RBI: Deforestation and Empty Chairs

On Monday night, Toronto was electric, not for the Restaurant Brands International (RBI) shareholder meeting, but for game five of the NBA Finals between the Toronto Raptors and the Golden State Warriors. If the Raptors had won, I worried that I might not sleep well given the ensuing revelry associated with Canada’s first NBA championship. Alas for Canada, but fortunately for my sleep, it was not to be on that night.

Restaurant Brands International, majority-owned by 3G Capital (a Brazilian-American investment fund with substantial ownership of Kraft Heinz and Anheuser-Busch InBev), includes the brands Burger King, Tim Hortons, and Popeye’s. Recent shakeups include a new CEO, José Cil, who took the helm in January.

Over the course of years, SGI has engaged RBI and its predecessors in dialogues. Recently, those dialogues have focused on deforestation concerns. In 2010, Burger King pledged to create a “rainforest policy to include all of its products.” However, nearly 10 years later RBI has yet to issue a comprehensive no-deforestation policy that properly addresses its direct operations and extended supply chain.

Photo from https://www.flickr.com/photos/crustmania/10094847976/

Deforestation, the permanent removal of standing forests, results in devastating consequences. It is the third largest driver of climate change. The destruction of trees and other vegetation can cause climate change, desertification, soil erosion, fewer crops, flooding, increased greenhouse gases in the atmosphere, and the incumbent problems for people near to and far from the actual place of deforestation.

Deforestation is also bad for business. It exposes corporations and investors to a wide range of operational, reputational, competitive, and regulatory risks. Companies that manage this risk likely will perform better in the long run. More than 500 global companies have made substantive commitments and the accountability for those commitments continues to improve.

The meeting itself took place in the new central offices of RBI at the Exchange Tower in downtown Toronto. RBI has a lower floor of the building. Emerging from the elevator, shareholders were received and documents were reviewed. In the next room, a larger space, chairs were aligned for the shareholder meeting with two podiums, one to each side of a small table with two chairs– one for Corporate Secretary Jill Granat and the other for CEO José Cil. Along another wall was an array of products from Tim Hortons: coffee, muffins, donuts, donut holes, and the like.

The agenda included the three common voting items: election of directors, the advisory vote on executive compensation, and the appointment of auditors. As well, three shareholder resolutions were on the agenda: a resolution related to workforce practices (put forward by the Atkinson Foundation and our ICCR colleagues, SHARE), our resolution (from the Capuchin Province of St. Joseph) on deforestation, and a resolution concerning plastic pollution and sustainable packaging (from our ICCR colleagues As You Sow). Later in the meeting, SumOfUs delivered a petition signed by 270,000 people and 500 shareholders concerning deforestation. (Their press release can be found here.) None of the three resolutions had a majority, an unsurprising outcome as 3G and Pershing Square own more than half of the company’s shares. The 8-K document filed with the Securities Exchange Commission show that SHARE garnered 26% of the shareholder vote at the AGM, and our resolution and the As You Sow resolution both netted about 22% of shareholder support. If one excludes the 3G Capital and Pershing Square votes, the deforestation resolution had 57% of independent shares in favor.

“Empty Chairs,” photo by Donald Lee Pardue https://www.flickr.com/photos/oldrebel/6173358287

More striking to me as a participant in the meeting was the absence of the board of directors– not one of the elected members of the board attended the meeting. The first order of business in the meeting was their election. It is reminiscent of that meme: “You had only one job. . . ” Their absence suggests that, to them, the annual shareholder meeting is not an important company function.

RBI, according to Cil and company documents, aims to be the world’s “most loved restaurant brands.” The shareholders present at the annual general meeting are people who love this company, and board members did not see fit to hear from them, their fellow shareholders, about the direction of the company.

Similarly, RBI has ambitious, public goals for growth, from some 26,00 restaurants today to 40,000 restaurants in the next eight to 10 years. We’d like to see a similar ambitious, public goal to care for creation. Consumers will buy from a company that advocates for issues they care about. If RBI cannot make ambitious, public commitments to care for creation, those consumers will turn to companies that do.

The deforestation resolution filed with RBI for the 2019 shareholder meeting can be found here. The exempt solicitation concerning the proposal can be found here. The statement delivered at the shareholder meeting can be found here.

ICCR Food and Water Strategic Review

By Frank Sherman

Last week, Chris & I participated in the ICCR Program Strategy Week. The Program Directors met with their Workgroups in NYC to evaluate the progress over the past year and chart out a path forward for the 2018-19 corporate engagement season. This article will summarize the Food strategy session.

The Food Workgroup has been focused on several issues over the past few years including the overuse of antibiotics in meat, supply chain deforestation, food waste, nutrition, pesticide use, and worker rights. As would be expected, many food & beverage (F&B) companies are confronted with many of these risks. Different ICCR investor groups often times deal with the same company in silos, leading to inefficient and ineffective engagements. In the future, the company leads will try to discuss their issue objectives and strategies with each other annually, inform each other of upcoming dialogues, and support each other with joint agendas.

Animal agriculture accounts for 70% of antibiotic use, most of which is not medically necessary. Although we are engaging the meat producers, our focus has been on restaurants and retailers. We have been successful in reducing antibiotics in poultry with Sanderson Farms being the last holdout (43% vote). We’ve made far less progress on beef, pork and turkey; however we anticipate a beef policy from McDonald’s by the end of the year which may be the catalyst for the industry. We will also collaborate with Karner Blue Capital on engaging F&B companies on animal welfare issues.

Deforestation has been a nexus of issues from deforestation and soil erosion to biodiversity loss and land & labor rights abuses. Investors and allied NGO’s have made considerable progress on palm oil with 74% of SE Asia’s palm oil refining capacity now covered by these No Deforestation, No Peat, No Exploitation (NDPE) sourcing policies. We plan to weigh in on RSPO’s update of the Principle & Criteria to strengthen them. Company commitments to source certified timber & pulp are also fairly extensive whereas commitments on sustainable beef and soy are far fewer, partly due to the lack of investor and NGO focus. This coming season, we will work with the broader global PRI investor coalition to focus on these commodities at companies who are creating the biggest impact.

With up to 40% of food (and all the resources that goes into producing it) wasted in the U.S., investors are calling on F&B companies to assess, reduce and optimally manage their food wastes. Kroger stepped up with their Zero Hunger-Zero Waste program with a target of zero food waste by 2025. Progress was also made at Target, Darden, McDonald’s, Kellogg and Hilton. The company target list will expand next season with stronger demands for companies to measure and report on waste reduction progress.

With more than 1 in 3 adults and 1 in 6 children considered to have obesity in the U.S. while 15% of American households are food insecure, nutrition continues to be a societal issue that we focus on. ICCR investors are engaging F&B manufacturers, retailers and restaurants to establish nutrition policies, improve product profiles, and change their marketing strategies, especially towards children. We have made progress in collaboration with the Access To Nutrition Index to encourage companies to improve their ranking. We will continue to work with UConn Rudd Center on marketing to children and minority communities.

We’ve increased our focus on food supply chain labor rights. We continue to support of the Coalition of Immokalee Workers and are starting to advocate for meat processing workers in the U.S. We are planning a campaign on the poultry sector where workers are typically immigrants and often undocumented leading to abuses. This is also the case for farm workers who are subject to unethical recruitment practices. We plan to work with Oxfam who’s recently released report, Behind the Barcodes, exposes the root causes behind human suffering in food supply chains.

The Food Workgroup has a full agenda, and Seventh Generation Interfaith members are welcome to jump in.

Forest Trends report documents corporate involvement in reforming supply change practices

Seventh Generation Interfaith members engage companies  to promote responsible sourcing and eliminate deforestation impacts of their supply chain.  Forest Trends, an international NGO whose mission is to conserve forests and other ecosystems through the creation and wide adoption of a broad range of environmental finance, markets, and other payment and incentive mechanisms, has released “Supply Change:
Tracking Corporate Commitments to Deforestation-Free Supply Chains, 2017.”  The report tracks companies, their commitments, and their progress towards these commitments over time to support stakeholders’ decision-making and, ultimately, to drive transformational change.  A press release and the report are available on the Web.