Danone announces a €2 billion climate acceleration plan

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Danone

Danone announced a €2 billion climate acceleration plan. The accelerated investment will support new bold commitments to advance some of the Company’s Goals for 2030.

Danone’s CEO Emmanuel Faber says: “2019 has been a year of strong progress for Danone both in terms of the delivery and the transformation of our company. The sequential acceleration of our business quarter after quarter is evidence that we are in the right direction on sustainable profitable growth, while navigating multiple headwinds. Yet we read the last 12 months as a shifting point in civil society, consumer, government, financial institutions attitudes and expectations towards the daunting climate and nature issues we are collectively facing. For Danone, as a company that has adopted One Planet. One Health. as a vision and as a business model, this is a strategic topic. On that front, we are proud that we were able to reach the peak of our full scope carbon emissions last year, literally five years ahead of our 2015 plan, and that our efforts on regenerative agriculture have already resulted in a 9% carbon productivity in our farmers’ fields over the last 2 years. This is critical to ensure the resilience of farms, sinking carbon in the soil, therefore reintroducing organic matter and fertility, and saving costs, pesticides, chemical intrants, and water at a critical climate juncture for agriculture. Yet, we are convinced that there is an urgent and significant opportunity to put climate actions even more at the core of our business model, truly joining people’s fight for climate and nature with the power of our brands.

To this effect, we announce a €2 billion climate acceleration plan today, which in the next three years will further transform our agriculture, energy and operations, packaging, and digital capabilities so that we will leverage fully our climate action to generate resilient growth models for our brands. This is backing my confidence in the relevance of our investment plan in the next three years and in both our short term guidance and mid term objectives as we are setting the company on a unique path of deep alignment between its vision and execution.”

€2 billion climate acceleration plan

In a context of shifting point in attitudes and expectations towards climate and nature issues and growing industry disruption, Danone is stepping up the speed and increase the depth of its transformation actions to put climate further at the core of its growth model, building truly recognized activist brands, moving from purpose to bold actions.

This will translate into an accelerated investment plan of around €2bn cumulative over the 2020-2022 period on brands, climate and agriculture, packaging and digitalization with the objective to build the most attractive business platform in the food industry, with greater recognition from consumers for climate-proofing actions, and create a virtuous cycle that fuels a superior growth model and unlocks value further and faster.

The accelerated investment will support new bold commitments to advance some of the Company’s Goals for 2030, including:

  • Sustaining current high level of innovation, with increased resources to enable more powerful activations and scaled distribution, building on the portfolio progress made to date;
  • Accelerating B CorpTM journey with Waters business expected to be certified as a B CorpTM by 2022. In today’s world where big companies and their brands are fundamentally challenged as to whose interests they really serve, B CorpTM certification is a mark of trust for companies demonstrating highest standards of social and environmental performance;
  • Building truly recognized activist brands, moving from purpose to bold actions towards responsible packaging, carbon neutrality and climate-efficient sourcing

Circular packaging: For Waters, in addition to the existing objective to reach 50% rPET worldwide by 2025, Danone is now committed to reaching 100% rPET in Europe from 2025. To serve this ambition, evian and Volvic brands will act to offer, starting from April 2020, 100% rPET bottles: Volvic full range in Germany, all evian and Volvic small and XXL formats in France, and all evian on the go formats in the UK. In order to accelerate the elimination of single-use plastics, Danone will pursue its investments to innovate other packaging alternative to plastics (such as glass, cans, and paper) and rethink business models for hydration. Danone will also act to enhance the recyclability of Essential Dairy and Plant-Based cups, targeting zero polystyrene worldwide by 2025, and zero polystyrene in Europe by 2024, starting with Alpro brand by 2021. Those initiatives will be supported by the launch a dedicated fund to explore next generations of packaging materials and models.

Climate, diets and agriculture: Danone will accelerate the carbon neutrality trajectory of its flagship Waters brands in Europe evian and Volvic to become fully carbon neutral in 2020 on all their ranges (full scope), by cutting emissions throughout the product life cycle as well as protecting, restoring and funding projects to sequester carbon in natural ecosystems. The company will also further invest to support regenerative agriculture and pivot large brands for preferred and climate-efficient sourcing.

Digital, end-to-end connected value chain: Danone will also invest in a ‘data, tech and agile’ enabled transformation, leveraging data and technology to strengthen execution, better serve people needs in a cost and climate-efficient way, to ultimately seize growth and efficiency opportunities.

This accelerated investment plan for 2020-2022 will include around €600 million of accelerated recurring costs behind brands, technology and capabilities (c. €200 million in 2020) as well as an accelerated capital expenditure plan of around €1bn. It will include on top material ‘other income and expenses’ dedicated to the transformation of our operations, notably in EDP. These ‘other operating income and expenses’ will, as usual, be determined and communicated in the course of the investment plan. We consider today they could amount to around €500 million costs in 2020.

Photo: the new production facility of Danone-Nutricia in Haps, The Netherlands

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