Mcdonald's Environment Strategy

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Pollution Prevention in Corporate Strategy
NATIONAL POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION

Case A: McDonald’s Environmental Strategy
Susan Svoboda, manager of the University of Michigan Corporate Environmental Management Program (CEMP), prepared this case under the guidance of Stuart Hart, director of CEMP and assistant professor of Corporate Strategy and Organizational Behavior at the U-M School of Business Administration, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an adminstrative situation. This document may be used by either students or faculty for background information.

Introduction
Rooted in Ray Kroc’s founding principles of Quality, Service, Cleanliness & Value (Q.S.C.&V.), McDonald’s management has always believed in being a leader in issues that affect their customers. This philosophy is evident in McDonald’s involvement in various community projects regarding education, health care, medical research, and rehabilitation facilities. These activities help the corporation to extend their image beyond fun and entertainment into social responsibility. However, in the late 1980s, McDonald’s began to face criticism for its environmental policies, especially those surrounding polystyrene clamshell containers. In 1987, McDonald’s replaced CFCs, the blowing agent used in clamshell production, with weaker HCFC-22’s after facing public criticism that CFC usage was contributing to ozone depletion. But this change was not enough for many grass-roots environmental groups that, led by the Citizens Clearinghouse for Hazardous Waste (CCHW), united in establishing a “Ronald McToxic Campaign” consisting of restaurant picketers and an organized effort to mail clamshells back to Oak Brook headquarters. When McDonald’s later tested trash-to-energy on-site incinerators, CCHW quickly named the project “McPuff.” By 1989, school children, the backbone of McDonald’s customer base, founded a group called “Kids Against Polystyrene.” Although they were not the only fast-food restaurant facing criticism for disposable packaging, McDonald’s could not afford to let this situation escalate. One of their primary competitors, Burger King,

was winning praise for its paperboard containers, which were claimed by some to be biodegradable.

Company Background
McDonald’s Corporation grew from a single drive-in restaurant in San Bernardino, California, in 1948, to the largest food-service organization in the world. In 1991, McDonald’s owned $13 billion of the $93 billion fast-food industry, operating 12,400 restaurants in 59 countries including company-owned restaurants, franchisees, and joint ventures. In the U.S. alone, more than 18 million people visit a McDonald’s daily. 1 Exhibits 1–3 contain McDonald’s 1991 income statement and balance sheet as well as an 11-year financial summary for the company. McDonald’s management intends to continue growing by: 1) maximizing sales and profits in existing restaurants, 2) adding new restaurants, and 3) improving international profitability. Ray Kroc based his empire on the fundamental principles of Quality, Service, Cleanliness, and Value (Q.S.C.&V.) and developed tangible goals and specific operating practices to carry out his vision. An extensive team of field auditors monitor these practices, which are communicated to employees through continuing education that includes videotaped messages from Kroc himself. These values were integrated into McDonald’s three strategic priorities for 1991, stated in the Annual Report as follows: • to enhance the message that McDonald’s is valuedriven on behalf of its customers by emphasizing their profitable value-meal combinations; May be reproduced freely for non-commercial educational purposes. McDonald’s: Case A • 1 March 1995

National Pollution Prevention Center for Higher Education • University of Michigan Dana Building, 430 East University, Ann Arbor MI 48109-1115 734.764.1412 • fax...
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