Scalable Farm Level Initiatives with Danone

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Transcript: 

John Lee [00:00:00]:

It's important to think about the translation of what you are doing into how you're going to create value for your partners around the business, for the person that is on the other side of the table or on the screen or on the phone. And it's about being that expert in sustainability topics, but shifting your diction, the discourse in a way that shows that your partners in creating the solution to the problem that they need to solve and not assuming sustainability is even the leading part of the conversation they're having with the supplier or with the customer. But how can you thread sustainability, whatever topic is relevant to whichever group into that conversation that enables it to be richer and more holistic overall? So I think that perspective is really key.

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Saif Hameed [00:00:55]:

I'm Saif Hameed. Welcome to the State of Sustainability Podcast, a show for professionals transforming corporate sustainability strategies brought to you by Altruistiq. Today, I'm joined by John Lee, Director of Nature and the Mission sustainability team at Danone, or Danone, if you're closer to North America, to talk through the ingredients of a successful nature program. Uh, we're going to discuss the best approach to prioritizing and scaling interventions across the board. There's a huge amount that most of us have to learn from Danon. Danone has been One of the OGs, really, of the impact space, going back decades now and really across the board. I remember I first came across some of Danon's work in this space with the Danone Grameen Partnership In Bangladesh, like 20 years ago or so. I remember reading about it in a book by Muhammad Yunus, which is one of the things that really pulled me into the impact space.

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Saif Hameed [00:01:55]:

So I'm just really excited to get more into the weeds on what John and the team are doing in nature. No pun intended. John, welcome. Great to have you with us.

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John Lee [00:02:04]:

Thank you. Thrilled to be back in conversation with you and looking forward to the conversation we're about to have.

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Saif Hameed [00:02:09]:

Fantastic. John, your role is a really exciting one and I think for many it almost sounds like a dream role. I'd love for you to tell us a bit more about it and what it includes, what it covers, what the success criteria are for you in your. In your role in your team.

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John Lee [00:02:26]:

Yeah, absolutely. When I saw the Director of Nature title, I thought, this, this is something I really want to pursue. Let me take a step back though, and talk about how that fits into Danone and our mission and vision. So, as a company, our mission is to bring health for food to as many people as possible. Health is always about individual health, but it's obviously much larger than that too. So we think about our sustainability goal in the terms of the known impact journey. There are three pillars. There's health per se, so bringing healthier choices to individuals.

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John Lee [00:03:04]:

There is improving outcomes in the communities from which we source and where we produce. And then finally, the third pillar is where I spend most of my time. That's nature. That's about preserving and regenerating nature. Lots of meat below that pillar that we'll get into very soon. But to talk about my role and how I fit into the company, I am really happy that my team fits into essentially the strategy function of Deno North America. I'm built into the enterprise insights strategy and planning team. And what that means is that my role in nature, my role in mission and sustainability, is about being the steward of the denote impact journey.

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John Lee [00:03:51]:

It is about identifying where we are and catalyzing the action across the business of where various functions, various businesses need to go with our partnership, with our advisory. And I think that that is key in the way I think about how I show up to conversations. It is about providing insights, it is about providing guidance on where we can go together. But it is not my role solo or any of these other teams across Danone to be able to achieve the vision, whether that's in carbon or regenerative, ag, plastics or circularity.

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Saif Hameed [00:04:27]:

And I mentioned, John, that the range of elements that you're kind of exposed to is quite broad. Danone is obviously huge present at so many different value chains. A lot of the sustainability professionals I speak with or trying to sort of juggle different metrics and kind of play them against each other or just decide where to prioritize, where to focus. How do you think about the risk of like carbon tunnel vision in your space and managing to kind of keep nature at the forefront while also trying to manage to support the organization on its carbon commitments and goals. Does a lot of the stuff go hand in hand? Are there trade offs to make? Is there an internal narrative you need to build to help you be successful here?

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John Lee [00:05:06]:

Not unlike nature itself. It's all interconnected. I think that a temporary slight tunnel vision on carbon has been really important for me. If I just look at the last year and the evolution of strategy to action. So really getting specific and discreet on who needs to do what across each of the different scopes. Whether that's energy, whether that is milk, whether it's sugar, packaging, logistics, how do we really turn all these ideas into specific projects and actions? And I think that that kind of codification that Professionalism on almost like a business ops mindset of how do we think about what we're doing in decarbonization? Who's managing this? How are incentives aligned? That gives us an ability to then run that business, like run the decarbonization aspect. Obviously everything's interconnected though, right? So within nature, one of my priorities is making sure the company is on its path of science based targets. 1.5.

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John Lee [00:06:15]:

But then there's regenerative ag and making sure that through our commitments to farmers and our work in procurement that we are helping farmers shift to a regenerative way of farming. There are carbon benefits to that work. Right? But it's a much more holistic idea with different benefits to different people within Danone and outside of Danone. And then if you start thinking about packaging, there's a lot to do on recyclability, on reducing our virgin plastic footprint. We give ambitions on both of those areas in 2030. Those are important per se. And I have specific work streams with research and innovation, with our procurement team, with our business units to unlock how we get further and further toward those goals. All of those also have carbon benefits, even if that conversation with procurement or research and innovation and the business unit happens to be more focused on a different goal.

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John Lee [00:07:18]:

There's usually a number of metrics I think that in terms of how do we not get too tunnel focused, There does need to be a team like mine or elsewhere in the organization is helping keep track of. Okay, what are we prioritizing in this conversation? For what reason? But if there is subsidiary or knock on benefits, how are we also tracking those? Whether that's in the water space, packaging, regenerative ag or beyond it.

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Saif Hameed [00:07:47]:

John, there's so much I'd love to dig into, but maybe right off the bat, given that your role is very closely aligned with strategy, what do you see as potentially the strategic positioning advantage for Danone of the work that you're leading? And let me just give you a parallel. We had the team from McCain's on this podcast several months ago and they have a really exciting program where Regenerative Ag is almost like they're trying to make the market for that. And as the market maker, they sort of end up being the best supplier, the main supplier, the only supplier at scale for regenerative potatoes, let's say to fast food for the McDonald's and the burger Kings and others. And so there's like a big long term strategic advantage for them in that positioning. Is there something similar or parallel to that for Denone? Because you guys are so far out front on a lot of the stuff that you do that I imagine there's a really good strategic rationale also for why it makes solid business sense.

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John Lee [00:08:40]:

Yes, I think that because we sit in this strategy function, I'm really blessed in that I get to see both upstream and kind of downstream. So let me talk a little bit about those elements on the upstream side. I think of that in terms of operations, I think about it in terms of procurement. The benefits here strategically for us are really going to be around resilience and continuity. So when we think about how we source our milk, one of our main ingredients for our yogurt portfolio, how do we develop long term relationships to get the high quality milk for our various types of yogurts in a way that sure, 1 reduces carbon, but 2, 3, 4, 5 is helping ensure better livelihoods for the farmers themselves, providing the next generation of income, generation after generation. It's about being more cost effective, right? These are the ones that we love, all of us, right? Where there's both a productivity savings, there's a cash savings and a carbon benefit. So it's about financial low hanging fruit and it's about resilience, right. In terms of our internal operations and our procurement as I think kind of downstream, and how our products hit our logistical footprint and meet our customers and ultimately our consumers.

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John Lee [00:10:06]:

I would say that there are a number of factors that we're starting to see come up in conversation which we will need to respond to strategically. One is that any number of consumers and sorry, customers is actually coming to us and asking, where are you on this carbon journey? How much progress have you made? As they want to understand how our progress helps them unlock their progress. This gets a little esoteric for those of us who are not as close to carbon reporting, but like how can we be a scope 3 delivery provider for customers? I don't know where I heard that phrase. It might have been you, Saif, but I've been gearing it up.

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Saif Hameed [00:10:49]:

I love that.

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John Lee [00:10:49]:

Yes, in the right audience it really makes sense. Then the next thing is we actually have customers coming to us saying, okay, how do we co invest in these solutions? It's not just awareness, it's how do we jointly partner to bring our emissions down. I think that that is a place that I'm proud of. Danone. We have had regenerative ag programs for years, far in the decades before this one. So we have a really great knowledge base. We have a team that is on farm that knows our farmers very well. We can bring that experience and we can bring that knowledge.

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John Lee [00:11:27]:

We can build that past progress as a platform to build on together with our customers. And then lastly, a different but overlapping set of folks is wanting to know about the carbon intensity of our products. Right. Like is there a carbon specific play? So that's something that as we get better, as we all get better on product carbon footprinting, I think there's interesting value to create in that space as well, for sure.

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Saif Hameed [00:11:54]:

And John, I think the idea of being a scope 3 solution provider is one that, you know, certainly in the B2B space, the advice we're giving to every B2B company is that there's an opportunity for you to move from being a commodity provider just selling a super commoditized product towards being a solution provider where you're actually selling impact bundled in with the product sale. I'm seeing that as a unique opportunity right now in a lot of B2B segments, I think packaging, ingredients, all of those have this opportunity. It's great to see also that coming to the fore with you guys. If we maybe look a little at the upstream opportunities that you described, where I imagine there have been a lot of pilots that you've tried over the years and also a lot of things that you've brought to scale over the years. What are the signs of something that you know will scale? Like when is it that you're looking at a pilot and you're recognizing, hey, this thing can get a lot bigger very fast, let's pour gas on it. What are the, what are those like sort of telltale signals?

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John Lee [00:12:51]:

Yeah. My answer here is probably thinking about how you're creating value for all of the different actors that are surrounding this pilot. So first you need to think about if we're in the world of regenerative ag and thinking about say a dairy farmer in particular, understand where they are in their regenerative journey. What have they done already? What is the next mile for them in terms of the next technology or feed additive that would make sense for them and their business. So that requires kind of a pretty clear understanding of where your intervention spot is at. Like where is this person and where do they need to go next? I think that the next element is going to be around like the commercial play for the known itself in procurement. So what level of milk do we need? What level of decarbonization do we need? Is that going to match up with what the, what the pilot was or what it's proving out to be? And then last, I mean to borrow from My last answer. But you need to think about like who in the known aside from procurement and who outside of known can find value here.

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John Lee [00:14:09]:

So is it, is it a customer? Is it actually is our sales team to be able to tell a story a little bit more clearly about what the benefit this work is? I think that when you're thinking about innovation, you need to have really quite a wide funnel. Not news for anyone who is in the kind of more in the research innovation space. But one of the things that we do to ensure we've got some good pilots to scale is making sure that we're testing and exploring a lot of ideas at once, even if ultimately they don't provide that funnel. If you don't have a lot of inflow into that top of the funnel, you're not going to get the idea that hits and checks the criteria. I was lining up before to bring that example a little bit more to life within specific example of innovation. One thing that I think is getting more attention is how do we bring methane out of the air? So direct air capture. I think that while this is really promising and something that we'd like to keep an eye on at Danone, you also need to think about where are our individual farms in the regenerative ag journey. If you've already taken a lot of methane out of your production, then maybe that technology is not going to be the best fit.

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John Lee [00:15:22]:

But it could be a great fit for someone who's newer to our network or for various reasons couldn't adopt the pilots that we've already put into place.

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Saif Hameed [00:15:29]:

John, I'm going to say something which is maybe a bit stupid, but I'd love for you to enlighten me, which is I kind of have this pet peeve where I think there's a lot of work out there. There are a lot of initiatives out there that look glamorous and exciting, but actually just aren't as performant as some of the more basic things. So for instance, you mentioned two of them. One was the feed additive and the other is the methane air capture. And when I kind of do the math on the impact you can get from the feed additive side, it doesn't compare with basic stuff that you could do around yield optimization. Like I'm thinking about increasing the protein content, for instance, in the feed. And if you look at a lot of the, if you look at dairy in South Asia, for instance, or just most parts of the world that aren't Australia, the Netherlands and you know, maybe the U.S. the protein content in silage is so low that there's just huge gains to be had on yield by increasing that.

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Saif Hameed [00:16:20]:

I would imagine that that's always going to be a lot better than what you could do on the feed additive side and even the methane air capture side. Am I totally wrong or you're the expert on this space? I would love to be enlightened.

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John Lee [00:16:32]:

I have worked a long time in East Africa, West Africa, Latin America on how to just do basics on a GR to improve yield. Like that equation is always the start for me when I'm thinking about sustainability or like how to improve outcomes.How do we get more through access to technology, access to information, access to markets. Like that is number one. The way I give an example of this, if we take it back to dairy, is that the bread and butter of taking methane out of dairy is manure management. That is not sexy. That is not going to ever be put on a, on a yogurt cup. Right. But it is how do you make this waste product less pollutive of our atmosphere? Right. And that is where we start.

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John Lee [00:17:18]:

It's not where we started this conversation because it's a lot of what we do already. And sure it's like a little bit less sexy, but like turning this waste product into something that's less pollutant, something that actually go back into soil to help boost productivity, to help reduce reliance on synthetic fertilizers, like that's where a lot of the game is in dairy. And a little bit of the expert on this, there's a regenerative ag team within denote within our procurement functions that are the true experts. But a lot of this is about doing the basics right. We don't want to be distracted by shiny objects. We want to keep an eye on all of those kind of shiny opportunities to see where they're going to kind of really fit. But you never know how that's going to map with your existing footprint. Going back to that direct air capture example or feed additives as well. It's. It starts from a very basic base and that's, that's where it all happens.

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Saif Hameed [00:18:18]:

I love that. John. Thank you so much. John, going back to another thing that you mentioned that I wanted to pick up on. You talked about how often it's going to be different members of the team pitching the narrative, including sales, for instance. One of the topics that's quite hot in our community is capability building. And in particular I find this is capability building in procurement teams and in sales teams when it comes to getting them in tune with sustainability priorities, agenda language, how to push the narrative. Do you find that there's a big capability building component of what you need to drive as well, where if there are programs that maybe your supply chain or procurement teams are at the front lines on, you need to be able to upskill them in the right direction.

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John Lee [00:19:00]:

We have a tremendous amount of enthusiasm across Danone within our procurement function around sustainability. It is one of the reasons that, I mean I came to denome because we are so kind of impact focused and on balance with everything else we need to achieve as well. But it is a real draw. I see that coming from our procurement function as well. Right. There's a lot of interest at every level, right up to our chief procurement officer, who is a huge advocate and our kind of major champion within North America. And with that kind of enthusiasm, one of the things that my team does that our partners within kind of the Procurement center of Excellence who do our carbon reporting is do some basic education, right this carbon accounting, how this works, how sustainability manifests in different commodities. That is work that we do together.

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John Lee [00:19:58]:

So I would say I play a role, my team plays a role in distilling what some of the complexity down and making sure that our buyers that are our procurement team can really get like the key message that they need to get across to their suppliers. And that's a partnership and that there's always going to be that like healthy kind of circle between each of the functions and a central team like mine of making sure there's clarity on where we need to go and then building the capabilities, building the process, the tools of how we help in this case suppliers get closer to where we'd all like to be on sustainability.

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Saif Hameed [00:20:36]:

John, before we hit the record button on this podcast, we were talking a bit about pcfs product carbon footprints. Do you find that that's like an interesting tool to help procurement teams as well, either in trying to acquire them from suppliers or using them as the basis to have more structured conversations. And would also just love, while you're thinking through that, would love your general take on how that space, like the data and reporting and analytics space, is evolving in a direction that helps people in your position and in your role.

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John Lee [00:21:07]:

For sure, this might be my own John Lee jargon, but I think of two different concepts. One, what I call like supplier specific emissions factors. So what we're getting from the suppliers that we procure from. And then I think about product carbon footprints more in terms of like the actual finish finished product, they're obviously related on the supplier specific emissions factor side. So this is key for us. One of the ways that we need to get to our goal on decarbonization is bringing in suppliers. Right. Supplier engagement.

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John Lee [00:21:40]:

So understanding and conveying to them really where we want to go on our carbon journey, trying to show that we'd like them to go on this journey with us. And as a way to actually take that forward, it's about sharing data around the carbon intensity of their, the material that they're, they're selling to us. That then allows us to have a conversation kind of buyer to supplier on how we jointly plan for sustainability. What's our waterfall, what's our roadmap for taking carbon out of the business? Is it renewable energy? Is it in the packaging space? Recycled resins? Right. But that's unless you have the data with the supplier, it's difficult to like have a conversation about where you need to go. Ideally, you know, we'll get more and more of those supplier specific inputs. We've already had some great wins across for a long time, our milk farmers. But then also this year for the first time, using some supplier specific data in the packaging space.

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John Lee [00:22:38]:

On the product carbon footprint side, this is a really exciting space that I'd like to see. All businesses can just move in and this crowds in the research innovation team. It brings in our marketers so that we can look at as we develop new products. Right. What's the carbon intensity drawing from the latest data we have from suppliers. Right. In that very specific way. I think it's about your capability building point, like which teams need to be helping drive and gather what data and then how to use it. How do you build that into process as you plan out where the company wants to go?

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Saif Hameed [00:23:16]:

Super interesting, John. And in terms of the types of interventions that you're making in the supply chain, how do you prioritize? What are the most exciting places to focus? Obviously dairy is synonymous with Danone and so is probably both strategic and kind of brand relevant. Is packaging the next place that you're looking to drive change? Are those two kinds of the ones running in parallel? And then there's maybe some distance to the third category. What are the, the big ticket spaces?

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John Lee [00:23:43]:

Yeah, absolutely. I think packaging is a really exciting space for us where I spend a lot of my time. I think that as a company that is as big as we are, that is in as many countries and in the United States, as many states as we are, making sure that we have one product that meets the requirements of all these different jurisdictions, it takes a lot of complexity. Distillation and strategic planning. So moving to this goal of 100% recyclability across each of our businesses, whether that's yogurt or specialized nutrition, an early child food business, or our beverage creations business, each one of those has particular challenges and opportunities that we'd like to help them unlock. The next place I think I'd like to go is how do we really take the sustainability of packaging to the next level. Whether that is by reducing the amount of packaging overall, whether that's switching from a virgin to a recycled resin, whether that's thinking about really left field ideas like new business models or types of how you fundamentally make and distribute the product. I think that there is a ton of interesting work to do in packaging.I think those are feeling like a lot of the work that keeps me busy and the team's busy, even in the context of also needing to keep an eye on water and waste and all the like.

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Saif Hameed [00:25:10]:

Thanks, John. John, While we're on the subject of water and waste in general, what I kind of find is we work with a lot of consumer goods businesses, particularly in food. We're finding that almost consistently carbon is the top priority. And in terms of mind share, it's like probably 60% mind share, 70%. We're seeing in beverage water be a very close second. Well, not a very close second, but water is like the Second one, maybe 15, 20% mind. Sure. And then there's like the long tail which kind of has waste and end of life and biodiversity in nature and sort of the whole bucket. Is that what you're seeing as well? Like is it pretty much that. Do you think there's a point where that dynamic changes for the industry or does it stay in that bounce?

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John Lee [00:25:54]:

No, I don't think it's does stay in the balance. I think that water is coming. I think that you will find consistency in us in terms of needing to pay more and more attention to the criticality of water. Danone thinks about our water commitments in threefold the water and operations used within our actual manufacturing. We think about stewardship and responsibility in the watersheds around those factories. So kind of watershed restoration, preservation, and then we think about water and agriculture. Right. And this I think is going to be critically important for us and so many others as we see the effects of climate stress.

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John Lee [00:26:42]:

Right. We look at our ingredients that are key to our products. This takes us back to milk, this takes us back to almond. But how can we ensure that our farmers, our supplier partners, they are managing that resource and managing risk in that resource in a way that allows them to grow the commodity that they base their livelihood on and sell it to us to make the products that we depend on and that our consumers depend on. I think that water is going to be a wave that comes and more and more attention will be importantly paid on in that in that area. I think biodiversity is going to be the next really proud of some of the work that our brands like Silk have done in supporting biodiversity and pollinator habitats. And in Central Valley in California, it's important to those farmers, it's important to the production of the crop, it's important to consumers. But how we think about biodiversity, how we measure biodiversity and outcomes there, I'd like to see that a next vanguard that we all tackle and that Denone as well.

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Saif Hameed [00:27:52]:

It's going to be super exciting to see John John as we just wind up, we typically ask for one piece of advice for our listeners in our community. As you know, we direct this podcast to sustainability professionals, mostly in the consumer space, a lot of them in food and beverage. What is the one piece of advice you'd give to your peers in similar roles in other companies?

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John Lee [00:28:12]:

I would say it's important to think about the translation of what you are doing into how you're going to create value for your partners around the business. So it may not always be like leading with that biodiversity or what this does for the individual species or what it does for the mechanics of soil carbon sequestration, thinking about how you can create value for the person that is on the other side of the table or on the screen or on the phone. And it's about being that expert in sustainability topics, but shifting your diction, the discourse in a way that shows that your partners in creating the solution to the problem that they need to solve and not assuming that sustainability is even the leading part of the conversation they're having with the supplier or with the customer or with the consumer. But how can you thread sustainability, whatever topic is relevant to whichever group into that conversation that enables it to be richer and more holistic overall. So I think that perspective is really key. And the last thing I would say is ground yourself in some optimism. Read books that inspire you. I think that it's a challenging time for folks who are focused on sustainability. A lot of competing cross currents, culturally, politically. Make sure that you are filling your cup, so to speak, and really reminding yourself of the potential in all the solutions that we're working on.

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Saif Hameed [00:29:47]:

That's great advice indeed. John. Particularly like the idea of thinking about what is a win for the stakeholders that you're engaging with and trying to dovetail your positioning with that. I think one of the best ways to do that is always to look at the KPIs of the other person and see how your program reinforces their KPIs. Thank you so much John. Really appreciate having you on this show. This was a great conversation. I'm looking forward to catching up with you soon in D.C. as well.

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John Lee [00:30:13]:

Sounds good. As always, so many great questions. I'm looking forward to the next conversation already.

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Saif Hameed [00:30:18]:

Perfect. Take care John.

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John Lee [00:30:20]:

You too.

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