Social responsibility: An ongoing mission for a good corporate citizen

Nation's Restaurant News 4/11/05

Since the founding of McDonald's Corp. 50 years ago, the company has worked to be a good corporate citizen in its local communities.

And staying close to the needs and wishes of the community now has been expanded from that handful of restaurants a half century ago to the McDonald's 31,000-plus units across the globe today.

In addition, the company maintains a goal of providing a framework for local owners — who operate more than 80 percent of the individual restaurants — to be socially responsible.

"When we started, it was Ray Kroc's philosophy for McDonald's to be a community-based business," says Ken Barun, corporate senior vice president for social responsibility at McDonald's. "Our efforts from the very beginning were to give back to the communities that we served. That's part of the business model conceived by Ray Kroc."

Apple slices are one of several recent menu additions.

To assess how the company is doing, McDonald's in 2002 launched a comprehensive evaluation to measure its social responsibility. Every other year, McDonald's produces a Worldwide Corporate Responsibility Report, the most recent being the 84-page tome published in 2004.

"When we did the first report, it was based on the fact that our customers and other stakeholders really wanted to know more about what we were doing," Barun says. "We thought it was a document that could help tell our story."

While those goals remain important, he says, "what we've learned is that just as important is our internal audience. For us, it's a rallying point and a one-stop shop you can go to for who we are and what we stand for."

The company works diligently to keep community values "front and center," Barun says. "We're very humbled by our responsibilities. We do work hard for continuous improvement.

"People who work for McDonald's share this idea that we are dedicated to giving back and doing the right thing. It's part of our DNA," he says. "It's not just rhetoric; it's a real thing."

Social responsibility is especially important in the franchisee community, Barun says. Corporate responsibility is striving to do what is right and may mean something different from one franchisee to another. One such franchisee is Lee Adams of Adams Tri-Cities Enterprises, which owns and operates 14 McDonald's units in Kennewick and Richland, Ore., and Pasco, Wash.

"One of the things that we pride ourselves on is going back to the original Ray Kroc philosophy, which was giving back to the community," says Adams, whose family has been in the business 32 years.

"We feel really strongly about being a stakeholder in this community," says Adams. "I've got children here. My brothers and sisters are involved in the business. We take it real seriously that it's a part of who and what we are in the community."

Adams says his company has the ability to decide how and to whom it provides support. "I have an opportunity to run with this in any way that benefits the community, the employees, and the business," he says. "Our philosophy is to help education and youth organizations. We pretty much do not say no to anyone who has a request for help when it involves education and youth, from sports and band to theater and chess clubs or reading programs."

Among the many local organizations Adams' company supports are the March of Dimes, Girls and Boys Clubs, the Girl and Boy Scouts. Internet safety for kids, Habitat for Humanity, churches and a health program called "Get Active Tri-Cities" with the local health clubs.

The local cooperative of McDonald's restaurants of which Adams' 14 restaurants are a part total more than 70 McDonald's restaurants in the area. "Our 70-plus stores also support the Spokane, Wash., Ronald McDonald House. We'll do fund-raisers and car-washes in our parking lots," Adams says. "We involve not only customers, but employees and operators."

Adams' father opened his first McDonald's restaurant in 1973 and developed the give-back philosophy from day one. "That was his philosophy," Adams says. "We've just continued to grow it through the years."

Most recently, Adams' company began supporting Junior Achievement. "We have some of our employees go into the classroom and do mock interviews as well as job-shadowing," Adams says.

Such large-scale philanthropy has a beneficial by-product, Adams adds. "We feel for us it's a trust opportunity. It's a way for the customer to know us, and us to know the customer," he says. "I personally believe it gives us a competitive advantage. Anybody can write a check and sponsor a Little League team. To make a commitment of your time and to work on ways to get involved and use your resources as incentives creates a connection between us and the customer. "

Personal satisfaction, he says, comes from "knowing you made a difference, whether in a child's life or a teacher's life or an employee's life."

Good corporate citizenship has evolved, says Langert, a 21-year veteran of McDonald's and senior director who heads up the social responsibility department that was created in 1997.

"Over the years, how we define social responsibility, corporate citizenship, sustainability — all the buzzwords that are used to describe this area, which is hard to define — has changed," he says. "The global market and expectations have changed — technology, government, politics, culture, people, people's access to information."

The public has become more sophisticated in getting and using information, Langert adds.

"The stakeholder community out there is much more developed in terms of what they have access to and what they want to know," he says. "I think there is a wider interest in companies like McDonald's, in what they do, what they stand for. The world around us has brought new dimensions to the expectations of our customers.

"A very important part of McDonald's is to do what's right and to be a trusted company," he says. "Nothing is more important than building trust with our customers. So as we grow and develop in any geographic area, we remain a local business run by more than 5,500 owner/operators. It's a fundamental part of our business model — that McDonald's is mostly independent businesspeople who work and live in their communities."

The motivation for McDonald's is to create more trust with consumers, Langert says. "There's a lot of ingredients in trust: it includes getting your order right and having clean bathrooms. But certainly, over time, customers in various parts of the world expect us to be a leader in corporate responsibility issues as well. We work on it, because we want to have 100-percent trust from our customers.

"Our early people practices date back to Ray Kroc and to his founding Hamburger University in the early '60s," Langert says. "We've been leaders in training people."

And in the late 1980s, McDonald's became an environmental leader as well, he says. "The packaging opportunities back in the late '80s and '90s were on everybody's minds, and we turned around and became an innovator in waste reduction and packaging innovation," Langert says.

McDonald's social responsibilities grew in the 1990s, when the company took up animal welfare. "We established industry-leading standards for animal-welfare auditing upstream at our processing facilities. Also during the early '90s, we established a code of conduct for our suppliers related to labor issues and working conditions."

People issues will continue to be a priority for McDonald's, he adds. "We'll continue to leverage the tremendous assets and people we have in the McDonald's system," Langert says. "We have 1.6 million people who work for McDonald's, plus the suppliers. What gets us energized every day is getting even more of our internal system aware of what we are doing and the values we have. We are building pride within the McDonald's system so we can continue to retain and attract the very best people."

In its introduction to the 2004 Corporate Responsibility Report, the company says: "At McDonald's, making customers happy is what our business is all about. And we know it takes a lot to make that happen. We work hard to provide every customer with a choice of meals and an experience that exceeds their expectations. But that's only part of the story.

When you come through our doors and look beyond the front counter, there's a company and a system dedicated to earning your trust. And whether it's called 'good corporate citizenship' or 'social responsibility,' we take seriously our commitment to conducting our business in a way that respects the world around us and the issues that matter most to you."

Langert cites the business case of social responsibility as well, saying: "This is not just the right thing to do, but we believe this is a key aspect of our business and our growth, making us more attractive and relevant to more customers."

Major areas that McDonald's addresses in corporate responsibility include:

# Community. In addition to Ronald McDonald House Charities, Langert says, "We try to highlight the influence of the owner-operator in the community." Approximately 70 percent of the McDonald's system is franchises.

"You can't say there is one program that encompasses that. Our local business leaders serve on school boards, give to kids' teams, sponsor education programs and scholarships. It's not a cookie-cutter thing," he says. "In fact, it's the opposite." Owner/operators have their fingers on the pulse of the community and can best assess what needs should be met, Langert adds.

# Environment. McDonald's has long been committed to environmental protection, applying innovative programs for recycling, resource conservation and waste reduction.

"We are one of the biggest purchasers of recycled products in the world," Langert says, citing napkins, clamshells, carryout bags, tray liners. "We are a big recycler of materials behind the counter. Most of our waste is actually in shipping containers, so we recycle the corrugated boxes and used oil as well."

Langert says McDonald's has reduced more than 300 million pounds of packaging since a waste-reduction program was instituted in the early 1990s. "We've been nipping away at cutting every bit of packaging that we can," he says.

# People. "When it comes to people, we invest a lot of time," Langert says. "Ray Kroc knew we weren't going to go anywhere unless we had the very best people running the restaurants."

McDonald's "People Principles" are committed to respect, recognition, openness and employee development, he says. Training programs are offered at every level, and diversity is emphasized. "We invest in Hamburger University and training materials," Langert says. "It's evolving. We have seven Hamburger Universities around the world, and we're developing e-learning tools. Our standards for learning are phenomenal."

# Responsible Purchasing. McDonald's works with suppliers to incorporate socially responsible practices into the company's operations and to build capabilities for continuous improvement. "We work with some terrific expert groups to help us with our policies and programs," Langert says. McDonald's consults with advisers to make recommendations on animal handling practices, uses of antibiotics, the quality and safety of products and restaurant environments, conservation of natural resources and suppliers' employment practices.

For example, Langert says, the Animal Welfare Council "has really helped shape a state-of-the-art system in conjunction with our suppliers." That council, created in 2001, is made up of six independent advisers from outside the company, according to Langert.

In addition, McDonald's has the International Scientific Advisory Council, made up of 16 experts on beef safety. That panel advises the company on keeping its beef supply safe and of high quality.

"These experts meet with us regularly to make sure our safety walls are up to our high standards," Langert says.

The company also works with environmental group Conservation International to develop a socially responsible food-supply-initiative scorecard. "We're working with our suppliers to develop an environmental scorecard related to energy, waste, air and water," Langert says, to provide a measurement in terms of supplier performance on environmental standards.

# Menu and balanced lifestyles. Across McDonald's global system, in more than 100 nations, new menu items, physical activity programs and education initiatives have been introduced or expanded for customers. In addition to traditional favorites, many markets are adding entrée, side and beverage alternatives with a variety of nutritional profiles that can fit into a balanced lifestyle, including: the Salads Plus menu (Australia): Lighter Choices (Canada); and Premium Salads and Apple Dippers (United States). Education and physical activity efforts have included a Five-A-Day brochure (United Kingdom) and the "Do the Ronald" Activity Program (Brazil). In 2003 McDonald's established a Global Advisory Council of experts to help guide the company in the areas of nutrition, education and physical activity.

"I'm part of McDonald's Global Advisory Council because I see an opportunity to help develop realistic approaches that meet people's need for fun and convenience," said Dr. Paul Gately, Carnegie professor of exercise and obesity at Leeds Metropolitan University, United Kingdom. "Working with McDonald's has made me realize that McDonald's is committed to tackling these issues."

Cathy Kapica, global director of nutrition, states that diet and lifestyle will continue to evolve in the future and should be something to keep a pulse on as it relates to our customer's wants and needs. "We spend a lot of time in our Corporate Responsibility Report on our balanced lifestyle efforts and providing menu choice, physical activity and education and information for our customers so they can be very smart and informed purchasers and users of our food when they come to our restaurants," she says.

McDonald's social-responsibility efforts have been recognized by Fortune magazine, which rated McDonald's as No. 5 among its Top 500 companies in social responsibility. Mark Lee, director at SustainAbility, an international consultancy dedicated to evolving sustainable business models, says: "McDonald's 2004 Corporate Responsibility Report is a significant improvement over its 2002 report and shows the advancements the company has made in addressing some of the toughest challenges facing the food industry.

"We congratulate McDonald's for increasing its transparency on a broad set of social and environmental issues," Lee says. "For example, McDonald's responsible purchasing efforts and global antibiotics policy move the company beyond traditional industry positions. At the same time, we encourage McDonald's to continue to establish quantifiable targets and to deepen discussion of the unique dilemmas it faces as a global brand."

Doing business in 119 different nations across the planet gives McDonald's added responsibility, Langert says. "The expectations are to be a leader in social responsibility and to do the right thing and to build trust through our actions at all the geographic business units," he says.

There remain geographic differences. "When it gets down to what is implemented and executed, [geographically] there are variations. But the philosophy and the framework are very similar," Langert says. "For example, we have an environmental commitment across the world. How that takes shape in Brazil is going to be different than Germany and that will be different from Japan. In Japan, because land is precious, it is going to concentrate on waste issues, for example. In Brazil, which just had an energy crisis, we are working to reduce energy usage, because that's the need of the country.

"Each category takes on a different emphasis given the government, the customs and the priorities of the local people. But that's the beauty of McDonald's and that's our strength. We're set up to be that way," he says.

Social responsibility will continue to reach in all levels of McDonald's, Langert emphasizes. "At the end of the day, progress happens at the local level," he says. "We set up a framework of policies and broad guidelines at a corporate level. Our mission here is to educate, inform and motivate and catalyze even more internal knowledge so that we can keep serving and pleasing our customers."

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