Paul Polman is the CEO of Unilever, home to brands including Dove and Lipton. Polman has set a goal of fully decoupling the company’s growth from environmental impact and maximizing overall social impact. Unilever’s sustainability goals focus on, among other measures, greenhouse gasses, water, waste and packaging, sustainable sourcing, livelihoods, and women’s empowerment. This interview has been edited and condensed.
Polman talked with HBR about his company’s sustainability efforts as part of The Future Economy Project, an HBR initiative that shares real-world lessons on sustainability leadership for all.
HBR: Why did you decide to pursue a sustainability agenda?
POLMAN: The financial crisis of 2007 and 2008 brought to life that a global economic growth model based on high levels of debt, overconsumption, and leaving too many people behind was not sustainable. Trust in business as well as many other institutions was low. Many companies had lost their purpose, and shareholder primacy (and in some cases greed) seemed to be the prime motivator. The life of a publicly traded company is becoming shorter and shorter, and its permission to operate is under threat.
We needed a new economic model; we also needed a different business model. Not one based on being “less bad” or on occasional acts of benevolence, but one where business has a positive impact on society in all it does.
It isn’t just about sustainability. It’s about the sustainable development agenda. It’s about how we provide growth and development in a more sustainable and equitable way for generations to come.
The purpose of business is first and foremost to serve society. It is, after all, not possible to have a strong, functioning business in a world of increasing inequality, poverty, and climate change. The good thing is that, next to our moral obligations to address the global challenges, there is an enormous business opportunity. That’s the equally exciting part.
From which stakeholders have you received the most resistance to your sustainability agenda? How have you worked to bring them on board?
Rather than resistance, we actually see that people want to be a part of this change agenda. Customers and suppliers want to partner with us. Young people want to join us. Consumers increasingly want to buy our products.
In 2010 we launched the Unilever Sustainable Living Plan (USLP), which aims to decouple our growth from our environmental footprint and to increase our overall social impact. Over half of our graduates say they joined us because of the USLP. Investors are staying with us for longer periods because of it; 70% stay with us seven years or more. The USLP is directly linked to earnings and returns; it drives growth, reduces costs, mitigates risks, and attracts talent.
We sometimes have to do better to convince the still large group of skeptics. Confusion around claims doesn’t help consumers, and lack of comparability or understanding of materiality doesn’t help investors. CEOs need to do a better job of making the case for a more inclusive and sustainable business model, at least to long-term shareholders.
The challenge we face is more about the system in which we operate. Like all businesses, we are impacted by the increasingly short-term focus of financial markets and political systems. We need a reform of the financial system, with greater focus on serving the long-term needs of society. The challenges are especially acute in the areas where you need governments to help implement frameworks or where industries as a whole need to change.
Equally challenging is the need to change consumer habits at scale. People are increasingly asking for responsible business; however, there is still a way to go to change consumers’ behavior en masse. We are doing our part by, for example, committing to making our packaging reusable, recyclable, or compostable by 2025.
Business has a clear interest in fighting climate change, as it is probably the biggest threat to its existence.
Voluntary carbon reductions are unlikely to achieve the scale needed to solve climate change — we also need policy. Beyond operationalizing sustainability, what obligation do businesses have to lobby for action?
This goes right to the heart of the transformational — not incremental — change we need to see. Not more projects, but system change. Not CSR, but whole new business models.
Business has a key role to play in moving the agenda faster and helping to de-risk a difficult political process. Fortunately, that is happening, as we saw with the #WeAreStillIn movement in the United States after the current administration announced its intention to leave the Paris climate agreement.
To truly accelerate at scale, we need science-based targets, we need to disclose exposure and mitigation plans in our business models (as per Bloomberg’s Task Force on Climate-Related Financial Disclosures), and we need to implement a price on carbon.
This starts with getting your own house in order. For an example, I would point to Unilever’s objective to become carbon positive by 2030, giving back more renewable energy than we use, and moving all our vehicles to electric power. We need to walk the talk.
However, it goes beyond that, as this alone will not deliver the transformational systems change we require. We also need government to put in place the right infrastructure, regulations, and systems, and business has a role to play in actively championing better policies. This includes things like pricing externalities such as carbon, encouraging a move to sustainable procurement, and creating the right financial instruments. And businesses play a crucial role in de-risking the political process to encourage these shifts.
You’ve been at this for a long time, long enough to witness many wasted years with little action. How do you remain personally resilient in the face of such seemingly insurmountable challenges?
Desmond Tutu said it well when he was asked if he was optimistic or pessimistic. He answered, “I am a prisoner of hope.” I see many amazing people working on this agenda, and I draw encouragement from it. I also see that many needlessly suffer from the failures of others (the poor that pay the price for climate change, for example), and I get a sense of duty from that.
At the same time, momentum is building around addressing climate change, and this keeps us resilient and optimistic. And even apparent setbacks, such as the decision by the U.S. president to withdraw from the Paris climate agreement, is revealing the true level of support from CEOs, mayors, and many others. Over 1,200 companies are now calling for a price on carbon, and many, including Unilever, are setting targets to be 100% powered by renewable energy. So, the pendulum is swinging in the right direction.
However, we still have lots to do. We undoubtedly still face many challenges in the world. You only have to open any news page to see the devastating effects of climate change, for example the string of devastating hurricanes that ripped through the Caribbean and U.S. recently. The increasing number of displaced people because of conflict, the many falling behind due to not getting the benefits of globalization — I could go on. The failure of global governance to deal with these challenges requires business to step up to the plate.
And it is very simple: Stronger alignment of business with societal interests and planning for the long term are the only ways to guarantee sustained success and longevity for our businesses and for our planet. Sustainability isn’t just the right thing to do; it is essential to drive business growth. Business-as-usual is not working. We see this in every corner of our society and our economy. Too many feel left behind — we see retrenchment, a rise in populism, and anti-globalization.
There is no business case for enduring poverty or runaway climate change. And there is a great business opportunity, if we seize it, to help harness markets — and all the financial, human, and innovative capital they represent — to deliver the world we want. It’s a minimum $12 trillion opportunity, according to the Business & Sustainable Development Commission’s analysis in their report “Better Business, Better World,” and 380 million more jobs. It’s worth going for.
We owe it to the next generation to leave the planet in a better place than we found it. I just became a grandfather to my third grandchild, and I want them to live in a world better than our own. And to achieve this, above all, we need human willpower — leaders who can put the interests of others ahead of their own, who are driven by a stronger purpose and guided by the stars, not by the lights of every passing ship. This is what drives me every day, and yes, I remain optimistic.
In the past year, you’ve had to fend off an aggressive takeover bid and been under pressure to boost financial performance. How do you remain committed to a sustainable agenda when faced with such immediate pressures?
There has never been a doubt in my mind that this is the right model for Unilever; it is part of our DNA. Our business model is one of long-term compounding growth, which has served the interests of our multiple stakeholders, including our shareholders. This is reflected in the 290% total shareholder return we have achieved over the last nine years, well ahead of the world index or sector, which again shows that responsible business models can go hand in hand with building shareholder value over the longer term. Those 70% of our shareholders who have held stock for seven years or more — that shows full support of our growth model. I am not sure what our investors would have done, as it never got to a vote, but it is increasingly clear from relative share price movements that there is a belief that we create better value over time.
Pure profit alone cannot be the sole measure of success. With our model, we are showing that growth and value complement each other. Unfortunately, an abundance of money in this world, low interest rates, and an appetite for fast financial return has made the markets more short term. In our case we saw it more as value transfer versus value creation. You could call it financial manipulation. It’s the difference between working for a few billionaires or for the billions of people who need us. I still believe and sincerely hope that over the longer term the billions will prevail.
You are, I believe, the only CEO to ask that all new products demonstrate that they contribute to meeting one or more of the UN Sustainable Development Goals. Is that really the role of business? And what has resulted from that mandate?
As a consumer goods company, the best way we can bring our purpose to life is through our brands and by leveraging our operating model. As a company of 170,000 employees, with 2.5 billion consumers who use our products on any given day, we touch many lives.
The SDGs can be seen as a scorecard on how well the world is doing and also as an enormous opportunity to address some of the world’s biggest challenges. We are getting to the point that, in each of the opportunities identified (be it food security, education, climate change, sanitation, or gender equality), the cost of not acting is becoming higher than the cost of action.
For example, the cost of conflict prevention and wars is estimated at 12% of global GDP, whereas implementing the SDGs only costs 3%–4% of GDP per year. At a time when we need jobs and growth, we have the plan already given to us — more important, a plan agreed upon by 193 countries in September 2015 in New York.
Brands that help solve problems are relevant and accepted. Not surprisingly, the stronger this purpose, the better the brands do. Our sustainable living brands are delivering more than 60% of Unilever’s growth and growing over 50% faster than the rest of the business.
It is very simple: We are orienting our brands to serve the underserved, something we know how to do. And when we do it well, we are rewarded with stronger business results. It requires having a ruthless external focus and caring enormously about the consumers we serve. But above all, it requires us to simply put the interest of others ahead of our own.