Emmanuel Faber at the Planet Workshops: co-construction is a win-win arrangement

Summary

During the Planet Workshops that were held in Évian this week, Emmanuel Faber, co-Chief Executive Officer of Danone, answered questions from two challengers on the Ecosystem Fund and the role of sustainability within the company.

28Sept.
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The 7th edition of the Planet Workshops, held recently in Évian, which gathered together sustainable development players from all over the world, had its share of keynotes speeches, panel interviews and workshops. But it was also an opportunity for in-depth conversations called “Challenge sessions”. A “Challenge session” brings together a top manager from a multinational company which is taking action in the field of sustainability, and one or two challengers whose role is to question the company’s and the manager’s own commitment to the issue. Emmanuel Faber, co-CEO of Danone, was thus interviewed by Solitaire Townsend, co-founder of Futerra, and Antoine Spire, journalist. The conversation was thorough and fruitful, and here are the main elements we wish to highlight from it.

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The story behind Ecosystem

Emmanuel Faber started off by giving a short speech on the work that Danone has been leading for the past four years around the notion of “ecosystem”. He explained that in 2008, when the first downturn struck, governments made many large companies inject money into their suppliers’ businesses, because “the larger these companies got, the more they stifled them.” At that point,Danone decided to lead a study on its “job footprint”, in order to count exactly how many jobs, direct or indirect, depended on its business. They discovered that for each Danone employee, there were 5 to 7 jobs outside of the company which depended on it at some level. “Then we put this into in perspective with the double project, economic and social, that Antoine Riboud set for Danone 40 years ago: should this project only apply to our employees?” The answer was no, as history shows. Danone decided to create an endowment fund to support the capacity of small players linked with the company to develop in a perennial way.

If we do nothing and the downturn strikes again, we run the risk of being confronted with suppliers that are completely strangled, financially,

insists Emmanuel Faber. The goal was also to build, in time, a very malleable ecosystem, that can grow bigger if needed, absorb the shocks too, and of course survive without Danone should the company have to end the relationship. Three and a half years after the creation of the Ecosystem Fund, which was provided with 100 million euros, more than 40 projects are now active, and around 40,000 jobs outside of Danone have been consolidated thanks to this investment. “Nothing we did was genius. But if we had asked ourselves, at the time, if it was possible, we probably would not have done it. In that context, it was a rather wild idea, but we felt like doing it and it worked. Sometimes, when you feel like it, it just works.”

 

Antoine Spire: Did you create the opportunity for the people you have helped to express themselves, give their feedback and maybe control the conditions under which the money is distributed?

 

The endowment fund is run by an advisory board composed of personalities independent from Danone, which makes the strategic and investment decisions. As for assessing our impact on the people concerned by the fund, we have developed measuring tools and methodologies to evaluate it on a social, cultural and anthropological level. We pay a lot of attention to the question of impact, and to measuring it in non-conventional ways. These studies are, of course, carried out partly thanks to the testimonies of the beneficiaries. Evaluation by the parties involved is an on-going question: co-construction means that the verdict is constant. If it does not work out for someone, the sanction is immediate: they leave.

There is also a different experience of time when you build with smaller communities, everything is slower than we are used to. We have planted seeds, they are growing now, but the true achievements will come a few years on. Co-construction requires patience.

 

Solitaire Townsend: You talked about your job footprint, but you also have another one, which is your brain print. You are an influential brand. What role can Danone play in affecting the attitude of its consumers, its shareholders and the authorities? How can your brain print be more sustainable?

 

There is no doubt that as far as social and working conditions are concerned, when we do a lot of business in a country, our influence tends to lead to an increase in the average wage, improvements in social security, etc. That is a direct impact. We work a lot on the level of decision-makers and politicians. But I do have my doubts about that; I have a doubt as to whether we should do it or not. Food is a local, cultural reality, even above being a biological and physiological reality. I personally do not think that the future of our planet, i.e. having 9 billion people able to feed themselves, will happen through multinational companies. The world should not be shared by a handful of them. But it is true that we do have the power of mitigation, and we must learn how to use it in the best way.

 

Antoine Spire: Co-construction makes you invest a lot of money in added value. Is this model perennial and renewable? If not, don’t you dread that it will all have been for nothing, once you stop helping these people or the downturn prevents you from doing so? And I also want to come back to my first question on the means that they have to control the distribution of funds.

 

To answer that last question, no, the beneficiaries do not take part in fund distribution decisions. It is the advisory board that decides, and we have ensured that it is composed of personalities who can provide an international and wide-ranging view on these questions.

To your other question, I will answer that, had we started the fund 10 years ago, the situation would be completely different. We created Ecosystem precisely to face the downturn. Today, in some countries in the South, parts of our business are experiencing a fall in demand, and in the traditional circuit some suppliers are bankrupt because 80% of their activity depends on Danone. If we had gone to them with an alternative scheme for their businesses, to diversify their client base maybe, they might not be where they are today. With the beneficiaries, and with our shareholders, we have a win-win type of arrangement. Like when we wanted to start the fund; our shareholders were worried about whether we could afford it, and if we would take the money from dividends. So we worked out something and decided to levy from profits. I have no guarantee on the durability of that balance, but I do know that there are things we can do.

 

Solitaire Townsend: I am very surprised by what you said about multinationals. Is that the sort of thing only a CEO can say? At this conference, we spend plenty of time talking about bottom-up, but I am wondering if it is also necessary to have a CEO who is convinced by sustainable solutions in order to move forward.

 

I deeply believe that change will happen when people accept not to change the world, but to change themselves. Normally, you become a CEO after so many years and layers of doing the same thing in the same company and with the same processes that you do not doubt the model you are in. I see a lot of business leaders who are convinced that there are no limits to what they do and how they do it, as long as they create economic value. But each time people are prepared to take a step back and think in a different way, change occurs. People might say:

It is easy for you to go out and say these sorts of things, you have the freedom to do it.

But in a company, everybody has constraints, including the CEO.

Change is also happening with the new generation, because they question the way we do things. One of the roles of the leaders and managers is therefore to open the mental barriers, to allow doubt and questioning to come into the picture. Then we will see initiatives blossom, and these are the signs of what the future could hold.

 

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Questions from the floor

 

You talked about the spirit of the Ecosystem Fund, but I would like to hear some statistics. How many illegal sellers on the streets were able to set up their own store and secure their goods for the consumer? What added value did you create for the South?

 

Like I said,

the endowment fund has reinforced around 40,000 jobs, and there are 20,000 more in the on-going projects.

To give you more precise examples, in Mexico City we helped 3,000 sellers on the streets, 150 to 200 people benefited from the construction of a sorting workshop in the landfill, etc. But we are only at the beginning. You cannot work within a co-construction context and imagine that you are going to resolve problems in just a year. We work on a 5 to 10 year timescale. And to us, knowing why we failed is as important as succeeding. Failure can teach you a lot of things.

 

Antoine Spire: Wouldn’t it be useful for the people who make and distribute Danone products to give their opinions on that evolution? Shouldn’t the company become more democratic?

 

My personal opinion is that multinational companies will have to switch to decision modes that come closer to what we call sociocracy. There is little doubt that the world is going to shatter religiously, politically and socially. And these three dimensions will become predominant. What this means for the future is that having a multinational company operating everywhere with the same processes and with just one decision centre is an illusion. I believe in the re-fragmentation of the economy, in re-localisation. Multinationals will essentially become networks of companies, whose organs will be more flexible and whose governance will be closer to the ground.

 

Multinationals often have a predatory culture. How can they combine that with co-construction and the change that must be accomplished?

 

To me, a company is always contingent, and it cannot be the answer to everything and for all. Temperance is crucial, and even more so as you get bigger. At Danone, I see that many older-generation employees really are actors for change, and I believe that the development of an intergenerational bond is much needed to get us over the hurdle ahead of us.


All multinationals have grown being small companies, and some very small companies are already multinational. It is not black and white. There is absolutely no need to be a multinational to act as a predator. The temptations of monopoly and greed are mainly a question of mindset. The real question is: what is the meaning of my action? It is true that the bigger you are, the more serious the consequences of predatory behaviour get. And the more you lose your sense of reality, too. This is exactly why the question of meaning and the role of the leaders in large companies are of particular importance.

 

What about your personal evolution? How do these changes affect you?

 

One of the chances that I have experienced is that I did not climb all the rungs of the company ladder. I nurtured my sense of freedom. And 15 years ago, I decided that I would spend the rest of my business life reconnecting social and economic issues. When I cannot do that anymore, I will leave.

 

Antoine Spire: How do you pass on the fruit of that personal evolution? How can you be sure that there will be continuity once you are gone?

 

I spend around 80% of the time that I dedicate to sustainability questions on that specific issue: how do we scale up from personal intuition to a corporate process that lies at the core of our activity? We plant seeds with our actions, but like I said, it is constant work-in-progress.

 

Antoine Spire: At the GCM last May, Franck Riboud was telling Muhammad Yunus that he wondered if Danone could ever become a completely social business. Do you see it happening?

 

What Franck Riboud said exactly is that if Danone did its job perfectly, then it would be a social business in its entirety. But then, there is the issue of definition: to Muhammad Yunus, a social business is a company that does not redistribute dividends. And Danone will always have to redistribute them, because we cannot take them away from our shareholders – some of them are “small” shareholders who hold shares through pension funds, for instance. I think that the question for the future really is: how do we redistribute the value that Danone creates through these sustainability processes?