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May/June 2009 - By Andrew W. Singer

McDonald’s CSR Report A Nutritious Meal, But Critics Want More

McDonald’s Corporation received plaudits for its 2008 Worldwide Corporation Responsibility Report, published in late 2008.

“McDonald’s unveiled a state of the art corporate responsibility report in 2008,” commented Ethisphere, which subsequently named Bob Langert, McDonald’s vice president for corporate social responsibility (CSR), one of its “100 Most Influential People in Business Ethics”

The giant food-service retailer—it claims to feed more than 58 million people in 118 countries each day—had little time to celebrate its rave reviews, though. Shareholders soon demanded that McDonald’s include more information in the report—specifically, data on sustainable pesticides.

BobLangert-(McDonalds)02“After facing shareholder pressure, McDonald’s will survey the amount of pesticides applied to potatoes used in its French fries and other potato products,” Environmental Leader reported in April 2009. “McDonald’s will survey its potato suppliers this year, it was revealed in a series of letters between McDonald’s counsel and Bard College, Newground Social Investments, and the AFL-CIO Reserve Fund.” The company will “collect and share with shareholders examples of best practices for reducing pesticides on potatoes within its U.S. supply chain.”

That’s how it goes sometimes with CSR. One good turn demands ten more.

Ethikos spoke recently with CSR chief Langert about some of the difficulties of tracking data at a global enterprise like McDonald’s. The company has been measuring its performance in five CSR categories since 2004: Sustainable supply chain; nutrition; environment; community; and employment experience.

“We’re not trying to create indicators for the outside world,” Langert told us. “Sometimes the easiest thing to measure is not the most meaningful.”

‘Fundamental starting point’

That said, tracking plays a pivotal role in any CSR report, Langert notes. It is the “fundamental starting point.” If you are not measuring your progress, if you are not building and comparing metrics, then “it’s not really a report—it’s a communication piece.”

McDonald’s first CSR report in 2002 presented no scorecards at all. But its second report in 2004 did. “It’s evolved,” says Langert. “There’s more and more numbers crunching”—something that enables you to tell your story.

Take diversity. The 2008 report explains that in the sub-category, “management opportunities for women,” 49 percent of McDonald’s company-operated restaurant managers were women in 2007, up from 46.2 percent in 2006 and 44 percent in 2005.  That seems like model equity. No problems there.

On the other hand, only 26.7 percent of the company’s worldwide management team (vice president and above) were women in 2007, virtually unchanged from 26.4 percent in 2006.

Room for improvement there, arguably.

Supply-chain challenges

As the potato contretemps above suggests, the supply chain is one of the most difficult areas to monitor. McDonald’s exerts 80-90 percent of its impact on the world from a social responsibility standpoint through its supply chain, says Langert. “To measure it is very difficult. The real impacts of sustainability are very upstream.”

When McDonald’s purchases beef, for example, it doesn’t buy it from a cattle rancher. Typically it is purchased from a supplier—one who takes in raw beef and forms it into beef patties. The ranch where the cattle are raised—and treated humanely or rudely, whatever the case may be—could be three steps upstream from the restaurant company.

Eventually McDonald’s would want to influence even how those cattle are raised. “Animal welfare” is a sub -category that the company tracks, after all. But it isn’t so easy. The company doesn’t have any direct business dealings with the rancher. It has to exert influence through intermediaries.

While the supply chain is the most challenging CSR sphere, it isn’t the only problematic one, either.
Even a seemingly simple metric, like the “percentage of company-operated restaurant managers who started as crew members” (employees) can be elusive. “How do you define managers?” asks Kathleen Bannan, a senior McDonald’s CSR manager. “Are you including shift managers?” Nothing is 100 percent clear-cut.

Things get more slippery in the environmental area. “Getting energy data from restaurants is very difficult,” concedes Bannan, measuring things like “kilowatt hours used per transaction count (kWh/TC), resulting from electrical energy use in the restaurant,” another subcategory.

This clocked in at 1.15 in 2007. Or take “C02 emissions (in tons) resulting from electrical energy use in the restaurant” (1,882,961 in 2007, up from 1,707,921 in 2006). One imagines that the typical store manager might not have those numbers at his fingertips.

 “It’s difficult to get the data—in all areas,” admits Langert.

CSR ‘influences’

Langert was asked about CSR influences on the food company—other companies that McDonald’s looked up to as it developed its first CSR report back in 2002.

One model was the Royal Dutch/Shell Group which published its much applauded “Shell Report” back in 1998. “I liked their openness and transparency. We’ve learned a lot from them,” says Langert. (See “The Shell Report: Searching for ‘Openness and Transparency,’” Ethikos, November/December 1998.) Closer to their own industry, “Unilever and Nestle have done an outstanding job.” Coca Cola, too, adds Bannan, has been a leader in this area.

Were there any surprises in the data gathered for the most recent report? “One thing that I’m always surprised at is the ‘people’ scores,” says Langert. “Those numbers are always pretty high.”

In 2007 (the most recent year covered in the 2008 report), 84 percent of “crew members” said they were “satisfied that they receive the training needed to do a good job,” up from 82 percent in 2006. And the “percent of managers who feel the person they report to supports their professional development” was 83 percent.

These numbers look good compared with other CSR reports, and it contradicts the claim the McDonald’s jobs are dead-end positions (the proverbial “hamburger flipping” vocation), suggests Langert.

‘Openness and transparency’

Looking ahead, what does Langert see as key emerging issues in CSR? The idea of “openness and transparency” is one that will have increasing pull, he says. (He was soon to compose a blog on this subject—he writes McDonald’s “Values in Practice Blog.”) “Show the factories and the farms. Put them on camera,” he says.

Another challenge, according to Kathleen Bannan, “is to make CSR everyone’s business.” Originally it was just the province of academics. But innovations like corporate CSR scorecards can motivate company employees as well.

Langert expects to see more attention paid to “supply chain issues in food and agriculture” in the future. How ethically are companies treating people who grow and produce the food (e.g., pick the lettuce); the animals (how are they raised; in what conditions, etc.); and food safety (bacteria, salmonella, etc.). “People are more concerned about where their food is coming from,” says Langert.

 “The growth of NGOs (non-governmental organizations) is another trend,” adds Bannan. NGOs are bringing more issues to the forefront, whether it be human rights, the environment, or animal rights.

Bannan recommends using outside groups to support CSR initiatives. McDonald’s has profited from its relationship with CERES, the Boston-based coalition of investors, environmental organizations and other public interest groups that work with companies on sustainability issues such as global climate change.

“I love CERES,” adds Langert. The group looked at McDonald’s most recent CSR report at the beginning, middle and end stages of its developmental process. “They actually came in to our office and met with some of our internal stakeholders.”

McDonald’s reports follow reporting guidelines in the CERES-created Global Reporting Initiative (GRI), an international standard for reporting on environmental, social and business issues.

Eventually, Langert would like to do his CSR report every year—it’s now published bi-annually. As the company increasingly digitizes the tracking process, he can envision a point at which elements of the report are published in real time.

Overall, “You can’t look through only one lens,” cautions Langert. You can’t focus on animal welfare only. Or the environment solely. There are a myriad of issues that have to be taken into account.

As for advice to other companies looking to do a CSR report, “Don’t worry about the external world,” says Langert. “Do it for your internal audience,” like your employees. “Concentrate on your internal audience.”

Above all, “be patient,” he adds. “This is a long-term effort. It’s a mindset. Don’t try to hit home runs.”

    Andrew W. Singer is Co-Editor of ethikos.
    Reprinted from the May/June 2009 issue of ethikos.
    © 2009 Ethikos, Inc. All rights reserved.

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