« View All Blog Posts

McDonald’s Beefs Up Its Sustainability Commitments
By Michael Schweibinz

In a world where consumers and businesses alike are realizing the impending need for sustainability, it may be easy to think that some industries—like “fast food” (burgers, fries, etc.)—are not making significant strides to change their business practices. The familiar logos of these corporate giants tend to produce thoughts of cheap, low quality food, workers making minimum wage, and service models designed to maximize profits.

Surprise, surprise! The fast food juggernaut, McDonald’s, is on the forefront of making their beef 100% sustainable. The company plans to start the purchase of “sustainable beef” by 2016.

Although this purchasing development is a huge first step in the ultimate goal of selling 100% sustainable beef, Bob Langert, McDonald’s Vice President for Global Sustainability, is not yet ready to say for sure how much McDonald’s beef will have the “Sustainable Stamp” that first year. The goal is to increase sustainable beef purchases year by year, and it could take a decade for the company to be able to boast that all of the beef it sells is sustainable.

The challenges are massive. To start, how does one define “sustainable beef”? McDonald’s did not want to establish the definition; instead, it created a collaboration of representatives from every level of the cattle supply chain. In Denver, in November of 2010, cattle ranchers, meat processors, packaging specialists, environmental activists, and other retailers (such as Walmart) met to discuss the future of the beef industry.

From that initial meeting came the creation of the Global Roundtable on Sustainable Beef (GRSB) in 2012. GRSB has since come up with a six part draft including the main areas that they believe should dictate whether beef is sustainable or not. This draft has been sent to a vast group of stakeholder’s who will be voting in March on whether or not to make the specifics of the document available to the public. After a two-month public comment period, there will be a second Global Conference on Sustainable Beef in August, 2014. This conference will take a final vote on whether to validate the document as the formal requirements for sustainable beef.

The six principles of the draft include:

  • People (human rights, safe and healthy work environment)
  • Community (culture, heritage, employment, land rights, health)
  • Animal health and welfare
  • Food safety and quality
  • Natural resources (ecosystem health)
  • Efficiency and innovation (reducing waste, optimizing production, economic vitality)

One of the biggest challenges McDonald’s will face is the issue of traceability. Because the company is horizontally integrated, it does not have complete control over its supply chain. This will make it difficult to ensure that its suppliers are following the regulations that are required for the beef to be considered 100% sustainable. One kink in the supply chain could destroy the integrity of whole system.

McDonald’s suppliers will most likely need to adapt their own businesses models as they accommodate new standard requirement needs. These changes will inevitably result in added costs—costs that will be transferred down the supply chain, all the way onto the golden arches.

Langert says that it’s too early to say whether future beef prices will rise or not due to these price fluctuations. He does believe, however, that operational costs may eventually drop as a result of the necessary changes. His view is that due to the new, sustainable practices that will be put into place, efficiency throughout the supply chain will rise. As efficiency rises, prices throughout the supply chain would be expected to lower—resulting in the same or similar prices for consumers.

So why is McDonald’s committing to such large-scale systems change? Langert answers this question very simply: McDonald’s customers want this change. Not only has research shown that McDonald’s customers truly care about where their food comes from, but the public also expects a strong output of Corporate Social Responsibility from large companies like McDonald’s. It will be both good for the environment and accommodate the desires of McDonald’s stakeholders.

 

Read more about McDonald’s sustainable beef plans, the ever-changing industry, or about reactions to this news.

 

At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?

 

Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.

 

Posted: March 17, 2014