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This blog focuses on four companies that are top global restaurant brands: McDonald's (NYSE:MCD), Starbucks (NASDAQ:SBUX), Dunkin' Donuts (NASDAQ:DNKN), and Yum! Brands (NYSE:YUM) (owns Pizza Hut, KFC and Taco Bell brands). Several Seeking Alpha contributors have written about these companies recently. I have provided some links (above) to articles that generated many comments, so you can get the context for the genuine debate among Seeking Alpha members about whether to buy, sell or hold investments in these companies.

My contribution to the debate is to provide currently available environmental, social and governance – or ESG – data for these four companies. Companies release corporate ESG data through annual reports such as the 10K and the corporate social responsibility (CSR) report. Bloomberg’s Professional Finance and ESG database (Bloomberg) is the source of the ESG data in the tables below is. Since 2009, corporate ESG data has been available through Bloomberg. If a company sees an error in their published corporate data, it should have a corporate representative contact Bloomberg and get it corrected, as it would with financial metrics.

Table 1: 2013-2009 ESG Disclosure Score Trends for MCD, SBUX, DNKN and YUM

COMPANY

2013

2012

2011

2010

2009

MCDONALD'S

40

30

32

32

30

STARBUCKS

33

35

35

35

27

DUNKIN' BRANDS

N/A

31

31

-

-

YUM! BRANDS

29

29

25

32

25

Source: Bloomberg Professional Finance and ESG Platform July 2014

Table 1 shows that McDonald’s leads the other brands when it comes to ESG disclosures. ESG Disclosure Scores (ESG D.S.) range between 0 (no disclosure) and 100 (full disclosure). N/A means the data has not yet been released yet. Just recently, MCD disclosed their greenhouse gas emissions, which undoubtedly raised its ESD D.S. for 2013. In fact, over the five-year period, MCD’s shows the highest rate of continual improvement compared to its top performing peers.

Bloomberg includes 36 public companies in MCD’s peer group. The majority have not disclosed key ESG performance indicators, preventing comparability among them. The average ESG D.S. for the 36 peers is 17. Chipotle (NYSE:CMG) (ESG D.S. = 19) and Panera (NASDAQ:PNRA) (ESG D.S. = 13) are included in MCD’s peer group, and although both companies have a reputation for serving quality food and sustainability, neither company has disclosed ESG data that allows them to be benchmarked with their peers. As a rule, when ESG D.S.’s are below 25, there is not enough ESG information to allow for benchmarking on ESG performance.

Table 2: Current Environmental KPIs for MCD, SBUX, DNKN and YUM

COMPANY

GHG Intens/Sls

Wtr Intens/Sls

Total Waste

Invest in Op Sust

MCDONALD'S

66

N/A

N/A

N/A

STARBUCKS

N/A

N/A

N/A

N/A

DUNKIN' BRANDS

20

N/A

N/A

N/A

YUM! BRANDS

N/A

N/A

N/A

N/A

Source: Bloomberg Professional Finance and ESG Platform July 2014

Both MCD and DNKN have disclosed total greenhouse gas (GHG) emissions, which includes Scope 1 and Scope 2 greenhouse gas (GHG) emissions. Scope 1 emissions measure GHG generated on-site due to the on-site combustion of fossil fuels. Scope 2 emissions measure GHG generated through purchased electricity from a utility. Once a company discloses its Total GHG Emissions, GHG Intensity ratios allow for comparability, such as GHG intensity per sales or per square foot.

Comparing MCD to DNKN on GHG Intensity per sales (Column 2), MCD’s GHG intensity is three times more than DNKN’s. This is not a surprising metric because MCD offers a wider range of cooked food choices than DNKN, and cooking food requires more energy. The risk, of course, of high-energy usage at a restaurant is its correlation to energy prices, which are historically volatile, and may result in higher prices to the consumer.

MCD and DNKN have also disclosed Scope 3 emissions, even though this blog does not provide them. Scope 3 emissions measure GHG generated by suppliers and corporate travel. For restaurant chains, the combined Scope 3 emissions of suppliers will usually exceed a company’s Total GHG Emissions (Scope 1 and Scope 2 combined) because GHG emissions related to meat, dairy, poultry, food, beverage, packaging etc. are energy intensive. Based on these ESG disclosures, good follow-up questions for MCD and DNKN are whether the companies have specific plans and targets to reduce GHG intensity from Total GHG Emissions. Also, how do the companies plan to work with suppliers to reduce Scope 3 emissions? On this last point, MCD has recently produced a supply chain report that may interest potential investors.

The ESG disclosures for Starbucks and YUM are a little strange. They suggest that both companies have measured and verified GHG emissions. However, Bloomberg does not credit either company with having reported Total GHG Emissions as a data point. Good questions for these two companies are whether they have measured and disclosed Total GHG Emissions and, if not, why not? Certainly, there are investors who would value ESG comparability between SBUX and DNKN or MCD and YUM.

The remaining KPIs for a company’s environmental footprint are Total Water Usage (Column 3) and Total Waste (Column 4). According to Bloomberg, none of the 36 securities has yet to disclose these ESG data points. We all know restaurants use water and sell water. When restaurants are located in water-deprived areas, water intensity as a percentage of sales can be a very provocative metric.

As well, none of the 36 securities discloses a budget for their investment in operational sustainability (Column 5). This metric is evidence of a company’s actual investment in energy and/ or operational efficiency improvements that help implement sustainability goals and reduce the intensity of a company’s environmental footprint. By not providing this metric, companies (perhaps unintentionally) communicate a lack of financial commitment to continual improvement in sustainable operations.

Further to our analysis, the data in Table 3 provides key social and governance metrics for the four companies.

Table 3: A Snapshot of Key Social and Governance Metrics for MCD, SBUX, DNKN and YUM

COMPANY

% Women Emp

% Women Mgt

% Women on Bd

Commun Spend


MCDONALD'S

N/A

28

23

$21,700,000.00

% Indep Directors

92

STARBUCKS

N/A

N/A

17

$12,747,000.00

92

DUNKIN' BRANDS

N/A

N/A

13

N/A

88

YUM! BRANDS

N/A

N/A

17

$60,000,000.00

75

Source: Bloomberg Professional Finance and ESG Platform July 2014

Table 3 shows that MCD, SBUX, DNKN and YUM have not yet disclosed the percentage of women or minorities employed in their workforce. Only MCD has disclosed a 28% representation of women in its management team. All four companies have disclosed the percentage of women on their boards, and MCD has the highest percentage at 23%. The four companies, except DNKN, have Equal Opportunity Policies. Good follow-up questions for all four companies are whether and how each company plans to provide equal opportunity training and experiences for employees that want to move into leadership roles.

When it comes to governance, MCD and Starbucks are leaders among their peers when it comes to board independence. YUM had the largest Community Spending budget in 2013, nearly three times that of MCD’s. The Community Investment metric is a proxy that measures companies’ financial commitment to the communities where they are located. Two key issues to consider with evaluating a public company’s community investment budget are: (1) whether its community spending priorities align and drive its sustainability priorities; and (2) is corporate governance sufficiently independent to insure that community spending dollars are not being allocated primarily for pet projects or marketing campaigns?

Who values this data? Investors seeking long-term investments in maturely positioned companies to absorb identifiable risks and opportunities value the data. Other stakeholders -- such as future and current employees and customers -- value ESG data, too. If you want a deeper explanation of this megatrend towards corporate disclosures, here is a PowerPoint on the subject.

Key ESG performance indicators are already developed and continuing to develop because investors find they serve as proxies to identify corporate risks and opportunities related operational efficiency, natural resource consumption, employee safety and opportunity, community relations, and sound governance.

Disclosure: The author does not hold a position in any of stocks mentioned in this article, and has no plans to change that position within the next 72 hours.

Source: How Do Global Restaurant Brands Compare On Environmental, Social And Governance Performance?