With Danone Cutting the Contracts of 89 Small Organic Dairy Farmers, B Corp has Made a Decision About the Company's Certification Status

How Organic Insider operates: We accept no advertising, we have no paywalls and we make our newsletters free to everyone — because vital information about our industry needs to get out to as many people as possible. Please consider supporting our work, whether you are an individual or a company. Thank you so much.

Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency and legal accountability to balance profit and purpose.

Given that many prominent organic brands are B Corps, what happens with this certification has real relevance to our industry.

At issue is what recently took place with Danone North America (Danone), when it cut the contracts of 89 small organic dairy farms in New York and New England, serving a devastating blow to these farmers and their communities.

While businesses are completely free to make decisions that are in their best interest, this move was complicated by the fact that Danone is also the largest B Corp in the world.

From B Corp’s website, it says:

“The B Corp community works toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose. By harnessing the power of business, B Corps use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.”

Furthermore, Certified B Corporations are legally required to “consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.”

DANONE’S ACTION — OR LACK OF ACTION

Because of the intricacies and nuances of the organic dairy industry in the Northeast, it was widely known that if Danone cut the contracts of these 89 organic dairy farmers, they would have few options for survival and very possibly face financial ruin. That would mean the small communities where these farms operate would also feel the effects, including a lower tax base and the elimination of important local businesses, which impact other nearby businesses.

At the time of the announcement, both Organic Valley and Stonyfield — the only obvious and realistic options for these farmers —  were not taking on new farms. Two weeks ago, seeing the calamity that was unfolding, Stonyfield announced that it would invite some of these farmers into its network and would create a task force to help all of the farmers.

“It’s a challenging time for the organic dairy market to absorb more farms, but we can’t just stand by and watch these farms in our own backyard go out of business,” said Gary Hirshberg, co-founder and chief organic optimist of Stonyfield.

Organic Valley has not committed to taking on any of these farmers, as it is already at maximum capacity. Stonyfield is a B Corp, and Organic Valley is a cooperative of farmers.

According to Ed Maltby, executive director of the Northeast Organic Dairy Producers Alliance, going at it alone is just not an option for most of these organic dairy farmers.

“They simply do not have the time, inclination or ability to farm, market, create new value-added products and distribute their products. On its own, organic dairy farming is brutally difficult, especially with the low prices and negative margins, at times. Aside from Stonyfield and Organic Valley, there is pretty much nowhere for these farmers to sell their organic milk, and every player in the industry understands this, including Danone.”

When Danone made this decision to cut the contracts, it cited “growing transportation and operational challenges” as the reason. For the first six months of 2021, the net income for Danone’s parent company was 1.068 billion euros ($1.238 billion dollars).

Knowing that these 89 organic dairy farmers would have limited options, what steps did Danone take to help soften the blow and make sure that it was in alignment with its B Corp commitment to strengthen communities? Did it fulfill its legal obligation to consider the impact of its decision on the community?

Upon making the announcement, Danone offered the 89 organic dairy farmers an additional one-year contract. Compared to the 90-day notice that Dean Foods gave dairy farmers several years ago when their contracts were cut, the one-year period is much more favorable.

Yet, that one-year contract extension is hardly a panacea.

What Danone did not do is exhaust every option in advance, such as working directly with the 89 farmers and respective government officials in the seven states to come up with a viable plan, or seeking financing for transfer stations or larger on-farm tanks in order to cut costs.

If the company had turned over every stone in order to come up with a solution that worked for all parties, it would not be facing such backlash from the organic industry and politicians.

Senate Majority Leader Charles Schumer (D-NY) is fighting for answers from Danone and is calling for aid from the company.

In Maine, Governor Janet Mills said, “I’m upset. Danone is a B Corporation. They’re supposed to be involved with social justice.”

In a letter sent to Danone (the parent company) from U.S. Representatives Peter Welch (D-VT), Chellie Pingree (D-ME), Jared Golden (D-ME) and Annie Kuster (D-NH), the lawmakers wrote, “By all accounts, your decision to sever the contracts of these 89 farms was one based solely on maximizing profits, regardless of the devastating consequences for the families and communities you cast aside and despite the reputational benefits and profit you gleaned from their work. Clearly, your 2020 corporate revenue of $27 billion was not enough.”

It went on to say, “Your actions against these Northeast farmers are in direct conflict with the B Corp commitment of ‘balancing profit with purpose’ and ‘using business as a force for good.'”

B CORP MAKES A DECISION

Last night, Alexa Harrison, senior public relations manager at B Lab U.S. & Canada, emailed Organic Insider with the following message:

B Lab (the entity that oversees the B Corp certification) has reviewed this situation internally and found that Danone North America is not in violation of the B Corp standards. B Lab’s standards were created to provide a framework for continual improvement and evaluation of positive impact and negative risk of a company’s social and environmental performance, transparency, and accountability throughout all aspects of their business. Our certification standards do not restrict a B Corp’s supply chain selections e.g. requiring a certain type of product from a certain type of supplier. Danone North America has been and continues to be a strong advocate for the B Corp movement, and while these decisions could impact a company’s score, it does not affect certification status.

It is now up to the entire organic community, including those that are B Corp members and those that are not, to determine whether this was handled in an equitable manner and what level of integrity the B Corp certification now carries.

In the meantime, no one should expect to hear much from the 89 organic dairy farmers. According to Ed Maltby, they are either under a confidentiality agreement with Danone, do not want to jeopardize the one-year contract extension from Danone, or do not want to be perceived as troublemakers by either Stonyfield or Organic Valley.

With gratitude, Max Goldberg, Founder