Business Economy

The growing receptivity to net positivity 

S Ramakrishna Velamuri | Updated on: Jan 15, 2022
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The authors show that embracing and practising ESG is not inconsistent with financial excellence  

Ever since Edward Freeman published his seminal work,  Strategic Management: A Stakeholder Approach (1984), the voices calling for an end to shareholder primacy in managerial decision-making in favour of a more stakeholder-centred approach have become louder and louder.

Net Positive: How Courageous Companies Thrive by Giving More Than They Take by Paul Polman and Andrew Winston is one more voice calling for a stakeholder-centric perspective, but it is unique for a number of reasons. First and foremost, Polman is the former CEO of Unilever, a consumer goods corporation with 51 billion Euros in revenues, nearly 150,000 employees and a presence in 190 countries. 

The first outsider CEO in the history of Unilever, he took over a company that was lagging in performance relative to its peers, most notably Nestle and P&G, and over his ten-year tenure (January 2009 to December 2018) delivered a return to shareholders of 290 per cent. He achieved this financial turnaround by implementing what is without doubt the most in-depth transformation in the way any large for-profit corporation is managed, away from an obsession with short term shareholder value maximisation to a more balanced approach, which the authors call net positive. They define a net positive business as one 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” (italics in original). This book represents the first time a multi-stakeholder approach is being advocated by someone who has personally implemented it on a massive scale in one of the most competitive industries, which gives it a unique legitimacy with practising managers. 

Climate change

Second, Unilever has been a pioneer in terms of having gone the farthest in addressing the challenges posed by climate change, by embracing future generations and the planet itself as its key stakeholders. This comes out clearly in Chapter 3, where the authors describe the Unilever Sustainable Living Plan (USLP), which was introduced in 2010 with three overarching goals – i) improving health and well-being for more than one billion; ii) reducing environmental impact by more than half; and iii) enhancing livelihoods for millions. These goals were broken down into 70 sub-goals to be achieved within specific time frames. Unilever has launched in 2020, under Polman’s successor Alan Jope, the Unilever Compass, which builds on the successes, failures and lessons learnt of the USLP.

Third, Unilever showed remarkable improvement in financial performance during Polman’s tenure, thanks to his long-term perspective by doing away with quarterly reporting and guidance and by increasing investments in R&D and innovation. Polman and Winston make it very clear that Unilever was successful be cause of its commitment to being net positive, not in spite of it. Any radically new approach takes time to be accepted. This was the case with quality management after World War II – the managerial response went from “it is costly” to “our competitors are doing it” to “our customers are demanding it” to finally, “a commitment to quality is a necessity for long term shareholder value creation”.

Net positivity (or ESG or the 3Ps approach) is following a similar path, with the vast majority of businesses even today being very defensive about embracing sustainability, diversity, inclusivity, fairness and transparency. It is in this context that the efforts of pioneers such as Polman are so important, not only in terms of their boldness in embracing net positivity (or ESG), but their ability to demonstrate that doing so is not inconsistent with financial excellence, and finally, their advocacy (such as through the publication of this book) to get more corporations to commit to it. Fortunately, their efforts are starting to pay off and there is clear evidence that the receptivity to net positivity is growing.

Different approach

After a couple of chapters providing the rationale for such a radically different approach, the book starts to address net positivity in Chapter 3 (Unlocking the Company’s Soul), describing how Unilever went back to its roots to redefine its purpose, which was the first step in a two-year process that led to the formulation of the USLP. In Chapter 4 (Blow Up Boundaries), the authors outline how the Unilever leadership set aggressive ESG goals, engaged with external stakeholders and empowered the internal stakeholders to find their own purpose.

About the book
Net Positive: How Courageous Companies Thrive by Giving More Than They Take
By Paul Polman and Andrew Winston
Published by: Harvard Business School Press
Pages 352

Chapter 5 (Be an Open Book) is all about building trust with the communities in which Unilever operates, through transparency and placing the needs of the communities ahead of its own. In Chapter 6 (Make 1+1=11), the authors underscore the fact that net positivity requires working with business partners up and down the value chain, and with NGOs and academic institutions. Chapter 7 (It Takes Three to Tango) is dedicated to exploring how corporations and civil society can work with governments to shape public policy to support initiatives that, by virtue of being at the cutting edge, are always breaking new ground.

Chapter 8 (Embrace the Elephants) discusses the “elephants in the room” that businesses have traditionally not wanted to talk about - such as some of the largest corporations not paying taxes, pay inequality, corruption, and poor governance - that need to be resolved to build a fairer and more inclusive market system. In Chapter 9, the authors focus on the role of culture in ensuring the sustainability of the corporations’ commitment to net positivity. Finally, Chapter 10 (Net Positive World) lays out what version 2.0 of net positivity would look like, and why achieving it would require us to question some of our most deeply held assumptions, such as those about consumption, growth and measures such as GDP.

In summary, Net Positive is a must-read book that shows us that leaving a more sustainable, fairer and kinder world for future generations is not contradictory with financial success.

Check out the book on Amazon.com

(The reviewer is Professor and Dean, Mahindra University School of Management) 

Published on January 15, 2022

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