribers. If you’re a subscriber, you can sign up here.


ADI IGNATIUS: Paul, let’s jump right in. Your book is Net Positive: How Courageous Companies Thrive by Giving More Than They Take. What does it mean for a business leader in your mind to be net positive?

PAUL POLMAN: What we’re trying to do in this book is really ask the simple question, Adi: how can a company profit from solving the world’s problems, not from creating them? And the ultimate question that we process: is the world better off because your business is in it or not? And that comes from a very simple notion that this year, World Overshoot Day, which is the day that we use up all the resources that the world can replenish, was July 29th. And after that day, you could argue we’re actually stealing from future generations. And this is one of the issues that we’re wrestling with, which is that we’re bumping up against these planetary boundaries like climate changes, biodiversity, destruction, and inequality. So most people or most companies are in the CSR space, corporate social responsibility, which is being less bad. But when we overshoot these planetary boundaries so much, less bad is simply not good enough anymore. “I used to murder 10 people, now I murder five people. Am I a better murderer?” I don’t think so.

So then people say, I need to be sustainable, which is neither good nor bad. It’s a very admirable position. But increasingly, companies are starting to understand that you need to be restorative, reparative, regenerative. And this is really what net positive leaders do. Net positive leaders have a few characteristics that we describe in the book.

The first one is really that they take responsibility of that total impact in the world. I call it the total handprint, all consequences intended or not. Where we see some companies going wrong nowadays is that they celebrate and herald the positive sides of their business model. But when it gets to undermining democracy or hate speech or child addiction, they don’t want to take that responsibility.

Net positive leaders operate for the long-term benefit of business and society. Actually, they run their models just like we did in Unilever for the stakeholders. In fact, they believe in it so strongly that they can actually prove that by optimizing the return for all of the stakeholders, which includes the planet and future generations, they ultimately also satisfy the shareholders, but they’re not driven by the shareholders as their sole objective.

And then the net positive leaders are societal leaders. They understand that they need to play an increasing role in driving the broader systems changes, either at an industry level or with other partners. We described this in the book as one-plus-one is 11, and it takes three to tango.

So these are leaders that are very purpose driven leaders. They cherish the partnerships. They think multi-generational. They operate with a high level of compassion or empathy, humanity, humility. And it’s interesting that these are also the leaders that have done well during this Covid crisis.

The last point to perhaps mention is that these leaders understand the importance of doing it everywhere in all parts of their business models, in all brands, in all operations, and they need to be consistent. And increasingly, companies that are consistent build that trust that is needed to drive prosperity.

What do I mean by consistency? Not making one statement yourself and having a trade association advocate for something different. Not using money in politics to advance your own goals to the detriment of democracy. Working human rights, looking at CEO salaries, having responsible positions in tax payments, etc. So these are all the hallmarks of a net positive leader.

ADI IGNATIUS: There’s a line that you use that’s really a challenge to corporate leaders: “If a goal is not making you uncomfortable, it’s not aggressive enough.” Talk about what you mean by that.

PAUL POLMAN: Well, yes, if many of the CEOs play not-to-lose versus playing-to-win, we cannot simply afford it anymore. An example of that would be most companies still taking climate commitments on scope one and two only, when you know that 80%, 90% is in scope three. So just to put targets out that you can achieve, that you can get away with, but it’s not what society needs, doesn’t build the trust anymore.

We talk about courageous leaders in the book, coming from the French word, “coeur”, which is the heart as much as the head, bringing humanity back to business. And these leaders are so strongly purpose-driven that they understand it is uncomfortable to set targets that you don’t know how to achieve, but that are needed.

It is uncomfortable to take responsibility of the total handprint you have in society. It is uncomfortable to work with other people when you’re not totally in charge and can’t set the agenda or might have to hear some inconvenient truths. So that takes courage. That comes from that stronger sense of purpose. We’ve also seen this in Unilever, where we set 50 targets. I was under the impression that the more we are open and transparent with what we do the better, hence the 50 targets. We built that trust and transparency. Because these targets were audacious, we also said, “We don’t know how to get there, frankly. And one thing is for sure, we can’t do it alone.” So that built an incredible amount of goodwill, open doors. And I think that was part of the reasons why in GlobeScan and other studies, we were continuously seen as the most trusted company, even well ahead of some of them like Patagonia. So I think it does pay to work on that.

And then there is something that I’ve always remembered, a saying, that says, “If you reach for the stars, you don’t end up with mud in your hands.” So we set audacious goals of completely decoupling our growth from environmental impact long before it became popular, decarbonizing our own electricity use, reaching 1 billion people, improving their health and wellbeing. And frankly, some of these targets we achieved or exceeded, and some of them, we fell slightly short. But where we fell short, we were probably 10 times better off than the trajectory we were on in a business-as-usual scenario.

ADI IGNATIUS: Let’s look back to your time at Unilever. You definitely did some audacious things. You pledged to double output while cutting in half the externalities that the company produces. You did away with short-term earnings guidance. You pissed off a lot of hedge fund managers. What parts of the Unilever playbook would you recommend? And what would you not recommend, having lived through it?

PAUL POLMAN: Well, to use your word, it’s not bad to “piss off” some people. You have to make choices and you’re not running a popularity contest here. You need to do what’s right and right for the business. And I think one of the things that has been very powerful for us is to go back to the core, go back to the history of the company, why it was founded, which was making hygiene commonplace in Victorian Britain, and Lord Lever started the company. One out of two babies didn’t make it past year one. So we translated that into making sustainable living commonplace, adapting that to today’s needs. So finding that purpose is a very important thing, and we’ve also seen that backed up by data, that companies that are driven by stronger purpose, longer term models, putting sustainability at the core, in general significantly outperformed their peer groups.

The second thing I would say, coming back to the shareholders. Do the long-term focus to solve the issues like climate change or food security and inequality. We can’t do that in the rat race of quarterly reporting. So by moving out of this quarterly reporting and moving compensation to the longer term, that in itself was not that heroic. I think it was really meant to change boundaries. People’s behaviors are decided by the boundaries that they have to operate. And then Unilever had fallen victim, like so many other companies, into that short-term behavior. And that’s what we have to move. I certainly recommend that to other companies. Moving to this multi-stakeholder model and taking responsibility for your total handprint actually opened up a lot of doors, created a lot of opportunities, created an expansionary mindset versus shrinking mindset, setting these targets and operating with transparency.

Regretfully, we have issued two human rights reports with many salient points in there. And I was hoping that others would issue human rights reports, but it hasn’t happened. People are still worried that they are exposed. In fact, even if you have these issues, talking about it will hopefully solve them faster and shine a light on them and create these partnerships. So be transparent if you want to build that trust.

And that brings me to the last point, which says, ultimately, we need these bigger transformations. How do you get plastics out of the oceans? How do you stop deforestation? And some of these things, no company can do that alone. So you need these broader partnerships and you need to embrace them.

ADI IGNATIUS: So you talk about a multi-stakeholder world and every CEO talks about this, the business round table brought it up. Are we there? Are people living up to that, or are we just talking about it?

PAUL POLMAN: Well, it’s a mix. I used to chair the international chamber of commerce, until last year and that 48 million companies and the reality is most of them are in the CSR space. Some try to move to sustainability, but very few companies, Unilever not included either, are in the net positive. There are hallmarks of net positive behavior, but not that consistently yet.

But I do believe that business is moving for many reasons, especially on things like climate change. If you now run a business, you will have the effects of climate change more likely in your PNL than not, in disrupted supply chains, natural disasters, and many other things. In fact, Covid was not just a disease, but a direct result of destroying biodiversity. It’s hard to argue that it didn’t cost us a lot of money.

We’re also seeing the financial market move where we now have half the world’s money under management making pledges to make their portfolios net zero. One of the bigger alliances that came out of Glasgow was the Glasgow Financial Alliance on net zero, which is now $130 trillion under management. Any shareholder proposition that comes from the asset managers is actually more on ESG now than on purely the financial performance. And then governments are moving, if we like it or not. Before Covid, we had 20% of governments make net zero commitments. Now we have 90% of carbon emission under net zero commitments. And you see the European Green Deal. We just announced at Glasgow, the establishment of the sustainable standard board. So it’s coming in.

And if that isn’t enough yet for businesses to start moving, listen to your own children or your employees. In every company now there is a Greta Thunberg. We’ve never seen so many walkouts or opt-outs in terms of not wanting work for these companies, or deliberately walking out. And that would’ve been unheard of a few years ago. It’s now the order of the day. So increasingly you see companies with hallmarks like Microsoft recapturing carbon since 1975, like Walmart protecting 50 million acres of land or 1 million square miles of ocean. Nestle, going to regenerative agriculture. Actually Interface I saw the other day coming out with a tile that absorbs carbon. Google, trying to use the algorithms to get climate deniers or false science off their platforms. These are all the initial hallmarks of net positive, but it requires consistency.

You see some companies in the US making enormous commitments to be net zero, and they should be applauded for that, but then they still belong to trade associations that lobby the dickens out of not getting the reconciliation bill passed because it has a tax increase behind it. So there is still work to do if I may be honest.

ADI IGNATIUS: With your book and your current foundation, Imagine, I think your goal is to empower leaders and to build a coalition. But you’re asking for a lot of things. Pledges on sustainability, pledges on broad stakeholder engagement, protecting democracy, getting involved in other social issues. I would imagine some CEOs will say, “I can’t do everything. And my board, they won’t support us getting involved in everything.” So what’s your advice? Is there a place to get started?

PAUL POLMAN: Well Mandela said it never seems possible until it is done. CEOs are able to juggle many balls. You cannot say anymore, nowadays, I’m going to strive to get a better gender balance in my company, but I don’t care yet about people of color or people with disability. It just doesn’t work anymore. You can’t say I’m going to be sustainable here and destroy the world somewhere else. It just doesn’t work anymore. You have to integrate that. And actually the good thing is it’s rapidly moving, Adi, from risk management to opportunity management. In Covid, we spent $17 trillion to save lives and livelihoods. The IMF estimates that over this decade, we’ve lost $27 trillion in the global economy in value. People have started to realize that you can’t have healthy people on an unhealthy planet, but they’ve also realized that the cost of not acting is significantly higher than the cost of acting.

Wherever you look, be it in the transformation of the food and land use systems, or energy transformation, which have difficult things to do and I’m not belittling that, but the cost of not acting, being higher than the cost of acting makes it attractive to do even for the diehard Friedman supporters, if I may say it that way.

ADI IGNATIUS: You talked about the power of employees, the ability to walk out. But let’s talk on a day-to-day basis. If a company isn’t living up to the purpose or the mission statement that is laid out, what can employees do short of walking out or quitting and taking their talents elsewhere? What can they do to try to move the company to do more?

PAUL POLMAN: Well, what’s very clear is, small or big, you cannot be a sustainable company if you’re not sustainable yourself. You cannot be a purpose driven company if you’re not purposeful yourself, finding your purpose, fighting for things that you believe in, be it our children or future generations. So live what you preach. And that’s the first thing that employees can do. Educate themselves on the sustainable development goals, on some of these issues, become an outside-in person or company versus an inside-out. Mark Twain said it well when he said the two important moments in life: the moment you were born, and the moment you found out why you were born. And I think that’s true for all of us. Employees have a choice and it’s increasingly being exercised.

Some people told us the biggest walkout after Covid [was] where millions of employees don’t want to go back to work. They do want to work. They do want to do something meaningful and they’ve come to the conclusion that they want to work for companies where they can achieve something bigger than just themselves and belong to something bigger that they otherwise can’t create. So they have a choice to work for these companies and increasingly exercise that. And then within the companies themselves, most of the decisions are made at lower levels, when management isn’t quite there yet. I understand that some of them take a little bit more to move, but start to convince them, start to understand the barriers that get into way for management, and come with constructive solutions. 60% of the energy transition that needs to happen can be done today with technology available and is actually cheaper than the alternatives that most companies are using. JUST Capital is proving that running these models with purpose at the core are more profitable.

And then obviously, you have the opportunity to send signals from the marketplace. 95% of consumers, everything being equal, want to buy from companies that have purpose at the core, that are purpose driven. If you can bring more of these signals into the company, that’s important. So many different areas, starting with yourself, starting with awareness, opting in for the companies you want to work for. I do want to say opt out as well. That’s very important. I had never thought that I would see the day that people would walk out of companies. It wasn’t heard of five years ago. Now you see every week or every other week, someone walking out of a company, be it Facebook for sexual harassment, or Netflix for movies that don’t pass the test anymore. Or Google, for not making fast enough climate commitments. Or Wayfair, delivering mattresses to the border where children get separated from their parents. And the list goes on. This is really a moment of activism, and CEOs are very sensitive to that.

For most companies, half of their workforce will be Millennials or Gen Z already, and they are their future leaders and CEOs. So [the need to pay] attention to them is significantly higher. And if they still miss the boat on that, which some do, then listen to your children. One of the main reasons we see fossil fuel companies changing more aggressively is that the children disown them. So that pressure is there. Use it smartly, use it wisely, use it constructively, and you can start to change companies as much from the inside out as it’s happening from the outside.

ADI IGNATIUS: We actually solicited some questions from our audience before this. I want to ask one now: what does net positive leadership look like in a situation where staff motivation is low and job uncertainty is high?

PAUL POLMAN: Well, the staff motivation is low and job uncertainty is high. There might be signals that the business isn’t run very well or that you’re not adapting to the changing environment. You know, there are always exceptions there that you are in a business that is quickly being obsoleted, but it’s basically, you have to go back to the core. What we did in Unilever was go back to the core of the company. Often, that’s where the answer is. You find that creates the awareness of what the world needs, linking people to the sustainable development goals, taking a broader mission.

When I came to Unilever, the data wasn’t very good either. The company had lost turnover from $55 billion to $38 billion. It had become short term. It lost its mojo, but by nurturing the core, before we stimulate progress, by bringing back these broader responsibilities, this broader purpose to profitably address these issues of people and planet, it took us a few years, but quicker than we thought to bring our engagement scores back and to become the employer brand.

In the end in Unilever, we had 2 million people applying to us every year, the third highest after Google and Apple on LinkedIn. And in most countries that we were operating, we became again preferred employers. So working on that, and unleashing that enormous energy that is tapped into an organization is still the best way of moving forward. You need to get everybody really engaged behind something bigger than this short termism or chasing the targets. You don’t want to become a Wells Fargo or GE or a Boeing which succumbed to shareholder primacy. And that frankly doesn’t work.

ADI IGNATIUS: We also talk a lot on the show about the workplace of the future, what it will look like, what it should look like. In a net positive framework, what should the future workplace look like?

PAUL POLMAN: Well, actually, I want to take a different tack in answering that because we can all make our speculation of how many people want to work at home and how many people want to work in offices and how you have distributed work and different environments. It’s true that most people now have become accustomed to flexible work. They’ve become accustomed to more empowerment. We’ve also seen that that is related to productivity increases that we didn’t think were possible. But they also want to be more involved. You know, most of the CEOs acknowledge that they need to relook at the flexible work arrangements. But very few people consult their employees on doing this. So as we decide the future of work, I would just bring it a little bit to a different level. I think it is a more mature relationship, less hierarchy, a more human, higher level of consciousness, hopefully a more inclusive one. An environment where we fight one of the most burning issues, which is inequality, where we have social safety nets in our business models that give everybody a chance.

I think if Covid has done one thing is it has shown a light or magnifying glass on the shortcomings in society. So if we want to have these engaged workforces, if we want to repair capitalism, if you want to bend a curve to where it needs to go, we need to have a different contract. Some people call it just transition. I just call it a fair society. And we’re far from that, we are far from that. Human capital has been de-prioritized under financial capital. And it just doesn’t work for the long term. And certainly hasn’t given us the results that we are after, this enormous polarization in society. Increasingly more people excluded. The haves’ and the have-nots’ gap is increasing. No wonder you have the mental issues and health issues at the levels we’ve seen. People really genuinely are concerned.

Fifty-six percent of the young people are concerned about the future. In fact, they are fearful and desperate about the future. Twenty-five percent don’t want to have children anymore. These are serious statistics. So I hope we just have a different contract with humanity in whatever way we figure out how to work. And that’s a contract that has to be based on dignity and respect, that has to be based on equity. And it has to be based on compassion.

So as we rebuild back better in terms of greening and making it more sustainable, we have to think about this new social contract that is desperately needed, and it starts with healthcare. That’s one of the things I have never understood in your country, where you have the most expensive healthcare, where your life expectancy goes down, and where too high a percentage of the population is not included. That gets to the border of not being human. So that’s a part of a social contract to bring humanity back to work.

I’d like to think about it in those terms. And we knew our contract was with our fellow human being. Then if one uses technology a little bit more than another, or stays home a little bit more often than others is actually trivial, but the energy that you will unlock, the engagement that you will get by focusing on these right drivers is precious.

ADI IGNATIUS: I had a conversation some years ago with the CEO of a big company, and you would recognize the CEO’s name. And we were talking about healthcare coverage, and he just said, “It is ridiculous that I’m carrying healthcare costs on the books. I have no interest in doing that. It makes no sense.” I said, “Well, why don’t you say that publicly?” He said, “I can’t. I simply can’t.” You criticize the American approach to healthcare. We’re incapable of having a rational discussion about it.

PAUL POLMAN: This is why you need courageous CEOs. And this is why you have CEOs that don’t believe in climate change. So when you go to the toilet, they talk derogatorily of gender equality. Then you have to call them out. Either you have the courage to talk about it in public and defend your position, or you don’t. This nonsense has to stop.

What I’m more worried about is the gross irresponsibility that gets portrayed down in the organization where 75% of the CEOs think that they are properly driven and all that. But if you then ask the employees, you get to only 30%. It’s that inconsistency, that lack of leadership. We really have a leadership vacuum right now in the world. And that comes from a lack of listening, which is where it starts. And that comes from a lack of engagement. And this is why in our book, Net Positive, we start with the first chapter, “Do You Care?”,  and what it takes to have a leadership transformation. You cannot have a company transformation without a leadership transformation, and you cannot have the wider system transformation without the company transformation, but it starts with that leadership transformation.

ADI IGNATIUS: So you were in the hot seat, you were the CEO of Unilever for 10 years. I would say the role of a CEO is certainly changed from that. In simple and clear terms, what is the role of the CEO primarily today?

PAUL POLMAN: Well, the role of the CEO has drastically changed. First and foremost, we have the broader issues that we need to address like climate change and inequality, the most important ones. This comes at a time that politics isn’t quite functioning because we haven’t addressed these major issues. We see populism, nationalism, xenophobia. We see the undermining of democracy since Covid in about 70 countries in the world. So CEOs have become societal leaders, and because these issues are so big, CEOs also need to think much more about cooperative leadership and not competitive leadership.

There are many of these issues that need to be tackled at a higher level, issues that concern the future of humanity that need to be worked together. So these jobs have become more complicated. There’s no question about it, but it’s also more rewarding if you do the right thing. Out of the chaos that we’re in right now comes clarity, and it’s clear for me, at least, that the CEOs need to adapt the way they develop their strategies, lead their companies, think about their roles and responsibilities within an organization. All that is evolving. Some basic skills will always stay—hard work ethics, basic intelligence, some one-on-ones on strategy—but these human values are significantly increasing, and the broader societal role is definitely increasing.

ADI IGNATIUS: Paul, I want to end with a couple of questions that I ask our guest each week. The first is whether you would be willing to share a turning point, a crucible moment in your life that really made you who you are, who you became as a leader, for better or worse.

PAUL POLMAN: I think we evolve our whole lives and I hope I still evolve and become a better person as I move forward. Where I was born, my parents, how they put themselves to the service of others, they were born in the war. Education was deprived from them. They put themselves to the service of their children. They wanted us to have education. They wanted peace in Europe. My father literally worked himself to death with two jobs. They were great role models to some extent.

And when I was in Newcastle, I saw for the first time second-generation unemployment with ship building, steel, and coal going belly up. Then I climbed Kilimanjaro with eight blind people and a good friend of mine, Erik Weihenmayer, which made me start the Kilimanjaro Blind Trust, which now is one of our foundations and has 25,000 blind children in schools in East Africa, which keeps me humble. I was in the Taj [Hotel] when the terrible terrorist attack happened, and I saw the lives being lost around us and how precious that is, but also what the price of poverty is and keeping people excluded from participating. But also the goodness, again, that night of all these people helping us afterwards.

I was part of the sustainable development goals, when Ban Ki-moon had the courage to ask me to help develop them, these famous 17 goals, and we spent two and a half years listening to all parts of society. All that stuff grows on you and there comes a moment that you discover that you’ve been lucky that you’ve won the lottery ticket of life and didn’t do anything for it. If I wasn’t born in the Netherlands where we get free education, I wouldn’t be talking to you. So if you’ve won the lottery ticket of life, you belong to 5% of the world’s population, you have to put yourself to the service of the other 95%. It’s your duty, your obligation. Otherwise, what’s the sense of being here. So all these crucibles will hopefully continue to evolve us and make us better human beings as long as we’re here.

ADI IGNATIUS: And the last question I want to ask is, in your mind, what is the key or what is the secret to innovation?

PAUL POLMAN: What is the secret to innovation? I think the most important thing is the curious mind and being in touch with reality, seeing reality in the eye, being connected to the outside world, making companies outside-in versus inside-out. Too many companies are inside-out. They become self-obsessed and they shuffle paper from one office to the other. So the question that we post in the book is, do you care? And that strong sense of purpose to solve these challenging, societal issues. It requires that strong sense of purpose, but we needed to make a bar of soap that was using one third of water because in the developing markets, there isn’t water anymore, but clean better and that’s what we did with Lifebuoy.

We needed to create toilet bowl cleaners for emerging markets that had different usage. Water-free shampoos, detergents that didn’t need rinsing, which is a tremendous loss of water use. These are big challenges for companies like Unilever. They might sound mundane to you, but you do that because you’re driven. You’re driven by this broader duty to society and serving these people that are left behind. So it comes from, do you care? And it comes from a strong sense of purpose and a curious mind.

ADI IGNATIUS: So, Paul, I want to thank you for joining us. It is always inspiring and thought provoking to hear your words. Paul Polman is the author of Net Positive, how courageous companies thrive by giving more than they take. Paul, thanks for joining us.

PAUL POLMAN: Thank you Adi, and hope to see you soon again.

Source: hbr.org

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