A LOT OF McCUPS

To use a concrete example, let’s say that it’s early 2011 and you own $2,000 worth of McDonald’s stock. Every morning before work, you go through the drive-in and get an Egg McMuffin, hash browns, and a McCafe caramel mocha latte.

At work, you finish your coffee and, since the polystyrene foam cup is not recyclable, toss it in the garbage can—its first stop on the way to the landfill. You recall that McDonald’s got rid of the foam clamshell years ago—in 1990, in fact—and wonder why they’re still using cups made of the same material. Foam keeps the coffee warm, and it’s probably cheap to manufacture, but isn’t foam made of polystyrene, a petroleum-based plastic? Doesn’t it last forever, just crumbling into smaller and smaller bits that are ingested by birds and fish? Hasn’t the styrene used to make the cups been cited as a possible carcinogen?

The next morning at McD’s you ask if they have any other types of cups—maybe one that doesn’t break down into harmful particles of resin and can be more easily recycled? They tell you no, that’s it.

Later that day, you do a little research and learn that for their 68 million daily customers, McDonald’s is using foam cups at 35,000 restaurants in 118 countries! You also see that they have no recycling program (other than for cooking oil), and you do the math. It comes to about 770 million foam cups per year in the United States.

The next day, rather than go through the drive-through window, you go into the restaurant and ask some of the other customers if they think it would be a good idea for McDonald’s to switch to a more environmentally friendly coffee cup. Several of them like the idea. You bring this information to the manager, who says she’d like to switch, but it’s a franchise, and she must buy her supplies from McDonald’s. What power does she have?

You leave discouraged. As you drive to the office, it seems like every other person on the road is sipping from a foam cup. Throughout the day, you can’t stop thinking about those billions of cups strewn across the beaches of the world. You calculate that the Great Pacific Garbage Patch, which consists of small bits of plastic suspended throughout the water column now estimated to be twice the size of Texas, just keeps getting bigger. Finally, you had heard that the World Economic Forum predicted that there will be more plastic than fish, by weight, in the world’s oceans by 2050!

The following morning you wake up with a brilliant idea: maybe you can get all of the owners of McDonald’s stock, like you, to vote on the idea of switching to a greener coffee cup. Like you, the other shareholders probably believe McDonald’s is a company destined to grow over the years. All those cups going to the landfills bother you and present a risk to the company. Also, as a shareholder, you feel it’s bad for the company brand to be associated with this toxic mess, because if people knew what was happening, that could drive the value of your shares down. Using foam cups when something better is available also shows that management is not thinking about the big picture, and you can’t help wondering what else they’re not considering.

But almost as soon as the idea to ask the company to use a more environmentally friendly cup occurs to you, you dismiss it. How would you get in touch with all the owners of the stock? And who would listen to your proposal, anyway? After all, you own just $2,000 worth of stock, and the company is worth more than $115 billion.

The fact is, you’re in luck. As the owner of even $2,000 worth of stock that you have held for a year, you have the right to submit a shareholder resolution, which by law, if properly written, the corporation is obligated to put to a vote of all of its shareholders on the company’s shareholder proxy or ballot at their annual meeting.

This is exactly what happened in 2011 at As You Sow, the nonprofit organization that I lead.

After a dialogue asking McDonald’s to fix the problem went nowhere, we filed a shareholder resolution, asking the company to replace polystyrene cups with more environmentally beneficial ones. Our mission is to increase environmental and social corporate responsibility and engage companies on critical issues. These engagements often lead to filing a shareholder resolution, one of the strategies we employ to motivate corporations to act more responsibly.

Led by our Senior Vice President, Conrad MacKerron, who specializes in issues of sustainability and waste, we felt that McDonald’s needed just such a push. The company had switched away from polystyrene clamshells in 1990, so they clearly understood how switching to a less harmful cup could improve their sustainability and enhance their brand.

McDonald’s had never faced a shareholder resolution about this issue, and that was the game changer. The resolution came up for a vote and was approved by 29 percent of the shareholders.

Voting on shareholder resolutions is different than a standard political vote. If you were running for mayor and got only 29 percent of the vote, you’d likely consider it a failure. But think how a publically traded company would react to a hedge fund or a single shareholder who owned 29 percent of its stock. Such a person would likely be on their board and have enormous clout. Also the vote was a nonbinding recommendation to the company. The fact that a large minority of its shareholders voted in favor of moving away from harmful materials and avoiding the risks associated with it sent an important message to the company.

The vote brought McDonald’s management to the table for discussions, yet over the course of a year, they still had not taken any real action, so the resolution was filed again. This time, however, the shareholder action got more attention because of a successful campaign in California led by Clean Water Action, the SurfRider Foundation, and other local groups. The effort cosponsored groundbreaking legislation and helped support grassroots leaders to pass 65 local ordinances to ban polystyrene in restaurants. The California effort gained significant national press attention, and combined with shareholder pressure, was enough that McDonald’s agreed to a pilot program, swapping out foam for recyclable cups in 2,000 West coast locations. In exchange the resolution was withdrawn because the company “indicated its intent to take several positive, substantive steps in response to our concerns about use of polystyrene foam-based beverage cups and lack of a comprehensive recycling policy for on-site beverage and food containers.”

The pilot was a huge success with customers and in the press. A year later the program was rolled out to all 14,000 US stores. It also set a goal to reduce food and packaging waste by 50 percent in several top markets by 2020 that will require increased recycling efforts. McDonald’s periodically reports the results of its ongoing efforts to reduce packaging waste and the deployment of more environmentally responsible materials. It has a significant incentive to expand and improve its packaging stewardship programs, actions that are perceived positively by both shareholders and the public. Additionally, the positive brand image has huge value for the company—a win for McDonald’s, its shareholders, and the planet.

This is just one example of how active shareholders can step forward to present an opportunity for a company to shift a policy or adopt a better business plan and then lead an industry. Often it is a shift that management may not be considering but that will ultimately benefit the company in many ways. At the same time, shareholders, employees, and other stakeholders enjoy increased share value, and the environment gets a break, too.