Fast food giants are failing on supply chain sustainability

According to a new progress report released today, a three-year global investor engagement with fast-food giants has led to significant progress in setting climate targets, but has raised concerns among investors about managing emissions and water use in the industry supply chain. by the global network of FAIRR investors and the sustainability organization Ceres.

Led by an $11 billion investor coalition, the Global Investor Engagement on Meat Sourcing focused on six major fast food companies with a combined market capitalization of over $281 billion: Chipotle Mexican Grill, Domino’s Pizza , McDonald’s, Restaurant Brands International (RBI, owner of Burger King), Wendy’s and Yum! Brands (owner of KFC, Pizza Hut and Taco Bell).

The coalition, which includes more than 90 investors, has urged companies to reduce risk in their meat and dairy supply chains by setting ambitious targets to reduce greenhouse gas emissions, while reducing the water consumption and their impacts on water quality.

The report, Global Investor Engagement on Meat Sourcing Progress Update 2022, reveals that the six fast food companies have now publicly set, or committed to setting, Science Based Targets Initiative (SBTi) approved science-based targets.

The SBTi is a partnership between the non-profit CDP, the United Nations Global Compact, the World Resources Institute and the World Wide Fund for Nature that stimulates climate action in the private sector by enabling organizations to set targets for science-based emissions reduction.

Wendy’s and Domino’s have confirmed that they will be submitting targets for SBTi approval. All the other companies have had their scientific objectives set and approved by the SBTi.

However, only two of the six companies, RBI and Yum!, disclosed total emissions from animal agriculture. Both companies reported that meat and dairy suppliers were responsible for more than half (57% and 51%, respectively) of their total emissions. Investors have warned that this lack of transparency in the animal agriculture supply chain could undermine food brands’ efforts to tackle climate risk.

Cristina Figaredo, Senior Research and Engagement Manager at FAIRR, said: “Regulators and influential frameworks such as the SBTi are increasing demands for the food sector to report and act on climate. Thus, investors are very concerned that the ambitious climate goals of fast food companies are not translating into action throughout the supply chain.

“The lack of alignment of supplier policies with corporate climate ambitions risks undermining the efforts of these big brands to address climate risk. Their water performance is also alarming, and efforts to mitigate risks related to water scarcity and pollution have stagnated over the past year.

According to the report, none of the fast food companies have set company-level targets to reduce pollution and water consumption in their supply chains (covering their own operations and throughout the value chain, including direct and indirect suppliers).

This is despite the fact that the food industry ranks by far as the biggest driver of water use, water pollution and other water-related impacts globally, the report warns. While some companies, including Wendy’s, McDonald’s and Yum!, have begun setting targets to address water impacts in their operations, investors continue to point out that they are failing to address the larger risks. within the agricultural supply chain.

This is particularly important because the agricultural supply chain makes up the bulk of a company’s water footprint, the report explains. Domino’s 2020 materiality assessment found that ingredient production accounted for 88% of its overall water consumption.

Currently, RBI has not disclosed any efforts to analyze water risks in its operations, while McDonald’s is the only company to have conducted a comprehensive water risk assessment that includes its supply chain. This means that five out of six companies may be unaware of the amount of water taken from areas of high water stress and the resulting risk of water shortages, the report warns.

Daniel Shepard, senior investor engagement partner for water at Ceres, concludes, “Now is the time for companies to step up and demonstrate real impact. We are particularly focused on promoting better water risk management in supply chains, an often overlooked – but equally important – aspect of the climate change coin.

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