MOST PEOPLE RESPOND to incentives. A lower price. A deadline. Chocolate pudding after you eat your vegetables.
Big companies respond to incentives, too, such as tax breaks or lower costs of inputs.
Remarkably, Danone Corp. has created its own incentives to step up its positive-impact game by getting lenders to agree to lower the price of money Danone borrows if it meets a range of socially beneficial goals. And, even more remarkably, in February, 12 global banks agreed.
Based in France, Danone makes and sells Dannon yogurt and other dairy products, infant and medical nutrition, and bottled water—a $2-billion-dollar industry. Any seller of bottled water and infant formula has and deserves critics, and although the company has far to go in serving the social good, it has come a long way. Danone focuses on environmentally sound sourcing, packaging development, and recycling, as well as employee well-being. Several of its subsidiaries are B Corporations, meaning they annually pass an independent, in-depth evaluation of how well they serve all stakeholders, including employees, customers, communities, and watersheds—not just shareholders, the only constituency that drives most businesses.
According to the lending deal, as reported in Forbes, Danone’s cost of capital will rise or fall with the percentage of its sales from B- Corp subsidiaries. Doing more business with all stakeholders in mind will result in cheaper loans to meet operating expenses and to invest in new business. In addition, Danone’s environmental, social, and governance (ESG) performance will be evaluated by other third-party monitors. A greenwashed annual report will not suffice.