Following a 3-year global investor engagement campaign, six giants of the fast-food industry, including Mcdonald’s and Dominos, have either set or have committed to set science-based targets for reducing greenhouse gas emissions.
Author: Lauren Foye, Head of Reports at Zero Carbon Academy
Research by investor coalition shows progress on target setting.
The third edition of The Global Investor Engagement on Meat Sourcing (GIEMS) research, conducted by sustainability-focused investor network FAIRR and non-profit Ceres, has found that fast food companies have made “notable progress in addressing investor requests to analyse the climate impact of QSRs (Quick Service Restaurant).“[i] Having come first together in 2019, today the coalition of investors have combined assets of $11 trillion[ii], with FAIRR representing the sustainability interests of hundreds of institutional investors and Ceres’s Investor Network on Climate Risk & Sustainability comprising of 163 institutional investors:
“Since the start of this engagement in 2019, institutional investors have steadily increased pressure on QSRs to address climate and water risks in their animal protein supply chains.“[iii]
According to a press release, the research focused on six leading fast-food companies with a combined market cap of more than $281 billion. These were: Chipotle Mexican Grill, Domino’s Pizza, McDonald’s, Restaurant Brands International (owners of Burger King), Wendy’s Co. and Yum! Brands (owners of KFC, Pizza Hut and Taco Bell). The coalition has urged QSRs to de-risk their meat and dairy supply chains by setting targets to reduce greenhouse gas emissions whilst also reducing water usage, and any associated impact QSRs have on water quality. The latest findings are positive, with the report stating that all six fast-food companies have now publicly set, or committed to, set science-based targets approved by the Science Based Targets initiative (SBTi). Further, Chipotle has committed to reducing scope 1, 2 and 3 emissions by 50% by 2030.
Concerns raised over water pollution & supply chain transparency.
Whilst there were positives in the commitments made by the big 6, the investor coalition has also voiced concerns around the lack of supply chain transparency. More than 90% of the QSR companies’ emissions are attributed to scope 3- where suppliers of meat and dairy products play a significant role. Yet, just two of the six firms, RBI and Yum!, disclosed total emissions derived from animal agriculture. Both companies listed meat and dairy suppliers as responsible for more than half (57% and 51%, respectively) of their total emissions.
Cristina Figaredo, Senior Manager, Research & Engagement at FAIRR, said: “Regulators and influential frameworks such as the Science-Based Targets Initiative (SBTi) are tightening requirements for the food sector to report and act on climate. So, investors are very concerned that ambitious climate targets by fast food companies are not translating into action along the supply chain.” She added, “The lack of alignment of supplier policies with corporate climate ambitions risks undermining the efforts of these high-street brands to tackle climate risk. Their performance on water is also alarmingly poor, and efforts to mitigate risks related to water scarcity and pollution have stagnated over the past year.“[iv]
As mentioned above, water pollution was of particular concern, with the report noting that whilst companies have initiated projects to implement agricultural practices which are known to reduce water use and pollution, “these activities fall dramatically short of meaningfully reducing the externalities caused by animal protein supply chains and are not likely to sufficiently mitigate physical risks to the meat supply chain from droughts, flooding, and regulatory and reputational risks related to water pollution,“[v] Worryingly, with the food industry ranking as the largest driver of water consumption, water pollution, and other water-related impacts globally, none of the fast-food firms analysed in the report has set enterprise-level targets to reduce water pollution and consumption across their supply chains, according to The Global Investor Engagement on Meat Sourcing.
Why science-based targets matter
The alignment to SBTs is an important step for the food industry; increasingly, we are seeing a strengthening in the requirements for climate disclosure across sectors as governments worldwide expand the scope and strength of climate commitments and reporting guidelines. The SBTi Business Ambition for 1.5°C campaign is just one example of how efforts are strengthening to drive commitments towards more stringent climate goals and ultimately net zero. Further, as the GIEMS research notes, “in 2021 and 2022, the European Union and the United States’ Securities and Exchange Commission (SEC) proposed new mandatory reporting rules for publicly traded companies to disclose material climate-related risk. These proposals could improve corporate transparency to investors and require companies to examine their response to climate risks.“[vi]
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