Fast-food giants beef up climate commitments following investor pressure
The likes of McDonald's, Domino's and Yum! Brands, which owns KFC, have all improved their climate commitments this year following pressure from an $11trn coalition of investors.
The investor group, FAIRR, revealed today (30 April) how engagement with six of the world’s biggest fast-food brands in its members' portfolios has evolved against a backdrop of Covid-19 and preparation for COP26 this November. The brands covered are McDonald’s, Burger King, Domino’s, Chipotle Mexican Grill, Restaurant Brands International (owner of Burger King) and Yum! Brands (owner of KFC, Pizza Hut and Taco Bell).
Strong progress was recorded on setting and strengthening climate targets. In late 2019, just two of the brands had committed to set, or already set, goals approved in line with the Paris Agreement through the Science-Based Targets initiative (SBTi). Now, the proportion is five of the six. While Restaurant Brands International has said it will develop global emissions targets including Scope 3 (indirect) sources for the first time, FAIRR has not received evidence that this will definitely be science-based.
FAIRR has welcomed the recent moves and is urging companies to consider how they will need to change their menus to meet the new targets. It praised Burger King UK for a commitment to transition half of the menu to plant-based protein by 2030, for example.
A further challenge will be engaging the remaining meat and dairy supply chain. 2020 FAIRR analysis found that eight in ten of the world's biggest meat, fish and dairy suppliers have not set meaningful targets to reduce emissions.
Climate risk persists
Despite strong progress on target setting, FAIRR is warning, along with analysis co-producer Ceres, that brands must do more to measure and disclose climate risk.
All six brands assessed showed “limited progress” on measuring and disclosing information in line with the recommendations of the Task Force on Climate-Related Disclosures (TCFD). This framework includes scenario analysis – a process whereby companies assess physical and transition risks across their value chain at a range of warming trajectories, including 2C by 2100.
This issue is not unique to the six brands. The TCFD’s most recent status report revealed that climate disclosure in the agriculture, food and forest products sector linked to company strategy fell by 7% between 2017-2019. This is not only concerning in terms of national and international climate targets being met, but in terms of regulatory compliance. Large businesses in the UK will all have to report in line with the TCFD by 2025, and, in the US, the Biden administration is mulling a similar mandate.
FAIRR is also warning that the six brands, and the wider sector, are failing to assess its water-related risks and to work in the near term to tackle issues such as water scarcity and pollution. While all six brands acknowledge the materiality of supply chain water risks in public reporting, half have not disclosed a specific assessment of risks. FAIRR is also worried that the brands are using initiatives that are “limited in scale and scope” compared to their whole meat supply chains.
“As investors, we have a vital part to play in the fight against climate change to safeguard our clients’ investments and ensure the stability of our planet and its natural resources,” Aviva Investors’ senior analyst Eugenie Mathieu said.
“Fast food is a sector that’s highly vulnerable to climate-related risk so it’s encouraging to see so many of the firms in this engagement taking significant steps to reduce their carbon footprint.
“However, we now need companies to apply the same level of urgency to the water risks in their value chains. It’s been estimated that $301bn of business value is at risk unless companies improve and innovate around water use, pollution and management. Meat and dairy production uses one-quarter of all the global freshwater used worldwide, so we expect better stewardship from the sector. Investors will be watching closely."