Net positive is a brilliant book that can change the way in which companies are operating in the world. It is also an annoying book at times because the authors, possibly blinded by their passion, leave no space for thoughts that are different from theirs. The book is written by Paul Polman, former CEO of Unilever and co-founder of Imagine, and Andrew Winston, an author and thinker on sustainable business.
Companies have to become a force for good in the world, they write. “We say simply that profits should come not from creating the world’s problems, but from solving them.” Companies shouldn’t benefit from causing or exploiting problems. “Given its outsized role in society and in creating the mess we’re in, business has a fundamental responsibility to help clean it up by moving to net positive action. Business cannot be a bystander in a system that gives it life.”
Becoming net positive is very ambitious and really difficult but according to the authors inevitable. “Our vision of net positive is a business that improves well-being for everyone it impacts and at all scales – every product, every operation, every region and country, and for every stakeholder, including employees, suppliers, communities, customers, and even future generations and the planet itself. The ultimate question is this: Is the world better off because your business is in it?”
“The net-positive company will operate differently from what’s normal today. It will, for example, eliminate more carbon than it produces; use only renewable energy and renewably sourced materials; create no waste and build everything for full circularity; and replenish and make cleaner all the water it draws. As a people-driven company, it will ensure everyone working in the value chain has the dignity of earning a living wage. The company will offer extensive opportunities for inclusion of all races and abilities, and achieve gender balance in management and pay equity. Through its products, services, and purpose-led initiatives – not philantropy – consumers and communities will be better off. NGOs will be treated as equals and collaborators, not antagonists. Government leaders will find they have demanding partners, not self-serving lobbyists, trying to develop a system of rules that benefits all. And investors who support long-term value creation will reap healthy financial rewards.”
That’s a lot. Therefore “you can’t get there in one leap”, there are “practical trade-offs along the way and you can’t advance on every front at once. No company embraces the ambition that we propose here…. yet.”
Net-positive pays off, they write. It saves money, reduces risk, leads to more innovations, builds valuable corporate reputations and brands, attracts and retains talent, leads to higher employee engagement. Unilever’s purpose-driven brands have grown 69 percent faster than the rest of the business and with higher margins. Net positive pays off for investors too. Sustainable indexes and portfolios outperform their benchmarks.
Polman and Winston aim to write a book “that is light on the why and instead focuses on the how where more of us struggle”. They want to stop trying to convince people and get moving. This book is impressive in its rich offering of concrete examples of how Polman steered Unilever in this direction during his decade at the helm, not all of them successful. “Nobody had tried to do what Paul was attempting: make sustainability the core mission of a world-straddling, public company with tens of billions in sales.” Moreover, the book contains inspiring examples from Microsoft, IKEA, Kering, Apple, and Ørsted, to name just a few.
Polman introduced the Unilever Sustainable Living Plan (USLP) with three ambitious goals: doubling sales while cutting its environmental footprint in half, helping a billion people improve their health and well-being, enhance the livelihoods of hundreds of thousands of people. From the first day, the detailed plan, including its fifty targets, was open to public critique. “Going public with specific numbers created accountability. Once a target is out there, it’s not voluntary anymore.” It transformed the company and “yielded a strong financial position and deep connections to its employees, communities, business partners, and governments. Those relationships gave it speed. Unilever moved faster than its peers because of the trust it had built up with stakeholders over years.” I am not sure if the Dutch government will agree to this statement. Unilever abolished its dual structure last year and moved its headquarters to London.
The authors make clear that earning a lot of money is part of running a company. “Pursuing net positive is only possible if it’s built on top of a strong foundation and an uncompromising culture of performance. (…) If you don’t have the foundations of a healthy business in place, any attempt at a mission-driven strategy or net positive model will likely fail. (…) If the basics aren’t there – growth, investment, innovation, pride, unity, and openness to new ideas – the rest falls apart, and you can’t do anything big.”
But profit is the result, not the objective, they write. “The great Peter Drucker reportedly once said, “Profit for a company is like oxygen for a person. If you don’t have enough of it, you are out of the game. But if you think your life is about breathing, you’re really missing something.” The obsession with shareholder value has turned businesses into soulless money machines.”
The authors reject the “quarterly-focused, shareholder-first mantra” which they deem “wildly unfit for today’s world and is ultimately self-defeating. We must kill the old philosophy if we want to survive and thrive. (…) We believe that more companies have failed because of short-termism than have tripped up because they were too visionary.” They mention Boeing with the 737 MAX failure and American bank Wells Fargo as examples of companies that have destroyed trust as a consequence of their short-termism. “If we keep shareholders in the driver’s seat, we cannot build a system that optimizes for well-being for all.” Let’s get rid of short-term pressure from markets, they write.
CEOs pay a lot of attention to investors, more than to other stakeholders, often pushed by their boards. You have to push back, they say. “Walk away from the quarterly profits insanity.” That requires courage, patience and determination. And you have to take your investors along. “When you’re promoting a model that treats profits as a result, not an objective, investors need to be enrolled and educated; otherwise, they will make life difficult.” Although Unilever-stock currently performs worse than peers, Unilever did well during Polman’s reign with “total shareholder return of 292 percent, far outrunning the 131 percent for the FTSE index”.
Even when profit is not a goal but a result, nothing is wrong with promoting your own interests as a company. Polman gives an example of a collaboration between Unilever and Unicef, in which soap was donated. Polman says, “I don’t have soap, I have Lifebuoy”. And adds, “If the work to serve a need in the world is done authentically and genuinely, why shouldn’t the brand get credit?” Another example is how Unilever partners with local women in India, focusing on those in disadvantaged situations. The company teaches 136,000 women how to set up shop and sell small amounts of Unilever products. Their status in the village and family rises, they increase their family income by about 25 percent, and Unilever increases its revenues.
This is a long review of an important book that every executive should read in order to apply the lessons in his or her own context. Polman and Winston are passionate to change the world and give many practical examples of how to do it. Take their lessons to heart.
Paul Polman, Andrew Winston. Net Positive. How Courageous Companies Thrive By Giving More Than They Take. Harvard Business Review, 2021