Issue Summer 12
McDonald’s sells millions of sandwiches each day. Consumers are handed their food in a paper bag – the food goes down the hatch, the paper in the trash. The customers might have a general end-user idea about how the sandwich came to be – especially if it’s “two all-beef patties, special sauce, lettuce, cheese, pickles, onions – all on a sesame seed bun” – but they think nothing of the packaging it came in. Even though the average McDonald’s patron may not know it, the process that brought that bag to fruition is just as intricate as the layers of a Big Mac.
It involves the corporate office, owner-operators and suppliers working in a collaborative effort to produce the best product for the lowest cost, and that process delves deeper than just the food itself. The customer might not eat it, but that bag factors into the price of the sandwich, too. To keep the price tag low for the consumer, McDonald’s, and subsequently its suppliers, has to keep its overhead low. Businesses around the globe know this simple concept, but it can take different forms. For some, automation or employee cross-training have been the solutions because they allow em¬ployers to get more done with less manpower.
Sticking with Sustainability
At McDonald’s, growing its business is “inextricably linked” to sustainability, explains Bob Langert, vice president of sustainability. “We view our work of sustainability as growing our business by making a positive difference in the world,” Langert says. “I would say that in our previous work, those efforts weren’t always linked. As we work on the future, we celebrate our past at McDonald’s. We’ve had a great company culture from the start, but in general most of McDonald’s efforts in sustainability came from the motivation of doing the right thing, which continues to be a foundation of our company today.”
The difference today, Langert explains, is that sustainability is now “a business imperative. We see that by responding to society’s needs – and that touches our food, our people and our footprint on the earth – we can do it in a way that drives efficiency and innovation, [and] reduces resources and costs in our supply chain while bringing in more customers, more transactions and more loyalty.That’s the short case for why we are upping our game in sustainable practices.”
The “how” in upping its sustainability game involves the three “P’s” – passion, persistence and patience. It begins in the corporate office and requires getting the other two legs of the stool – independent owner-operators and suppliers – to also buy into the notion that sustainable practices are a benefit to the whole.
“We are owned and operated by nearly 5,400 owner-operators,” Langert explains in a recent case study published by VOX Global, “Making the Pitch: Selling Sustainability from Inside Corporate America.” “We are more than 80 percent franchise-owned. We very much have a three-legged stool model of governance in our company. … So when it comes to sustainability, one of the biggest skills that you need is having the ability to discuss the issue from three different perspectives: company, owner-operator and supplier.”
Those are the players, and at McDonald’s the sustainability game revolves around five pillars: food, sourcing, community, people and planet. The three players have championed initiatives under these five pillars that work to benefit the world while also enhancing each entity’s bottom line.
The innovation can come from just about anywhere – a general manager in Brazil or an employee of one of McDonald’s suppliers. For instance, proving that the cost of the paper bag does affect the bottom line, McDonald’s Canada recently made a systemwide switch from white napkins and bags to un-bleached brown napkins and bags.
Employees in Western Canada found the bags to be sturdier and customers used fewer napkins. McDonald’s Canada rolled out the new supplies to the entire nation, reducing its energy, wood and water consumption, resulting in an annual approximate savings of $1.3 million for the whole McDonald’s Canada system, which means savings for the customers. This, along with countless other initiatives, ultimately helps keep the dollar menu alive.
McDonald’s restaurants the world over each address sustainable areas of im¬provement. Some initiatives blanket the entire global organization. How¬ever, Langert affirms that the tone needs to be set from the top.
“This is not just meant for others, it’s meant for the corporate office, too,” Langert says. He notes that the corporate headquarters in Oak Brook, Ill., is LEED-certified. “The building I’m in is actually LEED Platinum, which is very impressive considering that this building was originally built in the mid ’80s.”
A Cause for Each Country
LEED, which stands for Leadership in Energy and Environmental Design, is a green building ranking established by the United States Green Building Council. McDonald’s USA has demonstrated corporate leadership with four LEED-certified restaurants and a goal to build 25 LEED-certified restaurants over the next three years. The company is helping franchisees streamline the rating process with established time, costs and approaches.
LEED certification is optional to franchisees, but McDonald’s USA uses the lessons learned from these LEED restaurants to incorporate many of them into the minimum standards for new restaurants. Last year, McDonald’s made LED lighting standard for all new, rebuilt and remodeled dining rooms, which the company estimates should decrease energy consumption by 2 percent in each restaurant each year, resulting in an annual savings of nearly $1 million for McDonald’s USA.
McDonald’s USA and its focus on green building aligns with its region’s concerns, Langert explains. Energy costs are a major talking point for U.S. citizens and McDonald’s USA’s focus on developing green buildings re¬sponds to that. Likewise, each country has its own pet projects that address particular concerns in that region.
“When it comes to especially the environment and the supply chain efforts, we do have some common approaches,” Langert says. “[But] there’s no cookie-cutter approach. [It depends] on the country and needs of the society. For example, water is a huge issue in Aus¬tralia. They have problems with water and drought and they are leading the McDonald’s system for figuring out ways to save water.”
In Japan, reducing greenhouse gas emissions has been a focus for the nation since the Kyoto Protocol was adopted. In other countries, landfill usage might come at a high cost – making recycling a must. For instance, the collection of restaurant waste and used cooking oil to create biodiesel or biogas is widespread in several countries.
These programs all have one thing in common – as long as the company or independent owner-operators want to enact these programs, enacted they will be. Save water here, reduce waste there and a restaurant owner can nickel and dime his or her way into significant savings. However, many agendas require that third leg of the stool – the supplier.
Collaborating with Suppliers
“Our suppliers engage with us to achieve mutual strengths,” Langert says. “We operate by the three E’s of business: environment, ethics and economics when it comes to our suppliers. We’re concerned with animal welfare, environmental responsibility and having superior workplace labor standards and practices.”
Because McDonald’s drives efficiencies at its restaurants, it urges suppliers to do the same. On its Best of Sustainable Supply 2012 list, McDonald’s recognized companies such as Mullins Food Pro¬ducts. Through its Let’s Get Healthy Together program, Mullins provides education on medical, nutritional and financial health. It opened a full-service workout center and subsidizes Weight Watch¬ers programs for employees. The aim is to create happier, healthier em¬ployees and a less stressful workplace, leading to lower health insurance premiums and higher productivity.
A Step Above
McDonald’s aim is to choose suppliers that are at its own level or a step above in terms of sustainability. However, as it crosschecks its list of suppliers there might be some that don’t hold these same values. In those cases, rather than severing the relationships, McDonald’s leverages its dollar-power to create change in its suppliers.
“We see a role to to use our size and leverage to make a difference in our supply chain,” Langert explains. “These changes won’t just be for McDonald’s, though, but for the broader industry, as well. One thing we use is the environmental scorecard for major suppliers around the world. We ask them to support measures related to water, energy and waste. It’s their environmental responsibility to do so, but it’s also about growing our business. When you use less and conserve more, you have a more efficient supply chain.”
This power to create change is most apparent in its food supply. McDonald’s has six food priorities: beef, poultry, palm oil, coffee, wood fiber and fish. Its vision is to buy all of its food from verifiably sustainable sources. For some areas, there are ready standards to look to. For instance, 99 percent of its fish qualifies for the Marine Stewardship Council program.
Where guidelines are lacking, McDonald’s makes efforts to create and improve standards for better animal welfare. In May, McDonald’s USA joined a new coalition to study U.S. hen housing. The group includes animal welfare scientists, academic institutions, non-government organizations and egg suppliers in a commercial-scale study of housing alternatives for egg-laying hens in the United States, including cage-free housing and en¬riched housing such as nests. The study will help McDonald’s and other organizations make informed decisions on sustainable egg purchases.
McDonald’s is also a co-creator of the Global Roundtable for Sustainable Beef, formed in conjunction with the World Wildlife Fund and more than a dozen other companies. “This organization was created a year-and-a-half ago and has accelerated its efforts to deliver standards on best practices to improve the sustainability of beef in every way,” Langert explains. “This is one example of how we use our size and leverage to improve something that’s meaningful to us and to society.”
Living By Its Belief
When it comes to practices in the agriculture industry, McDonald’s could play the innocent bystander. But history has shown and McDonald’s knows that when one industry comes under fire, it affects all related industries. By promoting sustainable changes among not just agriculture but its entire supply chain and itself, McDonald’s is living by its belief that sustainability is “inextricably linked to its business growth,” and that the world’s sustainability is tied to McDonald’s sustainability, as well.
“We want to make a positive difference in the world and help grow our business – simply stated, that’s the ultimate goal,” Langert explains. “We know we have the people, the talent, the size and the scope to make a positive difference in the world, and we know that we can take these aspects and all these issues and turn them around in a way that will help our business grow. We can connect with society to address needs that people have and offer them better choices.”