by Steve Gilman edited by Elizabeth Henderson
Interstate NOFA Policy Coordinator
Acting through its North America subsidiary at the end of August, Groupe Danone, the multinational corporation and owner of Horizon Organic abruptly cancelled the contracts of 89 of their longtime northeast milk suppliers in Vermont, New York, New Hampshire and Maine – effective by August 2022. Danone’s exit means that over 10 percent of the northeast region’s organic dairy farms will be left without a market since other organic processors have limited capacity to accept new producers. The terminations will further have an acute impact on local economies, community resilience and area environments.
With no buyer/hauler/processor for their daily milk production and no legal recourse available due to Danone’s one-sided contracts, the 89 family farm dairies that helped build the Horizon Organic Milk brand for decades were suddenly facing liquidating their herds or going out of farming entirely, even though sales of milk to northeast consumers far outweigh regional milk production. Despite congressional and state inquiries, it took months to even identify the full list of affected farms because Danone’s contract confidentiality clauses include termination for divulging farm information.
Word of the Danone action quickly spread through farming communities. Due to its callousness, local media picked up the story – turning it into a major report regionally and nationally. Initially Danone declined to respond, but when pressed officials revealed their corporate strategy. They are in the process of developing a completely redrawn Eastern Region in Ohio, New York and Pennsylvania to fit a new manufacturing footprint that includes taking on 50 similarly sized replacement farms to feed their newly designated centralized processing plant in western NY, near Buffalo.
As a result of this relocation strategy the corporate decision to drop the 89 farms was based on increased milk transportation costs since the Upstate New York and New England farms were suddenly located too far east to maintain company profitability.
Upon closer inspection, we can see that there are other factors at work behind the scenes in Danone’s overall corporate plan. Doing the math of 89 farms out, replaced by 50 farms in, it’s clear that milk from outside the region is making up for the contrived eastern supply shortfall. After Danone’s 2017 Whitewave purchase, they dropped numerous smaller-sized Horizon dairies out west, replacing them with a few controversial 15,000 to 20,000 cow organic dairy producers located mainly in California, Colorado and Texas.
These behemoths have direct access to nearby ultra-pasteurization processing plants enabling bulk milk to easily be stored and shipped all around the country to localized bottling plants for retail sales. Despite the bucolic family farm scenes with cows-out-on-pasture printed on the milk cartons, this factory farm industrialized production is resulting in a flood of cheap western milk that has led to a diminishing pay price for the already beleaguered family scale farms. With the price of organic milk still holding steady at retail, Danone (with its $27 billion in annual revenues) stands to reap increased profits on each carton of milk sold to consumers nationwide.
Once the word got out, the organic community responses were fast and furious. With years of experience battling the industrialization of organic dairy, the Northeast Organic Dairy Producers Association led the regional charge, providing extensive updates and background materials for the mounting coalition and press inquiries. NOFAs VT, NH and NY along with the Maine Organic Farmers and Gardeners Association sprang into action to support their farmers by creating statewide task forces to work closely with governmental officials and agriculture departments. The Northeast Dairy Business Innovation Center, housed at the Vermont Agency of Agriculture, stepped in with supportive financing, tech assistance and business development funding.
Pursuing numerous strategies on the national level, the Organic Farmers Association (OFA) in coordination with the National Organic Coalition (NOC), took on an overall organizing function, leading initiatives and hosting regular regional coalition strategy calls. They launched a petition designed to pressure Danone executives into a meeting to re-evaluate the farm cancellations while calling for immediate contract extension and severance package support. Although the coalition set an initial goal of 10,000 signatures the petition quickly collected over 15,000 names.
OFA and NOC also utilized their contacts with members of Congress to orchestrate a pubic bi-partisan Congressional letter to Secretary of Agriculture Vilsack urging support for the affected farms and communities. Under the leadership of longtime organic champion Senator Patrick Leahy of Vermont, the letter was signed by the delegations of the affected states.
Also advocating for a long range solution, the Congressional letter specifically urged the final USDA implementation of three organic rule-making initiatives designed to level the playing field for smaller producers that have been held up over decades – or withdrawn entirely by the Trump Administration. Activated once again are the Origin of Livestock rule; the resubmitted Organic Livestock and Poultry Practices final rule and the ongoing Strengthening Organic Enforcement rule. When fully implemented each of these regulatory initiatives can offer deeper protections for smaller scale organic farmers and insure greater integrity for organic in the marketplace.
Challenging Danone’s B Corp status
A further coalition strategy has emerged to hold Danone North America accountable by publicly challenging their B Corporation or “B Corp” status. Administered by B Lab, a global non-profit verifier, B Corp businesses must “meet high standards of confirmed social and environmental performance, public transparency and legal accountability” by using their “profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment” and “working toward reduced inequality, lower levels of poverty, a healthier environment, stronger communities, and the creation of more high quality jobs with dignity and purpose.”
Companies must re-certify every three years to retain their B Corp status. Instituting their membership in 2015, Danone N.A. (owner of Horizon Organic plus 20 other brands in the US and Canada) last filed in 2018. But in light of the 89 northeastern dairy farm terminations their B Corp branding is now ripe for dispute.
Until recently, the Paris-based Groupe Danone parent was in the forefront of multinational corporations involved in transforming their business model into “a force for good” with over 50% of their global business covered by B Corp certification. But in late 2020 a hostile takeover transformed their beneficial social objectives. The hedge fund Bluebell Capitol teamed up with other investment entities behind the scenes to oust and replace Chairman and CEO Emmanuel Faber in March 2021 in a profit-driven radical overhaul of Danone’s “purpose-driven” corporate mission.
As a widely-proclaimed “humanist capitalism” advocate, Faber had worked his way up from Chief Financial Officer in 2000 to CEO in 2014 and then Chairman/CEO in 2017 and was largely responsible for gaining Danone’s B Corp status along with instituting a full corporate reorganization strategy based on broader international social and environmental goals. With Faber summarily removed, the Board of Directors installed a new profit-centered leadership – while still retaining their B Corp standing.
Petitioning B Lab
By early November the initial petition to Danone N.A had fruitfully achieved a meeting with corporate executives for discussions on significantly modifying their action, ranging from immediately extending farm contracts to 18 months with severance compensation for starters, along with staying on in the northeast and investing in regional dairy farm families and communities long term. Meantime, Task Force negotiations on behalf of the terminated farmers at the state and federal levels were starting to yield helpful initiatives with further assurances of governmental and private support.
At this point a further coalition strategy moved into high gear with a petition to B Lab challenging Danone N.A.’s B Corp status. As part of their ongoing verification process, B Lab has a complaint and substantiation process built into their protocol that is designed to investigate violations to verify that corporate behavior is living up to the terms of the designation. Filed complaints must be accompanied by substantial documentation. As of this writing in mid-November 2021, this approach has been launched and is still in process.
While numerous organic organizations as well as wide-ranging media reports have been publicly questioning Danone’s B Corp status, not all the organizations in the coalition were choosing to sign on, however. Some who are B Corp certified entities themselves view B Lab as an important ally on social justice issues overall and are concerned about being part of denigrating it. Those moving forward with the petition assert that unless Danone’s certification is contested, B Corp’s credibility is at stake, leaving the brand wide open to major charges of consumer greenwashing.
The overall coalition decision to move forward with a petition with detailed supporting documentation is also in response to an interim B-Lab statement exonerating Danone N.A. issued before the complaints were filed. However, this comprehensive petition holds them responsible for clearly violating B Corp’s mission of corporate responsibility to their workers, the communities they serve and to the greater environment in order to maximize corporate profits. The petition concludes with a call to B Lab to conduct a formal investigation and put Danone N.A.’s status on probation until they reinstate the contracts of the 89 farms and invest in the communities that have contributed to their success and social claims – and to terminate their B Corp status if they refuse to do so.
Farms are a Community Treasure
It is important to realize that the wide scale economic, environmental and social effects of the loss of these northeast dairies goes far beyond the fields of the 89 farms that have had their contracts cancelled. The economic repercussions of shifting their farm production to far away industrial-scale CAFOs are huge. Importantly, the B Lab petition specifically spells out the significance of thriving family farms to their local communities, as well as to the entire region.
“…This action has affected and will continue to impact the communities that Danone N.A. had supported through decades of committed business partnerships. When organic dairy farms spend their profits locally, it benefits the entire community as a whole. For every dollar a dairy farm spends locally, about $2.50 in wages and other business transactions are contributed to the local, rural economy. Family-size dairy farms also create jobs off the farm in related sectors like sales and service, animal health, nutrition, ag input suppliers, lenders, transportation, accountants, and agronomists. Research has demonstrated that one New York state cow is able to spread an extra $15,000 in economic revenue. Removing 89 family farms from rural communities in the Northeast in one fell swoop will have a drastic impact on the economic viability of these rural communities and the urban communities they serve.”
The Future of Organic
The combined efforts of the task force are starting to show signs of success as developments continue to unfold. Stonyfield is interested in taking on some of the Horizon-cancelled farms in New England while Chobani Greek Yogurt is looking into acquiring some northern New York farms in a move to extend its company footprint into organic. Thanks to the initial petition, Danone N.A. is finally being brought to the conference table. State and national action is producing increased farmer supports. The widespread coverage in the media is giving Danone public comeuppance while a second petition is challenging their B Corp status.
Here in the 50th year of NOFA’s founding there’s still many a row to hoe to protect organic integrity. The list includes fair farmer contacts, racial equity, protecting bona fide organic standards, calling out gene edited GMOs, resisting corporate ascendancy and countering climate greenwashing. Consumers have to be brought into a deeper understanding of how organic community farms promote the livelihood of our entire region. Hopefully this egregious Danone action will spark greater activity — from communities to congress — to battle for organic veracity and bolster the future of organic.
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