Balancing Profit and Purpose: Danone's Journey from Emmanuel Faber to 2023 Executive Compensation

Dear Readers,

In March 2021, the world witnessed a dramatic leadership shake-up at Danone, one of the largest global food corporations. Emmanuel Faber, the company’s CEO and chairman, was ousted after years of steering Danone toward a sustainability-focused mission. Under Faber's leadership, the company was transformed into an “enterprise à mission,” similar to an American B-Corp, aligning its success with environmental performance through the "One Planet, One Health" strategy. Faber’s bold moves garnered praise from climate activists and environmentalists, but shareholders grew restless as the company’s stock performance lagged behind competitors like Nestlé and Unilever.

Fast forward to 2023, and Danone’s new leadership, under CEO Antoine de Saint-Affrique, continues to navigate the delicate balance between profitability and sustainability, albeit with a different approach. At its February 2023 meeting, Danone’s Board of Directors outlined the company’s compensation strategy for its corporate officers. The details of this compensation package, especially for Saint-Affrique, provide a window into how Danone has evolved since Faber’s departure and highlight the ongoing tensions between delivering financial performance and driving environmental impact.

Emmanuel Faber’s Legacy: Sustainability at the Core

Emmanuel Faber’s ousting in 2021 wasn’t just a typical corporate power struggle; it was emblematic of a larger debate playing out across industries globally. Under Faber, Danone had embraced sustainability with unprecedented fervor. His leadership established metrics like a carbon-adjusted earnings per share are, directly tying the company’s financial success to its environmental footprint. This was revolutionary for a major multinational, but shareholders grew frustrated as pandemic-related disruptions, like a slump in Evian water sales, affected the company’s bottom line.

Despite the criticism, Faber remained committed to the idea that environmental and economic goals were not mutually exclusive. His removal sparked widespread debate over whether corporate leaders could truly integrate climate and social justice into their business models without alienating investors.

Was Faber’s ouster a sign that sustainability-focused CEOs face an impossible trade-off: to please shareholders or to drive climate action?

In response, Faber took solace in the Alps, where he reflected on his journey and soon joined agritech impact fund Astanor Ventures. He remained firm in his belief that sustainability and profitability are becoming inexorably aligned—an idea that is slowly gaining traction but still faces resistance in traditional corporate boardrooms.

2023 Executive Compensation: A Shift in Focus

Antoine de Saint-Affrique’s tenure marks a shift in Danone’s approach, where profitability and sustainability are more evenly balanced—at least in theory. The 2023 executive compensation package underscores this change, offering a blend of traditional financial incentives and ESG (Environmental, Social, and Governance) metrics. However, a closer look at the compensation structure reveals that Danone’s leadership may still be prioritizing short-term financial performance over long-term sustainability goals.

Saint-Affrique’s 2023 compensation package includes a fixed salary of €1.4 million, alongside a variable compensation that could reach up to €2.8 million, depending on the achievement of key performance indicators (KPIs). While this is in line with industry standards, it raises questions about how much weight is placed on sustainability versus financial metrics. Despite Danone’s commitment to sustainability, only 20% of the CEO’s annual variable compensation is tied to social and environmental outcomes, such as reducing greenhouse gas emissions and expanding B-Corp certification.

In comparison, 60% of the variable compensation is linked to traditional economic indicators like sales growth, free cash flow, and return on invested capital (ROIC). This disparity suggests that while Danone is moving in the right direction, financial performance still holds significantly more weight than environmental impact—potentially signaling a shift away from Faber’s deeper commitment to sustainability.

A Tale of Two Philosophies: Financial Growth vs. Sustainability

The contrast between Faber’s ousting and Saint-Affrique’s compensation package paints a picture of the broader challenges faced by corporations today. Faber’s "One Planet, One Health" strategy was radical because it made sustainability a core part of Danone’s mission, but it also placed a tremendous burden on financial performance. By comparison, the 2023 compensation structure under Saint-Affrique reflects a more conservative approach, rewarding financial metrics more heavily, even as the company maintains its focus on sustainability.

This balancing act raises the question: Can Danone, or any global corporation, truly lead the charge on sustainability without making it an equal priority to financial performance? The current compensation scheme suggests that Danone’s leadership believes these goals are still not fully aligned, despite Faber’s conviction that they must be.

Transparency and Accountability: Challenges for Modern Leadership

Another critical issue highlighted by Danone’s 2023 compensation report is transparency. While the company discloses many aspects of its financial and ESG performance metrics, some key managerial criteria remain confidential, in line with French financial market regulations. This lack of transparency could undermine the public’s trust in how executives are rewarded, especially when companies claim to be champions of stakeholder capitalism and environmental responsibility.

Moreover, while the inclusion of ESG metrics is a step forward, the modest weighting of these metrics (20%) could be seen as insufficient given the global urgency of climate action. To truly lead in the era of sustainability, companies like Danone may need to reimagine executive pay structures that place a greater emphasis on long-term environmental and social outcomes, rather than short-term economic gains.

Employee Engagement and Pay Equity: Progress, But Is It Enough?

Danone’s focus on employee engagement and gender pay equity in its compensation report reflects another positive step. Employee engagement scores improved in 2022, and 90% of Danone employees participated in a global survey that showed high levels of sustainable engagement. However, the gender pay gap remains stubbornly persistent, with a 3.2% gap among Executives, Directors, and Managers. While this is better than many global benchmarks, it indicates that more ambitious efforts are needed to close the gap fully.

Conclusion: A Path Forward

The journey from Emmanuel Faber’s radical sustainability-driven leadership to the more measured approach under Antoine de Saint-Affrique reflects the complexities of balancing profit and purpose in the modern corporate landscape. Faber’s ousting revealed the tensions that arise when CEOs prioritize environmental and social goals at the potential expense of short-term shareholder returns. Meanwhile, Danone’s 2023 compensation structure highlights the ongoing struggle to fully integrate sustainability into the heart of corporate governance.

While Danone has made commendable progress, particularly in tying executive pay to social and environmental performance, the weighting of these metrics still suggests that financial performance remains the dominant priority. For Danone to truly lead the charge in stakeholder capitalism, it will need to further align compensation with long-term sustainability goals—placing equal, if not greater, emphasis on the health of the planet as it does on the company’s financial growth.

In a world where climate change, inequality, and social unrest are becoming ever more pressing, the future of business will depend not just on profits but on purpose. The story of Danone—from Emmanuel Faber’s bold vision to the nuanced reality of 2023—serves as a case study in how companies can navigate these challenges, and what it takes to truly balance profit with purpose in a rapidly changing world.

With a commitment to rediscovering better ways to live,

Jogitha