Danone's Recipe for Sustainable Innovation

Despite economic turbulence, political abdication and consumer apathy, the corporate sustainable agenda is still alive & kicking.

According to a recent McKinsey survey on "The Business of Sustainability":

"More companies are managing sustainability to improve processes, pursue growth, and add value to their companies rather than focusing on reputation alone."

Clearly, some companies are doing a better job than others. Near the top of my list is Danone -- a publicly traded company that, in my opinion, is a model for best practice in sustainable innovation.

As with many successful sustainable companies, the vision within Danone comes from the top. It started with the founder Antoine Riboud who declared back in 1972:

"A company's responsibility does not end at the door to the factory or the office. The jobs it provides shape whole lives. It consumes energy and raw materials, and in so doing, it alters the face of our planet. The public will remind us of our responsibilities in this industrial society."

Franck Riboud, Antoine's son and Danone's current CEO, has remained true to -- and expanded -- this vision. He has understood, in a way so many business leaders do not, the interconnectedness between his consumers, his suppliers, his employees and his investors across the world. Danone's visionary approach to business combines a sincere social ethic with recognition of several fundamental truths:

1. Billions of people globally are malnourished or suffer from lack of clean drinking water.
2. Environmental impacts and consumer preferences are making local options more attractive.
3. Local suppliers often do not have the funds or the expertise needed to realize their potential.

Danone believes that these truths represent both a responsibility and a business opportunity. They have put in place several strategic programs to respond to these challenges:

Danone Communities

This social business incubator's mission is to fund and develop local business while reducing poverty and malnutrition. Danone acts as an active partner, providing funding and technical support to social entrepreneurs.

The founding project, Danone's Grameen Factory, is a joint-enterprise with Mohamed Yunus, Nobel Peace prize winner. The factory produces 23,000 fortified yogurts a day that are sold for 10 cents each in Bogra Bangladesh. Enriched with micronutrients, Shokti yogurts provide 30 percent of a child's daily nutritional requirements. The milk used to create the yogurt is produced on small farms and the products are distributed by members of the Grameen Bank collective.

While Danone is yet to make a profit on this project, they have confidently launched 4 other social business ventures and expect to have another 5 up and running over the next 2 years. It is no coincidence that these ventures focus on Danone corporate competencies in water purification (Evian and Volvic are also Danone brands) and dairy farming. By helping locals to purify water, or collect and process milk, Danone is not only delivering on their social responsibility, they are investing in future businesses with immense potential.

The Danone Ecosystem Fund

Launched in 2009 with a 100M€ endowment voted by 98 percent of investors, the fund's goal is to strengthen and develop the activities of the partners who make up what Danone calls their ecosystem. This includes farmers, suppliers, subcontractors, transport and logistics operators, distributors and local community authorities.

The Ecosystem Fund's three areas of focus are employment, competency building and micro-entrepreneurship. Projects are identified by local market subsidiaries to ensure that the chosen activities are in line with Danone's businesses.

Though no project can be called "typical," the Turkish "milk parlor" project is representative. Eighty-five percent of milk in Turkey is produced by small farmers and is relatively poor in quality. Since 2008, Danone has invested in 18 central milk parlors (CMP's) which serve just under 1,000 farmers.

The cows at these parlors are milked in a centralized hygienic unit and their owners benefit from competency training and guaranteed purchase of their milk. In return, Danone gets traceable, higher quality milk. Plans are in place to double the size of the project over the next five years. The fund will receive further annual contributions of up to 1 percent of net profits over the next five years for new projects.