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15/04/02 . ALISON MAITLAND . The Financial Times . United Kingdom
McDonald's responds to anti-capitalist grilling
The group claims to have listened to its critics on issues of globalisation, nutrition and the environment. But not all of them are likely to be appeased, says Alison Maitland
Is McDonald's, the ubiquitous symbol of US-led globalisation and the target of anti-capitalist campaigners, enjoying an image makeover? That certainly seems to be its hope with the publication today of its first worldwide social responsibility report.
The fast food company, which has tried in the past to silence environmentalist critics, is now telling the world it is addressing "legitimate questions" about globalisation, nutrition and the environment. "Our brand can sometimes be used as a symbol for these kinds of issues," says Jack Greenberg, chairman and CEO. "Although we may not always agree on every issue, we want to be responsive and more transparent. We know we are not perfect."
McDonald's has been attacked for everything from the quality of its food and its treatment of employees to its impact on local cultures and the environment. Its restaurants, sporting the "golden arches" sign, have been the target of anti-globalisation demonstrators, most notoriously Jose Bove, the militant French farmer convicted of destroying a McDonald's construction site in 1999.
The McLibel case, in which McDonald's sued two UK environmental campaigners in the High Court in London and won in 1997, was seen as a public relations disaster for the company - an attempt by a Goliath multinational to destroy its tiny opponents. The Court of Appeal later ruled as fair comment the environmentalists' claims that McDonald's employees fared badly on pay and conditions and that "if one eats enough McDonald's food, one's diet may well become high in fat etc, with the very real risk of heart disease". The court ruled unjustified, however, their allegations about food poisoning, rainforest destruction and starvation in the developing world.
The McDonald's 46-page social responsibility report addresses many of these issues, summarising its activities and goals under four headings: community, environment, people and the wider marketplace. The latter includes animal welfare and labour practices at McDonald's suppliers. So is this primarily an attempt to answer critics?
Mr Greenberg is unwilling to discuss the McLibel case, describing it as history. Some of the criticism levelled at McDonald's is the result of its high profile, he says. "People looking to create publicity for their point of view will attack brands like McDonald's because it's more visible." However, he admits that "we've made mistakes in the past, and we know how to learn from those mistakes. We've grown in our understanding of the need to be more communicative and to engage in dialogue."
The company's belief in "social responsibility" pre-dates the term itself, he says. Ray Kroc, who founded the business in 1955, argued that the restaurants should "give back" to the communities in which they operated. "We're proud of a lot of the things we've done," says Mr Greenberg. "I think telling our story will help people understand what we're all about."
Part of this story is that the company has been working closely with pressure groups and independent scientists in the past few years to try to minimise ecological damage and to improve animal welfare. These initiatives have already had an impact on opinion. Campaign groups and media commentators placed McDonald's 14th in last year's Financial Times/PwC survey of the world's most respected companies for environmental performance.
In today's report, the company points out that it has a long-standing policy not to buy beef from rainforest lands. It says it is investigating buying paper from sustainable forests and is testing new packaging materials such as EarthShell, made mostly from calcium carbonate and recycled potato starch rather than paper or plastic. "These are examples of ways our efforts are evolving: how we need to challenge our traditional thinking, start asking different and better questions, and balance our focus and actions on both restaurant and supply chain impacts."
Conservation International's Centre for Environmental Leadership in Business is working with McDonald's to prevent damage to biodiversity from the agricultural practices of its suppliers.
"They've been a step ahead of others in the industry in making these environmental goals," says Glenn Prickett, executive director.
On animal welfare, Joy Mench, professor of animal science at the University of California at Davis, has acted as an unpaid consultant to McDonald's for two years and says its efforts are not mere window-dressing. "It took a lot of negotiation and work with their suppliers to help them comply."
Responding to customer demand and pressure from animal welfare activists, McDonald's has set new US standards, for example on the way chickens are housed, that other leading food retailers are following, she says. "It's the first big change I've seen in more than 20 years."
Validation of this kind is crucial to McDonald's case. Its social report has considerable shortcomings, and the company acknowledges some of them. First, it has not been subject to independent verification. Bob Langert, senior director for global social responsibility, says this is because social reporting is still in its infancy and lacks generally accepted auditing practices. "We'll study that as it goes on."
Second, it is short on numbers and contains almost no data that allow comparison with past performance. In the "people" section, for example, it lists awards it has received. McDonald's Brazil was named "the best company to work for" and McDonald's Sweden "the best developer of people". But without comparative data, the reader has to take on trust its claim to pay more than competitors in South Africa, or more than the officially required rate in Sri Lanka. The report also makes no reference to trade unions and collective bargaining.
McDonald's says it is following the guidelines of the Global Reporting Initiative, the sustainability reporting organisation that was inaugurated in New York this month. However, the GRI states that "reliable comparative data should be provided to enable informed comparison over time".
The problem, McDonald's acknowledges, lies in its franchise model. More than 70 per cent of its 29,000 restaurants in 121 countries are owned and operated by independent entrepreneurs. It lacks systems to collect and aggregate information about what these operators do for their community, their people and the environment.
In confronting its anti-globalisation critics, McDonald's makes much of this franchise system, insisting that "in essence we are a network of local businesses owned by local entrepreneurs, who hire local people, and purchase from regional and national suppliers and service companies".
But is this not a potential liability for McDonald's in trying to ensure all its outlets and suppliers meet the same standards of social responsibility? Mr Greenberg replies that, while it is harder to collect data, the model gives McDonald's an advantage over multinationals that have stumbled by failing to understand that other countries operate differently from the US.
Given the damage caused by events such as the McLibel trial, McDonald's needs to demonstrate that it can handle criticism sensitively. An interesting example in the report is the way it responded to allegations in the South China Morning Post in 2000 that one of its facilities in China was employing child labour and forcing employees to live and work in squalid conditions. McDonald's sent in a multinational team of auditors from four social compliance monitoring companies. Although they found no evidence to back up the allegations, they uncovered serious record-keeping irregularities and related problems. "As a consequence, we terminated this supplier," the report says. "Compliance programmes cannot guarantee compliance, but they must incorporate processes that can deal swiftly and effectively with non-compliance."
Whatever independent observers make of McDonald's first step in social reporting, Mr Greenberg has no illusions that it will shake off the most persistent accusers, such as those behind the critical McSpotlight website. "We want to work with non-governmental organisations that want to make progress on these important issues. Some don't want to do that, and that's disappointing," he says. "I don't think it will silence every critic."