Paul Polman talks about authenticity, transparency, a sense of purpose in business and why profit warnings don’t worry him
CEO of Unilever Paul Polman addressing the Nutrition for Growth global hunger summit in June, 2013.
Paul Polman, CEO of consumer goods multinational Unilever, is considered by many to be the leading light in the corporate sustainability movement.
Criticising the financing sector for being self-obsessed and self-interested, he calls on all CEOs to recognise they “cannot be a bystander in the system that gives you life in the first place”. Polman brushes aside the profits warning Unilever made this week and says it will not sway him from taking a long-term approach to the business.
What are the main ingredients for an effective leader?
First of all, you need to feel comfortable about who you are. So a good leader, I think, is a good human being in the first place. Too often we are being programmed by the environment around us to behave differently. But I think a true leader is an authentic person, who feels good about who he is.
I don’t have a problem crying when I need to cry. There’s nothing wrong with that and showing that you care because it’s the same in any organisation; if you show that you care, others will care for you, 100%.
Often people ask me what my job is and I say honestly it is to make others successful, and the more you do that the more you will see that you create prosperity.
What is the role of humility in leadership?
Working together on solving something requires a high level of humility and a high level of self-awareness. When we launched the Unilever Sustainable Living Plan, people inside the company were very worried about exposing ourselves. But I did something there that I didn’t realise at the time, but that actually made a big difference, by just saying publicly I don’t have all the answers on how to do this and I can’t do it alone. I still say it today, and actually it’s becoming more difficult as we progress towards the 10-year goal that we set.
Is it important to have a sense of purpose?
I know we all have our jobs, but that has to come from a deeper sense of purpose. You have to be driven by something. Leadership is not just about giving energy but it’s unleashing other people’s energy, which comes from buying into that sense of purpose.
But if that purpose isn’t strong enough in a company, if the top doesn’t walk the talk, then the rest will not last long. The key thing for CEOs is to make that a part of your operating model.
We all need to be way beyond CSR, and yet we still talk about it as CSR, which is basically activity-driven but not holistic. The concept of shared value is good but I think it is a post-rationalisation of not getting in trouble with society.
Now some people will say that’s too pessimistic but I think it’s realistic. Companies will now have to provide solutions to some of these challenges and be co-responsible and that’s a higher level than that we have talked until now. Unfortunately not many see it as being absolutely crucial but it will come, I’m convinced.
Do you believe you are being courageous by pushing the boundaries of business and sustainability?
I have a very fortunate situation in that a lot of risks around me are taken away by the sheer size of Unilever, by our culture and heritage. So I have a lot of safety nets around me. The real heroes are the ones who actually do more but don’t have that. And there are many of those. I just get a disproportionate share of voice, perhaps.
How important is transparency in driving change?
It is about building trust and for this trust you need leaders who are very comfortable with transparency.
We said to Barbara Stocking before she left Oxfam, why don’t you just go to Vietnam and do the whole social audit of our supply chain? We have 200,000 suppliers and audit 20,000 suppliers, probably more than any other company, but there’s a capacity limit to that, otherwise you go bankrupt.
We published Oxfam’s report, which included criticisms, and we say this is a great thing because it helps us be better and it helps Vietnam be better. You didn’t see the press jumping on us. You didn’t see people saying that Unilever was irresponsible. In fact I’d argue perhaps the opposite. So you create this transparency that builds this trust, which ultimately is the basis for prosperity.
What is the role of partnerships in finding solutions to the complex problems we face?
I’m not a CEO who has actually much power to be honest. I have a convening power, but I use that to find the right partnerships so all the time I bring in new partnerships to the company and then there are many specialists who know much better what to do.
It’s a different way of working. When I was chairing the Food Security Taskforce for the B20, the NGOs brought in a lot of things I’d never thought about. We would not have talked about land rights if Barbara Stocking had not insisted on land rights, which now sounds so obvious. We would not have put the focus on women in agriculture and small farming, which now everybody is preaching about, but that was already two years ago on our recommendations. So it becomes much richer. And as the business community also educates itself around that, you get solutions that are much better.
How important is it that leaders can work with uncertainty?
These are very difficult times; it’s very uncertain going forward. You get currencies that go up and down 20%, you get markets that shift very rapidly. So you need to have people who can feel comfortable dealing with a Vuca world – volatile, uncertain, complex and ambiguous.
The problem is, you talk food security and you hear many different solutions. Some say: how can you have food security if girls cannot go to school? While others say: if I don’t have energy, I can’t have food security. Or, we need to have water because otherwise we don’t have food.
Then a CEO goes, oh my gosh, how do I participate in this? So what you need is leaders who are able to take this complexity and distil it in simplicity, and are actually able to drive that to action. That’s a skill that you have to learn. I’m not good at it either, to be honest, but now we have created some ecosystems, the global Consumer Goods Forum, the World Business Council for Sustainable Development and WEF which are able to turn that into a positive flywheel that creates momentum.
How important is diversity and inclusiveness in driving business transformation?
It’s all about the way we value things. If you look at the female brain, it’s differently developed from the male brain; there is a better balance between the left and the right side. So there is more empathy, more purpose, longer-term thinking, more partnership and a sense of equality, a better understanding and listening skills than men.
So the skills you need to be more successful in the future probably are more in the female than they are in the male. For that reason you need to be sure that you have a very diverse organisation.
How is it possible to move business culture away from a “winner takes all” mentality?
It’s important to understand the difference between values and culture because people mix them up. In terms of culture, nearly 60% of our business is in the emerging markets, and that is obviously around 90% of our growth, so it’s going to be around 80% of the total before I retire.
But if our culture is the European or American male MBA, it’s not going to last. This is why we deliberately put our major training centre in Singapore. We deliberately put women, by the way not a problem in that part of the world, into senior management positions.
You have to think about it as a CEO because you have to prepare the company for the future. One of the reasons we abolished the quarterly profit is not just to be cute and save a few days for quarterly reporting, but to send a clear signal that we are going to do well all the time.
Do you ever feel that people think that you’ve gone a bit soft in the head?
Well, they might or not, I leave that to others to judge, but the best thing we can do is to show that the way we are trying to be responsible also makes good business sense and I don’t think there is any question about that.
To pay a textile worker in Pakistan 11 cents an hour doesn’t make good business sense. We had a lot of cost pressures before I came and the business also wasn’t doing that well. We had a lot of contingent labour or we outsourced it and we looked at that as a cost item but we had a tremendous amount of turnover. Now we pay more and we have greater loyalty, more energy and higher productivity.
Do you feel you need to pay attention to the fluctuations in your share price?
I don’t get excited about the share price because I think it’s something you don’t control. Once you have the results, the share price will be what it is: affected by the state of the global economy, which sector is in vogue and all the other things.
But if you can look at it over the last four or five years, we have given anybody that invested in Unilever a more than acceptable return versus other vehicles.
Do you feel as a result of the recent profits warning there will be pressure on you from investors to refocus on short-term performance?
When we look at our overall business, we continue to grow our markets and we are still on course to deliver against our priorities of profitable volume growth ahead of our markets, steady and sustainable core operating margin improvement and strong cashflow. We cannot so precisely control our sales in any 90-day period and if we did, we would probably be making the wrong decisions for the longer term health of the business.
How do you stop yourself from getting overwhelmed by the problems facing the world?
You need to have an enormous discipline that you are not going to try to solve all the issues that are out there but that you stay focused on the things that you as your business, who you ultimately represent, can make the biggest impact.
So, for us, it is issues like food security, sanitation and deforestation. We focus on issues that also accelerate our business because we provide solutions. If it’s hygiene then we have a Lifebuoy for hand wash, if it’s women’s self-esteem we have Dove, so every brand becomes a cause, a social movement in that sense.
But I think the main thing is to have a firm belief about the core responsibility of solving these challenges, and not delegating that to someone else. If you don’t have that inside of you, then we can all sit here and be critical about government and legislation, but where are you in this? You cannot be a bystander in the system that gives you life in the first place.
Now, it is a very important thing to understand what these words mean, what is that life in the first place and what is the bystander? The role of business has to be firmly understood by the CEO down, that it is there to serve the broader society, the common good and only by doing that very well you will be rewarded, but it has to start there and end there.
That is the clear focus we have lost in many CEOs, in many businesses. That is not to be critical, just to be factual. It’s very hard for people in the financial community now to give you a really motivational speech about what their purpose is in society and yet it is so obvious what it should be and what it could be.
What is the purpose of finance companies?
Well, obviously it is about being an enabler versus an end in itself; adding true value for society versus creating your own value at the expense of others.
For example, we are working on ending deforestation. The banks can play an enormous role, to say: I lend money to responsible companies that only do sustainable sourcing and I don’t lend to others that don’t. You would expect now some of the major financial institutions to play a more proactive role in helping with the challenges that we have.
So you are saying they have a clear purpose if they want it?
Exactly, if they want it. We compared the salaries in the City with our salaries, and we are one third and yet the City is saying: oh, the changes with bonus and salaries, I cannot attract the right people.
Nobody really asks the right questions, why can’t you attract the right people? Is it because you’re not paying enough or because the purpose has disappeared out of your business model? And there are too many in some of these industries that are still driven by their own incentive system.
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