Sustainability Needs To Work For Investors, Danone CFO Says

By Reuters
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Sustainability Needs To Work For Investors, Danone CFO Says

Decisions based on sustainability need to offer financial returns to ensure they attract investors, Danone finance chief Juergen Esser has told Reuters.

Esser's comments are a departure from those of other executives in the industry who have tended to gloss over the need for sustainable strategies to deliver financial returns.

While they have won support from some shoppers, they have increasingly drawn criticism from investors.

Danone's efforts to be more sustainable include changing the way it runs its facilities to reduce energy consumption, Esser said in an interview with Reuters on the sidelines of the Responsible Business conference in London.

He said that had led to "a significant payback" for Danone, but declined to give details.


“On top of that, it drives competitive advantage: it allows us to come to our customers and partners and say: you asked us to help you to decarbonise – here this product is now with 20% less carbon emissions," Esser added.

Emissions Reduction

From restaurants to retailers, companies are racing to cut emissions in their third-party supply chains, known as scope 3 emissions, and meet lofty sustainability goals. These companies rely on the consumer firms that supply them with food and other goods to help them meet these targets.

"The reality is you need to find a different way to create an incentive to invest into sustainability," Esser said. "There’s no other way to do it without competitive edge. Because investors do not compromise on financial returns.”

Janus Henderson, portfolio manager Robert Schramm-Fuchs, said he agreed with Esser's position.


"Things are not sustainable if there's not a positive commercial impact behind it," Schramm-Fuchs said.

"If you do things that put your company in a disadvantaged position, others will take market share – your employees, your stakeholders will lose to outsiders. There's no point in doing things to disadvantage your company competitively."

Focus On Health And Medical Nutrition

Danone will step up its focus on health and medical nutrition as it seeks to grow sales and boost cash generation from 2025 to 2028, the company has said.

The maker of Activia yoghurt, Evian water and Aptamil baby food expects to achieve annual like-for-like net sales growth of 3-5% for that period, in line with the target it set for 2024.


That should allow Danone to deliver a double-digit return on invested capital (ROIC) and progress towards its long-term free cash flow target of €3 billion, it said ahead of a presentation to investors in Amsterdam on 20 June.

"There was nothing in there really that would make people say 'Oh my God, this gives us new confidence'," Bernstein's Bruno Monteyne said.

"The two new and improved targets about free cash flow and ROIC are not exactly very challenging, and investors were hoping for more momentum behind the turnaround story" he added.

Stabilised Performance

CEO Antoine de Saint-Affrique has attempted to stabilise Danone's sales and build more predictable revenues since taking the helm in 2021.


The company plans to diversify, making itself less reliant on its yoghurt and water brands while tapping into what it sees as a "tipping point" in the food industry where "health, and the role food plays in health, will become more critical than ever."

This would include scaling up, and seeking more acquisitions, in medical nutrition, de Saint-Affrique said.

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