His latest vacation photos have earned him a volley of green wood. Coming to disconnect “from the financial markets to open a new path in the Moroccan Atlas”, Emmanuel Faber suffered the wrath of environmental influencers on LinkedIn, bristling to see him praise this excursion carried out at the cost of a carbon trip. Yes, the ex-CEO of Danone is less consensual than it seems, and his paradoxes annoy.
“He is commonly considered a champion of responsible capitalism, describes Alexandre Rambaud, lecturer at AgroParisTech-Cired and co-director of the ‘ecological accounting’ chair. He has made great speeches on this subject, Danone has become a company with a mission under his presidency. All this before he was pushed aside by activist shareholders in search of profitability.” So much for the story, a bit romanticized. In reality, Danone had this vision for a long time: the speech of Antoine Riboud, the group’s founder, on the societal approach of the company goes back fifty years. “At Danone, Emmanuel Faber was mainly criticized for his interventionism, continues Alexandre Rambaud. I do not question his personal convictions. But they come into conflict with reality. This creates confusion between his thinking, actions and communication.”
Since December 2021, the Grenoble boss, a mountain lover, has been trudge to the top of an organization whose mission is to develop an international framework for extra-financial information for large companies. A kind of specific accounting, with indicators related to the environment, intended for investors to guide them in their choices. Souls sensitive to acronyms, abstain: Emmanuel Faber chairs the ISSB, an offshoot of the American private foundation IFRS, which competes with the work of Efrag, the non-profit association commissioned by the European Commission to develop similar standards. The technical issue is fundamental. It is all well and good to aim for carbon neutrality objectives by 2050, but it is still necessary to have reliable data to judge their credibility. The European regulations, which will concern more than 50,000 companies in Europe from 2024, aim to define the key figures – the greenhouse gas emissions of suppliers and customers, for example – which will have to be published in addition to the financial results.
A very partial vision compared to European ambitions
The problem is that the vision carried by the ISSB is very partial compared to the ambitions of Europe, a pioneer in the field. The American organization, based in Frankfurt, is confined to the climate, when the Efrag sweeps wide, from pollution to water consumption, including biodiversity, the circular economy, but also employees, the chain of value, corruption… Above all, the ISSB claims a so-called financial materiality approach that is supposed to measure the consequences of climate change on profits. How much would it cost to flood a factory on the coast in the event of sea level rise? The legal action against an association after the pollution of a site? Or the abandonment of a product made obsolete by the ecological transition? “The stated objective of the ISSB is to maximize the value of the company in a context of climate change.
For its part, Efrag wants to limit the negative impact of economic actors on nature and society, such as greenhouse gas emissions or the loss of biodiversity”, sums up Laurent Babikian, director of capital markets at CDP. (formerly the Carbon Disclosure Project), an international organization that helps multinationals assess their environmental impact. Europe is thus striving to align itself with the objective of the Paris Agreement: to limit the global warming over the course of the century. “Companies are urged to say whether they are reducing their greenhouse gas emissions, and how,” says Patrick de Cambourg, chairman of the sustainable reporting board at Efrag. Transparency does not dictate behavior, but it does influence it. Readers of the sustainability report will then be able to form an opinion on those who are committed to a credible approach… and the others.”
That Emmanuel Faber sets himself up as the mouthpiece of a minimalist approach, that surprised more than one. “This gesture is not insignificant, underlines Alexandre Rambaud. If an American had been appointed head of the ISSB, there would have been a more frontal rejection of Europe.” But European cohesion itself is cracking. The adoption in the United States of the Inflation Reduction Act, an effective driver of green reindustrialization made in America, is no stranger to this. The right of the European Parliament is hostile to the green pact for ecological transition. As for the “regulatory break” invoked by Emmanuel Macron in mid-May, it did not go unnoticed. “The pressure on Ursula von der Leyen is very strong, especially from the CDU, the German conservative party close to employers”, points out the MEP, and former Green, Pascal Durand (Renaissance). On March 15, the President of the Commission said she wanted to cut companies’ publication obligations by 25% by autumn. It remains to be seen whether this cut will exclude certain sections of the initial texts, such as biodiversity or human rights, ignored by the ISSB. At the idea that only the climate part remains in the extra-financial standards, Laurent Babikian gets carried away: “We have no time to lose. The risk is that the vote of the European Parliament will be postponed to 2024, year of elections and renewal of the Commission.”
Experienced mountaineer
Based on the work of the “ecological accounting” chair that he co-hosts, Alexandre Rambaud judges that “the taking into account of the sciences is almost zero in the approach of the ISSB. Their vision does not lead to the management of ecosystems compatible with their preservation”. In this light, the objective of the Paris agreement becomes out of reach. Pragmatic, Patrick de Cambourg prefers to retain points of agreement rather than disagreement. This figure from the consulting firm Mazars, a great professional in the accounting standard, believes that the two approaches “are not so far apart”. While pointing out the major limit of the American concept: “How to determine that a possible impact of companies on their environment or on people would not involve any financial risk and therefore would not be of interest to investors?”
These debates are also reviving old quarrels, those that shook the world of financial accounting twenty years ago, when the European Union chose to apply IFRS standards, a language spoken today in 168 countries. “This decision marked an abandonment of European sovereignty over accounting law, to the benefit of a private law body”, emphasizes Alexandre Rambaud. Ironically, the United States never adopted IFRS. “A real lesson in geopolitics!” recalls the researcher, who is concerned about the growing weight of the ISSB. With the risk that a distortion of competitiveness emerges between Europe and the areas where this less restrictive framework would prevail.
The Old Continent still retains a solid advantage: it hosts 85% of the assets of investment funds labeled as sustainable. From 2028, it even intends to extend its influence by requiring that the European subsidiaries of global groups also show a green paw, and this for all of their activities. Invited last January to the Collège des Bernardins, Emmanuel Faber had clearly recognized his role: “The ISSB focuses on the financial markets.” Before adding, skillfully: “Is this enough? We cannot accuse finance of having amplified the limits of the system worldwide, and say to ourselves that if we work on a different language and aim in finance, that will not have a massive and systemic impact.” To walk on a ridge line, you needed an experienced mountaineer.