"This is the end of the era of abundance" says Unilever CEO
Feb. 18, 2015
Last night, over 70 BCCJ members and guests joined a BCCJ event, "Building a sustainable business: the Unilever way", with Unilever's global CEO Paul Polman at Tokyo American Club.
Setting the tone for his speech on the importance of long-term sustainability, Mr Polman opened by saying he wanted to talk about issues which "bind us, not tear us apart."
He explained that 2015 is an important year in which the UN's Millennium Development Goals, set in 2000, and aiming to reduce the number of people living in poverty - defined as living on less than $1.25 a day - will expire . Mr Polman said this was a good opportunity to assess what progress had been made and to create a strategy for future development.
"Poverty is not any more, unlike 15 years ago, reserved for developing countries. Poverty has crept in to every society. 16% of the population in Japan lives in poverty. Millions in America live below the poverty line. One in five children goes to school without having breakfast, you wouldn't want that to be your children", he said.
He added this year was also a key point in time for the world to address climate change. "Let me just ask you a simple question: how many forests can we keep cutting until the forests are gone? How many cities can we keep polluting until the people can't breathe any more?"
Citing a recent visit to Dehli, which was named the most polluted city in the world, Mr Polman said people were becoming tired of living with daily and growing pollution: "People just don't want that any more."
Mr Polman also touched upon the necessity for all nations to contribute in the fight to preserve the world for future generations. "If Japan, the world's third largest economy, doesn't play its part, it's not going to work. There cannot be any opt-in and opt-out. We are making this world better. It takes courage from our government and from our business people."
He explained how improving life for the poor and tackling climate change were interlinked objectives. "When Hurricane Sandy happened, people in Haiti were set back two years. People in New York had great anecdotes for two weeks, they got fitter climbing the stairs, they watched less TV and talked to some new people...It's the really poor that suffered."
He continued on the theme of climate change: "In 1997 it was Japan who stood up and said we need the Kyoto Protocol. Admittedly some of the bigger countries like the US didn't sign up." He added that Japan had shown "early awareness" on the issue of greenhouse gases. "Japan took the lead, why can't it take the lead again?"
Mr Polman argued that now is the right time for Japan to focus on sustainability as a means to ensure long-term growth. "Japan could probably position itself for a very competitive economy, whereas now its struggling. This is an opportunity to make the right investment for growth, and the investment that gives very long term competitivity."
He added that there are currently "forces coming together that have never come together before" meaning that the geo-political landscape was subject to unprecedented changes over the coming years. He said: "Why do we see so many more geopolitical issues? Why is it so difficult to get people to like each other and work together for the common good?"
Mr Polman outlined three key issues he believes the world needs to address.
The new Asia
The first was "the new Asia - the world moving south and east," with an economic shift away from the US and Europe. He told the audience "You will be familiar with that. (Japan) had a little bit of a head start but the countries around you are catching up very quickly. China is now a massive economy."
He added emerging markets would soon account for the vast majority of the world's population, with India expected to overtake China sometime after 2016. This would lead to confused global governments. "The institutions were designed for America and Europe. These institutions are not recognised by everyone." He added the problem of global governance needs to be solved. "Many of the issues that we need to address are not being addressed. The number of issues we have between countries is definitely increasing."
The end of the era of abundance
Mr Polman said the second issue was "the end of the era of abundance" - doing more, with less. He said there had been an explosion in development, population and consumption. "Because of this immense push in consumption we are putting enormous constraints on planetary boundaries. We are currently using materials at a rate of 1.5 times what the Earth can sustain."
As resources become increasingly scarce, Mr Polman said it is vital to look at systems such as circular economies, sharing economics and more closely examine the use of resources. He added that more consideration should be given to different indicators of consumption, that were not as narrow as GDP.
Mr Polman dubbed the final issue "the consumer in charge", describing how the internet has led consumers having access to greater information and allowing them to share their views easily. "We have connected the whole world. Now we have to figure out how to make wealth available to everyone. People might not have money, but they do have power. In the absence of governments that cannot be trusted, people have to connect and impel change."
He claimed efforts to inject cash into the world economy following the 2007-08 crash had had little trickle down impact. "10% has gone to the economy, 90% is floating around in the dust. The rich get richer and the poor don't see any improvement."
But he added that the shift of power into the hands of consumers would be the biggest driver of change.
"It's the power of connectivity that is going to change the world and it's the young that are going to do that. In 2007-8 it was really a crisis of morality and greed - the benefits came to them and the cost came to society. [Economic success] had come at cost that was not sustainable. There was enormous public and private debt, over consumerism and too many people left behind." He added that when too many people are left outside of a system they will "reject it like a cancer in your body...The system is out of balance and it will never survive long term."
Mr Polman insisted that he was not against the private sector - after all he is the CEO of a multinational firm - but he felt that business across the board must act more responsibly. He also acknowleged that business was fundamental to global GDP, job creation and financial flow: "Business makes up 60% of global GDP, and creates 90% of jobs; we need to take more long-term responsibility". He added that businesses could not be a "bystander" in a system that "doesn't work."
He said that a reason for a lack of true and sustainable change could be the often short tenure of CEOs who are simply looking to return good quarterly results for shareholders, and that the average life-span of a publically-listed company is only 18.5 years. "We need to put a different business model out there. Not a model that is to the expense of our shareholders, but one that is to the benefit of our shareholders and the world in the long-term."
Mr Polman called for companies to abolish quarterly reporting and guidance, saying 76 working days between reports meant too much time was spent on meeting requirements and focusing on quarterly results, and not on long-term sustainable goals.
The Unilever example
Speaking about Unilever, Mr Polman said he wanted to double turnover while remaining true to the company's roots in providing people with everyday essentials. "We are in the simple business of soup and soaps...eating and washing." His vision of the company sees environmental and social impact at the forefront of the companies activities.
He added that with a turnover of $60-70bn and a presence in 190 countries, Unilever's taking a sustainable approach to the "whole value chain" could make a significant contribution. The firm is already using green energy for its factories in the US and Europe. It also takes a sustainable approach to its water supply and some ingredients are 100% sustainably sourced. "This is how responsible companies show up; the difference between doing the minimum requirement and not what's really needed."
Mr Polman said this approach had seen shares rise and employee engagement was high, and Unilever is behind only Apple and Google in terms of preferred employers on LinkedIn as they are seen as a business with a purpose. "And people want to have a purpose."
He reminded the audience that Unilever had been born out of a need for soap to improve sanitation in Victorian Britain. The Lever Brothers produced Lifebuoy and Sunlight Soap before merging with Dutch firm Margarine Unie in 1930. The Lever Brothers also took an interest in employee welfare, building accommodation and community facilities.
Mr Polman added that today there were the equivalent of 40 Boeing 747s full of children dying each day from poor sanitation around the world, which has driven Unilever to work with toilet building initiatives. He added this made good business sense, too, as Unilever produces Domestos toilet cleaner, and the more toilets there are the more toilet cleaner they will sell.
Invest in women
Bringing his speech to a close, Mr Polman stressed the need to increase diversity and female participation in the workforce in order to boost economic prosperity - in Japan's case equal opportunities would lead to a 13% increase in GDP. He added that 60% of the world's farming is done by women, but that women receive only 10% of the money and own 2% of the land, and that this should change: "Invest in your women. Give access to land rights and financing."
Trust the young
In the Q&A session, Mr Polman explained it was possible for businesses of all sizes to be green and focus on sustainability. When asked about how companies could bring about a cultural shift he said that he believed the next generation of workers would bring about a change - "trust the young", and that there was a need for social entrepreneurs. But he explained "Japan needs some people that are willing to stand up and be spokespeople."
He also called for greater efficiency in Japan, in the context of agricultural protectionism, and called the EU's Common Agricultural Policy "criminal."
In conclusion, he gave advice on how achieve his vision of sustainable growth. "The best way to find yourself is to be yourself, in the service of others. Everytime we give more we will receive more as well. How do we get people there? It's hard work."
Thank you to BCCJ Corporate Plus member, Unilever, for this opportunity
A selection of photos from the event can be found HERE
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