After French yogurt company Danone (DANOY) closed the merger between its North American business and Denver-based WhiteWave, the new unit, called DanoneWave, secured its spot as the leading dairy business among the top 15 American food and beverage companies by sales. What sets this deal apart from the rest however, is that it also formed this country’s largest “public benefit corporation” to date. (See also: Danone Gets DOJ Green Light to Acquire WhiteWave.)
Having the official status of a public benefit corporation gives a company a legal framework meant to hold the firm to a higher standard than the pure pursuit of profit. Instead of merely prioritizing the maximization of shareholder profits, public benefit corporations have an expanded purpose to enhance the general and specific public benefit while balancing the interest of stakeholders alongside shareholders.
Unlike a non-profit, benefit corporations do not receive special tax treatment and are distinct from B Corporations, which require certification from the non-profit organization B Lab. Requirements instead relate to corporate purpose, accountability and transparency. Each year, benefit corporations make public an annual benefit report which addresses overall social and environmental performance against a third-party standard.
Mission Driven Businesses
Since the first benefit corporation legislation was passed in Maryland in 2010, companies of a wide range of sizes across industries have chosen to acquire the status. By becoming a public benefit corporation, mission driven and other socially conscious businesses, impact investors and social entrepreneurs cease to be constrained by the traditional for-profit legal framework that requires decision makers to legitimize actions solely on the basis of pursuing shareholder profits. As a result, public benefit corporations give legal protection to for-profit entities with initiatives alongside the bottom line that they consider integral to their business model. Choosing to become a benefit corporation may also increase a company’s ability to raise capital, whether from private investors or social impact funds.
Well-known benefit corporations include Patagonia, Kickstarter, Laureate Education, Plum Organics, Methods, Altschool, King Arthur Flour, Solberg Manufacturing, and DanoneWave as of April 12th.
World’s Largest Yogurt Company Makes a Social Statement
Newly formed DanoneWave, as part of its benefit corporation status, has committed to offering healthier products, while pushing toward sustainable ingredients, water conservation, waste reduction and animal welfare.
As Millennial consumers become increasingly interested in the origins, nutritional information and waste product of their food and beverage products, the move also makes sense for Danone’s bottom line. As traditional food industry players lose out to smaller private labels and alternative premium brands, packaged food leaders have been forced to re-evaluate their portfolios. As shoppers vote with their dollars more than ever, many of the major players have chosen to double down on sustainability initiatives, aware that greenwashing in the digital age typically ends up backfiring.
Beyond the Factory Gate
DanoneWave Chief Executive Officer (CEO) Lorna Davis says that the European company’s purpose-driven initiative has been long in the making, dating back to 1972 when the company’s founder said “responsibility doesn’t end at the factory gate.” Since then, Danone has followed its transforming food peers in becoming healthier, with a series of strategic deals such as a sale of its biscuit division.
The newly formed dairy company will now also form an external advisory committee led by Rose Marcario, CEO of fellow benefit corporation Patagonia.
“In 10 years’ time, people will say its inconceivable that business was done any other way … The notion that a company can only care about profit will be seen as old-fashioned and irresponsible,” said Davis. (See also: WhiteWave-Danone Merger: Who Got the Better Deal?)