I just demolished the statue of Milton Friedman. CEO Emmanuel Faber told his shareholders a year ago, after they overwhelmingly embraced the new corporate mission of the French food group. In this, sustainability has become one of the most important goals. Last weekend, a year later, economist Friedman was on his feet again. Faber was forced to give up his position as CEO. Two active shareholders from the United Kingdom and the United States were able to convince the board of directors that Danone was underperforming. So Danone has to look for a new CEO, with fewer ideals.
50 years ago, when Faber celebrated his victory last year, Friedman wrote his famous essay “The social responsibility of a business is to increase its profits” in New York times. Profit maximization, and nothing else, should be the goal of the company’s management.
That was, in the social revolution of the time, very provocative. But since the early 1980s, Friedman’s principles have taken hold. That period under US President Reagan, and the 1990s with their unimpeded capitalism, led to a reevaluation of the entrepreneurship and businessman of the 1970s.
Since then, under the influence of the pursuit of sustainability and climate control, corporate social responsibility has returned to the top of many large companies. Not only are there shareholders, but there are also other “stakeholders”, from employees and suppliers to the planet itself.
Thus the coup by the Anglo-Saxon investors in Danone can be interpreted as an anachronism, a back-action in a battle that will soon be lost. It is very easy to think. Since they may be unsympathetic, they also tell an uncomfortable truth. Green policy is often welcomed until the bill is received by those involved.
On the Dutch election campaign it was also heard that not so much citizens, but rather the large business community, must take the bulk of measures to reduce greenhouse gas emissions. This basically puts the bill on the abstract level of the company, not the voter themselves. But the citizen himself is an employee and benefits from the continuity of the business world, which requires a certain level of profit. The citizen is also an investor in this business, through a life insurance company or retirement fund, or through direct investment in stocks.
Sustainable entrepreneurship can be just as profitable as the old alternative, and definitely more profitable in the future. This depends on the company itself, but also the other parties involved. Employees who help smart implement sustainable measures. Consumers who are willing to pay more for sustainable products. Governments that help with tax policy and regulations that give sustainable business a head start. Especially financiers, banks, investment and pension funds that their supporters encourage preferential treatment of the de facto green company policy.
Ultimately, the benefits of sustainable entrepreneurship far outweigh the costs. But sometimes there are sacrifices first, and it can come in the form of fewer initial returns. It is easy to speak of the shame of Anglo-Saxon investors. But the majority of Danone’s other contributors are the ones who shut their mouths at the wrong time. It has to be brought by its backers.
A copy of this article also appeared on nrc.next on March 17, 2021
