Evaluating a company’s impact (the case of McDonald’s)

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This week’s read time: 5 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

McDonald’s

This week we dive deep into McDonald’s environmental and social impact.

McDonald’s is one of the world's leading fast-food chains with more than 36,000 restaurants in more than 100 countries.

Some interesting facts:

• The first item ever sold at McDonald’s was a hamburger for 15 cents in 1948.

• The Economist created the “Big Mac Index” in 1986 as a fun way to compare the purchasing power between different currencies. It uses the price of a Big Mac as a benchmark.

COMPANY’S IMPACT

McDonald’s overall impact score

McDonald’s has a general impact score of -1.63 (on a scale from -5 to +5). Its impact is spread across 12 UN Sustainable Development Goals (SDGs) and 12 topics, split between positive and negative analyses.

In the socio-economic sphere,

McDonald’s is the world’s most popular fast-food chain, serving more than 69 million customers daily across the globe. The company employs approximately 150,000 people directly and helped generate 1.2 million jobs indirectly (2024), while also supporting tens of thousands of farmers in its supply chain. McDonald’s has achieved gender parity (with over 40% women inclusion) at all workforce levels, except for its board of directors. However, the company has been repeatedly linked to forced labor via its cattle, soy, and coffee supply chains. A report from 2021 revealed that some of McDonald's suppliers employed workers in poor and slavery-like conditions in Brazil, and allegedly paid them less than $10 a day and housed in shacks with no toilets or running water. The company has also allegedly used its market dominance to force franchisees out of business, employing tactics like requiring them to display higher prices than those at company-operated sites. In terms of health, McDonald's menu is highly caloric, with popular products surpassing sugar and sodium health thresholds, thus contributing to an unhealthy diet.

Environmentally,

McDonald's emits over 61 million tonnes of CO₂ equivalent annually (2022), including indirect emissions (equal to the emissions of 15.8 coal plants for a year). Annually, the company consumes about 1.8 million m³ of water (2022), with 33% of it being in regions with high or extremely high baseline water stress. McDonald's also generates an estimated 1 million tonnes of waste per year from packaging and toys for guests.

_{*The impact score is current as of June 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here.}

ESG VS IMPACT SCORE

What is McDonald’s ESG rating?

For comparison, McDonald’s has an A rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

McDonald’s impact scores by SDG

Now, back to McDonald’s impact score:

Positively (and by weight), the company scores the highest in Partnership for the Goals SDG (+2.90), followed by Zero Hunger (+1.75), and No Poverty (+3.58).

Negatively, the company scores the worst in Responsible Consumption and Production SDG (-2.68), followed by Climate Action (-3.26), and Good Health and Well-being (-4.08).

*the analysis takes into account the weight of the SDGs

McDonald’s also positively and negatively influences one SDG (8 - Decent Work and Economic Growth), which effectively balances each other out. Negatively, because some of its suppliers are involved in forced labor and offer poor working conditions. Positively, because it employs more than 1.3 million workers directly and indirectly.

PEER GROUP COMPARISON

McDonald’s scores by ILG Theme and compared to its competitors

The Investment Leaders Group (ILG) is a global network of pension funds, insurers, and asset managers, with over $12 trillion under management. They came up with a framework to analyze impact that uses the SDGs as a reference point but with 6 broader themes, 3 of them related to Social (Basic Needs, Decent Work, Well-being), and the 3 others to Environmental (Climate Stability, Healthy Ecosystems, Resource Security). Each analysis is linked to one particular ILG Theme.

McDonald’s scores negatively in all of the ILG themes. Compared to its competitors, the company performs worse in four of the six themes, when considering the peer group average.

CONCLUSION

Final words

So, McDonald’s key social and environmental impact lies in …

its role in enabling access to food to billions of people globally through its 36,000 restaurants in 100 countries. The company also contributes to economic growth and social stability by employing millions of people directly and indirectly and contributing billions of dollars in taxes.

Conversely, McDonald’s has a negative impact through its substantial emissions, water usage, materials sourcing, and waste production. The company has also been repeatedly linked to forced labor and used its market dominance to force franchisees out of business. Finally, being the world’s largest fast-food chain, the company contributes an unhealthy diet through its highly caloric menu.

Its negative -1.63 score is a balance of all of these factors and topics.

If you’d like to delve deeper into McDonald’s impact, you can explore it here.

Next week, we will analyze the impact of one of the world's leading producers and providers of entertainment and information, The Walt Disney Company. 📺

If you'd like to find out more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]