Sustainable Innovation

Danones dual focus on business success and social progress

Danone is a world leading company in fresh dairy products, bottled waters, baby and medical nutrition. Myriam Cohen-Welgryn is Danones General Manager VP Environment. She explains how Danone has implemented its dual commitment to business success and social progress, illustrated with examples such as the ambitious carbon emission reduction target, KPI’s, a Green Bonus for managers, the Ecosystem Fund and the Fund for Nature.

   

Myriam Cohen-Welgryn, VP Nature Danone

Read more about Danone, its Sustainability objectives, its eco-system, innovation with partners and outlooks in this article.

1. The Danone Group

The Danone Group, headquartered in Paris, is specialised in “bringing health through food to as many people as possible”: Fresh dairy products, bottled waters, baby and medical nutrition. The company is a global player, it employs currently 81.000 people and generates an annual turnover of 15 billion EURO [1] 

Some of Danones world famous brands are Evian and Volvic (bottled waters), Bledina (baby food), Nutricia (medical nutricion) as well as Taillefine and Activia (dairy products).

Evian, Bledina, Taillefine : examples of famous Danone brands

Danones dual commitment to social progress and business success dates back to 1972. CEO Antoine Riboud declared at a meeting of the French employers Association (then CNPF, now MEDEF)

A company’s responsibility ‘does not end at the factory gate or the office door […]. The jobs they offer play a crucial role in shaping people’s lives […]. And through their use of natural resources and their direct environmental impact, businesses gradually change the planet we live on […]. But public opinion is there to keep us aware of our responsibilities in these areas […].’

2. Sustainability at Danone

Bringing health through food has been defined as a key mission for long. The company has extended this mission in 2006 to ‘Bringing health through food to as many people as possible’ [2], aiming to bring solutions to poverty and malnutrition on a world wide scale.

In 2008 Danone’s Executive Committee decided to set up a new Nature General Manager function for which Danone senior business managers were acquired, to bring in their business sense, communication skills and internal Danone network and set up a change plan.   

Mrs Cohen-Welgryn was appointed as Vice President Nature. Mrs Cohen was already known within Danone as a seasoned marketing and general manager. As of 2009, Mrs Cohen is now responsible for all environmental policies and projects within Danone. For instance, she has set up the extensive calculation projects for green house gas emissions, water and energy consumption with a customized tool (‘Danprint’). She is also involved in the Danone Fund for Nature that invests in carbon capture projects. As well, she is responsible for the internal awareness and communication campaigns to inform and mobilise Danone employees. Mrs Cohen heads a small team of specialists, and works in cooperation with people throughout the business units, of which 110 Carbon Champions (‘Armee Carbon Plan’), sponsors for the carbon footprint calculations.

Rational and emotional arguments are at stake when selling an idea or a product. As a marketing manager, Mrs Cohen-Welgryn is aware of this more than anyone else. Mrs Cohen-Welgryn and her team use all kinds of media, including newsletters and video messages to create awareness within the company on its sustainability goals and progress. Mrs Cohen-Welgryn believes that ‘you should treat this information just like the company’s financial objectives and performance : communicate on a regular basis, fact based. Hereby it is important to use rational arguments and numbers, but emotions count even so. In a recent internal video, children of the Danone Executive Committee Members were asking their parents and their colleagues to make sure that Danone takes responsibility and contributes to keep the planet a safe and healthy place. This video has made a great impact, says Mrs Cohen-Welgryn, because it was all about emotions and not just numbers.

3. Danones Sustainability Objectives

In 2008, the Danone Executive Committee has set the objectives ‘Health, For all, Nature and People’ as its priorities to transform and reinvent Danone within a perspective of sustainable growth :

3.1 Health  

Danone wants to strengthen its ability to bring health through food. The Danone Health Institute, as of 1991, is present in 19 countries. It is a not for profit organisation that aims to bring relevant scientific knowledge about diet to the attention of the general publicy linking scientists with business people.

3.2 For all

Danone wants to provide new business and economic models for quality nutritional solutions to people with low purchasing power in developing countries.

One of the vehicles to provide quality nutritional solutions is the Danone Communities Fund. The Danone Communities Fund was founded in 2007, after a meeting of Franck Riboud, the CEO of Danone, and Muhummed Yunus the inventor of the micro-credit. As a result, the first ‘Grameen’ factory has been set up in Bangladesh that produces affordable yogurts with added micronutrients (iodine, zinc, iron and vitamin A) and provides a basic living for small farmers.

In 2007, the Danone Communities Fund has become a so called ‘SICAV’, a managed fund by the French cooperative bank ‘Credit Agricole’. Shareholders and employees of Danone can participate in this fund, also called‘dividend social’. Already 2000 Danone employees do so. The Fund aims to raise the number of sponsored projects from 3 to 15 by 2012. It has a mandate to expand the Graheem diary plants in Bangladesh, as well as further develop other social projects like the ‘Laiterie du Berger’ in Senegal and the ‘1001 Fontaines project’ in Cambodia, in cooperation with local NGOs [3]

Milk collection in Dhaka of the Grameen Danone Foods, that produces 23000 yoghurts per year [4] for an affordable price, enriched with micronutrients, providing small milk producers a basic salary

A separate cross-functional structure ‘Base of the Pyramid’ has been set up as well. Inspired by the Indian born professor Pralahad, who presented is his ideas in his book : ‘Fortune at the bottom of the pyramid’[5], Danone has decided to play a role in the development of products that meet the needs of the 1.4 billion people that live around the blog below the poverty line of US 1,25 dollar per day. In line with its core business, Danone starts to develop nutrition solutions in India and Africa.

3.3. Nature  

Mrs Cohen-Welgryn explains that in order to provide health through food, Danone has only one choice but to protect the health of our natural environments in order to keep a sustainable business. Our natural environments are the source of our food. This logic thinking proves that, again, Danone activities are not ‘just charity’ or ‘doing good’, it has everything to do with risk management as well as maintaining and growing its business.

First of all, says Mrs Cohen-Welgryn : In order to reduce, measuring is key. Danone customized ‘Danprint tool’ helps to identify and track the progress in two key areas for Danone : C02 and Water

Secondly, one simple and easy to communicate objective had to be found. Carbon emission reduction was chosen. as a key ‘synthetic indicator’ that sums up most of the other environmental indicators : the ‘carbon intensity footprint’. The Board committed to a 30% decrease of the companies carbon footprint between 2008 and 2012 : a rather ambitious, even considered unrealistic target. Probably thanks to the ambitious target, simple changes were not sufficient and Danone business units were forced to reinvent their business processes. As a result emissions have dropped significantly and early 2011 Danone is right on track of its carbon emission target.

Thirdly, Danone is developing innovative ways of carbon capture to compensate carbon emissions. The Danone Fund for Nature was founded in 2008 to capitalize on the role of wetlands in carbon capture. One of the pilots is a pilot with replanting mangrove trees in Senegal, see picture. The trees provide an important natural source for the local community and a means to capture carbon. In 2010, 60 million trees have been replanted, capturing 300 000 tonnes of CO2 over the next 10 years. It will help Evian to achieve its goal of becoming carbon-neutral by 2011

The Danone Fund for Nature is a cooperation between Danone, the RAMSAR Convention and the International Union for the Conservation of Nature) (IUCN), supporting the Mangrove Forest Replantation in Senegal, an important means for carbon capture.

3.4. People

Within its ‘People’ strategy, Danone has created the ‘Ecosystem Fund’.

The Danone Ecosystem Fund is designed to support, strengthen and develop the activity of  all stakeholders whose activities are impacted by Danone and who act closely with its local subsidiaries on economic, social and territorial matters, its ‘Eco-system’. The creation of the Fund was approved in April 2009 and financed by an initial donation of €100 million. As of 2010 onwards, up to 1% of Danone’s annual net profit will be contributed to the Fund for a period of 5 years[6]. Projects should meet the following criteria : initiated by a Danone subsidiary, creating economic and social value inside the Danones ecosystem, replicable and/or scalable, and created with a not for profit organisation.

An example is the Ukraine project: Danone Ukraine, Ukraine NGO Heifer and Danone Eco System Fund support small diary producers in the Ukraine to set up 20 cooperatives each with 60 to 80 smallholders, to develop their agricultural production. In the first phase it is expected that about 1000 farmers and families will see an improvement in quality of life and income (in this area about the lowest in the country, 80 Euros/month/person) [7]. .  

In Ukraine, Danone Ukraine, Local NGO Hiefer with Danone Ecosystem Fund help Ukraine milk farmers to set up and maintain their diary business with high quality products and financial stable income, that  increase their quality of live and reassures fresh diary supply to Danone, see video

4. Does sustainability drive innovation at Danone?  

As we have seen in the previous chapter, Danones philosophy drives innovation in all its varieties: In this chapter we give some more examples of specific product and business innovations initiated by Danone rooted in the companies Sustainability Mission.

Highly ambitious Carbon emission target: a necessary boost for business restructuring. Looking back, the simple but highly ambitious target of 30% carbon emission reduction that was set in 2008 has proven to be very constructive, says Mrs Cohen. No one could ‘just adapt a little bit here and there’, everybody needed to review and adapt its supply chain and production methods. The target has considerably boosted the companies change processes. Crucial to this change have proven to be the customized analysing tool (Danprint), Mrs Cohen is supporting 110 Carbon Soldiers’ in business units, so that everybody became aware of energy consumption and how to reduce it.  

Product packaging. Small quantity yogurts are used to be sold in small plastic cups with a cardboard around. Marketing and R&D managers of Danone’s Dairy division decided to change the packaging of some of the yoghurts and abandon, as a first step, the paper wrap. It did not serve a specific technical or hygienical purpose and the product information could also be printed on the cups. Despite the fact that retailers were sceptical (they believed that the general public wants its yoghurts in the old fashion packaging), Danone introduced its new Taillefine and Activia packaging without paper wraps. The new packaging has been very well accepted by the general audience and copied now by competitors. Mrs Cohen strongly believes that if producers offer product alternatives that are obviously better for the environment (for instance : less packaging), with an equal price, customers will choose the sustainable alternative.

 

New and former packaging of Danone Activia yoghurts.

Green Capex. To help unlock mental barriers and trigger innovations, Danone has initiated “green capex”, ie capital expenditure with longer payback leadtimes (5 years instead of 3 years) for projects with strong green benefits. This has generated a whole pipeline of innovations among which several green energy projects.

PET bottle recycling. In the footsteps of Mr Braungart who invented the ‘Cradle2cradle’ concept [8], Danone studies how to re-use products that are ‘end of life’, such as used PET bottles. A new opportunity is the re-use of PET bottles creating ‘rPET’ plastic bottles of washed and crushed PET bottles. At date, many ‘waste pickers’ in developing countries make a small basic living of picking up PET bottles and bringing it to recycling centres. Danone has started now PET recycling projects in Indonesia, Mexico and Argentina in close cooperation with the social entrepreneur NGO Ashoka and local partners. First of all, the picking and distribution process has been optimised. Secondly, Danone invests in the development of rPET bottles : The Danones Water Division has set its ambition of 35% of its production of water bottles based on rPET by 2011. The Mexican water brand of Danone called Bonafont has made a good start with a 100% rPET bottle in 2009, saving 20k tonnes of CO2/year. The Water Division moved from 4% in 2008 to 8% in 2009 and expects to reach 15% in 2010.

Recycling projects for PET bottles by Danone, Ashoka en local partners in Indonesia, Mexico and Argentina.

Carbon Emission Key Performance Indicators on carbon emissions are embedded in the company’s product development processes in the usual milestone checks (financial, commercial). In fact, these checks look similar to the checks and tollgates applied at Philips and AkzoNobel.

Bonus for the top 1400 executives of Danone. As of 2008, one third of the variable part of the salary of Danones Top 1400 is directly related to social and environmental objectives, one third the company’s financial objectives and one third individual performance goals. Mrs Cohen-Welgryn believes the introduction of the Bonus has been an essential step to make ‘dual focus’ top priority and ‘top of mind’.

5. Impact of the economic crises

How does the economic crisis influence the sustainability projects within Danone? Mrs Cohen-Welgryn says the sustainability projects remain key to Danone as they were. Danones CEO Franck Riboud says: The current crises is a triple crisis [9] : a social, environmental and financial crises. In order to cross this period, has decided to continue its focus on business and social objectives.

Danone stands firm to support the causes for people and planet, by continuing its programs and setting up new vehicles such as the Danone Ecosystem Fund and the Danone Nature Fund,

6. Trends and outlooks

Danone has shown a huge business transformation in the last few years, embedding new internal governance models, sustainability KPI’s, a green business and new business projects with the usually required return of investments (ROI) of less than 3 years, emphasizes Mrs Cohen.

How will the role of VP Nature, or more general ‘Sustainability Manager’, develop? Mrs Cohen-Welgryn believes that at date it is important that Sustainable Development is embedded at the heart of the company’s Business and delt with by managers with business background. 

Danone wants to continue its front leading role in sustainability.

 

I would like to thank Myriam Cohen-Welgryn for her cooperation.

More information on Danone and its dual project philosophy can be found on: www.danone.com and on the blog www.lespiedssurterre.danone.com

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