The Danone way

France is not usually known for its environmental record. In fact, activists often consider the country an 'environmental villain'. But if companies such as Danone are any indication, things may be about to change. John Elkington and Jodie Thorpe report.

In recent months, American companies have been grabbing the headlines with their announcements of major new environmental initiatives. Bank of America announced that it would invest $20 billion in environmental projects over the next decade, for example, then Citigroup said it would invest $50 billion. General Electric says revenues from its ‘ecomagination’ initiative have doubled to $12 billion in just two years, with an amazing $50 billion of orders in the pipeline. And Wal-Mart, after years of facing increasingly damaging attacks from activists and the media, has launched programs in areas as diverse as renewable energy and sustainable fish. All welcome developments, true, particularly when the Bush administration seems committed to stalling progress on critical issues like climate change, but there is a risk that this increasingly competitive green-flag-waving in the United States will divert attention from equally interesting changes taking place elsewhere.

Take France. The country, which has just elected a new President, Nicolas Sarkozy, is not known for its environmentalism. One of the most striking examples of the French way was the sinking by the French secret service of the Greenpeace ship Rainbow Warrior in Auckland harbour in 1985, resulting in the death of a Greenpeace photographer. It also invested heavily in nuclear power at a time when much of the rest of Europe was turning its back on this energy source, though as climate change grows in perceived importance this may prove to have been a particularly strategic move. In summary, however, even though they may be famous for the quality of their food and wine, the French have not been noted for their appetite for sustainable development.  

But things may be changing, with companies like Danone, Lafarge and Suez moving strongly into this space. Suez has publicly embraced sustainability in its pursuit of market opportunities related to energy, water and other infrastructure projects around the world, while Lafarge led the cement manufacturing sector in reporting its greenhouse gas emissions. But more interesting still is Groupe Danone, known for its Evian brand bottled water and Danone yogurt. Not only has Danone bought a leading US organic food company, Stonyfield Farm, but it has also now formed an innovative social partnership with the Grameen Group in Bangladesh—and is talking about launching a very unusual fund to support microfinance around the world.  

Danone Chairman and CEO Franck Riboud explains that these initiatives are all part of his company’s efforts to spur “positive globalization.” This approach sets Riboud apart from many of his countrymen, who tend to be deeply uncomfortable with the way in which globalization is developing. He believes that new business models can both help multinational companies to adapt to the new market pressures globalization brings, and begin to meet the needs of those who are so far largely outside the market system. Like US-based professors C.K. Prahalad and Stuart Hart, both of whom have spotlighted the money to be made in ‘base-of-the-pyramid’ markets, Riboud believes that companies like Danone can rise to the challenge. "There are 3 billion people living on €2 a day,” he has noted. “So why not create a business model that can work with this very low but huge income group? Not for charity but with the idea of profit sharing." 

In 2006, Riboud formed a joint venture in Bangladesh with the Grameen Group, founded and led by Muhammad Yunus, who won the Nobel Peace Prize the same year. Yunus is famous for his efforts in the field of microfinance, involving lending to the very poor. The new joint venture with Grameen has completed the first of 50 planned yoghurt factories in Bangladesh. The first plant cost €700,000, but the expectation is that the second factory will cost 30 per cent less, allowing local villagers to become shareholders in the project. The products are designed to help malnourished children return to health. 

Such initiatives have deep roots at Danone. The business was founded in 1966, initially as a packaging company but later morphing into the leading food group in France. When Franck Riboud took over from his father Antoine ten years ago, he decided to expand Danone internationally—based on a strategy of "affordability," which has involved developing and offering new ranges of products that poorer consumers could afford.   The venture will not be profitable, by design, but Frack Riboud argues that the joint venture with Grameen is providing a laboratory for Danone that in turn could help the company develop innovative products for rich-world markets.

Even more ambitious is Danone’s plan to launch a new fund, ‘danone.communities,’ which will aim for the maximization of social objectives, not of profit. Danone hopes to raise an initial $135 million, promising it will return a guaranteed rate comparable to a money-market account—about 3 percent to 4 percent annually. The fund is to be managed by bankers Crédit Agricole, and will be open to the French public as well as institutional investors. The social impact of projects on local communities will be assessed on the basis of indicators that include their contributions to public health, the reduction of malnutrition, and the alleviation of poverty, with an eye to any environmental and social impacts. Interested Danone shareholders will be able to reinvest all or part of their dividends in the fund in the form of “social dividends.” For Danone, the returns come in the form of the company’s reputation, its license to operate and its ability to attract and retain talent. 

We knew shareholders were meant to vote on the proposed fund recently and were surprised not to read the result in the week after the vote was due to have taken place. Indeed, we began to worry that the vote had gone the wrong way. But when we contacted Danone we found that the vote had gone the Danone Way, with an extraordinary 99.8 percent of shareholders voting in favour. In a different world, that would have been a big news story.

John Elkington is Founder & Chief Entrepreneur at SustainAbility and blogs at Jodie Thorpe is the Manager of SustainAbility’s Emerging Economies Program (

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