Paul Polman: ‘Less Bad is Not Good Enough’

Paul Polman: ‘Less Bad is Not Good Enough’
Companies are under pressure from all sides to become more sustainable. In light of that, ex-Unilever top executive Paul Polman asks why change is not happening faster. Polman discusses the leadership required to do the right thing. In his view, many directors are not able to address the problems of our time. However, he is still confident about the future: ‘I am hopeful that in 20 or 30 years, we will be better off than we are today.’

Paul Polman was CEO of Unilever for ten years, from 1 January 2009 to 31 December 2018. After he left, he founded Imagine, a company that aims to support companies and captains of industry in accelerating the implementation of sustainable development goals. His recently published book, Net Positive, written in collaboration with sustainability expert Andrew Winston, offers a step-by-step guide to getting there. The message? Companies need to be net positive, which means benefitting the world more than harming it. Polman says that lots of companies are stuck in the mindset of being ‘less bad’. ‘While they need to move towards being restorative and regenerative.’ Polman's activities after leaving Unilever align with his sustainability mission at the multinational. There, immediately after starting the role, he put a stop to the presentation of quarterly figures as he did not want to associate with investors who go for short-term profit. In 2010, he presented the Unilever Sustainable Living Plan with ambitious sustainable objectives for 2020, such as measuring the environmental footprint throughout the value chain and switching to 100% sustainably produced raw materials. It earned him much skepticism and criticism, which gradually died down as Unilever invariably appeared at the top of sustainability lists while its financial results did not suffer. His ten-year tenure left shareholders with a return of almost 300%. Incidentally, things can change: Unilever has recently come under fire again for its focus on sustainability. A major shareholder let slip that, ‘the management is obsessed with publicly displaying sustainability performance at the expense of focusing on fundamental issues.’ 

When you joined Unilever in 2009, you were the trendsetter in terms of sustainability. Now, almost all companies have a sustainability strategy with short and long-term goals and most stock exchange-quoted companies also say that they are concerned about more than just shareholder value. Has the spirit of the times changed?
‘Back then, thematizing climate issues, sustainability or social policy was almost seen as unworldly. There are now enough hard figures and facts that show what is required. The pressure on companies is increasing from all sides. Employees and consumers, and especially millennials, expect companies to have a higher purpose than simply making money. Governments are also becoming alert to that. Over the past 30 years, environmental and governance-related legislation and regulations from governments have increased tenfold. CO2 pricing is in the pipeline. But perhaps the greatest pressure currently comes from the financial markets, where the battle over short-term gains versus long-term value creation has been fought. Many investors recognize that a greener, more inclusive future will ultimately lead to higher returns and lower risk.
Given all this, companies can no longer afford to look away - they will simply have to become more sustainable. The writing is on the wall. So it is no longer a matter of which direction needs to be taken, but why it is all happening so slowly. Most company initiatives are still marginal – they have lowered their energy consumption slightly, reduced their paper use... That all helps, of course, but it is still far removed from integrating sustainability goals into the strategy and rethinking business models. Many CEOs have objectives they can get away with, rather than goals that are really needed. That is playing not to lose versus playing to win.’

Integrating sustainability goals into business strategy is complex, partly because lots of different aspects require work at the same time. What does it take to facilitate acceleration?
‘Many CEOs are already doing ten times as much as their predecessors, but the curve of society's need to change is increasingly much more steeply. Even with today's acceleration, the gap we need to close has become even wider. We have simply waited too long. Of course, it does not help that a number of companies still do not want to change because they benefit from the status quo, with leaders focused only on maximizing short-term profits. We are still seeing the same thing among too many governments. There is a good reason why one of the first chapters in our book is entitled How much do you care? If you live on an island, put up a wall and do not understand society’s real problems, you will not contribute to the solution. The most important thing is therefore to have awareness and courage,
and the second most important thing is collaboration. It does not help that governments are showing an increasing opposition to change rather than encouraging it. In the run-up to COP26, the International Monetary Fund (IMF) calculated that governments across the globe still subsidize the use of fossil energy with $5.3 trillion. Equal subsidies for food production indirectly cause deforestation, and that needs to change. Companies cannot solve structural problems relating to the climate, human rights, inclusiveness, biodiversity and cybersecurity on their own. To bring about the major changes that are now required, they must work together with governments and civil society. The mutual trust needed for this is currently lacking. That is probably the biggest bottleneck.’

So companies could even play a leading role. At the same time, you say that individual companies are not changing fast enough. You speak to many CEOs. What do they struggle with and which dilemmas do they face?
‘The greatest struggle is a lack of knowledge. Huge investments are being made in green energy. The kilowatt hour price in the Middle East is already €0.017, so cheaper than fossil fuels. Technology is also rapidly developing. Out of everything that will need to happen between now and 2030 in order to meet the climate goals, 90% can already be done affordably. That is something many CEOs are unaware of. It is not surprising, because it is complex stuff and it is all changing at lightning speed. CEOs simply cannot keep up. Moreover, there is a fear that if you do something and someone else does not, you will be at a competitive disadvantage. However, in general that is no longer true, as moving first is actually rewarded nowadays. Look at the success of companies like car manufacturer Tesla, energy company Ørsted or power company Vattenfall. If you really take the initiative, that actually gives you a competitive advantage.’

What does it take to solve these perceived obstacles? Which qualities do leaders need to have in order to not only want the right thing but to actually do it as well?
‘It starts with an awareness of what is happening in the world. As a CEO, you are in a privileged position to be able to do something about the problems and thus make your own life more valuable as well. In our book, we describe that as ‘to profit from solving the world's problems, not from creating the world's problems’. In order to realize that change, leaders need to search for the purpose and passion of their organization and staff. Discovering that purpose gives them the courage to stick their necks out. It takes courage to set goals while not knowing exactly how to achieve them. It takes courage to work with people who you do not usually work with. It takes courage to break through all the skepticism and doubt.
Next, you need to examine whether you are sending out the right signals in your own organization in order to encourage net positive behavior. A simple example: Sales managers who are paid based on the number of orders they close exhibit different behavior than sales managers who are rewarded based on their relationships with clients. A next step is to identify the impact of the entire company, both intentional and unintentional, on the world. How many of your products are sustainable? What is your impact on water use, waste production and climate change? Finally, establish where you can make the biggest change and set specific goals. You will also need to address the elephant in the room – the thorny issues that nobody wants to talk about. For example, there are companies that do very good things for their employees and formulate huge climate ambitions, while employing a huge team of lawyers who ensure that they have to pay virtually no taxes. The two do not go together. Sustainable policy needs to be consistent and holistic. Essentially, this means that the business community needs to prioritize people once again, rather than just numbers, profits, losses and spreadsheets.’

Even if companies want to do the right thing, they are trapped in a system that does not work optimally and where they partly rely on governments and civil society. Do you fear that in 20 or 30 years’ time, we will not have succeeded in realizing our ambitions?
‘I am hopeful for a number of reasons. First of all, I have faith in the younger generation. I am President of Saïd Business School in Oxford and am a Board member of IESE and INSEAD business schools. There, we are trying to get social sciences into MBA programs to create leaders who are aware of the overall impact of their actions. We need to give them not just a seat at the table, but the table itself. Many of today's directors were good leaders at one point, but they are not suited to address the problems of our time.
Second, I think we benefit from the speed at which technology is evolving. We underestimate that speed. Tesla sold 87% more cars last year than in the year before. From 2030 onwards, internal combustion engines will no longer be allowed to enter Amsterdam. The commitment is even pretty good in shipping and air travel. These are all tipping points.
Third, the COVID crisis has shown that the cost of doing nothing is getting higher than the cost of doing something. The United States and Europe have invested $17 trillion in saving lives. That is three to four times what is required in order to implement all the sustainable development goals. This is also one of the reasons why the financial market is now so interested – there is money to be made from solving the challenges. I used to get frustrated when people did not understand the urgency. Meanwhile, I think we may ultimately only need 15% of leaders and governments to reach a tipping point in order to create a better economy. If the responsible part of the business community accelerates, the political process will also gain more courage. I am hopeful that in 20 or 30 years’ time, we will be better off than we are today. There is no alternative.’

In your book, you write that your home life has taught you certain values – respect, dignity, equality and compassion. I know many leaders from your generation who are still stuck in the ‘sky is the limit’ mentality. How do we get them moving in the right direction, knowing that the values you grow up with shape you?
‘It is not just the values you grew up with. Your values are formed throughout your life. I have seen enough inequality to decide early on that I do not want to be part of a system in which people die from air pollution or human rights violations. A contemporary example is that COVID ended up positively affecting many people. Initially, everyone expected the same thing to happen during the pandemic as during the financial crisis: A return to short-termism, cost-cutting and the primacy of shareholder value. In the end, the opposite happened. What has become clear is that you cannot have healthy people on an unhealthy planet. Many people are seeing for the first time the connection between the economy and things like biodiversity, climate change and human rights. They do not want to return to how things were before. Lots of companies and a large part of the financial market have made a comprehensive shift towards ESG goals. So a huge step has been taken, but if we do not solve the problems quickly enough, the people who did not cause those problems will ultimately pay the price. We have to fight to prevent that from happening.’

Most CEOs of large companies become directors or Supervisory Board members of other large companies after they leave, or they take up golf. Does that appeal to you from time to time? ‘We need directors, but as a director of a company you can only do a limited number of things. In the life I have created for myself post-Unilever, I focus on where I can be most useful and achieve the greatest results. At Imagine, we work with entire industries, such as food, fashion or tourism and travel. By uniting CEOs from across the value chain, they collectively become more courageous to change faster. We call this the ‘courageous collective’. The International Chamber of Commerce, of which I am President, has 48 million member companies. I am also an SDG ambassador for the United Nations and Vice Chairman of the United Nations Global Compact, of which 17,000 companies are members. Through those types of roles, you can help a lot of companies implement change.
The same goes for our book, Net Positive, which I hope is the start of a new, more responsible movement. It also puts me in a good position to seek that collaboration with government and civil society. Most CEOs do not have time for that. You should strive to create maximum impact in life, and right now, my aspiration is to improve the lives of others. I have selected my current portfolio very consciously, because it allows me to make much more of an impact than in yet another CEO or Supervisory Board member position.’

This interview was published in Management Scope 03 2022.

This article was last changed on 15-03-2022