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Danone is showing multinationals the way to a less destructive form of capitalism

Henri Campeã for Quartz
  • Cassie Werber
By Cassie Werber

Reporter

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As the realities of climate change meet the injustices of wealth distribution, many people are struggling to see how capitalism in its current form can stay relevant. At the same time, it’s not clear how any alternative system could possibly keep a growing population fed, sheltered, and employed.

One answer is to reform the system we have, as a growing band of hedge fund billionaires and public-company CEOs have suggested. But when executives talk about serving a purpose beyond making rich shareholders richer, their words can ring hollow. Too often we find that what a company does, for example avoiding taxation, conflicts outright with these lofty new promises to society.

What’s missing at big corporations, ultimately, is accountability. But Danone CEO Emmanuel Faber has found a way to provide it—and he’s bringing it to every corner of the sprawling food and dairy giant.

Subsidiary by subsidiary, Paris-based Danone is on its way to transforming itself into a “B Corporation,” which commits it to meeting a rigorous set of criteria in areas including sustainability, transparency, and legal accountability.

Faber is compelling when he communicates the clarity of his vision, practiced no doubt on the other large-company executives to whom he has suggested joining Danone in the process of “B Corp” certification.

“It’s quite clear what I’m saying, I think, and we’ve been vocal about it,” he says. “We do not consider the purpose of this company to be returning money to shareholders. There is a broader purpose.”

Danone is a yogurt behemoth. It has a global staff of 100,000 and operations stretching across Europe, Asia, and America, where it sells a range of familiar products, from dairy foods (including the yogurt, called Danone or Dannon, depending where you live) to baby formula, Evian to almond milk. Most B corps, in contrast, are small. An analysis of data from all B Corps registered as of November 2019 showed that 95% have under 250 employees. But in 2015 Danone began the process of certifying every part of its $27 billion business, with separate certifications for each subsidiary. To date, about 30% of Danone’s operations are B Corp-certified, and it aims to convert the rest by 2030.

“We do not consider the purpose of this company to be returning money to shareholders. There is a broader purpose.”

The transformation will enshrine Faber’s vision of success, which is predicated on the idea that in order for the company to thrive, the rest of the world must be thriving, too.

Faber’s rhetoric is stronger than most CEOs will venture. But his sentiments don’t make him a total outlier. More and more, business leaders are talking about having a sense of responsibility to people other than those who own their stock. In August 2019, the Business Roundtable, an influential group of US CEOs, dramatically departed from championing the interests of shareholders exclusively, with a statement that firms had wider obligations: to customers, employees, suppliers, and communities, as well as to anyone who owns a share of stock. (Many questioned whether the statement has teeth, but it’s still a big change in focus.) 

There are 2,500 certified B Corp companies globally, most of them small, suggesting the movement has been a fringe enterprise with impressive ideals and not a lot of reach. But if a massive multinational like Danone is certifying, then other vast companies can do so, too. And that means we could be witnessing not just an existential crisis in capitalism, but a possible solution.

Purpose as a product

Faber’s ideas about purpose weren’t constructed in a vacuum. Paul Polman, as head of Unilever, was also a vocal advocate of a different kind of business (and remains so despite having retired as CEO in January 2019). Several parts of the Unilever empire are certified B Corps, including ice cream brand Ben & Jerry’s, which was bought by Unilever in 2000 and became a B Corp in 2012, and Seventh Generation, a maker of household cleaners that was among the first wave of companies to certify as B Corps back in 2007, and which was acquired by Unilever nine years later.  

When an artisanal ice cream maker founded by two Vermont hippies says it prioritizes the planet, it’s not hard to believe. But large, faceless companies typically haven’t earned the same level of trust. Even casual observers of the corporate world tend to respond to big firms’ social-responsibility pledges—caring for their people, or protecting the Earth—with a particular, grim kind of laughter. Of course companies say that, we think. But we are the children of capitalism. We’ve discovered, time and again, that what they truly care about is money, and what they protect is profit.

And why wouldn’t they? Companies exist both within and because of capitalism. And at capitalism’s heart is an immutable truth: however much a leader, worker, or founder thinks the oceans, or equality, or kindness matters, shareholders matter more. At least that’s the way Milton Friedman, one of modern capitalism’s encouraging parents, explained it to us. 

With an upbringing like that, what would a company—a profit-seeking structure in a world of finite resources—have to do to convince a skeptical public that it’s truly driven not by profits passed on to the investor-owners that keep it in business, but by purpose? And could a company driven by purpose possibly expect to find for support for the idea among its shareholders?

Faber notes an indication that investors are supportive of the direction in which he’s taking Danone. In 2018, the company added environmental, social, and governance (or ESG) criteria to a syndicated €2 billion ($2.2 billion) “positive incentive loan” from a group of banks led by BNP Paribas. The loan rate is structured to fall over time, so long as Danone meets its ESG goals and gets a certain percentage of its sales from B Corp-certified divisions. If the company underperforms, it pays a higher loan rate. The banks’ willingness to take on such terms is an indication, Faber says, that they see an increased upside, or at least a decreased risk, in the way Danone plans to develop over the next few years.

Marisa Drew, CEO of Impact Advisory and Finance at Credit Suisse, says there’s been “a sea change” in the extent to which big investors are seeking sustainable investments—an argument, no doubt, for why her position was created two years ago.

She says that five years ago, the evidence wasn’t clear that investors should be taking future-climate risks seriously. There surely are scientists and activists who would bristle at that, having been pleading with the world to heed their warnings for upwards of 30 years. In any case, institutional investors are now pricing in risk from climate change to their longterm plans, and corporates are “doing a lot of introspection,” Drew says. Looking at the roster of B Corps, she suggests, is a good primer on which companies have truly committed to change.

What it means to be a B Corp

When Danone’s entire North American business gained certification in April 2018, it became a Harvard case study, and the biggest B Corp in the world.

There’s no denying that the company uses its B Corp status to promote its brand, with marketing materials infused with themes of naturalness, family, and homespun values. A video released by Danone in 2018, for example, shows kids and grownups placing wooden blocks into a pattern announcing the company’s B Corp achievement, before upbeat music kicks in alongside images of flowering trees and children picking berries.

Could Danone’s message of purpose be nothing more than a slick marketing pitch? And how can a consumer tell the difference between that and real, purpose-driven change?  

Any company can call itself “green,” and most now do, even traditional energy companies with most of their business in mining oil and gas. BP readily lays out its intentions to expand its renewable energy business; ExxonMobil publishes its findings on biodiversity in an area of virgin forest it is gearing up to drill.

Certification holds companies to account. But in order to trust that B Corp status means real change, a consumer would need to trust the verification process.

Chris Turner, executive director at B Lab UK, the body that walks UK companies through the certification process, says that what sets B Corp apart from other frameworks and designations is the two-fold demand it makes of a company, both to go through a process of reporting and change, and also to make a permanent legal alteration to its structure. (In contrast, the Benefit Corporation designation available in the US requires a legal change but doesn’t have an independent vetting procedure. All US B Corps are also Benefit Corporations, but not vice versa.) 

To get B Corp status, a company must achieve a minimum “score” (of 80 points) across five criteria: governance, which covers a company’s ethics and its mission;  workers, including their wellbeing and career progression; community; environment; and customers. And to keep its status, a company must get re-certified every three years. The B Lab Standards Trust, a global body independent of the B Labs in each country, vets company submissions to provide independent verification of the applicants’ claims.

Part of the certification process relates to transparency. One requirement is that any B Corp which is a wholly-owned subsidiary of another company has to publish its full assessment on B Lab’s website.

UK-based smoothie company Innocent Drinks is a B Corp, and a subsidiary of Coca-Cola. That means its entire B Corp assessment is available to download, so it’s possible to see exactly where Innocent racked up points (92.5 in total), and where it missed them. To take one criteria, volunteering, as an example: There are seven multi-part questions pertaining to how staff volunteer, with a total of 5.5 points on offer. Innocent scored 2.8. It could boost that if, for example, a higher proportion of the staff took paid time off to volunteer (in this assessment, it was below 25%). 

Company heads who care about happy workers, good governance, or climate change might not need a lot of convincing as to why becoming a B Corp might make sense. A bigger question is: How?

The scores for Danone’s subsidiaries are available to view, too. The assessments aren’t stellar. The North American subsidiary, the company’s first division to get B-Corp certified, scored 84.9 in 2018, out of a possible 200. The assessment shows multiple areas in which the Danone subsidiary missed out on points and has room for improvement. The company didn’t offer health insurance to part-time workers, for example, had only minimal caregiver leave, and paid its top-earning employees a lot more than its lowest decile. It also gave up points on environmental measures like managing greenhouse gas emissions and waste, and publicly reporting on its impact. For comparison, Patagonia, an outdoor-clothing company that’s often cited as one of the foremost B Corps, scored 151.5.

But just getting its first subsidiary over the line to gain B Corp certification was an achievement, and not one predicated on a simple box-ticking exercise. How Danone did it could provide a useful blueprint for any company aiming to follow suit.

Blueprint for a big B Corp

Company leaders who care about happy workers, good governance, or climate change might not need a lot of convincing as to why becoming a B Corp might make sense. A bigger question is: How?

It’s certainly time-consuming. The assessment for Danone’s US business is more than 200 pages. Gathering data, and making policy changes to achieve higher scores, will likely take between eight and 14 months for large companies (i.e. those with more than $100 million in revenue), according to B Labs’ estimate. Danone’s 2030 timeline is instructive, B Lab UK’s Turner says. Transforming all its subsidiaries, most of which are themselves multimillion-dollar companies, is an undertaking so big that the company doesn’t expect to complete it for another decade.

Certification is also, surely, expensive. Danone declined to put a figure on the cost of its certification efforts so far, or to estimate what it would be in the future or in total, saying only that any expenses associated with the transition are “not exclusively related to B Corp, but rather to a wider transformation journey” in line with the company’s overall vision. B Lab charges an ongoing certification fee, starting at $1,000 a year for the smallest companies and rising to $50,000 a year for companies with up to $1 billion in annual revenue. For even bigger companies, B Labs charges more, on a case-by-case basis.  

But while time and expense are measurable, many people refer to the process of  B-Corp certification as something other than an administrative exercise with tangible costs. Rather, they say, it is a collaborative act.

Power to the people

Blandine Stefani has been Danone’s B Corp director since 2016. She says that, faced with the monumental task of transforming every subsidiary on every continent, Danone started with a simple hack: It asked for volunteers. 

The company-wide callout went to general managers, and after some put their hands up, 10 divisions were selected to pioneer the process, among them the company’s US operations—which had recently acquired WhiteWave, a US maker of organic food and plant-milks—and Danone’s Spanish dairy business. 

Stefani says she was “amazed” at the energy and passion displayed by those who engaged with the project, including younger workers who advocated with older managers to make changes. Stefani spends her days conference-calling with managers across the world, and often travels to meet them. But her team doesn’t swoop in and overhaul operations, she says. Rather, the work of achieving the necessary scores across hundreds of B Corp criteria is parceled out, a chopped salad of responsibility in which employees across geographies, and pay grades, partake.

At B Inspired, a conference for existing and aspiring B Corps held in London in September 2019, small business founder Pippa Murray told the same story. Murray’s experience falls at the other end of the food spectrum from Danone’s. She started her nut butter business, Pip & Nut, alone in 2013, and has since grown it into a successful company with more than 20 staff, supplying major UK supermarkets. Daunted by the breadth of criteria required for B Corp certification, Murray says she tackled the problem by sharing it out, making every person on her staff responsible for one small part of it and, she says, enfranchising them in the process. (Murray was surprised onstage when Douglas Lamont, Innocent Drinks’ CEO, presented her company’s certification to her; it had just come through.)  

Danone’s Faber also notes the unexpectedly passionate engagement he discovered when he attempted to enlist staff in more decision-making by gifting every employee a share. In October 2018, management sent out a survey on the company’s goals, expecting a 25% response rate. They got an 80% response rate instead, plus offers from 33,000 staff volunteering to lend extra help to the process of becoming more purpose-driven. 

Ex-Danone executive Lorna Davis confirms that the engagement from Danone’s staff was exuberant. She is a former general manger for Danone’s businesses in New Zealand, India, and France, who started with the company in 1997 and was running its China arm when Danone’s global biscuit business was sold to Kraft (now Mondelez), at which point she found herself president of Kraft China. She then moved back to the US as president of biscuits North America for Mondelez, but soon realized she was seeking something very different. 

“By that time I was really over the sort of classic CEO thing. I mean, I had run [Mondelez division] Nabisco, a $6 billion business in the US selling Oreos. My heart was breaking, basically,” Davis says. Faber wooed her back to Danone with the promise of driving forward the company’s purpose journey. She returned to Danone in the sci-fi-sounding role of “chief manifesto catalyst” for the B Corp transformation. 

Davis says the energy for the change she was tasked with catalyzing came, in large part, from the company’s youngest employees. (She also notes, anecdotally, that across other companies she now works with toward B-Corp certification, the change-makers are often in less senior roles than one might expect, and that women are over-represented in the cohort.)

As part of a mission to build community, Danone introduced new opportunities for its employees to spend stints with international divisions, a policy that was particularly popular with younger staff interested in spending time in countries where the company has operations, like Senegal and Bangladesh. Critical to their enfranchisement, Davis says, was an office communications app, Facebook at Work (now known as Workplace by Facebook). Having a hub where workers could communicate with one another based on shared interests—whether it was a love of dogs, or a desire to transform the company structure—made the difference between a disconnected, hierarchical, traditional multinational, and one in which rank-and-file employees could have an impact on the way their company acted in the world. The purpose drivers encouraged one another, and grew strong. 

“This is something that Blandine won’t tell you, but I’ll tell you,” Davis says, dangling the promise of insider knowledge paired with a frankness that an ex-employee feels at liberty to provide. Early in the B Corp process, she says, a particular regional boss at Danone didn’t buy into the changes that B Corp certification necessitated. The manager instructed the leader of one of their business units to focus on returns rather than “this ridiculous B Corp bullshit,” Davis says. That person, who was passionate about the transition, did the necessary work in secret, then presented the manager with the fulfilled criteria as a fait accompli. 

“If you’re going to do this journey,” Davis says, “you need to destabilize the classic power paradigm. Because the change will not come from the top down. It comes really from the bottom up, and the sides in.”

Who’s next?

Davis says Faber continued to pay her for two years after she stopped working at Danone, simply to talk to other companies about their potential to become B Corps. (In conversation, Davis refers to Emmanuel Faber simply as “Faber” because, she says, there were “thousands of Emmanuels” at Danone, and it’s the only first name in French where the feminine—”Emmanuelle”—and masculine versions sound the same. In texts, and in person, she tends to call him Em.) Davis now describes herself on LinkedIn as an ambassador for the B Corp movement, but she isn’t remunerated for the role.

“You need to destabilize the classic power paradigm. Because the change will not come from the top down. It comes really from the bottom up, and the sides in.”

“The way that I see it now, given that I speak to many companies: I look for wherever there’s an open door, wherever there’s any momentum, and we start from there,” Davis says. Visionary leaders are one part of the puzzle, but ordinary, young workers could be even more vital. “Once you have the young people involved in an organization, and motivated, and once you have outsiders to hold you to account, you really start to see things move,” she says.  

Are other big companies of Danone’s scale getting ready to bite the B Corp bullet? Davis says they certainly are, though she doesn’t want to name names. Stefani at Danone says a significant portion of her time is taken up with discussing Danone’s experience with other big companies. She, too, declined to identify names. But in a followup email, her team confirmed that interest among big companies is on the rise, in “various sectors including food industry and utilities,” and that “several have engaged to understand Danone’s journey and how it can apply to their own business.” 

Since the journey to certification is long and potentially exposing, and the chance to surprise the world with the announcement of certification makes for good press, it’s understandable why large corporations are reticent to share their journeys before they reach the destination. Recently several big names have certified, including Athleta, a subsidiary of Gap Inc., in 2018; The Body Shop, with a global staff of 8,000, in September 2019; and Guardian Media Group, which publishes the Guardian newspaper, in October 2019. 

Danone doesn’t seem jealous of its position as the B Corp community’s largest occupant. It convened an advisory committee, chaired by Patagonia CEO Rose Marcario, to help facilitate its own transition and that of other big companies.

B Lab UK’s Turner notes that working on Danone has been a learning experience for the certifiers, too. “A big business like Danone certifying has enabled us as B Lab, globally, to develop some much more sophisticated, fit-for-purpose processes” to help others do the same, he says.

A natural step

Faber doesn’t plan to stop when the whole of Danone is a B Corp. His vision for the transformation of capitalism is much more radical.

In September, Faber was in New York for the United Nations Climate Summit, the event where teenage activist Greta Thunberg delivered a stinging rebuke to world leaders for failing to take action on climate change. Faber’s appearance got considerably less attention; he was there to announce the formation of a 19-company consortium pledging to protect the planet’s biodiversity through sustainable agriculture and a reduction in deforestation.

At the UN event, in a roomful of Quartz journalists he spoke with in New York later that week, and in multiple other arenas, Faber has talked seriously about a complete transformation of the way we produce food, moving away from the use of chemicals to crop and animal cultivation based on deep knowledge of soil, ecology, and the climate. He thinks we should eat less meat, and rebalance our diets based on the planet’s future health, as well as our own (which in some cases might mean eating less dairy, Danone’s core business, and definitely means cutting down on sugar, which Danone uses in large quantities). He rejects the use of genetic modification in food production, and enraged a segment of the US food market when Danone’s North American business made the pledge in 2016 to become GMO-free.

Becoming a B Corp was a natural step for a company with values like Danone’s, Faber insists. It’s a good line, but given how radical Faber’s positions are on many aspects of the business, it may also be true. 

For other companies, indeed whole other industries, it’s perhaps not so easy. B Corp certification isn’t realistically open to every corporation. An oil major—for example—would struggle to meet the necessary sustainability criteria. Having said that, energy as an industry is certainly represented in the B Corp community (for example with the UK’s renewable energy company Bulb) as are a host of industries we might not immediately connect with ethics and transparency, including finance. 

Crisis point

Capitalism has been popular in part, it could be argued, because it is simple: Make money, and that in itself will ensure that other needs are met, because money-makers pay taxes, for example, and create employment. Where it falls down is if we admit, as we are increasingly beginning to do, that the world’s resources are finite (only so much coal to burn), and that making money for one group can fundamentally damage the happiness of another (think sweatshops in the garment industry.)

Nettled by the climate-related drive to buy less, or to shift consumption habits to encourage higher-quality goods and more thoughtful purchasing, Karl-Johan Persson, the CEO of H&M, one of the world’s biggest clothing brands, recently lashed out against anti-consumerism, telling Bloomberg in October that people flying less and limiting their consumption of cheap clothing could cause “terrible social consequences.” To Persson, it’s a matter of prioritizing between climate goals and reducing poverty through job creation. To others, his statement is the frightened cry of a business built on the fiction of unlimited resources and cheap labor that now finds itself in structural decline.

The evolution of the B Corp movement, with its evangelists and its detractors, is indicative of this liminal time. Amazon, a holdout among big tech companies in the race to mitigating its impact on the planet, was essentially forced by its own staff to finally commit to a timeline for reducing its carbon emissions to net zero.

As the imperative grows stronger for companies at least to express concern for the communities around them—and to acknowledge the business case for happier workers, non-exploitative supply chains, and healthy customers—it could become less clear who are the true change-makers, and who is purpose-washing for the sake of better optics. Increasingly we’ll have to ask of companies, what are they really doing to try and make the world a better place, or at least stop it getting worse? How can they prove they are doing it? And is it enough? 

Right now, B Corp certification is one of the most rigorous ways for businesses to put themselves through a gauntlet and emerge—it is to be hoped—as companies that are better governed, more happily staffed, and less environmentally destructive.

If B Corps continue to grow, with more huge additions like Danone, the governing body will have an increasing responsibility to make sure its standards don’t slip. And CEOs like Faber will have a real chance at talking credibly about the sustainability of modern capitalism.

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