McDonald’s – is the Big Mac in BIG trouble?
McDonald's is undoubtedly amongst the most well-known brands across the world, but it has an uncertain future ahead given it's complex position with respect to climate change – Causing it and trying to mitigate its impact at the same time.
Mc Donald’s has become a symbol of globalization, a flatter world. It’s one of the top 10 most valuable brands in the world (1) in 2016. World’s leading global food services retailer, The big mac is used by the Economist for the price parity index (2) across 100 countries it is present in.
But is this proliferation of the fast food giant synonymous with a laggard approach on climate change issues? As per, the most recent climate count rating for Mc Donald’s it has fallen in position(3) from last year. They are better than competitors like Yum foods and Wendy’s but way lower than some of the other climate conscious corporations.
Let’s review how McDonald’s is killing us one happy meal at a time, not just with obesity but also with climate impact. Mc Donald’s provides one of the cheapest meal options currently, but all of this comes at a cost. Not to the consumer, not to the corporation but also to the environment.
The Unhappy Meals
- Deforestation for Palm Oil – Mc Donald is one of the top 10 buyers of palm oil’s in the US and is currently purchasing only 13% (4) of the total oil from certified deforestation-free sources. As per the UCS USA, Mc Donald’s palm oil scorecard for 2015 is 24.4, only 3 points up from the previous year and categorized as a company with little commitment to the cause of deforestation.
- Beef and GHG emission – While unhealthy livestock practices to raise more cattle for more beef is an increasing cause of concern, the methane produced by corn fed cattle results in about 22 percent of methane emission in the US (5).
- Energy use across the supply chain – from production to running the swanky stores, Mc Donald’s reported a 6. increase in energy consumption per consumer (6) in 2014.
- Packaging and food wastes – the very packaging costs that help Mc Donald’s achieve a hefty bottom line also end up rotting in our landfills and causing pollution. As per a study done in 2009. Mc Donald’s packaging waste was 29% of the fast food litter on the roads. (7)
A number of environmental organizations have time and again shamed the burger chain to increase efforts in reducing its contribution to global warming and climate change. And that has led the burger giant to do a few of the below things in the name of green reporting and marketing
- It has signed President Obama’s ‘American Business Act on climate pledge’ (8)
- Supports sustainable beef – In 2014 the company aimed at purchasing a portion of it’s beef from sustainable beef sources. In 2011 it joined hands with the WWF and its suppliers to establish the Roundtable for Sustainable Beef (9). By 2020 the corporate envisions to use only sustainable beef.
- In Restaurant recycling – by 2020 the company plans to increase in – restaurant recycle to 50% and reduce waste. (10)
- Sustainable Palm Oil – By 2020 the company aims at shifting 100% to RSPO certified Palm oil (11)
- Sustainable packaging – Use 100% of the packaging material from fiber or recycled sources by 2020 (12). Efforts to achieve zero deforestation for all the fiber sourcing under its global commitment to deforestation.
- Energy goals – 20 percent increase in energy efficiency in company-owned restaurants. (13)
While all the above commitments look good in investor reports and annual reports and make a great PR case, the bigger problem is that climate change is posing an impending threat to Mc Donald’s sustainability as a business. The very operating model and business model that helped Big Mac become an object of price parity across nations are now becoming increasingly unsustainable. It’s a vicious circle. Earlier the burger behemoth was irresponsibly picking cheaper options, cutting costs, passing all the cost to environmental hazards but now with these initiatives it is again getting the cost in its own sheets. Which will further lead to price hikes and bring down the affordability of the ‘dollar menu’.
“Secret Sauce” for the future
The company needs to bring transformation across its supply chain.
- Start from grass fed cattle (who will release less methane compared to corn-fed cattle) ,
- Use methane compost bags on cows to stop methane from being released in the air, instead capture all of it and use it to produce bio-energy and self-sustain the farms, increasing energy efficiency.
- It can work hard in reducing energy consumption across stores by using energy-efficient devices. It can also set up equipment to convert all the restaurant waste into bio-energy, use solar panels to self-sustain the outlets.
This company can no longer shrug climate change, for its own good.
Word Count – 776 words
- http://www.forbes.com/pictures/mli45fflem/9-mcdonalds/#3b5a21d28daa
- “The Big Mac index”. – http://www.economist.com/content/big-mac-index
- http://www.climatecounts.org/scorecard_score.php?co=37
- https://www.theguardian.com/sustainable-business/palm-oil-name-shame-wwf
- http://www.bloomberg.com/news/articles/2016-08-18/could-less-gassy-livestock-be-a-cash-cow
- http://www.greenretaildecisions.com/news/2015/05/21/mcdonalds-energy-use-ghgs-increase-in-2014
- http://www.telegraph.co.uk/news/earth/earthnews/4223106/McDonalds-waste-makes-up-largest-proportion-of-fast-food-litter-on-streets.html
- http://www.bizjournals.com/chicago/news/2015/10/19/mcdonalds-makes-a-big-commitment-to-battling.html
- http://corporate.mcdonalds.com/mcd/sustainability/signature_programs/beef-sustainability.html
- http://corporate.mcdonalds.com/content/mcd/sustainability/sourcing/priority-products.html
- http://corporate.mcdonalds.com/content/mcd/sustainability/sourcing/priority-products.html
- http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/2.0/pdfs/sustainability/McDonald_s_2016_Sustainable_Fiber_Update.pdf?1.html
- http://corporate.mcdonalds.com/content/mcd/sustainability/planet/climate-and-energy.html
Dear Shray, thank you for this great post!
You bring out a great topic and also exemplify how almost every industry is contributing to climate change and the importance of accountability when it comes to the big players in those industries. Mcdonald is a great example of a company with a business model that directly impacts global warming. But on the flip side, is also a great example of a company that is aware of the consequences of its business model and that is actively doing something about it. You mentioned that the initiatives the company is currently doing will impact their business by affecting the variables that made them competitive on the first place, price. However, I believe that Mcdonalds’ approach has been extremely clever. They have started a campaign to transform most of their stores to its new concept Mdonald Next. The idea is to offer a broader menu by not only offering healthier options (made to order salad bar, quinoa) but also elevating the service of the fast food chain (1). By doing this, the company is planning to attract a wider range of customers and capture value inside the market of people who are currently under the “healthy movement”. This approach can help the company in its quest of becoming more eco-friendly by sourcing raw materials from certified suppliers and also increasing the value proposition of the company. The latter will probably result in a higher price but specific for an alternative menu. If Mcdonalds is able to expand its market share beyond the fast-food market, it can both help alleviate the impact of its operations on the environment while not necessarily taking a hit on its profitability.
(1) http://www.cnn.com/2016/01/11/foodanddrink/hong-kong-mcdonalds-next/
I strongly agree with Shray and Mwd that Mcdonald’s represents the group of companies that heavily contribute to climate change and we need to see more actions from this group. Unfortunately, the business idea behind this group of conglomerate is actually generating values at all cost. Those costs might mean deforestation, GHG emission and resource abuse.
I reserve the right to stay cynical about the promises that Mcdonal’s made. For example, we are now at 2016 and only 13% of their palm oil consumption is deemed “clean”.Yet they made the commitment to reach the 100% goal in 2020?
It will be interesting to watch these companies along their path and see how global NGO and governments go about controlling them.
Thanks for the very interesting read Shray. I agree that a large focus of McDonalds and similar fast food companys needs to be sustainability. However, given the business they are in, generating value at all cost might lead to corner cutting for short-term gains. Although I admire the public-relation focused moves McDonalds has instituted so far, I wonder how far they will go on their own accord without intervention from governing agencies. My personal opinion is that some regulation may be needed to influence them to package and perform in an environmentally sustainable manner.
Thanks for an excellent read on an industry I did not immediately associate with impacting climate change!
I am disappointed to hear that McDonald’s is contributing to global warming in a multitude of ways, from purchasing only 13% of palm oil from deforestation-free sources and engaging in less-than-ideal cattle processes. Especially being the largest player in the fast food market, McDonald’s is not leveraging its brand power to entice suppliers to follow sustainable practices. For instance, in the IKEA case, the company uses its status to influence suppliers to abide by IKEA sustainability standards. I feel that McDonald’s has even more brand recognition and dominance than IKEA, allowing them the opportunity to make a real difference; however, they seem to be resorting to PR initiatives rather than long-term sustainability.
Shray this is an insightful post about the impact McDonald’s has on the climate. I agree with all the points you have raised within this post as major issues faced by any global food supplier. While I agree there are further measures that McDonald’s can take to improve its carbon footprint, I feel that they will eventually face diminishing returns. These companies face very structural trade-offs between profitability and a better planet. I do believe there are certain measures that McDonald’s can take that align both incentives. For example, a more efficient logistics system that reduces on global fuel costs. Additionally, I believe that McDonald’s can implement measures similar to PepsiCo that reduce sodium in its foods to 1) combat health impacts 2) reduce sodium consumption globally and 3) benefit its bottom line.
Thanks again for the thought provoking post!
It is interesting that you state that McDonald’s has led to a flatter world – it has made me anything but flat :). The blog mentions how different stakeholders are ‘shaming’ McDonald’s into doing something about climate change. I strongly believe that they do not need to do that as McDonald’s is already, quite literally, feeling the ‘heat’ of climate change in its income statement. Because of unpredictable periods of drought and excessive rainfall that we have seen over the last few years, food prices are increasing which are adversely affecting all Quick Service Restaurants, including McDonald’s. For example, beef prices went up by 17 percent over 2011 – 2015 while consumption only dropped by 3 percent. In 2013 – beef prices were so high that McDonald’s actually lost money on every burger it sold. Driven primarily by that, McDonald’s profits have fallen in each of the past 11 years. So McDonald’s and others should be doing something about climate change not out of a sense of charity but because their survival depends on that.
[1] http://www.takepart.com/article/2015/02/20/how-climate-change-ignited-fast-food-chicken-war
Super fascinating read Shray! Great job! The company is definitely not taking the issue seriously enough at this point, and I’m curious to see where they will go from here. There is clearly not enough accountability. Perhaps in addition to the suggestions you provided above, McDonalds should also consider more aggressively promoting non-beef options (in return for more positive PR around health?). Methane emissions from beef cows alone represent about 20% of agricultural greenhouse gas emissions [1]. McDonalds is one of the few companies that has real power to influence how the fast food industry develops moving forward, and it is in their best interest to get this conversation around climate change right and in their control. Only a year ago McDonalds committed to shrinking its carbon footprint with President Obama’s American Business Act [2]. Even though they have committed, until they actually start sustainably sourcing beef, it is just false promises. Who knows what the future holds?
[1] http://www.fao.org/docrep/019/i3671e/i3671e.pdf
[2] http://corporate.mcdonalds.com/mcd/sustainability/planet/climate-and-energy/mcdonald_s-participates-in-climate-pledge.html
Thank you for your article Shray. McDonald’s has a bad reputation based on the quality of their food and we often don’t realize that their hamburgers actually start with real cows! Dealing with the methane from beef cattle is certainly a start and I would very much like to see some of these measures taken (even if it means raising prices). Methane is a very dangerous prorduce if released into the atmosphere, but also very useful as a biofuel. Capturing this valuable resource could help farms become energy-neutral or even net energy producers.
But though actions related to cattle raising are important, I wonder if you have thought through any solutions to some of the other issues you brought to light. I’ve noticed in our cafeteria, all of the packaging and cutlery are compostable. Though much, if not most, of McDonald’s is consumed out of the store, I wonder if composting meals consumed in-store would help reduce waste. Additionally, cars waiting in drive-thru lanes are idling and wasting gas. Though I don’t have a solution, perhaps this is another area where emissions can be reduced.
Great article good sir!
Are you by any chance familiar with the Impossible Foods burger?
They are creating a plant-based replacement for hamburgers (see: http://www.businessinsider.com/impossible-foods-burger-heme-secret-ingredient-2016-10). Not only is it good tasting, but also environementally friendly – can you say “watch out McDonalds”?
– Jose
Shray – excellent post!
I think you do a great job in highlighting the primary issues that McDonald’s faces from a sustainability perspective. One point in particular that I found interesting is the unhealthy livestock practices used to raise more cattle for more beef and the methane produced by corn fed. This is particularly fascinating because this issue feels like it can be immediately resolved through modest efforts and absorption of cost on McDonald’s side. Obviously the business will likely manage to a bottom line, however, a longer term focus would allow them to forgo short term profitability and exert the effort necessary to sure up a reasonable sustainability effort. Being one of the most well known brands in the world, McDonald’s is also uniquely exposed to the public scrutiny in a way that their peers aren’t.