- E?A/?4:/R-95/C07
Pollution Prevention in
Corporate Strategy
ION PREVENTION CENTER, FOB HIGHER EDUCATION
McDonald's/EDF
Case Studies and Notes
Teaching Note ; H
Case A: McDonald's, Environmental Strategy
Case Bl: The Clamshell Controversy
Case B2: McDonald's Decision
Case C: Sustaining McDonald's Environmental Success
Note oil Life Cycle Analysis .
Note on the Trash Crisis
National Pollution Prevention Center for Higher Education • University of Michigan
Dana Building,'430 East University, Ann Arbor Ml 48109-1115
Phone: 313.764.1412 • Fax: 313.936.2195 • E-mail: nppceumich.edu
May be reproduced
freely for non-commercial
educational purposes.
McDonald's/EDF Cases
' March 1995
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Pollution Prevention in
Corporate Strategy
•ON »HEv'EN~CN CE»
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The case concludes with a discussion of the growing
importance of environmental groups in terms of public
confidence. The joint task force was one of the first
high-profile, collaborative efforts between business
and an environmental group. As such it posed oppor-
tunities and challenges for both parties. EOF hoped it
would become a model to be used by other companies,
but risked being accused by environmentalists of "selling
out," McDonald's hoped it would give them needed
credibility with their customers; however, potential
task force disputes could further hurt their position. •
The case concludes by raising the issue that businesses
today face an increasing credibility gap with the public.
However, environmental groups are trusted by the
public. As a result, environmental organizations are
rapidly adding members as individuals seek to under-
stand and monitor corporate environmental practices.
Yet despite educational efforts and various environ-
mental initiatives, McDonald's reputation was eroding.
The supplementary note on the Trash Crisis gives the
reader additional information on U.S. disposal practices
and issues relating to landfilling, incinerating, recycling,
and composting trash that will aid students' analysis
of the case.
CASE B1
Case Bl narrows the scope of the case to the debate
surrounding polystyrene "clamshell" sandwich con-
tainers in order to frame a teachable situation for LCA.
Environmentally concerned customers oppose these
containers despite scientific arguments that they are
preferred over paper wraps. The case opens with a
description of McDonald's deteriorating public image
— especially with children, their most loyal customer
base — and the urgency for making the "right" choice.
The case then provides background information on
packaging's utility to the food industry and to
McDonald's. A brief description of how packaging
has become an issue of public concern in the US. due
to the growing volume of packaging entering landfills,
especially due to convenience products, is intended to
provide context to students.
The consulting group Franklin Associates provided the
task force with the LCA decision-making methodology.
This tool is intended to facilitate a comparison of prod-
ucts in terms of their environmental impacts. LCA has
three components: an inventory, an impact-assessment,
and an improvement analysis. The inventory compo- .
nent simply lists emissions, effluents, energy consump-
tion, etc. Impact assessment addresses ecological and
human-health impacts of these releases. Improvement
analysis combines quantitative and qualitative data to
determine opportunities for improvements in environ-
mental impacts. Franklin Associates performs only the
inventory-component since it has the strongest scientific
basis. Another supplementary note, discussed below,
•regarding LCA is provided to give students specific
information on how to perform this analysis.
The case then provides students with a detailed de-
scription of the manufacturing process used to produce
both paper and polystyrene sandwich containers. The
actual life-cycle data from Franklin Associates that the
task force used to reach a decision are included in
Appendices A and B. The data in Appendix A is from
a 1990 study that compared paper wrap to polystyrene.
The data in the Appendix B compares these two alter-
natives with a new paper-based wrap called quilt-wrap.
Quilt wrap is comprised of an inner layer of tissue to
absorb grease, a layer of polyethylene for insulation,
and another layer of paper for strength.
The case concludes by suggesting that the task force
will need to make some assumptions about future
disposal methods, unmeasured environmental impacts,
and consumer response when using this tool. Also to
be considered is McDonald's commitment to recycling
especially relating to clamshells.
CASEB2
Case B2 presents the decision made by the joint task
force and highlights reactions to the decision from
various newspaper editors, suppliers, and the national
polystyrene recycling center. Reactions differ greatly
and students are faced with the question of whether
they made the "right" decision.
SUPPORTING NOTES
The supporting note, on LCA reviews the origins of the
methodology and describes how it may be used for
benchmarking efforts, setting resource-reduction targets,
new product development, or comparing materials,
products, or processes. The results of LCA are greatly
affected by how managers establish the scope of the
analysis, the level of data used, and the assumptions
they make at each stage. Therefore, a detailed descrip-
tion of the types of information to be included at each
stage of raw material extraction, processing, and dis-
• posal is included.
2 • McDonald's: Teaching Note
March 1995
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The supporting note o.n the Trash Crisis gives.students
background information on.typicai issues; relating to
landfill, incineration, recycling,:and composting prac-
•tice's. This information is'intended to improve"their
understanding of these issues in order to help them
' make more realistic assumptions in their analysis.
Assignment Questions i
and Case Sequencing
The cases are designed to be taught in a two-class ,
sequence with video segments in both sessions.
The following are suggested assignment questions:
CASE A
• Why did EOF approach McDonald's? ,
• Why did McDonald's enter into the Joint: Task Force
with EOF? Was EDF the right choice for a partner?
• How well does the structure of the Joint Task Force
serve as a model for future partnerships?
• Has the Joint Task Force worked?
CASEB1
• Should McDonald's continue its recycling efforts or
drop the "clamshell" sandwich container? Why?
• What are the difficulties in using LCA in decision-
making?
• What are. the appropriate boundaries for the analysis?
• Is there one best environmental solution? Will it
, change over time? ! .
CASEB2 •
• Should McDonald's be accused of "flip-flopping"
or commended for being adaptive? ,
• Is the customer always right? Does it matter if
customer perceptions of environmental impacts
are incorrect?
Case B Suggested Readings
'."Management Brief: Food for Thought." The Economist
. (29 August 1992). '.,._-.
Part 2: Class Teaching Plans
Case A
OVERVIEW
The suggested teaching format begins with an assess-
ment of the growing customer dissatisfaction with
McDonald's environmental practices, particularly
regarding packaging. From a strategic perspective,
McDonald's reputation in terms of image, brand recog-
nition, and franchise commitment is critical. Image
and brand equity are particularly important to a com-
pany such as McDonald's that has outstanding name
recognition. Maintaining a strong and committed
distribution channel—the franchisees is equally critical.
From this, the discussion should move into issues
relating to the creation of the Joint Task Force between
McDonald's and EDF. The case presents the task force
as a "first" collaborative effort between a major business
and an environmental group. The discussion should
be facilitated in'order help the students understand the
benefits and risks of such an arrangement to both par-
ties. Next, students should discuss whether McDonald's
lack of environmental credibility'was unique or,is an
emerging problem across industries. Would issues
differ between regulated versus non-regulated indus-
tries' (consumer products versus chemical industry)?
The.case should generate a lively conversation of how
to pick partners and how to structure the partnership
for the best results.
For discussion purposes, itmay.be useful to assign
students either the role of McDonald's or EDF and then
discuss the following questions from their assigned
perspective. , .
Case A Suggested Readings
Stenger, Wallace. "It All Began with Conservation."
Smithsonian 21, no, 1 (April 1990): 35-43.
Prince, Jackie. "Launching A New Business Ethic: The
Environment As A Standard Operating Procedure."
Industrial Management, p. 15. : ,
McDonald's: Teaching Note • 3
March 1995
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Why did EOF approach McDonald's?
Students typically will respond with a number of
issues that can be categorized by pro or con as follows:
Pros
Potential high impact/good educational opportunity
—McDonald's serves 18 million customers/day plus
suppliers—worldwide
Opportunity to test the practicality of the
EPA hierarchy
A cooperative venture would start to diffuse
"watchdog" image
If you can influence the industry leader,
you influence the industry
Cons
Potential risk to reputation—EDF could be accused
by other environmental groups of "selling out"
Whv did McDonald's aaree to the Task Force?
Was EDF the riaht choice?
Exhibit 9 in Case A provides students with a synopsis
of the twelve largest environmental groups. These
groups could be viewed as falling into the following
four categories of environmental management. This
typology could be developed through class discussion.
It should be noted in the class that it is unlikely that
the groups in either the "preservation" or "deep ecol-
ogy" quadrants could be developed into collaborative
partners. In fact, McDonald's was being targeted by
some of them for direct action (e.g., CCHW and the
"McPuff" campaign). This leaves the "conservation"
groups as the best choice. EDF clearly falls into this
category.
Pros - >
McDonald's was under fire from consumer and
environmental groups "McToxic/McPuff."
They needed credibility as they had already switched
from paper to polystyrene (clamshell) once based on
the SRI study; EDF had expertise.
EDF was perceived as a "mainstream" environmental
group (conservation).
Joint Task Force could improve their image with
franchisees and suppliers.
Cons
Opening the company up to scrutiny could be
potentially embarrassing.
If the Task Force could not agree, the publicity
could be damaging.
EDF may not be able to "deliver" the environ-
mental community, if mat community feels that
EDF has compromised their position.
4 • McDonald's: Teaching Note
March 1995
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EC on on ic Growth
Nature's
Rights
Human
Requirements
Ecological Viability
How well does the structure of the Joint Task
Force serve as a modelfor future partnerships?
What guidelines would you establish in creating
a partnership like this one?
• Credibility |
- mixed team of participants includes
operations people -
- task force given authority to make decisions
• Independence
- each side covers their own expenses
- each side may issue separate reports if agreement
cannot be reached
- McDonald's cannot refer to the task force
in advertising unless authorized by EDF
Has the Task Force worked?
« EDF was able to convince McDonald's to give up
their recycling efforts and .focus on issues such as
waste reduction that are higher on the waste man-
agement hierarchy. ;
• McDonald's credibility improved, letters and
protests stopped. •'"..•
Case B
Case B focuses on the task force's specific decision on
whether or not to discontinue use of the polystyrene
clamshell sandwich container. Using the information
provided on packaging trends both in the U.S. and
within McDonald's as a backdrop, students are asked
to reach a decision by analyzing the same life cycle
data the task force used to reach their decision The
discussions should focus on how to use 'life cycle data
effectivelyby understanding its limitations and under-
lying assumptions. • • .
Although each student should come to class prepared
to make a decision about whether or not to discontinue
the clamshells, it may improve the discussion to have a
pre-selected team of students present their analysis
and recommendation to the class (approximately 10-15
minutes). A discussion can then be generated around
the assumptions and constraints of LCA as used in
their analysis. .
McDonald's: Teaching Note • 5
March 1995
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Should McDonald's discontinue use of the
polystyrene clamshells?
Student teams should present their logic in reaching a
decision. The discussion will raise many more ques-
tions than answers; however, the students will learn
from the complexity of these issues that there is no
single, clear-cut answer. Issues that should be ad-
dressed include:
• Boundaries
- Were the boundaries considered by the Joint Task
Force the appropriate ones? Why wasn't container
reuse (dishwashing) included?
• Comparison of pollutants
- How many pollutants should be considered in
the inventory? Were the right ones included in
the report?
- How should pollutants be compared? Does it
make sense to add them up to a lump sum or
are some more harmful than others? Is water
pollution more or less serious than air pollution
or the volume of solid waste? Should they be
compared based on their contribution to specific
problem—greenhouse gases versus groundwater
contamination?
• Comparisons between companies/indus'tries-
- Is there a uniform or consistent way to evaluate
products or packaging across companies or
industries?
- How do the assumptions related to boundaries
and pollutants affect comparisons between
companies? Is each inventory unique to the
company being analyzed?
- Reported pollutant data is based on emissions
generated assuming the national "mix" of disposal
methods including incineration, landfilling, and
recycling. What if a particular business has a
substantially different mix—can it be compared?
• Data Sources
- Is the inventory credible if the company itself
provides the data? Should a third party conduct
the analysis? Who should pay for it?
- If industry data is used is it specific enough to
produce valid results? If proprietary data is used
the company may not want to share it with others
in an industry study.
- What about the objectivity of studies supported
by either the paper or polystyrene industries?
« What is lost by canceling recycling efforts?
- Since carry-out business is at least 60 percent
of total volume and the best-case scenario for
recycling is 40 percent, is this still worthwhile?
- McDonald's could play a major role in recycling
education due to its 18 million customers/day —
what lessons should they teach?
- McDonald's would have been a major/stable
materials contributor to the struggling recycling
industry — what will be the impact on this group?
Is there one best environmental solution?
The students should discuss the balance between
needless flip-flopping in decision-making and necessary
flexibility. Issues that are likely to be raised include
the evolution of scientific knowledge, changes in
public perception, changes in technologies that alter
environmental impacts (e.g., non-chlorine bleached
paper), and changes in our understanding of impacts
(long-term effects of pollutants on employees).
The instructor might consider closing the discussion
with the "Closing the Loop" figure which summarizes
the underlying logic of LCA and its implication for the
corporation. The model depicts how environmental
management must be a process of continuous improve-
ment that encompasses all stages of the product's life
cycle. Increasingly products and corporations are being
judged using the above criteria. This model may be used
to put McDonald's packaging decisions in perspective
in order to address the question, "Are they done?"
Case B2
!$.
Case B2 is a one-page "what happened" case that
should be handed out near the close of the second
session. Case B2 presents the decision made by the
joint task force to drop the clamshells and highlights
reactions to the decision from various newspaper edi^
tors, suppliers, and the national polystyrene recycling
center. Reactions differ greatly and students are faced
with the question of whether they made the "right"
decision.
8 • McDonald's: Teaching Note
March 1995
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CLOSING THE LOOP
Minimize the life
cycle cost of
products
INPUTS
(Raw materials
and energy) •
A
OUTPUTS
(Production'Choice
. and design) ;
Minimize the
use of virgin
materials and
non-renewable
forms of energy
THROUGHPUTS
(Production processes)
Minimize emissions,
effluents, and
accidents
Published by:
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McDonald'!
Teaching Note • 7
March 1995
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Pollution Prevention in
Corporate Strategy
E= COS .-IGHER EDUCATION ';
Case A: McDonald's
Environmental Strategy
Susan Svbboda, manager of the University of Michigan Corporate Environmen-
tal 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 ineffec-
"'tive 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 esca-
" late. 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 wqrld. 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.' Exhibits 1-3 contain
McDonald's 1991 income statement and balance sheet
as well as an 11-year financial summary for the corn-
. pany. 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 com-
municated 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 isyalue-
driven on behalf of its customers by emphasizing
- their profitable value-meal combinations;
National Pollution Prevention Center for Higher Education • University, of Michigan
Dana Building, 430 East University, Ann Arbor Ml 48109-1115
Phone: 313.764.1413 • Fax: 313.936.2195 • E-mail: nppc©umich.edu
May be reproduced
freely for non-commercial
educational purposes.
McDonald's: Case A • 1
March 1995
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• to provide exceptional customer care by exceeding
customer expectations, including finding ways to
add personal touches that go beyond convenient lo-
cations, quick service, clean restaurants, and quality
products;
• to remain an efficient producer while maintaining
quality by looking to innovations in food processing,
construction, and design operations that will increase
global profits.
Approximately 80 percent of McDonald's restaurants
are franchises, paying a percentage of their monthly
revenue for centralized .marketing research and R&D.
Franchise fees cover roughly the costs of corporate
services; thus, if the franchises are not making money,
neither is the corporation. This mutual dependence is
considered by management to be a corporate strength.
McDonald's Corporation revenues are derived from
franchise fees plus company restaurant sales. The
Corporation operates approximately 16 percent of U.S.
McDonald's restaurants, and a higher percentage of
international restaurants since they usually enter new
countries with company restaurants and then franchise
them after they are well established. McDonald's typi-
cally.receives over 20,000 franchise inquiries per year.
Twenty-year franchises are awarded to applicants after
extensive screening, and additional restaurants are
allocated to franchisees with proven records of success.
McDonald's management style may be described as
"tight-loose" — the corporation sets overall quality
standards, but the franchisees are given the freedom to
make localized decisions. Many new product innova-
tions, such as the Filet O' Fish and the Egg McMuffin,
originated with franchises. Recently, McDonald's has
increased its new product development efforts, re-
sponding to customer's concern for nutrition. However,
Tom Glasglow, Vice President and Chief Financial-
Officer, is concerned With maintaining the focus that
has made McDonald's successful: in the 1991 Annual
Report he stated, "We're in the business of serving a
small number of products that have mass appeal.
That's our niche."
McDonald's is the second-best-known global brand
and intends to maintain this level of consumer aware-
ness with a $1 billion marketing budget.2 McDonald's
launched a major new ad campaign in 1991, "Great
Food at a Great Value," which was successful in pro-
moting profitable value-meal combinations. High
brand recognition is particularly important as many
customers are impulse purchasers, often selecting
McDonald's over competitors by the convenience of
the location. Glasglow, discussing how McDonald's
customers distinguish it from the competition, stated,
"We are the easiest. The place that satisfies customers
best, and gives them the best value." The emphasis
McDonald's places on customer convenience is mani-
fested in McDonald's self-description as a leader in the
quick-service industry, rather than the fast-food industry.
A -typical McDonald's may serve as many as 2,000
people per day, 60-70 percent of whom take their food
outside the restaurant. McDonald's depends on the
ability of their crew to be able to prepare hot, fresh
food and to serve it to their customers within two min-
utes of the time they enter the restaurant. To dp this,
McDonald's engineering department has carefully
designed the layout and equipment for its restaurants.
Exhibit 4 shows how all food flows from the back of
the kitchen to the front as it is prepared, and is placed
in a heated food "bin" awaiting customer delivery. ,
Servers at the counter or drive-through window collect
items from the bin and drink stations for customers.
An important component of McDonald's operational
strategy is to anticipate customer traffic patterns and
food selection based on a detailed analysis of sales
history and trends and to use this information to pre-
pare various menu items in the right quantities and at
the right times in order to have the food ready for their
customers when they arrive. Food may be stored in
the bin for up to ten minutes before it is discarded.
1991 marked the introduction of "Series 2000" design
restaurants. These buildings are approximately half
the size of traditional restaurants, designed to accom-
modate nearly the same level of sales but requiring a
lower real estate investment. Series 2000 restaurants
are targeted toward both small towns and major metro-
politan areas.
All of .McDonald's 600-plus suppliers are independent
companies with whom long-term relationships have
been developed. This strategy is intended to improve
McDonald's ability to focus its efforts on its core busi-
ness — restaurant operations. Most suppliers operate
on a cost-plus basis. McDonald's often holds seminars
and conferences for suppliers to discuss their needs.
2 • McDonald's: Casa A
March 1995
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JOINT TASK FORCE,
' 'Recognizing McDonald's potential to influence public
opinion through its 18 million~daily customers, the
Environmental Defense Fund (EDF) approached
McDonald's in 1989 to discuss environmental issues
related to solid wasted- At that time McDonald's was
facing environmental protests in the formiof demon-
strations, letters, and customers mailing their polysty-
rene clamshells back to the company. Realizing that
young people, traditionally loyal McDonald's customers/
were demanding "greener" practices, McDonald's
stepped up its recycling efforts. However, several U.S.
cities were proposing a ban on polystyrene packaging
altogether. Caught between seemingly conflicting
environmental goals, McDonald's welcomed EDF's help.
EDF is a national nonprofit organization that links •
science, economics, and law to create innovative, .eco-
nomically sustainable solutions to environmental prob-
lems. It was founded in 1967 by scientists on Long
Island, New York, to fight the spraying of the pesticide
DDT. Today, EDF has a professional staff of more than
110 people located in six offices, and has support from
over 200,"000 members and 100 private foundations.
McDonald's and EDF created a joint task force to work
together to understand the role of materials and pack-
aging used at McDonald's (see Exhibit 5 for a list of
task force participants). Each member spent one day
working in a restaurant, and the task force held meet- .
ings with McDonald's food and packaging suppliers,
toured McDonald's largest distribution center, and
plastics and composting facilities.
McDonald's Environmental Strategy
One of the first results of the task force was the develop-
ment of a strong company-wide environmental policy
declaring that McDonald's is committed to protecting
the environment for future generations, and that it be-
lieves that business leaders must also be environmental
leaders. The policy takes a total lifecycle approach to-
reducing and managing solid waste: a sizable challenge,
considering that each o'f McDonald's 8,600 U.S. restau-
rants 3 238 pounds of waste per day and each of its 34
U.S. regional distribution centers disposes of another
900 pounds of waste per day.4 •'.'•'
McDonald's has also been active in educating its cus-
tomers about the company's environmental activities
and positions. Brochures are available in restaurants
informing customers about McDonald's position on,
such topics as ozone' depletion, the rain forest, and ._
packaging.
McDonald's is working to translate this environmental
commitment into specific actions. In order to live up to -
its environmental policy, McDonald's Environmental
Affairs Officer has been given the authority to enforce
adherence to standards, and reports directly to the
Board of Directors on a.regular basis. McDonald's also
plans to continue to seek counsel with environmental ,
experts to take advantage of opportunities to improve
its environmental performance on an ongoing basis.
As part of its waste reduction action plan, McDonald's
has committed to reviewing annually all food-service
- products and packaging items to identify opportunities
for source reduction. McDonald's realizes that in order
to achieve its waste reduction goals, it must collaborate
with its suppliers. To promote collaboration, it has de-
veloped an annual environmental conference intended
to train suppliers and has included environmental
issues in its annual supplier reviews and evaluations.
The following initiatives were proposed by the task force.
Source Reduction
McDonald's had already initiated several waste reduc-
tion efforts when EDF contacted it, but the ensuing
discussions led to a proposal calling for a joint task
force to create "a framework, a systematic approach
and a strong scientific basis for McDonald's solid
waste decisions."5 The EPA's waste management
hierarchy became the foundation for task force efforts.6
In the joint task force report, "waste reduction" was
defined as any action that reduces the amount or toxid-
ity of municipal solid waste, prior to incineration or
landfill. "Source reduction" takes an even stronger
environmental position than recycling by reducing the
weight, volume, or toxicity of products or packaging
prior to their use. Because source reduction decreases
or eliminates waste at its point of generation, thus
• creating less to be reused, recycled, incinerated, or
landfilled, the EPA'gave it the highest priority on the
waste management hierarchy. The task fprce identified
the source reduction projects shown in Exhibit 6, which
are being implemented as a result of revised supplier
specifications. Annual waste characterization studies
will be conducted to determine a baseline against
which to measure future goals.
' McDonald's: Case A • 3
March 1995
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Consistent with McDonald's management style, the task
force reasoned that its waste management strategy
would have to be implemented in a tight-loose fashion,
as "centralized plans alone could not take into account
all the differing local and regional waste disposal prac-
tices, infrastructures, and costs. They also realized that
in many cases there was not one obvious solution to a
problem. In fact, trade-offs involving environmental
impacts, costs, and performance requires complicated
decision-making. For example, increasing the content of
co-cycled paper in packaging may diminish the strength
of the paper, requiring increased packaging thickness to
compensate for decreased performance. In addition, .
when a packaging alternative significantly reduces the
weight of material to be disposed, the material- still
might not have an existing recycling infrastructure.
. McDonald's has made substantial progress in its
source reduction efforts over the past 20 years. For
example, McDonald's "average meal" in the 1970s —
a Big Mac, fries and a shake — required 46 grams of
packaging. Today, it requires 25 grams, a 46 percent
reduction.7 McDonald's has also reduced the weight of
packaging in its sandwich wraps, hot cups, and nap-
kins, removed corrugated dividers in some shipping
cases, and switched to bulk containers wherever pos-
sible. A summary of source reduction accomplish-
ments is provided in Exhibit 7, which lists packaging
changes approved for implementation in 1990.
As an example, orange juice had been shipped, stored,
and served in individual containers. These have been
replaced by concentrate mixed at the restaurant, result-
ing in a packaging reduction of two million pounds
per year. In addition, a new Coke delivery system that
pumps syrup directly from delivery trucks to storage
tanks eliminates the need for intermediate containers,
saving an additional two million pounds of packaging
annually. Weight reductions, reductions in secondary
packaging, and increased use of bulk packaging has
reduced packaging by 24 million pounds annually.8
Further, McDonald's purchases materials from sup-
pliers that use more benign manufacturing processes,
such as non-chlorine-bleached paper bags, and has
switched to french fry'cartons made from mechanically
pulped rather than chemically pulped paper.
When new opportunities for source reduction have
been identified, operating practices are engineered and
researched using one to five restaurants as test sites.
During this process, customer perceptions are carefully
monitored; past reductions have been imperceptible to
most customers.
Reuse
Identifying immediately feasible opportunities for the
reuse of materials was a difficult assignment for the
task force as the time required to handle, collect, and
clean materials would impact McDonald's ability to
provide high-volume fast food. In addition, the
committee's investigation showed that opportunities
varied greatly according to behind-the-counter and
over-the-counter operations.
Over-the-counter options are currently limited as
McDonald's customers expect fast service even at-peak
times of the day. McDonald's operations are designed
to anticipate the content of customer orders and to pre-
pare food just before the customers arrive. However,
McDonald's does not feel it can anticipate where its cus-
tomers will chose to eat, and most reuse options require
different packaging for dine-in or take-out customers.
Repackaging food after the customer arrives or delaying
its preparation until the order Is taken would lengthen
service time. Further, sanitation issues were also a.
concern of the task force, as single-serve, disposable
packaging had basically eliminated the potential of
packaging-related contamination. Dishware storage,
both in the restaurant and behind-the-counter, and the
placement of dishwashing equipment are 'potentially
difficult in McDonald's already tightly designed kitch-
ens. Consideration was also given to the environmental
trade-offs of the dishwashing process, as it would re-
quire energy, water, and detergents.
Behind-the-counter opportunities appeared more
promising: an on-premise study indicated that that is
where 8,0 percent of restaurant waste was generated.
Exhibit 8 shows the breakdown of over-the-counter and
behind-the-counter waste based on a two-restaurant,
one-week audit. Several easily implemented reuse
options existed for behind-the-counter waste including
the reuse of plastic (rather than cardboard) disposables,
shipping trays for bakery items, and plastic shipping
pallets that last at least three times longer than wooden
pallets.
4 • McDonald's: Case A
March 1995
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Recycling ' ;
Recycling efforts take two forms: use of products
made from recycled materials, and the recycling of
post-consumer/post-industrial waste. Many of the _
technical aspects of post-production recycling of both
plastic and paper have already been exploited by sup-
-pliers' internal reuse operations for scrap.1 However,
little recycling has been done -of post-consumer plastic •
and paper materials due to contamination problems.
Unlike glass-and metal, where food residue and bacteria
contamination can be burned off, foam an|d paperboard
are not easily cleaned. ' •
> • '
McDonald's tries to use recycled materials whenever
possible. For example, it is one of the largest users of
recycled paper in the U.S. However, packaging that • • y
has direct contact with food, which constitutes approx-
imately 42 percent of McDonald's packaging, is strictly
regulated by the FDA not to contain post-consumer
recycled materials. Therefore, McDonald's strives to
increase the recycled content for nonfood; packaging,
such as corrugated boxes, which must be made of 35%
recycled material according to a 1990 mandate. In ad-
dition, it uses recycled paper for nonfood items such as
Happy Meal boxes, carry-out drink trays, and paper
•towels. :
In April 1990, McDonald's announced the McRecycle
Program, a commitment to spend $100 million annu-
ally on the use of recycled materials, especially in the
building and renovation of its restaurants. In 1991, it
surpassed its goal, purchasing more than $200 million
of recycled materials. It also created a clearinghouse of
"environmental" product suppliers,'which has received
over 8,000 calls since the 800 number was published.
The focus of McDonald's recycling efforts on post-
consumer, in-store waste has been polystyrene . .
recycling. In 1989, McDonald's launched a polystyrene,
recycling effort followed by a 1990 packaging brochure
stating, "Polystyrene foam is easily recycled." Ken
Harman, chair of the National Polystyrene Recycling
Center (NPRC), said, ; .
1990 is going to be a pivotal year for polystyrene
recycling. It will be the year that polystyrene - ;' .
recycling gains momentum due, in part, to the
efforts of recycling facilities like our Plastics
Again Center ... and the commitment of institu-
tional cafeterias, schools, and private companies.
However, implementation of McDonald's, recycling pro-
gram highlighted an inherent limitation of any recycling
option — that is, benefits are only realized for the •
. packaging that is actually collected and recycled.
McDonald's experimented with three different point-
of-discard methods.to educate and assist customers in
separating their trash, but customers' were generally
either confused or overwhelmed by_the instructions.
In communities that did not have an existing curbside
recycling program, participation was much lowe,r than
in communities where customers were already accus- .
tomed to sorting their trash.
Internal logistical problems increased recycling costs.
•A typical McDonald's restaurant produced five to ten
bags of incorrectly separated materials, creating dis-.
posal problems. And the bulkiness of the clamshells
made three pickup times a week a necessity, incurring
expensive hauling costs as 90% of plastic is comprised
of air. Further, the NPRC required incoming materials
to be free of paper and food contamination/a standard
that was not then being realized. To respond to this
problem, McDonald's experimented with material
. recovery facilities to sort, clean, and consolidate
materials, but the cost proved to be prohibitive.
Throughout this time, McDonald's continued to work
with suppliers to develop packaging that was consis- -
tent with curbside recycling programs, to support the
recycling of material that leaves the restaurant via
takeout orders.
Composting
Composting is still in the formative stage. Therefore,
much of the task force's work centered on gaining a
better understanding of McDonald's composting op-
tions. Composting is an attractive disposal alternative
as it diverts organic waste from landfills and incinera-
tors and it improves soil quality. ,
Almost 50.percent of McDonald's.waste stream con-,
sists of paper packaging and food organics that could
be composted. McDonald's is reviewing the eomposta-
bility of its packaging and studying materials such,as
the coatings used on its paper-based packaging to
determine if they impair compostability. Where pos-
:. sible, it will replace materials that are not cbmpostable
with materials designed for compostability;
McDonald's: Case A • 5
March 1995
-------
To make composting a viable option, McDonald's is
investigating how to: 1) collect and separate materials,
2) balance the cost and environmental trade-offs of
composting methods, and 3) identify markets for
composted products.
McDonald's began testing the compostability of nine
packaging items in January 1991. Several months later,
nine McDonald's restaurants in Maine began sending
their waste to Resource Conservation Services, a nearby
composting company. Data from these tests will be
used to determine the proper conditions for composting
McDonald's waste and to determine the quality of the
final compost product.
The Future
Environmental groups play an increasingly important
role in influencing policy (See Exhibit 9, for an over-
view of leading environmental groups). Furthermore,
during the past decade, membership in many of the
leading environmental groups doubled in size. This
growth may be attributed to both the public's concern
that industry and government are not adequately ad-
dressing environmental issues and to public confidence
in environmental groups. In fact, a recent study con-
ducted by Golin/Harris Communication, Inc. found
that 80 percent of those studied believe "some" of what
environmental groups report while less than 40 percent
believe "some" of what businesses report.'
The joint task force was one of the first collaborative ef-
forts involving a leading environmental organization and
a major corporation aimed at improving corporate solid
waste practices. It posed opportunities and challenges
for both sides. EDF wanted to create a model approach
that could be used by other companies, yet it risked, criti-
cism from other environmentalists. McDonald's needed a
way to respond tb public criticism of their environmental
practices, but knew that potential task force disagreements
could be embarrassing.
An early outcome of the task force was McDonald's
adoption of the waste management hierarchy. The hier-
archy served as a means to .guide early decision making,
but the long-term success of the program will depend
on both parties' ability to manage the partnership.
EDF's President Fred Krupp said, "Environmentalists
and industry alike will be waiting to see what
McDonald's does with the task force options and
recommendations. That will be the ultimate test of this
effort's success."
END NOTES:
1 Environmental Defense Fund and McDonald's Corporation.
Waste Reduction Task Force Final Report. Oak Brook, IL:
McDonald's, 1991. p. 22.
2 McDonald's Corporation. McDonald's 1991 Annual Report. Oak
Brook, It: McDonald's, p. S4.
3 The Task Force Study collected data for McDonald's 8,600
domestic restaurants only.
4 Environmental Defense Fund. Task Force Report, pp. 31-34.
5 Ibid., p. 3.
6 The waste management hierarchy developed by the EPA —
reduce, reuse, recycle, and incinerate/dispose — prioritizes solid
waste practices and is widely accepted.
7 Environmental Defense Fund. Task Force Report, p. 42.
* McDonald's Corporation. McDonald's Packaging — The Facts.
Oak Brook, IL: McDonald's, 1990. p. 7.
' Foundation for Public Affairs. Public Interest Group Profiles,
1992-93. Washington: Congressional Quarterly, 1992.
6 • McDonald's: Case A
March 1995
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EXHIBIT 1: MCDONALD'S CORPORATION CONSOLIDATED STATEMENT OF INCOME
'- 1 i
(In millions of dollars,. except per common share date)
Revenues
Sales by Company-operated restaurants - .
Revenues from franchisee! restaurants .,;
Total revenues ••.-.- '
Operating costs and expenses
Company-operated restaurants
Food and packaging ;
Payroll and other employee benefits
Occupancy and other operating expenses1
Franchised restaurants-occupancy expenses
General, administrative and selling expenses
Other operating (income) expense-net ;
Total operating costs and expenses
Operating income
Interest expense-net of capitalized interest of '
$26.2, $36.0, and $29.8
Non operating income (expense)-net
Income before provision for income taxes
Provision for income taxes .
Net income per common share ;
Dividends per common share
Years ended December 31 ,
, 1,9,91 1990 .' 1989
\
$4,908.5
1,786.5
6,695.0
,- • t
1,627.5
1,259.2
1,142.4
4,029.1
.306.5
-'. . 794.7
(113.8)
5,016.5
1,678.5 '
/
391.4
. . . • - , , 12.3
1,299.4
439.8
$ 859.6
$'2.35 .
$ .36
$5,018.9
1,620.7
6,639.6
1,683.4
1,291.0
1,161.2
4,135.6
279.2
, 724.2
(95.3)
5,043.7
•1,595.9.
381.2
• 31.6
1,246.3
444.0
$ 802.3
$, .33
$4,600.9
' .. 1,464.7-
..6,065.6
1,560.3
1,174.4
1,043:1 .
3,7 77 .0
240.6
.,656.0
(46.5)
4,627.9 ,
1,437.7
301.9
• ' . 21,4
1,157.2
• , 430.5
$ ' 726.7
$ .30:
The accompanying Financial Comments are an integral part of the consolidated financial statements.
Source: 1991 McDonald's Annual Report
McDonald's: Case A • 7
March 1995
-------
EXHIBIT 2: MCDONALD'S CORPORATION CONSOLIDATED BALANCE
( In millions of dollars! December 31,
SHEET
1991
1990
Assets ' : — : — -
Current assets
Cash and equivalents
Accounts receivable
Notes receivable
Inventories, at cost, not in excess of market
Prepaid expenses and other current assets
Total current assets
Other assets and deferred charges
Notes receivable due after one year
Investments in and advances to affiliates
Miscellaneous •
Total other assets and deferred charges
Property and equipment
Property and equipment, at cost
Accumulated depreciation and amortization
Net property and equipment
Intangible assets — net
$ 220.2
238.4
36.0
42.6
108.8
646.0
123.1
374.2
278.2
12,368.0
(2,809.5)
9,558.5
369.1
$11,349.1
$ 142.8
222.1
32.9
42.9
108.3
549.0
102.2
33S.-2
250.0
687.4
11,535.5
(2,488.4)
9,047.1
384.0
$10,667.5
Liabilities and shareholders' equity
Current liabilities
Notes payable
Accounts payable
Income taxes
Other taxes
Accrued interest
Other accrued liabilities • . . " •
Current maturities of long-term debt
Total current liabilities
Long-term debt
Security deposits by franchisees and other long-term liabilities
Deferred income taxes
Shareholders' equity
Preferred stock, no par value; authorized-165.0 million shares;
issued-9.9 and 6.9 million
Guarantee of ESOP Notes
Common stock, no par value; authorized-1.25 billion shares;
issued-415.2 million
Additional paid-in capital
Retained earnings ' •
Eauitv adjustment from foreign currency translation
Common stock in treasury, at cost; 56.5 and 56.1 million shares
Total shareholders' equity
$ 278.3
313.9
157.2 .
82.3
185.7
201.4
69.1
1,287.9
4,267.4
224.5
734.2
298.2
(286.7)
46.2
201.9
5,925.2
32.3
6,217.1
(1,382.0)
4,835.1
$11,349.1
$ 299.0
355.7
82.6
68.6
133.2
194.9
64.7
1,198.7
4,428.7
162.7
695.1
199.7
(196.5)
46.2
173.7
5,214.5
46.7
5;484.3
(1,302.0)
4,182.0
$10,667.5
The accompanying Financial Comments are an integral part of the consolidated financial statements.
8 • McDonald's: Case A
March 1995
-------
EXHIBITS: 11-YEAR SUMMARY :
(Dollars rounded to millions, except per common share-data and average restaurant sales) -
' ' .1991 1990 1989 '1988 198?' 1986 \ 1985
1984
1983 1982 1981
System-wide sales 319,928 $18,759. $17,333 $16,064 $14,330 $12,432 311,001 $10,007
U.S. .
-Outside U.S.
System-wide sales by type
' Operated by franchisees
Operated by the Company
Operated 'by affiliates
Average sales, restaurants .
open at least 1 yr, (in ,1,000s)
Revenues, fmchsd. rstmts. •
Total revenues
Operating income
.Inc. before prov. for inc. taxes
Net income
Cash provided by operations
Financial position at year-end
Net property and equipment
- Total assets
Long-term debt
Total shareholder equity
Per common share
Net income
Dividends declared
Year-end shareholder equity
.Market price at 'year-end
System-wide restaurants
at year-end
• Operated by franchisees
Operated by the Company
Operated by affiliates
12,519
7,409
12,959
4,908
2,061
1^658
1,787
6,695
1 ,679
1,299
860
1,423
9,559
11,349
4,267
4,835
$ 2.35
.36
13.48
38
$12,418
8,735
2,547
1,136
Systemwide restaurants at year-end:
' U.S. , ' . 8,764
' Outside U;S. 3,654
12,252,
6,507
12,017;
5,019.
1,723
1 ,649 "
1 ,62t.
6,640
1,596
1,246
802
1,301'
9,047,
10,668
4,429
4,182
$ 2.20
.33
11.65
291/8
$11,803
8,131
2,643
1,029
8,576
3,227
12,012
5,321
11,219
4,601
1,513
1,621
1 ,465
6,066
1,438
• 1,157
727
1 ,246
7,758
9,175
3,902
3,550
$ 1.95
.30
9.81
341/2
$11,162
7;573
2,691
898
8,270
2,892
11,380,
4,684
10,424
v 4,196,
1,444,
1,596 ..
' 1,325 ;
5,521
1,288
1,046
646
1',177
6,800
8,159
3,111
3,413
$ 1.71 $
.27
9.09
' 24 1/8
$10,513 ,
7,110
2,600
803
. 7,907
2,606
10.-576
3,754
9,452 ,,
3,667
1,211
1,502
1,186
4,853
1,160
959
549*
1,051
5,820
6,982
2,685
2,917
1.45*
.24
7.72
22
$9,911
6,760
2,399
752
7,567
2,344
9,534
2,898
8,422
3,106
904
1 ,369V
1,037
4,143
983
848
480
852
4,878
5,969
2,131
2,506
$•• 1.24
.21
6.45
20 1/4
$9,410
6,406
2,301
703
7,272
. 2,138
8,843
2,158
7,612
2,770
619
1,296
924
3,694
905
782
433
813
4,164
5,043
1,638
2,245
$ 1.11
.20
5.67
18
$8,901
.6,150
2,165
586
6,972
1,929
-8,071
1,936
6,:914
2,538
555
1,264
•828
3,366
812-
707
389
701
3,521
4,230
1,268
2,009
$ .97
.17
4.94
11 1/2
$8,304
5,724
2,053
527
6,595
1,709
7,069
1-.618
5,929
2,297
461
1,169
704
3,001
713
628
343
618
. 3,183
3,727
1,171
1,755
$' .85
.14
4.38 '
101/2
$7,778
5,371
1,949
458
6,251
1,527
6,362
1,447
5,239 .
2,095
475
, 1,132
620
2,715
613
546
301
505
2,765
3,263
1,056
1,529
$ .74
.12
3.78
9
$7,259
4,911
1,846
502
5,918
1,341
5,770
f,359
' 4,788
•1,9.16
425
-1,11-3
.561
2,477 ,
552
482
265 ..
434
. 2,497
2J899
926
1,371
$ .65
.09-
3.37
6 1/2 ,
$6,739
4,580
1 ,746
413
5,554
1,185
•Before the cumulative prior years' benefit from the change in accounting for income taxes.
McDonald's: Case A • 9
March 1995
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EXHIBIT 4: SCHEMATIC OF MCDONALD'S EXISTING FOOD DELIVERY SYSTEM
Food Preparation
Area
v
Package
_y
Warming/Holding
Bin for Hot Items
Cold Drinks,
Food Items
^
Package
\
\l
V
Package
_Z
Service Counter
Drive-Thru
Take-Out
Warming
Rack-Fries
10 • McDonald's: Case A
March 1995
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EXHIBIT 5: BIOGRAPHIES OF TASK FORCE MEMBERS
Terri K. Capatosto, Director of Communications,
McDonald's,Corporation. Ms. Capatosto joined 'the
Corporation in 1984 and is responsible for managing
McDonald's interaction with local and national news
media as well as providing communications counsel,
support, and training to the company's corporate and'
regional management, and local owner-operators. Since
1988, she has also held specific responsibility'for envi-
ronmental issues, working with Operations, Purchasing,
Environmental Affairs, and other key departments
viithin McDonald's on the company's environmental
initiatives. Ms. Capatosto has received numerous
awards for leadership and outstanding performance,
including McDonald's President's Award in 1987.
Before joining McDonald's, Ms. Capatosto was a Cap-
tain in the U.S. Marine Corps. She holds :B:A. degrees
in Psychology and Music from the University of Utah. •
Richard A. Denison, Senior Scientist, EDF. Mr.
Denison, who holds a Ph.D. in Molecular Biophysics
and Biochemistry from Yale, specializes in hazardous
and solid waste management issues ranging from
waste reduction and recycling to the health-effects and
regulatory requirements of landfilling and incinera-r
tion. Prior to joining EDF in 1987, Mr. Denison was an
Environmental Analyst at the U.S. Congress' Office of .
Technology Assessment and also conducted cancer
research in a postdoctoral position a,t the University of
.California, San Francisco. He has authored numerous
papers and reports on solid and hazardous waste man-
agement, and a recent book, Recycling and Incineration:
Evaluating the Choices. • '•• , i
Robert L. Langert, Director of Environmental Affairs,
The Perseco Company. Bob Langert is responsible for
managing projects related to source reduction, recy-
cling and other waste management alternatives for the
Perseco Company, the exclusive packaging purchaser
for McDonald's. His responsibilities include assisting
in the coordination of McDonald's recycling initiatives
across the country, and working with an extensive
group of packaging suppliers on waste reduction ini-
tiatives. Prior to joining the McDonald's family, Mr.
Langert was an operations manager for a McDonald's
distributor, Perlman-Rocque, and served as Midwest
logistics manager for the American Hospital Supply .
Corporation. He holds an M.B.A. degree from North-.
, western University. . '
Keith Magnuson, Director; Operations Development
Department, McDonald's. Mr. Magnuson works on
developing new operating systems and improving store
operations for the company's restaurants worldwide".
Most recently, he has been involved in the development
of McDonald's in-store recycling programs, packaging
source reduction, and other environmental initiatives.
• Over the past 17 years, his positions have included
store manager, area supervisor, field consultant, and '_
operations development manager. He attended the.
University of Maryland. . '
S. Jackie Prince, Staff Scientist, EDF. Ms. Prince con-
ducts research-on a variety of solid waste issues, in-
cluding recycling technologies and the use of product
life cycle assessments in evaluating consumer products..
Ms. Prince holds Master's degrees in'Public and Private
Management and Environmental Studies, and received
her B.S. in chemical engineering; all from Yale. She is
a former Project Manager/Engineer for the Waste
• Management Division of the U.S. Environmental
Protection -Agency, Region I, where she received the
1986 EPA Award For Excellence. She is the author
of Wetlands Assessments at Hazardous Waste Sites and
Assessment ofPCB Contamination in New Bedford Harbor.
John F. Ruston, Economic Analyst, EDF. With a
Master of City Planning degree from MIT, Mr. Ruston
works on issues that link economic development and
environmental quality. He is co-author of Coming Full
Circle: Successful Recycling Today; Recycling and Incinera-
tion: Evaluating the Choices; and The Economic Case for
Recycling: Evidence From the Brooklyn Navy Yard Hearings.
Mr. Ruston received his B.S. from the University of
California at Davis,-where he also completed graduate ,-
work in econofnics and computer modeling.
Dan Sprehe, Environmental Affairs Consultant,
Government Relations Department, McDonald's.
Mr. Sprehe's duties include internal research on recy-
cling and source reduction issues as well as serving as
a McDonald's corporate spokesperson to environmental
and government groups. He was previously a legisla-
tive analyst for the Illinois General Assembly's Senate
Energy and Environmental Committee, where he
helped draft legislation on numerous environmental
issues, including the Illinois Solid Waste Management
Act. Mr. Sprehe holds a B.S. in Political Science from
Eastern Illinois University.
McDonald'^: Case A • 11
• ' . • March 1995
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EXHIBIT 6: CURRENT SOURCE REDUCTION PROJECTS
Project / Idea / Concept
Potential % Reduction
1, Cold Cups:
A. Use unbleached /non-chlorine bleached paper.
B. Eliminate lids on in-store purchases.
C. Drink-thru lid.
2. Sandwich Wraps:
A. Explore different compostable barriers/coatings.
B. Use unbleached /non-chlorine bleached paper.
3. Cartons:
A. Replace medium and large fry cartons with bags.
B. New glue seam on cartons.
C. Replace hash brown carton with bag.
D. Reduce amount of paperboard used in Happy Meal boxes.
. Straws:
A. Reduce gauge.
B. Convert to unwrapped bulk.
5. Cutlery:
A. Evaluate polypropylene.
B. Test and evaluate starch-based materials.
6. Foam Cups & Breakfast Entrees: .
A. Look for environmentally preferred alternatives to polystyrene foam.
7. • Corrugated Shipping Containers:
A. Continue examining ways to reduce amount of corrugated used in boxes.
B. Test reusable plastic containers (distribution center to restaurant and
raw material supplier to distribution center).
'C. Test recyclable coating for meat boxes.
TBD* '
TBD
TBD
TBD
75%
TBD
75%
20% '
6%
20% .
TBD
TBD
TBD
TBD
TBD
TBD
8. Inner Pack PE Film Wrap:
A. Color-tint only those which are not recyclable.
B. Convert all possible wraps to LDPE to enhance recyclability. -
9. Condiment Packaging:
A. Convert to 17 g. ketchup packet from current 11 g. packet.
10. Other Unbleached Products:
A. Coffee Filters
B. Prep Pan Liners
*TBD - To be determined
TBD
Source: Task Force Report
12 • McDonald's: Cast A
March 1995
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EXHIBIT,?: 1990 SOURCE REDUCTION ACCOMPLISHMENTS
Accomplishments... \ % Weight Reduction
• Redesign 16-oz. cold cup (one supplier). . 10.2%
• • Reduce large cold cup. . 6. °
• Reduce density of breakfast lids,' >14.5%
. Reduce density of slant McChicken package. 6.6%
• Reduce density of small clamshell. • ; .8.5%
' • • T1 n%
. Smaller napkin. • zl'u/0 '
. Oriented unwrapped bulk cutlery. II. 0%-
• Convert to jumbo roll toilet tissue. ' . 23.0%
• Reduce gauge of sundae cup. ' . ' . 9-0%
. Replace breakfast sandwich foam with sandwich wrap. 59.0%
. Increase corrugated usage for 10:1 meat boxes. 15.0%
• Replace sandwich foam with wraps: ,
i -• weight . ' / l'0%
• •• -
. Down-sized McD.L.T. package ; 32-0%
*Note: Each change is based on its annual impact for that particular product line.
| Source: Task Force Report
McDonald's: Case A • 13
March 1995
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EXHIBIT 8: MCDONALD'S ON-PREMISE WASTE STUDY
Putrescibles
34%
High-Density
Polythlyene
1%
Behind-the-Counter
I I Over-the-Counter
Liquids
2% Misc.
6%
Corrugated
34%
Uncoated Paper
4%
Coated Paper
7%
Polystyrene
4%
Non-McD Waste
4%
Misc.
2%
Low-Density
Polyethlyene
2%
Source: McDonald's/EDF Task Force Report
14 • McDonald's: Case A
March 1995
-------
EXHIBIT 9: DESCRIPTIONS OF SOME ENVIRONMENTAL GROUPS
Citizen's Clearinghouse for Hazardous Waste (1981)
Mission: To assist grassroots leaders in creating and •.
maintaining local community organizations that fight
toxic polluters and environmental hazards.
Budget: 5689,908(1990) '•';...
Membership: Not available - ; - .
Conservation International Foundation (1987)
Mission: To help develop.the-capacify to sustain bio-
logical diversity, ecosystems, and ecological processes
that support life on Earth. ; - ...
Budget: $8.9 million (1991) •/
Members-hip: '55,000 individuals '.
Earth First! (1980) ' . ' '
Mission: The preservation of. natural diversity.
Budget: Npne . • . ., ...'..
Membership: Not available
Environmental Defense Fund (1967)
Mission: Committed to a multidisciplinary approach
to environmental problems, combining the efforts of
scientists, economists, and attorneys to devise practical,
. environmentally sustainable solutions to these problems.
Budget: $15.1 million (1990) :
Membership: 150,000 individuals
a • . _
Friends of the Earth (1990)
Mission: To work at the local, national, and interna-
tional levels to protect the planet;,preserve biological,
cultural, and ethnic diversity; and empovyer citizens to
have a voice in decisions affecting their environments
and lives. .
Budget: $3 million (1990) . •-:
Membership: 50,000 individuals . \
Greenpeace USA (1971)
Mission: To'preserve the environment through
international campaigns in the areas of toxic waste,
disarmament, ocean ecology, energy and atmospheric
preservation, and rainforest preservation.
Budget: $34 million (1990) ;
Membership: 2.1 million individuals
Izaak Walton League of America (1922)
Mission: To defend America's soil, air, woods, waters,
and wildlife through its local chapters; state divisions,
and a national headquarters in the U.S. capitol.
Budget: $1.8 million (1990)
Membership: 52,700 individuals
National Audubon Society (1905)
Mission:' Long-term protection and the wise use of wild-
life, land, water, and other-natural resources; the promo-
tion of rational strategies for energy development and
use; the protectionsof life from pollution/ radiation, and
toxic substances; and solving global problems caused by
overpopulation and the depletion of natural resources.
Budget: $35.8 million'(1990)
Membership: Not available
Natural Resources Defense Council (1970)
Mission: Dedicated to conserving natural resources
and improving the quality of the human environment.
' Budget: $16 million (1990) .
Membership: 170,240 individuals • '
The Nature Conservancy (1951)
Mission: To preserve plants, animals, and natural com-
- munities that represent the, diversity of life on Earth by
protecting the land and waters they need tb survive.
Budget: $68 million (1990)
Membership: 580,000 individuals; 405 corporations
Sea Shepard Conservation Society (1977)
Mission: To protect and preserve marine wildlife and
habitats for future and present generations.
Budget: $600,000 (1990) '
Membership: 17,000 individuals
Sierra Club (1892)
Mission: To explore, enjoy, and protect the wild places
of the earth; to practice and promote the responsible
use of the earth's ecosystems and resources; to educate
and enlist humanity to protect and restore the quality
of the natural and human environment; and to use al
lawful means to carry out these objectives.
Budget: $35 million (1990) .
Membership: 650,000 individuals
Wilderness Society (1935)
Mission: Devoted primarily to the preservation of
wilderness and the proper management of our
country's public lands and natural resourcees..
Budget: $17.9 million' (1990) ,
Membership: 383,000 individuals
McDonald's: Case A • 15
March 1995
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World Wildlife Fund
Mission, To conserve nature by using the best available
scientific knowledge and advancing that knowledge to
preserve the diversity and abundance of life on earth
and the health of ecological systems by protecting
natural areas and wild populations of plants and ani-.
mals, including endangered species; to promote sus-
tainable approaches to the use of renewable natural re-
sources; and to promote more efficient use of resources
and energy and the maximum reduction of pollution.
Budget: S54 million (1991)
Published by:
The National Pollution Prevention Center
for Higher Education
University of Michigan, Dana Building
430 East University Ave.
Ann Arbor. Ml 48109-1115
•Phone:313-764-1412 . .. .
•Fax: 313-936-2195
• E-mail: nppc@umich.edu
The mission of the NPPC is to promote sustainable development
by educating students, faculty, and professionals about pollution
prevention; create educational materials; provide tools and
strategies for addressing relevant environmental problems; and
establish a national network of pollution prevention educators.
In addition to developing educational materials and conducting
research, the NPPC also offers an internship program, profes-
sional education and training, and conferences.
Your Input is Welcome!
We are very interested in your feedback on these materials.
Please take a moment to offer your comments and communicate
them to us. Also contact us if you wish to receive a documents
list, order any of our materials, collaborate on or review NPPC
resources, or be listed in our Directory of Pollution Prevention
in Higher Education.
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The NPPC provides information on its programs and educational
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-------
Pollution Prevention in
Corporate Strategy
NAT'INA;, =S! — ON POEVEN-.CN ZENJEH COP .HIGHEH EDUCATION
Case Bi: The Clamshell
Controversy
1 Susan Sv'oboda, Manager of the Corporate Environmental Management
Program, University of Michigan, prepared this case under, the guidance of
Stuart Hart, Director of the Corporate Environmental Management Program
. and Assistant Professor of Corporate Strategy and Organizational Behavior at '
the Michigan Business School, as the basis for class discussion rather than to
illustrate either effective or ineffective-handling of an.administrative 'situation. •
We would like to thank the National Pollution Prevention Center for supporting
the development of this case. _ . .
Introduction
The Jpint Task Force of McDonald's Corporation and
the Environmental Defense Fund (EDF) Was in its third
month of collaboration when a decision needed to be
. made about the expansion of McDonald's polystyrene
recycling program. The task force, formed through a
mutual agreement between the parties, had been
charged with finding ways'to reduce McDonald's solid
waste through source reduction, reuse, recycling, and
composting. However, one aspect of McDonald's
operations seemed to attract the public's attention —
the polystyrene "clamshell" sandwich containers.
Although these packages represented only a minute
fraction of total municipal solid waste1, to the public
they symbolized the "throw-away" society.
Debate over McDonald's packaging materials started in
the 1970s when the public became concerned that too
many trees were being cut down to make packaging. In
response" to this interest, Ray Kroc, McDonald's founder,
commissioned the Stanford Research Institute (SRI) to
conduct an environmental impact study comparing the
paperboard packaging McDonald's was men using to
• polystyrene packaging. By analyzing all aspects of the
• two alternatives from manufacturing though disposal,
SRI concluded that plastic was preferred. They reasoned
that the coating on the paperboard made it nearly impos-
sible to'recycle, while polystyrene was recyclable and
used less energy in production. • '•,••'.,
As a result, McDonald's switched to polystyrene for
their cups and sandwich containers, and launched an
environmental education program to communicate to
the public their rationale for the switch from paperboard
to plastic. In 1989, McDonald's piloted a recycling pro-
gram in 450 of their New England restaurants by asking
in-store customers to sort their trash into designated
trash bins. The polystyrene was then shipped to one to
eight plastic recycling plants formed in a joint venture
of eight plastics companies. The program gained
enough success that soon it was expanded to California
and Oregon at the request of state officials, and involved
a total of 1,000 stores. McDonald's began planning a
national expansion of the program. However, EDF .
Director Fred Knipp told Ed Rensi, Chief Operating
Officer and President of McDonald's USA, that he
would publicly refuse to endorse the recycling program,
because he 'did not regard it as the best environmental
solution.
Packaging in the Waste Stream
Packaging is essential to a product's performance! It
protects the product throughout production, distribution
and storage, provides consumers with product and usage
information, and differentiates the product. Food manu-
facturers and distributors also expect packaging to extend
the product's shelf life and to preserve the appearance,
freshness, flavor, and moisture content of food. Effective
packaging reduces food spoilage-rates and diverts more
than its own weight from disposal.
National Pollution Prevention Center for Higher Education • University of Michigan
Dana Building. 430 East University, Ann Arbor Ml 48109-1115
Phone: 313.764.1412 • Fax: 313.936.2195 : E-mail: nppceumich.edu
May be reproduced
freely for non-commercial
educational purposes.
McDonald's: Case B1 • 1
March 1995
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The composition of solid waste has changed signifi-
cantly over the past three decades. Paper and plastics
have grown to a combined total of 50 percent, while
metal, food and yard waste, and glass have decreased.
See Exhibit 1 for a breakdown of municipal solid waste
(MSW). Further, the total weight of packaging in MSW
doubled between 1960 and 1990. However, as shown
in Exhibit 2, the EPA estimates source reduction efforts
will reduce the packaging content of MSW to 30 percent
by the year 2000 (from a high of 36 percent in 1970).
The growing trends of single-parent families and dual-
career couples have popularized single-use and micro-
wave containers for which no recycling infrastructure
currently exists. These packages offer convenience but
often replace more durable or reusable options. If the
present rate of growth continues, the proportion of
plastics in packaging is expected to be 15 percent by
the year 2000 (see Exhibit 3). Both manufacturers and
consumers value the flexible, durable, and insulating
properties of plastics. However, plastics have become
a topic of debate as citizens try to reconcile the desire
for convenience with "greening" attitudes.
Recent Greenwatch studies by J. Walter Thompson indi-
cate that 78 percent of those surveyed say that they are
willing to pay extra for products with recyclable or
biodegradable components, and 77 percent report that
their purchase decisions are influenced by a company's
reputation on environmental issues. Although actual
consumer behavior may not necessarily match intended
behavior, this growing sentiment is prompting manu-
facturers'to search for new technologies to make their
packages thinner or lighter in order to "green" their
packaging. In addition, many companies are looking
to find ways to overcome the diminished performance
characteristics of recycled materials so that they can
replace virgin materials with recycled ones.
Clamshells, Paperboard, and Quilt-wrap
McDonald's selects packaging based on long-standing
criteria derived from its founding principles of Quality,
Service, Cleanliness, and Value (Q.S.C&V.) considering:
packaging availability, its ability to keep food insulated
and control its moisture level, its ease of handling, its
customer appeal, and its cost. McDonald's packaging
philosophy is to "evolve as new applications and materials
that meet our customer's needs become available. If there
is a better package...we'll use it!"
Perseco, an independent and privately owned company
that purchases from over 100 suppliers, handles the
procurement of all McDonald's paper and plastic food-
service packaging, including direct food packaging as .
well as utensils, cups, bags, and napkins. McDonald's
packaging must provide customers with a convenient
way to take food out while keeping it fresh, hot, and
moist, since a typical McDonald's restaurant serves
2,000 people per day, 60-70 percent of whom take their
food outside the restaurant
As the task force began reviewing sandwich packaging
options, they basically had two alternatives: paper-
board containers costing approximately 2.5-3 cents per
sandwich and polystyrene clamshells at approximately
2-2.5 cents per sandwich.2 To help the joint task force
understand how packaging was used in McDonald's
operations, Perseco was requested to perform an audit
of all packaging — primary, secondary, and tertiary —
used in a restaurant. Secondary packaging, used to
contain and ship supplies, includes corrugated card-
board, inner wraps, packs, and dividers. Tertiary
packaging includes customer-related packaging such
as utensils, napkins, carry-out bags, etc. The results,
shown in Exhibit 4, indicated that paper products consti-
tute 81 percent of McDonald's primary packaging.
As the task force members contemplated the complex-
ity of the environmental issues before them, they knew
mat they must.develop a comprehensive framework
that would enable-them to assess the advantages and
disadvantages of various options. For example, some
options aimed at improving one particular aspect of a
package may have other detrimental environmental
impacts. Foremost, the clamshell issue needed to be
resolved. Although current public opinion opposed
the clamshells, McDonald's had selected polystyrene
clamshells over 20 years before because they were
shown to be more environmentally "friendly" than
coated paperboard, which could not be recycled. In
the meantime, McDonald's had made a strong commit-
ment to recycling polystyrene in both its relationship
with the National Polystyrene Recycling Center and
in its efforts to educate the public. Also, plain paper
wraps had been eliminated as a viable alternative since
they did not satisfactorily insulate the sandwiches.
The task force decided to let the waste management
hierarchy and the life cycle assessment methodology
guide their analysis. Life cycle assessment gives consid-
eration to all impacts that occur during each stage of
2 • McDonald's: Case B1
March 1995
-------
-the product's or packaging material's life cycle, from
.extraction of the raw materials through manufacturing,
transportation, use, and disposal. In addition, the. team
found that time spent learning about McDonald's ,
_operations,,suppliers, and customers was invaluable
to their decision-making when factoring in qualitative
measures of public perception of the magnitude of an
Option's impact on the environment; the Health or
safety risk to McDonald's employees, customers, or the
communities they serve; and how an option could be
integrated into both pilot tests and full-scale operations.
.Finally, they considered the feasibility of the option
being replicated in the many local conditions of the
McDonald's restaurants and supporting communities.
Task Force Adopts ,
Life Cycle Methodology
Understanding the important linkages between different
stages of a package's or product's "life" is a dynamic
process where, for example, a change in an input to the
manufacruring.process would result in corresponding .
changes in disposal figures. The analysis is further
complicated by the fact that many inputs or releases
have not been measured and tracked over time, and
some are not even quantifiable. The task force turned ,
to Franklin Associates Ltd., specialists in life cycle ,
analysis, for a complete review of the relative merit
of packaging materials. See the Note on ]Life Cycle
Analysis for background on this methodology.
Franklin Associates L:td. gathered data from a number
of sources including: material manufacturers, product
manufacturers, published literature, government
sources, and Franklin's existing materials and manufac-
turing database. Data from a 1990 Franklin Associates
.study, prepared for the Council of Solid Waste Solu-
tions, that compared polystyrene clamshell to bleached
paperboard containers.at various recycling rates is
shown in Appendix A. Also included as Appendix B
is data from a second study that compares clamshells to
a new "quilt-wrap" packaging developed by the James
River Corporation. Quilt-wrap is a layered paper pack-
age that was introduced while the task force was in
progress. The inner tissue-paper layer protects the
sandwich from absorbing grease. The middle layer is a
thin polyethylene film that acts as a barrier to moisture
and insulates the food. The outer layer of plastic gives
the paper strength. This wrap is not recyclable and is
estimated to cost.1.5-2 cents per sandwich.3
.As both the public and government agencies have
' become more environmentally concerned over the past
20 years/ several studies have been conducted to eval-
uate the impact of containers. However, confusion .
remains over how to measure and compare-all the envi-
ronmental risks associated with them. In many cases,
impacts such as pollution emissions have not been •
measured, and in other cases the long-term risks have
not been determined. Assumptions and limitations of
the life cycle assessment methodology have spurred
debate over the value of such assessments. Franklin -
Associates provides only life cycle inventories — listings
of quantifiable environmental inputs and releases. (Such
- inventories usually lead clients to develop improvement
assessments '•— studies that use inventory results to ,
pinpoint opportunities for improvement.
Other groups such as Green Cross and Green Seal have
used life cycle data to attempt to estimate a product's
environmental impact. However, consumer labeling
efforts often attempt to make product comparisons of
products for which comprehensive data have yet to be
collected. Currently, no general formula is available,
to make this comparison, and comparison of entire
categories such as plastics versus paper is virtually
meaningless. The validity of environmental labelling
without a scientific basis or widely accepted standard
continues to be debated by environmental, business,
and consumer groups.
Life Cycle Inventory Data —
The Clamshell Decision
The life cycle inventories prepared by Franklin
- Associates to aid task force decision-making provided
information on the systems that produce the products,
in this case sandwich packaging. Here a system is
defined as "the collection of operations that together
perform some defined function." Each individual
stage or process can be viewed as a subsystem of the
total system, as shown in Exhibit 5. The following is a
description.of the systems used to produce polystyrene
clamshell containers and paper-based sandwich wraps.
Variations in the production of either .paperhoard or
quilt-wrap are noted.
POLYSTYRENE PRODUCTION
.' ' '. '
Polystyrene containers result from a multistage process
with several production and manufacturing sub-
systems (see Exhibit 6). A description of the various
processes follows.
McDonald's: Case B1 • 3
; . March 1995
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Raw Materials Acquisition
Crude Oil Production
Oil is produced by drilling into porous rock formations
several thousand feet under the earth's surface that
contain oil. Pumps are used to extract the oil and the
accompanying "brine" water. The brine is separated
from the oil at the surface. Approximately 90 percent
of water with minimal oil residue is sent to separate
wells that are specifically designed for its storage, and
the remaining 10 percent is discharged into surface
water. Hydrocarbons may also be emitted to the air in
this process as many oil fields also-contain natural gas.
Crude oil passes through a distillation and desalting
process in order to remove salt, sediment, and water.
Natural Gas Production
Although natural gas flows quite freely to the earth's
surface, it requires energy to pump it to the surface.
Hydrocarbons are released during the process. Since
approximately 25 percent of natural gas is produced in
combination with oil, brine water is produced at the
same time as natural gas. Hydrocarbons are also pro-
duced with natural gas and are released into the air
during venting at the well-site.
Transportation
Oil and natural gas may be shipped in truck or railroad
tanks, by ocean tanker, or by pipelines. Ouleaks and
spills are potential risks. Transportation of highly
explosive natural gas necessitates special equipment
and safety precautions.
Material Manufacture
Natural Gas Processing ,
Processing plants use compression, refrigeration, and oil
absorption to extract light hydrocarbons. When compo-
nents of the gas are removed they are stored in controlled
conditions until being transported away. The primary
pollutants in this process are hydrocarbons. In some
cases, natural gas must undergo a "sweetening" process
in which sulfur dioxide is emitted.
Ethylene Production
Ethylene is produced by a process called thermal
cracking — hydrocarbons and steam are fed into the
cracking furnace, where they are heated, compressed,
and distilled. Typical feedstocks used in U.S. in this
process are approximately 75 percent ethane/propane
and 25 percent naphtha.
Benzene Production
Benzene is naturally produced from crude oil as it is
distilled in the refining process. It can also be pro-
duced using a reforming operation that uses decon-
taminated naphtha from ethylene production. Benzene
has been found to cause blood disorders and leukemia
in workers exposed to high concentrations for a long
period of time. It is regulated by the Comprehensive
Environmental Response, Compensation and Liability
Act (CERCLA/Superfund), the Resource Conservation
and Recovery Act(RCRA), and the Occupational
Safety and Health Administration (OSHA).
Styrene Production
Styrene is produced by combining benzene and ethylene
using a catalyst and then dehydrogenating the resulting
ethylbenzene. Ethylbenzene is listed as a volatile con-
taminant by the Environmental Protection Agency (EPA)
and is a standard priority pollutant for monitoring of
water discharges. Styrene is a clear, colorless liquid
which is flammable and toxic and requires special pre-
cautions. Exposure to high levels may result in irrita-
tion to eyes, skin, and the respiratory tract. The Health
Hazard Assessment Group and the EPA's Office of
Drinking Water classifies styrene as a probable carcin-
ogen; however, the Science Advisory Board refutes this
claim. Styrene is regulated under Superfund and by
OSHA and the Food and Drug Administration (FDA).
Polystyrene Resin
Styrene is converted to polystyrene by holding styrene
in a chamber under controlled temperatures to remove
solvents, unreacted materials, and other volatiles from
the end product. It is then fed through a die where
strands and pellets are formed.
Blowing Agent Production
Isopentane, n-pentane, isobutane, n-butane, CFCs,
and HCFCs are all blowing agents for foam plastic.
CFCs are commonly used in the production of polymer
foams, but used only 2.3 percent of the time in the
production of polystyrene. Of that 2.3 percent, most is
used to, produce insulation board. Common blowing
agents for polystyrene include pentane and HCFCs.
Pentane does not affect the ozone layer, but may con-
tribute to low-level smog if not recovered. The EPA
has endorsed HCFC-22 as an "excellent alternative" to
CFCs as it reduces ozone depletion by 95 percent over
CFCs. However, federal law requires a phase-out of all
qzone-depleting chemicals, and by 1993 HCFC-22 will be
prohibited by federal law from use in the production of
foam packaging. *
4 • McDonald's: Case B1
March 1995
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Final Product Fabrication . ;
Crystal polymers are combined with blowing agents
•under pressure in an extruder. The pressure drops as
they exit the extruder, which causes the polystyrene to
.bubble and foam. Sheets are produced and thermo-
f ormed into desired shapes.. Most of the solid waste
generated during this stage is, recycled- .
Packaging and Transportation .
Polystyrene.products are typically wrapped in poly-
• et'hylene sleeves and packaged in corrugated boxes
and shipped by truck or rail. , i . '.
Disposal -'_. .' . >;
Landfilling '•.'..
Plastics are an inert material that add stability to a
landfill, first by acting as a. liner that reduces leaching
• of toxins in landfills and second by not producing
methane gas. Landfill characteristics do'not foster the
biodegradability of plashes. Plastics may take as long
as 20 years to break down and even then will only
break into smaller pieces, retaining the same volume.
However, pressure within a landfill is estimated at 50 "
pounds per square inch, enough to compress, all the air
out of plastics, thereby reducing their volume.
. Incineration '_•
Plastics burn easily because the fuel value remaining
in the plastic is released during incineration. The heat
generated from combustion of polystyrene is much
higher than that released by average MSW, and over
twice that of paperboard containers.5
Recycling . ,•• :
After polystyrene is transported to the recycling facility,
it is washed and food contaminants are removed as
sludge. The polystyrene is ground, dried, re-extruded,
and pelletized. Energy needed to rnelt plastics for
recycling is 2-8 percent of the energy needed to make
virgin plastics.6 Recycling efforts are hampered by
• economic and operational factors. First, the sale of
polystyrene waste to recyders generates little revenue
relative to hauling costs because recycled materials are
" . generally purchased by,weight and polystyrene is very
light. Second, residual food contamination can hurt
the quality of the recycled material making it poten-
tially unsalable.
Operationally, cleaning is 'labor-intensive and requires
large amounts of water! .Recycled plastics are us'ually
weaker or less durable than non-recycled plastics of
the same weight, so they are often combined with ,
additives or formed in multiple layers to increase
strength. Biodegradable plastics complicate recycling
efforts. Manufacturers are working to improve the
degradability of plastics intended for landfill. However, ,
biodegradable plastics, if recycled, may deteriorate
while sdll in use. Finally, recycling postpones disposal,
but it does not eliminate eventual disposal.
PAPER PRODUCTION
Paper, paperboard, and quilt-wrap packaging result
from multistage processes with several production and
manufacturing subsystems (see Exhibit 7). The various
processes are essentially the same for each of the pack-
aging materials unless otherwise noted.
Raw Material Acquisition
Logging Operations
Logging operations can be divided into the following
four stages:
Harvest Planning. Decreasing timber supplies relative
to expected demand has made the planning stage in-
creasingly important to improve wood utilization and
to reduce environmental impacts. Planning decisions
include logging techniques, the volume and species to
be harvested, and road layout.
ratting Practices. Trees are cut down as low to the
ground as possible using.power saws. Machines known
as "feller-bunchers" cut the timber into smaller seg-
ments and gather them for transportation. The logs
are then roughly scaled, classified for best usage, and
graded and measured for length and diameter.
YardfrS Practices. Logs are moved from the forest to
a centralized loading area using either tractors to pull '
the logs or cable lines to transport logs above the forest.
Hauling. Logs are transported from the
loading area to the manufacturing plant using truck,
rail, or water.
Harvesting can lead to soil erosion, which causes the
pesticides and fertilizer applied before harvesting to
be washed into the water as well as the soil. Ongoing
erosion may change the run-off patterns of a watershed.
And the power tools, tractors, and trucks used all con-
sume energy and release emissions.
McDonald's: Case B'1 • 5
March 1995
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Materials Manufacture
Pulping
Pulpmg is a process whereby cellulose fiber, the mate-
rial used to make paper, is separated from the other
components found in wood. Wood is comprised of 50
percent cellulose fiber, 30 percent lignin, and 20 percent
oils and carbohydrates.
Mechanical Process. Logs that do not meet lumber-
quality standards are debarked by a rotating drum that
wears away the bark. Logs are chopped into blocks
which are combined with wood chips in a continuous
grinding machine. A! stream of water flows through
the grinder and washes the pulp away. The sludge
pulp is pumped over several screens to remove coarse
material and water, and is stored in tanks until needed.
Mechanical pulping tears the cellulose into shorter
fibers and allows more lignin to be included in the
pulp, which creates weaker paper that yellows easily.
Chemical Process. Debarked logs are chipped and
placed in large steel tanks called digesters where they
are "cooked" with a combination of soda, sulfite, and
sulfate at high temperatures. This pulpy substance is
blown into cyclones to remove steam and gas and then
sent to large tanks where the cooking chemicals are
separated from the pulp. The pulp is pumped over
screens to remove the water, which is usually 100 to
500 tons of water per ton of pulp. The pulp is thickened
and rolled through presses to make sheets of pulp, or
moved directly into papermaking operations.
Pulp and paper mills use an average of 50,000 gallons
of water per ton of paper output. The industry reuses
water to conserve usage. In fact, total water use is
usually three times higher than actual intake. In addi-
tion, mills employ internal recovery systems that re-
cover the liquors used in pulpmaking. Emissions into
the air include participates of sulphur dioxide and
organic sulfur compounds. Scrubbers that "wash" the
air to collect fly ash, and boilers and furnaces equipped
with air pollution controls are used to reduce emissions.
Final Product Fabrication
Bleaching
If bleached paper is desired, the pulp is either treated
with an oxidizing agent such as chlorine or a reducing
agent such as sulfate dioxide. Salt, limestone, and
sulfur mining processes extract the raw materials used
in the bleaching process, in the bleaching process,
approximately 10 percent of the chlorine used combines.
with organic molecules in the wood and produces toxic
chlorine compounds called organochlorines. One
organochlorine that has received particular attention is
dioxin. Bleaching is done in several stages with con-
rinuous agitation and washing to achieve the desired
brightness. The bleaching process can be skipped if
natural brown paper is acceptable to the customer, or
accomplished with non-chlorine processes such as
oxygen bleaching.
Packaging and Transportation
Paper wraps are packaged in corrugated boxes and
shipped by truck or rail.
Disposal
Landfilling
Biodegradability is not a factor in modern landfills
since the sunlight and air required for quick decompo-
sition does not exist. In fact, the "Garbage Project" at
the University of Arizona has been investigating and
exhuming landfills since the 1970s and has determined
that 40-50 percent of garbage is paper which has not
decomposed.
Composting
Paper is organic so it is compostable so long as it is
not wax coated or laminated.
Recycling
Waste paper is pulped using the same processes as
virgin paper and is passed through a filter to remove
any foreign materials. If de-inking is required, the
pulp is aerated so that the ink rises to the surface as
foam and is removed by a vacuum. In some processes,
heat and chemicals aid the de-inking process. The rest
of the process is the same as for virgin papermaking.
Recycling waste paper consumes less energy than is
consumed during the harvesting, production, and
transporting of lumber required for virgin paper.
However, this is somewhat offset by the energy used
to collect and transport waste paper to the recycling
center. Neither paperboard nor quilt-wrap packaging
is currently recyclable due to wax and polyethylene
content, and possible food contamination.
6 • McDonald's: Case 81
March 1995
-------
The Decision
As the task force members considered thejr decision'of
whether, or not to endorse McDonald's recycling pro-
gram for clamshells/they reviewed the data found in
the Franklin studies. They knew that they were going
to have to make some assumptions about future dis-
posal methods, unmeasured impacts and consumer
•response. '.•••• • . •
Clamshells had become a high-profile decision. Not
only would this decision affect McDonald's environ-
mental image but it may also be used to judge the
effectiveness of this type of joint task force. Should
McDonald's continue clamshell recycling efforts, or
/drop clamshells altogether? • '•'
END NOTES: '
1 Municipal Solid Waste (MSW) is solid waste generated by
residences, commercial establishments, and institutions.
2 "The Greening of the Golden Arches," Rolling Stone, August 22,
1991, p. 36; personal communication with Jackie Prince, EDF,
March 29,1993;
3 Stillwell, J., Contz, C, Kopf, P., and Montrome, M., Packaging for
the Environment, New York: American Management Association,
1991. . • ' ' . < -
4 Environmental Defense Fund and.McDonald's Corporation.
"Waste Reduction Task Force Final Report," Oak Brook, IL:T .
McDonald's, 1991. p. 22.
5 Personal Communication with Robert Langert, March 29, 1993.
k Ibid, ' . ,'''...-
7 Polystyrene Packaging Council, "Questions and Answers"
; literature, Washington, DC: PPC, 1992. •
8 ' Franklin Associates, Resource and Environmental Profile Analysis
of foam Polystyrene and Bleached Paperboard Containers, Final Report,
Prairie Village, KS, June 1990.
9 U.S. Congress, Of fice of Technology Assessment. Facing
America's Trash (202-546-1029), p. 176.
Published by:
The National Pollution Prevention Center
for Higher Education
University of Michigan, Dana Building
430 East University Ave.
Ann Arbor, Ml 48109-1115 .
• Phone: 313-764-1412 • .
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• E-mail: nppc@umich.edu .
The mission,of Jhe NPPC is to promote sustainable development
by educating students, faculty, and professionals about pollution
prevention; create educational materials; provide tools and
strategies for addressing relevant environmental problems; and
establish a national network of pollution prevention educators.
In addition to developing educational materials and conducting
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McDonald's: Case B1 • 7
March 1995
-------
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-------
Appendix A:
Comparison of Polystyrene Foam
and Bleached Paperboard
Selected data from Franklin Associates' Resource and Environmental*
Profile Analysis of Foam Polystyrene and Bleached Paperboard Containers.
Prairie Village, Kansas, June 1991. •
-------
APPENDIX A-1: LANDFILL VOLUMES OF POLYSTYRENE FOAM AND
PAPERBOARD FOOD CONTAINERS (PER 10,000 UNITS)
Weight for 10,000
Units (pounds)
Landfill Density
(Ib/cu yd)
(cu yd)
4-inch Hinged Containers
PS foam
112.3
180
LDPi-coated paperboard
323.2
800
Source: Franklin Associates, Ltd.
APPENDIX A-2- ENERGY REQUIREMENTS BY COMPONENTS FOR HINGED CONTAINERS
(MILLION BTU PER 10,000 HINGED CONTAINERS)
Containers
Foam Polystyrene
Container
Secondary Packaging
Disposal
Total
Paparboard Container
Secondary Packaging
Disposal
Total
Energy
5.62
0.80
0.05
6.47
8.88 *
0.34
0.00
9.22
Percent
. 86.9
12.4
0.8
100.0
96.3
3.6
0.0
99.9
Energy
3.66
0.80
0.02
4.48
Percent
"81.7
17.9
0.4
100.0
Source: Franklin Associates, Ltd.
APPENDIX A-3:
ENERGY REQUIREMENTS FOR DELIVERY OF HINGED CONTAINERS
(MILLION BTU PER 10,000 HINGED CONTAINERS)
Foam Polystyrene
0% recycled
25% recycled
50% recycled
75% recycled
100% recycled
Total Energy
Requirements
6.47
5.97
5.48
4.98
4.48
from Incineration1
0.37
0.29
0.22
0.14
0.07s
Requirements
6.10
5.68.
5.26
4.84
4.41
Paperboard
9.22
'Assumes 15%-incineraaon energy credit based upon solid waste available after recycling.
*Energy credit associated With secondary packaging which is not assumed to be recycled.
Source: Franklin Associates, Ltd.
-------
APPENDIX A-4:
SUMMARY OF ENVIRONMENTAL-IMPACT DATA FOR POLYSTYRENE
HINGED CONTAINERS (IMPACTS PER 10,000 CONTAINERS)
• Process Pollutants
0% 100%
Recycling Recycling
Fuel-Related Pollutants
0% 100%
Recycling Recycling
Total Pollutants
0% 100%
Recycling Recycling
Atmospheric (Ibs)
Particulates
0.23
0.20
0.65.
0.69
."0.9
0.9
Mercury
0.086
0.065
2.0
Hydrocarbons
Sulfur Oxides
Carbon Monoxide
Aldehydes
Other Organics
Odorous Sulfur
Ammonia
4.9
0.55 '
0.098
.0.010
0,0038 •
0.0022
0.0076
3.9
. 0.36 . .
. 0.094
0.0055
,0.0038
0.0011
0.0038
1.9
2.5
0.85 '
0.016
0.021 .
-
0.0015 ,
1 .3
2.6
• 0.73
0,012 .
0.018
-
0.0014-
6.8
311
0.9
0.0
O'.O
0.0
0.0
' 5.2'
3.0
0.8
0.0 •
0.0
0.0
u.u
Lead
2.8E-04
2.8E-04
1.1E-05
1.1E-05
0.0 0.0
Chlorine
Waterborne (Ibs)
Fluorides
Dissolved Solids
BOD
Phenol
Sulfides
Oil
COD
- Suspended Solids
Acid
Metal Ion
1.4
0.12
9.2E-04
0.0012
0.027
0.079'
0.27
-
0.72 0.20 0.17
0.11
4.6E-04 , - - '
5.9E-04
..0.014 . - . •
. 0.041 ' - ' • - .
0.20 - -
0.25 0.29
: - 6.033 0.037-
1-6
0.1
0.0
0.0
0.0
. 0.1
0.3
0.3
0.0
0.1
0.0
0.0
0.0
0.0
0.2
O.Q
Chemicals
Chromium
, 2.2E-05
• 1.1E-05
. . - .0.0 .0.0
Iron
Aluminum
Nickel
Mercury
Lead
Phosphates
Zinc
Ammonia
1.4E-04
7.2E-05
0.0
0.0
0.1
Other
0.067
0.059
0.1
Source: Franklin Associates, Ltd.
-------
APPENDIX A-5- SUMMARY OF ENVIRONMENTAL IMPACT DATA FOR PAPERBOARD
HINGED CONTAINERS 0% RECYCLING (IMPACTS PER 10,000 CONTAINERS)
Atmospheric (Ibs)
Participates
Nitrogen Oxides
Hydrocarbons
Sulfur Oxides
Carbon Monoxide
Aldehydes
Other Organics
3.0 2.1
1.9 • 3.3
1 .3 2.2
3.2 6.5
0.62 '1.2
0.0077 0.017
0.026 . 0.035
5.1
5.2
3.5
-9.7
1.8
0.0
0.1
Odorous Sulfur - , ' "
Ammonia
2.4E-04 . 0.0042
0.0
Hydrogen Fluoride
, Lead
0.0020 3.2E-05
0.0
Mercury - • "
Chlorine
0,37
0.4
Waterborne (Ibs)
Fluorides -
Dissolved Solids
BOD
Phenol
0.41 0.24
0.90
1.2E-06
0.7
0.9
0.0
Sulfides - • .
Oil
COD
Suspended Solids,
Acid
Metal Ion
0.0033 -
0.029
1.5
0.058 1-0
0.080
0.0
0.0
1.5
1.1
0.1
Chemicals - •
Cyanide
Chromium
2.4E-06
0.0 -
Iron - " •
Aluminum - • "
Nickel
Mercury •
Lead -. -
Phosphates - " ' .
Zinc .
Ammonia
Other
1.5E-05
0.093
0.0
0.1
Source: Franklin Associates, Ltd.
-------
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-------
-------
AppendixB:
Comparison of Polystyrene Foam, Paperboard,
Wax-Coated Paper, and "Quilt-Wrap" Paper
Selected data from Franklin Associates' Summary of Life Cycle Analyses
of Four Sandwich Packages. Prairie Village, Kansas, 1991..,. .
-------
Appendix B-l
Atmospheric Emissions for Sandwich Packaging
(per 10,000 units)
Atmospheric 15
Emissions
(Ib) 10
0
Standard
Paper
Wrap
Layered
Paper
Wrap
Foam
Polystyrene
Container
Paperboard
Container
Waterborne Wastes for Sandwich Packaging
(per 10,000 units)
Standard
Paper
Wrap
Foam
Polystyrene
Container
Paperboard
Container
Source: Franklin Associates, Ltd.
-------
Appendix B-2
Energy
(million Btu)
Net Energy Requirements for Sandwich Packaging
(per 10,000 units)
Standard
Paper
Wrap
Foam
Polystyrene
Container
Paperboard
Container
Solid Waste
(cubic feet)
Total Solid Waste for Sandwich Packaging
(per 10,000 units)
Standard
Paper
Wrap
Layered
Paper
Wrap
Foam
Polystyrene
Container
Paperboard
Container
Source: Franklin Associates, Ltd.
-------
APPENDIX B-3:
ENERGY REQUIREMENTS AND ENVIRONMENTAL EMISSIONS FOR THE PRODUCTION,
DELIVERY AND DISPOSAL OF 10,008 SANDWICH PACKAGING PRODUCTS
Total
Energy
Requirement
(MM Btu)
Standard Paper Wrap
Laye;ed Paper Wrap
Polystyrene Foam Container
Paperboard Container
Paperboard Collar (optional;
for use with either wrap)
1.5
3.5
6.5
9.2
2.7
Energy
Credit from
Incineration*
(MM Btu)
0.1
0.2
0.4
0.5
0.1
Net
Energy
Requirement
(MM Btu)
1.4
3.3
6.1
8.8
2.5
Atmospheric
Emissions
(Ib)
4.5
9.7
13.8
'25.7
8.3
Waterborne
Wastes
(Ib)
. 0,8
1.4
2.5
4.3
1.4
Total
Solid Waste
(Ib) (cuft)
63.7
129.5
159.8
382.4
117.1- '
2.0
4.1
16.5
11.7
3.5
'Based on approximately 16 percent of MSW being combusted for energy recovery and after materials recovery.
Note: AH values represent conditions with no post-consumer recycling.
Source: Data summarized from studies by Franklin Associates, Ltd.
APPENDIX B-4: DATA FOR SANDWICH PACKAGING PRODUCTS
Material
Standard Paper Wrap
(10'x12')
Layered Paper Wrap
(11.5'x13')
Polystyrene Foam Container
Paperboard Container
Paperboard Collar (optional;
for use with either wrap)
• Case Requirements
Wrap (3,000/case)
Bleached Paper
Wax/LDPE Coating
Total
LDPE(Sleeves and Shrink Film)
Corrugated Container
Wrap (2,500/case)
Bleached Paper
Bleached Tissue
. LDPE Coating
Total
LDPE(Sleeves and Shrink Rim)
Corrugated Container
Containers (500/case)
LDPE Sleeves* (10/50)
Corrugated Container
Containers (900/case)
Bleached Paperboard
LDPE Coating
Total
LDPE Sleeves* (6/1 50)
Corrugated Container
Collar (3.000/case)
Bleached Paperboard
Corrugated Container
Paperboard Divider
Weight per unit
grams ounces
1.9 '
_M
2.3
104.3
453.6
2.4
1.7
_&s
4.8
104.3
453.6
5.1
13.0
998.0
12.9
_2J2
14.9
13.0
816.5
4.3
689.5
59.0
0.07
0.01
0.08
3.68
16.00
0.08
0.06
0.03
0.17
3.68 '
16.00
0.18
0.46
35.20
0.45
0.-Q7
0.52
0.46
28.80
0.15
24.32
2.08
Number per Weight per
10,000 units 10,000 units (Ibs.)
10,000.00
3.33
3.33
10,000.00
4.00
4.00
10,000.00
200.00 •
20.00
10,000.00
67.00
11.00
10,000.00
3.33
3.33
• 41.7
_&2
50.0
0.8
3.3
51.9
37.2
17.3
106.4
0.9 '
4.0
112.3
5.7 ,
44.0
284.1
44.1
328.2
1.9
20.0
94.5
5.1
0.4
*An abbreviation used by the industry, with the first value representing the number of sleeves per case,
and the second value representing the number of hinged containers per sleeve.
Source: Franklin Associates, Ltd.
-------
Pollution Prevention in
Corporate Strategy
NATIONAL POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION
Case B2: McDonald's Decision
Susan Svoboda, Manager of the Corporate Environmental Management
Program, University of Michigan, prepared this case under the guidance of
. Stuart Hart, Director of the Corporate Environmental Management' Program ,
and Assistant Professor of Corporate Strategy and Organizational Behavior- at
the Michigan Business School, as the basis for class discussion'rather than to
illustrate either effective or ineffective handling of an administrative situation.
On November 2,1990, McDonald's announced its
decision to replace the polystyrene clamshell sandwich
packaging with a paper-based "quilt-wrap" that was
expected to reduce the.volume of its packaging by 90
percent. Representatives'also stated that trie production
process used to make .the new wraps would result in
reduction of energy consumption, air emissions,'and
water pollution. Burger King and Wendyfs do not use
polystyrene for their sandwich wraps; Burger King
uses polystyrene only for coffee cups and has even .
begun to phase out this use. ;
EDF's January membership newsletter reported the
• news of McDonald's switch from clamshells, calling it
a "major victory for environmentalists." However, it,
referred to the quilt-wrap replacement an "interim step."
EDF scientist and task force member Richard Denison
was quoted as saying, "There's no question that paper -
has its own environmental problems. We'relooking at
other changes to reduce the impacts of the switch to
paper" (e.g., using recycled or unbleached paper).
" The press responded with mixed reviews of the decision.
The New York Times story covering the decision ran a
headline, "Packaging and Public Image: McDonald's
Fills a Big Order." The Chicago Tribune rah an article
saying; McDonald's was "a lesson in environmental
progress." The New York Times hailed .the "Greening '
of the Golden Arch" saying that "McDonald's is at last
showing some McSense on the environment." How-
ever, Adweek's Marketing Week accused McDonald's
of "flip-flopping" again. And the Los Angeles Times
said, "I guess the environmentalists won't be satisfied
until McDonald's slaps the burger directly onto our
outstretched hand. If it is a burger, an agreement with-
the animal-rights movement may be next. Anyone
for McTofu?" . ,
A November 26,1990, Los AngelesTimes article called for
government to set standards, practices, and definitions
for recycling and incineration. Commenting on the ,
assumptions underlying the decision to phase out the
clamshells, the authors said that McDonald's "found
itself doing the wrong thing for the wrong reason."
As part of McDonald's polystyrene recycling test con-
ducted in New England, McDonald's supplied refuse
.to an industry-sponsored recycling center that was in
the process of building plants in several cities. A spokes-
man for the center said that McDonald's decision would
not change its plans to build the plants, but added, "The
chief loss is [McDonald's] as an educational resource."
'In the November 5,1990, issue of Business Week, Amoco
Chemical, one of McDonald's polystyrene suppliers, • '
ran a full-page advertisement saying, "Some people
believe that banning plastics and substituting other
materials will solve the problem. We don't think they
have all the facts " It continued with the points
that "Recycling is growing" and "Amoco is helping."
As a result of the efforts of the joint task force, the envi-
ronmental image of McDonald's has improved. An
independent study by Cambridge Reports/Research
International showed consumers ranked McDonald's
as the most environmentally responsible U.S. company.
Environmental experts awarded McDonald's second
place in the same survey. Also, McDonald's received
the President's 1991 Environment and Conservation
Challenge Award for environmentalism.
National Pollution Prevention-Center for Higher Education • University of Michigan
Dana Building, 430 East University, Ann Arbor Ml 48109-1115
Phone: 313.764.1412 • Fax: 313.936.3195 • E-mail: nppc@umich.edu
May be reproduced
freely for non-commercial
educational purposes.
McDonald's: Case B2 • 1
' March 1995
-------
Published by:
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for Higher Education
University of Michigan, Dana Building
430 East University Ave.
Ann Arbor. Ml 48109-1115
• Phone: 313-764-1412
•Fax: 313-936-2195
• E-mail: nppc@umich.edu
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2 • McDonald's: Case 82
March 1995
-------
Pollution Prevention in
Corporate Strategy
NATIONAL POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION
Case C: Sustaining McDonald's
Environmental Success
Susan Svoboda,-Manager of the Corporate Environmental Management
Program, University of Michigan, prepared this case under the guidance o/
Stuart Hart, Director of the Corporate Environmental Management Program
and Assistant Professor of Corporate Strategy and Organizational Behavior at
the Michigan Business School; as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative-situation.
By the spring of 1993, Michael Quinlan, McDonald's
CEO, felt quite confidehtabout his company's envi-
ronmental performance. A partnership with the Envi-
ronmental Defense Fund (EDF) had won McDonald's
praise from its customers, and its efforts at waste
reduction, combined with its well-publicized switch
from polystyrene "clamshells" to paper-based sandwich
wraps, had repositioned it as a leader in protecting the
environment. However, in April 1993 another non-
profit environmental group, The Beyond Beef Coalition,
targeted McDonald's in a campaign to reduce beef
consumption. This time the environmental complaints;
launched against McDonald's did not criticize ancillary
aspects of their business but, rather, focused on their
primary products and growth markets. Quinlan did
not want this campaign to diminish the reputation the
company had solidified through the EDF partnership.
McDonald's Operating Strategy
Ray Kroc, the founder of McDonald's Corporation,
based his empire on the fundamental principles of
Quality, Service, Cleanliness, and Value (Q.S.C.& V.).
The company, which started in 1948 as a single drive-
in restaurant in San Bernardino, California, grew to
become the largest food-service organization in the
world. By June 1993, McDonald's ran 2,576 company-
owned stores, 9,451 franchises and 1,362 joint ventures
in 65 countries.1 In the U.S. alone, more than 18 million
people visited a McDonald's each day.2 See Exhibit 1
for a summary of McDonald's financials..
McDonald's was the second-best-known global brand,
maintaining this level of consumer awareness with a,
$1 billion marketing budget.3 McDonald's launched
a major new ad campaign in 1991, "Great Food at a
Great Value," which was successful in promoting prof-
itable value-meal combinations. This was followed in
1992 with the largest outdoor advertising campaign
ever undertaken by a single brand. Messages focused
on value and customer satisfaction. High brand recog-
nition was particularly important to McDonald's as
many customers are impulse purchasers, often selecting
McDonald's by the convenience of the location. Ap-
proximately 28% of company revenues were derived
from franchisee fees, based on a percentage of sales
collected to coyer the costs of corporate services such
as centralized marketing research and R&D.
Approximately 70% of McDonald's restaurants were
franchises. McDonald's generally entered new countries,
with company-owned restaurants located in the center
of major cities, franchising them after they were well
established. Under-the conventional franchise agree-,
ment, the franchisees supply capital, equipment, signs,
seating, and decor with the company buying or leasing
the land and building. The initial investment ranges
from $430,000 to $560/500,60% of which may be financed.
Twenty-year franchises are awarded to applicants after
extensive screening, and additional restaurants are
allocated to franchisees with proven records of success.
New restaurant development was important to
McDonald's growth strategy. In 1991 it introduced the
"Series 2000"-design restaurants, which were about
National Pollution Prevention Center for Higher Education • University of Michigan
Dana Building, 430 East University, Ann Arbor Ml 48109-1115
Phone:-313.764.1412 • Fax: 313.936.2195 • E-mail: nppc@umich.edu
May be reproduced
freely for non-commercial
educational purposes.
McDonald's: Case C • 1
March 1995
-------
half the size of traditional restaurants but designed to
accommodate nearly the same level of sales at a lower
real-estate investment. This has resulted in an approxi-
mately 5400,000 reduction in development costs, which
lowers the facility's breakeven point. Additional loca-
tions have been opened in small towns and "satellite
sites," such as outlets inside Wal-Mart stores.
A typical McDonald's restaurant may serve as many as
2,000 people a day, 60-70% of whom take food outside
the restaurant. McDonald's depends on the ability of ,
its crew to prepare hot, fresh food and to serve it to its
customers within two minutes of the time they enter
the restaurant. To do this, McDonald's engineering
department has carefully designed the layout and
equipment for its restaurants. In 1993 it reported the
development of an enhanced production system that
improves McDonald's ability to serve hot food quickly.
This system is currently used in 80% of McDonald's
U.S. restaurants for breakfast; more than half are using
a more extensive system for lunch and dinner. In
accordance with Q.S.C.&V., specific operating practices
and careful standardization help to assure uniformity
among restaurants. For example, 10 hamburgers are
to be made from each pound of beef, and they are to
contain no more than 19% fat.4
An important component of McDonald's operational
strategy is to anticipate customer traffic patterns and
food selection based on a detailed analysis of sales
history and trends. Restaurants use "this information
to prepare menu items in the right quantities and at the
right times to have the food ready for customers when
they arrive. To ensure freshness, all food not served
within 10 minutes must be discarded.
McDonald's generally does not supply food, paper, or
equipment to restaurants. Instead it refers franchisees
to a network of more than 600 approved suppliers with
whom long-term relationships have been developed.
McDonald's often holds seminars or conferences for
suppliers to discuss their needs. This strategy is
intended to improve McDonald's ability to focus its
efforts on its core business — restaurant operations.
Product Line
In 1993, McDonald's marketing efforts focused on
value meals, composed of its mainstay items: a burger,
fries, and a beverage. Burgers are central to the menu;
indeed, McDonald's purchases more than 1% of all
beef wholesaled in the U.S.5 Although McDonald's
stated goal is to provide a "limited menu of high-quaiity
products consistent with customer tastes," it continues
to test a variety of new menu items. McDonald's feels
that it address public concern regarding nutrition
through a
.., combination of stringent product standards,
strictly enforced restaurant operating procedures,
and close working relationships with suppliers to
assure that McDonald's food is safe and of the
highest quality.6
It also discloses nutritional and ingredient information
regarding its menu items through in-store posters and
brochures distributed upon request.
In the early 1990's, international expansion into new
cultures and corresponding eating habits resulted in
new product introductions in several locations. For
example, fried egg sandwiches were available from
McDonald's in Malaysia, and spaghetti was sold as
a low-price alternative in the Philippines; pizza was
tested in the U.S.7 In India, where McDonald's will
spend over $20 million on a chain of restaurants over
the next seven years, ah important new item may be a
' "lamburger."8
McDonald's was also testing Vegetable McNuggets
and Cauliflower and Cheese McNuggets in a few res-
taurants in the UK in 1993. Burger King has offered an
increasingly popular spicy bean burger in Britain for
three years. McDonald's launched vegetarian burgers
in Holland in 1992.9 The burger, consisting of potato,
peas, carrots, corn, onion and spices, sold for about
$2.70, slightly less than a Big Mac. McDonald's new
items generally receive no advertising and little sales
promotion during the test period.
Fast-Food Industry
The total fast-food market in 1992 was estimated at
$81.4 billion. Although the convenience offered by
fast-food retailers was valued by growing numbers of
families and travelers in the early 1990's, the recession
and intense competition, produced slower growth and
sagging profits for the industry. Particularly hard-hit
were independent restaurants, which found it difficult
to compete with the burger chains' value-pricing strat-
egies and large advertising budgets. As a result, inde-
pendents comprised only 56% of all U.S. restaurants in
1993, down from 63% in 1986, according to Peter Oakes,
a vice-president at Merrill-Lynch.10 In fact, restaurant
2 • McDonald's: Case C
March 1995
-------
industry reports suggest that saturation in the "limited-
menu" segment of the restaurant industry Was'forcing
growth-oriented chains-to expand overseas and explore
alternate outlets domestically. According to the Res-
taurant Business Growth-Index, real sales growth for
this segment during 1990-91 was only 0.3% in the U.S.11
Customer satisfaction, nutrition, and value seemed to
form the basis for domestic competition, although the
fastest-growing restaurant chains pursued varied strat-
egies. For example, Rally's advertised "We get it fight
or you get it free," Boston Chicken emphasized nutri-
tion by roasting, steaming, and baking its dishes, and
Checkers, a double-drive-through burger chain, offered
• made-to-order burgers at lower prices. -Drive-through
window sales industry-wide reached $25 billion in 1992:12
In contrast to the domestic scene, the international
market for fast food .was exploding. From, the Pacific
Rim to South America, foreign cultures were being in-
troduced to American-style fast food. In 1993, Burger
King had more than 900 restaurants in 45 countries,
Kentucky Fried Chicken had 3,712 in 63 nations, and
Domino's had 566 in 30 countries.13 The Eastern Euro-
pean market offered relatively easy entrance, and the _.
Brazilian fast-food market grew 40% in 1992, to more
than $700 .million with no signs of slowing down.14 -
In Asia,'Western-style quick-service restaurants were
perceived by customers to be positive and trendy, ac-
cording to a Hong Kong consulting food firm that said,
"[They are] hot perceived to be junk food."15
The Hamburger Segment
Domestic competition in the hamburger market contin-
ues to intensify. Consumer demand for lighter, more
nutritious food has recently caused the major burger
chains to expand their menu, yet a new type of double-
drive-through restaurant has emerged to challenge the
"traditional" burger chains. On one hand, major
burger chains face, tough competition from the casual
dining restaurants such as Outback Steakhouse, Chili's
and Friday's, in providing a range of reasonably priced
menu items. On the other hand, they face the fast-
growing double-drive-through restaurants that offer
consumers a'basic burger menu more quickly and at
a lower cost. These franchises, such as Checkers and
Rally's, were expected to pursue aggressive domestic
growth. For example, the Pepsi-owned chain of
Hot'n'Now Hamburgers had plans to,expand to 5,000
locations from the 700 it had in 1992. Hamburgers or
cheeseburgers ranked as the most popular menu items
•and still accounted for 17% of all restaurant orders in
the U.S. in 1992.16 1992 revenue from the burger chains
totaled '$39:5 billion. See Exhibit 2 for a description of
the top hamburger chains.
In addition to pressure from these new entrants, price
wars served to dampen profit margins among the four
major chains, which, by 1993, all offered value-priced
items: Wendy's offered seven 99<Ł items, while Burger
King introduced its combination meals in 1993, fol-
lowed a month later by Hardee's value-menu program.
Burger King, the world's second-largest hamburger
chain, continued to expand aggressively, adding one
restaurant per day throughout 1992 while trying to
increase sales in existing U.S; restaurants through
dinnertime table service complimented by an expanded
dinner menu. Burger King achieved a 6% increase in
profitability in 1992, compared to Rally's 41% increase
in earnings during the same time period.
Wendy's enjoyed a 26% increase in net income in 1992,
• even though 30% of its sales were derived from its
Super Value Menu. Improved operational efficiency
and higher-than-average new-restaurant sales pro-
duced'these results. Wendy's planned a minimum of
75 new international restaurants in 1993, with targets
in Mexico, the Pacific Rim, and Saudi Arabia.
Competitive pressures, have forced the chains to re-
think their strategies." Many now consider themselves'
to be in competition with any business serving or sell-
ing food, such as quick-service eating establishments,
mom-and-pop's, take-outs, pizza parlors, coffee shops,
street vendors, convenience food stores, delis> super-
market freezers, and microwave ovens.17 For example,
McDonald's U.S. President, Ed Rensi, said he had
mapped out a-program to penetrate innovative domes-
tic venues including supermarkets, airports, hospitals,
stadiums, kiosks, and carts.18
Still, the most significant source of future growth was
clearly, abroad. Even with 3,355 units in 53 countries in
1991, McDonald's had barely scratched the surface of
the global market. So, to ensure that the company's
long-standing history of increased sales arid earnings
continued^ Ed Rensi accelerated the international ex-
pansion in search of a greater share of the world market.
Over the next several years, McDonald's expects to add
450-600 restaurants annually overseas,19 See Exhibit 3
for a listing of McDonald's international locations..
McDonald's: Case C • 3
March. 1995
-------
The Challenge of
Sustainable Development
In June 1992, the United Nations Conference-on Environ-
ment and Development (UNCED) held what has come
to be known as the "Earth Summit" in Rio de Janeiro.
While the meeting, which included representatives
from nearly every nation in the world, focused on
global environmental problems such as climate change
and biodiversity, a central feature of the Summit was
a proposed plan (Agenda 21) for industrial nations to
help poor countries develop their economies without
ruining the environment—'to pursue, "sustainable
development" on a global scale.
The U.S., for example, had only 5% of the world's
population, but used 25% of the energy, emitted 22% of
all carbon dioxide, and accounted for 25% of the world's
GNP. India, on the other hand, had 16% of the world's
population, but used only 3% of the energy, emitted
3% of the carbon dioxide, and accounted for only 1%
of the world's GNP.20 Thus, developed nations, having
reaped the comforts — and environmental costs — of
industrialization, wanted others to avoid their mistakes.
Developing nations, on the other hand, were anxious
to raise their burgeoning populations out of poverty,
and did not want to pay for environmental sins they
did not commit.
In 1987, the World Commission on Environment and
Development defined sustainable development as
economic progress that "meets the needs of the present
without compromising the ability of future generations
to meet their own needs."21 Although much attention
had already been given to the environmental problems
related to the industrialized nations, it was the first
document to clearly link third-world development
issues with environmental concerns: that is, population
growth and poverty in the developing world were also
identified as major causes of environmental degradation.
Over the next 40 years, world population was expected
to double to more than 10 billion, with nearly all of this
growth (95%) coming in the developing world. With
world GNP at about $20 trillion, economic activity would
have to increase at least 5-10 fold to provide basic amen-
ities for this population. The World Commission and
the Earth Summit stressed that this level of economic
production would be environmentally destructive with
current technologies and business practices.22
While Agenda 21 \vas primarily aimed at national and
international governments, the Earth Summit also
featured a high-profile business consortium — the
Business Council for Sustainable Development — •
led by Swiss industrialist and multibillionaire Stephan
Schmidheiny. This group of 48 CEOs of multinational
corporations produced a book, Changing Course, that
emphasized that "while industry may be a big part of
the problem, it must also be a big part of the solution."23
Since the late 1980's, several other business groups
aimed at altering corporate behavior consistent with
the principles of sustainable development have formed,
including the Global Environmental Management
Initiative (GEMI), the Coalition for Environmentally
Responsible Economies (CERES), and Businesses for
Social Responsibility (BSR), -
Beef and the Environment
In 1993, the beef industry was a $40-billion global
business, comprising approximately 1.3 billion cattle
occupying nearly one-quarter of the world's landmass.
According to U.S. Department of Agriculture data in
1990, nearly 40% of the world's (70% of U.S.'s) grain
was fed to livestock.24 Half of the continental United
States was used by the livestock industry for crops,
pasture, and range. Approximately 260 million acres
of arid public range in 11 western states were leased by
the government to ranchers for grazing. Federal grazing
fees averaged about $2 per month per head, whereas
private-market grazing fees were closer to $9. Over-
grazing of public land had resulted in significant soil
loss and desertification. In 1990, the U.S. Bureau of Land
Management reported that 70% of its holdings were in
unacceptable condition, with 10% having degraded to
desert conditions. Overgrazing of the range forces
cattle to feed on the remaining vegetation along stream-
banks, resulting in floods that carry away soil and
accelerate the decline of the land.
Globally, extensive overgrazing is leading to a steady
decline in per-capita beef production. If feedlots are
used to supplement beef production, grain harvests
will need to grow by seven million tons annually,
roughly two-thirds of the historical annual increase in
the world grain harvest. However, there is little new
fertile land to be farmed, and many existing farmers
are already using advanced yield-raising technologies,
reducing the likelihood that the gain will be achieved
through increased productivity. If population grows
as projected at 90 million people annually, and grain
output does not increase over current levels, per-capita
supplies of grain will continue to diminish by two
percent annually.25
4 • McDonald's: Case C
March 1995
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"In 1993, the U.S. imported only five percent of its beef
from Central America. However, since 1960 iri'bre than
25 percent of the forests .in Central America have been
• cleared to create pastureland for cattle.26 It has been .
estimated that .each rain-forest hamburger requires the
clearing of six square yards for pasture.27 Such a swath
would typically include one large tree, 50 saplings of
20-30 species, thousands of insects comprising hun-
dreds of species, and an unknown diversity of mosses,
fungi, and microorganisms.28 Clearing the .same piece of
.rain forest would release 165 pounds of carbon dioxide
into the atmosphere—the amount released by a typical
American car'in a 20-day period.29 > '-
It is estimated that between. 1966 and 1983,15,000
• square miles of Amazon rain forest were cleared for
large-scale cattle production.30 A United Illations report
predicted that if deforestation of the Amazon continued
at its 1987 rate until the year 2000, more than 15% of.
the plant species and an .unknown but significant per-
centage of insect'species, would be lost.31 The clearing .
of land for large-scale cattle production has also forced
millions of rural peasants to the already overcrowded
cities of Latin America. Worldwide, deforestation
accounts for nearly one-third of all greenhouse-gas
emissions/with the burning of fossil fuels accounting
for the other two-thirds.32 See Exhibit 6 for more infor-
mation on beef production in various countries.
i * .
The efficiency with which grain and feed is converted .
to 'meat varies greatly by.a'nimal. For example, in order
to produce one pound of meat, chickens must consume
4.5 pounds of grain, pigs must consume 6.5 pounds,
and cattle must consume 15.5 pounds.33. ,
Large quantities of energy and water are also used to
grow the grain required to feed livestock.1 Almost half
of the energy used in'American agriculture goes into
livestock production/the majority of it for meat produc-
tion.- In fact, according to Cornell University data, the
amount of energy used to produce one pound of beef
is equivalent to .25 gallons of gasoline". In addition, •
according to' an animal science expert at the University
of California-Davis, half of the grain and hay fed to U.S.
livestock grows on irrigated land. Each pound of grain-
fed beef requires about 2,500 gallons of Water. For the
typical American, "this is about 190 gallons/person/day
— twice the amount used at home each day for all pur-
poses.34 See Exhibit 4 for more information regarding
water usage. In California, livestock production takes
nearly one-third of all irrigation water used.
Pesticides and fertilizers used in grain production also
place a burden on the environment, since much of the
grain treated is fed to cattle. 1993 pesticide sales for
corn, rice, cotton, soybeans, and wheat surpassed $21 - •
billion globally. In 1993^,8.2 million tons of fertilizer
were used in the production of corn,. 1 million tons for
soybeans; and 3 million tons for wheat. Pesticides and
fertilizers used in grain production appeared to con-
taminate surface and ground water. Lumping together
animal wastes and feed fertilizers, livestock production
accounted for about 40% of the nitrogen and 35% per-
cent of the phosphorus released into U.S. rivers, lakes,
and streams.35 Cattle and other ruminants also emit
methane, a potent greenhouse gas, as.they digest grass
and other fibrous plants. Indeed, each head of cattle
belches put about a third of a pound of methane for
every pdund of beef it yields.36 See Exhibit 5 for infor-
mation regarding sources of methane.
While per-capita beef consumption in the U.S. has
declined since 1976, the average American still eats 65
pounds of beef per year — 23% of all the beef produced
in the world.37 Only about 12.4 million Americans
describe themselves as vegetarians, according to a 1992
survey by Vegetarian Times.3* For most of the world, .
however, a low-meat diet is the norm. Worldwide,
only about one in four people eat a meat-centered,'diet.
Historically, as income rises, so does meat consumption.
For example, per-capita consumption of red meat in
Japan has doubled since 1975. Koreans and Taiwanese ,
appear to be following a similar pattern. See Exhibit'7
for information regarding per-capita beef consumption
of several countries. To support the world's current
population of 5.3 billion on ah American-style diet
would require as much energy as the world now uses
for all purposes^ along with-2.5 times as much grain as
the world's farmers currently produce.39
Where's the Beef?
The Beyond Beef Coalition saw the spread of the
"cattle culture" to the developing world as one of the
greatest'threats to the global environment. The Coali-
tion was comprised of individuals and organizations
interested in environmental protection, animal rights, ,
publ'.c health, and world hunger (see Exhibit 8 for a
.. list of members). Like the Environmental Defense
Fund, this group targeted McDonald's for its campaign
because it was the industry leader, and one of the larg-
est users of beef in the world.
McDonald's: Case C • 5
•''-• March 1995
-------
The Coalition's goals were: to reduce individual beef
consumption in the U.S.' by at least 50%; to replace
beef in the diet with organically raised grains, legumes,
vegetables and fruits; to reform current cattle-industry
practices; and to promote humanely and organically
raised beef as an alternative for those who continue to
include some beef in their diet.40
The goal for the McDonald's campaign'was to inform
at least 1 million McDonald's customers about beef's
harmful impact of on the environment through an
extensive in-person campaign at 1,000 locations across
the country. On April 17,1993, thousands of Beyond
Beef volunteers gathered outside McDonald's restau-
rants to hand out leaflets and children's literature and
to inform customers about the "real" social and envi-
ronmental costs associated with beef. See Exhibit 9 for
a sample of campaign literature. They also collected
names on petitions in an effort to encourage individuals
to reduce their beef consumption by 50%, to encourage
McDonald's to add a vegetarian item to their U.S. menu,
and to commit 25% of advertising to the new item.
Reactions to the campaign were varied. "There's noth-
ing wrong with eating beef— it's American" said one
customer regarding the campaign.41 However, another
approached by a Beyond Beef campaigner said, "If
McDonald's had it [a meatless burger], I would try it in
a second."42 Dave Santoro, a franchise owner, said, "If
enough customers wanted it, we'd have it... We have
salads, cereals, hotcakes. We didn't just dream those
up. The consumers asked for them,"43
Kim Poston, marketing manager for McDonald's in
San Jose, said that the Beyond Beef campaign was "an
assault on small business " and that Beyond Beef is a
"fringe activist group that doesn't really reflect what
our customers want."44 McDonald's spokesperson
Ann Connolly added, "Ultimately, it's our customers
who decide what we serve, and our customers tell us
they're not interested in that kind of a product."45
Howard Lyman, former cattle rancher and current
Executive Director of Beyond Beef, responded: "It's
the same mentality as General Motors that said there's
no market for small cars. Large corporations can't see
the future because the present is so good for them."46
6 • McDonald's: Case C
March 1995
-------
END NOTES: . :
'"Making Up for Lost Time." Fortune, Oct. 18, 1993; and .'
1993 Annual Report, p. 3. . . ' . ;
2 EOF Task Force Final Report, p. 22. - •
3 McDonald's 1991 Annual Report, p. S4. .';
4Rifkin, J. BeyondBeef,'p. 269. :' -'• . •
5lbid., p. 267. . ,
• McDonald's 1993 Annual Report, p. 5.
7 "When Worlds Collide." Restaurant Business, July 1,1993, p.\56.
'"Silver Lining, Golden Arches." The Economist, February 13,
•1993, p. 41. • ' ;
9 "McDonald's Tests Vegetable McNuggets." Marketing, July-29,
1993, p. 5.
""The Hunger P.angs Let Up a Little-." Business Week, January 11,
'1993, p.97. . . ':>.-•
" "25th Annual Growth Index: Limited Menu—Flat as a (Beef)
Patty. Restaurant Business, September 20,1992.
12 Can Lightning Strike Twice?" Restaurant Business, Aug. 10,
1993. ' ' " ,
""When Worlds Collide." Restaurant Business, July 1,1993.
""Fast-food franchises fight for Brazilian aficionados."
Brandweek, June?, 1993. ' •
""Hot Wings Take Off." Forbes, January 18,1993, p. 74.
18 "Hamburger Market Segment Report." Restaurant Business,
January 1,1992.
17 McDonald's 1993 Annual Report, p. 7. • , -•
""McDonald's Steps U,P Overseas Push," Restaurants and
Institutions, August 15,1993, p.14.
18 McDonald's 1993 Annual Report, p. 2.
20 "Summit to Save the Earth." Time, June 1,1992, p. 42^43.
21 Schmidheiny, Stephan. Changing Course, p. 6_ ! . •
22 MacNeill, Jim. "Strategies for Sustainable Economic
Development." Scientific American, September, 1989.
23"Business has Message for Rio Meeting." New York Times,
June 2, 1992. ,' ' ' _' y , • ' ' -
"Durnihg, Alan. Tat of the Land." World Watch, 1991, p.11.
25 State of the World—1994, WorldWatch Institute Report, pp. 181,
182,and 186. . . ' ; • '
28 "A Reporter at Large: The Rain Forests." New Yorker,
January 14,1985, p. 79.
27Rifkin, p. 192^
28Durning, p. 15V
29Brown, Sandra, (University of Illinois forestry professor),
cited in Durning, p. 15.
30 Parsons, James. "The Whole Earth Review," Spring, 1988.
31 Our Common Future, Oxford University Press, 1987.
32 Steven Schneider. "The Changing Climate."
Scientific American, September 1989. ,
33 USDA Economic Research Service, 1994.
34 Water Education Foundation.
35Dumihg, p. 16.
Mlbid. . ' '
37 "Beyond Beef!" Utne Reader, March/April 1992
38 "For Folks Who Don't Care Where's the Beef,"
The New York Times, Dec. 9,1992
39Duming, p. 17.
"Beyond Beef campaign literature, Spring 1993, Vol.II, issue I.
41 "Activists to McDonald's: Wh'ere's.the Beef Alternative?"
Reno Gazette-Journal, April 18,1993.
*!" A Veggie Protest at Fast-Food Chain." The Honolulu-
Advertiser, April 18,1993. ,
430 Whafs their beef? Gas." Burlington County Times, April 18,1993.
44 "Anti-Beef Group Lobbies McDonald's," Santa Cruz Sentinel,
April 18,1993, and "Area Protesters Have a Beef with
McDonald's," Times-Standard, April 17,1993.
45 "Here's HisBeef." Chicago Tribune, April 15,1993.
48 Ibid. , , . '
Published by:
The National Pollution Prevention Center
for Higher Education
University of Michigan, Dana Building
430 East University Ave.
Ann Arbor, Ml 48109-1115
•Phone: 313-764-1412 "' - :
•Fax: 313-936-2195
• E-mail: nppc@umich.edu :
The mission of the NPPC is to promote sustainable development
by educating students, faculty, and professionals about pollution
prevention; create educational materials; provide tools and
strategies for addressing relevant environmental problems; and
establish a national network of pollution prevention educators.
In addition to developing educational materials and conducting
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Your Input is Welcome!
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McDonald's: Case C • 7
March 1995
-------
EXHIBIT 1": 11-YEAR SUMMARY
(Dollars rounded to millions, except per common share data
1991 1990 1989
System-wide sales
U.S.
Outside U.S.
System-wide sales by type
Operated by franchisees
Operated by the Company
Operated by affiliates
Average sales, restaurants
open at least 1 yr. (in 1,000s)
Revenues, frnchsd. rstrnts.
Total revenues
Operating income
Inc. before prov. for inc. taxes
Net income
Cash provided by operations
Financial position at year-end
Net property and equipment
Total assets
Long-term debt
Total shareholder equity
Per common share
Net income
Dividends declared
Year-end shareholder equity
Market price at year-end
System-wide restaurants
at year-end
Operated by franchisees
Operated by the Company
Operated by affiliates
and average restaurant sales)
1988 1987 1986 1985
12,519
7,409
12,959
4,908
2,061
1,658
1,787
6,695
1,679
• 1,299
860
1,423
9,559
11,349
4,267
4,835
$ 2.35
.36
13.48
38
$12,418
8,735
2,547
1,136
Systemwide restaurants at year-end:
U.S. • 8,764
Outside U.S.
3,654
12,252
6,507
12,017
5,019
1,723
1,649
1,621
6,640
1,596
1,246
802
1,301
9,047
10,668
4,429
4,182
$ 2.20
.33
11.65
291/8
$11,803
8,131
2,643
1,029
8,576
3,227
53
12,012
5,321
11,219
4,601
1,513
1,621
1,465
6,066
1,438
1,157
727
1,246
7,758.
9,175
3,902
3.550
$ 1.95
.30
• 9.81
341/2
$11,162
7,573
2,691
898
8,270
2,892
11,380
4,684
10,424
4,196
1,444
1,596
1,325
5,521
1,288
1,046
646
1,177
6,800
8,159
3,111
3,413
$ 1.71
.27
9.09
241/8
$10,513
7,110
2,600
803
7,907
2,606
1984
10,576
3,754
9,452
3,667
1,211
1,502
1,186
4,853
1,160
• 959
549*
1,051
5,820
6,982
2,685
2,917
$ 1.45*
.24
7.72
22
$9,911
6,760
2,399
752
7,567
2,344
9,534
2,898
8,422
3,106
904
1,369
1,037
4,143
983
848
480
852
4,878
5,969
2,131
2,506
$ 1.24
.21
6.45
201/4
$9,410
6,406
2,301
703
7,272
2,138
8,843
2,158
7,612
2,770
619
1,296
924
3,694
905
782
433
813
4,164
5,043
1,638
2,245
$ T.11
.20
5.67
18
$8,901
6,150
2,165
586
6,972
1,929
8,071
1,936
6,914
2,538
555
1,264
828
3,366
812
707
389
701
3,521
4,230
1,268
2.009
$ .97
.17
4.94
11 1/2
$8,304
5,724
2,053
527
6,595
1,709
1983
7,069
1,618
5,929
2,297
461
1,169
704
3,001
713
628
343
618
3,183
3,727
1,171
1,755
$ .85
.14
4.38
101/2
$7,778
5,371
1,949
458
"6,251
1,527
1982
6,362
1,447
5,239
2,095
475
1,132
620
2,715
613
546
301
505
2,765
3,263
1,056
1,529
$ .74
.12
3.78
9
$7,259
4,911
1,846
502
5,918
1,341
1981'
5,770
1,359
4,788
1,916
425
1,113
561
2,477
552
482
265
• 434
2,497
2,899
926
1,371
$ .65
.09
3.37
6 1/2
$6,739
4,580.
1,746
413
5,554
1,185
•Before the cumulative prior years' benefit from the change in accounting for income taxes.
8 • McDonald's: Case C
March 1995
-------
EXHIBIT 2: TOP 10 HAMBURGER CHAINS
Rank Chain U.S. Sales ($000) U.S. Units
- . , - t
1 McDonald's 12,519,400 8,764
2 Burger King ,5,330,000 „ 5,557
3 Hardee's/Roy Rodgers 3,580,000 3,954
4, . Wendy's 2,940,000 . -3,414
5 Jack-in-the-Box , 977,000 .' 1,094
6 Carl's Jr. , 629,000 210
-7 Sonic Drive-Ins 518,765.. 1,112
8 Whataburger • '' " : 338,000 • ^446
, 9 White Castle ; 302,549 257
10 Rally's 221,100 333
Source: 1992 Technomic Top 100
McDonald's: Case C • 9
March 1995
-------
EXHIBIT 3: SYSTEM RESTAURANTS
United States
Australia
Brunei
China
Guam
Hong Kong
Indonesia
Japan
Macao
Malaysia
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Total Pacific
Andorra
Austria
Belgium
Czech Republic
Denmark
England
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Luxembourg
Monaco
Morocco
Netherlands
Norway
Poland
Portugal
Russia
Scotland
Spain
Sweden
Switzerland
Turkey
Wales
Yugoslavia
Total Europe/ Africa
1992
8,959
338
1
4
4
62
5
956
3
31
61
47
44
15
67
16
1,653
1
35
16
3
21
429
14
239
438
2
10
16
16
2
1
1
83
10
3
4 .
1
24
50
59
32
14
15
6
1,549
1987
7,567
204
0
3
3
36
0
604
• 1
15
28
13 •
23
0
22
2
951
1
20
9
• 0
7
255
4
61
262
0
0
8
4
2
0
0
43
2
0
0
0
1
25
29
14
2
6
0
755
Canada
Argentina
Aruba
Bahamas
Bermuda
Brazil
Chile
Costa Rica
Cuba
El Salvador
Guadeloupe
Guatemala
Martinique
Mexico
. Netherlands Antilles
Panama
Puerto Rico
' Uruguay
Venezuela
Virgin Islands
Total Latin America
Outside of the U.S.
Systemwide Restaurants
1992
658
18
1
4
1
107
3
8
1
3
1
6
1
56
3
10
40
2
6
3
274
4,134
13,093
Source: McDonald's Annual Report, 1992,
1987
539
3
1
3
1
37
0
4
1
2
, 0
3
0
. 5
3
8
22
0
3
3
99
2^44
9,911
1987.
10 • McDonald's: Case C
March 1995
-------
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-------
EXHIBITS
BEYOND BEEF COALITION
MEMBERSHIP - U.S.A.
. . - .1 - - -
Animal Welfare Institute ,
1 Earth Island Action Group
EarthKind
EarthSave
Food First/The Institute for Food and Development Policy
Farm Sanctuary
Free Our Public Lands
The Fund for Animals
, Greenhouse Crisis Foundation
Greenpeace '
International Rivers Network V
The National Coalition Against the Misuse of Pesticides
Peoples Medical Society
, Physicians for Responsible Medicine '
, . .' Public Citizen
Public Lands Action Network
ResttheWest
United Poultry Concerns
International Membership
•-'•''• Africa Rainforest Network/Kenya
Alternative Konsumenten Bond/Netherlands
. Beyond Beef/Australia !
Compassion in World Fanning/England
De Kleine Aarde/Netherlands
Die Verbraucher/Germany
Earthwatch/Ireland
Erklarung Von Bern/Switzerland
Green Power/Hong Kong
Jungle Source/Mexico
KAG/Switzerland
Lega Per L'Ambiente/Italy
Milieudefensie/Netherlands
Network for Safe andSecure Food and Environrhent/Japan
NOAH/Denmark
Parents for Safe Food/England
Platform Biologische Landbpuw & Voeding/Netherlands
Rainforest Information Centre/Australia .
Research Foundation for Science, Technology, and Natural Resource Policy/India
Sahabat Alam Malaysia/Malaysia
Solidaridad/Netherlands
Tanzania Environmental Society/Tanzania
Uniao Protetora do Ambiente/Brazil
The Vegetarian Society/England
Vereniging Milieudefensie/Netherlands
Vereniging Voor Ekologische/Belgium
Walhi/Indonesia
-------
COST OF A
Whether they're from McDonald's, Wendy's, Burger King or any other fast-food restaurant, hamburgers are no bargain.
The next time you think about eating a hamburger, think about the real cost of eating beef.
World Hunger—At a time when nearly a billion people suffer
from chrontc hunger, more than one-third of all the grain grown in the
world is fed to cattle and other livestock. That's enough to give every
child, woman and man a meal a day,
Polluting and Depleting our Water—Cattle produce a
billion tons of organic waste each year. Waste from livestock, and the
pesticides and fertilizers used to grow feed, are the number one non-
point source of water pollution in the U.S. Almost half the water used
fn the U,S. each year goes to grow feed and provide drinking water for
cattle and other" livestock. It takes 29 gallons of water to produce a
pound of tomatoes; 139 gallons to produce a pound of bread; but 2,464
gallons to produce a pound of beef.
Animal Suffering—Each and every day, 100,000 cattle are
slaughtered in the U.S. Their deaths are cruel and horrible—shocked
with electric prods, beaten and kicked, shot with a stun-gun, hung by
their feet, their throats cut.
Global Warming—Cattle are a major source of greenhouse gases.
Tens of millions of tons of methane are released into the atmosphere by
the world's 1.3 billion cattle. In addition, hundreds of millions of tons
of COj are released by burning forests to create cow pastures.
Destroying the Rain Forest—Cattle ranching is a primary cause
of rain forest destruction in Central and South America. Since I960, more
than 25 percent of the forests of Central America have been cleared to cre-
ate pasture land for grazing cattle. While some fast-food chains claim they
no longer use Central American beef, for every quarter pound hamburger
still being exported from this region,'55 square feet of rain forest is
destroyed. •
Creating Deserts—Cattle are major contributors to soil loss and
destruction. As much as 85 percent of U.S. western rangeland, nearly 685
million acres, is being degraded by overgrazing and other problems. The
U.S. has already lost a third of its topsoil; more than 80 percent of this ero-
sion is directly attributed to grazing and unsustainable methods of pro-
ducing feed crops for cattle and other livestock.
Human Health—Seventy percent of U.S. deaths are related to diet,
particularly the overconsumption of beef and saturated animal fats. Red meat
is directly linked to heart disease, strokes, and cancer of the colon and breast.
Children's Rights—Children, as well as adults, have a basic right
to know the true facts about nutrition, health, and the social and environ-
mental consequences of what they buy and consume. McDonald's and
other fast-food giants have long targeted children with an advertising
message that is both one-sided and misleading.
How docs all this add Up when you buy a hamburger at your local fast-food restaurant? read on...
THE MCDONALD'S IMPACT
No single commercial entity has been more responsible for encouraging beef consumption in America than McDonald's.
More than 8,500 McDonald's restaurants in America—and
thousands more around the world-r-proudly advertise more
than 85 billion hamburgers sold. Whaf s the real cost of 85
billion hamburgers? For starters:
• tens of millions of cows slaughtered;
• trillions of gallons of water used to grow their feed;
• millions of tons of methane, a greenhouse gas, released;
• millions of acres of public land eroded and destroyed;
enough grain fed to cows'to provide millions of hungry"
families with a daily meal.
Most McDonald's patrons are unaware of how
their individual decisions as consumers add up
to create such a devastating global impact.
But this April and May, through
the Adopt-A-McDonaId's
Campaign—at more than 1,000
McDonald's outlets across the
nation—more than 1,000,000
customers-will get the-facts-abbut the •
'real cost of buying a fast-food burger.
To learn more about the campaign', ...read on...
HOW YOU CAN ADOPT-A-McDONALD's
BEYOND BEEF is helping to organize more than 1,000
Adopt-A-McDonald's teams. Each team of four or more
people will be responsible for adopting at least one McDonald's
restaurant in their community, and speaking with at least 1,000
McDonald's patrons as they enter or leave the restaurant.
Beginning April 17, each team will provide customers with
Name (Please Print)_
Street
City
leaflets, educational materials, and a children's coloring book.
They'll hold press conferences and carry placards. They'll focus
the attention of the country on the real environmental, health,
and animal suffering costs of eating hamburgers.
If you want to join the BEYOND BEEF team an'd Adopt-A-
McDonald's this spring, fill out the coupon, below.
State.
-Z'P.
I want to Adopt-A-McDonald's.
Get in touch with me immediately.
Return coupon to: Beyond Beef, 1130 Seventeenth Street, NW, Suite 300, Washington, D.C. 20036. Phone: (202) 775-1132 Fax: (202) 775-0074
Phone
-------
Pollution Prevention in
Corporate Strategy
NATIONAL POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION
Note on Life Cycle Analysis
Prepared by Susan Svoboda, manager of the .University of Michigan Corporate ••
Environmental Management Program (CEMP). This document may be used by
either students or faculty for background information. • ' ,
As corporations seek to improve their environmental
performance, they require, new methods and tools.
Life cycle analysis (LCA) is one such'tool that can help
'companies to understand the environmental impacts
associated with their products, processes, arid activities.
LCA is controversial and still evolving as a methodology.
However, the principles behind LCA thinking are being
adopted rapidly by manufacturers and service organi-"
zatioris alike .as a way of opening new perspectives and
expanding the debate over environmentally sound -
products and processes. The goal of LCA is not to
arrive at the answer but, rather, to provide important
inputs to a broader strategic planning process. .
The Origin of LCA
'••' '
- LCA has its roots in the 1960s, when scientists concerned
about the rapid depletion of fossil fuels developed it as
an approach to understanding the impacts of energy
consumption. A few years later, global-modeling studies
predicted the effects of the world's changing population
on the demand for finite raw materials and energy
resource supplies. * The predictions of rapid depletion
of fossil fuels and resulting climatological changes :
sparked interest in performing more detailed energy
calculations on industrial processes. In 1969, the Mid-,
west Research Institute (and later, Franklin Associates)
initiated a study of the Coca-Cola Company to deter-
mine which type of beverage container had the lowest
releases to the environment and made the fewest
demands .for raw materials and energy.2.
In the 1970s, the U.S. Environmental Protection Agency
(EPA) refined this methodology, creating an approach
known as Resource and Environmental Profile Analysis
(REP A). Approximately .15 REP As were performed
between 1970 and 1975, driven by the oil crisis of 1973.
Through this period a protocol, or standard methodol-
ogy, for conducting these studies was developed.3
In the late 1970s and early 1980s, environmental con-
cern shifted to issues of hazardous waste management.
As a result life cycle logic was incorporated into the
emerging method of risk assessment, which was used •
with increasing frequency in the public policy commu-
nity to develop environmental protection standards.4
Risk assessments remain controversial procedures:
the public is often disinclined to trust them, especially
when conducted after-the-fact to justify an activity or
when performed by an organization with a vested
interest in their conclusions.?
When solid waste became a worldwide issue in the late
1980s, the life cycle analysis method developed in the
REP A studies again became a tool for analyzing the
problem. In 1990, for example, a life cycle assessment .
was completed for the Council for Solid Waste Solu- •
tions, which compared-the,energy and environmental
impacts of paper to that of plastic grocery bags.6 A
similar study comparing disposable diapers to wash-
able cloth diapers was also conducted.
Environmental groups around the world have also
adopted life cycle analysis; organizations such as Blue
Angel, Green Cross, and Green Seal use and continue
to improve LCA for the purpose of product labeling
and evaluation. Thus, while initially limited to the
public sector, LCA has been adopted by increasing
numbers of corporations and nonprofit organizations
as an aid to understanding the environmental impacts
of their actions. And as demand for "green" products
and pressures for environmental quality continue to
mount, it is,quite likely that industrial life cycle analysis
will become in the 1990s what risk assessment was in
the 1980s. .. v
National Pollution Prevention Center for Higher Education • University of Michigan
Dana Building, 430 East University, Ann Arbor Ml 48109-1115 , "
Phone: 313.764.1412 • Fax: 313.936.2195 • E-rriail: nppc®umich.edu
May be reproduced
freely for non-commercial
educational purposes.
LCA Note-1
March 1995
-------
Components of Life Cycle Analysis
Life cycle analysis takes a systems approach to evalu-
ating the environmental consequences of a particular
product, process, or activity from "cradle to grave."
By taking a "snapshot" of the entire life cycle of a
product from extraction and processing of raw materials
through final disposal, LCA is used to assess systema-
tically the impact of each component process.
Ideally, a complete LCA would include three separate
but interrelated components: an inventory analysis,
an impact analysis, and an improvement analysis.
The components are defined as follows:
• .Life Cycle Inventory. An objective, data-based
process of quantifying energy and raw materials
requirements/air emissions, waterborne effluents,
• solid waste, and other environmental releases
incurred throughout the life cycle of a product,
process, or activity.
• Life Cycle Impact Assessment. An evaluative
process of assessing the effects of the environmental
findings identified in the inventory component. The
impact assessment should address both ecological
and human health impacts, as well as social, cultural,
and economic impacts.
• Life Cycle Improvement Analysis. An analysis of
opportunities to reduce or mitigate the environmental
impact throughout the whole life cycle of a product,
process, or activity. This analysis may include both
quantitative and qualitative measures of improvement,
such as changes in product design, raw material
usage, industrial processes, consumer use, and waste
management.
To date, most LCAs have focused on the inventory
component, as it is the most "objective" (and therefore,
least controversial) analysis to perform. Franklin Asso-
ciates, an industry leader in LCA, has been improving
inventory-analysis methodology over the past 20 years.7
However, it encourages clients to extend the inventory
and add the impact and improvement assessments.
Inventory Analysis
An inventory may be conducted to aid in decision-
making by enabling companies or organizations to:
• Develop a baseline for a system's overall resource
requirements for benchmarking efforts;
• Identify components of the process that are good
targets for resource-reduction efforts;
« Aid in the development of hew products or pro-
cesses that will reduce resource requirements or
' • emissions; ' .'
• Compare alternative materials, products, processes,
or activities within the organization; or
« Compare internal inventory information to that of
other manufacturers. .
Managers using LCA to aid decision-making can im-
prove the validity of the results'and keep the analysis
focused by precisely defining the scope of the "system"
to be analyzed, considering practical constraints such
as time and money. This step builds the foundation for
the analysis that follows and should be understood and
agreed upon by those responsible for commissioning
• the study. A'system refers to a collection of operations
that together perform some defined function. The
system begins with all the raw materials taken from
the environment and ends with the outputs released
back to the environment (see Exhibit 1).
Within most systems, three main groups of operations
may be defined: 1) operations for the production, use,
transportation, and disposal of the product, 2) opera-
tions for the production of ancillary materials such as
packaging, and 3) the energy production needed to -
power the system. A clearly defined scope will im-
prove the results of subsequent steps when the total
process is! divided into subsystems. An example of
typical subsystem categories is shown in Exhibit 2.
The linkages between subsystems make the process
of collecting consistent measurements complex. For
example, subsystems must be defined so that they are
large enough to provide sufficient data for analysis
but not so large that data is aggregated at a level that
precludes detailed analysis. In addition, subsystems
should be linked by a standard basis of comparison
such as equivalent usage ratios. For example, two
2-LCA Note
March 1995
-------
products or subsystems may use resources at different
rates, have different densities, or have different perfor-
mance levels. To resolve these issues, typical usage
patterns for products need to be determined so that
logical comparisons .can be made. For many of the
system inputs, equivalent weights or.volumes may
need to be calculated.
• Managers using LGA to aid decision making must
understand that the collection of data is a complex
process and that many assumptions are made in the
process. Absent or incomplete data, differences in the
way data were collected, variations in technologies, and
the number, diversity, and potential interactions of pro-
cessing steps all contribute to the complexity: Either
industry- or plant-level data may be used,-depending
on the scope and purpose of the study; government
documents, federal regulations, technical literature,
industry reports, published studies, and plant visits are
all important sources of data. However, the selection
of the source of data can substantially affect the inven-
tory results, and any analysis should include complete
documentation of sources, assumptions, limitations and
omissions. For example, comparisons should be made
using data from similar time periods, as manufacturing
processes often change over time as cdmpanies adopt
more'efficient practices. .
An important step in the inventory is the creation of a
process-flow diagram that will serve as the "blueprint"
for the data to be collected. Each step in the system
should be represented in the diagram,, including the
steps for the production of ancillary products such as
chemicals and packaging. This step is important be-
cause it clearly depicts the relative contribution of each
subsystem to the entire production system and the
final product.
Overview of the Inventory Sub$ystems8
A thorough understanding of how an inventory analy-
sis is conducted, and the limitations and assumptions
inherent in the various stages is critical to effective use
of LCA in decision making. The following is a synop-'
sis of the various subsystems analyzed in an inventory
analysis. " • .
RAW MATERIALS ACQUISITION
Data are collected for this subsystem on all activities
required to obtain raw materials, including transporta-
tion of the materials to the point of manufacture (see ,
Exhibit 3). Typically, raw materials are traced for the
primary product and all primary, secondary and tertiary
packaging. Managers should review the data to make
sure equivalent comparisons are used. For example,
a package containing recycled materials may need
increased thickness to compensate for the decreased
strength of recycled materials. In this case, managers
" must make a tradeoff between weight of materials that
will someday become part of the waste stream and
virgin material content. The inventory should also ,
include^all inputs of energy, materials, and equipment
necessary for acquiring each raw material. Because this
dramatically increases the complexity of the analysis,
criteria must be determined to eliminate insignificant
contributions. This may be done by establishing a
threshold for inclusion. For example, any component
contributing less .than .five percent of inputs might be
ignored,
Ecosystems are impacted in many ways by the extraction
or harvesting of raw materials, but only those effects
that can,be quantified, such as pesticide run-off from
agriculture or soil loss from logging, should be included
in the inventory: Effects that cannot be easily measured,
such as loss of scenic or aesthetic value, may be covered
in the more subjective impact assessment At this point,
attempts to quantify renewable or nonrenewable re-
sources for inventory calculations are subjective, as
quantifiable data is not publicly available. However,
'maintaining separate lists of renewable and nonrenew^
able materials may be helpful if an impact assessment
is later performed. .
Energy acquisition is actually part of the materials-.
' acquisition subsystem, but because of the complexity
of the subject, it warrants its own analysis. Data col-
lected should include all energy requirements and
emissions attributed to the acquisition, transportation,
, arid processing of fuels. This means that if gasoline is
used as a transportation fuel, not only should emis-
sions related to combustion be included, but also en-
ergy consumption and emissions due to extraction and
refining. In the U.S., energy is derived from a number
of sources .including coal, natural gas, petroleum,
hydropower, nuclear power, and wood. Utilities use
many different types of energy sources to produce
LCA Note • 3
March 1995
-------
electricity, so the energy analysis must include a deter-
mination of the fuel mix used to generate the electricity.
Generally, the national average fuel mix may be used,.
but industry-specific information is preferred.
Some materials are made from energy resources and
are therefore assigned an energy value. For example,
plastics, made from petroleum and natural gas, release
energy when burned. This energy value is credited
against the system requirements for the primary prod-
uct, resulting in a new energy requirement that is less
than the total energy requirements for the system.
MANUFACTURE AND FABRICATION
Data collected for this subsystem includes all energy,
material, or water inputs and environmental releases
that occur during the manufacturing processes required
to convert each raw material input into intermediate
materials ready for fabrication. This process may be
repeated for several streams of resources as well as
several intermediate cycles before final fabrication of
the product (see Exhibit 4).
Often co-products — outputs that are neither products
nor inputs elsewhere in the system— are generated in
the manufacturing process. Co-products are included
in LCA until they are separated from the primary
product being analyzed. Raw materials, energy, and
emissions should be allocated between the primary
product and the co-products by their proportionate
weight or volume. If scrap within one subsystem is
used as an input within the same subsystem, the raw
material or intermediate material required from the
outside is reduced and should be factored into the
analysis. If industrial scrap is used in another sub-
system, it is considered to be a co-product and should
be allocated to the same consumption and emission
rates required to produce the primary material. Some
scrap is simply discarded and should be counted as
solid waste.
Differences in technology throughout the industry
require certain assumptions to be made at this stage.
Comparisons between different-size facilities, differing
ages of equipment, different capacity-utilization rates,
and differing energy consumption per unit of produc-
tion must be made explicit.
The data collected for final product fabrication assesses
the consumption of inputs arid the emissions required
to convert all materials into the final product ready for
consumer purchase. Calculations follow the same
procedure as in converting raw material to intermediate
materials and include the same limitations.
Data collected for fabrication of the final product in-
cludes the inputs and releases associated with filling
and packaging operations. As this is a necessary step
for virtually any product, this step focuses on differ-
ences between processes or materials being compared.
If the filling procedure is identical for the two products
being compared, this step can be ignored. Both primary
and secondary packaging must be included in the
calculations, taking care to keep packaging per unit •
consistent between alternatives.
*
TRANSPORTATION/DISTRIBUTION
An inventory of the related transportation activities of
the product to warehouses and end-users may be sim-
plified by using standards for the average distance trans-
ported and the typical mode of transportation used (see
Exhibit 5). Inventory of the distribution process in-
cludes warehousing, inventory control, and repackaging.
Environmental controls such as refrigeration are com-
ponents of both transportation and distribution. As in
previous stages, clear boundaries must be established
to define the extent to which issues such as building
and maintaining transportation and distribution equip-
ment will be factored into the inventory results.
CONSUMER USE/DISPOSAL
Data collected for this subsystem cover consumer ac-
tivities including use (product consumption, storage,
preparation, or operation), maintenance (repair), and
reuse (see Exhibit 6). Issues to consider when defining
the scope of the subsystem include:
• Time of product use before it is discarded
• Inputs used in the maintenance process
» The typical frequency of repair
• Potential product reuse options
Managers should incorporate into the analysis any in-
dustry information on typical consumer usage patterns
that may make the study's results more valid. For
example, consumers may occasionally use two thinner
paper cups to attain the strength of a single comparable
polystyrene cup. Sources of data that may help this
process include consumer surveys, published materials,
4 • LCA Note
March 1995
-------
and assumptions. Inventory reports must include
documentation of assumptions including the timeliness N
of the-data, potential biases, and other limitations.
Various disposal alternatives exist such-as reuse, ' : .
recycling, composting, incineration, and landfilling.
Transportation and collection of post-consumer waste
should also be included in the analysis. Inventories .
often use a national estimate of waste management
methods, citing current averages for the percentage of
waste disposed of by landfilling, recycling, and incin-
eration methods.
Recycling technology is e'xpected to improve greatly
in the future. Therefore, content levels and recycling
rates should always be reported at current rates with
documentation of study dates. Advances in technology
will both increase rates and the number of products •
that are recyclable, altering both open- and closed-loop-
recycling options (see Exhibit 7).
Open-loop recycling means that a product is recycled
into a different product that is disposed of after use.
In these cases, the resource requirements and environ-
mental emissions related to the/ecycling and final
disposal of the recycled material is divided equally
between the two products produced.
, • " f
Closed-loop recycling refers to materials that can be
recycled into the same product repeatedly. This means"
that the more times the product is recycled, the less
virgin material is required and the greater the number
of cycles over which the .resources and emissions can
be allocated. The environmental effects of a closed-loop
product will approach zero over the life of the product.
For some products, a recycling infrastructure already ,
exists, providing data on the collection, transportation,
. and processing of its materials. But for many products
such information doies not exist, leading to the use of
data extrapolated from pilot programs or forecasts.
Wastes may be defined as materials that have.no in-
trinsic or market value. Waste occurs in some form at
every stage of the life cycle. Careful analysis of waste
management issues is required as disposal options
vary with the seasons, geography, and the technology
used by a particular facility. Further complicating the
inventory is the fact that many waste streams are com-
binations of materials derived from several subsystems,
and that waste treatment facilities may produce a varv-
ety of releases including air, water, and.solid wastes.
For example, reported waterborne waste data should ,
include an analysis of the water treatment system, the
land associated with the treatment system, and atmo-
spheric and solid wastes associated with the-system.
Information about emissions from solid waste is more
difficult to find as there is no existing method to deter-
mine the emissions of a particular product once it has
been mixed with municipal waste in a landfill or incin-
erator. If, however, a disposal process is being used
for only one type of product (e.g., composting for yard
waste or recycling for aluminum cans), accurate mea-
sures are available.
Impact Assessment and
Improvement Analysis
All life cycle analyses collect inventory data on raw
material consumption, energy and water use/and
waste production. However, a meaningful LCA
should contain more than a mere inventory of inputs
and outputs — it should also consider the overall
contributions and risks to the environment and public
health, as well as the social, cultural, and economic
impacts of each option. In short, the products and
processes being assessed should be seen in the context
of the society they are intended to serve. .
An impact assessment and improvement analysis thus
evaluates the impacts caused by the proposed products,
processes, or activities. The final result of an impact
assessment is an environmental profile of the system.
Impact assessment is one of the most challenging
aspects of LCA since current methods for evaluating
environmental impacts are incomplete at best.9
Even when models exist, they can be based on many.
assumptions or require considerable data beyond that
associated with the inventory.10 Evaluating the impor-
tance and meaning of the data collected during the
inventory requires judgement and interpretation.
Thus, impact assessment inherits all the problems of
inventory analysis while also introducing new method-
ological and measurement challenges. ,
ENDNOTES:
1 For example, D. Meadows, D. Meadows, and J. Randers. Limits
to Growth. New York: Universe Books, 1972. .
2 Franklin Associates. Product Life-Cycle Assessment: Guidelines
and Principles (EPA Report #68-CO-0003J." 1991. -
3 Hunt, R., J. Sellers, and W. Franklin. "Resource and Environ-
mental Profile Analysis: A Life Cycle Environmental Assess-
ment for Products and Procedures." Environmental Impact
Assessment Review, Spring 1992.
LCA Note.- 5
March 1995
-------
4 Stilwell, ],, R. Canty, P. Kopf, and A. Montrone, Packaging for
the Environment, New York: American Management Association,
199L ' . , .
s See, for example, Lowrance, W. 1976. Of Acceptable Risk. Los
Altos, CA: William Kaufmann, 1976.
* Council for Solid Waste Solutions. "Resource and Environ-
mental Profile Analysis of Polyethylene and Unbleached Paper
Grocery Sacks." CSWS (800-243-5790), Washington, DC, June 1990.
' Franklin Associates, Ibid.
8 For details, see Franklin Associates, Ibid.
9 U.S. EPA, Risk Reduction Engineering Lab. Life Cycle Design
Guidance Manual: Environmental Requirements and the Product
System (EPA #600/R-92/226). Prepared by Keoleian, Gregory
A., and Dan Menerey. Cincinnati: EPA, 1993.
10 For examples of the range of methods available, see Hart, S.,
G. Enk, and W. Hornick. Improving Impact Assessment. Boulder,
CO: Westvie'w Press, 1984.
EXHIBIT 1: INPUTS AND OUTPUTS OF A SYSTEM
Inputs
Raw Materials •
Energy
Water •
System
Outputs
Emissions to Air
Releases to Water
Solid Waste
Usable Products
Other Environmental Releases
EXHIBIT 2: DEFINING SYSTEM BOUNDARIES
Life-Cycle Inventory
Inputs
Raw Materials —^-
Energy
Water
Raw Material Acquisition
I
Material Manufacture
I
Final Product Assembly
Transportation/Distribution
I
Consumer Use and Disposal
System Boundary
Outputs
Atmospheric Emissions
Waterborne Wastes
Solid Wastes
Usable Products
Other Environmental Releases
Source: Battelle & Franklin Associates, Ltd.
6 • LCA Note
March 1995
-------
EXHIBIT 3: RAW MATERIAL ACQUISITION SUBSYSTEM
Inputs
Energy
Materials
Infrastructure and Capital Equipment
Inputs
Exploration and Extraction
Cultivation, Harvest, and Replenishment
Handling and Transportation
Outputs
Outputs
EXHIBIT 4: MANUFACTURING AND FABRICATION SYSTEM
Raw
Materials
Aquisition
, Fuel
Producing
Industries
Production
of Ancillary
Materials
Main Production System
Pre-Consumer
Recycling
Emissions to Air
Releases to Water
Solid Waste
Usable Product
Co-Products
LCA Note • 7
March 1995
-------
EXHIBIT 5: TRANSPORTATION/DISTRIBUTION SYSTEM
Energy
Railway
- Diesel
- Electric
- Steam/Coal
Airplane
Truck
Barge
Freighter
Supertanker
Pipeline
Electric Power Lines
Considerations:
- Distance
- Containment
- Environmental Controls
~^ Air Emissions
->• Water Pollution
EXHIBIT 6: CONSUMER USE/DISPOSAL SYSf EM
Transporta^on
/ Distribution
Point
of Use
Use —i
Maintenance
Re-Use —1
Waste
Management
8 • LCA Note
March 1995
-------
EXHIBIT 7: RECYCLING SUBSYSTEM
Produce virgin
Material
Produce Virgin
Material
123 Closed-loop
r~\ Open-loop
Published by:
The National Pollution Prevention Center
for Higher Education
University of Michigan, Dana Building
430 East University Ave. •
Ann Arbor, Ml 48109-1115 , ,;-•
• Phone: 313-764-1412
• Fax: 313-936-2195 .
• E-mail: nppc@umich.edu
The mission of the NPPC is to promote sustainable development
by educating students, faculty, and professionals about pollution
prevention; create educational materials? provide tools and
strategies for addressing relevant environmental problems; and
establish a national network of pollution prevention educators.
In addition to developing educational materials and conducting
research, the NPPC also offers an internship program, profes-
sional education and training, and conferences.
Your Input is Welcome!
We are very interested in your feedback on these materials.
' Please take'a moment to 'offer your comments and communicate
them to us. Also contact us if you wish to receive a documents
list, order any of our materials, collaborate oh or review NPPC
resources, or be listed in our Directory ot Pollution Prevention
In Higher Education. , '
We're Going Online!
The NPPC provides information on its programs and educational
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We may also update the NPPC information available through
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(ftp.snre.umich.edu). Please contact us if you have comments
. about our online resources or suggestions for publicizing our
educational.materials'through the Internet. Thank you!
LCA Note • 9
March 1995
-------
-------
-------
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Pollution Prevention in
Corporate Strategy
NATIONAL.POLLUTION PREVENTION CENTER FOR HIGHER EDUCATION
Note on the Trash Crisis
Prepared by Susan Svoboda, manager of the University of Michigan Corporate
Environmental Management Program (CEMP). This document may be used by
either students or faculty for background information.
As the volume of municipal solid waste (MSW) pro-
duced in this country continues to grow, communities
are finding it increasingly difficult to dispose of the
garbage and sludge produced by business and industry,
institutions, and individuals. Differing definitions
about what constitutes MSW leads to different estimates
of volume. The EPA estimates that each American
produces 4 pounds of trash per day; BioCyde magazine
estimates 6.6 pounds per day. In general; estimates
vary according to whether both pre-consumer and post-
consumer waste are included or just post-consumer.
According to the EPA,'approximately 73 percent of our
trash was landfilled in 1988., Yet, over the past 10 years
the number of operating landfills has decreased by 60
percent, with me majority of the closings occurring in .
New England. Today, the highest percentage of new
closings are in the western states. The rate of landfill
closings is a serious issue as past dumping practices,
characterized by unsanitary conditions, methane
explosions, and releases of hazardous substances
into ground water and the atmosphere, have made it
increasingly difficult to site new landfills.
New EPA regulations/which require controls such as
ground water monitoring, may force many small land-
fills to close. The opening of several.large facilities may
' offset the loss of the small sites, making capacity a more
meaningful measure. It typically requires at least five
years to permit and develop new landfill facilities.
According to a 1988 EPA study, eight states had less ;
than five years of remaining capacity, and 15 states had
five to ten years of capacity.1 This capacity constraint,
coupled with cleanup costs, has caused an increase in
"tipping fees" (charges to use landfills). 'For example,
in Wisconsin it is estimated that a sixfold increase in
the state's tipping fees may be necessary to cover pol-
lution problems at licensed landfills over the next 30
years.2 Further, the incentive to.minimize tipping fees
. has caused the waste-hauling industry to grow rapidly
as waste is transported to regions with higher capacities
and correspondingly lower fees.
As of 1991,20 states had enacted Some type of waste
reduction plan; 22 have enacted some requirements
mat local government provide,some sort of recycling
program. In addition,-29 states have enacted more
than 100 disposal bans, prohibiting certain bulky or
toxic items from landfills or incinerators.3
A growing recycling infrastructure and improved in-
cineration methods, combined with constrained landfill
capacity, are changing the way waste is disposed of in
.the United States. By 1995, the EPA estimates that 53
percent of waste will be landfilled, 23 percent inciner-
ated, 19 percent recycled, and 5 percent composted.
Landfills
Municipal solid waste (MSW) comprises 90 percent
of the materials that are landfilled. The remaining 10
percent consists of construction debris, sewage sludge,
incinerator ash, medical waste, etc. In 1976, the Re-
. source Conservation and Recovery Act (RCRA) was
enacted, thereby prohibiting uncontrolled dumping
• and assuring that operating landfills were sanitary.
EPA regulations forbid open burning and require all
> landfills to have a clay or a synthetic liner as well as
alternate layers of plastic or dirt between layers of trash.
Only 25 percent of operating landfills had groundwater
monitoring equipment prior to 1986.* Now, mandatory
leachate systems use pipes to collect and treat water
that seeps through a landfill to the liner.
• State-of-the-art regional landfills with multiple liners
and environmental controls are estimated to cost
National Pollution Prevention Centerfor Higher Education * University of Michigan
Dana Building, 430 East University, Ann Arbor Ml 48109-1115
Phone: 313.764.1412 • Fax: 313.936.2195 • E-mail: nppc© umich.edu '
May be reproduced
freely for non-commercial
educational purposes:
Trash Crisis Note • 1
March 1995
-------
5400,000 per acre. The expected lifetime of a landfill is
ten years. Once a landfill is full, it is allowed to settle
for a few years before it may be used for a park, athletic
field, or golf course.
Landfills must be carefully managed in order to reduce
their inherent drawbacks. For example, each day's
deposit of trash must be covered so that litter and ash
are not scattered by the wind. In addition, organic
wastes that are landfilled partially decompose under
certain conditions to produce carbon dioxide, methane,
ammonia, water, and other chemicals, which, unless
recovered, may be released into the atmosphere.
Further, during decomposition, liquids may percolate
through the landfill and carry chemicals into the soil
and groundwater. Finally, until alternative means of
disposal are determined, landfills contain many com-
mon items such as glass, plastics, and metals that will
never biodegrade.
Landfill disposal costs in the United States are estimated
to be $40-60 per ton and rising.
Incineration
In 1988, the United States had 164 incinerators operating
in 36 states with a design capacity of 70,000 tons per
day. Vendors estimate that municipal incinerators
typically operate at 85 percent capacity due to occa-.
sional shutdowns.5 Incineration handles solid waste
by burning combustible materials and melting non-
combustibles. There are two processes for incineration:
mass burning and refuse-derived fuel (RDF), Mass
burning systems burn unseparated municipal waste on
a moving grate that helps agitate the waste in order to
mix it with air. RDF separates materials such as steel
or glass, and shreds the remaining materials before
burning to produce cleaner emissions.
Many mass-burn and RDF systems are designed to re-
cover energy by transferring the thermal energy to wa-
ter in a boiler. The steam that is produced can be used
to produce electricity or distributed by pipeline
to buildings and industry. Combustion "upsets" can
cause temporary increases in emissions due to changes
in MSW composition, or failures in plant power, in-
strumentation, or controls.
As MSW burns, flue gas is created that may'contain
carbon monoxide, dioxins, acid gases and metals. Older
incinerators without computerized combustion or
pollution controls have higher emissions than modern
facilities. Today, scrubbers, filters, and continuous
monitoring devices control emissions.
Incineration produces ash that includes minerals,-metals,
unburned organic carbon, and dirt, which constitutes
10-20 percent of the original material's volume. Fly ash
consists of light particles that are blown off the grate
and form in the flue gas. Fly ash typically contains
volatile metals such as mercury, lead, and cadmium
as well as dioxins and PCBs. Bottom ash consists of
the uncombusted or partially uncombusted materials
remaining on the grate after burning. Less volatile
metals such as aluminum, iron, and tin as well as
hydrocarbons are typical components of bottom ash.
In some cases, this ash could be highly toxic, because
the heat of the incinerator may increase the toxic prop-
erties of the materials burned.
Ash creates potential hazards, as it can be blown into
the air during transport or contaminate groundwater
after disposal. The main method for controlling blowing
ash is to collect it, spray it with water, and combined it
with bottom ash to'produce a sludge. The EPA esti-
mates that 36 percent of ash is disposed in landfills
containing only ash, 17 percent is disposed with MSW,
and the rest is undetermined.6 Research is being con-
ducted to determine how to stabilize the ash chemically
before transport and disposal.
Although incineration has been performed successfully
in Europe and Japan for decades, in the 1970s domestic
incinerators were plagued by problems due to inade-
quate technology and less stringent safeguards.
Building incinerators is risky business. Not only is
siting difficult because of community opposition, but
laws that affect construction and operating costs can
vary greatly between a project's start and finish. How-
ever, incinerator construction, maintenance, and oper-
ating costs are somewhat offset by the sale of energy
produced in the process.
Plastics release four times more energy during incin-
eration than average MSW as they "borrow" energy
from the petroleum that is released during burning.7
However, plastics that are incinerated can also be a
valuable source of income to recycling programs that
pay as much as $300 per ton for separated post-con-
sumer plastics. Incineration is currently more expen-
sive than landfilling — $90-110 per ton — making it an
economical choice only for communities that would
have to transport waste long distances before disposal.
2 • Trash Crisis Note
March 1995
-------
Recycling ".,.•"
Recycled materials are either pre-consumer or post-
consumer. "Pre-consumer" refers to both materials
and by-products that have been recovered, during the
manufacturing process. "Post-consumer" materials are
derived-from products that have already fulfilled their
original purpose and were separated from MSW.
Recyciability refers to the actual rate at which materials
are recycled in a given geographical area. Although
some materials, can be recycled into products similar
to the original product ("closed-loop" recycling), the
recycling process generally weakens or chknges the
composition of the original material. Therefore, most
products are "open-loop"-recycled into materials that
require less strength or different properties. In addi-
tion, the. U.S. Food and Drug Administration does not
allow packaging that has direct contact with food to be
made from recycled plastics, which may have absorbed
toxins from oil, pesticides, or other hazardous materials.
Although recycling holds potential for relieving some .
of the waste burden, the complexities of building an in-
frastructure to support the process are cumbersome. -
Materials are collected either by drop-off programs or
curbside pickups. Drop-off programs may be centrally
located or may require driving many miles. These
facilities may or may not have on-site workers, but dp
generate revenue from the sale of collected materials.
Many drop-off programs were started by the beverage
industry as an alternative to bottle deposits, and are
more common in the western United States. More than
2,700 curbside programs are currently operating in the
United States, 45 percent of which are mandatory; these
are primarily in the Northeast.8 Curbside services typi-
cally operate similarly to garbage services, using trucks
that consume fuel and contribute to air pollution.
Sorting materials is a critical step in the recycling pro-
cess, because contamination can jeopardize an entire
batch of materials. The process starts by previewing
the materials to remove any oversized or explosive
items. In many cases, materials are carried along con-
veyor belts for manual separation; however, some
materials such as broken glass are dangerous to remove
and may be done mechanically. Plastics are particularly
hard to separate due to their visually similar physical
properties. The industry is searching for ways to auto-
mate this process. One practice currently being used to
separate plastics is to float the materials, since contain-
ers of differing materials have differing densities."
Once materials have been sorted, they are usually
ground or chopped, washed and dried, and sometimes
rernelted for .purification and to achieve similar color
and consistency throughout the melt.
The recycling industry faces several economic barriers.
Manual separation is an expensive process, but contami-
nation makes an entire batch worthless, and the recycler
must pay the cost of disposal. Large differences in the
weight-to-volume ratio may reduce incentives to recycle
as hauling fees are based on the number of trucks used,
but recycling allowances are based on weight. Options,
such as increasing monetary incentives for recycling or
taxing products that use virgin materials may realign
economic incentives. Finally, there does not yet exist a
consistent supply of inputs or a consistent demand for
recycled products to stabilize prices. Many materials
are currently recycled to avoid disposal rather than to
earn revenue from actual material value.
•'.)''. > * - ', - '•-.',
Composting
Composting is the biological decomposition of organic
material by microorganisms such as bacteria and fungi.
It has been used for years to improve soil quality but is
gaining popularity because it diverts waste from land-
fills and incinerators. 'With proper temperature and
moisture controls, composting can quickly reduce the
original volume of some materials by 50 percent. .Bio-
degradable organic materials such as leaves, grass,
food wastes, and paper can be composted. '
Composting occurs either in static piles or vessels.
In-vessel systems often co-compost sewage sludge-
with organic municipal waste. This process increases
moisture and speeds decomposition but increases
odors. Once the compost is complete, the material is
"cured" for several months to assure stabilization. It is
then pulverized, crumbled, or pelletized to specification.
Composting faces similar challenges to those of recy-
cling, in that organic materials must be separated from
non-biodegradable materials (e.g., glass or metal).
Compost products are used by landscapers, farmers,
golf courses, etc. Most composting is done for local
markets, as the weight of compost makes transporta-
tion expensive. Composting does not appear to be a
profitable venture for municipalities, since the cost of
collection offsets revenue from the. sale of compost.
However, it may offer a "breakeven" method for
disposal of organic solid waste.
Trash Crisis Note • 3
March 1995
-------
• 1.
J
There are currently approximately 1,400 composting
programs in 44 states. Most programs start with
autumn leaf harvests and expand to include grass
clippings. Thirteen municipal facilities are operating,
10 are under construction, and 82 more are in planning
stages.* In addition, some companies are experimenting
with composting for their biodegradable products
(e.g., Proctor & Gamble and its disposable diapers)..
END NOTES:
1 U. S. Congress, Office of Technology Assessment.
Facing America's Trash, p. 271.
2 Ibid., p. 335.
i
3 J. Walter Thompson. JWT Greenwatch, no. 4 (Spring
1991).
4 EPA Report to Congress: Solid Waste Disposal in the
United States. Volume II, October 1988.
5 U. S. Congress, p. 221.
6 Ibid., p. 219
7 J. Stilwell, C. Contz, P. Kopf, and M. Montrone.
Packaging for the Environment. New York: American
Management Association, 1991.
8 J. Walter Thompson, p. 12.
9 Ibid., p. 16.
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4 • Trash Crisis Note
March 1995
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