Interview: Unilever’s Gavin Neath

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Companies betting on business as usual are so wrong. “I don’t think they fully understand how wrong they are.”

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Gavin Neath is the senior vice president, sustainability, for global consumer products giant Unilever, which has been at the forefront of calls for more ambitious emissions reduction targets in Europe, the debate over sustainability in products such as palm oil, and on resource efficiency.

Neath, a former chairman of Unilever’s UK operations, says many companies still don’t understand the challenges before them, and, like Kodak, are making completely the wrong decisions. He is currently visiting Australia and this is an edited transcript of an interview with RenewEconomy.

Giles Parkinson: You’re one of few leading companies who are calling for increased ambition in abatement targets, particularly in Europe and presumably elsewhere. Aren’t you just making life more difficult for the company?

Gavin Neath: To some degree. Our principle mechanism for working has been inside the Prince of Wales Corporate Leaders Group on Climate Change and it’s through that we’ve tried to approach the UE targets, always influencing them upwards. Our own view on that is that when you set parameters or constraints for people, it’s a terrific incentive and driver for innovation. And I think what we’re essentially saying to ourselves – time will prove whether we’re right or not – that we will back ourselves on that innovation, that we will find ways of doing it. And I think that’s what this is about to a large degree.

GP: So, what’s driving this desire in the first place? Why do you think we should be increasing our targets?

GN: The harsh reality is … particularly when you talk about carbon, at a macro level there has been a real failure of governments to set binding targets; not for any way trying to suggest that’s an easy thing to do, but demonstrably we’ve failed up until now. Given that and given the evidence that you’re seeing from IPCC and others, there is quite a big obligation, particularly on very large transnational corporations, to act, and you can make a credible argument to say that they are better equipped to act in many areas than governments are because they are transnational to start with. So whereas the President of the United States can’t influence what happens in China, the CEO of Unilever, despite being Dutch and sitting in London, can influence what happens in China or India or whatever, so our ability to deliver is considerable. And then if you talk about other big organisations whether it’s in the energy sector or the extractive industries or companies like GE, they too have a similar capacity.

GP: But there are a lot of corporates around the world, and very large corporates around the world, that seem to be basing their business models on business as usual as though nothing will change. Are they wrong?

GN: They are so, so wrong. I don’t think they fully understand how wrong they are and I honestly feel that many of those businesses will have pretty limited futures if you talk in five, ten, fifteen year horizons, because if you aren’t getting on to the case now, you can’t put in place the kinds of programmes which are going to ensure your long term survival overnight. So something like the sustainable agriculture programme, which is important for us and where we’ve been working on that since the mid ‘90s and, that’s not something you can switch on and off. We’re getting the benefits of that now, the work we’ve done on water over the last decade. Your R&D, you’re doing them now, or you are going to be stuffed long term I would have thought.

GP: Why are they so wrong? Because you said the world has failed to act … what’s going to change in the future that’s going to force them to act?

GN: I think there is always a terrible fear of going first because there’s very often a transition cost to pay. If you think about it carefully, most people will recognise that if  over a kind of five year period, you could see the prospect of either you getting your money back or your costs coming down, but in the first… year one, two, three, four, five you’re probably going to be losing money. Curiously, that’s exactly the same with any other investment you make in the business. If you’re launching a new brand in a country like this, you don’t make money till about year three, year four once you put it all in. It’s the same with your factory investments, your other investments that you make. People seem to think this is different. They fell they have a right to expect a return from day two. But it’s no different from other facets of business.

GP: You’re working in so many different countries across the world. Is this something that is understood by all these different nations? Because we seem to have this picture painted where it’s just the do-gooders in Europe acting on this and everywhere else is trailing their heels. What’s your view?

GN: Well, it is a good question because you get of course different nationalities come at this in a different way. The business that is slowest in Unilever to really engage with this agenda is the US business and that has partly been about the leadership that they’ve had at the top, but there’s also a part of me which feels that you’re at a serious disadvantage being an American on this because you live in a country which is bountiful. You’ve got more land than you know what to do with. You’ve got energy. You’ve got food. You’ve got minerals in the ground. And it must be really hard sitting there to imagine that this isn’t going to last forever.

And then they have such a narrow view of the world; very few people travel abroad and they can’t imagine therefore that what’s happening in India or what’s happening in China or Indonesia is going to have an impact on them. So, that’s a problem area for us which we’re about to address in fact now. Where you get into some quite interesting debates on things like deforestation with the Indonesians who quite legitimately in my view say you can often get into debates when you’re talking about deforestation. People will say well you’re British, aren’t you? Five hundred years ago your country was forested, you chopped the trees down, you’ve built an economy, you created an empire, you got wealthy, now mate it’s our turn. These are natural assets. They are our assets. So, the burden absolutely… the obligation is on us to demonstrate that there’s an economic case for them to keep their trees standing rather than chop them down.

GP: And what is the economic case for Unilever then to take a proactive role and to try and be a leader in this? What’s in it for you to be so proactive? Is it a matter of greenwashing or is it simply a core business imperative?

GN: Well, it certainly isn’t a matter of greenwashing, but you would expect me to say that. I think in the end this is about survival. The principle goal of any large corporation is its own survival and I think, you know, at a basic sort of fundamental level that’s what… No one articulates it in that way … but that’s what this is about. But I think there is a huge economic transformation which is going to have to take place and once it starts it will accelerate very rapidly, and if you’re not in on the first wave of that, you are going to be in a very difficult position.

GP: It’s interesting because that’s what my new website is about. It’s called RenewEconomy and it’s talking about the economic transformation, but most people look at me as though I’m barking mad. Do you get the same response in business circles?

GN: Less so. I can only talk with any kind of knowledge or authority about our own industry sector, so I’m less kind of knowledgeable about other areas. But in our own industry sector you do detect now, even amongst the large American corporations, a recognition that change is inevitable and that they had better get on the front foot on this. It happens at varying speeds, you know, with varying levels of commitment, but I feel sort of mildly more optimistic and confident than I did a few years ago.

GP: Am I right to think that you’re more of an optimist than a pessimist on…?

GN: No. Well, I blow hot and cold. Some days I wake up and I’m a glass half full and sometimes a glass half empty. My own perspective on this is that business has to talk with a great deal of humility about this area because for forty years, the environmental NGOs have been telling both business and government, but business in particular, your activities are causing grave damage, and for a whole variety of reasons business has chosen not to listen. Over the last decade or so, slowly there is a change in attitude and behaviour and I think that will accelerate very rapidly because you get a terrific amount of peer group pressure. When we published this sustainability report in November 2010, the first telephone call I got was from my opposite number in Coca Cola who had been summoned in to meet his boss in head office in Atlanta. He was asked why haven’t we got one of these? And that’s great. We’re not the only ones acting in this area, but we will have failed unless a huge number of other people come along with us…

GP: But the opposition to this sort of thing seems to be getting louder and more strident. Is that because those people fear that they’re in the minority …?

GN: I think they are the minority, but I think people get defensive. Just go back through history, any big change comes with a huge amount of resistance, antagonism and because for many people this threatens their livelihood or else they change pretty rapidly.

GP: But being human, means we are probably going to react to a disaster and chaos and crisis it would be more revolution more than evolution do you think? Can it be otherwise?

GN: I’ve been very taken by this notion which people talk about in the energy industry which I’ve never really understood before, this difference between shocks and stresses, and a shock in the energy system is kind of a blow out in the Gulf of Mexico or a war in the Middle East or whatever which has an impact on demand and markets respond instantaneously to that. You’ll see oil prices spike. We get that in our own markets in food when there’s a harvest failure in the Ukraine or Canada or this country. You see spikes. And so markets are really very good at responding to shocks.

Stresses, which are these slow, underlying trends which are coming up to hit us, CO2 in the atmosphere, water availability, certain key minerals running out, markets have no way of pricing those, no way of responding to that. They just kind of intellectually know there’s something going bad going on in the background, and therefore what we’re trying to deal with here are these stresses. The shocks, you know, you’ve got to deal with because they come along and hit you, but it’s how you manage these long term stresses. Some people will move first and I would say that history would say that for the most part, the people who move first do better out of this. Sometimes you move first and get it wrong and then you’re snookered.

GP: But there are an awful lot of Kodaks around the world though, aren’t there, who invent the future and still can’t see it?

GN: Who invent the future and then ignore it. Exactly. Isn’t that the saddest tale ever? But  you asked about disasters and things and the point is that led me onto this sort of notion of shocks and stresses and I think you’re right. Behaviour change will be accelerated at a macro level by disasters and we will get our fair share of those, probably more than we imagine. You know, just in our own industry, Hurricane Katrina had a big impact because it it happened in Wal-Mart’s backyard and Wal-Mart literally changed. I don’t know whether you’ve read Lee Scott’s speech which he made immediately after. But it’s beautifully written and it’s called “21st Century Leadership”. You can Google that. You’ll get it.

And basically what influenced Wal-Mart were two things. This was don’t forget about the most hated company in America at the time, but what influenced it… they were anecdotal stories of a guy somewhere deep in Louisiana managing a Wal-Mart store, floods all around him and he literally opened the door to people and said come in and take what you want. He probably did it because they were going to loot it anyway, but he actually said come in and take what you need, you’re in, you know, you’re in distress. And all of a sudden, people thought… they were getting press reports of how marvellous this was, what a responsible action. The other thing was that then the Walton family who were kind of sort of outdoorsmen themselves really kind of started worrying about this. But Wal-Mart have changed dramatically and if that’s the largest company in the world and, you know, we are a sort of small supplier to Wal-Mart, that they now dictate to us how they want things and for the most part what they’re demanding are the right things and… So, disasters will have their role to play unfortunately in this, in getting people to address these stresses in the system.

 Tomorrow: Part 2, the Australian connection.

 

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