Paul Polman on climate change, development, and the role of business

WASHINGTON — Tackling climate change and inequality will require swift action, greater scale, and more partnerships, and everyone involved — from businesses and financial markets to governments and the aid industry — must adapt and do better to achieve the progress that is necessary, Paul Polman told Devex.

“We cannot go on to operate in silos and expect to find the answers. It gives us some improvement but not at the scale and speed that we need. It’s just incremental improvement, whereas what we now really need is step change,” Polman said in a recent interview after speaking at the Society for International Development’s annual dinner in Washington.

Polman, the former CEO of Unilever who stepped down about a year ago, has continued working to engage business on issues of climate and sustainable development.

The premise of his latest endeavor, Imagine, which defines itself as a “benefit corporation and foundation” aimed at unleashing business to achieve the Global Goals, is that governments cannot be counted on to act meaningfully in the next 10 to 15 years. But the development community can’t do so on its own either, because it doesn’t have the necessary money, so business has to step up, Polman said.

Collective action among businesses — but also between companies and NGOs, civil society, aid agencies, and governments — will be critical to spurring the scale and speed of change needed to achieve the Sustainable Development Goals, according to Polman.

While each of these sectors has an essential role to play, the business leader also offered up a number of critiques of the sectors during the hourlong interview conducted in a car en route to the airport.

How things have changed

In recent years, a number of changes have led business to engage differently on social, environmental, and development issues, Polman said.

“The private sector is understanding that no business can succeed in societies that fail. And increasingly, you not only see an economic opportunity to get involved — creating livelihoods, making these economies work — but they also see that if business doesn't actively start owning or addressing some of the issues that are out there in society, then society won't let them be around,” he said.

For example, on the issue of climate change, pressure is coming from civil society, activists, employees — such as the roughly 8,000 Amazon workers who signed a letter to CEO Jeff Bezos last year to demand that the company act on climate — and, increasingly, from financial markets.

Financial markets have begun to act partly because issues such as climate change are becoming a risk to the financial performance of companies. A growing amount of money under management is subject to disclosures related to climate, “so business feels that pressure to have a broader business model,” Polman said.

Moves such as the recent announcement by the Business Roundtable redefining the purpose of business as serving stakeholders, including communities — not just shareholders — are an “enormous opportunity,” Polman said.

He spoke proudly of efforts undertaken by Unilever and the example it has set for other companies on how to make sustainability a core part of the business. Unilever’s “purpose-driven” brands that are most aligned with the SDGs — including Lifebuoy, a soap product that focuses on health and hand-washing, and Domestos, a toilet bowl cleaner, which is working on issues of open defecation — grew twice as fast as other brands.

He also said that a growing number of businesses are learning about and contributing to the achievement of the SDGs.

Alliances among businesses are growing, according to Polman, who chairs the board of the International Chamber of Commerce. He said 22 chapters of the chamber are putting climate targets in place and signing up to initiatives ranging from gender balance and fighting hate crimes to pledging not to buy wood products resulting from Brazil’s illegal deforestation.

The progress in corporate-culture change and engagement with the SDGs is also evidenced by actions such as a recent joint labor union and CEO statement about the Paris Climate Agreement, which Polman said would have been unheard of even a year ago, or would have taken a very long time to put together.

Effective partnering

As their interest in tackling climate issues and inequality has increased, businesses have realized that they need to form partnerships in order to succeed.

Coalitions will be important, especially to solve problems that span the interests of multiple companies or sectors. For example, while no company can change the vanilla industry in Madagascar alone, a coalition of companies in the food or perfume business can work with governments and aid organizations to make changes, Polman said.

And he has pushed for cross-sectoral collaborations on multiple occasions, including for a food security task force he chaired for the G-20, where he insisted on including NGOs and U.N. agencies — not just food companies.

“By bringing them all together, the discussions might be a little bit more uncomfortable. All of a sudden, it's about land rights for women or it's biofuel. But if you don't tackle that in an integrated way, you don't solve it,” Polman said.

Partnerships also typically result in a better product, he added.

“I never did anything in Unilever alone when we did these things [programs] at scale because, first of all, I didn't feel that I had all the answers. And secondly, you need to also get legitimacy from society,” he said.

Moving financial systems

Some of the big systemic changes — infrastructure development, changing food and land-use systems, moving to sustainable farming — will require significant investment, Polman said. Financial markets are often unwilling to take risks in emerging markets, or have a short time horizon, he said.

The financial markets are moving too slowly on financing sustainable development, according to Polman, despite there being some impact funds and the emergence of green bonds.

“It's not happening at scale. Many banks that have $500 billion of assets under management make a lot of noise by creating a $2 billion ESG fund, and you have to laugh at that. But that's OK. It is the beginning of it,” he said.

New financial products are needed, but there also needs to be a new approach to risk. Multilateral development banks should be looking to manage risks better instead of focusing only on financing projects, Polman said.

“You have to change their remits” and look to work with philanthropists or high net worth individuals so that they can bring in catalytic financing, he said.

Changing the way financial markets work may require legislation or policy changes to prevent banks from certain types of lending, or to enable investments or push the industry to calculate risk or require transparency frameworks, Polman said.

If banks are forced to disclose their exposure to climate risk in their portfolios, then any asset owner or potential investor can see it and determine if they want to invest.

Accelerating change

Even if governments are slow to act, corporate and civil society leaders can still make progress on the global goals without their involvement, according to Polman.

“What is happening now is that businesses want to move. Civil society understands it. But actually governments hold us back,” he said. Governments need to be more ambitious in demanding climate disclosure, putting a price on carbon, and putting in place the right policies to support the transformation to a green economy, he said.

New policy frameworks, shifting the financial markets to a longer-term perspective, and changes to tax systems are all necessary moving forward. Tax systems need to be changed to factor in the impacts of production, and funds raised should be used to help poorer people and address social issues.

Expanding the tax base is key to having the money to help the poorest countries in particular, which means that companies need to pay their share of taxes, he said.

“Now, the national sport is not to pay taxes,” he said, adding that society will never function if tax systems don’t work and aren’t enforced, because there are certain needs that governments must meet. “When governments are short-term and populist, they do obviously the opposite. They drive tax down to get reelected — it makes things worse.”

Aid organizations will play a critical role moving forward, as they can implement and understand people at a grassroots level, Polman said.

“These aid organizations play a crucial role in helping to bring in that knowledge to help execute on the ground, to make it work,” he said. “We couldn't work without it.”

Those organizations aren’t perfect, though, and sometimes need to be questioned — such as when many organizations went into Haiti and stepped on each other’s toes and wasted money, Polman said.

“Aid organizations themselves need to rationalize a little bit, need to become more focused, need to have better cooperation between themselves,” he said.

Polman discusses the challenges at hand, but it’s clear he is passionate about using his voice and his ability to organize and advice to accelerate change. For him, the two key issues that must be global focuses are addressing climate change and reducing inequality — otherwise, there is no path forward to a healthy planet for business or society, he said.