Few executives of the big company have thus been linked to the cause of sustainable business Paul Polman managed Unilever in his decade. The launch of a new book by Polman and sustainability consultant Andrew Winston is likely to draw a crowd next Tuesday.
In Not positive: How encouraging businesses thrive by giving more than they take, Polman calls on its fellow business leaders not only to do less damage, but to do more good by focusing on their stakeholders’ long-term interests and taking responsibility for their impact on the wider world.
The blunt Dutchman was never a sugar daddy, and he delivers this message in an uncompromising way. Polman was not only overwhelmed by the net zero-emission targets set by his peers; he also follows their ‘corrupt’ political donations, saying they should pay their taxes and declaring that managers should develop a ‘sense of shame’ about their high salary.
In agreement with the debate on whether ESG is just a distraction from the necessary state interference, the book refers to ‘cowardly’ enterprises that present a climate-friendly image while regulating their associations to kill dirty work (‘Most oil and gas companies say they carbon supports price, but if there is a real policy going on, mobilize the groups they represent to oppose it, ”the authors note).
No business – not even Unilever – is very close to being net positive, says Polman, but technological advances, young passions’ passion for change and the pandemic showing that ‘the cost of unintentionality is now higher than the cost of action’ are hopeful .
Moral money Andrew Edgecliffe-Johnson caught up with Polman to discuss one of the most poignant CEOs of recent times. This V&A has been edited for clarity and length.
Moral money: how do you define a net positive business?
Paul Polman: I put it very simply. Organizations should not create the world’s problems, but actually solve them. One question, if I may: is the world better off because they are in it or not? . . . Even [among] companies that make climate commitments, there are very few [doing enough]. At the moment we are at the most dangerous part in history. This may sound ridiculous. . . but more and more people think they are moving [forward] because they do things differently than yesterday, but the gap between what is needed. . . and the actions taken are actually increasing.
MM: You call it the biggest business opportunity in history. How do you see that it does not threaten the current profit models, but actively increases the profits?
PP: You can look at it for each industry. In the food industry, as you can see [new entrants like] Oatly, Impossible Foods and Beyond Meat are appreciated [billions of dollars], all the value creation is there. The value creation for the big companies, even Unilever, was rather bleak. When you look at energy, all the value creation is in clean energy. In transportation, it’s all in green transportation. All the incumbents are relatively under pressure and all the newcomers are getting incredible valuations. Companies see the market change, the financial markets shift, the cost of capital shifts, the risk equation changes. The good companies see the opportunities in it.
MM: You mention names of companies that do not pay their taxes or have a too sociable relationship with the government, and you say: “CEOs earn too much money”. Have you experienced a setback?
PP: There are some people for whom it is uncomfortable to read, but I also think it shakes them out of their comfort zone. It is very easy to make commitments for 2050, to set goals that they already know they can achieve. The group mentioned in Moral Money – Unilever or Patagonia – this is a too small group of people. The reality is that no more than 20 percent of businesses succeed. So let’s call a spade a spade. . . I think a healthy shame and naming is helpful.
MM: You say that business has played a big role in creating the mess we are in. Does this not undermine your argument that matters – not the government or civil society – should lead us out of the mess?
PP: We can not do it alone: it takes three to tango. The book says that multilateralism does not work. [With intergovernmental efforts like] COP26, the outcomes are terrible. If we could film how these people behave when they are at the meetings, we would be ashamed of our children. . . My point is not to be too theoretical. Now governments are going through a difficult period; [business should] step up and do it for a while – but not for long.
MM: We are already seeing a setback from left and right over the environmental and social efforts of businesses. Does the business have the social license to operate that it has to lead on this agenda?
PP: When we talk black and white, absolutely not. The answer is no, but with any change movement you only need a certain critical mass to create a turning point. What we focus on is creating these tipping points. What I have discovered over time, by falling honestly and rising again, is that you need to get about 20-25 percent of an industry together to find the turning point. I believe you can get 20-25 percent of businesses together to act. [Surveys show that] society puts more trust in the business world than in politicians, even though we start from a low base.
MM: You quote Judy Samuelson [founder of the Aspen Institute’s business and society programme] says a settlement of company tax is coming. How will this change business models?
PP: Businesses benefit from governments that pay for education, from an infrastructure system that you can be happy with, from relative stability and peace and justice, from a social safety net around the system. We have many advantages if we have good government. If so, we must do our part to ensure that these services can be maintained. . . When I came to Unilever, I abolished all our tax havens unless we had a business there, because we spend more time managing our taxes than running our businesses. . . You will find that it is actually a pleasure to pay more taxes because your business is so much better.
MM: Milton Friedman defined the social responsibility of business as making a profit within the rules of the game. How do you define it?
PP: The most important definition for me is a long-term model with more stakeholders with the goal at the core, where you maximize the return to all stakeholders. The social responsibility of the business is ultimately to ensure that we have a healthier planet. If businesses can not show that they have a positive impact on the world, then why should we allow these businesses to stay there? You must put the interests of your children and grandchildren before your personal greed.
MM: Do you think ESG has a significant setback?
PP: What we see is that the world is waking up and a thousand flowers are blooming, but you have no clear definitions. I consider this a moment to raise the standard higher. [The ESG boom] sometimes reminds me of the dotcom era. If you put dotcom behind it [then], it was good with you; if you put ESG behind it [now], you are right. We need to take these flowers and make a bouquet of them. This is a sign of so many things happening that we now need to get some order in the game. We created the game without creating the rules, especially when it comes to the S of ESG.
MM: Are we entering a new chapter of the ESG story where stakeholders want to see more impact? Is there more of a ‘show me’ mood?
PP: Not just ‘show me’, but ‘show me now’. What you do between now and 2030 is going to be crucial. . . We can solve the majority of this [climate] problems by 2030 when we wake up. There is a gap between what people think is possible and what is possible. . .[which]make it the most amazing opportunity. If you want to invest in the long term, this is the best way to protect your business from things like climate change; otherwise there will not be a longer term. Even first-rate believers – and I do not think there are many – would conclude that I should do this to maximize my return.
Are we heading for ‘green inflation’? Larry Fink of BlackRock has been warning for a few months that we are – and that could backfire on the cause of climate change reform. In my latest section I wholeheartedly agree, especially as energy prices in Europe rise – and outline three things policymakers can or should do to fight back. Do you agree? We would love to hear from you. Subscribe to us firstname.lastname@example.org. Gillian Tett
The governor of the Bank of Italy says strong international action against ESG data is needed (Reuters)
Boris Johnson under pressure to take British path to zero emissions (FT)
Alex Edmans: Is Sustainable Investment Really a Dangerous Placebo? (Medium)
Poor ESG standards hamper the ability of funds to do good, research suggests (FT)
Abrdn launches ESG fund with absolute return (FTadviser)
Calpers, Carlyle in ESG Data print for $ 4 billion funds (Bloomberg)