3 Takeaways - How Courageous Companies Thrive by Improving the Lives of Everyone They Touch with Former Unilever CEO Paul Polman (#60)

Episode Date: September 28, 2021

Paul Polman is the former CEO of Unilever, one of the largest companies in the world with over 300 brands. Paul helped redefine what being a good company means long before it was acceptable to think about anything besides profits. Paul shares how Imagine, a movement that he co-founded, brings together a critical mass of CEOs across the value chain to move industries toward sustainable impact goals such as climate change and inequality. Learn more about what a good company is and how your business can thrive by giving more than it takes.Paul is the author of the highly anticipated book Net Positive: How Courageous Companies Thrive by Giving More Than They Take.

Welcome to the Three Takeaways podcast, which features short, memorable conversations with the world's best thinkers, business leaders, writers, politicians, scientists, and other newsmakers. Each episode ends with the three key takeaways that person has learned over their lives and their careers. And now your host and board member of schools at Harvard, Princeton, and Columbia, Lynn Thoman. Hi, everyone. It's Lynn Thoman. Welcome to another episode. Today, I'm delighted to be with Paul Polman. He's the former CEO of Unilever, which is one of the largest companies in the world. Unilever has over 300 brands, including Dove Soap, Ben & Jerry's Ice Cream, and Suave Shampoos. And over 2.5 billion people per year use Unilever products.

Paul has helped redefine what being a good company and a good leader means. I'm excited to find out. He is the author of Net Positive. Welcome, Paul, and thanks so much for our conversation today. Well, thank you, Lynn, for having me. Look forward to it. Paul, you strongly believe in businesses operating in a sustainable and equitable way. Can you tell us about that? Yeah, I actually believe that the role of business is to address the issues in society. So business should profit from addressing the world's problems, not creating the world's problems. What we have at the moment is a very precarious situation, if you want to, where our business model that we have exercised until now has served as well, lifting enormous amounts of people out of poverty. But increasingly,

it's also showing its shortcomings with the stress that we're having on the planetary boundaries, climate change obviously being the most important one, was frankly leaving too many people behind. And COVID has been a stark warning of that. It's a direct result of our linear consumption model, the destruction of biodiversity, that we get these psoriatic diseases. COVID actually is not a surprise. We've had SARS, Zika, Ebola, Asian flu.

But this is a particularly nasty one. But it is really a reflection of an unsustainable way of production and consumption, if you want to. And the private sector being such an important part of the global economy, 65, 70% of the global GDP, 80% of the job creation, 90% of the financing. It really has to bend its curve if you want to change its modus operandus. If we want to create this more equitable and inclusive world, which is really what I've always fought for. For me, Colin Meyer says it well, that the purpose of business is to profitably address the issues of people and planet if you want to. And we have plenty of these issues to address. So turning it around, it's actually probably one of the biggest business

opportunities for Citigroup, which makes it so exciting. Well, I love your comment about profit through purpose as opposed to profit with a side of purpose. Can you elaborate on that? Well, it's very simple. If I may make it simple for the audiences, profit is a little bit like your white blood cells. You need them to live, but you don't live for them. And it's the same with profit. Of course, a company needs profit. We have that tension and we need to be sure that we can generate enough funds to do more of what we're doing, especially if that is a good thing. But it cannot be the only reason that motivates employees, that gives you a beacon of where you need to go when tough decisions need to be made. There's more to life than that. And increasingly, we have discovered that we need to

define the role of business well beyond the narrow definition of shareholder primacy. First of all, it hasn't really given us much to be proud of. The more we run these businesses for the short term, the more we actually run them into the ground or created a lot of these issues by disregarding the negative externality. So a business to be successful has to redefine profit to also include not only the return on financial capital, but also social and environmental. And increasingly, what we see is that companies that do that, that are able to internalize that, are actually more resilient, more robust, and ultimately actually more profitable as well.

And that latter part is important, even for the doubters that are there. We've come to the point that we find ourselves where the cost of not acting is actually higher than the cost of acting. COVID, regretfully, has cost us $17, $18 trillion in spending by governments in Europe and the US. Kristalina from the IMF estimates that we've lost about $26, $27 trillion in GDP. That cost, just to save lives and livelihoods alone, there's no light at the end of the tunnel yet, is significantly more than what it would cost us to avoid these issues in the first place. Implementing things like the Sustainable Development Goals, which are these famous 17 goals

that have been signed by 193 countries in July 2015 at the UN, and have as objective to irreversibly eradicate poverty and do that in a more sustainable and equitable way would only cost us three to five trillion dollars a year. And it would avoid a lot of the issues that we're now willing to pay for. You take goal number 16, which is peace and justice, which deals with corruption, conflict, prevention, wars, et cetera. We're currently spending 8% to 10% of our global GDP just on that alone. That's twice as much as what it would cost us to implement all the sustainable development goals. And the same you find in all the other areas of the goals. Climate change is

costing us already significantly more than what it would take us to implement all these goals. So I've always turned this around and said, this is the best opportunity that you can have as a business and also to guarantee that you have a long-term successful business at the same time. As you did at Unilever, you believe that business needs to start thinking about its impact on the wider world. Can you explain what that means. Well, the impact of the wider world is one important notion for this book itself and the leadership that we need to create. This book, Net Positive, is as much about leadership transformation as it is about organizational and systems transformation. But frankly, you cannot get to the organizational and systems transformation if you don't have the leadership transformation.

And the most important decision you have to make is to take responsibility of your total impact in the world, good or bad. And that is really where it starts. If you neglect parts of your operations, many of the companies still, too many, may I say, outsource their value chain, for example, and also think that they can outsource their responsibilities. That doesn't work anymore. So just making commitments on climate, like the bulk of companies do that make commitments just on scope one and scope two, what is under your own control, but not where the real effects of your carbon emission are in your value chain. For example, with Unilever, that would be deforestation

in the production of food. If you don't take responsibility for that, I don't think you're running a serious business model. And increasingly, society is holding you accountable for that. So it means, first and foremost, taking responsibility of your total handprint in society, not just your footprint, if I may call it that way. And your handprint, as you think about it, Paul, is from the creation of a product deep in the supply chain to the end of a product's life.

It is the whole cycle. And this actually goes beyond that. I think responsible companies not only have to ensure that they have a positive impact in all they do across their total impact on society, but they also have to be part of the broader transformations that are needed. Businesses cannot be successful in societies that fail. So they have a direct interest to ensure that systems function. And they're being stressed right now for various reasons. I also think that business cannot be a bystander in a system that gives them life in the first place. To get that license to operate, that permission cannot be a bystander in a system that gives them life in the first place. To get that license to operate, that permission to be there, they have to also be part of these

broader transformations that are needed. So it goes beyond your direct value chain if you want to. For example, just to give a very simple example, if as a business you see dignity and respect or human rights being violated, or what we saw in the US in Charlottesville or the dreadful day in January 6 at the Capitol, and you stay quiet, then you become implicit bit by bit. Just by staying silent, you move the boundaries of what is acceptable. And bit by bit, we undermine these values on which humanity is based. And by doing so, we actually put at risk humanity itself. It's very difficult to perhaps understand that, but it is really what is happening. Populists or xenophobic or nationalist politicians have abused these situations to suppress a human freedom or dignity and respect or equity, these basic values. And business has an opportunity, but also a moral obligation to speak up. And interestingly, even in the U.S., most of the citizens of this world expect businesses to speak up. Obviously, it has to be relevant, has to be related to your business, it has to be supported by your broad constituents, but more and more businesses

should speak up. And not only speak up, then they should put their word where their mouth is. In a country where you believe in democracy, which will be a separate debate than this podcast, so I deliberately choose the word where you believe in democracy. It is based on one person, one vote. And that vote cannot be translated by votes of the wallet. It has to be votes of the people. So when you have $3.5 billion in money in politics, when so much is spent on your PAC, when you have Citizens United, which could be unlimited spending, you really have to ask yourself a question, tough question. Do you want to participate with that as a company because it might benefit you

short term? Or are you really undermining the functioning of democracy for which you would pay a much bigger price long term? These are these tougher challenges that I think businesses need to discuss at boardroom level. How do you think about people? As CEO of Unilever, how did you think about all the different people touched by Unilever? Well, that's why I was there. I wasn't there for myself, nor was I there for many of the other stakeholders, although we want to optimize the return to all the stakeholders over time, because they all contribute. But our ultimate reason for being was to help the people that can't help themselves. Lord Lever invented the company at the end of the 19th century in Victorian Britain

because the issues of hygiene were so severe that only one out of two babies would survive year one. So he created bar soaps because he wanted to make hygiene commonplace. His main interest was to ensure that less people were dying. The reason now that we have our products has not changed. The issues might have changed. It might have moved to different parts of the world, but we are ultimately there to address these world's problems. So that was really the driver for Unilever,

to ultimately have that stronger purpose in each of our brands. Consistency as a company, but translated that into each of our brands. So a bar shop like Lifebuoy, for example, was there to help a child reach the age of five. Four million children still die of infectious diseases like pneumonia, diarrhea that can be solved solved with simple hand washing, as you know. A brand like Dove was there to help women get self-esteem in a world where many women don't feel confident enough to participate at equal levels as men or speak up or be present. That's what you address. So addressing these worldly issues is what you are about, why you have these products. And you need to keep that center in your reason for being. The fact that we need a competitive price or that people need the functionality of products

are really hygienic factors. Increasingly, people want to buy products that they can associate themselves with, that fight for the same causes as they believe in, that stand for things that they stand for. And it's that higher order that we call purpose, something bigger than yourself. Passion is for yourself, but purpose is to unlock something bigger than yourself. And if you can get it into your brands, you'll be well off. Not surprisingly in Unilever, these brands, and I mentioned some that had a stronger purpose, were also growing faster and were being more profitable. So purpose pays. This is not philanthropy. Can you talk about how that approach to value, to purpose informs a brand like Dove Soap?

First of all, what we did in Unilever, as we made this transformation to a more purposeful company, we started obviously with our own purpose. You cannot have a sustainable company or a purposeful company if your own people are not sustainable or purposeful. Then we used that collective effort to define the company purpose, very much going back into the history of the company, but also looking forward into what the world needs. This is where we made the commitment to make sustainable

living commonplace, to improve the health and well-being of a billion people, to make all of our sourcing sustainable. And these things permeate to the brands that you're selling. Then we set audacious goals, which I think is part of a net positive company. Most companies play not to lose. You have to really play to win. Most people set targets that they know are already achievable or that they know are not enough when it comes to climate change or planetary boundaries or human rights or slave labor in your value chain. You have to set absolute targets. Anytime you don't set that, you nearly give permission for your own children to find themselves

in that situation. So once you set these targets, you stretch your thinking. Then you work on the boundaries because people's behaviors are not influenced as much by what they know or think it is right, but by the boundaries that are put upon them. So how do you create an environment that is more long-term focused? In Unilever, we stopped quarterly reporting. We stopped giving guidance.

We changed our compensation system, quite revolutionary, to give people space to breathe, but move these boundaries. And then you obviously have to embed it not only in the company itself with accountability and transparency, but you have to get it then in the individual brands where it especially comes to life. What we did in Unilever was put it in the brand key. We started with any of our brands, that prime objective being its ultimate purpose. Now we had undoubtedly targets around that in terms of market share or growth of the business or profitability, but it was profit through purpose. It is so easy to produce profit for the next four or five years. Some companies have become very skilled at it. They've become so skilled that they link it very strongly to executive compensation,

who then walk away with tons of money in four or five years. The company is ruined. The CEO is gone. The base is reset and the game starts over again. One of the main reasons why the lengths of a publicly traded company in the US has dropped from 67 years when I was born to 17 years now. So it is tough to play the game of the long term. It is tough to play the multi-stakeholder game. It is tough to make these trade-offs. But ultimately, a brand is robust if you can first take care of your core stakeholders and understand that by doing that, the shareholders are better off as well. And in Unilever, with our 300% shareholder return over 10 years, was operating consistently on a 19% return on invested capital. I don't think we have

disappointed any of our long-term shareholders, but we've certainly worked hard to get the short-term speculators out. And they shouldn't be called shareholders in the first place. The word holder has a slightly different connotation than what we're currently exercising. But it's difficult to think of a purpose of a brand, but as soon as the brand has it and you see it, it's so obvious, like so many things. So it's hard work. And it's hard work to deal with these dichotomies and these trade-offs. So that's why ultimately it boils down to leadership, actually. How do you get the people that are strong enough in its conviction, in their purpose, in their reason for being, that they can overcome some of these hurdles, including the cynics and skeptics along the way or the shorter term pressures? And the real test in this case is what they do in the dark, so to speak, that makes them shine in the light. Can you tell us a little more about what you did with one of your brands, as an example,

Dove? You created one of the most innovative marketing campaigns, but it was really about the substance, the key purpose of the brand. The substance of the Dove brand is enhancing self-esteem, women's self-esteem. So the brand is really working on the insight that globally, only 4% of women feel happy actually in the skins that they're in. Partly it's a function of how we promote and advertise women. Very biased, very sexist. And most of these photos, I always say to people, never fall in love with a woman you see in the magazine because she doesn't exist. We've worked them over with computers 10

times over. But all of that adds up to make women feel uncomfortable to the extent that they are not willing to raise their hands in class and draw attention to themselves or participate in sports activities because they feel uncomfortable. So the whole premise of Dove is women's self-esteem. And so we made commitments, just advertising is actually the least important to us, but may say, in schools to really work on their self-esteem. And these school programs are now global. They're not branded or any of that. They're really meant there to build that self-esteem. But it is a program that Dove puts out there. Now, the insights that they get because they're involved with these deep societal issues. It's enormous. And it needs to be adapted by country, how you express that. In India, it might be that you start to address these social

barriers that are there of the caste systems. In other countries, it might be religious barriers that discriminate women from men. And it's an infinite opportunity from two perspectives. First of all, sadly enough, there are only six countries in the world where women have the same rights as men. And my native, the Netherlands, is not included in that either, nor is the US. In Switzerland, my wife needs my permission to open a bank account. So it's an enormous opportunity. And secondly, it's an enormous economic cost. McKinsey estimates that if we would just give the same access to education, land rights, financing to women as we would do to men, we could unlock the global economy by over $20 trillion. In the

US, only 5% of the private equity funding goes to women. And if you're a black woman, completely forget it. If you just call a spade a spade is less than one percent so the job for dove is to change that frame and that social consciousness and to address that issue and the more we address that issue the better we do more than 50 of the world's population are women and i think they're pretty much behind the cost that we're fighting here. So it's a tremendous opportunity. And that's why the brand has been doing well. Interestingly, these brands were growing faster, really, and they were more profitable as well. And it doesn't surprise me.

Can you tell us about the fashion pact which you helped to create? So one of the things I wanted to do coming out of Unilever, I felt that CEOs are held to a very high standard, sometimes higher than they can deliver. There are many issues they cannot do alone. What I saw in Unilever, where we were able to do a lot of things because of our size and scale and operating in 190 countries and all the things, but there were some things we couldn't do. If I would start an initiative, my main competitor would not join. Or there is a trust thing. Oh, well, you do it for business.

It must be in their own interest. Or I didn't have the depths of knowledge or time because there's such a complexity of all these issues in the world. And yet we are held to these high standards to address issues like deforestation or human rights in the value chain or plastics in the oceans. So what I did was create a neutral platform, which we call Imagine, where we bring together a critical mass of CEOs by industry sector across the value chain. There are two things that happen there. Collectively,

the CEOs become more courageous, and we can address issues if we build that trust across the value chain that otherwise are not solved in silos. For example, you can move all the cars in the world to green cars, absolutely change and make them carbon neutral. But some people have to invest a lot, other people get the benefit. But if you all work together, it's a few pennies on the end product. How do you get to these levels? So we looked at the most impactful industries towards the sustainable development goals, the ones that actually cause the most damage. The energy industry, the fossil industry goes by itself, and there's a lot of attention against that. But fashion is actually the second most destructive

industry. Tremendous pressure on the planetary boundaries was on biodiversity, was unsustainable cotton, human rights in the value chain are just a few examples. Plastics in the oceans, a lot of it comes from clothes. So we looked at fashion, food, tourists and travel, and now private equity to see if we can galvanize the changes at speed and scale that is needed. With fashion, we were fortunate enough with the help of François-Henri Pinot, who runs the Caring Company, with brands like Gucci and others, to put together about 80 of the best companies across the value chain in fashion. We've met a few times, more on Zoom lately, but we were fortunate enough in the beginning to meet in person. Because we have a critical mass of companies across the value chain, we're getting

into deeper issues, like how do we implement the paris agreements and be carbon neutral by 2050 how do we get out of single-use plastic how do we move the whole industry to regenerative cotton and projects come out very quickly already joint buying of energy green energy no company individually has the scale joint buying you might get the scale to transform these industries. Agreeing different standards to get out of plastics. Jointly supporting innovators to find alternatives. What we also find is because we have a critical mass, civil society gets interested. So they want to be part of this change effort. Governments start to listen. So they want to be part. In fact, we launched this initiative when France was hosting the G7 and President Macron was asking me, how could we make this a very effective G7?

The year before the G7 was held in Canada and your former president wasn't quite behaving like a president and it ended up being a disaster, unfortunately, may I say. And he wanted to be sure that the G7 was more productive. And I suggested to him, work on tipping points. So he said, why don't you help me do this? So we created in different industry sectors opportunities to create tipping points. And one of them is fashion. And so that is where we're focused on. And it's fun to do.

I don't report or belong to any company. I created this neutral platform where I can help the CEO set the standards higher. Or since I have been CEO and know what their pressures are, we can honestly address some of these issues. And if the trust is high, I'm convinced that we can solve them. And this is what we're working on. It's a five-year commitment from each of these CEOs, but I already kept the sense that most of them want to participate well beyond that. And the real premise at the end, sorry about that, Lynn, is that ultimately, we should not compete on the future of humanity. And there are many things that we would be better off cooperating on. And now you might say, I expect governments to do that. I agree with that.

But it's very difficult right now at the governmental level. That is more polarized. Multilateralism isn't quite working the way we designed it. So whilst business has benefited for decades from responsible government, now it's a responsible thing for business to fill that void and to help de-risk the political process. And as you mentioned earlier, business has tremendous power. Oh, absolutely. But it has to be a moral power. It cannot be economic power. You cannot change this by board authority if you want to. This has to be done in partnership with civil society and governments to be sure that we actually serve the people that we need to serve and not end up even more so making a small subgroup, often the shareholders, the beneficiaries of all of this. So it takes more than just using our skill, but it is no question that the technology

disruptions, which have been tremendous, will come from business, the resources, the funding, the people, the creativity. So we absolutely need that. Of all these sustainable development goals, 85% of those absolutely require business to take a leading role for us to get there. Does your view on business having a positive impact on people and on the planet and everything they touch mean that business leaders need to be good people? Well, I think first and foremost, and that's a good question, a good leader is a good human being.

What we have seen during COVID that the leaders that excelled, because there's an enormous level of uncertainty and angst and stress in the system. We've seen mental health issues go up. We've seen businesses panic. We've seen the supply chains being disrupted. I don't envy CEOs. I mean, this is a change at the scale of the industrial revolution and the speed of the technological revolution. But what we have broadly seen is that the leaders that have done well with their businesses, with their organizations, are leaders that have a high level of empathy, humanity, humility, that are system leaders, purpose-driven, work in partnership, think multi-generational.

Those are the hallmarks. I deliberately use the word courage in the book, Courageous Leaders, because courage comes from the French word, cœur, which means heart. So these are leaders that work as much with the heart as with the brain. To some extent, you might argue that we've taken humanity out of business by distilling everything to spreadsheets and numbers and day trading and win-lose. So bringing that humanity back and these leaders that fit that description broadly have been doing better, but we're short of them. There's no question that the crisis that we're currently facing in the end of the day is not a crisis of biodiversity loss or climate change or food security. It's a crisis of greed, of apathy, of selfishness.

And that is a bigger issue that has crept into society than the fundamental issues that we need to change, which frankly are easier to do in my opinion, but it needs this leadership and this courageous leadership to get there. Who do you admire? Who are the courageous leaders? Well, I admire a lot of people because the world doesn't function with all the people making it possible on the ground. But it's easy to give you an answer that is the Martin Luther King or the Nelson Mandela or the Mother Teresa or Martin Luther King or all those people. They've been tremendous examples, moral examples of moral leadership in the history of mankind. But interestingly, I get more of my strengths and admiration from people that are on the ground. The doctors who fought Ebola and went

right away to West Africa when they knew they were risking their lives. The medical community who helped and rallied together when this terrible COVID crisis struck. I run a foundation in East Africa for the blind, and we have 26,000 blind children in school to unlock their literacy for life, often a very forgotten group. But the people that work with them, the blind, the deafblind, the teachers who spend 24 hours sometimes with them and dedicate their lives to these people, these are the real leaders. The farmers who often live in absolute poverty in this world, in many of the countries, hanging on a threat of subsidy to stay alive. And yet they work day and night to feed us and to ensure that we have better lives.

These are the ultimate leaders because these are the ultimate expressions of leadership, which to me is to put yourself to the service of others, knowing that by doing so you're better of yourself as well. And that's the ultimate. The moment you understand that it is better to give than to receive. And the interesting thing is that many people think greed is good, but ultimately generosity wins. So leadership ultimately is about that. What mistakes, Paul, do you see companies making? Well, it depends on what we are talking about. But I think right now, the biggest mistake that the company can make is denial. We see that a lot where companies say, well, these issues there are not

my issues or I'm doing something, often marginal. So I'm not part of the problem. It's the politicians or it's that. So not owning a problem is a big mistake, in my opinion. We have that responsibility to own many of these issues that are directly or indirectly related to our businesses. Wanting to do it alone. It's the easier way out to say, I don't have to deal with other people because they might tell me something that's unpleasant to hear, or they might force me into doing something I'm not sure I'm ready to do, or I expose myself and don't have the power that I have when I'm CEO alone. So that's why we talk about courage. It takes courage to set targets that you know are needed, not targets that you can just achieve. It sets courage

to work with anybody other than people in your organization. It takes courage to transform these business models that nobody else has done before you. And the mistake that people make is first of all, not owning it. And secondly, not being able or willing to work in these broader transformations that often require these partnerships. And that's probably where we also see not surprisingly the biggest opportunities. And then the last thing I would say is

you have to make this totally inclusive. It is just amazing to see how creative and purpose-driven and passionate the young people are in this world. Half the world is below 30 years old and they're going to be 100% tomorrow, according to my calculations, but they're often not included in things. Companies have big hierarchies. So the mistake is to not involve even in your own organizations, especially the young, to drive these changes that we've been talking about during this podcast.

Paul, before I ask you for the three takeaways you'd like to leave the audience with, is there anything else you'd like to mention that you haven't already talked about? No, I think we've covered most of it. I just like to stress even once more that it starts with the individual. If you believe it, then I think you've overcome a big hurdle already. If you believe you can, you can. If you believe you can't, you already have the individual. If you believe it, then I think you've overcome a big hurdle already. If you believe you can, you can. If you believe you can't, you already have the answer. And the three takeaways you'd like to leave the audience with today? The three takeaways go directly to the book again. It's an enormous opportunity. We've talked a lot about the issues out there, but we've also talked about what we can do.

So it's an enormous opportunity for companies to embrace this. The ones that do will have a very profitable future. We've seen that with the Teslas or the Orsted's, which are some of the pioneers in their industry or beyond Berger or some of the other ones. Tremendous value will be created as well. The ones that don't will be very quickly relegated to the graveyard of dinosaurs, as I said. The second message is it starts with you.

It starts with leadership. We've talked about courage. We've talked about taking responsibility of your total handprint in society. This is as much a personal transformation, which we always have to work on. The most difficult thing is not to learn the new things, difficult as it may be, but also to unlearn the old things. And that probably would be the second. And having that courage, what comes with that leadership or that purpose driven to stand

up when it's wrong, to speak out when it's needed. So that is the second message. And then the third message is really don't take it all on your shoulders. Someone very wisely said once that the issues of that magnitude cannot be solved at the level that they are created. You need to create these transformative partnerships. You need to be part of something as an organization that is bigger than your narrower self-interest and form these broader partnerships with civil society, with industry partners, with governments at times to drive

these changes. And it's important as my third message to embrace these partnerships. It's hard work, but it's rewarding. Thank you, Paul, for your leadership and your approach to owning all of a business's impact on people and our planet. And thank you for spreading the word. This has been terrific. Thank you, Lynn, for the opportunity and for what you're doing. And above all, be safe. If you enjoyed today's episode and would like to receive the show notes or get new fresh weekly episodes, be sure to sign up for our newsletter at 3takeaways.com or follow us on Instagram, Twitter, and Facebook. Note that 3takeaways.com is with the number 3.

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