Paul Polman on Purpose, Profit, and the Future of Capitalism | Enduring Excellence

Paul is a fascinating individual, and you're referring to Second Mountains. Makes me think of an anecdote about you that I think reveals a lot about who you are. You took some blind mountain climbers, did you not, on a climb of Kilimanjaro, including a mountain climber who had been, as I understand it, the first sightless person to climb Everest, correct? Why do you do things like that? I mean, I think that's just a terribly revealing anecdote of the kind of person you are.

No, I thought the question was, why are they doing something like that? Because that's more remarkable than us doing it. But Someone gave me once a book that is called Touch the Top, and thanks for the opportunity to be here, obviously. I was looking forward to it. And he said, read this book. So I read this book, was a quick read, and it was about Eric's life. Eric Weihenmayer is his name. And Eric got blind. He started getting blind at the age of 12, was blind when he was 14. His mother died in a car crash at 16. He was ready to commit suicide. Wow. His father worked at that time for AT&T. Ed was his name, and quit his job, was in personnel, quit his job, took care of Eric, and basically raised him with, there are no limits, you know? In fact, he has now an organization in Boulder, Colorado, which is called No Barriers. So I read the book, I liked it, I called Eric, and I said, you know, it's amazing, your story, your life story, and wanted to get to know him. So I invited him. At that time, I was living in Geneva, running the international business for P&G. So I said, why don't you come over? And he came to our house, a tremendous experience for my children. And I brought him to the airport, and he said, there are so many people here. I said, how do you know, man? You're blind as a bat. Yeah. And, you know, then he said, it's busy on the streets. And he made all these comments the whole time. And so anyway, we became good friends, and Then he called me one day. He has actually climbed all 7 summits. So he got married on the Shira Plateau on Mount Kilimanjaro. Wow. Mont Blanc was the— sorry, Mont Blanc, I'm saying. Mount Everest was the last one, obviously. He trained for that for a year. But anyway, it's— he calls me and he says, Paul, I'm getting married. I got married on the Shira Plateau on Mount Kilimanjaro. Do you fancy going back there? I said, you know, I'm in. So I took 2 of my 3 children and myself, and— but then I said, I believe in a concept called the multiplier, and which is always try to get more out of a thing that you do by touching more people. So we said, why don't we take a blind person from all parts of the world? So we took Bill Ryder, who runs the American Braille Press. He's now retired. We took someone from Japan, someone from Austria, someone from the first— India. blind person to climb Kilimanjaro from Nairobi, who got blinded in the Al-Qaeda bombing at that time. So anyway, 8 people, we go up and had a great time, obviously. And then when we came down, we visited these schools for the blind, Moshia, Arusha, and the situation was quite dire. And, you know, we had taken canes with us and these watches and some money to build a school, and we thought we were doing the right thing, but it was very clear that it wasn't quite working. And that's probably one of the toughest problems in society. If you restore sight or give people glasses, and then you can make an economic story out of it. But if people are really blind, which is really difficult, less than 10% of these children go to school and all that. So anyway, we said we need to do something about it. So I created a foundation which is called the Kilimanjaro Blind Trust. And now we have about 25,000 children in school. operate in all the countries in Africa, basically on the east side, and we call it Unlocking Literacy for Life. So it's a great multiplier, and Eric obviously has become an even better friend.

This isn't at all where I thought I would start, truly.

In fact, that's why I wear it.

I thank you for mentioning mountains because it put the thought in my head, but now I go to another place. I'm gonna get back to my cards in a minute, believe me. What occurs to me, and is sort of a through line of your life, there are a lot of people who have very good intentions. They mean to do something, but they never get around to it. You get around to it. You do what you intend to do. What's the transition point, or the lock that turns for you that takes you from the guy who thinks, oh, it'd be an interesting thing to go take a blind person and a troop of blind people on a hike of Kilimanjaro, from thinking it to doing it, from thinking about being a conscious capitalist to being a conscious capitalist?

Well, we were in a fortunate position that we were able to do it. I mean, I think many people would want to do it, but they're not in that same position. So, and if you're in a position to deal with some of these things, then, you know, I personally think it's sort of your obligation to do that. And I wasn't born blind. I had education. I didn't have to deal with the issues of sanitation or hygiene. So if you want the world to function, you fight for the people that didn't have that opportunity.

There was another story that I believe was in Net Positive, your really highly acclaimed, extraordinary book. You were in the hotel in Mumbai On the night it was bombed, a decade and a half ago or so, I can't remember the exact time.

2001.

You were one of the fortunate ones. There were dozens of people killed. I can't remember the total number. But after that event, you went back and what did you do for the people who were affected by that and the people who worked in that hotel? What did you do?

Well, it's not an experience you wish to anybody, but unfortunately we were there at that time to— it was actually my welcome dinner to the Indian organization. We were going around and sort of saying goodbye to my predecessor and welcoming me, so we were all over the hotel, which obviously didn't make it very nice for us because they probably knew we were there and clear targets. For some reason, we had a dinner outside, and then it started raining, and we had to go inside. And because that was a last-minute decision, we ended up with a room in the corner. And that room was, for these terrorists, was too difficult to enter because they would have exposed themselves with the window. So I think it saved our lives. But anyway, we were there the whole night, and then some miracle got us out, unlike many others. But then again, you saw the goodness of all the people. We didn't have anything. Everything was destroyed. And our rooms had burned down, and, you know, yet people gave clothes. They didn't want them.

And you went back, though, after that.

Yeah, then you saw the incredible— this is the Taj Group, this is the Taj Hotel, and there was a person who had welcomed me the night before, Karanbir was his name, and he had 2 children and his wife, and the terrorists had locked them up in their room, and they all 3 burned to death, so he lost his family. And yet the next day he was working again. He kept working. Ratantata at that time had to literally send him home and, you know, take some time off. But the dedication of the staff, I'm just saying that, was just tremendous. And some staff deliberately lost their lives to protect the guests. I mean, what ultimate purpose in a sense if that's a price you pay for that? So anyway, I thought it was a good idea about 6 months later when some of the restoration work was done to go back to the Taj Mahal and And what I called Finish the Meal, which was actually the same meal, but the difference then was that we were serving the people of the Taj Mahal.

You served them.

Yeah.

Very interesting. As I said, I did not mean to start there. Let's turn. But it's interesting, and I think it's a revealing window of the kind of person you are and the kind of things you do.

Well, if you see goodness If you express goodness, you meet goodness. So the amazing people were the ones that got us out alive. So you have to keep it in perspective. Again, it's easy for us to do that.

So let's go back to your youth and upbringing in a relatively small town in eastern Netherlands. I wrote it down. It's—

Man, you've done your

homework. Enschede?

Enschede in Dutch, yeah.

Enschede in Dutch.

The Haarsands.

One of 6 children in a rather devout Catholic family. At one point in your life, you considered going into the priesthood. Why did you do that, and why did you decide ultimately not to do that? Why didn't that work out for you?

So, you know, when in elementary school they had the funerals, the weddings, and they would happen during the week, The school was obviously Catholic, so we had a priest come and teach and all that stuff. But they would take students to be altar boys that could afford to be out of school and then get back into the program. So if you were not performing very well, you weren't picked. So it was an incentive to study a little bit because you could get out and then, you know, when the priest wasn't there, you could get to the wine and some other things that came with it. See,

the daydreaming comes back.

Had a great benefit. But it sort of— I was interested in that. I had a family member who was a priest, and I saw what the priests were doing, the positive ones amongst them. And so it was attractive to me in terms of, you know, wanting to go into that vocation. So I went to seminary, which was— that was basically the high school. But then, unfortunately, we didn't have a Dutch pope. If you have a Polish pope, you get a lot of Polish priests. If you have a Dutch pope, you get a lot of Dutch priests. If you get a world champion tennis player from Sweden, then all of a sudden everybody plays tennis in Sweden. So, we didn't have many people, so they had to close the school. And then I went back to my hometown and finished my education. So then I wanted to be a doctor. That was my next thing. But that didn't work out either. So my life is full of failures.

Yeah. Then you came from university in the Netherlands and went and got an MBA at, I believe it was the University of Cincinnati, and landed at the company that is so associated with Cincinnati, Procter& Gamble. And you were there for about 30 years. What were the lessons that you learned at Procter& Gamble that you carried forward into your later career? career. What was it about the culture there that kept you there that long, and how did it change you, and how did you change it, if you did?

Well, I stayed there long because it's a good company. You know, they started in 1837 when 2— they married sisters, Procter and Gamble, and they started making candles on the river there, and the rest was sort of history. But anything they did was with a longer-term perspective. In fact, when they started the company, it was the first branding that really happened in the US. People that were buying candles were getting ripped off in terms of quality and all these things. So that was more like a guarantee. And these people had a highly ethical standard of how to do business, and I think that permeated the company. If you can't make an honest living, it was always their saying, then, you know, you should be— You know, he would use breaking stones.

Were their corporate values—

Very, very high.

Were their corporate values ones that you were comfortable with immediately?

Yeah, they were American, but—

Explain that!

Another time. But we, you know, we could handle them, put it that way. But they were— no, no, I think they were very long-term focused, very disciplined. Very much investing in people and training. It's very important for them. You know, highly ethical in the way they do business, etc., etc. So for that time, you know, issues were different then. So you have to put it in perspective. I think it was a very, very good company and fortunate to work for them. So I left when I was in Europe, didn't want to go back to Cincinnati then. So, you know, that is a choice. I'm European. and I had most of my family there, and sort of the crisis of being 50. So that's why I left them and wanted to stay in, at that time, in Geneva, which we were very happy to do. But I would otherwise have stayed with them. It's a great company, but very centralized. You know, if you live in the US and you live in the Midwest, it gets a little insular from time to time.

You learned a lot about branding there. I spent some of my time, the company I worked for, CNBC, was owned by General Electric. And there were 2 companies in America, Procter& Gamble was one and General Electric was another, where the cultures were extremely distinct and where the grooming of leaders was really a focus.

Yeah, 100%.

Of both of them. You went from Procter& Gamble to Nestlé where you were the CFO, and then in 2009, to Unilever, where you were the first sort of outsider to run that company as CEO. This was in the middle of the financial crisis that you were hired there. What kind of company did you find, and what did you decide you needed to fix first?

Well, I could never have done the job if I wouldn't have been in Nestlé either, so I want to be grateful for that because It's always a little bit of luck, but with P&G, I had the personal care business and the detergent business. I was running that at that time globally and had seen what discipline could do. Nestlé is a very dispersed organization, very close to the markets, has a different operating model. Being in the food business, it probably brings that with it a little bit, but also a very long-term focused company. Great portfolio work and all these things, people incredibly loyal. It was a great company. And then coming to Unilever was, again, was luck, because the job opened up and they needed someone. And being Dutch, it is an Anglo-Dutch company, so being Dutch might have helped a little bit. But I put myself in the UK. And what I found was, obviously, they had to hire for the first time someone from the outside. And, you know, if you have the talent inside, you won't have to do that, let's just be honest. So the company had underperformed in the last 10 years, had become more short-term focused, and had lost a little bit its mojo. The turnover had come down from about $55 billion to about $38 billion when I came. The share price hadn't moved when the world had done extremely well. So it was time for a change. So I came in and— And it was difficult because people thought they'd let the Trojan horse in, having worked for P&G and Nestlé, you know, was not a glorious moment. And I could understand that.

Interestingly, those 3 companies are 3 really legacy, longstanding companies. I think Lever was 100 and some, 120 years.

Yeah, interestingly, 1837, Nestlé, 1857. Henry Nestlé, and then Lever itself, it's a little bit difficult because he took a grocery store from his father in the 1860s, more or less. So yeah, about the same time. So same philosophy, built to last instead of built to sell, and that type of stuff. But the company had lost its mojo a little bit.

So what did you focus on first?

Well, getting accepted. You know, you can't ask to be respected, you have to earn your respect. That's as simple in life as that? So without trying to fall asleep, I read all the books on the history of Lord Lever and what made this company tick and how it started, because I didn't— I could see that the company had lost some things. The business side is always easy. What do we need to do? Product quality or pricing or spending money behind it. I mean, you don't need high school for that, but getting into the understanding of what makes a company successful. Jim Collins wrote a book From Good to Great, and in there, if I remember it, he says, nurture the core before you stimulate progress. So I was well aware of coming in and standing on the soapbox and telling everybody what to do was not the right way of getting people behind you. So it was understanding first what made the company work. So I called a friend of mine, which you know very well, which was Bill George. Hmm. I had gotten to know Bill when he was still the chair of Medtronic. He was running Medtronic. And he had invited me in Switzerland to Rolle, which is a little place on the lake of Lake Geneva. And I was interested in visiting others. I was at that time chairing the Swiss American Chamber of Commerce. That's where I got to know him. And I was inviting every month people to talk to our people to be a little bit more externally focused. That's how I got to know Peter Brabeck from Nestlé, who hired me later. So anyway, Bill had come and spoke to us at that time, and he said, why don't you come to a role? And I was interested in product quality. When you make pacemakers, you can't afford to have one be of a defect quality, because someone is going to die. So I was interested more from a product production point of view. How do you get the quality at that level and bring that back to P&G? So I was always looking at— at illogical benchmarking, perhaps. But then he said, when I was there, he said, come and stay for lunch. So I stayed for lunch. First of all, he didn't have a cafeteria for the executives. He was having lunch with everybody else, which was quite fairly unusual, certainly in Switzerland at that time. But then all of a sudden, everybody was silent, and a lady was there, and she started talking, and I didn't first notice, but She was invited in to talk about her pacemaker and how it changed her life, how she could see her children, her grandchildren, and all the others. And everybody was crying and sitting there. Terry wasn't there, but most of the— I cried. You were there. But we were all tears in our eyes, and we were just talking. And so then I thought, man, this is purpose in action, you know? So then Bill wrote this book, True North.

True North. It's a very good one.

Yeah.

Pretty good book.

It's a very good book. It's worth reading. So I called Bill. I said, listen, I'm scared stiff. I've never been a CEO. I don't know what to do. Financial crisis. I don't know why they picked me. I had actually tried to convince them that there were better candidates, but they didn't buy into that. So anyway, then I said, I need your help. So Bill has been very instrumental because— so the first thing we decided to do, basically the first year, is work on purpose. You know, you cannot change a company if you don't change the people first. You know, this Rumi, who is a poet from the 15th century or so, he said it very well when he said, yesterday I was clever, I tried to change the world. Today I'm wise, I'm changing myself. So we really have to start first with that. That's also the reason we created Imagine. Imagine. Is to work on an inner core, not only the outer core. So Bill and a wonderful group of people around him put a program in place for about a year to develop your own purpose, how do you work with others around that, and then how do you influence for results. It's still the most popular training program, and the whole company goes through that. But out of that came a sort of a joint consensus in terms of what this company could be. And then I brought it back to the roots, basically, of Lord Lever. I'd seen some elements we wanted to keep and some of the values. Lord Lever already talked about shared prosperity. That's not different than a multi-stakeholder model. Lord Lever talked making hygiene commonplace. That's why he invented the bar soap. That's not different than us saying making sustainable living commonplace. So we borrowed a lot from him without being overly intellectual. But it clicked with the people and they got a joint purpose that gave them courage and we started developing something that was called the Unilever Sustainable Living Plan, which at that time was seen as audacious. We didn't think so, the targets might have been, but the plan was absolutely needed. So that's how it started.

So let's get to the question of purpose and talk about that. USLP, Unilever Sustainable Living Plan. You didn't become a priest, but you did become a kind of a spiritual father, an evangelical for sustainability and conscious capitalism. You believe, I think I've got this right, that companies and capitalism serve a higher purpose than purely profit. How and when did you start to believe that? And what made you think you could apply that philosophy at scale at a company the size of Lever, of Unilever? And was the company— I think you probably answered this— was the company receptive to it?

Well—

Was the board? And were executives receptive? Did you lose some people over it?

I'm still alive. But, and they let me be there for 10 years, which was, you know, at that time, the tenure of a CEO was significantly shorter already. And since then, unfortunately, it has gotten shorter again. No, it was— where do I start on your question there? Let me see what the best way is to make it short. Yeah. So, first of all, I didn't invent anything. You make it sound a little bit heroic, but it isn't the case. You know, the name company, company comes actually from compañero in Spanish, con pan, with bread. If you speak— anybody speak Spanish here? Con pan, and breaking bread together. So, company has always been a— Profits comes from the Latin word proficere, which means to carry forward. It's not to extract and destroy. So the origins of the companies and most companies that were created in the history, and the Dutch are actually the inventors of the corporate model as we know it right now, was the East India Company and some other things, was to work together to address issues in a way that society expected that to be. So, it was never there to just myopically focus on the shareholder and extract value. That wasn't the case for companies. And that would be increasingly— it's clear now that that's a stupid way to run a business. So, I don't think I invented anything new. The financial crisis had brought to light that our system wasn't quite working. I was very happy that I was the CFO of Nestlé for 3 years because I didn't know the difference between a balance sheet and income statement. And, uh— That

could be a problem.

No, it wasn't, because some of these banks came with the fanciest things to sell to you pre-financial crisis, and I didn't understand any of it. So my mother always said, don't do it if you don't understand it. So I didn't do anything. So Nestlé never lost any money, in fact. We were in a very good position. So Peter Brabeck was very happy that I was CFO, and he thought that was a miracle, but it was totally driven by stupidity. But the one thing I discovered was that, you know, when at that time, actually, if you looked at some numbers in the US, it was always aggregate numbers, but about 40% of the corporate profit was in the financial world. And I don't know about you, but I've always learned that the financial world should facilitate the real economy, not the other way around. We literally have become slaves of the financial world. And our system, because the financial world has developed as well, has taken more distance from business. There's too much money chasing returns, no liabilities in any sense. It had become a little bit dysfunctional. And when the financial crisis happened, I think it drove home the irresponsible behavior. And I think the reason that we see now what is happening out here, you can go back to the financial crisis as one of the main causes for that, because then already people started to feel that banks were too big to fail, people were too small to matter. Thousands of suicides around the world, where people desperate lost their fortune, lost their living. There's not a banker that went to jail, even today. So the system is just not working, and I think people started to understand that. It's not a matter of is capitalism good or bad, it's just how do you make a system work for everybody? And then the financial crisis came and everybody started to cut costs. It's like the same thing, when there's a crisis, most CEOs think that they can do— the only thing they can do is cut costs. But you cannot save your way to prosperity, it doesn't bring any value. So you actually destroy more if you do that, if you think a little broader. So I needed to do something, we needed to do something that was value creating. And you don't create value on the quarter, you create value 5 years out, 10 years out. So you need to create an environment to do that. So in Unilever, I stopped quarterly reporting when I came.

That was one of the first things you did, was stop quarterly reports and estimates. And to the consternation of some shareholders.

Sure, sure, not surprisingly. But, you know, the share price had gone up 8% when I was appointed, and it went down 8% when I said I stopped reporting. So it shows you how ridiculous that game is. I'm not going to play that. And the same with guidance. Everybody's being measured against guidance. He misses his guidance, he beats his guidance. What the heck? We're living in a real economy. We don't live in a foo-foo economy. So get rid of all of that stuff. So what you lose is exactly the share— they're not shareholders you lose, they're share speculators you lose. And we should call them share speculators.

So you were, in a way, happy that they left?

Well, I told them, if you don't like what we're doing, then go somewhere else, put your money somewhere else. And some clearly did, otherwise the share price wouldn't have gone down 8%. And it's more difficult to attract shareholders than to lose shareholders. I understand that part of it. But I had to create the environment. You know, people want to do the right thing in the world, in many different environments, also in business, but it's often the constraints that are put around them that make them behave dysfunctionally. It's not that they're bad people. If you read the book Rutger Bregman, Humankind, you know, you have to believe in the goodness of people, otherwise it's not worth living. But then collectively we don't behave like that because we're operating in systems that that in fact put us in certain binds. So the role of a leader is to work on the forest, not in the forest, and the first thing I did was not— actually was the easiest decision, and I actually didn't ask the board because I figured the first day they hire me, they're not going to fire me. So we stopped quarterly reporting, and yeah, people felt uneasy about that. I think the difficulty was not there. The difficulty was the financial market had no trust in Unilever. So if you then don't do anything, they expect worse things to come. So that was reflected in that share price drop.

And I'm sure they would think, if he's not telling me what the quarterly results are, he's hiding something.

Right, there's bad news coming because that was the pattern. So, you know, Stephen Covey in his book 7 Habits says you can't talk yourself out of things you've behaved yourself into. So I understand that, you know, so I could not talk myself out of things that the company had behaved itself into. So it takes 1 year, 2 years, 3 years, 4 years, 5 years of consistency to gain that confidence, also of the financial market.

Let me read you something that you wrote. I believe it was in Net Positive, and I want to get you to explain it. Corporate social responsibility is not the sidecar to the engine of profit. It is the engine itself. Explain what you mean by this, and how can elevated values like a noble purpose generate higher profits, better ROI, which you did, than a single-minded focus on the bottom line and shareholder profit?

Because business cannot succeed in societies that fail, nor can business be a bystander in a system that gives them life in the first place. And unfortunately, with lack of knowledge perhaps in the past, now a little bit more aware—

Businesses cannot succeed in a society that fails.

No. How much is your business in North Korea? How much is your business in Iran? How many have driven to glory in Cuba? It just doesn't work. So there are now 6 places in the world where there are genocides. There are 10 places in the world where there are wars. The business community will be the first one paying the price for that. But there's another failure. Business cannot separate itself from a system that gives it permission to be there in the first place. Business is there at the— not at the mercy is perhaps the wrong word in English, but business is there to serve society. If business would only take from society, who is going to let them be around for a long time? That's why you see many businesses floundering or trust going down. But if you are a solutions provider, if you provide net benefit, then people will want you to be around. Not different than friendship between people. Business, as I always say, is a collection of humans. So there is a certain human element to that that we need to bring back to business. Otherwise, it doesn't work. And the most important thing is that business can only succeed if we take care of the most important components that make business succeed, which actually is Mother Nature. We all depend on nature. We breathe the air, we drink the water, we eat the food that also connects us. That's what has connected us over history. That is what connects us now. And yet our economic system destroys what keeps us alive. So that doesn't make sense to me. You don't need to be rocket science. There's a— across the border from here, if you look to the left or whatever, you see Michigan, you see Canada. There's a philosopher in Canada called Hubert Reeves, and he said it very well in one of his books that I remember. He said, man is the most He worships an invisible God and destroys the visible nature, not realizing that the visible nature he destroys is the invisible God he worships in the first place. So, you cannot run your businesses if you are separating yourself from the mere forces that keep you alive. So, the businesses that understand that are more resilient. The businesses that understand that look at risk differently, look at opportunity differently, Look at leveraging the power of the different stakeholders that make these companies a success differently. And what you now find, again, not surprising to me, is that businesses that are run for the longer term, that businesses that invest in the multi-stakeholders, that businesses that address these risks proactively are businesses that are increasingly also better valued by the market. So Milton Friedman, who lives here, or lived here—

Oh, we're going to get to Milton.

No, but the interest, are in that sense aligned because these businesses are actually increasingly better valued as well because they're positioning themselves for a future that I would argue is already here.

One of the things I sense about you and your career is that you take it to another level. You don't merely believe that a business can be good by doing less bad. You see what I'm saying? that to be really good, a business has to be an active force for good. It's got to give back more than it takes out of the society. It must be, in the words of your book, net positive.

Yes, a net positive contribution.

So in practice, how can a company that consumes energy, that burns carbon or has customers or suppliers that do, creates waste in the form of plastic packaging, which certainly Unilever did and does, and relies on vast quantities of sensitive natural resources like palm oil, of which Unilever was a big buyer, probably still is. How can a company like that leave the world better off?

Yeah, so what you are describing is indeed the reason why we need to run these business models net positive. You know, if you have more plastics in the oceans—

Can they? Can it be done?

Oh, absolutely. And you can certainly— it's an aspiration for many companies, but you certainly should have that aspiration. And the reason for that is very simple. The health of this planet is defined by scientists in about 9 planetary boundaries. Think about CO2 in the atmosphere, think about water, think about forests, think about oceans, So we have 9 indicators that decide the health of this planet. In the past, we didn't have to worry about that because we were 1, 2, 3 billion people, even when I was born. We didn't consume that much, but that has gone up by infinite factors now, unfortunately. And 7 of these 9 planetary boundaries are already outside of what we would call safe limits, and we're paying the price for that. We're at the point now that we're paying a higher price for playing with these planetary boundaries than what we would have to invest to avoid these issues in the first place, which for a businessman means bingo, that's a great business opportunity. So that's how I look at it. And no better way than the private sector that has the funds, the resources, the innovation capabilities to address that. And businesses that do, do very well. And, you know, so, so— I think that's a very good point. The question is, is Unilever a net positive company? No, not at all. I've never said that they are, but they are definitely— the aspiration that we had and the plans that we worked were definitely there.

And you did things to accomplish that.

Well, we were the first company that had totally green energy. I'm happy there's price on carbon. We didn't have to worry about that. There's disruption on geopolitical tensions in the world. If you have your own energy sources, you don't have to worry about it. Green energy, once you've made your initial investment, if you can handle that, the cost of that is relatively low, so you're more competitive than the other buggers out there that don't move. It just makes good sense. It makes business sense. The discussion that always baffles me is we invest in training, we invest in factories, we invest in R&D, we invest in IT systems. All these investments have 5, 10, 15-year time periods, and CEOs seem to be able to handle those. And there are multiple decisions they have to make, and there are trade-offs to make in these things. And we've done that our whole life. You've done that, I've done that, and that's how we grew up. Now, when it gets to the most important decision, which is another element, which happens to be the future of humanity, we sort of seem to paralyze. It just doesn't make sense to me. Then you say, isn't that difficult to do? Or you see, you take the most difficult challenges. No, I take the most logical challenges, not the most difficult. The most difficult thing for me would be to do deliberately the wrong thing when you're aware of the fact that it is wrong. There are so many CEOs that are aware of the fact that they're destroying biodiversity, that they're keeping people in slavery in the value chain, that they're clogging the oceans with plastics. If you then don't do anything about it and you sort of greenwash or you put your PR departments behind it with some notional programs, then, you know, that's a choice, but then you're not true to yourself. I think it's more difficult to do to me than doing the right thing.

Is profit then a direct byproduct of doing the right thing, of acting in a socially conscious way? Is it an outcome?

Yeah, profit is 100% an outcome. Profit is like white blood cells in your body. You need white blood cells to live, but you don't live for white blood cells. Hey, how are your white blood cells today? Have you ever had that question? So, you know, it's oxygen for a business, but you're not living for that. So you have to— people get— they don't get energy around that. You know, you talk GE. I don't want to be denigrating GE. It's a great— it was a great company.

Yeah, it barely exists.

But, you know, all of a sudden there's a board of 25 people, and every board meeting was what next quarter's earnings per share were going to be. Yes. And anybody who read From the Gut from Jack Welch, he was extremely proud, extremely proud that in the 34 quarters that he reported, there were only 2 quarters that he missed by 1 penny. When I read that, I thought, man, this man should have been in Las Vegas. You know, he shouldn't have run GE. But it was clearly manipulation. So then Imelt comes and GE Financial was then sort of the buffer, how you manage these numbers. The whole card of decks fell apart. You can get away with it for a while.

That was the black box.

Yeah, but how black is the black box? You don't need to— you don't— in Holland, you don't need to have elementary school to figure out that that's not a way to run the business, in all fairness. So why doesn't anybody speak up? Why are the discussions in every board meeting, which you hear from all the board members that were there, you know, about earnings per share for the next quarter and how to position it? Shall we sell the furniture or shall we lease it out so to make the numbers work? Shall we postpone this decision like 70% of the CEOs do when they know that they're actually destroying value for the company? Yeah, do you want to live that life? It's a choice. I'm just saying to people, it's a choice. And I can point out that choice to people. I certainly wouldn't condemn people, but it's a choice. I decided not to make that choice. I think it's easier not to make the choice and try to do the right thing than deliberately knowing that you're doing the wrong thing. I just couldn't live with that.

So let's get to Milton Friedman, who's in the room here somewhere.

I feel him.

You feel him?

He's nodding, by the way.

How would Friedman respond to what you've just said writ large? Wouldn't he say that unless it yields a return, the pursuit of virtually anything other than shareholder profit is a tax on shareholders, or at the very least, a misuse of their money by executives and the board?

Yeah. So, I had to give a lecture on 250 years of Wealth of Nations for Adam Smith. And 17 years before that, he wrote the book Theory of Moral Sentiment. And so, the moral sentiment that he wrote about empathy, about Wanting to belong to, being accepted in a broader circle, he felt would put people in the right ethical behavior whilst the invisible hand was doing its work. Unfortunately, when Milton wrote things, he was only focusing on the invisible hand. He wasn't focusing on the theory of moral sentiment. So he lost that part out of it. And I think he forgot that at that time. Yeah. But you have to look at the time. If Milton Friedman would write the paper today, he would not write the same paper. You know, he wrote like Adam Smith. Adam Smith, by the way, never finished the book, contrary to what people think. The Wealth of Nations wasn't the finished book. It was an older version of the next book he was going to write. So these were papers. Milton Friedman also was a paper. And as things— developed and they understood things better, they would probably develop their thoughts. You know, it was Milton Keynes who said, when the facts change, I change my opinion. That's what research is all about as well. That's why you don't want to destroy science, by the way, or cut it out or do some other things without going in a different direction here. But when Milton Friedman wrote the paper, you need to look at the environment, governments were functioning, Businesses were basically local. The shareholders were direct owners. The behaviors, the external issues that we now face with these planetary boundaries, et cetera, that affect us all, weren't there. So the environment in which that paper was written was different. So he said, yeah, if a real owner of the business, a direct shareholder, which you don't have anymore now, You have indirect without liability, which are basically, you know, index funds, mutual funds, ETFs. So you know the story. So you don't have that involvement anymore. So for him, it was a matter of when you are an agent for a company, you have to perform for the owners of that company. But if you read his paper, he talks about ethical behavior. He talks about, he even mentions that if you feel it's, if you can show that developing, investing in your communities to be able to hire the people you need or to sell the products you want, which was very important in those days when most of these companies were local, then he said you should do that as well. He wasn't that far away from what I'm actually advocating right now. He just wrote it at a certain time when some of these limitations that were— that we see now were just not available. So, and he might have been right for that time. Then neoliberalism started and his paper got hijacked. Then it actually happened under Clinton, a Democratic president surprisingly, that the financial markets got liberated and frankly too many financial instruments came and they started chasing money. And that's where the short-termism came in. When Milton Friedman wrote his paper, and don't quote me on the exact numbers, but share buybacks were probably 5% in the '70s. Now share buybacks are 80%, 90%, and special dividends. If you look at the last 10, 15 years at Fortune 500, there is significantly more money spent on share buybacks and special dividends than the companies invest in R&D or or capital investments. That's why we're having the issues that we have now. That's why you see the inequality popping up in society. Don't be mistaken. So he would not have written the paper today.

Would he have seen executives who pursue responsible capitalism or socially conscious capitalism, would he see them as a kind of moral legislator? In other words, that those pursuits, pursuits of those social goods, really should be left to real legislators, the government, to price carbon and tax carbon.

Well, if the issues are not there, you might not have to address them. When a CEO in those days got paid 15 to 20 times more, you don't have to address the issue. When a CEO gets paid 400 times more, Houston, you have a problem. A lot of people are feeling unhappy about that. When the company's externalities are not priced in, but Mother Earth compensates for that, you're not aware of them. Give them some credit. When the externalities we're well aware of right now, the costs are being borne by others than the ones that extract the rent, People have a problem with that. So it is— it's just a different environment that we live in that Milton Friedman, if he definitely would have been a scholar at Chicago with his brains, then he would have picked up on that and he would have adjusted his paper accordingly. Yeah. And what you now see is, if Milton says, well, the priority is to maximize shareholder return, I say, I don't have a problem with that. In Unilever, I could show that running the business responsibly gave a higher return than our competitors, than the market.

Well, you did deliver shareholder returns.

Yes, so I don't see that as a problem. I'm a capitalist at heart, but I want capitalism to work for everybody because otherwise it doesn't function. If we don't run this world around the common values that connect us, as we talked, it won't work. We're destroying this very fabric that keeps us alive. That's all I'm saying. So when we go in a country in Unilever, we first think about not how many how much money can we get out and how many dividends we can pay. We think about how many people can we teach how to brush their teeth so that they don't get oral problems so that they can go to school and study. We think about how many kids can we teach handwashing so that we don't have 5 million people dying of infectious diseases before the age of 5 because they don't have access to hygiene. We think about how many people, the 1 billion people that still have open defecation, how can we ensure especially women, very vulnerable, that there is a toilet at home. And then we think about, hey, we happen to be in that business, so it makes good sense. And if we address these issues, we tend to do better than if we neglect these issues. What do you otherwise focus on? What gets you up at night?

I want to save some time for audience questions, but I'd like to ask one sort of final question, then I'll ask my final, final question, and then the final, final, final question. But this has been a wonderful conversation. Feel free to contradict me, but it seems to me as though ESG, environmentally, socially, and governance investing, and ESG principles in corporations and institutions have peaked, and that environmental standards have been rolled back here in the United States. For the second time, we've pulled out of the Paris Accord. DEI has come under attack as woke ideology. It's not merely a rhetorical attack. It can be a legal attack. You can be charged for pursuing DEI policies in this country. Are companies and boards and executives as all in as they were 5 or 6 years ago? What's happened? And are you still hopeful?

So there is no doubt that there is pushback. And that comes at the wrong moment, and that we are paying a little bit of a price for that. The first thing we have to do is blame ourselves a little bit, because there were many companies for which ESG was virtue signaling, but not action. And these companies are being called out. And these companies are also the first ones, actually, that run away from it, because if it's embedded in the core of the company, and if it creates value for you, you're not running away from it. Nor will your shareholders let you run away from it. So the 8% of companies in America, 8% of companies in America, less in Europe, and actually the opposite happening in the Far East right now, which I'll come to in a second, these 8% of the companies, you have to ask yourselves, were they serious in the first place? So that's just a moment of shakeout that needs to happen. Then the second thing you see is the political side. I don't want to spend too much time on that. But with any major transition of this magnitude, you are naive not to assume that the vested order is not going to fight back. And that— Is

that the what?

The vested order is not going to fight back. And the money, when you had your Citizens Unite and all the other things, you have created a system that it's not anymore one person, one vote, but it's $1, 2 votes. And that has— affected significantly the politics and the ability of the vested interest, you know, to decide some of the things that I think should be left either to the market or to the citizens of this country. The 180-degree flip of the tech brothers is a good example of that. I don't need to say more. It's frightening and it's not good for business, not good for society. What is happening there? And then the third thing is, if you then look at the reality of what is happening and you peel the onion, there was just an article in Harvard Business Review last week that I saw from Neil Hawken, was a good article, that the majority of companies, by any study that we do, 85 to 90% of the companies, the CEOs are committed, they will stay the course, about 40% actually will accelerate, Because technology is becoming cheaper and cheaper exponentially, and they just—but what they do is keep their heads down, and which is not good. I'll tell you that in a second. And the second thing that they do is not anymore these collective actions. But don't be mistaken. There were 111 lawsuits in Arkansas, Texas, and Florida alone. Only 14 of them against ESG. Only 14 of them were supported. These 14 are now being challenged because you can show that the pension funds in these states, etc., are actually losing out because they're not investing in the right companies that give the returns. You look at the last 3, 4, 5 years of the sustainable companies index versus the rest of the market, you see an outperformance. So not surprisingly, so you're not going to be happy with these policies if they actually hit your wallet. You're not going to be happy with that. Yeah. So the reality is you have to be very careful with the story that is out there that some people want us to live and the reality of what's happening in the world. The world spent last year $2.3 trillion on the green conversion to deal with climate change. $2.3 trillion. That is twice what they spent on fossil fuel. In a country like this, where there is a slightly different narrative coming from some quarters, 95% of all the new investments in new energy have been in green energy. You wouldn't believe it if you read the papers. There are more coal plants that have been retired under this president and during his previous term than any other president in history. So the reality of the story. Is slightly different than than and and what what is driving that? Driving that is actually the real economics. The cost curves have come down. You look at the cost of wind, of solar, of battery, and I could go on. The that is just exponential. Now, the the second thing that that is happening is the the technology, the cost curves, but also the geopolitics. It is now. increasingly an advantage to not be energy dependent. There are 75% of the countries in the world don't have their own energy sources. And especially with what is happening now in the world, you don't want to be dependent on anybody else. Right. So Pakistan has moved in the last 2 years to 20% green energy. I was in Africa right now. The solar panel industry is just incredible. We've created a global alliance against Global Energy Alliance for People and Planet, we call it, where we want to give 800 million people access to energy, but we want to give them green energy. That is now going at 1,000 miles an hour because of these low prices. So it is happening, it is happening.

Let me just interrupt you because I know we're running a little short on time. We have time for 5 or 10 minutes of audience questions? We have microphones there. There's a gentleman there who's raised his hand. You get to go first. Make your question—

A question from Pakistan.

Make your question quick so we can get a lot in.

I'm Malik, graduate student at Harris. So I've been an employee at Unilever. I joined Unilever back in 2017 in Pakistan. I was the junior-most employee, entry-level territory manager there. My question would be that how you made this purpose that we were so much conscious even in 2017, the junior-most person in Pakistan, that it has to be with the purpose. What we are doing, as you mentioned, that we have to wash your hands, we have to ensure that people are getting their teeth brushed and there is no hygiene issues or we are saving the lives. And one thing more that I think probably you had left by the time we had COVID. I think that was the time when we actually lived it, lived your philosophy. That was the time because we didn't feel that we have to sit at our homes. It was not about the continuity of the business. We were going beyond the call of duty to ensure that people are well enabled to combat COVID. So I think the kind of fabric you built, as in your time, that helped us a lot, and we were able to serve humanity well. So my question is, That how were you able to get this message across the organization, even in developing countries, even in small markets, that a territory manager like me was also conscious that we have to be selling with a purpose?

Okay, how do you get the message across?

And yeah, the best thing is to show that it is actually, that success breeds success. So if you show that it actually is better for business, Also better for the shareholders. I have no problem with that at all, as I keep saying. Then it will emulate. So what do net-positive companies do? They take responsibility of their total impact in the world. Many companies still think that they can outsource their supply chain and outsource their responsibility. You take fashion, you take Pakistan, you have my point. It's unacceptable to me. If you know, I grew up with the values, if you break it, you own it, you know. So if we're in the food business, then we're in the deforestation business, we're in the keeping the smallholder farmer poor business, we're in the stunting business, we're in the food waste business, we're in the obesity business, we're in the malnutrition business. So you need to take responsibility of your total business. Then you see business opportunities, then you become more responsible, you adapt your products, you anticipate what is happening, makes your business stronger. The second thing you do is you set targets in line with science. Don't set fufu targets. You know, most companies play not to lose. You have to play to win. So science helps us. That's why it's so important to be sure that we protect science, because if we don't have a base for truth, then we never will have a base of trust. That goes together, you see? And science is often the base for that. So we set all of our targets in line with science. Then we said, you know, that's so audacious, we don't know how to do it. So then you go into partnerships. If these issues are so big that you can't do them alone, invite other people in. But we've all been trained in the schools like this, myself included, in competitive leadership, not in cooperative leadership. So it's embedding it in the core, taking the full responsibility, setting the targets that science demands, forming the alliances that you need to solve the problems. The reality is, We have now about 50 to 60% of the problems that we need to address can be addressed profitably with the technologies that we have. But sometimes you need to work together because you have the valley of death or some other things. Then there is about 20% that could be done if we put energy behind it. Take sustainable airline fuel. We have the technology, but we need to unlock the capital. But we have the money in the world, we could do that. And then the balance needs to come from the right consistency and the right policies and governments working together. That definitely is a little bit difficult right now. I'm the first one to acknowledge that, although we should try to keep working on bridging. But at the end of the day, we should, you know, if we focused already on the 80% that is actually under our control, we would not be sitting here talking many of the issues that we've been talking.

Let's take 2 more quick questions if there are 2 more. If there aren't, I'll ask my final question. There's one over here. Thank you.

Hello. Thank you so much for such an inspiring talk. I also work in sustainability for a corporate company. My question is, what do we do with unintended consequences? So just to give an example, the companies have targets to reach 100% deforestation and conversion-free supply chains, and we tend to achieve that goal by getting the right certificates in place if, say, if we are sourcing from Amazon. But that doesn't really stop deforestation from nearby regions. In fact, it increases that. So what is your take as a business? Because after a point, businesses say, oh, it's, you know, our role is limited, we are not the government. So how do you really think beyond that point?

Yeah, so what we talk in our book, Net Positive, we have 2 chapters on this partnership. One is what we call 1+ 1= 11. Where you work with your industry and others to set standards. And for example, on deforestation, you could work it across the industry, you could work it on jurisdictional levels and avoid some of these problems, but they are challenges. But then we have another chapter which is called It Takes Three to Tangle, where you actually— we believe that the new— the leadership that is needed in this world needs to be systems thinkers and changes, and that has to be manifesting itself by going beyond your company alone and trying to de-risk this political process that is very difficult right now. So in 3 weeks' time, I'm in Indonesia, for example, and we're trying to see if we take a whole— Ertharin is here, who actually did it. I should have recognized Ertharin because she used to run the World Food Program, is she's one of your— She's one of your best citizens to make America proud because she brought technology to the World Food Program, different ways of logistics, working with the private sector, and et cetera, and really changed the face of what that should be, and including the soft power that comes with it that was to the benefit of America, I believe. But you work together, you bring these alliances together. Now Indonesia wants to be food independent, just take a very practical example. Right now they have to import food, it's not a good thing if you're a country of that size. But the last thing you want to have happen is to deforest, which is happening right now, so it's not a good thing. Although deforestation has come down, it's still too high. So they happen to have 10, 12 million acres of degraded land. There's more degraded land in the world now than fertile land. So, you know, how can we incentivize them by working with governments, by working with private sector, by working with others to use that degraded land and restore that? How can we move them to regenerative agriculture at the same time versus, you know, the non-sustainable How can we ensure that it's linked to school meals so that every Indonesian kid gets a school meal and give farmers a livelihood? So these are system changes, and that requires all of us to work together and put these alliances together. The main reason I left Unilever was that I tried to live my life with a maximum impact, and I felt staying in Unilever I fall into that bottleneck or trap after 10 years of your individual company issue, and I underutilize my potential. And the CEOs don't have time to work on these platforms, don't have the knowledge on how to do that, don't have the credibility. I was very fortunate to help develop the Sustainable Development Goals, so I feel very, very comfortable on the intersection government, civil society, business. And that's where I work. That's why we created some organizations around that. So there is help needed in that space. Companies alone cannot do that. So your question is not one on credibility. Your question is really one on how do you drive systems change. And, you know, so, yeah, I'll leave it there. I'll leave it there. Thank you.

I had one final big finish question that I was going to ask you, but I hate it now. I don't like it because it's going to leave us on a down note, and I don't want to do that. Instead, I would like you to repeat that quote that you said a few moments ago about worshiping the unseen God but degrading the seen God. It was beautiful. I'd like to hear you say it again.

I have to remember it again. There's so many things in your mind after you talk with you for an hour.

Yeah.

But it was Hubert Reeves. He's a philosopher from Canada, and he said, man is the most insane species. He worships an invisible God and destroys a visible nature, not realizing that the visible nature he destroys is the invisible God he worships in the first place. But I like to end on another quote which says, where the real problem is today, and coming back to your first question, now that I think about it, about Eric Weihenmayer and being blind, it reminds me of Helen Keller. Has anybody heard of Helen Keller here? Sure. So Helen went to Watertown, Massachusetts, close to Boston, School for the Blind, and spoke 7 languages, was blind and deaf. And anytime she would give a speech, she would say, I cannot hear you, I cannot see you, just stamp your feet on the ground and I can feel the vibrations. And after each talk, someone would come up to her and would say— they would show compassion and they would say, Helen, It's terrible to be blind. I feel terrible for you. And her answer was always the same. The worst thing is actually not being blind. The worst thing is having eyes and not being able to see. Paul Polman, thank you.