McDonald’s New Super-Sized Deforestation Commitment: 4 Things You Should Know


Just in time for Earth Day, McDonald’s has released a new global deforestation commitment. While this policy is new, the company is no stranger to the issue. In fact, McDonald’s was one of the first companies to be confronted in the 1980s as consumers began to recognize the “Hamburger Connection” between beef production and tropical forests. In response, the company established its Amazon Policy, which prohibited the sourcing of beef from the Amazon. Seventeen years later, McDonald’s was instrumental in creating the Soy Moratorium, an industry-wide effort which has effectively halted soy expansion on native vegetation in the Amazon Biome. (Soy is a major source of feed for chickens and other livestock).

Now, following a wave of commitments from agricultural giants such as Cargill and ADM, the new global policy is a first-of-its-kind in the fast food sector and, if executed correctly, could stand as a shining example for other companies in the food business to follow. As one of the world’s most recognized brands, McDonald’s knows any commitment with such a large impact on the planet – tropical forests are one of the largest contributors to, and buffers against, climate change – will be heavily scrutinized. So, what do we need to know as we watch this journey unfold? To radically simplify, four things come to mind:

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New Report Supports Jurisdictional Approaches to Ending Deforestation in the Amazon

Andrew Hutson EDFThe world’s attention has been on Brazil lately.  With an exciting World Cup this past summer, an election season full of drama (including a plane crash), and the coming Summer Olympics in 2016, it has been easy to overlook the piece of news that has the greatest impact on all of our lives: the remarkable decreases in rates of deforestation in the Amazon.  With little fanfare (at least from the general public), deforestation decreased 70% since 2005 and Brazil has become the world leader in reducing greenhouse gas pollution.

But while this progress impressive, it is important to note that we’re still losing over 5,000 square kilometers of forest a year in the Amazon. More importantly, we’ve seen a slight uptick in the rate of deforestation over the past two years, with an increase of 29% from 2012-2013. That number looks likely to increase again this year.

As the number of companies, governments, NGOs, and indigenous peoples who signed the New York Declaration on Forests last month demonstrated, there is an eagerness to address this issue across all sectors of society. Among other goals, signatories to the Declaration seek to halve the rate of loss of forests globally by 2020 and end natural forest loss by 2030. To get there, we need a scalable and systematic approach to meet this ambitious, yet achievable goal. EDF believes one solution is the creation of Zero Deforestation Zones (also referred to as jurisdictional approaches) – nations or states that are able to demonstrate reductions in deforestation within their borders as the most effective way to save forests the scale of entire landscapes, rather than individual parcels of land.

A new report by Datu Research, Deforestation in the Brazilian Beef Value Chain, supports this notion.

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Quiet But Admirable Commitments to End Deforestation

Andrew Hutson EDFIf you saw the news that there was a UN Climate Summit this week, but haven’t followed it closely, you might well assume that nothing substantive happened.  You can certainly be forgiven for thinking so – there was a lot of pomp and lofty talk (this is the UN after all), and no global treaty was signed (although none was expected). Below the surface, however, quiet momentum for key policy actions was built. And even quieter, but yet potentially more exciting, commitments were made. Chief among these was news that global agriculture giant Cargill committed to ending deforestation across all commodities in its supply chain as part of the New York Declaration on Forests.

This is a big deal.

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Summer Heat Brings Industry Call for Climate Deal

Andrew Hutson photo

As I write this blog, it’s hot outside.  I mean really hot.  At 97 degrees today here in the North Carolina Piedmont – with a heat index of 100 degrees – it’s thirteen degrees above the average high for June.

Summers have been getting hotter here, as they have in most parts of the world, since I moved to the South from my native Michigan fifteen years ago.  And the weather has gotten weirder. Way weirder.  Too much rain at times, not enough at others.  Hot when it should be cold, cold when it should be hot.  Bigger storms. You get the picture… you’re experiencing it too.

Yet, somehow, I’m hopeful.

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Generating solutions for energy reduction across the supply chain

How China can harness the power of supply chains to save costs, energy and ultimately the environment

Gearing up for the start of a new school year begins with shopping for new school supplies. Your daughter has asked for the latest princess backpack and a full set of colored pencils. While she has insisted that you buy the set of 36 and not 12, she has not specified any carbon footprint limit. And neither have you.

Turns out, your purchases hold great promise for reducing emissions. According to the International Energy Agency, the global industrial sector emits approximately one-third of energy related CO2 emissions and consumes the same amount of total primary energy supply.

Luckily, a perfect storm of consumer awareness, corporate responsibility and government incentives has ushered big US players like Walmart into the spotlight, who can use their market clout to move their suppliers away from wasteful practices. The good news is that from a technical standpoint, we know how to help companies like Walmart reduce their footprint at in a way that actually saves a lot of money.

But despite making economic sense, the average company implements less than two thirds of energy efficiency projects. We can attribute a lot of this disparity to the complexity of the marketplace in China, where most consumer goods on the shelves of US retailers are manufactured. Among these small and medium sized producers, the scale is vast. Coordination is difficult. The true numbers are obscured. The promise of financial return is hazy. There is a lot of room for improvement.

In October of last year Environmental Defense Fund (EDF) partnered with the University of Minnesota Institute on the Environment’s NorthStar Initiative for Sustainable Enterprise (NiSE) to convene 31 participants from energy service companies, finance, retail, NGOs, government and academia to brainstorm real solutions to this challenge.  This week, we’re launching The Supply Chain Coordination and Energy Efficiency Symposium report to summarize the group’s findings and outline a roadmap to close the gap between the energy efficiency opportunities that are identified and those that are implemented in the supply chain.

Once again, EDF’s commitment to “finding the ways that work” has paid off in spades. This group of unlikely partners has crafted ideas that will help guide our work moving forward. Our ideas included staging pilot programs at leading companies, engaging peer manufacturers to collaborate and compete for success, and advocating for increased industry transparency.  Finally, and most importantly, we emphasized the need to find quick and easy ways to prove to investors what we already know—that investing in energy efficiency pays back, and pays back well.

At the heart of this report lies the goodwill of unlikely partners working together to catalyze solutions. As we know, the trick is ensuring that these solutions are not only imagined, but that emission reductions are realized both in the US and in China, both among industry giants and small businesses. A purchase as simple as a backpack and colored pencils could be a powerful tool in securing a safe future for your daughter. This report is a step toward that future.

Saving Business from Itself

Is the business community its own worst enemy? That was my takeaway from a recent post on FastCompany’s blog. In it, Joss Tantram makes the provocative argument that trade — “rights of enterprise, private trade and market activity” — is a fundamental human right.  But he also notes that that right is increasingly at risk, given the market’s failure to address the disruptive effects of global warming and other environmental challenges. 

“Trade as we have known it is endangered,” Tantram writes. “Clear trends in demographics, urbanization, water quality and availability, climate stability, resource scarcity and ecosystem health represent risks to the continuation of trade as usual.”  He suggests changes to trade law, policy and regulation that remedy the problem.

I agree with Tantram. Mostly. Trade is the lifeblood of the world economy and the engine that enables people to live better lives. And, yes, systems of commerce are increasingly at risk due to self-inflicted social and environmental wounds.  So we do need new public policies to ensure future prosperity.

It’s also true that a growing number of businesses are keenly aware that environmental threats are also threats to the bottom line.  As Tantram notes:

“A growing number of companies …recogniz(e) that their longevity relies upon the health and vitality of natural capital and the continuing stable functioning of natural systems, have developed plans to transform their production activities to become sustainable.”

So far so good. But I don’t think Tantram’s diagnosis or his cure, are precise enough. The real question to ask is: can business save itself from itself?

In fact, despite the progress that has been made, the primary obstacle to enacting policies that will safeguard the environment and protect the “right to trade” is still the business community and its allies. Far too frequently, their knee-jerk reaction to proposed environmental policies is to try to kill them.  Or, nearly as bad, many executives will sit on the sidelines while their more aggressive peers disrupt meaningful, system-wide action.

In the very worst  cases, companies speak out of both sides of their mouths. Publicly, they maintain the importance of sustainability; privately, they apply money and influence to thwarting meaningful action – often by undermining sound science (as detailed in this report by Union of Concerned Scientists).

We’ve come a long way in the past decade.  Environmentalists have gone from being seen as the enemy in corporate boardrooms to trusted advisors.  As a result, there are many exciting initiatives underway at corporations around the world aimed at tackling critical environmental problems.  But we cannot continue to pretend that voluntary programs alone are sufficient to solve the scope of the challenges we face.

Over the next decade, being a business leader (or a leading corporation) will mean helping to shape smart government policies that preserve ecosystems vital  to the continued profitability of business itself.  It will also mean taking a more aggressive role in overriding those voices within the business community that wish to maintain the status quo.

Business leadership of this sort is one of the critical elements to meeting the global threat of climate change. The stakes are high: our systems of global trade and the ecosystems life depends on hang in the balance.

Originally posted on EDFVoices.

The Walmart Chronicles: Energy Efficiency Ain’t Rocket Science, But It Could Use a Boost

Two years ago, I sat in a crowded ballroom in Beijing and listened to incoming Walmart CEO Mike Duke say, “By 2012, our goal is for the top 200 factories we source from directly in China to achieve 20 percent greater energy efficiency.”

It was music to my ears. Even though my organization, Environmental Defense Fund, was one of the key stakeholders working with Walmart, and I had already made several trips to China to help the Walmart team shape the commitment, I was still a bit astounded. This could change everything, I found myself thinking. When Walmart speaks, suppliers listen, and other retailers and brands tend to follow. My thoughts were confirmed by a flurry of BlackBerry action from suppliers in the room. They must have gotten the message.

Well, sort of.

Since the announcement in October 2008, EDF has been working closely with Walmart and its suppliers on the ground in China to meet that goal. We’ve been in over 300 factories and here’s what we’ve found: Walmart is off to a decent start with its Chinese factories, but for the program to be impactful and meet its potential, it needs to up its game. Dedicating sufficient resources to get the job done would be a good place to start.

Here’s the good news: The opportunities for improvement are even larger than we envisioned — it’s not unusual for us to find savings of up to 60 percent in many factories — and the payback periods for upgrades are absurdly short. We never recommend a project with a payback period longer than two years, and many of the recommendations we make have simple returns on investment of less than six months.

Our perspective all along has been that energy efficiency ain’t rocket science. Solutions to radically reduce energy using mature technology are readily available. The trick was to better understand how such technologies could be applied in the context of Chinese manufacturing for export, mostly small and medium-sized enterprises.

And for the most part, we’ve figured that out. From toy factories replacing outdated air compressors to furniture makers installing motor maintenance programs, suppliers are finding substantial value in rooting out energy efficiency. One production engineer even exclaimed “Work here is fun again!” when we asked him how it was going.

I’ve outlined one particular case of how easy such projects can be on the EDF business blog, but can say with confidence that such experiences are not unique. Using simple checklists and data from similar factories, we can evaluate the biggest energy saving opportunities at manufacturing sites very quickly, and have trained a few amazingly dedicated young Chinese Walmart associates to do so as well — this is their country after all and they want to make it a better place. Industry accounts for 68 percent of all electricity use in China (compared with 32 percent in the United States) and 70 percent is from coal-fired power plants. Such changes can go a long way towards driving China’s low-carbon future.

That’s the beauty of EDF’s partnership approach — Walmart has the leverage, we have the know-how.  When we have momentum, it’s pure magic.

Now for the not-so-great news: Despite the huge possibilities and proven benefits, energy efficiency in supplier factories still seems to be viewed as extracurricular by Walmart managers. It is not, in the lexicon of the Walmart world, seen as a “core activity” and not given the priority it needs. We’ve had several fits and starts getting this program off the ground. For a time, we’ll have several of those young, talented associates pushing hard to improve the performance of suppliers — and seeing very promising returns — only to have them peeled away when “more pressing” issues arise.

Resources at the notoriously frugal retailer are always tight, and several consecutive quarters of declining sales generally don’t help. So when push comes to shove, “core activities” get the attention, sometimes at the expense of earlier priorities.

We get it: When you’re the biggest retailer in the world, you’ve got a lot going on. There are lots of pressures to get everything right, loads of risks to manage, and eyeballs glued to your every move. Priorities need to be balanced. But here’s what doesn’t make sense: Leaving lots of money on the table when aggressively going after it also happens to solve a huge global problem.

And herein lies the missed opportunity. In our estimation, it would require only minimal additional human resources and a few key structural changes to knock this program out of the park and truly transform the way energy is managed in Chinese factories. Stronger mandates for supplier participation, the introduction of key metrics and a system for metering progress, as well as incentives for good performance would all go a long way towards the meeting the commitment.

So while many suppliers are making substantial progress on energy efficiency, and Walmart will probably achieve its goal of 200 suppliers reducing energy 20 percent by 2012, it has not been the stampede we’d hoped to see. That could change, however, and we’re optimistic that it will. Walmart leadership is far too savvy to let an opportunity this good slip through its fingers.

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The Golden Ticket Yields Plenty of Green: A tour of a Chinese factory brings energy savings to light

“Check this out.”  Our industrial engineer had removed the side panel from an injection molding machine to show me the outdated motor chugging inside.  “There is no reason for this thing to still be in operation.”

We were in Dongguan City – in the heart of China’s Pearl River Delta – where the bulk of consumer goods for export originate.  The machines were cranking out casings for Christmas lights, hundreds at a time.   Chances are the lights on your house, or tree, or dorm room wall framing that blacklight Hendrix poster, began here – particularly if you bought them from any major retail outlet in the United States, like Walmart.

Environmental Defense Fund (EDF) is currently working to improve the environmental performance at the 30,000 Chinese factories that supply Walmart and building a purchasing system that rewards suppliers with environmentally preferable products. A tour of one of these factories revealed the opportunities for potential energy savings in China, now the world’s biggest energy user. Read more

Wal-Mart’s Sustainability Index: Thoughts from an (almost) insider

Fresh out of Wal-Mart’s quarterly “Sustainability Milestone Meeting,” where the company announced its intention to create and support a Sustainability Index to measure and rate the environmental attributes of products, I’m left with a lot of questions – and also a lot of hope for the future.

I won’t attempt to recap the discussions already swirling around the blogosphere about whether or not this effort is real (Joel Makower’s blog does a pretty good job of summing up the issues). Instead, I’ll give a sample of what I heard today and why we need to help ensure its success.

Amidst the normal hullabaloo of a Wal-Mart event – part business meeting, part tent revival – two key executives reinforced that they understand the imperative of sustainability and why the company needs to act. Read more

Bringing Lifecyle and Value Chain Analyses together…at Last

A webinar hosted by the Supply Chain Council this morning on GHG Accounting in the Supply-Chain brought me back to a question I’ve been chewing on for a long time. How can we best take advantage of the complementary methodologies of life cycle assessment (LCA) and value chain analysis (VCA) for better supply chain management? In his very thoughtful presentation, Taylor Wilkerson from the not-for-profit government consulting group LMI, outlined a framework for greenhouse gas accounting using the SCOR (short for supply chain operations reference) model in conjunction with the WRI/WBCSD GHG Protocol (wow, what an alphabet soup!) under development and review. His case was compelling, that the SCOR model, already used by many supply chain professionals for tracking standard supply chain metrics (i.e. cost, quality, price and delivery) is an excellent tool for companies to track the greenhouse gas pollution emissions along their supply chains and in their operations. I think Taylor is off to a great start and his approach is extremely innovative. But I think we need more people, and a much deeper effort, working to integrate lifecycle thinking into how products are designed, manufactured and delivered to consumers.

LCA and VCA are two extremely useful platforms that can help push such an effort forward and each has its own strengths and limitations. In general, LCA is great for quantifying the impacts and giving a fairly good idea of where the most significant areas in a production chain exist from raw material extraction, through manufacture, use, and hopefully new life. But, in many ways, the raw numbers LCA provides are dumb. What it can’t do is explain the dynamics that exist within a particular industry or identify the most effective levers for change. This is where VCA holds the most power, and it seems to me, is a perfectly complementary methodology to use alongside LCA. Not only does VCA provide a roadmap of sectors, identifying with great detail the stages of production – from firms responsible for raw material extraction through the lead firms orchestrating production, but also the relationships among actors (firms, governments, industry groups, etc), and the power dynamics among them: a level of detail that LCA alone cannot hope to provide, even in a perfect world using the cleanest possible process-level data.

Imagine you are a global retailer, concerned with the environmental impact of a brand new must-have children’s toy. In order to better understand the environmental impact of this toy to satisfy eco-conscious moms, you commission an LCA to determine where in the lifecycle the “hotspots” (areas of greatest impact) exist. Your consultant comes back to you, two weeks later with a report full of bar charts and boxes connected by lines of varying thickness – telling you exactly which attributes you need to worry the most about and the relative impact of each. Ok, so now you know that the electric motor is by far the most impactful component and something you should target, but what do you do? Who makes that motor? Where is the factory? Is it even the same company who sold it to you? How deep in the supply chain is it? Are there competitors out there who could produce the same item in a much more environmentally sound manner? Is there much you can do about it given your relative influence in this industry? Who else might you recruit to help make this product better? These are all questions VCA can help answer.

The overlap between these approaches seems obvious, but the barriers to useful integration are substantial – but they don’t need to be. The communities that exist around each have their own languages, in many cases peculiar nomenclatures that can seem foreign-sounding even when using common English words (e.g. functional unit, reference flows, allocation through partitioning, et al). Even worse, they have their own fiefdoms, which can be difficult to penetrate. However, there are thoughtful scholars and practitioners in both areas, who see the benefits of each method and the inherent complementarity between them. This is good news.

In order to move forward, we need to get leading thinkers in each area together and help them better understand the linkages between approaches – how they can best design their studies to be of greatest collective value. Perhaps this is where initiatives such as the Sustainability Consortium can provide a forum, and framework, for collaborative innovation that leads to better environmental outcomes.

These kinds of data incorporated into a framework like SCOR could be really powerful across environmental media. I’d love to see what Taylor Wilkerson could do with that information and how supply chain managers, NGOs and governments around the world could take advantage of the new opportunities it would provide.