Water supply<\/u>: Danone relies heavily on water availability to sustain the pastures and livestock required to produce its dairy and plant-based products. However, rising temperatures are leading to water shortages around the world. In addition, as temperatures increase, livestock and pastures require more water to sustain themselves, which results in a magnified water shortage.[1]<\/a><\/p>\n Livestock behavior:<\/u> Rising temperatures cause deviations in animals\u2019 optimal temperature and deviations in excess of 4\u00b0F negatively impact milk production yields. [1]<\/a><\/p>\n CO2 concentration:<\/u> Increased CO2 concentrations speed up the growth rates of plants; however, this results in smaller plants and reduced yields, because soil nutrient levels are not sufficient to match the accelerated growth rate. The resulting lower yields are also amplified by higher temperatures.[2]<\/a><\/p>\n These factors reduce supply chain reliability and could lead to significant raw material cost increases.<\/p>\n Optimizing the supply chain to curtail the impact of climate change<\/strong><\/p>\n In the short term, Danone is preserving natural resources by increasing operational efficiency. Danone is on its way to reducing its own water use in factories by 60% in 2020 compared to the year 2000. The company is also reducing energy use across all offices and factories. [3]<\/a> In addition, the company is increasingly relying on trains to ship product, instead of by road transport, to lower carbon emissions[4]<\/a>. Danone has also taken a systematic approach to carbon emissions reduction by partnering with software company SAP to roll out a carbon calculation and management system that allows the company to measure carbon emissions for Danone\u2019s 35,000 skus.[5]<\/a> This data allows managers to make sustainable strategic decisions.<\/p>\n In the medium term, Danone is working with its farmers to develop water-efficient farming systems[6]<\/a> and other sustainable practices, such as rotating crops and sustainable fertilizer management[7]<\/a>. Additionally, Danone is striving to completely eliminate the use of paper from unsustainable sources, like deforested areas, by the year 2020.[8]<\/a> Finally, the company is starting to roll out packaging made out of plant-based plastic, an approach that was developed through the Bioplastic Feedstock Alliance, a partnership with the WWF and other leading food and beverage companies.[9]<\/a> [10]<\/a><\/p>\n Through these changes, Danone was able to reduce its carbon emissions as a percent of sales by 50% since 2007, and the company is on track to be carbon neutral in absolute terms by 2050.[11]<\/a><\/p>\n Figure 1: Danone’s plan for becoming carbon neutral<\/p>\n Resolving the Prisoner\u2019s Dilemma through increased regulations and partnerships across the food industry<\/strong><\/p>\n While Danone has already made significant changes to its supply chain, the company is still contributing to climate change, as it will not be carbon neutral until 2050. However, setting more aggressive targets would likely cause a drastic increase in raw material costs threatening the firm\u2019s profitability. There is a limit to customers\u2019 willingness to pay for \u201cgreen\u201d products, and poorer consumers would no longer be able to afford Danone\u2019s \u201cbetter for you\u201d products. Furthermore, the farmers that provide Danone with raw materials would have to bear a share of these cost increases. This would make it more difficult for them to make a living. Additionally, if Danone is the only large food company that takes more aggressive goals, most price-sensitive consumers would shift to competitors. To avoid this \u201cPrisoner\u2019s Dilemma\u201d, Danone should lobby in favor of more stringent carbon regulations within the food industry. Indeed, coordinated collective government responses have proved more effective in tackling climate change than the private sector.[13]<\/a> Additionally, Danone should work closely with other large food companies to develop a set of common sustainable practices that could be recognized by the customer through a \u201cgreen label.\u201d Danone has already engaged in this type of work within the Bioplastic Feedstock Alliance, but I believe this sharing of best practices should expand to these companies\u2019 agricultural supply chain. Finally, Danone could consider profit sharing initiatives with its farming partners to ensure that incentives are aligned across the supply chain and that the required changes are sustainable for all entities involved. Full vertical integration with farmers could also potentially help Danone better adapt its supply chain to climate change, but could this idea have negative implications?<\/p>\n <\/p>\n [791 words]<\/p>\n <\/p>\n [1]<\/a> National Climate Assessment<\/em>, US Global Change Research Program, 2014, nca2014.globalchange.gov\/report\/sectors\/agriculture#statement-16364.<\/p>\n [2]<\/a> Climate Impacts on Agriculture and Food Supply.\u201d EPA<\/em>, Environmental Protection Agency, 6 Oct. 2016, 19january2017snapshot.epa.gov\/climate-impacts\/climate-impacts-agriculture-and-food-supply_.html#ref1.<\/p>\n [3]<\/a> Water<\/em>. Danone, www.danone.com\/en\/for-all\/sustainability\/better-world\/water\/.<\/p>\n [4]<\/a> Danone. \u201cLess CO2 for Every Tonne of H20 \u2013 Danone \u2013 Medium.\u201d Medium<\/em>, Medium, 2 Feb. 2017, medium.com\/@Danone\/less-co2-for-every-tonne-of-h20-e617bfe4303f.<\/p>\n [5]<\/a> Danone and SAP Team Up to Analyze and Measure Carbon Footprint Across 35,000 Products .\u201d News.sap.com<\/em>, SAP, 2012, news.sap.com\/danone-and-sap-team-up-to-analyze-and-measure-carbon-footprint-across-35000-products\/.<\/p>\n [6]<\/a> Water<\/em>. Danone, www.danone.com\/en\/for-all\/sustainability\/better-world\/water\/.<\/p>\n [7]<\/a> \u201cDannon Announces Breakthrough Sweeping Commitment for Sustainable Agriculture, More Natural Ingredients and Greater Transparency.\u201d Dannon.com<\/em>, 29 Aug. 2016, www.dannon.com\/the-dannon-pledge-on-sustainable-agriculture-naturality-and-transparency\/.<\/p>\n [8]<\/a> Packaging<\/em>. Danone, www.danone.com\/en\/for-all\/sustainability\/better-world\/packaging\/.<\/p>\n [9]<\/a> \u201cDanone Uses Bioplastics for Yogurt Packaging.\u201d Food Packaging Forum<\/em>, www.foodpackagingforum.org\/news\/danone-uses-bioplastics-for-yogurt-packaging.<\/p>\n [10]<\/a> \u201cDanone Is Part of the Bioplastic Feedstock Alliance.\u201d Down To Earth<\/em>, downtoearth.danone.com\/2013\/11\/20\/danone-is-part-of-the-bioplastic-feedstock-alliance\/.<\/p>\n [11]<\/a> Climate<\/em>. Danone, www.danone.com\/en\/for-all\/sustainability\/better-world\/climate\/.<\/p>\n![\"\"](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/tom-paper-300x160.jpg\")
<\/a>[12]<\/a><\/p>\n