By Anne Moore Odell, SocialFunds.com; published: Aug 4, 2008
With a third of all children in the U.S. eating a fast food meal on any given day, the fast food industry is far reaching. The industry seemingly has a hold in every corner of American life and industry, from health care to agriculture, from transportation to marketing. Consumers, shareholders and other stakeholders are starting to look at the fast food industry and demand more accountability for both the food it serves and how it produces that food.
Signs exist that the fast food industry is moving to reflect people's desires for healthier choices and greener products. The ban on trans fats in New York City is just one example of how quickly the restaurant industry can move to answer public demand or governmental policy. However, many shareholders may wonder if enough is being done by fast food chains to protect the environment, and how to tell the responsible burger and pizza peddlers from the rest.
Ellen Kennedy is a senior social research analyst at Calvert Group, which specializes in mutual funds that invest in socially and environmentally responsible companies. Kennedy identified four high-impact issues for socially responsible investors regarding fast food: the company's environmental footprint, workplace issues, animal welfare and product safety, and marketing to children.
"Like Wal-Mart, large fast food companies can influence whole categories of suppliers by virtue of their purchasing decisions, "said Kennedy. "So one way to think about fast food operations is to start with each ingredient and follow it through the supply chain to disposal or recycling. For example, we know that global seafood supplies are predicted to crash in the 2040s. Does the company sell fish species that are threatened? Does the company have good seafood supplier standards that are independently monitored? Does the company source shrimp that have been farmed with high levels of pesticides or antibiotics? How is the fish processed, transported, and refrigerated? What does the company do with trash and organic waste?" Kennedy continued.
Eighteen years ago, Michael Oshman helped create the Green Restaurant Association (GRA), a third party non-profit that works to certify restaurants as green. So far 256 restaurants have received certification or are in the process of getting certified. GRA defines a green restaurant as one that is Styrofoam free, has a full scale recycling program, has made four new environmental changes, and is committed to make four new pro-environmental changes every year.
"In the last year we have tripled the amount of restaurants that are certified or on the way to being certified, " Oshman explained.
GRA has also recently signed a partnership with PepsiCo (ticker: PEP) and Sysco Corporation (ticker: SYY), both of whom approached GRA to consult with them to help make the businesses they own more sustainable.
Yet certified green restaurants make up only a very small percent of the restaurants in the U.S.. With 40 percent of restaurants surveyed by Fast Casual magazine using Styrofoam take out containers, they won't be green any time soon. Most restaurants haven't been part of a third party verification system and don't readily supply information on their environmental impact for consumers and stakeholders to verify what is a real commitment to the environment and what is just green hype.
Investors need to look first at the sustainability fundamentals: good disclosure, a trend of positive performance on issues of environment, labor relations, animal welfare, and product nutrition, and policies and programs that extend to operations of franchised locations and suppliers.
"Fast food companies that show CSR leadership are by no means perfect, but are more willing to engage stakeholders and report on how they have learned from mistakes," said Kennedy. "Some of the most clear-eyed critics of the industry are the long-time NGO advocates who have developed relationships with companies over years, or even decades. They often have a sense of which companies "you can work with" and which ones give the run around."
"It's reallyall about the results and measurable outcomes," said Annika Stensson, director of media relations for the National Restaurant Association. "The investors, of course, have to understand the issues to fully comprehend what efforts have an impact. For example, while not the sexiest of environmental issues, saving energy is one of the most impactful ways to go. By simply changing light bulbs, training staff to conserve energy, using energy-saving, an establishment can make a big difference."