©Africa images via Canva.com
December 12, 2024
McDonald’s Faces Activist Pressure on Food Waste Transparency: Is Fast-Food Wastage a Growing ESG Concern?
While profit is, of course, a primary concern for most investors no matter the economic sector, other motivating factors can drive investor interest in a particular brand or product.
This is becoming even more evident in contemporary business models, with environmental, social, and governance (ESG) principles driving an increasing amount of investor sentiment when selecting companies to add to one’s portfolio, as The Corporate Governance Institute pointed out.
McDonald’s, BJ’s, and El Pollo Loco Targeted for Increased Food Waste Transparency
In keeping with this line of thought, Restaurant Business recently reported that a shareholder activist group had increased efforts to see fast-food and casual-dining restaurants improve upon transparency efforts regarding their food wastage metrics.
Targeting McDonald’s, BJ’s, El Pollo Loco, and others in the restaurant sector, The Accountability Board (TAB) — a group holding an investment portfolio spanning over 200 companies, mostly in the fast-food and retail segments — indicated it had submitted shareholder proposals requesting expanded disclosure of company practices regarding food wastage.
TAB President and Co-Founder Matthew Prescott signaled not only a concern for environmental or climate considerations around the issue but also a concrete fiscal interest.
“It’s a financial issue,” Prescott said. “All waste is financial waste. Strategies that mitigate food waste also save money.”
As Skip Shapiro Enterprises underlined, food wastage produced by restaurants amounts to between 22 billion and 33 billion pounds of food being added to U.S. landfills every year — and further, given the fast-food industry’s particular operating model, this subsection of the restaurant business was even more susceptible to overproduction, and thus, undue wastage.
McDonald’s Wins Points for Focus on Packaging Waste, But Could Improve on Food Waste Issues
Not all of the news regarding TAB’s callout of the red-and-yellow brand was entirely negative.
“While we recognize the company’s packaging waste efforts, we believe identifying food waste totals and targets would substantially advance its management and oversight of this highly consequential ‘priority impact’ issue,” the TAB shareholder proposal regarding McDonald’s read.
According to TAB, McDonald’s almost entirely overlooked a commitment to delineating its food wastage efforts in its 78-page Purpose & Impact Report, with only a single line dedicated to explaining its efforts on the subject: “Donated excess food in cooperation with suppliers to support families in need.”
Fast-Food Restaurants Could Financially Benefit by Cutting Back on Food Waste: Study
Citing a study by Champions 12.3, TAB suggested that for every $1 invested in food waste mitigation or reduction efforts, restaurants could see a savings of $7 in operating costs over three years. With an ROI like that, TAB implied, it was simply smart business to start making moves in this direction sooner, rather than later.
In fact, as Restaurant Business detailed, several competitors to McDonald’s have already begun undertaking the ESG task at hand. Both Starbucks and Yum! Brands have freely disclosed information regarding their restaurants’ food waste since 2020, with a stated goal of halving their waste by 2030.
TAB’s efforts haven’t always paid off — as they did in 2023 when Wingstop and Jack in the Box shareholders agreed to a vote pushing greater transparency regarding greenhouse gas emissions — but it seems the firm has established at least some credibility in terms of getting results.
Whether McDonald’s, or other named competitors, will see shareholders adopt a resolution to increase transparency regarding food waste remains to be seen. Beyond that, there’s the greater step of curbing food waste entirely, a completely different challenge to face in the days (and years) to come.
Discussion Questions
Do restaurants, fast food or otherwise, have an ethical obligation of any sort to engage in food waste reduction efforts?
What steps can fast-food chains take to improve the transparency of their operations regarding food wastage and to reduce food wastage overall?
What are some challenges faced by fast-food restaurants in particular when it comes to food wastage that may not be felt by other restaurant categories?
Poll
Loading …BrainTrust
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
Mark Self
President and CEO, Vector Textiles
Neil Saunders
Managing Director, GlobalData
Recent Discussions
More Discussions
Which Tech Will Solve In-Store Inventory Woes?
Three major tech lineups are looking to solve retail inventory problems. Which is most suited?Will Ford’s New Retail Experience Deliver Results?
Ford is revamping its global dealership model, in terms of physical space and other aspects. Will…Will Target’s Rebalancing Act Solve its ‘Sloppier’ Stores Problem?
Target is making an operational move to take fulfillment duties away from certain stores. Will this…
As most consumers want good availability of products – whether in McDonald’s or in supermarkets – there will always be an element of food waste. If we want to eliminate waste completely, then we will need to turn the country into the Soviet Union with chronic shortages everywhere. I don’t think many people would like that. All that said, chains should do what they can to reduce waste, if only because it costs money. McDonald’s has done a lot on packaging waste but is less open about food waste. There is no harm in asking for this information to be made available to investors.
First off, ESG is on the way out as a driver of investor interest. Not to say that ESG type goals are wrong, but any measurement that is impossible to quantify was always destined to fail eventually. I believe that reckoning is here.
Second, regarding food waste in general, solving that completely is a fools errand. Maybe, just maybe, people don’t need to order the extra large fries, or the double quarter pounder with cheese or the 50 ounce Coke. Fantasy? Absolutely, however it cuts to the root cause of the problem-too much cheap food on offer that does absolutely nothing but contribute to the obesity crisis.
Finally, who, exactly are these activists and how, (exactly!) are they motivated? Maybe they should turn their attention on issues that solvable. Just a thought.
A cynic would argue that the “perfect” activist orgnization has as its goal something that’s never attainable…that’s how they stay in business.
Mark, you’re absolutely right on both counts. I gravitate to the second point more forcefully. The fast-food industry’s waste problem isn’t driven by a lack of corporate transparency and investor documentation; rather, it’s a symptom of a larger excess-driven consumer culture. The North America market is particularly saturated with messaging that associates value with abundance and unlimited availability. Consumers have internalized this relationship and it drives their purchase behavior. Any behavioral change without addressing these underlying expectations will only push customers toward competitors who maintain the wasteful status quo. A more impactful (and infinitely challenging) solution requires tackling markets’ cultural addiction to excess, not just pressuring companies to document it.
We seem to be serving up more than a full dose of irony in this: the conventional – i.e. “hater”- wisdom being that fast food does the most harm when it’s products are consumed...not sent to a landfill. I don’t really agree with that premise – at least in its extreme form – but if I were heading a QSR right now, I’d be far more worried about that, than some gadfly organization no ones ever heard of.
As soon as the private sector begins allowing “activists” to dictate ethics, we will experience an economic disaster similar to those of communists and socialist states.
Restaurants, fast food restaurants, and other businesses are under no obligation to reduce food waste. Unlike third world countries, America does not face a food shortage everywhere (yet).
To reduce waste, restaurants do what they can, but in a profitable way, and without creating shortages that would force them out of business.
Food waste is a natural byproduct of any food establishment and even in your household. Eliminating food waste is an aspirational goal we are unlikely to achieve; however, reducing food waste is an immediate lever for boosting fast-food profitability with a positive impact on food security, the environment, and climate change.
As Peter Drucker reminded us, “You can’t manage what you don’t measure.” I guarantee that if a publicly traded fast-food chain focused on reducing its food waste, resulting in expanded margins, it would take credit and happily call that to the attention of financial markets. It sounds like a winning situation for the companies. So, what’s the harm in having transparency on food wastage?
McDonald’s is second to none regarding reach and impact in the fast food world. Their 2023-24 Impact Report states, ” Our purpose is to feed and foster communities. As a leading global foodservice retailer, we believe it’s our responsibility to make a positive impact on the world.” McDonald’s impact strategy revolves around four pillars: (1) community connection, (2) food quality and sourcing, (3) jobs, inclusion, and empowerment, and (4) the planet. The efforts of The Accountability Board (TAB) is better served by going after the worst offenders instead of pursuing conveniently large targets for publicity purposes.
If activist investor groups were to focus the same amount of effort on improving McDonald’s drive-thru velocity and the associated experience, I’m willing to place a very large bet that the ROI would be 2-3x that of any ESG food waste initiative. Go to a McDonald’s drive-thru and then go to a Chick-fil-A drive-thru and you’ll know what I mean.
Corporate ESG initatives are following the example of DEI, which we discussed in this space earlier this week. In six weeks, climate action and reporting will be a non-factor in the United States.