DURHAM, N.C. – What does one of the world’s largest fast-food chains think about its responsibility to the environment?
McDonald’s CEO and Duke alumnus Chris Kempczinski (AB’91) recently spoke with Toddi Steelman (PhD ’96), Stanback Dean of the Nicholas School of the Environment, about ways the corporation is working to drive climate action, create circular solutions to reduce waste, and further its commitment to our planet.
Below are edited excerpts from their conversation, which is posted in its entirety on YouTube.
Question #1: Can corporations lead the charge?
Steelman: Expectations are rising for companies to do more, especially in the environmental social governance (ESG) space. Do you think society is turning to industry to fill this role because government has failed?
Kempczinski: “I think there's an element of that, where companies like a McDonald's now have the social capital, the political capital, the intellectual capital, the financial capital to be able to go and make a difference in these areas.
“At the same time, it is not possible for the private sector to lead this on our own. There's a lot of things that we can do at McDonald's to be part of the solution, but we absolutely have to have government be a key part of the solution, too. At the end of the day, we're in a very competitive industry, and we have to make sure that we are not competing on an unlevel playing field. And that's, a lot of times, where government can come in.”
Question #2: How do you balance social values and financial goals?
Steelman: Stock price drives a lot of CEO attention, but McDonald's has also been faithful to adhering to its core values. As CEO, how do you manage those competing demands, so they don't come into conflict with each other?
Kempczinski: “You’re right: the stock price is something we monitor, and usually I hear if it’s up or down. But if you go beyond the stock price, it's about who owns the stock because ultimately I'm employed by the shareholders to look after their interests.
“About 80% of our shares are owned by people like you and me. As society becomes more and more attuned, more and more concerned, about sustainability, the environment, and diversity, equity and inclusion, we’re seeing that the customer who's concerned about these things also happens to be the person who owns our stock.
“If anything, over the last decade or so, ESG has become an even bigger part of the conversation. About 10% of our stock is owned by what we would describe as pure ESG investors. These are people who have an explicit mission to be focused on ESG. So I think there's actually more of a coalescing or coming together on this topic than a divergence.”
Question #3: Can a business drive behavioral change in its customers?
Steelman: Are there ways corporations like McDonald’s can nudge customers to make more sustainable choices without facing a backlash for being perceived as manipulative?
Kempczinski: “Most of my career has been in marketing and I’ve spent a lot of time trying to understand what drives consumer decisions. I think there is quite a gap between what people say they want and what they actually do. That’s probably nowhere more apparent than on sustainability and climate-related topics.
“In any survey you do, you get 75% to 80% of people saying that, yes, climate affects how they think about making decisions. But in reality we know it’s probably less than 20%.
“There are things we can do to (address this), but I wouldn’t call them manipulative. In our case, it can be things like asking people, ‘Would you like a straw with that?” Another thing we do in a lot of European countries is, instead of just putting a plastic toy (in a Happy Meal box) by default, we say, ‘Hey, would you like a paper-based book instead of that?’
“Ultimately, our job is about meeting the needs of customers. So if someone says, ‘Well, yes, I'd like to have a straw,’ or a plastic toy, we’re going to give them that. But I do think you can prompt people to think about these things, and we certainly try to do that in ways that make sense within our business.”
Question #4: What are some of the most promising innovations in sustainability?
Steelman: Describe some of the innovations in sustainability you’ve implemented in recent years? Is Europe still ahead of the United States on this front?
Kempczinski: “Yeah, Europe is by far on the leading edge of this. We have nine European countries where all our restaurants are powered by renewable energy. In the Nordic area, where their recycling infrastructure is top-notch, the majority of our packaging can be recycled from our own restaurants. We have other places, Netherlands is an example, where we use the cooking oil that comes out of our kitchens as fuel in our delivery trucks.
“We’re trying to take some of these ideas and export them around the world. From an infrastructure standpoint, in the U.S. we’re unfortunately pretty far behind some of recycling and reusability you see in Europe. And if you go to Asia – India for example – there’s just not the same degree of concern or awareness on climate initiatives, so the infrastructure in those places is even more lacking. But there are things we can do. Here in the U.S., for example, 8,000 of our restaurants are powered through virtual power purchase agreements, which are essentially renewable energy credits.
“Another thing…is how we source our food. That’s where we go into things like carbon sequestration programs with ranchers and farmers or working with the Rainforest Alliance to make sure all our coffee is sustainably sourced.”
Question #5: What’s the takeaway message for future corporate leaders?
Steelman: If you had to distill your wisdom on sustainability into a tip for future corporate leaders, what would it be? What’s the most important thing they can they do balance their company’s social and environmental goals with its financial ones?
Kempczinski: “There’s no one thing. It’s a lot of different things, and I think that's one of the difficulties when a petroleum-based economy is so pervasive through the entire supply chain. It's not like you can just take one area of it and fix that and you fix the entire problem. You've got to go through almost every single element, and so it ends up being a hundred different initiatives that all cumulatively add up to making an impact.”
Watch the Full Conversation