Pushing Davos Leaders Beyond Good Intentions and Greenwashing

(Bloomberg Businessweek) -- At the World Economic Forum in Davos three years ago, Paul Polman, then the chief executive officer of consumer-goods giant Unilever, was a standard bearer of the enviro-capitalist elite. Before leading a standing-room-only session on gender inequality, he’d given a separate talk on the United Nations’ sustainable development goals and later in the week appeared alongside the prime minister of Norway and an indigenous-rights activist from Chad to discuss the threats of deforestation..At the time, despite the forum’s mission that dates to the 1970s to improve the state of the world, Polman may have been considered something of an outlier addressing an audience of financial and business leaders whose focus was on creating greater shareholder value. His benevolent message certainly didn’t resonate with Kraft Heinz Co., the ketchup giant backed by frugal private equity firm 3G Capital that made an unsolicited $143 billion takeover bid the following month. Unilever emphatically fended that off..This year’s forum, however, will seek to pick up where Polman left off and to give concrete meaning to “stakeholder capitalism”—a blueprint for a more inclusive and sustainable model of increasing earnings—at a time when “people are revolting against the economic elites they believe have betrayed them,” Klaus Schwab, the event’s founder and chairman, said late last year..A key issue is that the corporate pursuit of purpose—such as French yogurt maker Danone SA’s focus on improving global nutritional standards, or American clothier’s Patagonia Inc.’s goal of highlighting environmental fragility—has come to seem hackneyed. Alan Jope, who took over as Unilever’s CEO a year ago and will be at this year’s forum, is trying to combat what he calls “woke-washing” in the consumer-goods industry. The term applies to companies seeking to score points from hollow initiatives. For example, last spring, U.K. grocer Marks & Spencer introduced an LGBT (lettuce, guacamole, bacon, and tomato) sandwich in rainbow-colored cardboard packaging..At Unilever, Jope sees Ben & Jerry’s ice cream’s work in raising awareness about climate change and the use of Vaseline in healing sores at refugee camps and HIV clinics in the developing world as benchmarks for aligning revenue growth with societal benefit. It’s unquestionably what a majority of shoppers want—Unilever has said the 28 brands it counts as “purposeful” contribute about two-thirds of revenue and drive 75% of sales growth. Jope has said he might begin selling off brands that can’t find a higher calling than earning cash in the coming years..“The new model is that companies have to increase profit and improve society—three-quarters of people say that,” says Richard Edelman, who runs the communications company Edelman, quoting figures from surveys in the 2020 Edelman Trust Barometer report. Only 13% of participants ranked shareholders as the business community’s most important group, Edelman says, while a majority believe capitalism is doing more harm than good..Companies responsible for the lion’s share of climate change, such as those engaged in oil drilling and animal husbandry, have sought to be seen as stepping up to the challenge. Some have shifted their takeover strategy to focus on sustainable growth by acquiring their more wholesome rivals—for example, Royal Dutch Shell Plc bought U.K. battery storage network Limejump..But the majority of “reforms” depend largely on the internal controls set by each company—which can be tweaked or scrapped at the whim of management. The same is true of several products marketed in the Environmental and Social Governance (ESG) bracket, such as investment funds focused on social concerns. Some of these have no clear criteria for inclusion, and everyday investors may not know that several ESG funds in fact back tobacco and oil and gas companies. This has led to accusations of greenwashing. The European Union addressed the issue in December by creating a labeling system for what counts as a sustainable financial product, the first time a global regulator had done so. The agreement is expected to galvanize demand for green bonds, a form of debt linked to sustainability initiatives, which is estimated to have totaled $250 billion in 2019, according to credit rating company Moody’s Investors Service..In the meantime, established mass-market brands remain at the mercy of increasingly woke shoppers. Even the most medaled large advocates for an egalitarian growth model, such as Unilever, could see their ambitions hampered by consumer rejection: Last month, the company said it was facing the slowest growth in a decade—an unwelcome setback in Jope’s goal of doing well by doing good, at a time when society and the planet can’t afford to be doing worse. Read more: How Dow Chemical Got Woke.To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net.©2020 Bloomberg L.P.

Pushing Davos Leaders Beyond Good Intentions and Greenwashing

This year’s forum will seek to give concrete meaning to “stakeholder capitalism”.

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