French dairy company Danone made headlines this week with the announcement it plans to adopt the ‘Enterprise a Mission’ legal framework, aligning itself closely with environmental, social and governance (ESG) ideals in its business outlook. The step is distinct from, but consistent with, Danone’s ongoing attempts to achieve B Corp verification by 2025, which would make them the first listed company in the world to do so, writes Louis Auge.
The move is only the latest in a lengthy list of efforts made by the French company to fulfill its ESG obligations. 20 of Danone’s subsidiaries are already B Corp certified, while 15 more hope to achieve accreditation this year. Those endeavors have been accelerated by the coronavirus outbreak as Danone looks to shore up the financial future of all of its stakeholders, having guaranteed all employees a full wage until June 30th, 2020 and pledged €300 million in support for its trading partners. CEO Emmanuel Faber has also committed to a 30% salary cut for the second half of the year, while all other board members will wave their remuneration packages completely for the same period.
In a world where profit margins are all too often prioritized above the health of the planet and those who live upon it, Danone’s actions are a refreshing step in the right direction. With the current health crisis highlighting the perilous state of affairs countless everyday citizens find themselves in, it’s to be hoped their commitment to ESG principles can provide a working blueprint for the entirety of the corporate sector as the human race seeks to take its first steps in a post-COVID world.
Sign of the times
Created as a means of measuring corporate success via social responsibility (rather than mere shareholder profitability), B Corp status was launched by non-profit B Lab in 2006. The following year, the first generation of B Corp accredited companies were born, with the number of firms seeking and achieving certification growing exponentially year on year. By 2016, there were over 1,700 B Corp companies in 50 countries around the world; today, that figure stands at more than 3,000 in 70 nations.
While the proliferation of B Corp businesses has, in part, been driven by forward-thinking CEOs and leaders, it’s far more of a by-product of a gradual shift in the societal perceptions of the importance of environmental issues. With consumers demanding greener credentials from corporations, there has been a tendency towards greater greenwashing across the board. As a result, smaller and more dedicated firms have attempted to differentiate themselves from only paying lip service to the idea by achieving a certified status that acts as testament to their commitment. It’s no surprise that the vast majority of those 3,000 B Corp companies are small- to medium-sized enterprises (SMEs).
Of course, the practicalities and logistics of adhering to the ESG values outlined by B Lab are far simpler for a smaller and more nimble business entity, which also partly explains the reason why larger behemoths have been slower on its uptake. But with Danone vying to become the first listed company to become B Corp within five years, the stage will surely be set and the wheels put in motion for other major players to follow suit. And as for accusations that Danone’s latest exploits are merely further evidence of greenwashing, CEO Faber was quick to point out that the €2 billion that has been earmarked for a complete overhaul of its packaging model would comprise an expensive coat of paint, to say the least.
High time for change
The transition is a timely one. Even before the coronavirus hit, private debt had been spiraling out of control, sending public spending down the drain as a result. In the US, aggregate household debts reached a new high of $14.15 trillion at the end of 2019. In the UK, the same figure stood at £1.28trn between April 2016 and March 2018. Despite that, the British government has slashed spending on public health by £1 billion, while the Trump administration has consistently gone after vital institutions like the Centers for Disease Control and Prevention (CDC).
Obviously, those institutions are desperately needed right now. The inequality rampant across the US (and much of the developed world) is only set to increase post-pandemic, according to experts on the topic. Previous studies of past crises support that hypothesis, too. In the five years following a major outbreak, the income gap between the top and bottom deciles increases by over 2.5%, while the ratio of employment to population in unskilled professions falls by more than 5% (though remaining largely unaffected for skilled professions).
Reform both essential and urgent
One small silver lining of the crisis is the spotlight it has thrown on the current state of affairs, and how unsustainable it is going forwards. Thankfully, countries such as France have used the pandemic as a platform to call for reform to the meat industry, while Germany have gone one step further by implementing a raft of new legislative measures designed to address those very issues. Of course, the meat industry is just a microcosm for the business world as a whole, but hopefully similar steps can be taken right across the board.
Doing so is not just an environmentally and socially responsible course of action, but also demonstrates good business sense. In the wake of the 2008 economic crash, B Corp businesses were 64% more likely to survive than those operating on traditional principles of commerce. Meanwhile, a recent report from the World Economic Forum (WEF) warned that failing to invest in sustainability during the COVID recovery could have dire consequences for both the planet and everyone living on it.
One solution, pioneered by Oxford University economist Kate Raworth and adopted by the city of Amsterdam, is nicknamed the doughnut model and aims to prevent the most vulnerable from falling through the hole in the middle, while similarly ensuring we don’t overstretch the Earth’s resources at its outer ring. Working within those parameters is a noble goal for any business operating in the 21st century, and one that adherence to B Corp protocols encourages. The next step is to convince more companies not just that the step is possible, but that it is an imperative.