Paul Polman on Capitalism, Leadership & Sustainability
Paul Polman is stepping down as CEO of Unilever, and the business pages are full of tributes, led by the FT, which calls him ‘the standout CEO of the past decade’. I interviewed him in 2016, as part of the research for How Change Happens. We met in Paul’s office in Unilever House, its cavernous Thames-side HQ. Inside the art deco exterior, everything had been ripped out and modernised – all glass and walkways. We sipped mint tea as dusk sank over the London skyline and Paul talked non stop for 70 minutes, providing insights into the thinking of a global corporate mover and shaker:
On being CEO: I don’t short change Unilever, but how I use the rest of my time is up to me – perhaps half of my time [is for a wider advocacy role], but if I work 100 hour weeks, Unilever still gets more than it did from previous CEOs.
On Leadership: A leader is first and foremost a human being – there are many CEOs that don’t qualify in my opinion. There are two big issues – a chronic lack of leaders, and a chronic lack of trees. Leaders bring a morality, that it is not about yourself, and that is shown through respect for others. The faith in big men is misplaced. Rosa Parks was a true leader – she didn’t have a private jet.
Any leader makes decisions that have winners and losers, so by definition, we are in the business of pissing people off.
On Short Termism and Shareholder Capitalism: Short termism has crept into everything. We have become slaves to the financial markets – you can’t solve the world’s problems based on quarterly returns (QRs). Businesses were created to solve the problems of society. Lord Lever created bar soap because Victorian Britain needed it, not because of QRs. We have to put long term sustainability as the true fiduciary duty of boards, but they have poisoned the well of fiduciary duty. It’s written in many laws, but not acted upon. We have to wean ourselves off that. Our shares went down 8% when we stopped quarterly reporting. I got a lot of pressure. But our share price has more than doubled over my 7 year period because we’ve delivered results.
The Case for Sustainability: Business is not there for the shareholders; it has to find longer-term solutions. If society doesn’t function we need to do business differently, a different form of capitalism. There are big issues coming up – climate change, inequality, unemployment, social cohesion. Governments are not responding and business is paying the price – economies are not growing.
Companies that operate in a more responsible way on Environment, Social and Governance (ESG) are more successful long term. If you publish more, take into account climate change or water scarcity, your plans are more robust, you publish more data, you reduce risks for investors. Then your cost of capital will be lower.
On Multi-Stakeholder Approaches: The job of a CEO has totally changed. You have to be systemic thinkers, able to work in partnership with national governments. I don’t want to work with just businesses any more. I was asked to chair a food security task force – they asked me to get a group of business people to write something for the Business 20. I said no, because if it’s just getting recommendations from business, they would have defended first generation biofuels, no-one would have thought about land rights, the whole issue of women would not have come in – that’s why I asked Oxfam, FAO, WFP, Greenpeace. Then I invited some companies. I would not do anything in Unilever without a multi-stakeholder approach. We have to work with government and civil society.
We need to create systems that are much more agile – you can predict maybe 1/10 things if you’re smart, but the other 9/10 something happens to which you need to react, new competitors, a natural disaster, a new law is passed – things that happen outside your control. And the world is getting more volatile everywhere. What you have to do as a company is that you have a quick feedback loop from the market that picks up these signals, and a structure that is very agile and externally focussed. So we have delayered and decentralized to the countries. It’s the supertanker to speedboat transition, while you are moving.
On Corporate Social Responsibility: What we did was not CSR, it was at the operating model. We moved from projects to an integrated business model, and linked it to the success of the brands. Every brand has a strong purpose now – Domestos wants to build 25m toilets. That’s partly because the purpose means that we are much more connected (with the local context) – that’s always the challenge in a big company. If the environment changes we get a quicker signal. Many companies which are big are just obsessed with themselves. If your brand is toilet cleaner but you’re responsible for tackling open defecation, you start to think about your business quite differently from if your role is just to sell more toilet cleaner. When you are driven by not wanting anyone to go to bed hungry, you tackle food waste differently to when it’s just a cost savings programme.
On Climate Change and The Future: In the business community, there is much more advocacy on climate change – a whole new generation, thinking differently. The evidence and opportunities on climate change are overwhelming; the millennials want purpose driven businesses. There is real change happening. When there are abuses, we should go after them, but we should rejoice in the energy, even on climate change. The Paris Agreement is an amazing agreement – one of the most amazing that the world has done. How you make it come alive is the challenge, but it worked by focussing on the positive and embracing whatever came in.