On May 10, 2016, New York University’s Stern Center for Sustainable Business and The Huffington Post hosted a conversation on “The 21st Century Corporation.”
The discussion featured Tensie Whelan, Director of Stern’s Center for Sustainable Business, and Jo Confino, Executive Editor of The Huffington Post, along with Paul Polman, the CEO of Unilever Plc (UL). Consumer products behemoth Unilever produces over 400 brands globally, from Dove and Closeup to Ben & Jerry’s and Cup-A-Soup.
The conversation focused on the next generation of capitalism. Specifically, Polman, Confino, and Whelan discussed how companies, in providing valued services to society, ultimately provide more value to themselves.
A Symbiotic Balance
Polman opened the discussion by emphasizing, “Profit and principal must co-exist.”
These words framed the theme of his message that companies tend to ignore issues of environmental sustainability, and when it does fall on their radar, “they’re using 20th century thinking.”
From Polman’s point of view, shareholders are simply given too much stake in corporate decision-making.
“There is too much shareholder primacy and pressure on the short term,” explained Polman, “You can’t just blame the financial markets… We need to educate boards on fiduciary duties and think more long term.”
Debunking Quarterly Reporting
Polman’s stance on the excessive power of shareholders in controlling a company calls into question the need for quarterly reporting.
Corporations are kept from being sustainable because “the drivers of change are economic forces over morality… because personal greed is still too dominant.”
Polman pointed out that the average life of a public company is 17 years, which isn’t terribly long, and this period is only growing shorter.
Meanwhile, the average CEO today serves only four and a half years. This amounts to approximately four CEOs in every company’s lifespan – that’s a pretty rapid overturn.
CEOs “are checking out,” Polman explained, in hopes that “they don’t face an activist investor before they leave” the position.
Yet, investors are asking for more clarity on risk factors regarding sustainability and its boundaries.
Unilever, in an effort to maintain longevity and a reliable, steadfast corporate team, is engaging in long-term policies. For instance, it’s employing more senior management from the Far East where the market and corporations overall face less short-term pressure and offer more long-term planning.
Addressing the next big change for corporations, Polman stated, pointblank, “The cost of not acting becomes higher than acting.” He continued by pointing out that “CEO’s are not bad people… but they face boundaries.”
All of Unilever’s sustainability goals have a three-year payback, which further validates the inconsequentiality of quarterly reporting.
The Challenges and Opportunities of Emerging Markets
Sixty percent of Unilever’s business is in emerging markets (EMs) and, by the time Polman leaves his position as CEO, it will have risen to 75%.
With EMs “you can leapfrog into green energy. China, as an example, has a competitive advantage in solar energy,” Polman explained. The challenge for many EMs, he argued, is that “the skill sets and funds are not there.”
“We need functioning states; that’s a big unlocker,” Polman added. In fact, $90 billion per year disappears out of Africa, he claimed.
Unfortunately, galvanizing governments on the issue of poverty and hunger, Polman explained, “is not a sexy political agenda. We need to just be adults and work together. It’s not a question of money – we have enough of that.”
The drive to sustainability led to the launch of Unilever’s global leadership development center: Four Acres Singapore.
The $80 million complex represents Unilever’s largest investment in leadership development, globally, thus far. It serves as the training hub for some 900 international senior management staff each year, all while tapping into the insights and expertise of the city-state’s leading academic institutions – including INSEAD Singapore and the Singapore Management University.
The Economy of Transparency
Polman argued in favor of putting a price on carbon in order to quantify it such that institutions can gain back the trust that they have lost.
Today, according to surveys, only 30% of millennials want to work for corporations. In fact, 60% of global gross domestic product (GDP) currently comes from the private sector.
“The only way to get trust is through transparency, and that has to be earned,” Polman continued.
Unilever’s next mission is to eliminate poverty within the next 15 years.
He put this goal into perspective: While a whopping $9.6 billion is spent on violence prevention annually, if we were to simply give women the same rights as men, the global economy could unlock $28 trillion in benefits.
Further, there’s $800 billion of global food waste per year, yet to feed the number of people who go hungry every night costs $80 billion – an unfathomable imbalance.
“We need to change the theory,” Polman expounded, “all you need is at least 20% of people to believe in it. Millennials can lead the way. Wealth in 2020 will be quite different as they will be a dominant force.”
Having a Positive Impact
Polman reflects back on the day he was hired by Unilever in 1979. Back then, it was his job to scour the budget and find all the ways in which Unilever could cut costs. He joked, “Every day I check to see if the job still exists.”
Today, however, Polman describes the Unilever philosophy as being focused on having a positive impact on society so that society says, “We welcome you.”
Much of the company’s emphasis is on resource sustainability, starting with energy.
Invested in Going Green
For the first time in history, global investment in green energy has surpassed that in fossil fuels. Plus, using green energy saves the company $600-$700k million per annum.
Polman is dedicated to securing Unilever’s role as a positive influence on the planet as well as the market. He’s dedicated to green energy, fair taxation, and innovations that help all kinds of people. Further, he’s keenly aware of the habits and patterns of consumers all over the world.
His efforts will attempt to maintain Unilever’s sales and success, as, by 2020, millennials will have the majority of the U.S. vote. This rising generation is becoming more vital to the economy, and 80% of millennials want to work towards solving the issue of climate change.
All of Unilever’s factories are zero-waste-to-landfill and they have eliminated the use of coal as an energy source.
He understands that climate change is a serious concern for energy, oceans, and cities. One billion people across the globe make their living from the planet’s oceans. Meanwhile, people are increasingly moving towards urban landscapes. The population of cities is projected to grow from 3.5 billion to 5 billion by 2030.
Despite this overwhelming migration, Polman pointed out that while most soap on the market requires 30 seconds of water use for proper disinfecting, “most of the world doesn’t have the luxury of so much water.”
As a result, Unilever, thankfully, has created a product requiring only 10 seconds of water use.
Further, there are 230 million unemployed people internationally with only 20 million employed annually. As such, Polman argued in favor of “taxing goods and not labor” in order “to reconfigure our economic system.”
A Culture of Sustainability
The performance culture of sustainability is imbedded in Unilever. In fact, about half of Unilever’s growth last year came from its sustainable living brands, which grew 30% faster than the rest of its divisions, according to its annual progress report.
Unilever’s goal is to halve the environmental effect of both the production and use of their products by 2020 in an effort to continually reduce the environmental impact.
Distinguishing NGOs and Corporates
Polman admitted that, eight years ago, he was told by trusted sources that he should never “talk to non-government organizations (NGOs) as they cause problems.”
On the contrary, he explained that, today, “we need systematic thinkers; we need concrete action statements. Business leaders are overwhelmed by the number and influence of NGOs.”
Unilever has countless NGOs begging to be a part of its success. In order to weed through the options, Polman revealed his sweet spot for farmers, particularly mono-crop farmers that “always get the short end of the stick… and are captive to factory owners.”
Good NGOs emphasize the importance of creating a value chain, with a focus on training and social compliance.
“Leadership is all about giving. When you reach that, you will lead a very balanced life,” Polman assured. “Be purposeful in life. And create a passion around it.”
This is certainly refreshing to note.