Global Food Giant Adopts Stakeholder Model To Survive COVID-19 And The Long-Term

A change in French law and a global pandemic have accelerated Danone’s pursuit of a stakeholder-driven business structure that aligns social and environmental benefit with the bottom line. 

Earlier today at its annual general meeting, Danone’s board overwhelmingly approved adoption of the Entreprise à Mission model, a new type of corporation created by a 2019 French law. By adopting this model, Danone formally commits to go beyond the traditional corporate focus on short-term profit maximization to also prioritize other stakeholders such as workers, community, environment, and customers.

Danone also recently announced its intent to become the world’s largest Certified B Corporation by 2025, 5 years earlier than its prior commitment. B Corps are for-profit businesses that must reach a minimum score on an independent assessment of their social, and environmental performance. By standing with other leading businesses, the multinational food company with annual sales of more than $28 billion U.S. also signals a new future for corporations where they must value people and planet as well as profit to survive and succeed. 

“The decision was certainly accelerated by the COVID crisis because we saw, as a board, that the stakeholders’ economy was there,” Faber says. “We wanted to embrace it, because we believe a stakeholder business approach is going to stay in a COVID world.”

As part of the research for my upcoming book, Better Business, I had the opportunity to talk with current Danone Chairman and CEO Emmanuel Faber in advance of the Danone board meeting about the decision to become a global B Corp and how its stakeholder-minded mission has shaped Danone’s operations during COVID-19. 

Historic Base for New Corporate Model

For nearly 50 years, Faber says, Danone has based its business on successes beyond the bottom line. In 1972, then CEO Antoine Riboud outlined a new vision of social responsibility by emphasizing that the company’s concerns extended beyond the factory gate and office doors. Riboud’s guidance built a strong foundation for the growing company, which now includes popular brands such as Silk, Oikos, and Evian. 

“For half a century we’ve been working on this assumption of how we should be doing business,” Faber says. “It could not be timelier and more meaningful, as employees, consumers, customers, partners, governments and shareholders now see the critical importance of a balanced multi-stakeholder approach to value creation and sharing.”

While adoption of the Entreprise à Mission model does not directly change Danone’s legal structure, it strengthens its commitment to stakeholder governance with a long-term focus on sustainability and resource-conscious value creation. Implementation will be monitored by a mission committee that is separate from the board of directors and must include at least one employee.

In its initial steps to formalize a stakeholder-based legal structure, Danone’s North American subsidiary registered as a benefit corporation in 2017 and became the largest B Corp a year later. Another 19 Danone subsidiaries now are B Corps, allowing the larger global organization to witness the benefits of a stakeholder-driven structure.

“Our board and our shareholders have been acquainted with the topic of B Corp for a while. We’ve had breakout sessions with our investors during investor meetings and investor seminars to explain what B Corp meant and why it would create value,” Faber says. “Now we have the opportunity of the new law in France to embrace that as a framework to accelerate and roll out our Danone B Corp certification.”

Lessons—and a Push—from COVID-19

While the COVID-19 pandemic disrupted global markets and Danone’s operations around the world, the company used a stakeholder-driven approach in adapting its business practices. It has maintained its daily food supply to customers and continued to support its communities through donations of $6.7 million in funds and $36 million in products.

Behind the scenes, Danone acted quickly to ensure the holistic safety of its workers, Faber says. “We started from a very basic point, which was that we couldn’t have an operation without our people feeling and actually being safe from a sanitary standpoint,” he says. “We started work-from-home procedures where possible before governments declared stay-at-home orders.”

To extend that feeling of safety on a mental level, Danone guaranteed income for all workers worldwide and secured employment contracts through June 30.

“We believe that the business relies on the engagement of our people and our ability to create value and to share value relies on their engagement,” Faber says. “That engagement could be seriously damaged if people didn’t feel safe in their jobs, didn’t feel good if they need to take care of their children or their parents, or any personal situations that have been unpredictable during these last few months for everyone.”

To assist its supply chain partners, Danone has provided extended payment terms and credit to small clients, farmers, and suppliers, as well as additional funds for ecosystem partners and entrepreneurs in its venture portfolio. And for shareholders affected by market drops, Danone maintained its proposed 2019 dividend. The company’s leadership is seeing a cut: the board of directors will forgo compensation for the second half of this year, and Faber proposed his own 30% pay cut for the rest of 2020. 

Another change: COVID-19 has accelerated Danone’s timeline for global B Corp certification, advancing the goal year from 2030 to 2025.

“The decision was certainly accelerated by the COVID crisis because we saw, as a board, that the stakeholders’ economy was there,” Faber says. “We wanted to embrace it, because we believe a stakeholder business approach is going to stay in a COVID world.”

New Challenges and Opportunities

About 30% of sales come from Danone subsidiaries that already have B Corp certification, Faber says, and the shorter timeline creates new challenges as well as opportunities to establish additional practices and policies with stakeholders in mind.

“There are new challenges, opportunities, and angles that we haven’t seen yet, or that the B Corp people haven’t seen yet, because we’re by far the largest organization that they are in the process of certifying,” Faber says. “We want to stay flexible and find pragmatic solutions.”

While Danone has seen the benefits of considering all stakeholders and incorporating social and environmental factors in its business operations, it hopes to show other companies—from large corporations to entrepreneur ventures—why and how it can follow its lead in pursuing B Corp certification. 

“At the company level, it’s very important for us to continue to build the business case for B Corp certification,” Faber says.