How Making a Positive Difference in Society Can Grow a Business and a Big Brand Like McDonald’s

One of the world’s most recognizable brands, McDonald’s is not just a multinational corporation: it’s an eleven-figure global entity with over 34,500 restaurants worldwide in 120 countries. Bob Langert, retired Vice President of Corporate Social Responsibility and Sustainability at McDonald’s, spent 32 years within this brand and has learned just what sustainability means in the face of such a global colossus like McDonald’s. On April 9, 2015 Mr. Langert presented on the challenges, opportunities, and risks inherent in Corporate Social Responsibility (CSR) and Sustainability, including providing insight into how large corporations can form partnerships with non-governmental organization (NGO) activists to make progress in its sustainability.

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This journey began with McDonald’s trying to figure out to to have a “sustainable” hamburger, a feat not easily achieved as McDonald’s had no prior experience in such a venture and is highly decentralized with over 80% of its restaurants being franchised. “We were willing to take a chance at figuring out how we can make a difference with beef and how we can be influential towards changing the industry to be more sustainable,” said Langert. However, this was a necessary step for McDonald’s as the sheer size of its operations — with 1.8 million employees serving over 70 million people around the world every day — affects so much of the world’s population on a daily basis that it warrants real corporate social responsibility.

Langert’s experience at McDonald’s with sustainability started in 1990 with a much-criticized collaboration between the premier environmental entity of the time, the Environmental Defense Fund (EDF), and McDonald’s (which was going through its own PR setbacks) to phase out the company’s use of polystyrene Styrofoam hamburger containers; McDonald’s saw a cost-free packaging waste reduction of 70-90% and 30% reductions in its restaurants. Moreover, the initiative led to the recycling of over 100 million tons of corrugated boxes. Langert reflected, “More than anything, I learned a lesson that applied to everything I’ve done since then. You can come up with practical solutions, that are economical for the business, on tough societal issues if you: get smart people together, work with a partner [like the EDF], work with a company that wants to do something, work with your suppliers, you base your work on science (which is not easy to do), and you allow yourself time.” Since 1990, McDonald’s has embarked on 30 more sustainability partnerships.

Besides reducing packing waste, McDonald’s has, in conjunction with animal welfare specialist Dr. Temple Grandin, pioneered the globalized transformation of animal welfare into animal agriculture. “Most businesses don’t have a supply chain structure like McDonald’s… We’re very long-term with our suppliers. A lot of our competitors are day-to-day and they price shop, but we pick suppliers out for the long-term… Our culture is one of relationships, trust, and openness,” said Langert. He approached McDonald’s’ suppliers in 1997 about mutually agreeing on an animal welfare program, and because of the relationship McDonald’s has with its suppliers, they agreed and the animal welfare program was established. Through it, McDonald’s helped implement solutions to such issues as electrical cattle prodding, which McDonald’s did away with, and now cattle are guided by strategically-directed gates and flags.

In addition to animal welfare, criticisms by the NGO Greenpeace of McDonald’s’ European branches (specifically British) using soya in their suppliers’ chicken feed that is cultivated in the Amazon rainforest in Brazil. Langert did research into this environmental issue and turned to such organizations as the World Wildlife Fund for information.  He came to the conclusion that although their placing the blame solely on McDonald’s was disproportionate, their accusations were true. Langert worked with Greenpeace on getting to the root of the problem: getting those who are involved in the soy production and sales to agree with them and collectively work together on finding a solution. Within three months, they were able to successfully announce in 2006 that Brazil’s soy traders, Greenpeace, and retailers that there would be a moratorium on any further soy farming that would harm the Amazon; this agreement has been renewed every year since with increased tracking to make sure it is being enforced.

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A few years ago, the new McDonald’s CEO saw the work Langert and his department were doing and was equally as enthusiastic, but saw that it was unorganized and unclear to those both inside and outside the company. He therefore saw the need for McDonald’s to place CSR and sustainability more prominently and strategically within McDonald’s management. They then created the CSR and Sustainability framework which has the goal of “Growing our Business by Making a Positive Difference in Society.” The five pillars of this framework are: Food, Sourcing, People, Community, and Planet. This framework effectively finds the “middle ground” between business values and social values to created a shared value model that is used by McDonald’s.

Looking towards the future, McDonald’s, like other successful MNCs, has created a set of sustainability goals. For 2020 McDonald’s’ goals are: set global criteria for sustainable beef production and begin purchasing verified sustainable beef; verify 100% of its coffee, palm oil and fish as being sustainably produced; and creating fiber-based packaging made from 100% certified or recycled sources.

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Patagonia: Why Business is Good for the Planet

What began as founder Yvon Chouinard’s desire to create stronger and more durable gear for his own recreational hiking in 1957 in Southern California has now morphed into a multimillion-dollar global corporation that is actively involved in environmental conservation and protection efforts while still being able to admit to past corporate environmental downfalls.

Rachel Cantu, Vice President of Global Supply Chain for Patagonia, spoke on March 26, 2015 on “Why Business is Good for the Planet.” She began by discussing Patagonia’s products, which are available on almost every continent. The company creates clothing and equipment for everything from climbing to surfing to skiing, as well as clothing for everyday casual wear. On creating a great quality product for their customers, Cantu says, “It will continue to be job #1 at Patagonia. It’s not the best product at a price point, it’s not the best product in its class: it’s the best product for what it’s intended to be used for, and that’s core to what we do everyday.” Their clothing contributes to their environmental goals: one of their best-selling pullovers is largely made from recycled polyester while still performing its function of keeping people warm and protected from the elements, and their best-selling Wayfarer board shorts were one of the first ever created from recycled nylon. In additional recycling steps, the company accepts used Patagonia products from customers, which are then categorized and then sorted to be either re-purposed or recycled; this saves products from going to landfills that greatly harm the environment. They also invest in innovations and research for new recycled fabrics that they use as much of as possible in their clothing to maintain its performance ability.

Patagonia region in Argentina, where much of wool used in base layer products is produced. (photo courtesy of Patagonia.com)

Patagonia region in Argentina, where much of wool used in base layer products is produced (photo courtesy of Patagonia.com)

In addition, the company works to not only eliminate unnecessary environmental harm from their production but also to eliminate all unnecessary social harm to their workers, including ensuring that all of their employees are paid fair wages and are working in comfortable and safe conditions. In 1988 Patagonia faced a moral dilemma when unknown chemicals in some of the Patagonia cotton apparel caused various minor health problems in its employees in a Boston store. After doing a study that led to the discovery that formaldehyde (commonly used to keep cotton from wrinkling) off-gassing and pesticide use in some of the cotton apparel was what caused the symptoms, the company began the transition to using organic cotton; in 1996, Patagonia finished the transition and has only uses organic cotton in its cotton products ever since. “We decided to take back responsibility for understanding what was going on throughout our supply chain that we had delegated to other people at that point and time, and we made a commitment to know what was going on in our supply chain,” Cantu said. Patagonia uses a four-fold approach in its supply chain management: business capabilities, quality, environment, and social.

Photo courtesy of Patagonia.com

Patagonia factory (photo courtesy of Patagonia.com)

Another management aspect of the company is a commitment to transparency: on their online store, each of their products’ pages includes information about that product, including the factory it was made in, the mill that made its fabric, the organic cotton farms, etc. As of 2004, their down fabric is also 100% traceable and certified, meaning that none of their down comes from geese that are live-plucked and/or forced fed. Their wool is not left out of their efforts: through a conservancy organization, they have a partnership with sheep ranchers in the Patagonia region in Argentina that helps them restore and heal their grasslands, producing a high-quality wool that is used in many of the company’s base-layer products.

Besides using recycled and organic fabrics, Patagonia’s main form of being environmentally conscious is building their products to be extremely long-lasting. Cantu comments, “One of the most important things that we can do as a company is to make high-quality product that lasts years and years and can be repaired so that you don’t have to buy as much of it. That is probably the single-most important factor in environmental impact and foot printing for a product: its overall lifetime durability.”

Photo courtesy of Patagonia.com

Reclaimed wool to be used in Patagonia products (photo courtesy of Patagonia.com)

Outside of their products, Patagonia is committed to investing in grassroots environmental efforts that disrupt current harmful social and business norms in diverse types of sectors ranging from unnecessary dams to unnaturally-produced foods. Add in a venture capital fund focused on investing in environmentally like-minded companies, formal certifications binding the company to these values, and a formal alliance with various other outdoor apparel companies, and Patagonia has consistently worked to not only pursue environmental efforts but to spread that mindset around the world.

Patagonia’s mission statement is: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Cantu’s presentation of Patagonia shows that the company has used its mistakes and struggles as learning experiences, and it has continually worked to improve their environmental efforts, minimize future mistakes, and help other businesses to do the same.

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Closing the Gap: An American Experience with Argentine Economics

In January 2015, graduate student Elizabeth Tanner participated in the intersession course (Global Entrepreneurship for Social Change) program in Buenos Aires, Argentina and got a first-hand look at Argentine economics, including a growing wealth gap, which has been affected by both domestic political and financial instability starting in the 20th Century.

One of the ten wealthiest states during the 19th Century — a result of prosperous trading with European countries, flowing immigration and rich natural resources — Argentina began going through political and financial stability, as did much of the world, during the two World Wars. Add in political instability, degenerating fiscal policies and a domestic currency crisis in 2001, and socioeconomic inequality rose immensely.

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The closing dinner for the students in Buenos Aires; Elizabeth Tanner is second from the right.

Fast forward to 2015, Elizabeth Tanner was able to see and experience how Argentinian businesses are working to decrease that gap. “The role of business and entrepreneurs [is] in finding solutions to the wealth gap, creating and providing sustainable jobs, and improving the social climate in Argentina… Many business and entrepreneurs are taking an active role in driving social change through business initiatives. We witnessed this first hand through site visits during our course in Buenos Aires,” said Tanner.

Outside of the classroom, the participants went on numerous site visits to companies and organizations who are directly modeling their company goals and practices towards helping decrease poverty and grow the middle class. Tanner commented, “I was most impressed by Fundación Avina. We visited their Argentine headquarters in Buenos Aires… At Fundación Avina, they are addressing social challenges by creating sustainable profitable ventures. We learned about their efforts in Argentina. In the slums of Buenos Aires (and every metropolitan area globally), there are a subset of people who create income by picking through garbage and reclaiming the valuable and reusable waste… Waste pickers are an important part of our society [as they] are preventing landfill and assisting in achieving environmental sustainability and reclaiming commodities.” However, because they are working informally, their rights and leverage concerning wages. Fundación Avina, in response, has created cooperatives that unite the workers and enable them to get higher wages. On the legal end, the philanthropic group has worked on pushing public policy to formally recognize these workers.

View of Buenos Aires at sunset from the hotel.

View of Buenos Aires at sunset from the hotel.

Overall, Tanner’s experience has shown her how many businesses around the world are concerned just as much, if not more, about the ethics surrounding their practices and goals as they are with their bottom line. “The Golden Rule is moving to the forefront of many entrepreneurial efforts globally and businesses are prioritizing social responsibility. In addition, individuals and businesses are recognizing that sound business models and sustainable revenue flows can benefit social initiatives in creating long standing change,” Tanner said.