With the State of the World in the Hands of Big Business, Some Executives Think It Can Pay to Do Good

Even by the pandemic’s standards of Zoom fatigue, the hours-long virtual meeting one Sunday in March 2021 was draining. Around 2 a.m., the board members of the global food giant Danone finally wound down their fractious arguments, and announced they had fired the company’s CEO and chairman Emmanuel Faber—a stunningly swift end to his 24 years at the company.

The ouster of an executive at a Paris-based multinational might have been a passing, internal disruption, but for one fact: Faber had become a champion among environmentalists and climate activists for having turned Danone into a company that focused not only on making money and increasing its share price, but also on trying to remake the agricultural business, an industry with a far-reaching impact on the environment. Faber had in 2020 declared Danone—maker of products like Activia and Actimel yogurts, and Evian water—France’s first enterprise à mission, a public company whose goals included targets aimed at bettering the world, akin to an American B Corp. Inserting climate change into Danone’s core strategy, Faber introduced a so-called carbon-adjusted earnings-per-share indicator, measuring the company’s value not only by its profits and revenues—as virtually every business in the world does—but by its environmental footprint too. The slogan he devised: “One planet, one health.”

His firing was also one sucker punch, which Faber says felt like being cast adrift, or “leaving your family,” as he put it to TIME. The reasons were complex, including the fact that the company’s share price on the stock markets—the financial world’s key measure of success—had risen a minuscule 2.7% in Faber’s six years in charge, compared with the rocketing growth of Danone’s competitors Unilever and Nestlé. Its revenues plummeted during work-from-home lockdowns, too, when items like bottled water were suddenly less relevant. Even so, Faber’s departure provoked a deeper question, one that lingers nearly a year later: Do CEOs risk a backlash from their investors if they make a point of putting the planet’s health above purely financial returns?

Answering that question could hardly be more urgent. An ever growing share of the global economy is in the hands of private business. By 2021, businesses accounted for 72% of the economic output in major industrial countries—triple what they did 60 years before—and, of that, more than one-third of the gross value comes from just 5,000 companies, like Danone, with revenues topping $1 billion, according to a study by the intergovernmental Organisation for Economic Co-operation and Development (OECD) and the consultancy McKinsey. How those companies succeed in cutting their carbon emissions—or in tackling problems like human-rights abuses, inequality or racial justice—will have a significant impact on the state of the world, for better or worse.

Of the 2,000 companies analyzed by the organization Net Zero Tracker, 682 have declared target dates by which they aim to zero out their carbon emissions. Brands like Coca-Cola and McDonald’s have vowed to cut plastic waste, and automakers like GM and Volkswagen say they aim to end the production of fossil-fuel cars within the near future.

There are holes in all these promises, but one thing is now clear: for companies, it has become a risk not to make them. The actual debate now is whether tackling those issues—“purpose-driven capitalism,” as it is known—is in sync or in conflict with what businesses have always thought was their main job: making money.

Read more: What Kind of Capitalism Do We Want?

“People ask me, ‘Is there a dissonance between profits and purpose?’” says Dan Schulman, PayPal’s president and CEO, who has said he aims to bring his social views to the financial tech giant, where he has hiked pay and cut employees’ health care costs. “My view is that profits and purpose are fully linked together,” he tells TIME from his home in Palo Alto, Calif. “We cannot be about just maximizing our profit next quarter. We need to be part of our societies,” he says. “We need to think about the medium term and the long term, and we need to act accordingly.”

More and more business leaders have begun to echo that opinion. Those voices were especially loud during the months leading up to the COP26 climate talks last fall, when corporate executives and government officials converged in Glasgow for the biggest such negotiations ever. In advance of the gathering, hundreds of companies raced to declare commitments to environmental and social issues, and to set net-zero targets.

Net zero is a mammoth job. Take, for example, the oil major BP, whose CEO Bernard Looney became one of the first fossil-fuel executives, in February 2020, to declare a net-zero goal for the company (its target date is 2050); BP alone adds a huge 415 million metric tons of carbon to the atmosphere each year, all of which, according to Looney, the company intends to zero out with oil-production cuts, ramped-up renewable energy and the use of carbon capture—technology, with still uncertain results, that removes carbon from the air. “We’re reallocating capital, we’re restructuring the company,” Looney told TIME during a November interview in his London office. “We are all in on the transition.”

It is easy to dismiss the proclamations of corporate executives like Looney—and many surely do. After all, their hugely profitable business operations have clashed with environmentalists for decades; in the run-up to COP26, organizers told oil and gas executives, including Looney, that they could play no formal role in the talks because it was “unclear whether their commitments stack up yet.”

Plus, despite all the talk of purpose-driven business, the world has yet to invent any sure way to measure whether companies in fact make good on their environmental commitments. “There is no universally agreed system,” says Ian Goldin, professor of globalization at Oxford University. “The counting relies on self-reporting.” That system is deeply faulty at a time when companies are making promises about limited solutions like carbon capture or committing to planting billions of trees in order to “offset” their emissions. “You say you’re planting a forest, or the airline is offsetting your air miles,” Goldin says. “Is anyone tracking if that forest is there? Has someone also claimed that forest? There is no system in place that has accountability to it.”

Read More: As More Companies Make Net-Zero Pledges, Some Aren’t as Good as They Sound

And yet the fact that so many corporate executives feel compelled to make such statements signals just how drastically the climate crisis and social upheavals have impacted business decisions within a very brief period of time.

The onrush seemed to begin in earnest in January 2020, when Larry Fink, head of BlackRock, the world’s biggest asset-management company, announced in a letter to CEOs that “climate change has become a defining factor in companies’ long-term prospects.” Though that fact seemed obvious to climate activists, the statement was widely regarded in the financial world as a game changer. Fink—whose firm manages close to $10 trillion in assets—was telling companies, and their potential investors, that those without a climate strategy faced a shaky future. “We are on the edge of a fundamental reshaping of finance,” he wrote.

It is no surprise that companies have since rushed to put climate policies in place. “We have seen quite significant commitments made,” says Paul Polman, co-author of the book Net Positive and co-founder of IMAGINE, a sustainability-focused business consultancy based in London. Until three years ago, Polman was CEO of Unilever, the $135 billion consumer-goods behemoth, where he drove a dramatic overhaul of the company, implementing environmental commitments and lobbying officials on issues of poverty and climate.

In a move that was hugely controversial at the time, Polman scrapped Unilever’s quarterly earnings reports—standard for publicly traded companies—on his first day in office in 2009, saying the practice forced CEOs into short-term decisions in order to push up share prices, at the expense of longer-term social issues. Although that angered some investors, Polman told Harvard Business Review, “I figured I couldn’t be fired on the first day.”

Now, principles for which Polman fought a relatively solitary battle for years have been adopted by countless other business leaders. “There has been more progress in the last year and a half than the previous five years,” he tells TIME.

Even Emmanuel Faber still thinks purpose-driven capitalism brings with it more reward than risk. By his telling, his firing had little to do with his environmental commitments. In his mind, it resulted from the intense financial pressure the pandemic brought, which prompted him to impose layoffs and cuts; Danone’s shares sank 27% on the French stock exchange in 2020. Activist shareholders from two funds in London, who together owned less than 4% of Danone, blamed the company’s difficulties on Faber’s management, and they pressed board members to fire him. “The mess in the Danone boardroom is a reminder that distractions from the core goal of making a profit can be dangerous,” the Financial Times opined days after he was fired. Within hours of the meeting, Danone released a statement saying that the board “believes in the necessity of combining high economic performance and the respect of Danone’s unique model of a purpose-driven economy”—perhaps hinting that the high returns were lacking. “A few people saw a window of opportunity at the moment when it was easy to destabilize the governance of the company,” Faber tells TIME, over tea in Paris. “In no way should that discourage progressive CEOs,” he says. “They have, ultimately, the backing of large shareholders.”

To Polman, the saga at Danone brought back memories of the battle he fought five years ago, while he was CEO of Unilever. In February 2017, the U.S. conglomerate Kraft Heinz launched a hostile takeover bid worth about $143 billion against his company. Back then, Polman was spending considerable time traveling the world, meeting government officials and NGOs about issues like mass poverty and clean water. “There is no better way than using companies like this to drive development,” Polman told me then, just weeks before Kraft Heinz made its hostile bid. When I asked Polman whether he was prepared to be fired as CEO, if shareholders finally grew tired of his busy social campaigning, he said, “I never wanted to be a CEO, and I don’t really care about that.”

Kraft Heinz’s 2017 bid collapsed within days, after most shareholders backed Polman. But five years on, Polman is still deeply marked by the episode, which he says crystallized a fraught conflict within the world’s biggest companies. “These were two opposing economic models,” he says. “One focused on a few billionaires; the other focused on serving billions of people.” He believes Kraft Heinz “would have milked the company.”

Both Polman and Faber saw their companies as a means to improve the world, rather than simply profitmaking machines. Yet there were crucial differences between their situations. For one thing, Unilever was able to try save the world while making boatloads of profit; shareholder return was about 290% over Polman’s decade running the company. Danone, by comparison, struggled. That left Faber vulnerable to doubts and hostile challenges, even while he gained fans outside the financial world, and many inside too. Still, not even Polman’s profitable returns at Unilever sheltered him from shareholders growing irked as he focused on campaigning for a better world. British shareholders shot down his plan in 2018 to close Unilever’s London headquarters and consolidate at the company’s other base, the Dutch port of Rotterdam; Polman resigned within months.

Read more: Good Intentions Are Not Enough. We Must Reset for a Fairer Future

Despite the trend toward purpose-driven capitalism, one fundamental truth remains: companies need to be profitable. “If you go bankrupt, or get taken over, you certainly cannot be investing in the long term,” says Goldin, the Oxford professor, whose 2021 book Rescue examined how businesses have weathered the pandemic. “You need to be successful in the short term to think about the long term,” he says.

The optimistic view is that those two needs—short-term profits and long-term vision—might finally be inching closer together, after decades in which the first has dominated the second.

One hint is the steep rise in ESG (environmental, social and governance) investment funds that focus on those issues. Even though the vast majority of regular people have little idea of what harm the companies in their pension funds might wreak on the planet or in communities—and it’s still unclear how quickly that might change—the new money plowed into those funds, which claim to be attracting trillions of dollars, more than doubled from 2019 to 2020.

And increasingly, CEOs realize they can hire top talent and keep customer loyalty if their companies are seen as championing environmental and social issues. “I am beginning to see more and more shareholders embrace that concept,” says PayPal CEO Schulman. He says that major shareholders had told him in a meeting the previous day that they appreciated the company’s diversity and equity program. “We do it regardless, because it is the right thing to do,” he says. “But it is nice it is being noticed.”

—With reporting by Eloise Barry