(To receive weekly emails of conversations with the world’s top CEOs and business decisionmakers, click here.) A note to subscribers: The Leadership Brief will not be delivered on Nov. 28. See you again on Dec. 5! The battle within Danone—producer of Activia and Oikos yogurts, Silk soy milk, and Evian water, among others—might have been dubbed a “food fight,” had it not erupted in such serious times. But it was no laughing matter. Months of tension within the executive board of the $36-billion global food giant exploded in March 2021, just as the world began easing its lockdowns and launching mass vaccination campaigns. In a gloves-off power struggle, two small stakeholders maneuvered a coup, ousting the company’s CEO and chairman Emmanuel Faber, whose four-year leadership had made him a star among environmentalists and climate activists. Faber had turned Danone into an “enterprise à mission,” France’s new category similar to an American B-Corp, whose purpose was far broader than profits and growth. He named his strategy “One Planet, One Health,” and created a carbon adjusted earnings per share indicator, pegging Danone’s success directly to its environmental performance. While that brought applause from climate activists, the company’s shares lagged behind peers like Nestlé and Unilever during the pandemic, as sales of some key Danone products like Evian water plummeted. Amid the shock of Faber’s ouster, there were roiling questions over what it all meant. Do CEOs now face an impossible dilemma: Either to please their shareholders, or to join the fight for climate justice and social equity? Faber had placed those issues at the core of the company. And outside it, he threw himself into activist CEO coalitions like the B Team and Business for Inclusive Growth, or B4IG. Little wonder, then, that his firing left palpable distress in some circles, from Paris to the U.N. “Are these two objectives, environmental and economic, irreconcilable?” asked France’s liberal Le Monde of Faber’s ouster. “It plunges us into a confusion of emotions over the ethics of capitalism,” the paper said. Faber, for his part, was more sanguine. At 57, he escaped to his beloved Alps, where he was born and raised, and climbed the peaks, reflecting on what to do, after a 24-year career at Danone. In October, he took a partnership at agritech impact fund Astanor Ventures. Far from irreconcilable, environment and economic objectives are, he believes, becoming inexorably aligned. Over green tea and Perrier in Paris on Nov. 16, Faber spoke with TIME about the role business leaders must play in solving the world’s urgent crises. Fresh off the COP26 climate talks in Glasgow, he believes companies will be key—perhaps the key—to fighting climate change and inequity. (This interview has been condensed and edited for clarity.) It's been a very strange year for you. Did you feel sideswiped by what happened at Danone? Danone had grown to become my family, so it's like leaving your family. I didn't choose that. But I suddenly discovered that I was totally free to reinvent myself, in terms of where I do want to spend time and with whom and how. Which is a privilege, really. What happened was a few people that saw a window of opportunity and for personal reasons pursued that opportunity at the moment where it was easy to destabilize the governance of the company. The outside world believed you wanted to create a climate-driven company, and were punished for it. You know, they had voted the equivalent of public Benefit Corporation [B-Corp] status, 99%, not even a year before, they had agreed with the €3 billion climate and digital acceleration plan that we had announced a year before. … None of them were opposed to what we were doing. You need to read the end of the story, which is unfortunately on the 29th of July. The whole board had to resign. They said they would not seek any reappointment, and all of them would step down with one year in advance. The board had lost total credibility to shareholders. How should corporate boards be changed? What needs to happen in this new generation of corporate leaders? Climate change is there. I don't think you would find one CEO in the business ecosystem that would say it is not there. That is behind us, different from five years ago... Five years ago, that recently? Oh yeah. I think the pandemic has also taught us lessons, about the fact that there were elements in our supposedly well-controlled and old system that we did just not control. This virus is only half a living organism, and yet it played havoc with the health system. Suddenly we discovered that our food systems were entangled in such a complex web that food sovereignty became huge in the agenda. We suddenly learned that what we felt was a predictable model and a safe model wasn't, that we hadn't been super good at being efficient, but we were tested in our resilience in the system. The other thing is, I think last summer's extreme weather events, fires all over the place, floods all over the place, brought to the public attention that climate change was not in five or 10 years, it was not for remote countries. It is here now. Agriculture is the first victim of climate change warming. The yields are declining, water stress all over the place, soils are eroded. We see a number of situations where civil society and citizens are going after governments for action or inaction against climate change. Governments will have no other way than turning to companies and corporations to do the job, because governments are not doing the job themselves. The private sector will be front and center of the climate transition. So that's one. Employees collectives are asking questions about ESG [Environmental, Social, and Corporate Governance], big time. More and more, the war for talent is there for the larger companies. So many of the highly educated talents don't want to work for these large companies. More and more employers are asking the new generation what they want: Meaning, they want impact. And then you have the shareholders. Already now it's harder for the most carbon-emitting companies to find the right appeal from shareholders. I'll just give you one example. Anglo American [Corporation] wanted to spin off their coal-mining operations, Thungela. Typically, the market would be ready to pay you 20 years of your current earnings because they believe these earnings have great potential to grow in the future. In the case of Thungela, when they spun it off, they got four months of EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] multiple. They couldn't find enough investors that would be willing to pay the cost on their reputation to consciously, in 2021, choose to invest in the business which is purely coal mining. So how do you even keep a business like that going? Well, that's exactly my point. The global financial markets are increasingly reluctant to finance these assets. So far, ESG has been sort of an easy path for CEOs and boards that wanted to look good, but weren't ready to really walk the talk. That's the whole question of greenwashing. I think there will always be greenwashing. All this greenwashing noise is paralyzing everybody. It's penalizing the people that are doing the real stuff, because they can't prove that, and it's favoring the people that are not doing the real stuff, because they can claim without being challenged on the reality of this stuff, because there are no metrics. The big announcement at COP26 for me was when the IFRS [International Financial Reporting Standards, which sets rules for public companies] said that they have prepared a prototype for a climate standard that is going to be transparent, comparable, and reliable and audited. It's huge news. What they are essentially saying is by 2023, all companies will be able to—and in some cases compelled to—report under these new standards. Essentially, 140 countries already agreed to be part of the IFRS metrics in the past, so they would take the additional metric on climate, and adopt it as part of their IFRS. Each company will have to report on its targets on CO2 emissions and its pathway to reduce that. If a company is ahead of its plan, the market will look at this positively. If you're late, it means that there are some capital expenditures that you need to do in the future. That will mean additional debt. So immediately, the valuation of companies in the stock market will be impacted. Which means as for profits, when you are ahead of your forecast, you get a bump on your share price, and a bump down if you're super late on your emissions trajectory. Suddenly you can be compared, within peers, within an industry. And you start having a situation where the capital allocation can be based not only on profit but also on carbon. So it's a huge change. How many companies followed your model of using a carbon-adjusted earnings per share metric, to show the financial cost of the company's carbon emissions? Zero. Because it takes time. There was a whole journey for those shareholders to understand where I was coming from. We took them into the fields. We had food scientists coming to speak to them. We had been constantly and consistently over years speaking about this to our shareholders. When we decided to become a B-Corp, we were puzzled about how to explain that to our shareholders. I received a short note from my friend Doug McMillon, CEO of Walmart, and he said, "Emmanuel, that’s so great." So I call him and say, "Would you shoot a short video saying why you think it's great? You’re my biggest customer." So he he did that. It was 2017. The Investor Day started with a video of my biggest customer, saying why it was great. It cut 80% of the questions. So when like two years later, we come up with this CO2 adjusted metric, they knew that this carbon charge was not just here to save the planet, it was to save the business, because we needed that carbon in the soil, not in the air. Beyond the food and agriculture system, you don't have the same magic of telling a story that it's actually good for the business to put carbon back into the soil. The absence of metrics on carbon made it very difficult to do this. I think the day you have those climate metrics it will become obvious. Maybe we were just ahead by a few years. … The metrics may not be the ones that we had, but there will be one, which will make it a market conversation instead of just one company that had this crazy idea. What got a lot of people's attention from COP26 in Glasgow was Greta Thunberg's protests. I think maybe most people will remember her saying, “It’s all blah, blah, blah.” Is that just cynical? And what’s the impact of that on the real work being done? Is it just a sideshow? Unfortunately, it's a combination of all of that. I don't think this is only cynicism. I think there has been blah blah. I have myself said that we had not moved either fast or far enough. But I can see many things moving fast. We're still behind the curve, but we have never been as close as coming to a tipping point. CEOs are held back in talking, by their legal teams, by their comms teams, by their PR teams. They have this polished, you know, sometimes bullshit kind of communication. Shareholders were not so interested in all these discussions three years ago, but now they got very interested, and so everyone is super nervous. But in themselves, [CEOs] know that there is a problem, and they know that there is an opportunity. The food industry, your industry, is a big carbon business. We started the journey on carbon emissions in 2008. By 2009, all the team managers at Danone had a significant incentive [to reduce our] carbon footprint. An incentive bonus. A third [of the bonus] was on social and environmental issues, among which was carbon. The EBITDA level of the company and the carbon footprint had an equal weight in my bonus. So that's how far we and I went into walking the talk and putting our money where our mouth was. Were you losing some money because that was part of the equation? No, I was making money. We established in 2009 a trajectory that said our peak carbon emissions would be in 2025. And the result of the hard work of 15,000 team leaders, incentivized in their bonuses, led us to reach peak carbon six years in advance, in 2019. So we have constantly been ahead of our plan and the reduction of the intensity of carbon. When you speak about agriculture, carbon is 60% of the organic matter of the soils. And the intensive agriculture, the monoculture kind of agriculture that is the dominant food system, is actually extracting carbon from the soil. Danone was the first—Patagonia and ourselves—to start a regenerative organic certification in the U.S. in 2015. When we started, no one understood what that was. It started by saying we need to regenerate the soil health by going from intensive agricultural practices to practices that actually put carbon back into the soil. We know how to do that. How big has the idea of putting carbon back in the soil become? In 2019, I gathered 30 of the largest companies in the world that that are using resources from the soil: Textile companies, fashion companies, cosmetics, food retailers, some data companies, Microsoft, Google, joined…. So we are now two years after, we have a set of indicators, a framework for what regenerative agriculture stands for. And you find these huge companies. After Danone, you have Nestlé, that this year said by 2030, we will supply from regenerative agriculture. These people needed a safe place where they could incubate and think and work and get their teams to meet together and discuss as an ecosystem. You talk about monoculture agriculture—growing only one type of crop at a time, as is popular at large American farms—ruining soils and the need to put carbon back into the soil, so they're actually seeing the effects in terms of the quality of their crops? The International Union for Nature Conservation, which is a UN agency on biodiversity, ran a big study. They looked at the wild relatives of the varieties that are being used in the fields. Wild vanilla. Wild coffee, etc. They found out that a third of all the wild relatives in beans are under threat of extinction. They found out that 100% of the sample they used on vanilla’s wild relatives are under the threat of extinction. The seeds of those wild varieties, they constantly adapt to the climate conditions, to the water availability, to the shades or no shades, to the temperature, to the sun, to everything. They mutate naturally. So with climate change, these wild varietals are going to be just way more able to deal with things, and it is so important that we bring them on board. If you are a Cargill or others, or the big coffee companies or the big cocoa companies, that are directly dealing with this reality, with the farmers who see their yields declining and the water scarcity more and more, they have either the choice of going up in altitudes—meaning lower lands at lower volumes, more expensive to adapt—or to find alternatives. This is one of these topics on which I see CEOs' minds just opening when they realize that there is this opportunity. Because climate change is knocking on the door saying, "Here is the huge problem we have." But also nature is saying, "Here are the huge abilities that I have to solve your problems." In your new role in Astanor Ventures, are you going to be putting investments in the future of agriculture? I think at the juncture of technology and nature-based solutions. I'll say something which is terribly unpopular, but which I've been saying for 10 years: We are not paying the true cost of food. We are just not. Do you think that should be reflected when we go to the supermarket? Yes, it should be more expensive. Because it's not sustainable in terms of farmer income, in terms of animal welfare, in terms of your health sometimes. When we walk into a supermarket in 10 years’ time, is it going to look different? Will there be different products on the shelves? What do you think, and what would you like to see? I hope it is going to be different. There is one aspect that I think I am absolutely convinced about: The food system will relocalize. The second biggest topic for governments through the pandemic has been to make sure that there would be enough food. And they suddenly realized that with the complexity of the food system, there were these bottlenecks. The reduction of the food system carbon emissions will also come from the fact that the ingredients will travel less. In 20 years from now, you will have much more local food. I would like to see more diverse local food, and more expensive than you have today. Some subsidies should be redirected in order to make sure that the people that cannot afford to pay are being given the possibility to do that. At the end of the day, we know where the food systems have led us: About two billion people that are overweight in the world, about 700 million people that have diabetes. Instead of dealing with these obesity and diabetes issues, by providing better food aid and supporting people that need to be supported, you'd actually save money for the future. This is the whole theory of where I think we can gradually move. And climate change will force us to move there. I want to get back to the original thing we were talking about: What we call “conscious capitalism.” You sound almost kind of optimistic, that there are really big changes to come out of this pandemic. And yet inequality is worse, and the profit motivation seems as strong as ever. What makes you so hopeful that people are going to act in the common good rather than in their own self interest? I'm not sure they will. I've seen the worst and the best in this pandemic. We see all over the place that growing inequalities are a danger for democracies. So I'm not optimistic. But we've seen solidarity, social bonding, people changing their behaviors in many ways, again for the worse and for the best. I see climate change as such a huge frontier for us as a species, that I'm sure it will bring the worst. And I see signs that it can also bring the best. It would be illogical to blame capitalism and the global financial markets for ruining the resilience of our species. I've defined myself as a business activist. I'm an activist of business being part of the solution, being the fundamental solution, the solution. I saw you said that when you were 33, you thought of leaving business. Now you think it is the place to be. Yes, I really think so. Do you think the next generation of CEOs is going to be quite different? The next, I don't know. But the next-next? I think yes. Maybe they will not join the companies. That's the point. And this is why CEOs are paying a lot of attention to these collectives of employees that have started all around the world. They are highly educated, talented managers. And they will be candidates for CEOs. They are part of a generation that was born with these questions already. So it's not a cultural shift [for them]. We were talking about this climate skilling and upskilling. How to make people aware of [climate change]. This is not a problem for that generation. They're entirely into it already, sometimes too much, with climate anxiety and everything. So they will leave these large companies, in which case I think these large companies will simply not survive, because they will not have the skills. Put it this way, if you're not able to lead climate strategy 10 years from now, you should not be a CEO. It's as simple as that. Your company will not find capital. I'm pretty clear on that. Share this edition Of The Leadership Brief by clicking here. | 
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