Compassionate CEO: Paul Polman on repaying business’s debt to society

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.’”