McDonald's VP talks about improved sustainability: They're lovin' it

McDonalds (MCD) has been vilified by a number of movies and books, including Fast Food Nation. The company is a favorite punching bag for environmental and nutritional activists. While Big Mac's are hardly health food, the company has diversified its menu to offer healthier choices. McDonald's has also mounted a steady and sustained effort to improve its environmental practices by reducing energy and water usage and enforcing higher levels of sustainability among its network of suppliers. We spoke with McDonald's VP of Corporate Social Responsibility Bob Langert about efforts underway at "the Golden Arches" to make the company a better global citizen. Here's an edited excerpt.

Daily Finance: McDonald's has made an explicit push to enhance sustainability with its policy and operational changes. Could you talk about this a little?

Langert: We have done a lot already in terms of improving our sustainability. And we would like to have continued progress in our sustainable supply chain efforts. The supply chain represents 80 percent of our footprint.
We've had a good track record of progress to date, with significant energy and environmental impact improvements over time. But we hope to do a lot more. We're in the process of evaluating a policy for a set of sustainable land management guidelines. This could have major impacts on the things we buy further upstream. Soy, beef, and palm oil are all things we use. How providers grow and raise these things is two or three steps removed from who we buy from, but we want to have more of an impact on this as well. Rather than be reactive to what's happening with deforestation resulting from palm plantations in Indonesia or soy farming in Brazil, we want to be much more proactive in working with suppliers to improve standards. Another long term issue still emerging is our water foot print on the restaurant and supply chain side. In some of our "green" pilot restaurants, we've halved water consumption.

Daily Finance: How has your drive towards safety and sustainability impacted your bottom line?

Langert: Issues related to sustainability most of the time drive efficiency. Take the two biggest issues in our restaurants. We as a company spend $1.7 billion on energy around the world. Energy efficiency can cut that cost. The other big issue is waste. That includes packaging that turns into waste and other waste in general. We spend $1.3 billion on processing waste. So reducing our packaging and figuring out ways to divert waste will be necessary and help our bottom line. We are also implementing an environmental score card with our suppliers. It's the right thing to do, but its also business related. We see it as an efficiency measure that helps focus them on driving efficiencies and reducing their costs.

Daily Finance: Can you point to some specific examples?

Langert: Sure. At the restaurant level, we will have 10 different green design restaurants put in place that we are using as learning laboratories. We have challenged our development and equipment teams to figure out ways that make our restaurants lean and mean and energy efficient. There's one in Chicago that's reduced its water usage by 50 percent and energy usage by 25 percent. Through learning experiences like this, we'll figure out how to translate [the benefits] into every McDonald's restaurant. With waste, packaging is a big part of what we're doing, so we're always looking to redesign, trim and use new materials. We're very interested in some sort of organic composting and have a couple of pilots underway because most of our waste is organic in nature and can be broken down easily. Even our packaging is mostly paper-based and can be turned into compost. Turning waste into something that can be useful is our vision.

Daily Finance: Why haven't you adopted packaging that's made from more easily renewable sources than trees, such as corn or potato starch-based products, for example?

Langert: The challenge of packaging in general is you have a lot of functional needs. Packaging serves convenience and portability. We've tested different biodegradable materials that warp or don't retain heat, and they simply didn't work. We've been testing various products like this for the last 10-15 years without much success. We're always open to trying new things, though.

Daily Finance: Critics say that McDonald's still promotes practices, such as feed lot usage and very large cattle farms, that harm the environment. How would you respond to this?

Langert: Agriculture in general has a set of impacts that need to be managed, no matter what product you are talking about. Beef has a set of sustainability issues. We care about those types of issues. We want to work with our suppliers and their suppliers to encourage more sustainable beef practices. We think a lot of these industry issues are systemic in nature and are best addressed with collaborative efforts. In our work with soy in the Amazon, we were able to work with other retailers and suppliers to support a moratorium on environmentally bad practices. That's an example of the kinds of things we'd like to do. Will it ever be perfect? That's hard to say.
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