Two Steps Forward

McDonald’s and sustainable beef: A one-year status report

Photocollage by GreenBiz Group
It's the one-year anniversary of McDonald's announcement that it will begin buying verified sustainable beef in 2016. How's it going?

It’s been just over a year since McDonald’s announced it was working with its sprawling supply chain of ranchers, packers and others toward the goal of purchasing beef in 2016 that meets a standard for sustainability.

So, how’s it going? Over the past few weeks, I’ve talked to executives at McDonald’s and some of its supply-chain partners — a rancher, a wholesaler, a supermarket chain and a verification firm — to find out how this audacious journey is progressing, or isn't.

The short answer: Many of the pieces are falling into place, but there’s a long road ahead.

In November of 2014, McDonald’s announced that Canada would become the site of the program’s pilot, with verified sustainable beef showing up in restaurants there sometime next year.

The company isn’t planning to sell “sustainable Big Macs” or anything of the sort. Rather, the world’s largest hamburger chain plans to blend the sustainably sourced beef with the conventional stuff, gradually increasing the percentage over time — much like it did over about a decade with sustainably sourced seafood, to the point where it can now claim that all of its whitefish purchases worldwide come from fisheries certified by the Marine Stewardship Council.

McDonald’s hasn’t yet said how much verified sustainable beef it will purchase next year, but it has said that in 2016 it will set a sustainable beef procurement goal for 2020.

Canada made sense for several reasons as a place to pilot sustainable beef purchasing. First, it’s a fairly streamlined market, with just two slaughterhouses and one patty processor serving the entire country. It’s also a self-contained market: 100 percent of the beef consumed in Canada comes from Canadian farms. McDonald’s buys all the beef for its Canadian restaurants from just one supplier. And the nation boasts a progressive cattle industry, tuned into environmental issues and relatively open to innovation.

McDonald's purchases of sustainable beef in Canada will hew to a Canada-specific standard, which will be issued late this year or early next. Since beef production methods vary by region — and sometimes even within the same country — a one-size-fits-all global standard for sustainable beef wasn’t possible.

Last fall, the Global Roundtable on Sustainable Beef — a multi-stakeholder group formed to develop a standard — issued a set of “Principles and Criteria” for beef-producing countries and regions of the world, intended to serve as the basis for establishing locally-relevant standards. The document was the product of several years’ worth of meetings and discussions about what it means to produce “sustainable beef” in a way that would stand up to public scrutiny.

Business as usual?

The principles received their share of criticism. A group of activist NGOs wrote a scathing letter to the GRSB, charging the group with trying to “pass off ‘business as usual’ as ‘sustainable.’” Among the criticisms was a lenient approach to the use of antibiotics and other pharmaceuticals commonly given to beef cattle to maximize growth. The letter stated in part:

A beef production system reliant on the routine use of medically important antibiotics to mask poor animal husbandry is, by any definition, not sustainable. Yet the GRSB’s Principles and Criteria do not address routine antibiotic use in industrial beef production. The document simply states, “All veterinary pharmaceuticals and vaccines are used responsibly and in accordance with labeling.” 

The GRSB responded that the activists’ criticism reflected “a fundamental misunderstanding not only of the global beef production system, but the committed and diligent work” of the roundtable, which included the participation of the World Wildlife Fund, Rainforest Alliance, National Wildlife Federation and other NGOs.

Both sides agree on one thing: The principles were designed to be met by a significant number of beef producers using current methodologies and practices.

Consider Canada, where the Canadian Roundtable for Sustainable Beef is working to turn the GRSB principles into a national standard. Cherie Copithorne-Barnes, a fourth-generation beef farmer based just west of Calgary, Alberta, and president of the Canadian roundtable, told me, “We’re not trying to create something completely new right out the door because then you’re not going to get buy-in. We’ve got to create a system that people can build upon to create the momentum of continuous improvement, but it’s got to be something that people can’t be afraid of.”

For the Canadian beef industry, that’s the right way to transform a supply chain. For some environmental activists, that’s tantamount to greenwash.

The work of GRSB “was intended to set a framework so that the local, regional and national roundtables would have that framework to incorporate what works in their market,” says Michele Banik-Rake, McDonald's Director of Sustainability – Worldwide Supply Chain. “Eighteen months ago, nothing even close existed to talk about what sustainable beef could be. A year and a half later, there's a framework that exists that allows roundtables to operate within, and many are doing that.”

As Banik-Rake suggests, the criticism hasn't stopped the efforts of sustainable beef roundtables around the world, including in Europe, New Zealand, Brazil — and Canada. Each is developing a locally-relevant sustainability standard based on the GRSB Principles and Criteria. The formation of a U.S. roundtable is imminent, she added.

The cart before the cow

McDonald’s isn’t driving the standards-making process in Canada, but it isn’t exactly hands-off, either.

For example, Cargill, from which McDonald’s buys 100 percent of the beef (and poultry) it sells in Canada, is “working closely” with the Canadian roundtable in developing the specific indicators and means of verification that will become part of Canada’s sustainable beef standard, according to Derek Schoonbaert, managing director for beef and poultry for Cargill Canada.

“We’re aligning the work that we’re doing in Canada with the principles and criteria that have been established by the Global Roundtable for Sustainable Beef,” Schoonbaert told me. Meanwhile, Jeff Fitzpatrick-Stilwell, who leads McDonald’s sustainability efforts in Canada, chairs the Canadian roundtable’s communications working group.

There’s nothing sinister about this. Companies affected by industry standards often sit at the table at which they’re being developed. And this is a voluntary standard, not a regulatory one, so there are no rules about what influence the affected companies can have.

What’s interesting in this case is that McDonald's is moving forward with developing a sustainable beef supply chain in Canada in tandem with, and maybe just ahead of, the standard-making process. The Canadian roundtable isn’t expected to produce a life-cycle analysis for the beef industry until the third quarter of 2015, though Schoonbaert anticipates that a Canadian standard will be in place in time to meet McDonald’s 2016 goals.

“We're taking a little bit of a risk, to be honest,” admits Banik-Rake. “Ideally, the Canadian roundtable would have already completed its lifecycle analysis. It would already have that piece of information feeding into the work that's going on. This would be more of a partnership with the Canadian roundtable.”

But, “If we start working down the path that we're on today and, come third quarter when their lifecycle analysis work comes back, it says, ‘Here are the areas of opportunity for the Canadian beef industry,’ and we've missed some, we'll need to make changes.”

However, she adds: “I will be very surprised if there's some big gap that we've missed. We literally have talked to dozens of stakeholders of every kind to provide input into our process.”

Down on the farm

McDonald’s says it doesn’t foresee any roadblocks on its road to sustainable beef.

“We haven't really run into any resistance, and that almost makes me nervous,” Banik-Rake told me.

But it’s still unclear how many ranchers — in Canada or elsewhere — are ready and willing to make the necessary changes, beyond the relative handful of sustainability-minded souls like Cherie Copithorne-Barnes, who says that many of her fellow ranchers are concerned about what the new standard will require.

“Most of us are in the same boat,” says Copithorne-Barnes. “We can’t add another layer of bureaucracy to a very busy business already, and we don’t have the personnel and the staff to be able to have hours and hours to fill out reams of paperwork. The ideal situation right now is that there be no change in cost. It’s just going to be a little bit of time management because all we’re doing is defining what we’re already doing.”

She continued: “We’ve got to create a system that can automatically fold into our everyday standard operating procedures. We need to have the flexibility and the freedom to be able to set up those indicators that best suit our specific needs, and not ones that specific interest groups would be going after.”

Canada's beef industry has reached a level of cooperation and sophistication not seen in most other regions, says Cargill’s Schoonbaert. 

He points to investments in things like the Verified Beef Production program, a voluntary program for ensuring food safety and quality control, and the Beef InfoXchange System, a web-based data platform for tracking and managing cattle and beef. Both programs will be useful in the production, verification and distribution of sustainable beef.

“I think as it moves beyond the borders of Canada to other areas of the world, that will be the tricky part, where that understanding of what sustainability is and its importance can be a bit more difficult,” says Schoonbaert.

Another prerequisite for getting to scale will be an ample army of third-party verifiers. “If you’ve got high-integrity, third-party verifiers, it’s not difficult to pull sustainability into their existing process,” says Leann Saunders, president of Where Food Comes From, which provides third-party verification of farming and food production practices in North America, and which is working with McDonald’s and the Canadian roundtable. 

“I don’t think it will be difficult to scale,” she adds, “and that’s why we are spending so much time in the design process and making sure the product that comes out of that is right and acceptable. I think with where we are today and kind of the process that we’re going through, it will be something that will be sustainable for the beef production system to apply.”

Market makers

Still another challenge McDonald’s faces in transforming its supply chain is that in Canada, as in nearly all of the 100-plus countries in which it operates, the company consumes only between 1-2 percent of the total market for beef. To nudge markets toward sustainability will require engaging larger players — supermarkets and restaurants, where the lion’s share of beef is sold.

In Canada, McDonald’s is working with Loblaw Companies, the nation’s largest retailer, which sits on the executive council of the Canadian roundtable.

Loblaw’s efforts in sustainable beef “stemmed from our commitment to source with integrity and was a natural next step after the implementation of our sustainable seafood program,” according to Melanie Agopian, Loblaw's Senior Director, Sustainability. She says that, like McDonald’s, her company hasn’t set any targets or timetables for selling verified sustainable beef. “As the program develops and the CRSB learns from this pilot, we’ll be in a better position to understand the impact of the verification process and develop targets against that.”

McDonald’s will need the participation of Loblaw and other retailers. The hamburger chain buys trimmed beef, a relatively small percentage of the animal, while retailers buy the prime cuts — rounds, loins, ribs, briskets, flanks and more. If retailers sign on to buying sustainable beef, it could move the market far faster than even the world’s largest hamburger chain is able to do. (One potential market force is Walmart, which is a member of both the Canadian and the global sustainable beef roundtables. So far, the retail giant hasn't made any public moves toward sourcing sustainable beef.)

High stakes

All of this is early-stage, very much a work in progress. In some ways, it feels slow and plodding. In other ways, it seems utterly expeditious, especially for a global industry whose practices go back generations. It’s important to keep in mind that most of this has developed over the past two years, a blink of the eye in industry-transformation terms.

The speed may have something to do with the pickle in which McDonald’s finds itself, with declining sales in its core U.S. market and a flat stock price amid a rising stock market.

Among other things, the company is under attack from a new generation of “fast-casual” burger joints like Five Guys, In-N-Out, Habit Burger and Shake Shack, whose initial public offering last month was gobbled up by investors. And there are scores of other fast-casual eateries, from Au Bon Pain to Zaxby’s, which cumulatively are taking a bite out of McDonald’s market share.

There’s also a new generation of food-conscious consumers who care more about both nutrition and the provenance of their meals.

“When you hear more and more about what the consumer is asking for, we and the industry clearly don't have a choice but to continue to work toward more sustainable practices on farms and throughout the value chain,” says Banik-Rake.

Indeed, Derek Schoonbaert believes McDonald’s can play a key role in changing consumers’ perception of beef.

“The beef industry recognizes that consumers are more interested in where their food comes from and they want to tell the story,” he says. “They see the reach that McDonald’s has, and McDonald’s ability to help tell the story of how beef is produced in Canada. So, where McDonald’s makes a statement or sets a goal, the industry in Canada sees this as a real great opportunity to say, ‘We can do that here.’ And McDonald’s can help us with what we want, which is for people to know more about our beef and to help us sell more beef.”

How now?

I asked Banik-Rake to fast-forward to the end of the year: Where does she hope McDonald's will be on the road to sustainable beef?

“If I have my wish, by the end of 2015 we will have at least one major market in each area of the world running some kind of a pilot,” she responded.

The Brazilian industry is on the verge of starting a pilot, she explained. The Asia-Pacific region, particularly New Zealand, is moving forward; that country supplies about 20 percent of the beef McDonald’s uses in the United States. Ireland is seeking to be Europe’s leader in producing sustainable beef, though the size of its beef herd is tiny, roughly equal to that of Minnesota. The United Kingdom and Germany are hot on Ireland’s hooves.

During 2016, 2017 and 2018, she says, the goal is to work in those regions to grow the supply of sustainable beef — regardless of what critics think.

“We want to show leadership, and we'll continue to do the right thing,” says Banik-Rake. “I'm not overly concerned about what others are thinking at the time. We know this is the right move for us, and what we need for McDonald's to show the leadership in this space.”

Meanwhile, what about Mickey Dee’s fast-food brethren — Burger King, Wendy’s, Dairy Queen, Jack-in-the-Box? So far, they’re AWOL. Not one has joined the roundtable or taken an active role in building a supply chain for sustainable beef.