Research Of McDonald's Corporation Sustainability In Malaysia


Green Accounting is a type of accounting practice that attempts and concerns to factor environmental costs into the organization’s financial results of operations and performance. The purposes of green accounting are to assists businesses understand and manage their operation, being able to measure clearly define any potential risks between traditional economics goals and environmental goals. In order for the companies to implement and adhere to this practice, so called going green, the companies must disclose this in their sustainability reporting, as this will enables the organizations to consider their impacts of wide range of sustainability issues, enabling them to be more transparent about the risks and opportunities they face.

The company and nature of its operations

From my observation on some companies in Malaysia that comes to my attention is the McDonald’s Corporation. It is an American fast-food company, in San Bernardino California, United States, the restaurant launches since 1940 and the founder was Richard and Maurice McDonald. In 1948, they reorganized their business as a hamburger stand, using production line principles. The first McDonald's franchise using the arches logo opened in Phoenix, Arizona in 1953. Businessman Ray Kroc joined the company as a franchise agent in 1955 and subsequently purchased the chain from the McDonald brothers.

Today, McDonald's is the world's largest restaurant chain, serving approximately 69 million customers daily in 120 countries across approximately 37, 855 outlets in the year 2018. McDonald's primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, milkshakes, wraps, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies, and fruit. A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The revenue of McDonald’s Corporation comes from the royalties, rent, and fees paid by the franchisees, also from the sales in company-operated restaurants.

Sustainable Waste Management

McDonald’s is going green by 2025 where the fast food chain plans to use renewable, recyclable or certified materials in all of its food and drink packaging and it is working to offer to recycle in all of its 37,000 or more restaurants. Currently, customers can only recycle at 10% of its locations meanwhile behind the counter, they used cooking oil and cardboard are being recycled in up to 90% of McDonald’s restaurants. Today, about half of McDonald’s customer packaging is eco-friendly where 64% of its paper cardboard packaging comes from certified or recycled sources. In 2018, McDonald’s announced that they will eliminate all foam packaging by the end of 2018. McDonald’s decision to focus on waste reduction efforts about 25 years ago and it was right as most customers say packaging waste is one top environmental issue occurs.

Besides that, McDonald’s Corporation always ensures that their foods serve its purpose of feeding people. Starting with the suppliers by reducing food going to waste in the supply chains and as for their Franchisees in several countries to reduce food going to waste in restaurants. In 2018, McDonald’s successfully encourage their suppliers to align with a food waste hierarchy through the development of the Global Food Disposition Policy. The first step is to avoid creating food waste which will get to work with the suppliers, farmers and restaurant staff to improve efficiency and avoid creating food waste in the first place. The second step is giving foods to families in need by involving or partnering with food banks, charities to ensure all consumable food goes to families in need. The third step is making animal feed, happens when the foods are not fresh enough to donate to families and can turn it into animal feed. The fourth step is recovering energy from food waste were using the anaerobic digestion to convert foods waste, including eggshells and coffee grounds, into gas for energy. The fifth step is to make compost for food production where the process of converting unavoidable food waste into compost for farms and gardening purposes. Sixth which is the last resort for the waste food to be in the landfill or incineration as for the last option.

Was the company really concerned on the environmental costs? 

Environmental costs are often known as the subset of the costs from the business operation. The activities arise in a business which caused environmental effect such as if there are substances released into the land, or water, air which may result in pollution that is harmful to the environment. This will further require more investment in certain equipment and training, or fees resulting from the harmful effect into the environment which is a failure of management. Investors will start to consider the environmental risks such as resource used, or costs of a company’s or national economic impact on the environment and before starting to invest because this is where the new costs emerge. For example, environmental penalties, fines, and taxes, the costs to clean up or remediate contaminated sites, purchase of pollution prevention technologies and waste management costs.

The new costs should be recorded by the traditional cost of the accounting system, so to maintain the product costs whether there are enough costs to facilitate the decision making by the top (policymakers/business manager) business management. Also, it can be conducted at any level like corporate or the level of the national economy through the System of Integrated Environmental and Economic Accounting which will able to produce estimates from the National Accounts of Gross Domestic Product of a country. For example, the costs could be, how should the cost can improve waste of packaging (using recyclable, certified materials) this will be reflected in the costs of the products responsible for waste materials.

I would say yes; the McDonald Corporation do concern on the environmental costs which connected with the potential deterioration of natural assets due to the economic activities which are the day-to-day requirement to run the business operation smoothly.

As for the global warming concern, McDonald’s decided to undertake its greenhouse- gas emissions by more than a third. Firstly, they start to be more innovative by using LED lighting and using energy-efficient equipment that helps to lower down the emissions. Secondly, changes in how they produce beef where the suppliers already started to experiment for new grazing practices such as the cattle herds will be rotated to different sections of pasture. So, it allowing the grass to grow back which also prevents trees from cutting down to make space for the pastures. These practices also allow the soil to sequester more carbon. Next, the suppliers also shifting a different kind of feed to reduce the cow burps and farts which can cause a huge greenhouse gas emission. With this method, it protects the environment, as well as the animal health, and also improves the farmer and community livelihoods. Thus, being able to collaborate with related industries will accelerate the process of adoption or finding the solution for best practices by producing more but with a lesser impact to the environment and this will ensure long-term sustainability.

The McDonald’s logistics providers also ensure that everything is delivered at the right place and at the right time with a minimal environmental effect such as foods, drinks, packaging materials, and other products. It is said that the logistics also working towards lowering the environmental footprint during the distribution activities by using alternative fuels with lower emissions, improving fuel efficiency by modifying the vehicle specifications, optimizing the network design and routes, and monitoring the consumption of electricity in warehouses. When innovating the transportation will be handy when comes to eliminating waste from the supply chains and kitchens such as used cooking oil, plastics, and cardboard. One of the major success for McDonald’s existing production and delivery systems which is to create an environmentally friendly and economical solution was by taking further steps on optimizing carbon footprints savings. It was called closed-loop system which is highly efficient in the McDonald’s restaurants where the used oil from the fryers will be converted into fuel for their delivery trucks which are known as biodiesel fuel. Thus, this strategy not only helps to reduce the carbon footprint but also to ensure sustainable transport in environmental health into a better future.

4. Could the company measure clearly between its traditional economics goals and environmental goals?

McDonald’s Corporation was able to measure their traditional economics goals which stand with few conditions and first is efficiency. It is extremely important for McDonald’s competition among other similar business to remain in the economy market. McDonald’s use their resources efficiently, the goal is to make a profit in any way possible in order to survive in the long-run competition for the business. McDonald was able to ask help from the World Wildlife Fund to discover ways to improve McDonald’s supply chain which help them to focus on the global sustainable sourcing initiatives in the future ahead. Therefore, being efficient is to actually by using the resources wisely and correctly and it is because without concern on the limited resources will result to scarcity problem which is why it is important for most business to be more efficient than their competition and how profit take place by competing for better efficiency process of a business.

Moreover, freedom is also important where the supply and demand are going to influence what is going to be produced, how it is going to produced and who will be our customer or buyer. McDonald’s will be the one will determine what type of product will be produced from their resources without government intervention for the most part. McDonald’s Corporation was able to see the social challenges like what will McDonald’s will contributing to in the future because resources will increasingly scarce due to the needs of the growing population, at the same time the world climate will continue to change where extreme weather events and global warming effects. So, the solution is where McDonald’s starts to create value for the business and society by sourcing their ingredients and packaging sustainably where it can protect the ecosystems, resource efficiency, support the economic viability of farming, fishing and to be responsible for land management so that the resources is more than enough in the future.

Incentives to promote continuous growth for businesses or individuals to produce more and to avoid any waste of a generation. McDonald’s improve their growth by investing in capital equipment such as their facilities and investment in human capital where McDonald’s had collaborated with many other organizations to fulfill their goals such as providing training and education to their farmers on how to improve their agriculture process. Thus, this implementation will promote growth where it helps the company continue to innovate and to perform better in the future.

According to Linda Walker, WWF-US Director of Responsible Forestry and Trade said that “McDonald’s is taking significant steps to avoid deforestation and forest degradation in sourcing key commodities. While this is a journey that requires a long-term vision, these goals and progress are important steps forward in addressing issues that are key to McDonald’s business and value chain.” Their environmental goals are to eliminate deforestation from our global supply chain by 2030. The goal is to have environmental work process that should have less environmental impact to the surrounding where plans should be working one step early by implementing a proper environmental management system to improve the environmental standards of the company. To fulfill their goals, McDonald’s ensure that their suppliers operate their businesses ethically and follow according to the laws and regulations. Suppliers will have the responsibility to protect important sites to remain the biodiversity and for terrestrial which is important to ensure long-term and sustainable use in the future to come.

Conclusion and recommendations

On the recommendations, McDonald should try to encourage customers to use reusable container or packaging and promote advantages for having and bringing own containers by offering a discount to the customers in order to reduce the daily packaging consumption. Implementing the concepts of using recyclable and renewable packaging and sustainable materials will not only offers sustainability but also reduce the waste generation.

Next, McDonald’s may start to come out with a new offer like an additional product and services that can fulfill the demand of home delivery which can be very convenient for many customers and further enhanced the freshness of the ingredient for better delivery quality. Also, investing for a new menu which requires customization and strategies that attract potential customers in the diverse geographical markets.

Besides that, McDonald’s should continue to provide training for staff in order to deliver a high-quality service to the customer. This will ensure a well-structured development for the employees and as well as the long-term growth of the organization. McDonald’s should continue to develop a healthy image by taking criticism as a way to learn and the opportunities develop better services for fast food. Focusing more on sustainably sourced food, providing a good quality type of foods by monitoring the supplier’s performance and while maintaining a healthy public image of a low cost and eco-friendly restaurants.

Moreover, McDonald’s should invest in technology advancement where it can lower down the operational costs through customer’s self-service and this will immediately help to increase the customers loyalty through the simple access and convenience of ordering system for the customers use such as delivery services, personal touchscreen ordering system in McDonald’s restaurant, and McDonald’s App.

Overall, McDonald’s has been performing very well when comes on handling the environmental issues where it is the common criticism from the customers and which is why I can see from the feedback of the customers helps to drive the McDonald’s Corporation towards a long-term sustainability goal for their operations. Compare to the past few years McDonald’s performance doing even better until the year 2018 and I hope to see more impactful results in the future. 

09 March 2021
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