00:09And now I'd like to introduce you to our featured presenter today,
00:14uh, Professor Julia Novy-Hildesley.
00:16So Julia is a Professor of the Practice and
00:19the Executive Director of Stanford's Change Leadership for Sustainability Program.
00:23Her research and teaching focuses on business strategies, leadership approaches,
00:27and cross-sector partnerships that spur global development and
00:31align systems with the goal of intergenerational well-being.
00:35Prior to Stanford, Julia served as the Executive Director of the Lemelson Foundation,
00:40the Director of World Wildlife Fund's Pacific Marine Office,
00:44and the CEO of Washington STEM.
00:46Julia holds a BA from Stanford University
00:49and a Masters in Philosophy from the University of Sussex,
00:52where she was recognized as
00:53a distinguished Young Global Leader by the World Economic Forum in 2010.
00:58And with that, let us turn it over to Julia.
01:02Hello and thank you for joining us.
01:05I'm really thrilled to have all of you here
01:06today and to talk about such an important topic,
01:09um, so important in our time,
01:11and really looking forward to the Q&A at the end,
01:13as well to hear some of the perspectives all of
01:15you have regarding this shift we're starting to
01:17see in business as it becomes more and more of the norm to embrace sustainability.
01:22So today we're going to organize our conversation,
01:26uh, around three core themes. There we go.
01:30Okay, so first, why are we seeing this shift in approach?
01:33Why are we seeing more and more businesses,
01:35and organizations in general, embracing sustainability?
01:39Second, uh, what strategic changes are organizations making as they embrace this change?
01:46And finally, how are they actually implementing these changes?
01:49So we're gonna look a little bit at the why,
01:51and the what, and the how, throughout the hour.
01:54Um, first let me share a perspective,
01:57um, as we [LAUGHTER] get into the why here.
02:01You know, what is causing organizations to increasingly embrace sustainability?
02:05And Paul Polman, former CEO of Unilever, uh,
02:07where he was for a decade,
02:09summarizes an insight that is driving the shift.
02:12And fundamentally, he says,
02:13"We must develop a business model aimed at contributing to
02:16society and environment instead of taking from them."
02:19Um, and it's not just Unilever that has this insight of course,
02:23we're seeing organizations and businesses of all varieties,
02:26from small companies to transnationals like Unilever, embracing sustainability.
02:31And not simply as we've seen in the past as an effort to comply with regulations,
02:36or to be charitable through corporate social responsibility initiatives, but really,
02:41um, embracing sustainability as core strategy,
02:44putting sustainability at the heart of a company's business model.
02:47So let's step back a little bit and ask ourselves why are our businesses doing this,
02:52why is this happening,
02:54and why is it happening now.
02:55As we've all experienced firsthand in our personal lives and in our work, um,
03:00we are increasingly operating in an environment characterized by volatility,
03:04uncertainty, complexity, and ambiguity.
03:08And VUCA is- is actually a term that was coined by
03:11the US Army War College to describe
03:13the geopolitical context resulting from the end of the Cold War.
03:17But more recently, it is now used widely in business
03:21to describe the complexity of the operating environment, um, that we're in.
03:26So we could of course devote an entire course to the causes of VUCA World,
03:32VUCA World results from
03:34the fundamentally dynamic and nonlinear interactions
03:38between human beings and the natural environment.
03:40So as we're going about our business,
03:42we are working and living in a vol- a natural environment,
03:46and there are all sorts of feedbacks and interactions that are so complex and non-linear,
03:52that it leads to a lot of this volatility and- and complexity that we're seeing.
03:55And from the human side, we're looking at, you know,
03:58the combination of technology breakthroughs across
04:00a wide variety of fields that had- have impact,
04:02population growth of course,
04:04depletion of natural resources, and climate change,
04:07and also an increasing demand by
04:09the public for transparency and accountability in business.
04:14So all of this is feeding into businesses shifting their approach,
04:20um, to one where sustainability is more embraced.
04:24And, um, what we're starting to see is
04:26that because of the volatility companies are experiencing,
04:28they began to look outward in an effort to understand the sources of disruption may face,
04:34and to determine how best to navigate them.
04:36So this has led many institutions to take more of a systems approach,
04:41recognizing their fundamental interconnectedness to the world around them,
04:45and see not only the extent to which they are impacted by outside forces,
04:49but becoming more and more aware of the breadth and depth of
04:51their own impact on society and the natural environment.
04:55Dr. Paul Polman at Unilever, um,
04:57he talks about the need for companies to see themselves
05:01as part of an interconnected web linking multiple players.
05:04And taking this as perspective as companies do this,
05:08it naturally deepens the responsibility companies feel
05:11and organizations feel towards diverse stakeholders as they become more aware.
05:18it becomes clear that without engagement and collaboration
05:22with stakeholders a lot of these challenges cannot be addressed.
05:25These things are fueling a second shift,
05:29which is the integration of sustainability into core strategy
05:32as a means to mitigate risks that they're facing,
05:37um, but also to strengthen their resilience in the face of VUCA World.
05:42And finally, to also capture value
05:45and- and see the opportunities for creating new value by focusing on sustainability.
05:52um, into more detail,
05:55I want to step back and just say a few words about sustainability,
05:58because it is a term that is often understood differently by different people.
06:02Um, it seems to invoke disparate reactions from different communities.
06:06Um, and I think a starting place for thinking about
06:09sustainability is the framing Jane Jacobs offers,
06:13when she reminds us that the economy is
06:16a wholly owned subsidiary of the environment and not the other way around.
06:19We really can't have an economy without an environment,
06:22all of the inputs come from our environment.
06:25Um, yet sustainability is really not environmental term,
06:28or a green concept as- as we've tended to think of it in the past.
06:32In fact, it's a very human concept.
06:35Uh, sustainability is about building a society that
06:38provides for the long-term well-being of its people.
06:41And this requires us to recognize our fundamental dependence on the natural world,
06:45and to know that we must generate social,
06:49economic, and environmental value in order to thrive.
06:52So we like to use the term intergenerational well-being to describe sustainability,
06:57because we're talking about the well-being of all people,
07:00not just a privileged few,
07:01and we're talking about building a society where we can provide for that well-being,
07:05not just today, but across generations.
07:07[NOISE] Uh, the online course in our strategies
07:11for sustainability program includes extensive interviews with Kate Brandt,
07:15Google Sustainability Officer and Adam Lowry,
07:18Co-founder of Method Cleaning Products and Ripple Foods.
07:21And what I wanted to do is just incorporate throughout this webinar,
07:24three brief clips, um,
07:26from those interviews that you'll see in more, uh,
07:29completion on the online course to give you a few industry perspectives,
07:33people who are grappling with this in their own companies,
07:36because so many of you are doing the same.
07:38So let's turn to a- a brief clip and hear their perspective on,
07:43uh, why we're seeing a shift in business approach.
07:47Business needs to have
07:48a broader perspective around the innovation that it's providing [MUSIC].
07:51And at- at a very basic level,
07:54we're living in a time where a lot of the social contract
07:58between business and societies is broken down.
08:01And a lot of that, I would argue is because of
08:04a hyper focus on shareholder primacy, right?
08:07When you put shareholders in front of anyone else, and then,
08:11yeah you've got some policymakers in your back pocket,
08:14then the outcome sometimes are things that aren't good for the population as a whole.
08:19And rightfully so, people get angry about that, right?
08:23What I'm trying to do with my businesses and many other people are trying to do is
08:27try to build in enlightened corporate governance into that model of innovation,
08:32so that what gets innovated is inherently better for society and environment as well.
08:37And if- that's a design exercise.
08:39And if you can do that well,
08:41and then you can grow a business focusing not just on one thing,
08:45which is shareholder return,
08:46but a broader set of things which makes managing
08:49and leading a business more complex and a little harder.
08:52But if you can do that and do that well,
08:54then you're achieving the goal.
08:56There is increased motivation for
08:58companies to shift toward sustainability for a few reasons.
09:02I think generally there is now
09:03an expectation that businesses will serve a social purpose.
09:07You know, we heard that from Larry Fink in his shareholder letter.
09:09Uh, that is a tremendous shift.
09:11And I think that's led to, you know,
09:13much more executive engagement from corporate leaders,
09:16and philanthropy, and advocating for social environmental causes.
09:20And I think it's led to a lot more activity within companies are really having
09:24very robust sustainability programs that I think are really geared towards, you know,
09:29expectations from customers, from employees,
09:31and from investors, that- that we're seeing increasingly that, you know,
09:35you need to have time-bound goals,
09:37you need to be incorporating this into your operations,
09:39and increasingly incorporate into
09:41your business strategy and making it part of how you think about generating value.
09:44I think that today's operating environment is
09:47really requiring businesses to take more of a systems approach,
09:50and I think that's both because we are increasingly facing greater risks.
09:55So looking at changing climate,
09:57constraints on water, constraints on other natural resources,
10:00and its sustainability is a really critical way to assess those risks,
10:04to do scenario planning,
10:06and to develop new strategies in the face of a world that's changing before our eyes.
10:10Equally, I think there's a lot of opportunity.
10:13You know, when we think about developing more circular business models, uh,
10:17where we're designing waste out of systems,
10:19that creates tremendous new opportunities,
10:22new opportunities for value.
10:24Thanks. So to complement their perspectives,
10:28I wanna just delve in briefly to looking at
10:30the perspective of various stakeholder groups,
10:32investors, customers, and employees, and see,
10:35you know, how are they perceiving the role of business now?
10:37Are there, are we starting to see shifts in that way that might also be contributing to,
10:41uh, the reason that business is becoming to embrace sustainability.
10:46Uh, so let's, let's turn first to investors.
10:48You heard Kate Brandt mentioned Larry Fink.
10:51Uh, in 2018, Larry Fink,
10:53the CEO of BlackRock,
10:55the world's largest investment manager,
10:57gave a wake-up call to corporate CEOs when he wrote in
10:59his annual letter to BlackRock's investees announcing that,
11:03"A company's ability to manage environmental, social,
11:07and governance matters demonstrates the leadership and
11:10good governance that is so essential to sustainable growth,
11:14which is why we are increasingly integrating these issues into our investment process."
11:18That was, that was a big wake-up call,
11:20uh, for companies, and, and of course,
11:22a lot of companies had already perceived that, uh, shift in,
11:26in requirement and recognized the benefits of, uh,
11:28reporting on environmental, social, and governance issues.
11:31If we look at, um, the data,
11:3485 percent of companies now produce and share ESG reports with investors,
11:39which is up from only 20 percent in 2011,
11:41that's a pretty big change in a few years,
11:43and now we've got more data that demonstrates that
11:46positive ESG performance is correlated,
11:49uh, with a lower cost of capital,
11:51better operational performance, and higher stock price.
11:55Let's turn to employees and look at what they're saying.
11:59So, uh, they're putting similar pressure on companies,
12:03younger generations in particular,
12:05who make up the largest population in the workforce
12:08expect businesses to do much more than turn a profit.
12:11Eighty-three percent of millennials and 80 percent of
12:14generation Z employees believe
12:16that business success should be measured in terms of more than financial performance.
12:21Millennials also believe that employers are generally out of sync with them.
12:26When they were asked to identify,
12:28the millennials were asked to identify three priorities for business,
12:31job creation, improving society and enhancing livelihoods,
12:36and improving the environment rose to the top.
12:39Um, well, millennials say their company's top three priorities are profit generation,
12:46driving efficiency, and producing goods.
12:49These happen to be the three lowest priorities on the millennials' list.
12:54Customers too see business as responsible for improving society.
12:59Eighty-five percent of people surveyed across 20 countries hold
13:03companies they buy from accountable for improving their lives.
13:07The same level of expectation they have of government where we traditionally thought,
13:12um, the institutions we've traditionally thought
13:14were responsible for improving our lives.
13:16So what we're seeing is,
13:18as companies start experiencing more and more of the realities of VUCA world,
13:24as well as these heightened expectations of diverse stakeholders,
13:27they're increasingly integrating new perspectives as
13:30they take the system's approach and look beyond themselves, um,
13:33they're engaging with more diverse stakeholders, uh,
13:36that they now see the deep connection they have with and ultimately
13:40recognizing that pursuing sustainability can
13:43drive innovation and long-term value creation.
13:46So here's what we can hear from an industry perspective.
13:50Method was a business that I started in 2000.
13:53We raised $25 million of capital.
13:55uh, when that business got sold,
13:58it achieved multiples in that sale that were far
14:03beyond businesses that had not filled sustainability into their business models.
14:08The shareholders, the employees,
14:10they all made more money financially because the business
14:14we- explicitly because the business was sustainable, not in spite of it.
14:18The business has since grown,
14:20the business has since sold again,
14:22and those shareholders have made more money
14:26because of the type of business that Method is,
14:30So it's a very real example of shareholder value.
14:34I mean, we could just measure it on shareholder primacy alone has been higher because
14:39the business focuses on social outcomes and the environment, not in spite.
14:45Thank you so much. So, um,
14:47I just wanna shift now back to Unilever and,
14:50and mention that Paul Polman took quite a similar tact to
14:53the one Adam Lowry is describing, um,
14:56when he questioned the traditional notion that generating
14:58profits must be the primary purpose of business,
15:01ultimately the end, leading to societal benefit.
15:04Rather, he argued that it was the other way around.
15:10By focusing first on improving lives and generating genuinely sustainable solutions,
15:15companies would be profitable over the long term.
15:18The new operating system for business, he argued,
15:21would drive growth through innovations that bring
15:24new sustainability benefits to consumers and retailers,
15:29lower cost by reducing waste and energy use,
15:34and help manage supply chain risk by securing
15:37long-term sustainable sourcing of materials.
15:40And he called for a shift in focus from shareholders,
15:44just like the shareholder primacy Adam Lowry talks about, to all stakeholders.
15:50He says, "I don't think our fiduciary duty is to put shareholders first.
15:56What we firmly believe is that if we focus our company on improving the lives
16:00of the world's citizens and come up with genuine sustainable solutions,
16:04we are more in sync with consumers and society,
16:08and ultimately, this will result in good shareholder returns."
16:11So he's really flipping our traditional understanding
16:14and mirroring what we heard from millennials,
16:16which is, a lot of companies just seem to be out of sync with their priorities.
16:19Paul Polman is focusing on getting in sync.
16:22So let's turn from the 'why',
16:25our first question, uh,
16:27in this webinar, to the 'what'.
16:30What are some of the concrete changes that
16:33organizations are making as they embrace sustainability?
16:38Organizations are changing the way they do business across many areas,
16:42but I'd like to highlight three primary ones here and then provide some examples of each.
16:47They're adopting business models and practices to focus on sustainability,
16:52they're innovating to create sustainable products and brands,
16:56and they're also partnering, often,
16:58with competitors to drive scaled impact.
17:03Alongside Method and Google,
17:06there are a few but certainly growing number of companies
17:09experimenting with and adopting circular economy approaches.
17:13Uh, let's take a brief look at a couple of
17:15examples to illustrate the potential of circular models.
17:18These are just two of many,
17:20uh, but let's start with Michelin.
17:23Uh, Michelin has transitioned from a product to a service-oriented business model.
17:28By leasing rather than selling tires,
17:31the company stays engaged with customers because
17:34it has that continuous engagement with them,
17:37rather than just selling your product and saying goodbye,
17:39and then can gather customer feedback and informed product innovation more efficiently.
17:45By controlling its products through leasing rather than selling,
17:49good tires can be recovered and released,
17:53and end of life cycle tires can be
17:55recycled into playgrounds surfaces or converted into fuel.
17:59The company has 97 percent recycling rates in the EU and Brazil,
18:03and this is something that's much more possible because it is
18:06controlling the supply by leasing rather than selling.
18:09Caterpillar has a global network of
18:12re-manufacturing facilities and takes back millions of end of life units.
18:20That's each year, um,
18:23which requires 85 to 95 percent less energy than new production,
18:27and which reduces, of course,
18:29waste and the need for virgin resources.
18:34A growing number of companies such as Eileen Fisher,
18:38a lot of companies you know,
18:39Warby Parker, Ben and Jerry's,
18:41Etsy, Seventh Generation, Method, you've heard about,
18:44have become certified benefit corporations or B corporations,
18:49as a way to operate under a legal requirement to integrate social,
18:53economic, and environmental values and goals.
18:56B corporations are for profit entities just like C corporations, but they, uh,
19:02are required legally to meet
19:05the highest standards of verified social and environmental performance,
19:08and to consider the impact of their decisions on all stakeholder groups,
19:13not just shareholders, including their workers,
19:16customers, suppliers, community, and the environment.
19:20There are now 3,000 B corporations across about 150 industries and 60 corporations.
19:26Several multinationals, it's quite interesting to see, including;
19:30Procter and Gamble, Unilever, Danone, General Mills,
19:34and others have recently accelerated their acquisition of the corporations,
19:39um, and they say they're, they're using these sustainability innovators,
19:43these B Corporations, int- integrating them within
19:46their own companies to help accelerate their own learning on environmental,
19:49social, and governance issues,
19:50to figure out how to drive sustainable product and brand creation.
19:54Um, and David illustrates the financial benefits of the B Corporation approach.
19:59B Corporations averaged to
20:0050 percent revenue growth rate during the 2008 financial crisis and
20:05had a higher revenue growth rate than public firms of
20:08comparable size throughout the subsequent great recession,
20:11according to a 2018 study conducted at Yale University.
20:15Um, let's hear a little bit more from, from Adam and Kate.
20:20So both of the businesses that I have started,
20:22Method products and Ripple Foods are B Corps.
20:25Uh, they're both certified B Corps and benefit corporations both in Delaware.
20:29And what's been interesting is the journey.
20:32I think with Method, we,
20:34we were one of the founding B Corp back in 2007.
20:37I forget exactly where we were on the rating scale which goes from 0-200.
20:42I think we're right around a hundred and or maybe high 90s to begin with.
20:45The businesses is now at 142, and its,
20:48I believe the highest if not- if not,
20:50it's one of the highest manufacturing businesses highest rated B Corps in the world,
20:56and a lot of that is a function of some of the things that
20:58we've been able to do as we've grown.
21:00The most shining example of that would be building
21:03a sustainable manufacturing facility in the inner city of Chicago
21:06to make all of Methods products for North America.
21:09And this is a facility that's renewably powered with utility-scale wind and solar,
21:14uh, it's water neutral,
21:15it's landfill-free, it's got
21:17the largest rooftop greenhouse in the world growing leafy greens on its roof,
21:20growing vegetables in a food desert.
21:22So really cool example.
21:24Those are the types of things that you can do as you start to
21:27achieve some scale and you have a bigger balance sheet,
21:29you can do more and more interesting things.
21:32And importantly, those are things that are not
21:34just done so that I can sit here and talk about them.
21:37Those are things that actually lower
21:39the cost structure of the manufacturing of the business.
21:42They improve our, uh,
21:44vacancy rates and truancy rates on,
21:47uh, line workers at the factory.
21:49They're hard financial metrics that
21:52those sustainability investments or allowing a method to enjoy now,
21:57am, you know, and that's reflected in a B Corps score,
21:59and that's the way it should be.
22:01If you do the right things that should accrued all three bottom lines,
22:04it should get reflected in how you
22:07measure yourself from a social and environmental standpoint.
22:10So let's shift now to sustainable products,
22:13the third area, I mentioned we- we'd explore.
22:16Companies are recognizing the growing opportunity for
22:18sustainable product innovation as consumers increasingly prefers sustainable options,
22:23and consumer demand is also moving as the population changes to emerging markets,
22:30where needs are often related directly to sustainability,
22:34access to water, sanitation, etc.
22:37So what we're starting to see is companies are really taking
22:41off in terms of capturing the value that's possible through sustainable,
22:44um, product and brand innovation,
22:47but also some interesting efforts to really work collaboratively with partners on
22:53the ground to pair sustainable products and brands
22:56with campaigns that create positive social and environmental impact.
23:00So let's look at Unilever as an example in India.
23:04Um, the company recognized that cholera, typhoid,
23:07and skin and eye infections were the leading causes of child mortality.
23:11So it designed, it innovated a new product like buoy soap,
23:16which is a water-saving soap because this happens to be in a very arid region,
23:20but also with 10 times the protection against
23:23the specific disease-causing germs that we're the ones causing these,
23:28these mortal, um, diseases for, for children.
23:31And then what they did is after innovating the product,
23:33they partner with local governments, NGOs,
23:36and a network of 70,000 rural women to
23:40integrate product marketing and distribution with hand washing campaigns,
23:45um, reaching millions of households and dramatically reducing childhood disease rates.
23:49[NOISE] Unilever, um, has developed 26 of these sustainable living brands,
23:55what they call their sustainable living brands,
23:57which grew 46 percent faster than the rest of the business and delivered
24:0170 percent of the company's overall growth in 2017.
24:07Now, um, some challenges are, um,
24:11certainly too big for one company to tackle alone and
24:15even one sector of corporations to
24:19tackle alone really if they require partnership across civil society,
24:23government, and the private sector.
24:25Um, and so what we're starting to see is
24:26more and more companies recognizing this and forging alliances.
24:30Um, Often engaging in pre-competitive problem solving,
24:33um, to shift their sectors towards sustainability for collective benefit.
24:38I'll just give a few examples and these are certainly very complex,
24:42uh, systems challenges, uh,
24:44with no simple answers,
24:45but this will give you a sense of,
24:47of what some companies are doing in partnership with government and civil society.
24:50The Consumer Goods Forum, for example,
24:53is a network of 400 retailers and manufacturers across 70 countries.
24:58They represent four trillion dollars in combined sales,
25:01and they're working together to reach net,
25:04uh, zero net deforestation in their supply chains.
25:07So palm oil has been a big issue that many of you have probably heard about,
25:10leading to a lot of deforestation of very important rain forests in Indonesia.
25:15The Consumer Goods Forum and network of retailers there are,
25:19are working with Indonesian government and other international agencies,
25:22civil society, and a range of,
25:24of palm oil plantations to try to remove deforestation out of the supply chain,
25:29figure out how else to grow palm oil,
25:31um, that is less, less disruptive.
25:34And because they're, they're working on this together,
25:36no one company necessarily will lose
25:38competitive advantage if they step up first and say okay we're going to do this,
25:41but the other companies operate businesses usual,
25:43uh, that, that first leader may lose competitive advantage,
25:47while doing this together and making a shared commitment and working on the challenge,
25:50it allows for greater innovation and also,
25:53um, creates more incentive for everyone to move in the right direction.
25:57The Marine Stewardship Council is another initiative.
26:00I've worked on the MSC very, um,
26:03intensely about 20 years ago when it was being launched by
26:06Unilever and World Wildlife Fund, and,
26:08and the vision is really to create an economic incentive for sustainable fishing through
26:13certification and eco-labeling of well-managed fisheries
26:16so that products from this fisheries would have chain of custody,
26:19verification, end up in our restaurants or
26:21grocery stores and being marked with eco-labeling you see there,
26:24to indicate to all of us that they came from sustainable sources.
26:27And many of you probably know the state of our oceans is dire,
26:31um, global fisheries are- have been collapsing worldwide for, for decades,
26:35and the MSC offers a similar opportunity to bring government, business,
26:40and civil society together to create an organization that is,
26:44is driving, uh, for positive change.
26:47There are currently about 10 percent of fisheries worldwide
26:50certified as, as MSC sustainable.
26:53Finally, um, the Sustainable Apparel Coalition
26:57has created a set of standardized tools to help companies in
27:00the apparel textile and footwear industry
27:03measure environmental and social impacts across their supply chains,
27:06allowing to achieve much greater transparency and address,
27:10uh, the unsustainable behavior collectively.
27:13And as I mentioned none of these efforts is simple nor is any of them
27:16without unintended consequence- consequences and trade-offs.
27:20Um, companies in the Consumer Goods Forum, for example,
27:23don't have clear ways to engage the thousands of
27:25smallholder farmers who are growing oil palms,
27:28yet without them, deforestation will continue.
27:31So it's really an effort that is,
27:33is very complex and,
27:34um, certainly, um, has not yet reached scale in terms of success,
27:39and none of these three, but it is an avenue through
27:42which change can happen and in which systems change can happen,
27:46um, and we don't really think there was a kind [LAUGHTER] of a way to do it,
27:50it's just important to acknowledge how complex and challenging it is.
27:53[NOISE] So let's, um,
27:57shift now to a bit of the how.
27:58We've talked about why businesses are shifting their approach.
28:01We're talking- we've talked a bit about some of
28:03the strategic changes organizations are making,
28:06you know, what exactly are they doing when they embrace sustainability?
28:10But also, it's really important to think about how
28:12our organizations going about this internally?
28:14How are they implementing these changes and what barriers
28:17are they coming up against as they try to make the shift?
28:20So, um, let's take a look inside Unilever to explore this.
28:26Um, in 2010, Unilever launched a 10-year Sustainable Living Plan or SLP,
28:33covering all aspects of its business,
28:35incorporating all brands and divisions in every country where it works, um,
28:41and SLP outlined three 10 year goals
28:44aligned with its purpose to make sustainable living commonplace.
28:48So at that time in 2010,
28:49Unilever revisited its purpose and really focusing on,
28:53you know, our corpus as an organization is to make sustainable living commonplace.
28:58And so they frame these three, um,
29:01big 10-year goals as part of the Sustainable Living Plan.
29:04They said they first want to help more than one billion people,
29:07improve their health and well being.
29:09We have that briefcase of the Lifebuoy soap as an example.
29:13They said they want to have the environmental footprint of Unilever products.
29:17And third, they want to source
29:19100 percent of their agricultural raw materials sustainably,
29:23and back to the oil palm growers I mentioned,
29:27enhance the livelihoods of millions of people across the value chain, you know,
29:31if- how do you really take responsibility at
29:34that level for your entire value chain all the way down to the growers?
29:38So, um, they also have taken this very seriously in terms of, um,
29:43establishing targets and, um,
29:47sub goals under each of these major goals.
29:50So, for example under health and hygiene, or under, um,
29:53health and well being,
29:54they've established goals around health and hygiene and improving nutrition.
29:59Under reducing environmental impact,
30:01they've set goals and targets around greenhouse gases,
30:05water use, waste and packaging,
30:07and, uh, in, and a sustainable sourcing.
30:10And then finally under enhancing livelihoods,
30:13they've set goals and targets in term- terms of fairness in the workplace,
30:18opportunities for women, and inclusive business.
30:22Progress against the targets is measured and reported in
30:25Unilever's annual report and accounts to shareholders.
30:28So they've been very transparent about
30:30both the goal setting and the metrics and targets they're using,
30:33but also on reporting on an annual basis,
30:35um, in public forum, how they're doing.
30:38So, um, in order to do the work and this goes back to
30:43the internal work I- I talked about in introducing the section of the webinar, um,
30:47in order to align the company behind the sustainable living plan,
30:51Unilever needed to revisit its internal systems and
30:53processes and reorient corporate behavior.
30:56Look for where things were aligned with this goal and look at
30:59where they have processes or systems that worked against,
31:02um, the goals they stated and figure out what to do about it.
31:06So, for example, Unilever has tied,
31:09um, since it launched SLP,
31:10tied remuneration and performance evaluations
31:13to achieving the objectives of the sustainable living plan.
31:16Um, it's removed incentives for short term profit maximization,
31:21um, by deciding not to publish quarterly reports.
31:27There are very few publicly traded companies have made that decision, but there's, um,
31:31actually recent data that demonstrates that those companies that have,
31:34actually have better performance because they
31:36aren't driven by decision making for short term,
31:39um, short term results to report to shareholders.
31:42They also established two board committees whose sole responsibility, uh,
31:47is to provide top-down oversight on the implementation of the sustainable living plan.
31:52And also all internal and external
31:54communications and human resources activities include SLP,
31:58making sure that across this massive corporation,
32:01all the employees are hearing about,
32:03um, this priority and feeling a part of it.
32:07Perhaps, most importantly, the company supports
32:11ongoing learning and adaptation by engaging employees.
32:14It's one thing to learn about it through communications,
32:16but it's another thing to be engaged as an employee, um,
32:19as a manager, as a supply chain partner,
32:22in the process of designing and implementing practices that support the SLP.
32:27employees work directly on
32:29the company's global wellness efforts such as the Dove Soap Self-esteem Project,
32:35um, or the Help A Child Reach 5 campaign,
32:38deepening their commitment to the sustainable living plan,
32:41and deepening their understanding.
32:42Unilever managers also work across the organization and in partnership with
32:46suppliers and distributors to conduct life-cycle assessments of their product lines,
32:50so that they can evaluate
32:52social and environmental impacts and determine changes that need to be made.
32:57So what about progress?
32:59It's one thing to set goals and targets and, um,
33:02it all looks great, but actually,
33:05um, how is Unilever doing?
33:07Um, it's actually on track to meet around 80 percent of
33:09its sustainable living plan commitments across its three major goals by 2020.
33:14Um, by the end of 2017,
33:16Unilever had reached 601 million people through its programs on hand-washing,
33:21sanitation, oral health, self-esteem,
33:24and safe drinking water against the target of 1 billion.
33:27It had reduced its waste by 29 percent against it's target of 50 percent,
33:32sourced 56 percent of its products sustainably,
33:36as verified by third-party certifiers,
33:38against its target of 100 percent, and finally, um,
33:42it had exceeded its target to engage at least 500,000 smallholder
33:45farmers in its supply network to improve their agricultural practices,
33:49reaching actually 716,000 farmers.
33:52So interestingly, rather than suffering, um,
33:56from this new business approach,
33:57much as Adam Lowry said,
33:58Unilever has continued to perform well.
34:00Um, Unilever's share prices outperformed the Euronext
34:03100 and the FTSE 100 Indices consistently over the past nine years.
34:07And just stepping back,
34:10Unilever offers one perspective on how to create
34:13a business model focused on sustainability by defining new goals and metrics,
34:17innovating sustainable products and brands,
34:19and aligning its internal systems and processes to support this new business model.
34:24Um, maybe your organization's quite different, um,
34:27but what would long-term business goals focused on sustainability look like for you?
34:32Um, what does sustainability mean in your context?
34:37And- and where does sustainability offer opportunities for growth,
34:40or risk mitigation, value creation?
34:44How might some of Unilever's changes in internal practices be
34:46relevant and doable in the context of your organization?
34:51So stepping back, we began with these three core questions for the webinar.
34:56You know, why are we starting to see the shift in- in approach where
34:59businesses are- are really starting to pursue and embrace sustainability?
35:02What are some of the strategic changes organizations are making?
35:06There are obviously a multitude; we looked at a few.
35:08Um, and how are they going about implementing these changes?
35:11What- what are some of the nu- nuts and bolts of- of
35:13actually trying to do this in context?
35:16Um, and- and what we saw is,
35:18you know, for the first question,
35:20we're- we've got businesses responding to the reality of VUCA world,
35:24of changing stakeholder expectations,
35:27definitely heightened expectations of the role of business in improving lives,
35:30in solving social challenges,
35:32and tackling 21st century global, um, global challenges.
35:36Um, but also that, uh, sustainability,
35:40i- it has a real role to play in helping businesses
35:43mitigate risk and lower cost and drive growth.
35:46Um, under the second,
35:48we looked at some new business practices including circular economy,
35:52um, pursuing B corporation status,
35:55um, to sustainable products and sector-wide partnerships.
36:00And then we looked at how Unilever in particular is aligning goals, um, processes,
36:07and incentives to really support, um,
36:10support its- its objectives around sustainability,
36:13to really walk the talk internally
36:15to make it possible to make progress against these goals.
36:18And so just here at the end before we move to Q&A,
36:22I wanna just step back and- and look at these broader shifts we are seeing,
36:26uh, in society with respect to business.
36:29Um, what we talked about today is part of
36:31a larger evolution that's been going on for decades,
36:36where we're- we're seeing companies move from this focus
36:39on compliance and corporate social responsibility,
36:42um, to one where sustainability is actually a strategy.
36:45It's not just a charitable act or something we gotta do to comply with regulations.
36:50It's actually a strategy for doing well.
36:53Um, and as we heard from many, Adam Lowry,
36:55and Paul Polman, and others,
36:57this shift from focusing, uh,
36:59on shareholder primacy to one of really seeing
37:02the whole network of stakeholders companies are connected to,
37:05um, and impacting and being impacted by.
37:08And then also short-term profit,
37:10moving more towards long-term value creation.
37:13Um, how do we endure over the long-term,
37:15generate value, have relevance,
37:17live up to the responsibility that we have as
37:19a business in this changing world that is so
37:21volatile and ambiguous, um, and complex.
37:26And- and finally, how do we start thinking now about not just company leadership,
37:31being a great leader as a- as a company in your, in your sector,
37:34but also leading your sector through global partnerships?
37:37How do we, how do we move full sectors, you know,
37:40to better practice and- and actually partner with
37:43some of our competitors to make that happen?
37:45And that leads to the final point,
37:47which is rather than competitiveness, you know,
37:49being supreme, we're starting to see a- a real recognition that the collaboration is key.
37:54And just to close, I think, you know,
37:57I wanna share the message that I think in order for business to
38:01really fully capitalize on the opportunities that sustainability presents,
38:04and to play the leading role it must in tackling 21st century global challenges,
38:10these shifts that we described today that- that really
38:13aren't as mainstream as- as we'd like them to be,
38:16really need to become universal cultural norms,
38:19simply the way things are done in the 21st century.
38:22And all of you listening today,
38:24thank you for your time.
38:25I'm really looking forward to your questions,
38:27but you have a really important role to play in this.
38:30Wherever you are in your organization,
38:31whatever position, you can start by asking curious questions.
38:34You can start by taking a systems perspective and being
38:36sure others around you are seeing the way in
38:39which your organization is so fundamentally connected
38:41to other stakeholders and the natural environment,
38:44the social and cultural and historic context.
38:47Um, and you can start demonstrating opportunity through
38:50cost-saving measures that you might identify within your units,
38:53or incredibly great value creation opportunities through-
38:57through new product design that's actually really meeting a social or environmental need,
39:00um, that has broader value.
39:02So look forward to hearing your questions and- and thanks so much for your attention.
39:07Okay. Great. So now we'll move on to answering your questions.
39:11So clearly, you know,
39:13we have an audience that is really experienced and knowledgeable about the topic.
39:18Um, what you've presented really resonated with, um, you know,
39:21their thoughts and their views on,
39:23uh, sustainability and corporate strategy.
39:25Um, and we've gotten, you know,
39:27a- a few questions really around,
39:29kind of, the specifics of implementation.
39:31You know, the challenges, the barriers and all of that.
39:33So one of the questions that we got from participants is that, you know,
39:37this line of thinking is really great for companies engaged in manufacturing,
39:40you know, resources, and traditional industries.
39:43Are there any examples and,
39:45you know, are there any ways, um,
39:47as to how a company that's in
39:49a service industry can kind of engage and help out with this initiative?
39:52You know, for example, a company that's in financial services,
39:55and business services, how can they contribute to this effort?
39:59Yeah. Great question. And certainly,
40:00I would argue that it is universally relevant, but certainly,
40:03um, needs to be interpreted and
40:06manifested differently depending on what kind of company or sector or industry you're in.
40:09So absolutely great question.
40:11Um, I think Google, uh, we didn't hear as
40:13much from Kate as you will in the online course,
40:15um, in- in my short clips,
40:18but she talks a lot about their emphasis and, you know,
40:20using Google advantage where they have, you know,
40:23incredible advantage in AI and machine learning and Cloud computing,
40:28and pull those together to generate incredible cost-savings, um,
40:32billions of dollars in, uh,
40:33the heating and cooling of their,
40:35the cooling in particular of their data centers.
40:38Um, and so it really,
40:41you gotta sit where you're- where you are.
40:43I- Google also, you know,
40:44it's not just cost savings,
40:45um, from a sustainability standpoint,
40:47they focus their first and,
40:48you know, focusing on using,
40:50just having purely renewable energy source in their company.
40:54Um, but they also move towards societal benefit.
40:57You know, how can we actually use our tools to generate benefit for society?
41:01So they've actually innovated this interesting, um,
41:04tool called Global Fishing Watch where they've taken their GPS,
41:07um, capacity, combined it with, um,
41:11machine learning, with an algorithm that would help them identify,
41:15um, getting data, using, you know,
41:17just getting masses of data from around the world on- on boats out on the ocean,
41:21and then being able to identify which boats are actually fishing boats,
41:24versus cargo, vessels, et cetera.
41:26Uh, and then being able to see where fishing boats are actually actively fishing,
41:30and if in fact they're fishing illegally, helping governments,
41:33helping empower governments to really protect their fisheries more effectively.
41:36So it's- depends what industry you're in and how you can combine your talents and
41:41your skills and your advantages and your- your tech know
41:44how to- to find the right solutions that work for your company.
41:47I think related to the service question in particular,
41:51I mean Michelin is an interesting example where it was a product-driven company,
41:55and Philips just shifted too from selling light- lighting services,
41:58um, from shifting to pro- from products to selling light as a service.
42:02Um, and Michelin's leasing tires so that they're controlling
42:06that- that, um, that product.
42:09So a lot of companies are shifting to,
42:11um, from product to service models,
42:12and I think there are ways in which any company can- can make that shift.
42:18Great. So the simple question that we have is, you know,
42:22as a lot of more companies are paying more attention to this topic, they're reporting,
42:26they're redesigning products, you know,
42:28their branding is more aligned with the suitability message overall.
42:31There's also kind of criticism that comes up, you know,
42:34where people are mentioning or accusing companies of green-washing,
42:37you know, their practices,
42:38their products, and etc.
42:40So, you know, how can we hold corporations accountable and,
42:44you know, as consumers or as civil society,
42:46what are some of the metrics and things out we can look for to really identify
42:50whether a company is simply "green-washing" or are they actually,
42:56dedicated to this effort?
42:57Well, it- it's a great question and it's a huge challenge.
43:00We faced it early on with the Marine Stewardship Council as
43:02soon as we launched the Marine Stewardship Council which,
43:05you know, we took a lot of time to develop the global standard for sustainable fishing.
43:10It was based on the UN FAO code of conduct,
43:12which had existed for many years.
43:14It was a very high standard, uh,
43:16and scientifically validated in terms of, okay,
43:18this is really a good definition of a well-managed fishery.
43:21Well, as the MSC label gained traction,
43:24a number of industry labels came up,
43:26where industry then created its own label
43:29for sustainable fishing and put that on on products.
43:31And so it really took education of consumers,
43:34and I- I think that's what it is.
43:36It's education of consumers,
43:37it's testing these different labels and really
43:40getting the truth about what- what is behind the label,
43:43what does it really mean.
43:44Um, and that is, yes,
43:46as the person who asked the question acknowledges, it's-it's very complex.
43:50I- one thing that was really important for
43:51the Marine Stewardship Council was to have the World Wildlife Fund.
43:54You know, WWF panda logo,
43:56alongside Unilever when the- when
43:58the organization first launched because it gained credibility,
44:00um, and it held that standard to a very high level.
44:03And- and then once the tent widened and many many more NGOs became involved,
44:07those NGOs made sure that that standard stayed high and appropriate.
44:12And many times pushed the MSC saying the standard wasn't high enough
44:15and the fishery that got certified shouldn't have been certified, and challenged them.
44:18So this is the complexity of the work,
44:21but- but it needs to be done and I think,
44:23you know, new technology offers some benefit.
44:25I think we will be able to trace chain of custody more easily now with
44:29block chain and with other technologies that will help us ensure that um,
44:34we know about the products that we're buying and we know more about them.
44:38But yes, great-great question.
44:40Right. So another question is that, you know,
44:42our participants- participants come from a variety of different companies,
44:45you know, from different industries and at different scales.
44:48So a lot of times, you know,
44:50the companies that are getting
44:51the most exposure through these initiatives are the large corporations.
44:54You know, these are multinational corporations,
44:58uh, companies that have reached into many different industries and products.
45:02So how can we get smaller or medium-sized businesses to be more engaged,
45:08or join these initiatives led by these larger corporations and how can,
45:12you know, small and medium businesses contribute to this effort?
45:15So when you say join these initiatives,
45:17what are you referring to?
45:18So for example, with, you know,
45:20the consumer uh, that- the forums that you've talked about,
45:24You know a-a lot of transect companies that are represented
45:27in these initiatives are large, multinational corporations.
45:30So how can small and medium-sized businesses also participate?
45:34Well, I think it's absolutely essential that they do
45:36because the sector is complex and that,
45:39you know, well there's a lot of consolidation,
45:40and a lot of control um,
45:43and market share within the larger companies,
45:46the smaller companies are- are essential and play a vital role.
45:48And in fact, in the case of the oil palm example,
45:51it really is, you know,
45:52one of the challenges is,
45:54what do you do with thousands and thousands of
45:56farmers who don't have a clear alternative,
45:59and is Unilever going to take care and
46:01make sure that their farming practices are sustainable,
46:03and their livelihoods are secured,
46:05because if not, they have only one way to support themselves,
46:08which is to continue to cut the forest,
46:10and- and grow either food or- or oil palm for- for- for engaging the cash economy.
46:16So um, it is absolutely essential that-that all scales are engaged and I think,
46:21you know, some smaller companies can play a leadership role.
46:24I- I think about Sustainable Harvest Coffee Company and they, you know,
46:27they are a small operator within the huge coffee,
46:31relatively consolidated coffee industry, and they said,
46:34"we're going to have a different model, we're going to have a
46:35relationship coffee model," which is basically,
46:37you know, we are going to take the linear supply chain, and make it circular,
46:39and we are going to have every grower that we worked
46:42with part of a team that is connected to roasters,
46:47and bankers and um, retailers,
46:50so that everybody in the supply chain
46:52knows what the reality of doing business is like um,
46:56for each stakeholder group in the supply chain.
46:58And- and they have built that model,
46:59they have Let's Talk Coffee events that they host,
47:02um and they innovate it every year in a coffee growing country.
47:06And now, all the big players are coming,
47:08McDonald's is coming, you know, Walmart is coming.
47:12They want to understand- and- and Sustainable Harvest
47:14created that platform as a very small company that said, "You know,
47:17we're a big corporation,
47:18we have a different business model,
47:19we put 50 percent of profit back into farmer training,
47:22um, and we believe in transparency."
47:24They will not do business with anyone unless
47:27every transaction in the entire supply chain is transparent.
47:30So from farmer to roaster and retailer,
47:33every transaction is transparent and um,
47:36and that's allowed them to build these trusting relationships,
47:38and- and shift the way business is done,
47:40um, for this segment of the coffee industry.
47:42So small companies can- can play a very disruptive and- and positive role.
47:46Right. So we're getting really close to an hour right now,
47:49we have time for one last question.
47:51So um, this question specifically concerns kind of your experience and your perspective.
47:55So Julia, you've worked with,
47:57you know, a lot of different sectors,
47:58you've worked on partnerships between government and- and business,
48:01and- and industry with companies of different size.
48:05So-so do you see, you know,
48:07certain business sectors or certain industries being more
48:10receptive to this change than others and conversely,
48:13you know, which industries,
48:14or which sectors are you seeing the greatest resistance?
48:17Well, it's a great question.
48:20Um, you know, I think what is interesting is to see
48:25how different issues engage different stakeholders and- and how that happens.
48:32I mean, is it because you get a green-peace campaign and you're
48:35forced to deal with the palm oil challenge,
48:37which was-was the case for Nestle and Unilever,
48:40when they launched the video?
48:41Um or is it that, you know,
48:43you have an enlightened leader who really wants to take responsibility and has-has
48:48insight into some of the impacts the company is having or a combination?
48:52Um, I think about a lot of the um,
48:54chemical companies and things,
48:56who are starting to get more and more engaged because of the plastics issue.
49:00So maybe some traditional industries we thought wouldn't
49:02necessarily engage so much in this issue are really
49:05recognizing as we look at our oceans and they have become
49:08filled with- with plastic, including micro plastics.
49:11The average seafood consumer has- consumes about
49:1411,000 particles of micro plastics per year.
49:17Um, so it's not just the plastic we can
49:20see in the ocean that we know that we're dumping into the ocean,
49:22but it's now all of the micro plastics that are there.
49:24And so companies are starting to recognize responsibility,
49:28and um, I'm working right now on an ocean plastics initiative to-to really say,
49:32how do we get all of
49:34these global actors from throughout the supply chain engaged in this,
49:37from the chemical companies, um,
49:39to the recycling infrastructure, globally, across nations.
49:44Um, so I think really it depends how you look at the- the challenge,
49:49but- but everybody- everybody has a stake and
49:51everybody's connected to the-the problem, and the solution.
49:53So it's just a matter of, you know,
49:56what incites the initial- initial engagement.
49:59Great. So we are on top of the hour right
50:02now and we're going to have to wrap up the Q&A session.
50:05So again, thank you very much Julia
50:07today for sharing your knowledge with our participants.
50:09Um, for those of you who have indicated interest in the program,
50:12our team will definitely be reaching out with more information.
50:14If you have any pressing questions for Julia or about the program,
50:19feel free to reach out to our team as well.
50:22So as a final reminder, you know,
50:23the recording of this webinar will be emailed to you within a week and you
50:27can always visit us at globalimpact.stanford.edu.
50:31So thank you all for joining us today and have a great rest of your week.
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