McDonald's: In Pursuit of Sustainable Beef

The life of a Big Mac commences on a ranch.

Said Big Mac generates over $1 billion in annual revenues for McDonald's.  In fact, McDonald's has five products that each generate over $1 billion per year: The Big Mac, The Quarter Pounder, The Quarter Pounder with Cheese, The Double Cheeseburger, and The Cheeseburger. Suffice to say, beef has treated the company's bottom line quite nicely.Yet, on January 7th, the world's largest hamburger chain (nearly 70 million customers per day) announced it would begin purchasing sustainable beef in 2016.“Our vision is to buy verifiable, sustainable beef in the future for all of our beef.  It's a small part risk management and a large part about growing our business by making a positive business for society" -  Bob Langert, VP Global Sustainability, McDonald'sYou're probably wondering what sustainable beef means.Good question.In fact, it's a question McDonald's has yet to answer.Enter the Global Conference on Sustainable Beef. (Yes, this is a real conference.)In 2010, 350 packagers, restaurant owners, processors, and activists collaborated in Denver. The topic of discussion? Beef. The outcome? Apparently, not much. However, this event triggered another to occur in 2012: "The Global Roundtable on Sustainable Beef" (GRSB), which was, essentially, a larger gathering of similar people.“One of the first priorities we identified was defining this nebulous monster of a term, sustainability. What does it mean? And, particularly, what does it mean for beef? Our idea was to scope out five to ten critical areas that we think no matter where you are in the world producing beef, and no matter what part of the supply chain you’re involved in, you should be addressing. And if you are addressing those areas in whatever manner is suitable for your region, you are on the path to continuous improvement. You are on the path to sustainability.” - Cameron Bruett, President of GRSBThe way I read it? No one really knows what sustainable beef means.Subsequently, McDonald's has been working with the GRSB to define sustainable standards. The byproduct is vague.For example, the guidelines state that companies must "provide stable, safe employment for at least the minimum wage where applicable" and establish "where applicable, third-party validation of practices by all members of the value chain." The plan further requests that, "emissions from beef systems, including those from land use conversion, are minimized and carbon sequestration is optimized."  What is stable? What is safe?  What constitutes optimization? Whatever you want, apparently.The GRSB claims the lack of details in the guidelines is intentional: it "deliberately avoids" explicit measures of sustainable progress, instead leaving this to roundtable discussion. This is faulty. Although a "one size fits all" regulation is not always effective, the blank slate that the GRSB is suggesting is widely unenforceable.Changing long-lived profitable practices is an arduous task.'What's the Beef' with beef?Beef is not great for the environment. Raising cows and subsequently producing beef requires energy - and lots of it. In turn, beef production leads to massive greenhouse gas emissions. Approximately speaking, producing one hamburger uses enough fossil fuel to drive a small car 20 miles. Further negative externalities from beef production include deforestation, water and soil loss, and pollution from untreated animal waste. To provide some context, the world produces over 60 million tons of beef per year.  It takes approximately 2,500 gallons of water to produce a pound of meat, in contrast to 25 gallons of water to produce a pound of wheat.  Beef, however delicious it may be, is extremely resource and energy intensive.An Uphill Battle: The Supply ChainCompanies that depend on a supply chain face tremendous complexities when striving to embrace sustainability.We saw this a few weeks ago when we examined Kellogg. [Read Post Here!].  The reason being that most, if not all, of the chain's links must be ameliorated. This typically involves new practices, greater transparency, and larger investments. Oh, and a whole lot of time.The Big Mac lies at the end of one of the world's most complex supply chains.  McDonald's purchases finished frozen patties (sorry McDonald's lovers) from about twenty various food processing companies around the globe. The beef itself changes hands (hopefully clean ones) five to six times before it even arrives in a McDonald's parking lot.Further down the supply chain, there are roughly 400,000 cattle farms that provide the meat that eventually ends up in a Big Mac. Along the way, cows are raised, fattened, and slaughtered; the resulting beef is trimmed, ground, mixed with other beef, inspected, packaged, frozen, shipped to distribution centers, and THEN shipped to a McDonald's restaurant.McDonald's global nature heightens complexity. Simply put, cows are raised differently in specific areas of the world. Consequently, the supply chain varies from country to country.  For example, the majority of U.S. cows are grain-fed for part of their lives, while cows in Europe, Brazil, and Australia only eat grass and hay. Different countries have different climates - and different laws.  Australia is sensitive to its Barrier Reef, Brazil to its Amazon. You get the picture.What's my point? Donald Thompson (CEO, McDonald's) can't just make a phone call when he wants to achieve a certain goal of sourcing sustainable beef.We're talking about altering an entire industry.