Executive Insights: How corporate leaders make sustainable business work for their companies
By Deborah Zabarenko | 25 October 2012
Around the time of the 2008 global financial meltdown, consumer products giant Unilever decided to swap the push for short-term results — what CEO Paul Polman calls “the three-month rat-races” — for a long-range business plan tied to environmental and social sustainability.
“We don’t do three-month reporting any more,” Polman said in a telephone interview before Unilever’s latest earnings report on Thursday. “We’re not going into the three-month rat-races. We’re not working for our shareholders. We’re working for the consumer, we are focused and the shareholder gets rewarded.”
He reckons this strategy is working, with the company’s share price doubling over the four years since the Sustainable Living Plan was first envisioned.
Sustainability — the notion of using resources so that they are not depleted or permanently damaged — has become something of a buzzword this year, and was the focus of a United Nations Earth Summit in Rio de Janiero in June.
On Thursday, Unilever’s quarterly sales growth beat forecasts as demand for cleaning and personal care products in China helped it outshine rival Nestle.
Shares in the maker of Dove soap, Ragu sauces and Lipton tea rose to equal their all-time high. The Anglo-Dutch group posted underlying sales growth of 5.9 percent in the third quarter, ahead of a company-compiled consensus of 5 percent and a second-quarter rise of 5.8 percent. Emerging markets, which make up 55 percent of sales, grew 12.1 percent.
This kind of growth is what Unilever’s sustainability plan was meant to foster when it was launched in November 2010, but not at the expense of the environment and society at large, Polman said. He parried a half-serious allegation of doing well by doing good, but categorically denied a charge of idealism.
“NOT ALTRUISM … JUST COMMON SENSE”
“Business cannot survive in a society that fails, so it is stupid to think that a business can just be standing on the sidelines of a system that gives them life in the first place. So this is not idealistic at all. All of the actions that we do are hard-wired to our business purposes, hard-wired to our brands.”
Take, for example, Lifebuoy.
Launched in Britain in 1894 as the “Royal Disinfectant Soap” by one of the original Lever Brothers, Lifebuoy was promoted then for the washing of hands to ward off disease. Fast-forward to October 15, 2012, when Unilever partnered with the United Nations to promote Global Hand-Washing Day.
The disinfectant soap is one of Unilever’s fastest-growing brands, and he said some 250 million people around the globe participated in hand-washing day, which he said could help save the lives of 600 million children under the age of five by curbing diseases like pneumonia and diarrhea.
“That’s a noble cause, but it also happens to be that the way to do that is with Lifebuoy, which is the leading disinfectant soap in the world, which we happen to sell … Because we sell more Lifebuoy, we can do more hand-washing days, we can reach more people. And because we reach more people, we sell more Lifebuoy.”
Another product Polman sees as a potential billion-dollar brand for Unilever is Pureit, a home water purifying system that requires no gas or electricity.
“It’s the mobile phone of drinking water,” he said. “So yeah, we advocate clean drinking water, we advocate sanitation, but we do that with our brand. That’s not altruistic, that’s just common sense.”
CORPORATE GROUPS CAN LEAD
Like its competitors in the consumer products sector, Unilever has made inroads in emerging markets, but Polman said his company’s strategy is aimed at lifting up the 2.5 billion people on Earth who lack access to clean water and the 1 billion who go to bed hungry. The sustainability plan also looks to mid-century, when world population is expected to rise to 9 billion.
The 2008 financial crisis crystallized the notion of economic, environmental and social sustainability at Unilever, he said, even as consumers gained power through new technologies, including interactions through social media.
At the same time, Polman said, “The political environment is breaking down … so the need for companies to play a more active role is very transparent to me.”
He saw the weak agreement reached at the United Nations summit in Brazil, and the inability to conclude pacts on curbing climate change or global trade as symptoms of this breakdown, and said corporations like his must take the lead.
“It’s too late for business to say, government should give me this or the government should give me that,” Polman said. “We all would like to have more frameworks in place … but unfortunately the reality is the political environment can’t agree on that.”
Instead of agreements among governments, he sees coalitions of corporations and sometimes non-governmental organizations as the way forward for sustainability. He mentioned GE, Nike, Levi’s, Pepsi and Kraft as large corporations that have taken responsibility in this area.
He said Unilever had cut carbon emissions by 50 percent over the last three years, and developed detergents with lower washing temperatures, which us
e less energy, and sustainable and alternative farming techniques, which also can decrease the emission of climate-warming carbon.
To combat illegal deforestation, which he said is estimated to be responsible for 17 percent of global warming, Unilever joined a consortium of industry partners that agreed not to sell any products made as a result of this illegal practice by 2020.
“You focus on the right things, you put the consumer in the middle of all you do, and ultimately your shareholder will benefit as well, as a result but not as an objective in itself,” Polman said. “And hopefully we’ll bring the world back a little bit to sanity.”