Paul Polman: CEOs should put grandchildren ahead of greed

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Few large company chief executives have become so associated with the cause of sustainable business as Paul Polman did in his decade running Unilever. So next Tuesday’s launch of a new book by Polman and sustainability consultant Andrew Winston is likely to draw a crowd.

In Net Positive: How Courageous Companies Thrive by Giving More Than They Take, Polman calls on his fellow business leaders not just to do less harm, but to aim 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 one for sugarcoating, and he delivers this message in uncompromising fashion. Not only is Polman underwhelmed by the net zero emissions goals his peers have set; he also goes after their “corrupt” political donations, tells them to pay their taxes and declares that executives should “develop a sense of shame” about their high pay.

In keeping with the debate about whether ESG is just a distraction from needed government interventions, the book assails “cowardly” companies that project a climate-friendly image while letting their trade associations do the regulation-killing dirty work (“Most oil and gas companies say they support a carbon price, but when there’s an actual policy in the works, the groups representing them mobilise to oppose it,” the authors note).

No company — not even Unilever — is very close to being net positive, Polman says, but technological advances, younger generations’ passion for change and the pandemic showing that “the cost of inaction is now higher than the cost of action” all make him hopeful.

Moral Money’s Andrew Edgecliffe-Johnson caught up with Polman to discuss one of the punchiest CEO books of recent times. This Q&A has been edited for clarity and length.

Moral Money: How do you define a net positive company?

Paul Polman: I put it very simply. Organisations should not be creating the world’s problems but actually solving them. One question, if I may: is the world better off because they’re in it or not? . . . Even [among] companies that make climate commitments, there are very few [doing enough]. Right now we’re at the most dangerous part in history. That might sound ridiculous . . . but more and more people think they’re moving [forward] because they’re doing things differently from yesterday, but the gap between what’s needed . . . and the actions that are being taken is actually increasing.

MM: You call this the greatest business opportunity in history. How do you see it just not threatening current profit models but actively boosting profits?

Polman: ‘If you see [new entrants like] Oatly, Impossible Foods and Beyond Meat being valued at [billions of dollars], all the value creation is there’ © AP

PP: You can look at it for every industry. In the food business, if you see [new entrants like] Oatly, Impossible Foods and Beyond Meat being valued at [billions of dollars], all the value creation is there. The value creation for the big companies, even Unilever, has been fairly dismal. If you look at energy, all the value creation is in clean energy. In transport, it’s all in green transport. All the incumbents are relatively under pressure and all the newcomers are getting incredible valuations. Companies see the market shifting, the financial markets shifting, the cost of capital shifting, the risk equation shifting. The good companies see the opportunities in that.

MM: You name names of companies not paying their taxes or having too cosy a relationship with government, and you say “CEOs make too much money”. Have you faced any blowback?

PP: There will be some people for which this is uncomfortable reading but I also think it shakes them out of their comfort zone. Making commitments for 2050, setting targets they already know they can achieve, is very easy to do. The group that gets mentioned in Moral Money — Unilever or Patagonia — that’s too small a group of people. The reality is at best 20 per cent of companies get it. So let’s call a spade a spade . . . I think a healthy shaming and naming is useful.

MM: You say business has played an outsized role in “creating the mess we’re in”. Doesn’t that undermine your argument that business — not government or civil society — should lead us out of that mess?

PP: We can’t do it alone: it takes three to tango. The book is saying multilateralism isn’t working. [With intergovernmental efforts like] COP26, the outcomes are dreadful. If we could film how these people behave when they’re in the meetings we’d be embarrassed for 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’re already seeing pushback from the left and the right on companies’ environmental and social efforts. Does business have the social licence to operate that it needs 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 tipping point. What we are focused on is creating these tipping points. What I discovered over time, by frankly falling and standing up again, is you need to get about 20-25 per cent of an industry together to find the tipping point. I believe you can get 20-25 per cent of businesses together to step up. [Surveys show that] society puts more trust in business than they do in politicians, although we start from a low base.

MM: You quote Judy Samuelson [founder of the Aspen Institute’s business and society programme] saying a reckoning on corporate taxes is coming. How will it change business models?

PP: Business benefits from governments paying for education, from an infrastructure system that you might be happy with, from relative stability and peace and justice, from a social safety network around the system. We have a lot of benefits from having good government. If that is the case we have to contribute our fair share to ensure these services can be maintained . . . When I came to Unilever I abolished all our tax havens unless we had a business there because we were spending more time running our tax than running our businesses . . . You will find out it’s actually a pleasure to pay more tax because your business is so much better.

MM: Milton Friedman defined the social responsibility of business as being to make a profit, within the rules of the game. How do you define it?

Milton Friedman defined the social responsibility of business as being to make a profit, within the rules of the game © FINANCIAL TIMES

PP: The main definition for me is a longer-term multi-stakeholder model with purpose at the core, where you maximise the return to all stakeholders. The social responsibility of business ultimately is to ensure we have a healthier planet. If businesses cannot show they’re making a positive impact on the world, why should we let these businesses stay around? You should put the interests of your children and grandchildren ahead of your personal greed.

MM: Do you think there’s a meaningful backlash to ESG?

PP: What we’re seeing is the world waking up and a thousand flowers blooming, but you have no clear definitions. I see it as a moment to raise the standard higher. [The ESG boom] reminds me sometimes of the dotcom period. If you put dotcom behind it [then], you were fine; if you put ESG behind it [now], you’re fine. We need to take these flowers and make a bouquet of them. It’s a sign of so many things happening that we now need to get some order in the game. We’ve created the game without creating the rules, especially when it gets to the S of ESG.

MM: Are we entering a new chapter of the ESG story where stakeholders are demanding to see more impact? Is there more of a “show me” mood?

PP: Not only “show me” but “show me now”. What you do between now and 2030 is going to be crucial . . . We can solve the majority of these [climate] issues by 2030 if we wake up to it. There’s a gap between what people think is possible and what is possible . . . [which] makes this the most wonderful opportunity. If you want to invest for the long term the best way to do that is to protect your company from things like climate change; otherwise there isn’t going to be a longer term. Even diehard shareholder primacy believers — and I don’t think there are many of them — would conclude that I need to do that to maximise my return.

Smart read

Are we heading for “greenflation?” Larry Fink of BlackRock has been warning for several months that we are — and this could set back the cause of climate change reform. In my latest column I heartily agree, particularly as energy prices jump in Europe — and lay out three things that policymakers could or should do to fight back. Do you agree? We would love to hear from you. Write to us at moralmoneyreply. Gillian Tett

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