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McDonald’s launches new sourcing policy for palm oil, paper, beef to reduce global environmental impact

McDonald’s (NYSE:MCD) announced a far-reaching sourcing policy that could significantly reduce the fast-food giant’s impact on the environment, including global forests.

Yesterday McDonald’s unveiled its Sustainable Land Management Commitment (SLMC), a policy that requires its suppliers to use “agricultural raw materials for the company’s food and packaging that originate from sustainably-managed land”. The commitment will be monitored via an independent evaluation process, according to the company.

The policy will initially focus on five commodities: beef, poultry, coffee, palm oil, and packaging. McDonald’s target commodities are based on analysis conducted in partnership with environmental group WWF’s Market Transformation initiative led by Jason Clay.

McDonald’s has announced several environmental criteria for sourcing in recent years including seafood and soy commitments, but the new pledge brings in more commodities.

oil palm fruit

Palm oil is a highly productive crop grown primarily in Indonesia and Malaysia. Palm oil is used widely in processed foods, cosmetics, and soaps. It is also increasingly used as a biofuel.

While palm oil can be produced sustainably, much of recent expansion has come at a high environmental cost. By some estimates, more than half of oil palm expansion since 1990 occurred at the expense of forests, spurring strong backlash from environmentalists concerned about greenhouse gas emissions and loss of habitat for endangered wildlife—including orangutans, pygmy elephants, Sumatran rhinos and tigers. Oil palm plantation development has also exacerbated social conflict in some areas. The RSPO is an effort to improve the social and environmental performance of the industry.

Under SLMC, McDonald’s is working with the Global Roundtable for Sustainable Beef to improve the environmental performance of beef production and is sponsoring a three-year study to assess carbon emissions on 350 ranches in the U.K. and Ireland. The company said it plans to join the Roundtable on Sustainable Palm Oil (RSPO) this year and will source only RSPO-certified palm oil by 2015. McDonald’s has also joined the Sustainability Consortium, a group working to build tools to assess the environmental impacts of consumer products over their life-cycle.

McDonald’s said it is introducing the policy as a response to consumer concerns.

“We know that our customers care about where their food comes from,” said Francesca DeBiase, McDonald’s vice president for Strategic Sourcing, in a statement.

The announcement comes amid a broader emphasis on sustainability by consumer-facing retailers worldwide. As corporations have increased the share of resources they consume in meeting global demand for their products, they have found themselves increasingly under pressure to become better stewards of the environment. Accordingly, a number of major retailers in recent years have announced new sourcing policies that improve traceability of raw materials in their supply chains. Suppliers have either had to meet these criteria or find new customers.

McDonald’s experienced this first-hand in 2006 when the activist group Greenpeace launched a campaign targeting animal feed used to fatten chickens used for McNuggets in Europe. Greenpeace spent a year tracking soy as it moved through the supply chain from farms in the southern Amazon to ports on the Amazon River, across the Atlantic, and eventually to poultry facilities in Britain and Ireland.

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More than 70 percent of land deforested in the Brazilian Amazon ends up as pasture, making cattle production one of the most important drivers of deforestation in the world. In 2009 major beef processors, traders, and buyers in Brazil announced a moratorium on deforestation for cattle production. Photo by Rhett A. Butler.

The response was immediate. McDonalds—stung by the McLibel case of the 1990s and other activist campaigns—immediately demanded its suppliers provide deforestation-free soy, presenting the industry was presented with a daunting dilemma: move towards environmental respectability or of its biggest, and most influential, customers. The largest soy players—whose vast portfolio of commodities are sold globally—chose the former, agreeing to a moratorium on soy grown on newly deforested lands that has changed the way commodities are produced in the Amazon. The moratorium has been extended every year since and through monitoring, which has has continually improved, has shown to be effective at reducing direct forest clearing for soy production.

In a sign of the campaign’s success, John Sauven, a Greenpeace campaign director at the time—issued a statement congratulating McDonald’s for using “its might to push a multi-million dollar industry towards a more sustainable future.”

“I cannot say it came naturally to Greenpeace to jump into bed with the world’s largest fast food company!” Sauven said in the statement.

McDonald’s, which says it has 32,000 locations that serve approximately 64 million customers in 117 countries each day, acknowledged its global environmental responsibility in making its latest announcement.

“McDonald’s serves customers around the world, and we accept the responsibility that comes with our global presence,” said McDonald’s Chief Executive Officer Jim Skinner. “We will continue to focus our energy on developing sustainable sourcing practices and broadening our menu choices.”

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