Unilever and responsible capitalism: a "licence to lead"

25.02.2013

Over the past two days, we've had the good fortune to hear up close what Paul Polman, CEO of Unilever, has to say about responsible capitalism and the role of Unilever in making the world a better place. Polman has been in Toronto speaking in the Bata Lecture Series on Responsible Capitalism hosted by the Schulich School of Business. And from what we've heard, Polman is in a different league to most of the other identi-kit CEOs out there. He really gets that business has to do things differently if its to succeed and prosper in the future. And so far, he's been backing that vision up with real progress. That's not to say that Unilever is anywhere close yet to being a truly sustainable company, but few CEOs of global multinationals can match Polman's grasp of the challenges ahead. And more importantly, few can match his visioning of where he wants to get to.

Polman says that what we need to do is change the conversation about social responsibility from one about a "licence to operate" to one about "a licence to lead". The former is about meeting your basic legal and ethical obligations. The latter is about building for the long term based on "growing our businesses in line with the needs and aspirations of the communities we serve". OK, he's hardly the first to talk about long term goals and win-win opportunities. But what's interesting about Polman is that when he talks about the long term, he really seems to mean it. Talking about a resource constrained planet, global hunger, infant mortality, and the like, Polman sees plenty of opportunities in bringing people out of poverty and giving them the products they need to live better lives. But he's not just thinking about the 7 billion inhabitants of the planet who are already struggling to get by, but the next 2 billion that will be born in the decades ahead. As many people know, under Polman's leadership Unilever has embarked on its hugely ambitious Sustainable Living Plan with, among other things, a goal to source 100% of its agricultural products from sustainable sources, and a plan to double their revenue whilst reducing their absolute environmental footprint by 2020.

As Polman made clear in his talks, much of the company's impact comes not just in Unilever's own business but in their value chain and among their consumers. Getting people to wash at lower temperatures and to shower for 2 minutes less can radically reduce the carbon footprint of their products in ways that far outweigh operational efficiencies. And who better to change consumers' behaviour than the marketing experts at Unilever? If they can make us buy a bunch of stuff that we don't really need (and let's be honest, a lot of what they still do is exactly about that), then they can certainly get us to burn less energy when we're doing it.

What was inspiring about Polman's vision though is not so much the big goals they've set, but the framework they're trying to achieve it within - radical transparency, collaborative action, and brands that all have a social purpose. To you or me, it may look like a bar of soap, but to Polman, "we're not in the business of making soap, we're in the business of saving lives" as he said about their Lifebuoy product which aims to improve hygiene in the developing world.

Of course, getting a licence to lead is not just about getting a renewed licence from customers, but also from shareholders. A long term vision doesn't often sit well with short term focused investors Polman moved quickly on this when he was first appointed CEO of Unilever in 2009 - within weeks he had stopped offering quarterly guidance ("I figured no one would fire me in my first month" he quipped). And trading investors they didn't want for those they did want - i.e. those with a little more patient capital - has been a critical element in Unilever's transformation.

So far it is clearly bearing fruit - progress towards the many goals of the Sustainable Living Plan has been good and the performance of the company is better than ever. Polman appears to be well on the path to finding the holy grail of matching economic growth with social prosperity. But as he acknowledges, the path will not be easy one, and Unilever won't be able to do it alone. As he said, even if Unilever meets its ambitious goals, it won't have succeeded unless other companies have joined them. "We're just a pimple," said the leader of one of the world's largest packaged goods companies.