The Power of Moral Leadership: Paul Polman Thinks We Are Short of Leaders and Trees and We Need More of Both

Welcome to a profound exploration of moral leadership and sustainable business practices, as exemplified by Paul Polman, former CEO of Unilever, and Dov Seidman, a respected thought leader in moral leadership. Their conversation not only highlights the importance of ethical decision-making but also demonstrates how moral leadership can profoundly impact global businesses and society at large.

Scaling Moral Leadership in Business

Paul Polman has long been admired for his ability to infuse moral leadership within Unilever and extend its influence beyond to reshape global capitalism and the broader business community. His journey with Unilever began with the audacious Sustainable Living Plan, which was introduced long before sustainability became a mainstream concern in business strategy.

Reflecting on Global Challenges

In a candid reflection on the current global challenges, Polman emphasizes the interconnectedness of biodiversity, human health, climate change, and social inequality. These issues have been brought into sharp relief by recent global events, including the COVID-19 pandemic, which has prompted significant introspection about our societal systems. According to Polman, the pandemic has been a “rude awakening,” exposing the deficiencies in our systems and highlighting the urgent need for inclusive and sustainable economic models.

The Need for a New Economic Vision

Discussing the role of businesses in societal and environmental stewardship, Polman advocates for a shift from Corporate Social Responsibility (CSR) to Responsible Social Corporations (RSC), where companies integrate purpose at their core. This approach not only focuses on minimizing negative impacts but also on maximizing positive influences on society and the environment.

The Role of Moral Leadership in Navigating Crises

As the conversation dives deeper, Polman labels the myriad of contemporary crises as a “crisis of morality.” He argues that moral leadership is crucial in navigating these crises, yet it is in short supply. The essence of moral leadership, according to Polman, lies in the ability to prioritize long-term sustainability over short-term gains and to make decisions that are ethical, not just profitable.

Implementing Long-term Sustainable Practices

Paul Polman’s leadership at Unilever was characterized by bold moves that often went against the grain of traditional corporate practices. By abolishing quarterly reporting and shifting focus to long-term planning, Polman not only challenged the prevailing business norms but also set a precedent for sustainable growth and ethical leadership.

Stakeholder Capitalism: A Framework for moral & Ethical Business

The discussion also touches on the concept of stakeholder capitalism, which Polman contrasts with traditional shareholder primacy. He explains that true stakeholder capitalism involves considering the needs and well-being of all stakeholders, including employees, suppliers, customers, and the community at large. This approach fosters a business environment where everyone is seen not as a means to an end, but as a co-equal participant in the business’s success.

As the conversation concludes, Polman and Seidman emphasize the importance of aligning business practices with moral values. They call for a systemic change in how businesses operate, advocating for a model that is sustainable, equitable, and responsible. Their dialogue not only serves as a call to action for current and future leaders but also as a beacon of hope for a more ethical and sustainable future.

In summary, this conversation between Paul Polman and Dov Seidman encapsulates a critical shift in business leadership from profit-driven to value-driven. It underlines the necessity for moral leadership in the face of global challenges and stresses the importance of ethical practices in achieving sustainable success. Their insights offer invaluable lessons for leaders striving to make a positive impact in today’s complex business and social landscape.

Read the Transcript

Dov Seidman: Welcome everybody to our next How Conversation. I am just delighted to welcome Paul Polman my friend, a kindred spirit, a fellow traveler, and an embodiment of moral leadership. And not just a personal embodiment of moral leadership, but Paul Polman is somebody who I’ve long admired for scaling moral leadership in his institution at the time, Unilever and then beyond and capitalism itself and in the broader business community.

Paul Polman: Thank you, Dov. Looking forward to it. Thanks for the opportunity.

Dov Seidman: You created Unilever Sustainable Living Plan probably 10 to 20 years before it became fashionable if not so practical to be principled. You are now the Co-founder and Chair of IMAGINE and you’re going to tell us about that. You are a board member of The HOW Institute for Society and in that regard we are in common cause. You are a member of the World Economic Forum’s International Business Council and you chair The B Team. You’re the Vice Chair of the United Nations Global Compact. Welcome Paul, I’m just thrilled to have you and I look forward to our conversation.

Paul Polman: Well, thank you, Dov. Certainly looking forward to it as well.

Dov Seidman: Wonderful. So I know you’re physically in Geneva, but emotionally, philosophically, spiritually, where do I find you? You and I have talked often that the one of the hallmarks of moral leadership is the pause. Because it’s in the pause that we can hear the call, in the pause we can reflect more deeply on the world we’re in or the situations we confront. So in the spirit of pausing, Paul, take us into your pause. What new reflections have you been having about the world, about leadership, about the path ahead? Just bring us into your pause. I know you’ve been pausing.

Paul Polman: Yeah. We’ve definitely been pausing and thinking about the lessons that we can draw from COVID once more. I think it has drastically changed all of our lives and the ways we obviously interact with each other and I don’t want to go through that right now, but it is very clear that COVID has been a rude awakening for most of us. I think for the first time we have seen the relationships between biodiversity, human health, climate change, inequality, with the tragic events in the U S now also the racial inequalities. And that has really brought to life that our current system isn’t really working as well as we intended it to be. And I’ve said many times that if too many people feel that they are not included or excluded from systems that ultimately will rebel against itself. And we’ve actually seen that. We now for the first time are in a situation that we’ve put 12, $13 trillion into the global economy just to save lives and livelihoods and are starting to think now of how do we come out of it now that the vaccines start to be rolled out across the world, more so regretfully in the developed markets and in the developing markets. But that’s what it is right now. And we need to now think about the lessons from the past and how to build the right inclusive economy moving forward. One that is inclusive as our fellow human beings, one that is inclusive with planet earth, one that is resilient for generations to come. And COVID has shown us that if we are faced with a burning action, we can actually work together enormously at the local level, we can react fast. We’ve also seen that companies that have a business model that is more focused towards the long-term multi-stakeholder seem to be doing better. We see the financial market waking up to some of the risks, but more importantly to the investment opportunities. So now we need to be sure as we work together the private sector, civil society and governments that we built it back better and that we start to address the shortcomings and create this greener more inclusive future. And that’s a huge opportunity.

Dov Seidman: So before we move on as to what exactly that entails and we’re going to spend more time on the kind if it’s a time for action, the job of a leader is to inspire the right action in many others and to generate enlistment and worthy ideals and paths that are sustainable. So we’re going to get to leadership, but I’d like to encapsulate everything you’ve said, you’ve recently said, and also told me directly that we are living through a crisis of morality. So if I take the combustion of these many different crises that you’ve described and put them all together, why have you termed them explicitly a crisis of morality? And then you’ve said that moral leadership to get us through and beyond this crisis of morality is in short supply. Just speak. Why do you call it that? And why is moral leadership in short supply?

Paul Polman: Well, I’ve always said that we are short of leaders and trees and both are desperately needed. Never, ever have we been so forewarned about what is going to happen. And frankly, I also believe never ever have we been so forearmed to do something about this. The crises of climate change, of food security, of air pollution, of inequality are not new to us. And on the one hand, you will not find any CEO that tells you that they want more air pollution, more people going to bed hungry, more unemployment, more inequality yet collectively we are not able to live up to the challenge to address these areas. And we simply in the rat race of short-termism, of shareholder primacy, don’t the time or the pause to do the right things for the longer term. And if we want to create this more sustainable, equitable world and the tech issues that we talked about, it requires longer term solutions. So we need to create that space to do that. And what we currently are facing is that our behaviors are controlled not by our own desires or in our compasses or moral beliefs, but they are more decided by the boundaries that are put on us. And for example, to make this come alive Dov, if you talk to CEOs, they have to incentivize the salespeople to perform. If you incentivize the salespeople with the number of orders they write, they will write a lot of orders, but they will be very small. If you incentivize them by the way they behave or give customer service, they will behave differently. It’s no different from society. So we need to focus on moving these boundaries to let moral leadership blossom and that’s difficult because it’s very complex and it’s not fully in your control. It requires system thinking. It requires partnerships. It requires longer term thinking. It requires making tough choices.

Dov Seidman: Yeah. And is this why you recently called for a kind of Marshall plan to redesign our entire economic system? But as a huge note in the system, when you became the CEO of Unilever, what inspired you to go to the edge and declare a moral journey of sustainable living? To go to Wall Street and say, “I’m going to escape the tyranny of 89 day planning cycles. And we’re not just going to think long-term, we’re going to operate long-term and I’m going to inspire 160,000 Unilever colleagues from around the world if I as their fearless leader, I’m going to take on Wall Street, then I’m going to create a context where you can think long term.” It was a very systematic approach. Because you were alone at the time very few CEOs were so out in front that was about 12 years ago. Take us into that world lessons learned from that journey that others can grab and run with today.

Paul Polman: Well, I’ve always believed that you cannot have infinite growth on a finite planet. I’ve also always believed that organizations are here to positively address these issues of people and planet that we have. So even organization is only working in its own self-interest the shareholder, I think we have increasingly the evidence that that is not leading you to a long-term success. The organizations that are long-term successful are built on strong values, they think multi-stakeholder, they operate under the longer term. In order to move our business to this longer-term positive model, which we call the Unilever Sustainable Living Plan we had to create the boundaries that we talked about a minute ago. We have to move these boundaries for people to behave differently. So by abolishing guidance, by abolishing quarterly reporting, by changing our compensation systems for the longer term, I actually provided a framework for people to operate in. By making clear statements that we would only grow as we would decouple our environmental impact and increase our overall social impact, I provided permission for people to behave in certain ways. By making clear that we had to be responsible for our total footprint in society. Many companies still think they can outsource their supply chain and also outsource their responsibilities. We said, no, we are responsible for our total footprint. I gave them permission to work on more areas and more importantly, ultimately to not have all the brands that we sell, which was basically the connection we have with our citizens, our consumers of this as well, not be driven by just a functional benefits and profit and growth, but really having each of these brands address the broader societal issues. And what we found very clearly difficult at that time because the evidence wasn’t there and the data probably weren’t there, but what we found was that these brands that have a higher purpose also actually were growing faster and were believe it or not also more profitable. And that is increasingly the case. If you now look at the financial market during the crisis, the ESG funds have performed better. Financial institutions increasingly demanding transparency and behaviors that probably was unheard of three, four or five years ago. So I think we’re in the right direction. Now, normally it would be governments that we rely on, but in the absence of that, I would argue once more that business who is after all over 60% of the global economy, 80% of the financial flow, 90% of the job creation if business at scale doesn’t get involved, we will never solve it. And the ultimate victim of that will be business itself. Business cannot succeed in societies that fail nor can business be a bystander in a system that gives some life in the first place. So with Unilever, we moved our business model from CSR, Corporate Social Responsibility, that actually deals with less bad that simply isn’t good enough anymore nor acceptable to what I call RSC, Responsible Social Corporations, putting purpose at the core, maximizing the return on the multiple stakeholders, working on creating value and values, making shareholder return the result of what we do not the objective and that we have seen over a 10-year time periods giving us about a 300% return and an enormously robust and resilient business that is well placed for the future.

Dov Seidman: Let’s take stakeholder capitalism. There’s been a movement away from shareholder primacy, but there is a system in shareholder primacy that as long as you aggressively pursue your commercial ends and your growth agenda within the bounds of the law, right? And you make money for shareholders, you have permission to continue to operate. Stakeholder capitalism basically says that the imperative is to take into account the interests of all stakeholders. Well, what does that mean? What is the framework of taking into account entail, right? Is that just shareholder primacy that let’s be thoughtful and about everybody else so that shareholders can make more money over the long-term or is it really a moral system, Paul where every stakeholder is not a means to anybody else’s ends, but everybody is a co-equal constituent with their dignity that deserves respect. They were really are creating value for everybody. So maybe you can help us really where the rubber hits the road. What does it mean to take into account the interests of everybody? What could a framework for doing that look like?

Paul Polman: So what you now see obviously is that it is in company’s interest if you want to be around for the longer term that you have a workforce that is engaged, that you have relationships in your value chains with your suppliers or your customers that are built on trust and transparency. So the currency of trust transparency, the currency of cooperation is increasingly defining what the value is of your company. And so dealing with optimizing the multiple stakeholders that actually create your value will also then result in the best long-term value creation. That is really what the multi-stakeholder model is after. And I don’t think that these two are in conflict. If you think about Unilever shareholders, where we certainly want a good return for the shareholders, we pay out 80% of our profit, 70% of our profits in dividends. That’s basically pensions for people that need to live a decent life after they retire. So it’s not bad to have millions of shareholders that benefit from the profits of companies and can retire perfectly. But the way to do that is to ensure that the people that created value are being prioritized. First of all, the planet, to be sure that we can continue to live on this planet now and for future generations, which is a most important thing. Secondly, that it results in inclusive growth so that these markets expand more people benefit from that. And thirdly, that it is done in cooperation with all the people in a fair way, the farmers who work for you, the suppliers who help you and provide innovations or technologies, the communities that let you be there and prosper. So this contract that you have with society is really getting to the heart of this multi-stakeholder model and actually companies that understand that will do really well, because one of the great traits of leadership I would say is to have a high level of awareness and engagement with what is going on in the world, so that you can see the opportunities to respond to that. Companies that are outside in, as I call it instead of inside out, do much better over time.

Paul Polman: And that brings me to the next step of leadership is to really have great leaders understand that it’s not about themselves. That actually, if they invest more in others, making them successful is the main driver of their own success as well. If that is true for individuals, then it must be true for companies which are a collective of individuals as well. And that certainly has proven to be the case for Unilever. Instead of selling bar soaps and do hand-washing we said we’re going to attack the issues of infectious diseases of pneumonia, diarrhea, where 4 million children die. In fact, instead of making just a toilet bowl cleaner, we said we’re going to attack the issues of open defecation. So we made commitments to reach a billion people with hand-washing. To build a hundred million toilets. With Dove to build self-esteem with a hundred million girls in schools. And as we put these bigger objectives out there, we’re not only helping to hopefully make humanity a little bit better, but we created unlimited growth for our brands. That’s why every year we’re growing ahead of the market and also actually more profitable. So at the end, all of our stakeholders can benefit if you believe in that model.

Dov Seidman: I’d like to talk about leadership. Obviously what’s been animating you, is this deep conviction that business and society have fused, there’s never a conflict just like Aristotle said that a good decision is both practical and principled they can come together and reinforce each other. Business people often use cost-benefit analysis. And even if you’re going to do the right thing, if you do the right thing for the wrong reasons, it doesn’t scale because it doesn’t enter the heart. It doesn’t sustain. So it’s one thing to do the right reasons because you’ve done some analysis and you say, if we do the right thing, we’re going engage, our employees or more people will think highly of us.

Dov Seidman: But the best reason for doing the right thing is that it’s the right thing. Virtue is its own reward. And that’s what really scales. So it seems that you need moral leaders to help foster this dynamic because moral leaders are about doing the right thing because it’s the right thing, not through a business cost-benefit analysis. How do we go on that journey of not just identifying the problems and the solutions which are right and more sustainable, but how do we scale the reasons for pursuing them and rooting them in moral purpose, in moral values, in the kind of leadership so that it sustains and scales in that way?

Paul Polman: So I could not agree more with you Dov that the starting point that we need to attack in my opinion is the boundaries of what we define success. If we continue to live in cultures where self-worth is measured by net worth, we will not get there. And we’ve forgotten some of that and it is good to go back to that. Things like the golden rule, do unto others and the planet as you would do unto yourself, are around in every religion in one form or another. So we need to bring that moral compass back to ourselves. And that has to start with education at the parental level, in education itself, where we very much have taught at least in business where most of the MBAs come from or law we’ve taught Milton Friedman. We have to broaden obviously the teaching here and go multi-disciplinary and social science and other things have to come in.

Dov Seidman: Yeah, Aristotle said that educating the mind without educating the heart is no education at all. And in many ways we’re so good at analytics and business, and so good at all the intellectual parts of business, but the heart, the seat of values and empathy, and concern, if that needs education as much as anything where you’re not really educating, I think you’re saying something in that same spirit.

Paul Polman: In the same spirit, but ultimately that can only come from having a very strong moral compass. Because even in Unilever, where we changed compensation systems, where we were really focused on making this a long-term successful company, there were still incentives there to drive your short-term performance. I could have gotten the share price higher over a five or 10 year period, cut my compensation up even more than I thought was ever possible and leave the problems to the next person who then would have a big write off and start again. And then secondly, as not everybody can have that strong moral compass, you need to move these boundaries. How can we move to a different accounting system? If we only account for the return on financial capital, then indeed, we’re very good in optimizing that. But if we can rapidly change our reporting to really what counts, which is also environmental and social capital, then the capitalistic system is very good to optimize the total.

Paul Polman: So changing what we measure, as we say, we treasure what we measure and bringing that to the foreground, things like a price of carbon for example, drives behavior. So we can work on our own inner compass, but we can also work on the boundaries in which we operate to make it a little bit easier on people. And then we need to move to the third level, which is a higher level. That is partnerships. We have to realize that the challenges that we now face, they are what they are, but they are of such magnitude that nobody can handle them alone anymore. And as Einstein said of the definition of insanity, doing the same thing over and over again and expecting different results is not going to work. We need to solve them at a different level than they were created and a different level is partnership. So how can we bring civil society, governments and private sector together in these more transformative partnerships. And that requires trust. That requires transparency, that requires respect and all of these values are values that moral leaders now need to foster if they want to be successful moving forward.

Dov Seidman: So Paul it’s just a really meaningful to be in common cause with you with The HOW Institute and so many other ways in which our lives have intersected and overlapped and thank you for being you and for all that you’ve done and continue to do to.

Paul Polman: Likewise.

Dov Seidman: Make it sustainable and better. Thank you.

Paul Polman: Likewise. And thanks for being such a great, great part of our journey actually, you have been to some extent, a friend, a mentor, a teacher already along the journey. If I go back to the many memos that we’ve sent back and forth and found common ground and learn the same language and share the valuable lessons each others lives. It hopefully it makes us all the better for it. So I’m grateful for that.

Dov Seidman: Well, that’s heartening of you to say, and I share in the gratitude. I’ve learned just as much or probably more. So thank you for being you and for the friendship.

Paul Polman: Be safe and see you soon.

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