Business drivers around the world right now share one big common concern — how to deal with Volatility, Uncertainity, Complexity and Ambiguity (VUCA) without compromising on growth and their evolving consumers. As keynote speaker at the ISA’s Global CEO Conference on ‘Navigating a VUCA World’ organized in association with exchange4media in Mumbai last week, Paul Polman, Chief Executive Officer, Unilever Global, offered straightforward advice to industry honchos on why companies need to rejig business models and why it’s important for them to contribute significantly to society
On October 2 this year, even as Anglo-Dutch consumer goods giant Unilever issued its first profit warning in years, foreseeing a slowdown in emerging markets, its CEO Paul Polman, a leading advocate of responsible business models, told the media that he was unperturbed by the warning and would carry on his agenda of corporate sustainability and a long-term approach to business.
Polman is known for advocating diversity and responsibility in what he describes as a VUCA (Volatile, Uncertain, Complex and Ambiguous) world, calling upon all businesses to make the world a better place to live in and not just drive profit for themselves. Polman’s concerns remain issues such as the underpaid worker and rampant deforestation, even as he travels across continents and drives Unilever. Incidentally, the Unilever Global CEO is also the President of Kilimanjaro Blind Trust and chairman of Perkins International Advisory Board.
Right after the profit warning was issued, an interviewer from The Guardian asked Polman, “Do you ever feel that people think that you’ve gone a bit soft in the head?”, to which he replied, “They might or not, I leave that to others to judge, but the best thing we can do is to show that the way we are trying to be responsible also makes good business sense . I don’t think there is any question about that.” Under Polman’s leadership, Unilever has set out an ambitious vision to double its size while reducing its overall environmental footprint and increasing its positive social impact. Ever since he took over as CEO in 2009, the company has strengthened its foothold in existing markets and made inroads into emerging ones. Every brand under the company has a clear social role.
On Polman’s first visit to Mumbai, he was among the top Unilever executives, including Patrick Cescau, the then Unilever CEO, and Harish Manwani and Nitin Paranjpe of Hindustan Unilever, trapped at the Taj Mahal Palace hotel during the terrorist attacks of 26/11.
According to a report in The Telegraph, UK, Polman, who had thought about becoming a priest in his early 20s, said, “Sometimes when something happens to you, you can’t do anything about, it but you can do something with it. I’m now seeing a lot of qualities in people I didn’t see before.”
The same report says Polman and Cescau not only returned to the Taj hotel the next year “to finish their meal”, but hosted a dinner with the HUL board for the manager and staff of the hotel, who had helped them so much during the attacks, making the staff sit down and actually serving them the meal. Polman was in Mumbai last week as keynote speaker at the Indian Society of Advertisers’ (ISA) inaugural Global CEO Conference, organized in association with exchange4media. He greeted the packed conference room with ‘Diwali Mubarak’ and won everyone over with his attempt to speak in Hindi. The guru of responsible business spoke on ‘How Responsible Business Models Can Help in VUCA Times’. According to him, the challenge is to hold on to the energy, enterprise and creativity that characterize capitalism in business as practised over the past 20 years, while doing away with its destructive elements.
An abridged version of Paul Polman’s keynote address:
On my flight from Amsterdam to Mumbai, I overheard a doctor, economist and engineer having a discussion about whose was the oldest profession. The doctor said, “If you go by the Book Of Genesis, Eve was born out of Adam’s ribs and that was probably the first ever successful operation performed on Earth. Clearly, ours is the oldest.” The engineer argued, “There was chaos and we created the Universe. If there is someone who could create order out of chaos, it must be the engineer. So, ours is the oldest profession.” Finally, the economist said, “I don’t think so. Because who created chaos in the first place!”
And that is where we are in this VUCA world… Never has change been as slow as today. The amount of change and volatility that you will see will go up exponentially. Consider the GDP development… it took 100 years for England, which has about 1/10th of India’s population, to double its GDP, whereas in India, it took only 10 years to double its GDP. The reason why I think change will accelerate is because a lot of forces are coming together in this decade. We’re struggling with that not just as marketers, but also from a geopolitical, economic and sustainable point- of-view.
The new world order
Let’s look at the three [trends] today. The first one is what Kishore Mahbubani teaches at the Lee Kuan Yew School of Public Policy and Management [at the National University of Singapore] as ‘the new Asian Hemisphere’, which you are a part of. The world is changing quite rapidly to [favour] the East and South. With that change, comes a lot of pressure. It used to be that we’d be following the ‘US model’ [or] the US MBA-educated way of doing things… [Now] clearly, the US is shrinking back to its own territory, especially when… politics has been paralyzed and polarized. Unfortunately, West is shifting power feuds — countries like India and China are not yet fully ready to set up to the global plate, although their size would increasingly demand that, to be honest.
We think it is courageous to move from G7 to G8, and it’s really out of sight if we move to G20. But unfortunately, it doesn’t work that way anymore. Many of the issues that the world is now facing are issues of global magnitude. Unfortunately, our political system is increasingly designed obviously for local issues, and that causes enormous tension. Why don’t we get agreements to The Doha [Development] Rounds? Why do we get an incredibly watereddown agreement on the Rio+20 [United Nations Conference on Sustainable Development]?... Why has Syria become a soap opera spectacle, a very tragic one, on TV on a daily basis? That’s the political environment, unfortunately, that you will see for the next decade at least. Politicians are becoming increasingly more short term and worried about their electorate. They are struggling with the way the world is moving as much as we all do.
The consumer is in charge
The second trend… is what I’d call the ‘consumer-in-charge’. The world has rapidly changed because of digitization, and your profession, and others as well, obviously struggle with that the most. We are an enormously inter-connected world. Nobody would have expected that Facebook would be the third biggest nation in the world after China and India. Nobody would have anticipated 175 million tweets every day either, or 100 hours of video uploaded on YouTube, every minute!
The consumer doesn’t like what they see at the political level and at some other things, but they are increasingly able to connect their voices. They are discovering the power of that, especially and interestingly among the emerging markets and the young. Currently 50% of the population is below 25-year-old, and they very well understand… that they might be 50% today, but they are 100% tomorrow, and they do care about the future. When things happen, the young get together fairly quickly. Look at a regime like Mubarak’s, [which was] one of the most ingrained regimes… they always had inflation, corruption, high unemployment. It took 17 days [to overthrow this regime] with the help of Facebook, Twitter and YouTube. My point is very simple — if you can get a very ingrained regimen out of office in 17 days, you can get an irresponsible company out of office in nanoseconds.
End of the era of abundance
The third trend is what I call the ‘end of the era of abundance’. Our GDP in the last 40 years has gone up 300% and it will go up again by 300% even today, with 7 billion people hitting the planetary boundary. Our nitrogen levels are already beyond the minimum acceptable levels. That is before many people are lifted out of poverty and before another 2.5 billion people come into this world. It just doesn’t add up anymore.
WWF rightfully said we currently already live off 1.5 planets and if we live like Americans, we need four to five planets. With all these missions we’ve taken to space, we haven’t discovered many great, illuminating things. So we have to start to do things differently. People ask me, ‘Do we have more scandals in business and is that why trust in business is low?’ No, I don’t think we have more scandals. I just think it’s more transparent. Consumers are connected, and they can get information quickly. They can find out what you are doing. This is the age of transparency. You cannot build trust without transparency, and you need that trust to build prosperity. It’s increasingly becoming more difficult to build trust in a transparent society… But more than transparent, you have to become a solution provider and giver, not a taker.
Capitalism works, but it needs to evolve
In this world, not many people believe that capitalism works. Sure it works. As Winston Churchill said, ‘Democracy is the worst form of governance, except for all the other ones [that have been tried]’ and he was right. The same thing can be said about capitalism — it’s the worst form of ruling and to counter our economic system, except for all the other ones invented. I have been to many places in the world, and I haven’t found a better system. But it’s also clear that capitalism needs to evolve. There isn’t one form of capitalism.
Any system where too many people feel they are not participating or are excluded will ultimately be rejected like a cancer in your body. It’s happening all around us, and businesses need to understand that… We have to change our business models and if we don’t we’ll become dinosaurs, because consumers will vote us out of office; just like they voted [Mubarak’s] Egypt out of office.
Eradicating poverty
Obviously, capitalism has lifted 500 million people out of poverty in the last three or four decades. A lot of that is actually China, may I add — it’s one of the countries that has contributed enormously to the millennial developmental goals, which, if you probably remember, were introduced in the year 2000 and one of its objectives was to [eradicate half of the poverty] by the year 2015. The number will be achieved, thanks to China.
But as we have lifted poverty, increased our access to medicines and rights to education… we also have some shortcomings. We’ve learnt that this form of capitalism certainly comes at an enormous price — enormous levels of government debt or private debt, enormous levels of over-consumerism where the top one billion in society use 70% of the world’s resources and the bottom one billion uses only 1% of these resources.
Today, one billion people go to bed hungry not knowing if they’re going to wake up the next morning. Every six seconds, a child dies. That’s not the world we want to live in. That’s why I responded to the call from the Secretary General, when he asked if I wanted to be a part of a high-level panel for the post 2015 millenium developmental goals… I remember the first meeting with 26 other panellists, most of whom were former heads of states... it was very clear, having been in politics their whole life, that the issue was business.
We cannot afford to have global warming, have more people go to bed hungry and have a system of over-consumerism. We can’t afford to have part of the world in huge debts and consume everything, while the other parts of the world work like donkeys producing everything. This is not a system of equilibrium, neither for companies nor for society.
Unilever’s sustainable living plan
What does this have to do with Unilever? As much as it has to do with all of you, because if we can figure out our business models where we become net contributors and net givers, where we deposit more than we take, we have unlimited opportunities to grow. That’s why we introduced Unilever’s sustainable living plan. It’s basically says, let’s double our business and because of the two billion people in the emerging markets, the opportunities are plenty to grow. But let’s do it in such a way that we totally decouple our growth from environmental impact and also improve our social impact.
It sounded weird and added some funny business KPIs — 100% of our agricultural based materials are sustainably sourced; 500,000 jobs create for small whole farmers; live-able wages in our supply chain; reaching a billion people and helping improve their health and well-being. This sounds like a lot... but we have two billion people using our products every day and we’re in seven out of ten households.
The objectives set by the company for sustainability are so big that Unilever cannot do it alone. If you agree with us, then join hands to work towards [achieving] a common goal. It also requires business plans to be long term, that’s why we said no more quarterly reports.
How many businesses have been created for the shareholders? None. All these businesses were created because someone saw an opportunity to follow needs. All marketers focus on consumers and citizens. Do that well and shareholders will be rewarded.
Let brands make a positive contribution
The biggest tools you have are your brands. They create that confidence and trust. What we have tried to do is give each of our brands a social mission. The biggest toilet cleaner brand is about sanitation, with a goal to build 400,000 toilets. If you can make a positive contribution, your brand has the right [to exist]. My favourite brand is Lifebuoy. It is a brand which was born here more or less and it is one of our fastest growing brands.
One side of the world is concerned right now about the scarcity of the latest iPhone 5S. There are still 2.8 billion people worried about sanitation. There’s a dramatic increase in billionaires in India and people living on less than 1$ a day. There are more mobile phones than toilets! We need to make this VUCA world more sustainable. Business leaders who understand this will have a bright future, and those who don’t will be isolated. Every brand needs to have that social purpose. Think of the enormous force we can create for good via these brands.
(Transcribed by Shobhana Nair and Sneha Ullal)
Feedback: sneha.ullal@exchange4media.com
