Soy Toolkit Interview with Rachael Sherman, McDonald’s

As one of the world’s leading restaurant chains and an important buyer of chicken and beef, McDonald’s plays an important role in the soy supply chain.

Rachael Sherman, who leads McDonald’s sustainability team, told us about the company’s responsible soy sourcing journey, its challenges and the lessons that can be useful to industry peers.

Could you tell us more about your role as Director of Global Sustainability at McDonalds?

I work on the McDonald’s global sustainability team. McDonald’s operates in more than 120 countries around the world, and we have about 70 million people coming into our restaurants every day. On the global team, we're looking at suppliers that supply multiple countries around the world and working to make sure that our standards are in place across our global system.

In my role, I lead our work on forests, palm oil and coffee sustainability. I work closely with Proforest on our commitment on forests - that commitment covers a number of commodities, and in 2020 we're focusing on beef, palm oil, coffee, fibre, and then soy in our chicken supply chain. For 2030 we’ll expand that work on soy to anywhere soy touches our supply chain footprint, as well as other commodities. Every day I'm working with partners like Proforest and NGOs like the World Wildlife Fund, our suppliers, our internal supply chain team, and then people that work at McDonald’s around the world.

My role in sustainability for soy is really connected with our commitment on forests. Our commitment has both environmental and social criteria that we want to ensure are met in our supply chain - and so my role is essentially to make sure that McDonalds’ has standards and procedures in place to be able to meet our commitment on forests. What that looks like in practice is understanding what companies can do to make sure that in our supply chain we can make claims that we’re free of deforestation, or that our commitment on forests is being met and then integrating those procedures into the way that we purchase products.

This includes things like working with our buyers of commodities that have soy in the footprint to understand which suppliers we should be working with. That might be someone who buys chicken, for example. Then it would be working with people like our Quality Systems Department, who manage our raw material specifications, to understand how we can embed our expectations into those policies. Then there's work around communicating what we're doing and making sure that we can not only address our supply chain, but drive change beyond our supply chain. That means meeting with suppliers, setting our expectations and joining forums like the Tropical Forest Alliance to communicate McDonald's position. There's a lot of work involved day to day that looks a little bit different, but those are some of the major areas that I would be doing to make sure our commitment comes to life in our supply chains globally.

McDonalds is committed to eliminating deforestation from its global supply chains by 2030, through agricultural commodities such as beef, chicken and palm oil. What role does soy play in your supply chains?

What is actually quite significant for any company, but especially a company of our size, is just to understand what your footprint is - and coming up with a calculation is more difficult than you might expect at the outset.

A lot of work goes into being able to answer this question, but I think it's important to mention that McDonalds doesn't actually produce or manufacture any food, so whenever we're doing this work, we're working with suppliers who sell food into McDonalds’ restaurants.

We need to work with them to understand what the footprint looks like. For soy it's especially complicated because we're not generally buying soy directly. We do use some in our restaurant cooking oil, but that isn't the majority of soy usage. We use much more soy as an embedded product e.g.as animal feed in some of our meat supply chains.

Of the meat supply chains, based on what we know so far, chicken is the biggest majority of our soy usage. In fact, more than half of the soy we use as a company is sitting in our chicken supply chain as feed, and that's why we're prioritising our work on chicken.

How soy fits as a commodity, in terms of impact and volume, is the second most important. Beef for us is the largest by far in terms of how much we purchase, so we're putting a lot of effort and focus on beef - and then soy. It's a little bit different from beef because, again, we don't purchase it directly. Whereas with beef we buy it directly - it's not used just as an ingredient.

So just to reiterate, soy is probably the second biggest in terms of volume. And then when we look at soy, chicken is the biggest area where we need to examine our supply chain. Then, after we've come up with solutions for chicken, we'll look at other areas where there's embedded soy - dairy, eggs, beef (in some places as feed), pork - so there's a lot of areas where we'll have to look into how we use soy after 2020.

In addition to the actions you’re taking as a business within your supply chain, are there any other activities or programmes that you’d like to highlight which are part of the broader effort to address sustainability challenges – and why are those important to McDonald’s business?

McDonalds wants to meet its commitments on forests within our supply chain which we can operationalise, communicate and report on transparently.

But even if we meet our commitment as a company, we may continue to see deforestation in these in these high priority areas. Our ultimate goal is to stop deforestation. We know we need to do that because of the climate impacts, and people and the animals that rely on forests. This is important to our business and we want to focus on that larger impact, not only our supply chain metrics. That's why we engage in these industry partnerships because without moving the whole industry - having government involved, civil society, etc - without doing that work, we won’t make the change we need on the bigger issue.

We do that in a number of ways - we try to participate and use our position as a consumer facing company, and our communications abilities to send a market signal that this is important in our supply chain and that we care about it as a company. And that our customers and our investors are asking us to do this. So, it's important to our stakeholders.

The places that we do that is that we engage in multi-stakeholder platforms. For soy and other commodities, we're active in the Tropical Forest Alliance, which is a great forum that brings together private sector, non-profits and governments - which is a really important connection that can be difficult to do as a company alone.

We also engage in other forums, like the Collaboration on Forests and Agriculture that's being led by the World Wildlife Fund and a group of other NGOs. Then on soy, we were really proud to be involved in the Soy Moratorium, when it was put in place in Brazil, representing retailers who support the Soy Moratorium in the Amazon biome. We supported that agreement as it was continued indefinitely. So that's an example of how this kind of multi-stakeholder platform can drive real reductions in deforestation rates. We hope that that kind of work continues.

How mature do you think some of these sectorial collaborations are? How far do you think they are in terms of achieving the sectoral goals we want to achieve?

I think the indicator is how much deforestation continues to happen. We're seeing that those rates are down from previous years, which is great, but still on the rise compared to recent years.

I think we need to focus on that metric and that tells us that we still have more work to do. But having said that, I think the state of the platforms are much more mature than they were a few years ago. There are a lot of people, companies and governments involved. One thing that gives me hope is that I see them focusing a lot on action, not only about talking and meeting - which is very important - but also on what concrete actions every member of the platform take, as well as setting outcome-based targets, which I also think is very important.

What are some of the key drivers for fulfilling ongoing commitments and increasingly ambitious targets?

We set our commitment on forests in 2014, after we signed the New York Declaration on Forests, and that came out of conversations around climate. One of the reasons that we know it's important is that if we don't address the impacts of climate change, we won't be able to serve food in the future - and we're a food business. So, at its core, it's about resiliency, and making sure that our supply chain is strong in the face of crises.

I think the COVID-19 crisis showed us how fragile our food supply chains may be, and we know that there's more shocks to the system coming with the impacts of climate change. If anything, the importance of these issues has only risen over time which I think is good that companies continue to see it as very important.

We also do it because our stakeholders tell us that this is important to them. We know that it's important to our customers. Our investors regularly ask us about deforestation specifically, and also related issues like human rights and climate change. That pressure from civil society, from investors, from customers hasn't stopped. It's very consistent. It was the reason we set up the commitment in the first place. It's also the reason that we continue to make progress and we'll look at this seriously over time. I think once McDonalds sets a goal, we're very serious about meeting our goals but we also have this continued pressure and noise that this is important for all of our stakeholders.

What are some of the practical lessons learnt by your sustainability and sourcing teams along the responsible soy sourcing journey?

It's been quite a journey. When we set these commitments it was, and it still is in some ways, very aspirational as we did not have a template of how to do this work. A lot of work that's been done on creating definitions for example, and guidance for companies through groups like The Accountability Framework, which I think is fantastic, but didn't exist a few years ago. So, it really has been a journey where we've had to sort of jump in and try different things and see what worked. It’s led to some innovative solutions, so it's been a really helpful process.

But there has been a lot of work involved and there's a few key lessons that have come out of it. For me, one of the most important is to work with partners locally in the regions where the food is being produced because this isn't about a global multinational company telling people in Brazil, for example, how to produce food. This is about listening to people locally, so that we can tailor our expectations for what the reality is in that location.

One of the reasons we work with Proforest is because you have a strong local office in Brazil. We have people who speak English, Portuguese and Spanish and so we can engage with local stakeholders. I think that's really important. We also work with Agrotools, which is a Brazilian ag-tech company, who helps us do some of the big data and mapping - the technical sides that gives us the supply chain insights that we need.

Then we work with local suppliers, producer groups, and then also local civil society groups like NGOs that give us insights at the local level. Then, we communicate that knowledge so we can learn between countries and then at a global scale - it's not about trying to find a one size fits all band aid to locally relevant issues.

Another takeaway is that even a company as big as McDonalds cannot do this work alone. It takes a huge amount of partnership and we might report progress in one metric but actually it takes a ton of people - from the farmer, to our suppliers, to all of the external groups including Proforest, and all the multi-stakeholder platforms. There are many, many people involved in making any of this change. That partnership outside of the business and then inside the business is very important as well.

When I work at McDonalds, I'm working with buyers of food, people who work in our Treasury Department, people who work in our legal team, people who are specialised in food safety, everyone is involved, and it really is a collaborative effort to get this work done.

Given all of those lessons, what has been the biggest challenge? Is there anything that 10 years ago you thought might have been easy but has proved to be the hardest?

I think there are two things that are the biggest challenges. The first is making a market mechanism that is effective for sustaining the change we want. So, the biggest challenge still today is that a lot of the deforestation that is occurring, is illegal.

Making sure that we have anything illegal out of our supply chain is something obvious that we need to work on, but it requires local regulations, follow up and assurance. Legal deforestation (where people have the right to deforest) and the ones who are not are providing ecosystem services to society in the marketplace. The financial reward for that isn't yet clear. I think that that debate is still one that needs to be resolved and is a big ongoing issue.

In terms of McDonald's work specifically, you would think that understanding how much soy we use would be easy but actually, it took us years and years (and a lot of resources at work) to get an accurate picture of how much soy we use.

Part of the reason that's challenging is because of soy being an ingredient. We're not just purchasing soy directly - we don't have the specific volumes. Then, when you start looking at how soy is used in a global chicken supply chain, it becomes even more complicated because the soy used in a European chicken supply chain is maybe coming from different sources than a US chicken supply chain for example. The way that chicken is raised in Thailand is different than it is in Brazil, so we need to look at how much soy a chicken eats throughout its lifetime. Then what different types of chicken products we use in different parts of the world. That all changes how much soy is used.

We had to do a lot of research to understand the trade flows of soy because that traceability isn't there yet today. Then, we had to do a lot of work to create a calculator, which Agrotools helped us with. Proforest also supported us in being able to get an accurate picture of the soy in our supply chain. Now we know not an estimation based on academic research but based on a commercial supply chain at a global scale, how much soy we use in our chicken supply chain. That was a big challenge. We're there now and hopefully other companies can leverage some of what we've done, but it was definitely harder than we thought at the outset.

It's taken us a long time, but we will be reporting this year [on our global soy footprint]. We have been reporting estimates and now we'll be reporting a much more accurate picture going forward. We report through CDP Forests, then we'll also be reporting on our website on our Commitment on Forests page.

At the most basic, we communicate through the platforms I mentioned. Our website is always a place that we will post updates, and platforms like CDP we think are really important for reporting. It's great that there are places where companies can report consistently so that stakeholders can compare what companies are doing, and then companies [also] have consistency for year on year reporting.

We also share our learnings in other ways – in interviews like this is one example, or speaking at different conferences, especially multi-stakeholder platforms like the Tropical Forest Alliance. We're working on publishing some of the findings of the work we've done through different white papers. We're working with Proforest to be included in a Soy Toolkit case study where we share a little bit more detail on the work we've done. Then we also do things in person in different locations, which has been really helpful for us to be able to share what we've learned but then also to get feedback from others.

We were happy to host a workshop in November in 2019, in Sao Paulo, where we invited people from the Brazilian agriculture industry, academic institutions, non-profits, and our suppliers were there. We presented in a lot of detail the work that we've done on soy, so that we could share with other companies but then also get feedback from them. That was a great kind of workshop and something we'll continue doing. It was a great way for us to share what we've been doing and then evolve the work as well.

What does the next few years look like for McDonalds, given where you’ve got to so far?

We have a lot of work left to do, as I said, we had the 2020 commitment that focused on our five key commodities - so those are our biggest impacts in terms of volume and where we're sourcing.

Then we have a 2030 commitment to expand this work to our entire supply chain. Our entire supply chain is quite large and complex, so there'll be a lot of work to do to make sure that we meet our commitments in our supply chain.

The other area is addressing the bigger issue - that we actually help deforestation, which is the point of the work we're doing. So, thinking about engaging in the ways we have been engaging, but then also are there new things that we should be doing to try to tackle this issue? If what we've been doing the last five or 10 years hasn't been successful in getting the outcomes we want, are there new things that we want to work on? New partnerships? New mechanisms?

One area that we're looking at for example, is that we rely on soy as a protein in our chicken supply chain but there are ways to replace that protein with other sources. We’re working with our suppliers, like Cargill, to test alternative proteins in the chicken supply chain. We're doing research into using algae and insects in the chicken supply chain as a replacement for soy. Commercialising and bringing that to scale would be another area that we're looking at the problem in a different lens

For companies interested in furthering their responsible soy sourcing commitments, we are offering free training from the expert team behind the Soy Toolkit.

Please email us at soytoolkit@proforest.net and we’ll be in touch.