McDonald’s is facing a headache in the US, where a row has erupted over its use of pork from suppliers housing pregnant pigs in gestation crates.

Activist investor Carl Icahn this week nominated two board directors as part of a campaign to get McDonald’s to eliminate the practice from its supply chain.

The fast food giant claims that in 2012 it became “the first major brand to make a commitment to source from producers who do not use gestational crates for pregnant sows”.

By the end of 2022, it expects to source 85% to 95% of its US pork volumes from sows not housed in gestation crates through pregnancy, and by 2024 it expects 100% of its US pork will come from sows housed in groups during pregnancy.

However, Icahn wants McDonald’s to go even further and make new commitments that would require all of McDonald’s US pork suppliers to move to “crate-free” pork and set specific timeframes for doing so.

“While the company looks forward to promoting further collaboration across the industry on this issue, the current pork supply in the US would make this type of commitment impossible,” a statement from McDonald’s board of directors said this week.

Icahn’s concerns over McDonald’s pork supplies do not apply to the UK, where gestation crates (known as sow stalls) have been banned since 1999.

Here, around half of the country’s sows are still put in farrowing crates shortly before giving birth until after piglets are weaned at three to four weeks of age, according to Compassion in World Farming, but that’s a considerably shorter period than the confinement in gestation crates during almost four months of pregnancy still seen in the US.

Still, UK companies should take note of Icahn’s campaign, which was reportedly spurred by his animal welfare activist daughter.

As the Financial Times noted yesterday, it shows activism is evolving, with investors “pressing companies over matters where blunt profit maximisation is not the issue”.

We’ve seen some similar moves in the UK, where shareholders in Tesco and Morrisons launched resolutions calling for targets to be set to increase the proportion of healthy products on their shelves.

At the same time, however, companies have started to face criticism from investors for putting too much emphasis on social purpose, most notably Unilever, which recently came under fire from fund manager Terry Smith for fixating on sustainability, or Danone, which ousted chairman and CEO Emmanuel Faber following pressure from activist investors concerned over his decisions to prioritise people, the planet and social responsibility.

Indeed, conservative thinktank Policy Exchange this week published a paper urging firms not to put purpose above profits. Instead of abandoning good old capitalism to save the world, it says, companies should work with government to help solve socio-economic problems.

“The day-to-day job of managers is to provide products and services that people want to buy, and to do so as efficiently as possible” suggests the paper. “There is or should be a division of roles between government and business, with each side doing the things they are qualified and empowered to do – accountable to voters in one case, to shareholders in the other.”

The trouble with this argument, of course, is that food companies are also in some ways directly accountable to the public – with shoppers unhappy about their social, sustainability and welfare policies increasingly willing to vote with their feet. So there’s a balancing act. And, as the row over McDonald’s in the US shows, while some investors want action in one direction, others want action in another. 

As things stand, the food sector appears committed to its pursuit of purpose, for now at least. Our Goodness Issue – out on Saturday – will take a look at some of the impressive moves by the sector, such as Tesco’s ”ground-breaking” partnership with WWF, the surplus stores set up to help redistribute food from supermarkets to those in need and how Covid has changed the industry’s approach to mental health.

Ultimately, both profits and purpose are priorities. And if companies want to be truly sustainable, they need to find a way to balance both.

Topics