"In today’s volatile world, chief executives need a high level of awareness of what is happening around their companies"

Interview with Paul Polman

 

 

The chief executive officer of Unilever and 2014 European Communication Award winner on sustainability and more

When you took over at Unilever in 2009, you announced new plans for doubling the company’s size while reducing its overall environmental footprint and increasing the company’s positive social footprint. How did you arrive at this plan?

Gobalisation has lifted many people out of poverty over the past few decades. Yet as the financial crisis of 2008 highlighted, it has come at a price, with high levels of government or private debt, over-consumption and too many being left behind. Frankly, any system that is not in equilibrium will ultimately be rejected, and we are seeing more and more evidence of this – from Occupy Wall Street to the Arab Spring, to people protesting on the streets of Turkey or Brazil. In the absence of effective global governance and in the context of an increasingly connected and well-informed world, citizens expect others to step up to the plate to fill that void. With low levels of trust in elected officials and business, now is the time for business to restore trust by moving from a license to operate to a license to lead. Business can no longer be a bystander in a system that gives it the right to exist in the first place. The Unilever Sustainable Living Plan attempts to address these societal challenges by presenting a business model that decouples growth from environmental impact while enhancing positive social impact. What makes it unique is that it takes responsibility for the total value chain from “farm to fork”, and moves well beyond corporate social responsibility to an integrated company model based on sustainable growth.

How exactly does your Sustainable Living Plan “move beyond” traditional corporate social responsibility?

Although important, corporate social responsibility tends to focus on those operations which are under direct control of the company and are usually shorter term in nature. Its basic premise is still about being less bad. The Unilever Sustainable Living Plan goes well beyond that. It is at the heart of our business model, covering our entire portfolio and all our operations. It is based on a total value chain approach, moving from suppliers through production to distribution and final use. It covers environmental, social and economic aspects of sustainability and is built around clear commitments with the aim of ensuring we have a net positive impact. For us it means a focus on key issues like climate change, sanitation, food security and poverty, with the aim of actively reversing some of the current trends. At its heart are some big goals, like moving to sustainable sourcing for all of agriculturally-based materials, improving the health and well-being of an additional one billion people, and totally decoupling growth from environmental impact. Underpinning the plan are 50 time-bound targets on which we regularly report progress.

What kind of internal messaging took place within Unilever to ‘sell’ this ambitious strategy?

Actually, this is not really about selling a concept or a strategy to people. It’s about defining a common purpose that inspires people and relates to their daily lives. The energy and commitment it has unleashed has been extraordinary. Employee engagement scores have moved up rapidly and the company is the preferred employer in most of the key markets in which it operates. It resonates in a world where more and more people – particularly young people joining our company – want to make a positive difference in the world and are not just driven by traditional incentives.

Unilever has a huge reach, present in seven out of ten households globally. It also relies on raw materials from tropical developing nations for the production of consumer products. Do these factors mean that Unilever has an extra special responsibility to work towards positive societal and environmental change?

Yes, with size comes responsibility. In the absence of efficient global governance business needs to step up. Deforestation, for example, accounts for over 15 per cent of global warming. And over 50 per cent of deforestation is driven by the growing demand for food. That is why we have come together with other companies like Mars, Kellogg’s, Procter & Gamble and Johnson & Johnson, and with growers such as Wilmar and APP, to commit to deforestation-free supply chains. Taking another example, 850 million people are still going to bed hungry whilst 30 to 40 per cent of food is wasted in the value chain. Besides the moral reasons, as a foods company we have to take a share of the responsibility and use our reach to help tackle these issues.

You’ve said that “historically, too many chief executive officers have just responded to shareholders instead of actively seeking out the right shareholders”. How does Unilever conduct its shareholder relations?

Yes, we need to fight short termism if we want to solve some of the major global issues like climate change, poverty and food security. They require longer term solutions. In this volatile environment, the average tenure of a chief executive officer is unfortunately less than five years and short term pressure is actually increasing. Too much effort goes into satisfying current shareholders with a short term horizon. This is why at Unilever we stopped giving quarterly guidance, are investing in a sustainable business model, and are actively seeking shareholders that are willing to support this. Increasingly, shareholders can see how a responsible business model is driving the growth of our business and as a result, our shareholder base has changed and we see less volatility in the stock.

The approach which you encourage companies to take towards their supply chain relies on a greater degree of transparency than is perhaps usual for big companies. Do you find that global companies are ready for this challenge?

You cannot build trust without transparency. This is the basis for all relationships and prosperity. Furthermore we need to be judged by actions, not words. As Steve Covey said “You can’t talk your way out of a problem you behaved your way into!” The good thing is that more and more companies are realising that they need to be more, not less, transparent. For example, the number of companies disclosing their carbon footprint has significantly increased. Research increasingly shows that companies that do social and environmental reporting are generally better performing companies.

You are in constant contact with policy makers. What kind of messages are you delivering to them?

Well, I am not in constant contact – I have a business to run as well! But yes, I do talk to policy makers because we are at such a critical moment in time. We are on the eve of two major global agreements, with efforts underway to achieve an ambitious climate change deal coinciding with an opportunity to renew the Millennium Development Goals. These provide us with a chance to end extreme poverty for good and tackle the urgent sustainable development challenges. This will all happen in 2015, and the next 19 months or so will be crucial. Food security also remains a critical issue, as I mentioned, with unacceptably high levels of hunger at great human and economic cost. In 2012, I lead the B20 Food Security Task Force which contributed to the G20 food security agenda during the Mexican Presidency. It is sad to see that this is no longer a G20 priority. At the risk of repeating myself, it is time that everyone shows leadership on an issue which is the root cause of many of the problems, conflicts and tensions we see in the world. I do believe that there is increasing awareness and recognition – among business and policy-makers alike – that the challenges we face are big, complex and systemic, going beyond the power of any of one of us to fix. The only way to design solutions is through partnership. These will enable us to de-risk the measures which are needed to realise these solutions. There are many good examples of these multi-stakeholder partnerships emerging to solve some of the bigger issues, like the EU’s Resource Efficiency Task Force, New Vision for Agriculture, the Scaling up Nutrition (SUN) initiative or the Tropical Forest Alliance. Putting the burden solely on politicians and elected officials to find solutions is frankly unfair and unrealistic. Business needs to step up and play its part in helping to de-risk the political process by actively participating.

You have also said that chief executive officers “need to broaden their education with the reality of today’s world.” Where can they receive this education?

Yes, in today’s volatile world, chief executives need a high level of awareness of what is happening around their companies and be willing and prepared to engage much more actively with society. We may be part of the solution, but we don’t have all the answers, which is why a high level of humanity and humility is also important. I am encouraged to see that more and more chief executives understand that systemic changes are needed – and this despite a very tough business environment. As chief executives we are more than just leaders of our companies, we have the responsibility to translate a very complex world and challenges into tangible solutions and take personal leadership to drive action.

You are active on many boards, mostly with a focus on sustainability efforts. What is it about this role of chief executive-as-activist that appeals to you?

This is not about the chief executive as activist. This is about taking responsibility for the challenges we are facing, identifying solutions and turning these into actions and output which is measurable, just as we do in our business. This is directly relevant to Unilever. As you know, the UN High Level Panel is addressing enormous challenges, for example around a lack of drinking water, sanitation and hygiene. Many of our brands can contribute to these issues by providing sustainable solutions. Take Lifebuoy. The brand’s mission is to spread the importance of good hand washing habits around the world, so that more children can reach their fifth birthday. Likewise a brand like Domestos is helping to improve sanitation and fight open defecation; Dove is focussed on helping women’s self-esteem and Knorr on sustainable farming. Each brand should be to the service of society, and the bigger the challenge, the bigger the opportunities as well. A more sustainable and equitable world will benefit us all. After all, business will not be able to function if societies fail, and unfortunately we are seeing more, not less, instability and geopolitical conflict lately.

You are a very visible presence in the media and an example of a communicative chief executive. What kind of support do you receive from Unilever’s communications team?

This is a team effort of course. We created a structure where the communications team works closely together with the sustainability and advocacy teams. Many companies still have corporate social responsibility in one part of the business which is developing philanthropic initiatives, and in another part of the business are the communications people who are working on nice stories. In Unilever our Sustainable Living Plan is part of our business model, integrated in all we do.

Finally, Unilever is a Dutch/UK company that operates in 100 countries. What has this historically international background meant for the company?

In fact, we are a global company selling our products in 190 countries around the world and we happen to have our roots and head offices in the Netherlands and in the UK. In the 19th century, Lord Lever, one of our founders, already understood the importance of being a global business. As far back as 1892, he was off on his first world tour travelling to America, Canada, New Zealand, Australia and Ceylon. So we have a long and strong and long presence in many countries. This heritage has positioned us very well in growing our business all around the world. Indeed, the emerging markets now represent 57 per cent of our global turnover. We are truly a multi local organisation connected through a strong common purpose and values.

And how do you connect with employees in so many different countries and cultural contexts?

I communicate frequently on what we are trying to achieve and I am a regular blogger inside the company, always encouraging people to respond with ideas and comment. However, there is no substitute for meeting people directly and to listening and engaging with our wonderful employees on what is happening around the company. That is why I spend around two-thirds of my time travelling, visiting our operations in every part of the world.
 

David Phillips

David Phillips is editor in chief of Communication Director.