• Nuno Moreira da Cruz

The replacement of Danone’s Group CEO: Is it about Purpose vs Profit? Or Purpose AND Profit?


March 21st 2021

This week we have been surprised with the announcement that Danone’s board of directors has decided to replace Emmanuel Faber as CEO and chairman. This is said to be due to pressure from activist investors who criticized the company for its chronic underperformance compared with larger rival Nestlé or Unilever. Faber, since his appointment as CEO in 2014, has positioned himself as an advocate of Responsible Business, ie companies that do not only serve shareholders but also protect the environment, their employees, and suppliers. When Danone shareholders approved a change in the company’s legal status last year to reinforce its social mission, Faber declared they had “toppled the statue of Milton Friedman”. Danone became the first big listed French company to become a so-called “enterprise à mission”, or purpose-driven company. Faber also championed the growing environmental, social, and governance movement among investors in other ways, such as when the group began reporting “climate adjusted” earnings per share last year and invested heavily in reducing plastic use. After all, for many, this was just Faber continuing Danone’s tradition of a more human, “multi-stakeholder” model of business going back to the 1960s under the leadership of Antoine Riboud. During the week we have seen numerous articles falling into the temptation to think that this has to do with the conflict of profit vs purpose. In other words, it was written that these shareholders have lost patience with a CEO who made such a bet in Sustainability. I personally believe that cannot be further than the truth. Rather, on the contrary, this only confirms what all business leaders should have clear by now: "if it is true that without economic sustainability there are hardly environmental and social concerns, what is increasingly true is that without environmental and social concerns there will hardly be economic sustainability." In my view, what these shareholders are simply saying to Faber (leaving aside other possible reasons that have nothing to do with financial performance) is simply "you're not getting that balance!". Full stop. Going further and say that, when “the tough gets tougher” the good old shareholder capitalism and Milton Friedman are back, seems to me to be missing the point. Let us remind that it was those same shareholders who unanimously approved the status of "enterprise à mission" less than a year ago, and it is also those same shareholders who clearly stated, "look at Unilever and Nestle, if they can get that balance – purpose, AND profit - you should get it too". The sole pursuit of profit for its own sake has its limits and they have been overtaken. Businesses that combine profit with a wider purpose will benefit from the reinforced commitment of employees and customers. Those that fail to do so will not survive to become the companies of the future. Yet again, the only challenge ahead is how to strike the balance between economic sustainability and environmental and social sustainability. Have a great and impactful week! Nuno Moreira da Cruz Executive Director Center for Responsible Busines & Leadership