Paul Polman: Courage

0:00The values with which you run a business are very important and you need to be very grounded in those and understand those. And yet so many companies struggle to verbalize their values. You know, why are you here? And what is important to you? By the smallest pressure on the financial results, they might go back to short-term behavior whilst having preached a long-term behavior before. So crises and these challenges that you have externally flush out, I think, the leaders from the laggers or the ones that are truly committed to it versus the ones that pay lip service to it.

0:44Welcome to the Future in Sound podcast. I'm your host, Jen Wilson. This is a podcast where we discuss people, planet, and profit. In each episode, we'll learn from world-leading experts who can help us see the future we want and our role in it.

1:10This is episode 39, Courage.

1:19Paul Paulman is an internationally recognized leader in sustainable business and a co-architect of the UN Sustainable Development Goals. As CEO of Unilever from 2008 to 2019, he proves that purpose-driven strategies deliver exceptional results through board roles, impact investments, and his best-selling book, Net Positive. Paul continues to inspire responsible leadership and drive global progress toward a sustainable future.

1:53I should also say that I've been a big fan of Paul Paulman for probably 15 years, and it's a real honor, Paul, to have you on the podcast today. Welcome. No, welcome to you, Jan, as well, and thanks for the opportunity. I've been looking at the work that you're doing with Vico, and I'm equally impressed. That means a lot. It really does. And just getting into the conversation, I mean, many listeners will be thinking, gosh, we're facing a lot of turbulence at the moment when it comes to sustainability, geopolitical changes. You're a true pioneer in corporate sustainability. And, you know, many investors and corporate leaders that I speak to have seen the headwinds against sustainability mount rapidly.

2:34I'd like to start by asking, how should business leaders think about the turbulence they're facing when it comes to sustainability? Yeah, first of all, Jen, I would say the turbulence is not new. We've had always turbulence. If you look at any history of a company that's been around for a long time, they had to, you know, even during my tenure in Unilever, which lasted a little bit more than 10 years, we had to deal with a financial crisis when I came in, the Eurozone crisis, political shocks like Brexit, COVID, food price volatility, and many of the environmental signals were already there causing stress in our system.

3:12So I don't think it's new. And there's always a lesson in all of that for anybody. And that is in turbulence, you are better off if you have a good strategy. And if you think a little bit about some of these things happening in the environment and then you double down, you don't quit by the first setback or bad news that you're getting. And the leaders there that have the courage and that stick to their strategies, I think will prove over time to do better than the ones that go back and forth. Not different from the ones that hop in and out of the stock market by the smallest noise or turbulence that is happening.

3:56So I don't think business has ever operated in calm seas, to say that and true leadership is not learned in the harbors. It's when you're in the storms, obviously. So in all of this, there are some things that I think are important to keep in mind that won't change. First of all, the values with which you run a business are very important and you need to be very grounded in those and understand those. And yet so many companies struggle to verbalize their values. You know, why are you here? What is important to you? So by the smallest pressure on the financial results, they might go back to short-term behavior whilst having preached their long-term behavior before.

4:37By the pressures on the bottom line, they might stop some of the investments they need to make in making their business models more resilient, which they know are needed for long-term survival. So crises and these challenges that you have externally flush out, I think, the leaders from the laggers or the ones that are truly committed to it versus the ones that pay lip service to it. But, you know, there are some things that don't change. And that's important to mention to the audience. You know, science doesn't lie. And science is very clear. And I've always been a big believer in science. We've created a group, the Planetary Guardians.

5:15we're looking now as science is being attacked on on keeping that very much to the foreground that's very important environmental destruction continues we know deforestation is going up we know carbon emission is going up we know water scarcity is increasing we actually know that more people are falling back into poverty or dropping out of the middle class so these things don't change and they're not subject to who's in any political office you know climate change frankly doesn't care who's in the White House, if I may be honest. So it's important that you maintain that true north and that sense of direction.

5:53And then, you know, the citizens of this world, frankly, are crying out louder by the day. They want healthier, better lives. They want better lives for their children, more sustainable lives, and frankly, a fairer economic system that is more inclusive and not to the benefit of a few. So I think in that environment, the only question is not what is the next crisis going to be or how do we focus on the short term to survive but the question is really how do you prepare for it and what I found the most useful thing to do is first to work on your own resilience I don't think you can run a sustainable company or a purposeful driven company if you don't have your own purpose if you're not sustainable yourself which also means investing in your own health your physical health, your emotional health, your mental health, but most importantly also your spiritual health.

6:49And I think that's a pyramid we always need to continue to work on. The other thing that is important is to continuously create a high level of awareness of what is going on in the world and sort of an engagement with that to do something about it. Awareness without engagement doesn't mean anything. So read a lot, go out, you know, talk to the people that you serve, be in the communities. When I was running Unilever, 70, 80 percent of the time I spent in the markets, that's where the citizens were. And that's where the issues were prevalent and the ones that gave you ideas on how to respond to it.

7:23The third one is that think about this turbulence as opportunity, not a threat. And look at how you can actually grow your businesses. The fact that one and a half billion people don't have access to toilets and have still to deal with the issues of open defecation is an enormous opportunity. to grow your markets. The fact that 5 million children die before the eighth of five from infectious diseases is an opportunity. The first one on toilet, bowl cleaning and all that. The second one on bar soaps. So all these challenges are tremendous opportunities and you need to seize those. And the ones that do, I think, are better placed than the ones that don't.

8:02The next element is probably, you know, be clear on what your purpose is or what your true north are. Bill George wrote a wonderful book called True Nurse, in which he talks about your own personal crucibles or what is important to you. But you have to live your life, not by the political up and downs or the PR nonsense or, you know, many of these things, but really live truly to your values. And I think it is clear from many of the surveys that have been done that many companies lack that sense of purpose according to their employees. In fact, the majority of employees think actually that you don't have that purpose.

8:43And what you see in the U.S. is a good example right now where pressure is especially high. There's no reason to deny that many CEOs waver from previously made commitments, that they rather follow the political course than staying true to their values or what is true to their companies. So smart companies stick to their values and they continue to do what they know is needed in society. I've talked many times about my favorite slogan, which is the need to make the dust versus eat the dust. I think that's very important. There is a sense of uncertainty there, a sense of uncomfortableness, but it's better to take the initiative on things that you know need to happen anyway.

9:25And I've talked lately more about the ABCs of leadership in this environment, which undoubtedly is more challenging again once more and changing rapidly. You need what I call the ABCs of leadership, adaptive leadership. You need to know what is going on in this environment. Why did these people get elected? Why were so many people dissatisfied? what is on people's minds more than anything else? Have we communicated clearly about climate change or have we made it too abstract, too far removed? Did we put the people in the center of everything we did, adapt to the current realities and figure out why we have failed so far to address many of these challenges?

10:03And then the B stands for bridging. You know, people might have different opinions. You might like them, not like them, have them over at your house for dinner or not, but you better spend a lot of time understanding them and bridging. because we can only solve these issues together and not alone. And it takes courage to do that bridging. I understand that. And the C actually comes from adapting and bridging, which is cooperating. I personally believe that the challenges that we face now are of such magnitude that nobody can do it alone anymore. So those are what I call the ABCs of leadership.

10:37And in my book, we obviously talk about the five traits of leadership, which are, I think, equally important. When we did our study of successful companies and non-successful companies, many of the things I just talked about came out. A strong sense of purpose, a strong sense of empathy, purpose and empathy together, drive courage, the ability to unlock energy in others and to work in these broader partnerships are probably some of these traits that successful companies and often symbolized by successful leaders process. It's really interesting. One of the topics that I want to pick up on there, Paul, is the topic of bravery.

11:17Obviously, CEOs, even if we put sustainability to the side for a moment, even that's the core topic of this conversation, there's a certain amount of bravery and consistency required in order to really pursue and go after a strategy. And usually, there are targets associated with that. And what we're seeing right now is some leading companies are walking back on targets. You've shared the importance of setting bold targets to galvanize action in the past and shared that even if you hit 90 % of a really bold target, that's worthwhile in setting that bold target. How can leaders maintain ambition despite the rising politicization of sustainability and the temptation to walk back on these targets?

12:01I think it was Leo Burnett who said, if you reach for the stars, you don't end up with mud in your hands. I've always believed when I came to Unilever, I've always believed in the principle that business is there to solve the world's problems, not create the world's problems. And CSR, which often if you read any sustainability report, it basically is CSR talking about a little less carbon in the atmosphere, a little less plastics in the oceans, or a little less deforestation in your value chain. But as you know, we've already passed six of the nine planetary boundaries that define our overall health.

12:34We're actually living well beyond our means. World Overshoot Day, which is the day that we use up more resources than the world can replenish, was actually in July this time. Every day after, we're literally stealing from future generations. So we need to think regenerative. We need to think restorative. We need to think reparative. And that requires both targets. That requires feeling uncomfortable. I've said many times, if you know how to achieve your targets, you're playing not to lose versus playing to win. And this is what most companies do. They go to their PR departments, they go to their legal departments, and they say, I make commitments on climate change, or I make commitments on human rights, if you're lucky, or many other things.

13:15if I already have the plans or in some cases, if I already have implemented it. Otherwise, I'm getting attacked by whatever NGO or whatever legal system or governments. Nothing could be farther from the truth. What you actually see is that companies that set targets in line with science, that set targets where they often don't even know how to achieve it yet, are actually companies that are, in the end, getting better results and actually moving the needle faster than anybody else. In Unilever, when I came in 2008, when it was by no means clear why you would set sustainable targets, why you would deviate from looking only at the shareholder to all the other stakeholders and trying to optimize the well-being of all of those, including planet Earth and future generations.

14:02There were no data. The financial market was not convinced. But yet we set targets to decarbonize our business model, to make our whole value chain sustainable, to extend our diversity efforts, not only to our own company, which we have achieved as one of the first in the UK, with a totally gender-balanced sport, etc., but also in our whole value chain. So these targets made us feel uncomfortable, but it also made us human. When we went out there and said, this is the goals that we're setting, but frankly, we don't have all the answers and we can't do it alone. All of a sudden, it made us human.

14:40We got many people who wanted to work with us on these targets because they felt it equally important. We formed enormous partnerships from UNICEF to Save the Children to PSI on Water and many other organizations that helped us achieve these objectives. We could have never reached 1.2 billion people in hand washing, which made our basketball business grow double digit over these 10 years, year after year after year. We could have never reached these 1.2 billion people and saved millions of lives, were it not working with USAID, with DFID, with the Gates Foundation, with UNICEF and many others to do that.

15:16We could have never reached 90 % of our food products being sustainably sourced and working with smallholder farmers, hundreds of thousands and creating livelihoods, were it not with all these partnerships that made that financially possible as well, but also reached the bottom of the pyramid if you want to. So not to be naively optimistic, but it is in the bolder targets that science actually direct us to that often the answer is there. And let's be clear on this one. Walking back is probably right now the most dangerous response you can choose from all perspectives. You know, investors want companies to be resilient and future growth.

15:59They might have gone out of some of these bold commitments under, you know, the net zero alliances or whatever you have. But in essence, they're looking at their portfolios from a risk return point of view, and they know what is happening. Citizens are looking for companies that behave responsibly. Employees, increasingly, the Gen Zs and the others who enter the workforce want to work for companies that are responsible. And what we did show in Unilever, I think, at the end of the day, that brands with purpose that had put it at the core of their strategy were not only growing faster, but were also more profitable.

16:35And I think when that happened, the penny dropped for many of us. So I think it's a firm belief that you need to have in this environment that simply doing the right thing goes beyond catering to your shareholders only, if I may say it that way. Hey, it's Jen. I just wanted to take a quick moment to let you know a bit about RICO and what we do. We're a tech-enabled advisory firm that helps private market investors and companies measure sustainability metrics using our software platform. We also help you to set targets and focus your efforts on sustainability areas that really matter for your business.

17:16And finally, we help clients to translate all of this work into your core value creation strategy or your business model. Check us out at re.co.com to get in touch. All right, now back to our conversation. So at Ricoh, we spent a lot of time working with companies and investors on creating a clear link between sustainability and financial value creation. How did you consider this while CEO of Unilever? And what steps would you recommend CEOs take in considering this link between sustainability and value? Well, as you say, Janet, it's not a fair enough, it's an enhancer. Obviously, when you run your company, and we've seen that in Unilever as well, you need to hire the right people.

18:02You need to have the right organizational structure. You need to invest in R &D. You need to have discipline. You need to do the right M &A. And if all these things are missing, your business results are not there either. But I think there's overwhelming data out there now that if you do all these things well, call it the basics of leadership, of running these bigger companies, then putting sustainability at the core of your business increases so much more your chances of success and that's also one of the reasons why in aggregate be it in the private equity business which you are more familiar with where they're increasingly starting to embrace these principles because they know they have to exit in seven eight nine ten years and want to prepare these companies for a future we know will happen but also in in the rest of the the publicly traded companies, they are consistently higher valued by the financial market if they put sustainability at the core of their strategies.

18:58And it starts with a belief. It starts with a belief that the best return for shareholders over the longer term is achieved by also ensuring that all your other stakeholders are satisfied, that your employees are happy, that the communities in which you operate, your suppliers and your value chains. As I said, planet Earth on which we depend for the success of our businesses, the air we breathe, the water we drink, the materials we use. I mean, it could not be more obvious that we are an integral part of nature and a strategy that creates wealth by destroying on what we depend in the first place.

19:37It's just not a good thing. You know, Hubert Reeves said it very well, a philosopher from Canada, when he said man is the most insane species. He worships an invisible God and destroys a visible nature, not realizing that the visible nature he destroys is the invisible God we worship in the first place. So if we don't have that realization, we won't get there. So where do we start? Well, in Dunilever, actually the first year, I did some basics in getting the business back in shape, which was not in good shape at that time. But I spent a whole year with my friend Bill George, who now teaches at Harvard, who had written this book, True North, that I talked about, on working on purpose.

20:20We looked at our own purpose. We looked at our purpose to influence others. We looked at purpose to get results. It's still the most popular training in Unilever, actually, today. But out of that came the Unilever Sustainable Living Plan, a plan to decouple our growth from environmental impact, increase our overall social impact, a plan that was quite courageous. But it came from that courage, where people knew that we had a role to play in society beyond the role that, despite being a very responsible company even then, but well beyond the role we had been playing until then. Then you look at your total impact.

20:58We did that. Many companies still think you can outsource your value chain and also outsource your responsibilities. That just doesn't work anymore. So we looked at our overall impact on all of our businesses. What is the impact on water, on CO2, on waste, on human rights, etc.? And we measured them and we looked at what is material. Where can we have the biggest impact, even as a company? So we first brought our own house in order. And then we had to build trust. And only trust can only come from transparency. So we went out there with 50 targets. Some people said it's a little bit too much. You will get attacked.

21:34If you don't all achieve them, you'll lose your job. Nothing further from the truth. By going out there with these targets, we created these broader partnerships. And as these partnerships were created, we started working on the broader systems changes. How can we work with the Indonesian government to stop deforestation related to Palma? How can we work with Brazil on the tropical forest and maintain that? How can we work with governments on water sanitation and hygiene, what is called wash programs? And that became in India, for example, the Swatshbarat, the Clean India program. How can we work in Ethiopia and ensure that any kid that goes to school has oral care, has nutritional foods, has a health and sanitation that we all expect anywhere in the world?

22:22So we became more involved in these broader systems changes of driving society. And it's interesting as a company, when you start to solve the broader issues and not only look at your own self-interest, not only do you expand your markets and grow your business, but also you start to attract the best people. Your corporate reputation goes up. Unilever's reputation at that time was twice the level of companies even like Patagonia. Two million people were applying to us every year to work. So when you stand with the world, the world stands with you. Even when you get attacks of different economic models like Kraft Heinz at that time, which are purely driven by a few billionaires wanting to earn a few more billions, destructive for society, as has shown.

23:08These are not long term models. I call them at that time already Ponzi schemes. Then you see that everybody is behind you and said, no, you know, you do have a function. We like to criticize companies. We like to criticize multinationals. We always want to get them to move a little faster and higher on some of the things that seem to be, you know, not fully at the speed needed. But at the end of the day, you get rewarded for doing these right things. And that is a strength, I think, that any company should aspire to if they want to be long term successful. And then, you know, I always said that the task of a CEO is to work on the forest, not in the forest.

23:48we spend a lot of time on looking, especially in middle management, etc., what prevents us from moving faster. And it's certainly not blaming people for not moving faster. You have to look in your own cabinets and say, what am I doing to prevent these people from moving faster? That's the role of a leader. And we put enabling mechanisms in place. One of them, for example, was a bolus in quarterly reporting, because I felt people needed to think long term. We moved our compensation system to five-year periods, very unusual at that time. And everybody was paid on a one, two, or three-year basis.

24:22And it was casino grab-all, in my opinion. We stopped giving guidance because we didn't want to live in this fufu economy where we were chasing fake numbers. And we started just reporting on what we were doing and our plans. And as we did that, we started to be more strategic in our communication, attracting more strategic shareholders, changing our shareholder base as a result of that. But also our business model started to change. Likewise, we put in place enormous programs with our suppliers in the value chain. We called them partner to win, helping them be successful. And what we found was they were equally motivated by what we were doing.

24:57So the right innovation started to flow to us. And the right partnerships took care of the economics. You take a lot of friction out. You start to work seamlessly. We became the lower cost producers. and it actually drives a performance culture in the end. You know, food has a lot of food waste. We were one of the biggest buyers, believe it or not, of, let's say, tomatoes, for example, with our products. And one out of four is probably lost in the whole value chain, regretfully. You know, food waste is 30%, 40 % of all the food produced. In Unilever, we were probably more successful attacking that than anybody else.

25:35Most other companies were looking at it at a cost saving. We can give the shareholders a little bit more money. we can show higher profits by cutting food waste. I never really, was never really important to me. We said, you know, there are 950 million people going to bed hungry, not even knowing if they wake up the next day. How do we have the audacity to waste food? So that creates a motivation to drive things beyond any other efforts that I'm at least familiar with. So that sense of purpose, that sense of embedding it into everything you do in the core ultimately of your brands, if you're a consumer goods company, is what is probably the most important thing.