Fast food firms failing to face up to climate challenges, investment giants warn

Water and emissions targets were found to be particularly lacking

That is according to a group of more than 90 investors with more than $11.4trn of assets under management collectively, convened by sustainability non-profits Ceres and FAIRR.

A new report from the coalition this week reveals the results of research into the sustainability ambitions and actions of six of the world’s largest fast food firms: McDonald’s; Restaurant Brands International, the parent firm of Burger King and Tim Hortons; Domino’s; Wendy’s; Chipotle; and Yum! Brands, the parent firm of KFC, Taco Bell and Pizza Hut.

The research saw investors in each of these firms approach them directly for information on sustainability requirements in supplier policy; environmental disclosure processes; sustainability targets and whether risk assessments are being carried out in line with the Task Force on Climate-Related Disclosures’ (TCFD) recommendations. The TCFD notably urges businesses to produce scenario analyses in line with the Paris Agreement, predicting how global temperature increases will affect their value chain.

On questions related to climate and water considerations in supplier policies, the information provided by all companies was either partial, non-existent or based around future plans rather than action to date.

On targets, the report highlights McDonald’s’ leadership in setting science-based targets that cover Scope 1 (direct), Scope 2 (power-related) and Scope 3 (indirect) emissions. But no other firms analysed have set science-based targets yet. Yum! Brands has committed to develop targets in line with the Science-Based Targets initiative, as have Chipotle and Restaurant Brands International – but the research found no evidence that Domino’s or Wendy’s were working towards this aim.

Water targets for suppliers were found to be even more lacking, with the investors finding no evidence of past implementation or planned development at four of the six brands. Only time-bound, numerical targets which are aligned with science were considered during the research.

Finally, the research revealed that none of the six firms has completed scenario analysis in line with the TCFD recommendations. McDonald’s has begun this project, however. The investors could find no evidence that either Wendy’s or Domino’s were working to link environmental and financial risks, in line with the TCFD or otherwise.

“Notable gaps in the [fast food] sector’s risk management strategies remain, particularly around assessing supply chain resilience to various warming scenarios and setting time-bound, quantitative targets addressing supply chain emissions, water use and water pollution,” the report concludes.

Next steps

Rather than bluntly divesting from any of the companies analysed in the report, the investors have pledged to work with them in order to improve ambition and action across the sustainability agenda.

The report outlines the key steps the coalition would like each brand to take – Wendy’s and Domino’s are urged to develop dedicated sustainability functions, for example, while McDonald’s is encouraged to accelerate its scenario analysis work and build land-use emissions into its science-based targets, off the back of the IPCC’s assertation that 23% of man-made emissions globally can be attributed to agriculture.

The investor coalition first began this engagement activity with fast food companies in January 2019, making a broad call for action across all environmental aspects “as a matter of urgency”. It says the second phase of this engagement will allow for more detailed, context-based conversations with individual brands.

An exposed sector

The global meat and dairy sectors are widely classed as a key contributor to climate change – and one of the worst-prepared industries for climate challenges such as droughts, floods and heatwaves in the world.

According to the IPCC, an average global temperature increase of 2C would see livestock numbers fall by 7-10% globally, resulting in economic losses valued between $9.7bn and $12.6bn. As of 2018, none of the sector’s largest firms had aligned themselves with a 1.5C trajectory, according to FAIRR.

Since the IPCC’s landmark report was published, however, action seems to have accelerated. With 40% of global GDP covered by net-zero targets in line with a 1.5C trajectory, thousands of businesses will be mandated to comply. A handful of other large firms have set net-zero or other science-based targets independently of legislation, including the likes of Arla Foods, Cranswick and Alpro.

But emissions aren’t the only environmental issue for the sector. Large-scale deforestation, fires, and human rights abuses in Argentina and Paraguay’s Gran Chaco region have been linked to meat producers across the globe. The sector is also coming under increased scrutiny around issues such as nutrition and animal welfare.

Amid this perfect storm, many big food businesses are investing more heavily in alternative proteins and other plant-based products – a market predicted to reach $5.2bn in 2020 and continue to expand at an annual rate of 8.29% thereafter.

Sarah George