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The battle within Danone—producer of Activia and Oikos yogurts, Silk soy milk, and Evian water, among others—might have been dubbed a “food fight,” had it not erupted in such serious times. However, it wasn’t a joke. In March 2021, the tension within the board of $36 billion global food giant burst into flames just as the world started to relax its restrictions and launch mass vaccination campaigns. In a gloves-off power struggle, two small stakeholders maneuvered a coup, ousting the company’s CEO and chairman Emmanuel Faber, whose four-year leadership had made him a star among environmentalists and climate activists.
Faber had turned Danone into an “enterprise à mission,” France’s new category similar to an American B-Corp, whose purpose was far broader than profits and growth. He named his strategy “One Planet, One Health,” and created a carbon adjusted earnings per share indicator, pegging Danone’s success directly to its environmental performance. While that brought applause from climate activists, the company’s shares lagged behind peers like Nestlé and Unilever during the pandemic, as sales of some key Danone products like Evian water plummeted.
Amid the shock of Faber’s ouster, there were roiling questions over what it all meant. Are CEOs facing an unsolvable dilemma? To please shareholders or join the fight against climate injustice and social inequality? These issues were at the heart of Faber’s company. He also joined activist CEO alliances such as the B Team or Business for Inclusive Growth (or B4IG). Little wonder, then, that his firing left palpable distress in some circles, from Paris to the U.N. “Are these two objectives, environmental and economic, irreconcilable?” asked France’s liberal Le Monde of Faber’s ouster. “It plunges us into a confusion of emotions over the ethics of capitalism,” the paper said.
Faber was, however, more optimistic. Faber, 57, escaped to the Alps where he was raised and climbed them to reflect on his 24-year Danone career. He became a partner in the agritech venture fund Astanor Ventures in October. He believes that environment and economic goals are not incompatible.
Over green tea and Perrier in Paris on Nov. 16, Faber spoke with TIME about The role business leaders must play in solving the world’s urgent crises. Fresh off the COP26 climate talks in Glasgow, he believes companies will be key—perhaps the key—to fighting climate change and inequity.
(This interview has been edited to be more concise.
It’s been a very strange year for you. Were you affected by the events at Danone and felt like we were losing our minds?
Danone had grown to become my family, so it’s like leaving your family. I didn’t choose that. But, suddenly I discovered I had complete freedom to choose where and with whom I want to spend it. This is an amazing privilege. The result was that a few individuals saw the opportunity to disrupt the management of the company at an easy time.
Outsiders believed that you were trying to establish a climate-driven organization, so they punished them.
The equivalent to public benefit corporation, you know. [B-Corp] status, 99%, not even a year before, they had agreed with the €3 billion climate and digital acceleration plan that we had announced a year before. … None of them were opposed to what we were doing.
The end of this story must be read, unfortunately it is on the 29th July. The entire board was forced to resign. The board members stated that they wouldn’t seek a reappointment and would resign with one year notice. Shareholders had lost all credibility with the board.
Changes in corporate boards: What can we do? How can this generation of corporate executives be changed?
The climate change problem is real. I don’t think you would find one CEO in the business ecosystem that would say it is not there. That is behind us, different from five years ago…
This was five years ago.
Yes. The pandemic taught us lessons about how our old, supposedly stable system was affected by elements we didn’t control. Although this virus is only half of a live organism, it still caused serious havoc to the health system. We discovered quickly that food sovereignty was a major issue in our food system.
We suddenly learned that what we felt was a predictable model and a safe model wasn’t, that we hadn’t been super good at being efficient, but we were tested in our resilience in the system.
The other thing is, I think last summer’s extreme weather events, fires all over the place, floods all over the place, brought to the public attention that climate change was not in five or 10 years, it was not for remote countries. The climate change epidemic is upon us. The first to be affected by climate change warming is agriculture. It is causing a decline in yields, increased water stress, and soil erosion.
In many cases, citizens and civil society are suing governments for inaction or lack thereof on climate change. Because governments cannot do this job properly, they will turn to corporations and companies for help. The climate transition will not be dominated by the government.
So that’s one. ESG questions are being asked by employees collectives [Environmental, Social, and Corporate Governance], big time. Larger companies are facing a greater talent shortage. So many of the highly educated talents don’t want to work for these large companies. Employers are increasingly asking new generations what they desire: Impact, meaning.
Finally, there are shareholders. Already now it’s harder for the most carbon-emitting companies to find the right appeal from shareholders. I’ll just give you one example. Anglo American [Corporation]Thungela was interested in spinning off its coal-mining business. The market will typically pay 20 years of the current earnings if they feel these earnings are likely to continue growing in the future. Thungela received four months’ EBITDA when it was spun off. [Earnings Before Interest, Taxes, Depreciation and Amortization] multiple.
They couldn’t find enough investors that would be willing to pay the cost on their reputation to consciously, in 2021, choose to invest in the business which is purely coal mining.
What’s the best way to keep your business running?
Well, that’s exactly my point. Global financial markets have become increasingly reluctant to finance such assets.
So far, ESG has been sort of an easy path for CEOs and boards that wanted to look good, but weren’t ready to really walk the talk. That’s the whole question of greenwashing. There will always be greenwashing, I believe.
Everyone is being paralysed by all this greenwashing noise. It’s penalizing the people that are doing the real stuff, because they can’t prove that, and it’s favoring the people that are not doing the real stuff, because they can claim without being challenged on the reality of this stuff, because there are no metrics.
My big moment at COP26 was when I heard the IFRS. [International Financial Reporting Standards, which sets rules for public companies]They have created a prototype of a climate standard which will be transparent, comparable and easily auditable. It’s huge news. What they are essentially saying is by 2023, all companies will be able to—and in some cases compelled to—report under these new standards.
140 countries have already committed to the IFRS metrics. They will now adopt the climate metric as an additional metric in their IFRS. Each company will be required to disclose its goals for CO2 emissions, and how it plans to reach them. Markets will view a company that is on track with its goals positively if it does so. If you’re late, it means that there are some capital expenditures that you need to do in the future. This will result in additional debt. The stock market valuations of companies will suffer immediately.
Which means as for profits, when you are ahead of your forecast, you get a bump on your share price, and a bump down if you’re super late on your emissions trajectory.
You suddenly become a peer in your industry. You can have capital allocations that are not solely based on profit. So it’s a huge change.
How many companies followed your model of using a carbon-adjusted earnings per share metric, to show the financial cost of the company’s carbon emissions?
Zero. It takes time. It took them a long time to get to know me. We brought them to the fields. Food scientists came to talk to them. This topic has been discussed by us over many years to our shareholders.
We were unsure how we would explain it to shareholders when we made the decision to be a B-Corp. I received a short note from my friend Doug McMillon, CEO of Walmart, and he said, “Emmanuel, that’s so great.” So I call him and say, “Would you shoot a short video saying why you think it’s great? You’re my biggest customer.” So he he did that. It was 2017. It was 2017. The video cut out about 80% questions.
Two years later, when we created this CO2 adjusted measurement, the team realized that the carbon cost was needed to not only save the earth, but to also save the company.
Beyond the food and agriculture system, you don’t have the same magic of telling a story that it’s actually good for the business to put carbon back into the soil. It was very hard to achieve this without carbon metrics. It’ll be evident when there are climate metrics. We may have been a little ahead of the curve by a few more years. … The metrics may not be the ones that we had, but there will be one, which will make it a market conversation instead of just one company that had this crazy idea.
What got a lot of people’s attention from COP26 in Glasgow was Greta Thunberg’s protests. I think maybe most people will remember her saying, “It’s all blah, blah, blah.” Is that just cynical? And what’s the impact of that on the real work being done? Or is it a show?
Unfortunately, it’s a combination of all of that. I don’t think this is only cynicism. Blah blah. Myself, I said we hadn’t moved fast enough. But, many things are moving very fast. We’re still behind the curve, but we have never been as close as coming to a tipping point.
The legal team, comms and PR departments hold CEOs back from talking. This is a polished communication, which can sometimes be a bit grotesque. Three years ago, shareholders weren’t interested in these discussions. But now, they are very interested and everyone is nervous. In themselves? [CEOs]They know there’s a problem and that there are solutions.
Your industry is big on carbon.
In 2008, we began our journey towards reducing carbon emissions. In 2009, Danone’s team managers all had significant incentives [to reduce our]Carbon footprint Incentive bonus. An incentive bonus. [of the bonus]The focus was on issues related to social and environmental concerns, including carbon. My bonus was equal in weight to the EBITDA and carbon footprint of the company. So that’s how far we and I went into walking the talk and putting our money where our mouth was.
Did you lose some money as a result?
Yes, but I was earning money. Our peak carbon emission would reach 2025, as we set a course in 2009. The hard work of 15,000 team leader, who received bonuses to help them, helped us reach peak carbon in 2019, six years before our target. We have always been in front of our plans and reduced carbon intensity.
Talking about agriculture, 60% of soil organic matter is carbon. But intensive agriculture (the monoculture type of agriculture) is extracting carbon from the soil. Danone was the first—Patagonia and ourselves—to start a regenerative organic certification in the U.S. in 2015. Nobody knew what it was when we started. We need to improve soil health. This means that we must move away from intensive farming practices and adopt practices that add carbon to the soil. That is what we know.
Is it possible to put carbon back into the soil?
In 2019, I gathered 30 of the largest companies in the world that that are using resources from the soil: Textile companies, fashion companies, cosmetics, food retailers, some data companies, Microsoft, Google, joined…. Two years later, we now have an indicator set, a framework that explains what regenerative farming is. You will find such large companies. After Danone, you have Nestlé, that this year said by 2030, we will supply from regenerative agriculture. They needed somewhere safe where they could think, work, and incubate.
You talk about monoculture agriculture—growing only one type of crop at a time, as is popular at large American farms—ruining soils and the need to put carbon back into the soil, so they’re actually seeing the effects in terms of the quality of their crops?
A large study was conducted by the International Union for Nature Conservation (UN agency for biodiversity). They also looked into wild relatives of varieties being planted in fields. Wild vanilla. Wild coffee, etc. The researchers discovered that one third of the beans’ wild relatives are at risk of extinction. They found out that 100% of the sample they used on vanilla’s wild relatives are under the threat of extinction.
They adapt constantly to climate, the availability of water, the shade or lack thereof, the temperature and the sun. They naturally mutate.
These wild varieties will be more capable of dealing with the effects of climate change. It is crucial that they are brought onboard. If you are a Cargill or others, or the big coffee companies or the big cocoa companies, that are directly dealing with this reality, with the farmers who see their yields declining and the water scarcity more and more, they have either the choice of going up in altitudes—meaning lower lands at lower volumes, more expensive to adapt—or to find alternatives.
This is one of these topics on which I see CEOs’ minds just opening when they realize that there is this opportunity. Because climate change is knocking on the door saying, “Here is the huge problem we have.” But also nature is saying, “Here are the huge abilities that I have to solve your problems.”
Are you planning to invest in the future agriculture in your new position at Astanor Ventures?
At the intersection of technology and natural-based solutions, I believe.
I’ll say something which is terribly unpopular, but which I’ve been saying for 10 years: We are not paying the true cost of food. It’s not true.
Is that something you feel should be included when we shop at the supermarket?
Yes. It should be more costly. Because it’s not sustainable in terms of farmer income, in terms of animal welfare, in terms of your health sometimes.
When we walk into a supermarket in 10 years’ time, is it going to look different? Are there different products? Are you a fan of the new products?
It will be different, I believe. It is one thing that I believe in: Food system will relocalize. To ensure sufficient food is the second most important topic facing governments during this pandemic. These bottlenecks were evident due to the complex food system. Reduced carbon emissions in the food industry will also be due to the decreased travel time of ingredients.
It will take 20 years to have more authentic local foods. It would be great to have more local foods, as well as more affordable than what you currently offer. To ensure that people who cannot pay for the food are able to afford it, some subsidies need to be diverted.
We know the consequences of our food system. There are approximately two billion overweight people in the world and 700 million with diabetes. Instead of dealing with these obesity and diabetes issues, by providing better food aid and supporting people that need to be supported, you’d actually save money for the future.
This is how I see the future. Climate change is going to force us there.
I want to get back to the original thing we were talking about: What we call “conscious capitalism.” You sound almost kind of optimistic, that there are really big changes to come out of this pandemic. But inequality continues to grow and profits motivation is as strong today as it ever was. Why is it so encouraging to see people acting in the greater good of society and not in one’s own interests?
I’m not sure they will. I’ve seen the worst and the best in this pandemic. Democracies are at risk from growing inequalities, as we can see everywhere. So I’m not optimistic. But we’ve seen solidarity, social bonding, people changing their behaviors in many ways, again for the worse and for the best.
I see climate change as such a huge frontier for us as a species, that I’m sure it will bring the worst. There are signs it could also be the best. It is absurd to attribute capitalism and global financial markets to the loss of resilience in our species.
I’ve defined myself as a business activist. I’m an activist of business being part of The solution, being the fundamental solution, the solution.
You said it when you were 33 that you considered leaving the business. It is what you believe it to be. TheIt’s the place to be.
You think that next-generation CEOs are going to look very different.
The next, I don’t know. The next? But I’m positive. They might not want to join these companies. That’s the point. This is why leaders pay a lot more attention to the collectives of people who have come together from all over the globe. These are talented, highly-educated managers. They will also be potential CEO candidates.
These people are part of an already-born generation with such questions. So it’s not a cultural shift [for them]. Talking about climate skilling, and upskilling. What can you do to get people more aware? [climate change]. It isn’t a problem. They’re entirely into it already, sometimes too much, with climate anxiety and everything.
These employees will eventually leave the large businesses, and in that case, I don’t think they can survive because they lack the necessary skills.
Put it this way, if you’re not able to lead climate strategy 10 years from now, you should not be a CEO. It’s as simple as that. Capital will not be found for your company. I’m pretty clear on that.