The $570 billion fast-food sector is increasingly vulnerable to impacts of global warming but climate and water risks often ignored
In the US alone around 85 million adults, one third of the population, consume fast food every day.
Those that do are likely to visit one of the restaurants owned by McDonald's, Domino's Pizza, Chipotle Mexican Grill, Burger King, Wendy's or KFC. The sheer size and scale of these six companies means that the environmental footprints of their meat and dairy supply chains reach far and wide with a high dependency on natural resources.
Animal agriculture alone produces around 15% of global greenhouse gas emissions, largely due to enteric emissions from livestock and deforestation driven by soy production for feed. Feed for livestock is responsible for around a third of annual global water withdrawals. As consumer awareness and financial impacts of these issues grow, it would be logical to assume that these customer-focused fast food chains are doing their best to reduce such supply chain risks and limit their environmental impacts.
Climate change and water risks often ignored
This is not yet the case. As they expand further, fast food chains are placing ever more unsustainable burdens on the planet's limited resources. Change is needed and, like the food they sell, this must happen fast. If we are to tackle climate change and avoid more water shortages, the fast food sector must drastically cut both emissions and water use in their supply chains.
This is why, back in 2019, the global investor network FAIRR and the sustainability non-profit organisation Ceres mobilised investors with $6.5 trillion in combined assets to call on fast food companies to better manage their climate and water risks.
Investors have specifically asked the companies to build the resilience of their meat and dairy supply chains by measuring and reducing all major emissions sources, adopting science-based emissions targets and conducting water risk assessments.
Progress to date has been too slow but there are some steps in the right direction being taken by some of the companies.
Environmental leadership emerging
When it comes to tackling climate risks, McDonald's and Yum Brands! (who own KFC, Taco Bell, and Pizza Hut) have committed to science-based emission reduction targets. These are targets that are aligned to global commitments to limit temperature rise to below 2 degrees. McDonald's, for example, is piloting grazing techniques that bolster soil carbon stores and has begun an analysis of how various global warming scenarios could impact its bottom line.
While all companies have taken steps to increase board and management oversight of climate and water risks, there remains a worrying lack of specificity on requirements for meat and dairy suppliers to manage climate and water pollution. As more meat suppliers face scrutiny over their environmental practices, it is still unclear how their fast food customers are monitoring supplier violations.
Another urgent need is for fast food companies to ensure that their meat and dairy supply chains are resilient to water scarcity; only McDonald's has undertaken a water risk assessment. Restaurant Brands International, owner of Burger King, has stated that it is planning to evaluate its water footprint.
A call for best practice
More investors are recognising the urgency of these risks. That's why the coalition of investors engaging the fast food companies on these issues has nearly doubled over the last year, now representing $11.4 trillion in combined assets.
These investors understand that as climate-fuelled weather events become more severe, the fast food industry's deep reliance on water and emissions-intensive meat supply chains will prove to be a financial liability. Supply chain risks pose a threat to profits as well as the planet and the $570 billion fast-food sector is increasingly vulnerable to the impacts of global warming.
If global emissions are not reduced quickly, we will be living with catastrophic climatic instability by 2050, by which time as many as five billion people will be facing water scarcity. As some of the largest buyers and sellers of meat with ownership of 120,000 restaurants worldwide, these companies have a responsibility to act, and quickly. Otherwise, they will be in deep water with investors, consumers and society at large.
Aarti Ramachandran is Head of Research and Engagements at FAIRR; Kirsten James is Director of Water at Ceres.
Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.