- Over the past decade perhaps no major diversified consumer products company has done more to burnish its sustainability credentials than Unilever, the 91-year-old conglomerate that owns brands ranging from Dove soap to Lipton tea to Ben & Jerry’s ice cream. A driving force behind this shift was Paul Polman, who took the helm of the British-Dutch company in 2009 and led it to declare a goal of decoupling its environmental impact from its growth.
- Early in his tenure at Unilever, he make bold and unconventional moves that seemed heretical to some investors accustomed to a focus on short-term profits. Polman stopped issuing quarterly guidance, warned that climate change was costing Unilever hundreds of millions of dollars annually, began requiring suppliers develop plans to eliminate deforestation from their supply chains, and acquired companies known for their eco-friendly branding.
- Polman is now working to drive this mindset among a wider range of companies via IMAGINE, a social venture whose mission is “unleashing business to achieve our Global Goals” including addressing the climate crisis and widening inequality.
- During an October 2020 conversation with Mongabay founder Rhett A. Butler, Polman talked about his career at Unilever, IMAGINE, and the need for transformative change to tackle critical challenges facing the planet.
Over the past decade perhaps no major diversified consumer products company has done more to burnish its sustainability credentials than Unilever, the 91-year-old conglomerate that owns brands ranging from Dove soap to Lipton tea to Ben & Jerry’s ice cream. A driving force behind this shift was Paul Polman, who took the helm of the British-Dutch company in 2009 and led it to declare a goal of decoupling its environmental impact from its growth.
That Unilever emerged as a globally recognized leader in sustainability may seem surprising given Polman’s pedigree — as an seasoned executive at Nestlé and Procter & Gamble he wasn’t known for greenery going into the role. But early in his tenure at Unilever, he make bold and unconventional moves that seemed heretical to some investors accustomed to a focus on short-term profits. Polman stopped issuing quarterly guidance, warned that climate change was costing Unilever hundreds of millions of dollars annually, began requiring suppliers develop plans to eliminate deforestation from their supply chains, and acquired companies known for their eco-friendly approach, including Seventh Generation, Schmidt’s Naturals, and Tazo tea. One of his biggest moves was to establish the Sustainable Living Plan, a blueprint to move Unilever toward more planet-friendly growth, including shifting to 100% renewable energy supply, substantially reducing plastic waste and water use, achieving a deforestation-free supply chain by 2023, and pressing world leaders to adopt the Paris climate accord.
These decisions weren’t always welcomed by Wall Street and in February 2017 Polman faced his biggest test when Kraft Heinz made a $143 unsolicited billion bid for Unilever, which valued it at an 18% premium on its then stock price, a tempting offer for investors, but one that could have driven a sharp shift for Unilever. The two companies couldn’t be more different in terms of their sustainability strategy: while Unilever had distinguished itself on its environmental performance, Kraft Heinz was ranked among the companies least committed to sustainability, according to CERES, a shareholder advocacy nonprofit that pushes corporations to adopt robust corporate social responsibility policies. Unilever quickly rejected the offer.
Since then, the financial fate of the companies has sharply diverged, with Kraft Heinz’s stock plunging 67% and Unilever’s climbing nearly 50%. Polman chalks this up to the company’s different approaches.
“Creating value for a few billionaires is not the answer to today’s challenges,” Polman told Mongabay. “The difference between the two models is stark. I described it at the time as creating value through values, versus pursuit of value at any cost. The battle between a few billionaires and our model of serving billions of people. If you look at their valuation today, it seems the financial markets have also caught on.”
Polman says the metrics of success need to be more than a company’s stock price.
“Business can in fact be a tremendous force for good and make a huge contribution to solving the biggest problems facing our people and planet. Actually, this is the only way for business to be accepted in society and it should always strive to have a net positive impact.”
Polman is now working to drive this mindset among a wider range of companies via IMAGINE, a social venture he co-founded with Valerie Keller, Jeff Seabright, and Kees Kruythoff, colleagues at Unilever who helped engineer the company’s sustainability transition. IMAGINE’s mission is “unleashing business to achieve our Global Goals” including addressing the climate crisis and widening inequality.
During an October 2020 conversation with Mongabay founder Rhett A. Butler, Polman talked about his career at Unilever, IMAGINE, and the need for transformative change to tackle critical challenges facing the planet.
AN INTERVIEW WITH PAUL POLMAN
Mongabay: How did your career path develop and what inspired your interest in the environment?
Polman: Like many people, I was greatly inspired by my parents. Growing up just after WWII, they were driven by strong values, such as dignity and respect for all, fairness, investing in future generations and protecting peace.
They met in the scouts and enrolled me at an early age, which left a lasting impression about our interdependence with our fellow humans and the environment. Putting ourselves to the service of the greater good inspired me to train as a priest and then as a doctor, before I ended up – with some serendipity – in business.
I discovered that business can in fact be a tremendous force for good and make a huge contribution to solving the biggest problems facing our people and planet. Actually, this is the only way for business to be accepted in society and it should always strive to have a net positive impact.
Unfortunately, our challenges have only become even more severe in recent years, given the limitations of our narrowly defined growth model. Runaway climate change and gross inequality – two deeply interconnected issues – being the biggest threats to our future.
The coronavirus pandemic is also a stark reminder that human and planetary health are profoundly connected and confirms that we cannot have healthy people on an unhealthy planet. It’s also magnified the increasing social divide that is hampering our progress.
Mongabay: Under your leadership Unilever stood out by making audacious environmental and social commitments and then actually sticking to them, or even increasing the level of ambition. Why was that the case?
Polman: Unilever has a long history of trying to do the right thing that stretches all the way back to its founders, who talked about shared prosperity and “making hygiene common place”.
This is the original inspiration for our long-term, multi-stakeholder model, where shareholder returns are the result of our activities, not the objective – or put another way, profits through purpose. After all, we are ultimately here to serve society, which in my view is the only sustainable way to earn your license to operate.
That’s why I devised the Unilever Sustainable Living Plan, which had a simple objective: to decouple our growth from our environmental footprint, while increasing our positive social impact. We set some big – uncomfortable – targets to keep us focused and build trust. This included 100% sustainable sourcing; improving the health and hygiene for over a billion people; enhancing livelihoods and accelerating gender equality throughout our value chain; and moving to zero waste. With a global deficit in trust, transparency and accountability were vital to building confidence in our strategy.
Unilever brands remain at the forefront of driving positive social and environmental change, whether that’s Dove championing self-esteem; Lifebuoy encouraging handwashing to help every child reach the age of 5; Domestos building millions of toilets to tackle open defecation; Hellmann’s acting to cut food waste; or Knorr promoting regenerative agriculture to protect nature.
If Unilever has learned anything, it’s that this model works. Businesses thrive when they serve all their stakeholders: citizens, employees, suppliers, partners, those who make up the extended value chain. When you make your business relevant to the needs of the communities and societies you serve, then everyone benefits, including shareholders.
Mongabay: What distinguishes Unilever from the companies whose primary interest in the sustainability space seems to be greenwashing their image rather than substantive change?
Polman: It starts by defining a true purpose for your business and then institutionalizing this in every part of your operation. Moving from CSR (Corporate Social Responsibility) – which is far too narrow – to RSC (Responsible Social Corporations), where you take responsibility for your total impact on society.
Accountability for taking meaningful action has to start at the top – with the CEO, the executive team and the board of directors. In particular, we need authentic and caring leaders that truly believe in making this world a better place. Window-dressing or greenwashing will rightly be exposed for what it is – a PR stunt that does nothing to tackle the underlying issues.
You simply cannot expect to build a business with longevity and resilience if you don’t embed ethical conduct in all you do. This is now a precondition for any successful company and if you do not move to a more responsible, sustainable and equitable way of doing business, then you don’t deserve to have any business at all.
What makes it easier now is that, increasingly, the economics support this approach. Previously, we didn’t have the data to prove the business case for this way of operating and many, especially in the financial markets, were not interested.
Fortunately, we can now demonstrate that those companies that embrace the long-term, multi-stakeholder model perform much better, as it helps them to earn their license to operate; reduce costs; attract and retain top talent; access new markets; accelerate innovations; and partner with key stakeholders to affect system-level change.
Ultimately, this model drives improved business performance – and these are the kinds of companies that investors and consumers’ reward.
Mongabay: In 2017 Kraft Heinz attempted to acquire Unilever. Since then, we have seen a significant decline in Kraft Heinz’s valuation whilst Unilever has continued to perform strongly. Do you think Unilever’s focus on sustainability is a factor in the diverging directions of the two companies?
Polman: During my 10-year tenure, Unilever consistently delivered top and bottom line growth – outperforming its peers and the market – recording a 300% shareholder return.
This was certainly not the case for Kraft Heinz. Their model has shown that you cannot save your way to prosperity with a myopic focus on shareholder primacy. Creating value for a few billionaires is not the answer to today’s challenges. Indeed, I believe it was Warren Buffett’s biggest write-down.
The difference between the two models is stark. I described it at the time as creating value through values, versus pursuit of value at any cost. The battle between a few billionaires and our model of serving billions of people. If you look at their valuation today, it seems the financial markets have also caught on.
Mongabay: What do you see as your greatest legacy as CEO of Unilever?
Polman: I’m not a big believer in legacies, as it often leads CEO’s to pursue the wrong short-term actions.
We simply tried to make Unilever stronger by focusing on our people and our purpose – and the real test is not how well the company did under my tenure, but how it will perform in 5, 10 or even 50 years.
I passionately believe we proved the value of our long-term, multi-stakeholder business model – both for shareholders and the communities we serve. And I hope we also changed the mindset of many other companies along the way. Especially, in demonstrating the power of partnerships to drive system-level change, whether that’s taking bold climate action; transitioning to the circular economy; supporting ‘nature-based solutions’; or accelerating food systems’ transformation. Unilever is deservedly held up as ‘the’ sustainability-leader that helped to redefine corporate responsibility.
I’m equally proud of the culture we helped to incubate, which was ultimately about helping people succeed. Something that would not have been possible without the enormous commitment and passion of many. A CEO’s responsibility is really about inspiring and uniting people behind a common purpose and then helping them to find their own clear sense of direction. Releasing energy in others. Or as Bill George, former CEO of Medtronic has said, helping people find their ‘True North’ so they can become genuine and authentic leaders.
If you can connect individual purpose to organizational purpose you can truly unleash enormous energy and commitment in support of a single mission – in Unilever’s case, making sustainable living commonplace. To see it in action is incredibly powerful and I like to think we helped many people on their leadership journey.
Mongabay: In your new role as Co-founder and Chair of Imagine, you’re working with a variety of business leaders and companies. What are the key ingredients to make real progress on sustainability?
Polman: IMAGINE has a simple vision: to empower collectives of CEOs to accelerate delivery of the Sustainable Development Goals and Paris Agreement, focused particularly on climate change and inequality.
Individual companies can make a big contribution, but their actions will never be transformative, as to have real impact you have to effect system-level change – climate, oceans, biodiversity – and for that you need to forge deep alliances with multiple stakeholder (SDG17).
This is where IMAGINE adds value, by helping to connect CEOs with each other to increase the pre-competitive space and shift industry norms. As we like to say, working on the system rather than in the system. We do this by bringing together 25-30% of a sector with representation across the entire value chain to create the needed tipping points. We’re initially focused on four key sectors – fashion, tourism, food and technology.
A good example would be IMAGINE’s role in helping to launch the ‘Fashion Pact’ at last year’s G7 Summit, an initiative championed by President Macron – which has seen over 67 CEOs, representing 250 brands and over 30% of the sector – making bold commitments on climate, oceans and biodiversity on a scale not seen before. Progress includes science-based targets to stay below 1.5 degrees warming, elimination of single use plastics and moving to regenerative cotton. No single company could have achieved this on their own. And in the foods sector we also have 28 CEOs of the biggest companies working together, focused on accelerating regenerative agriculture, becoming carbon positive and enhancing smallholder livelihoods.
What we find is that with critical mass we can drive meaningful systems-level change. This is where IMAGINE plays a catalytic role.
Mongabay: Are there companies you’d call out now for taking especially outsized steps to meaningfully address climate and biodiversity risks in their supply chains and operations?
Polman: Sustainability has in many ways become mainstream, as the business community understands that committing to net-zero targets and the protection of our natural capital is now necessary for earning your license to operate.
There are many great examples of companies taking positive actions at scale. For example, Microsoft has pledged to become carbon negative by 2030 and by 2050 will remove from the environment all the carbon the company has emitted since it was founded in 1975. And Walmart has set itself the goal of becoming a regenerative company with the bold aim of protecting, managing or restoring at least 50 million acres of land and one million square miles of oceans by 2030. Even Amazon wants to be carbon neutral by 2040.
The fossil fuel sector – under pressure from stranded assets and declining share prices – is also moving, with strong commitments from companies like BP and others. We are on the verge of a crucial tipping point, as rapid technological advancements, changing consumer habits and growing engagement by the financial markets helps us to build momentum towards a more sustainable future.
These initiatives are to be applauded and my sincere hope is that their combined impact will accelerate the climate transition the world needs and help governments to become more ambitious in delivering the Paris Agreement.
Mongabay: In an interview with GreenBiz you said that COVID-19 had made the world understand “there cannot be healthy people on an unhealthy planet”. What are some examples of actions from companies in response to COVID-19? And more broadly, what do you see as some opportunities arising from the pandemic?
Polman: The economy has undergone rapid transformation since the beginning of COVID-19 and we’re all trying to adjust to the ‘new normal’.
But I think on balance the business community deserves huge credit for its response to the pandemic, as there are many examples of constructive collaboration across the private sector aimed at protecting lives and livelihoods. Whether that’s consumer goods manufacturers producing hand sanitizers, the fashion industry making masks, or the engineering sector building ventilators.
Unilever has been at the forefront of taking bold actions, including contributing €100 million to help fight the pandemic through donations of soap, sanitizer, bleach and food; providing €500 million of cash flow relief across its extended value chain, such as early payment for vulnerable SME suppliers and extending credit to small-scale retail customers; and making a €1 billion pledge to restore nature. All these actions are consistent with the company’s long-term, multi-stakeholder model that puts people and the planet first.
In fact, if this crisis has taught us anything, it’s that the emphasis on the ‘S’ – social – in ESG is even more important than before. And as we think about how we can build back better, it’s worth remembering that fortunately we already have a business plan, the Sustainable Development Goals. Worth at least $12 trillion and 380 million jobs a year by 2030 – at a time when we need them most.
Now is the time for every business to get on board in this crucial ‘decade of action’.
Mongabay: Do you see opportunities for environmental issues to unify politically divided people? And if so, what issues do you see as having the most potential to appeal to people across the political spectrum?
Polman: The threat to humanity posed by climate change should in my view never be politicized, as unless we take decisive action it will make the coronavirus pandemic look like a dress rehearsal.
Unfortunately, there is currently a huge vacuum in global cooperation and governance at a time when we can least afford it, but on balance I remain a climate optimist. That’s because of the amazing climate partnerships that are forming, driven by a deep understanding that we all share the same planet and all have the same shared destiny, which is leading us to unite.
Even in countries where governments are not taking climate change seriously, we see a groundswell of community-based movements. Take for example the U.S., where states, cities, corporates and colleges have joined the ‘We Are Still In’ coalition, which is committed to delivering the Paris Accord. Given that climate change has already cost the American economy $350 billion over the last decade – and growing – you can easily see their motivation to act.
But I’m especially encouraged by young people, who are agitating for change and effectively mobilizing to avert what they see as a betrayal of future generations. More than ever, they are placing their trust only in those politicians that are genuinely committed to driving positive environmental change that helps to deliver the Paris Agreement. And this gives me great pause for optimism about the future.
Credits
