This article is part of our Rising Star Portfolios series.
Socially responsible investing considers topics far removed from simple price-to-earnings ratios or short-term profit growth. In their search for truly ethical companies, socially responsible investors highly rank businesses that work to eradicate cruelty from their operations.
According to a recent survey by Chicago food research firm Technomic, more than half of consumers consider animal welfare one of the most important social issues in the food business. Films such as Food Inc. and authors such as Peter Singer and Michael Pollan have been increasing interest in the ethical ramifications inherent in the business of what we eat and how it was raised. After years of development, Whole Foods Market (Nasdaq: WFMI) recently teamed up with Global Animal Partnership to roll out companywide animal welfare ratings for its meats.
Free birds!
Growing trends like this one aren't limited to companies with progressive reputations.
In mid-January, the Humane Society of the United States honored several well-known companies with Corporate Progress Awards. These awards recognize companies that have made solid progress toward reducing animal suffering in their supply chains. Among the honorees:
- Burger King became the first major fast-food restaurant chain to implement animal welfare policies that reduce factory farm abuses, including cage confinement of egg-laying hens.
- Subway vowed to switch to 100% cage-free eggs for its food offerings, a pledge it has already fulfilled in the U.K.
- Royal Caribbean (NYSE: RCL) was the first cruise line to start using cage-free eggs, which prompted its rivals to do the same.
- Unilever (NYSE: UL) hopes people will take a pass on the guilt instead of holding the mayo, by switching all the 350 million eggs it uses in Hellmann's mayonnaise to cage-free eggs.
- Food service company Compass Group received the award for its "Be a Flexitarian" initiative; it encouraged its chefs to devise more vegetarian offerings, and to spread the word to consumers about the benefits of incorporating more plant-based meals into their diets. When it comes to the treatment of egg-laying hens, Compass Group was ahead of the pack: It switched to cage-free eggs for U.S. customers in 2007.
Stuck in cages and crates
The Humane Society of the United States is no stranger to shareholder activism, and its efforts to work with companies to increase awareness and focus on animal welfare are clearly bearing fruit. However, some companies are making more progress than others.
McDonald's (NYSE: MCD) has curiously failed to take meaningful steps forward in areas such as switching to cage-free eggs. Although it does use 100% cage-free eggs in Europe, it uses no cage-free eggs in the U.S.
Pork producers Hormel (NYSE: HRL) and Tyson (NYSE: TSN) aren't particularly progressive in this area, either; they continue to use gestation crates in states that allow them. These enclosures, used for breeding pigs and veal calves, are so tiny that the animal can barely move, leaving many inhabitants immobilized for their entire lives.
Seven states have banned these inhumane farming methods, and some companies, such as Whole Foods Market, Chipotle (NYSE: CMG), and Wolfgang Puck, don't sell or use pork produced in this manner. The Humane Society, which owns stock in Hormel in order to address these issues, last week announced plans to question the company about gestation crates during its annual shareholders' meeting.
No pain, no shame
With more consumers weighing the implications of factory farming, more and more companies are exhibiting a change of heart. We investors can push for such changes, too. Innovation drives our marketplace, and devising ways to profit while avoiding negative, damaging, or cruel repercussions on the world around us is a path to good, pain-free long-term profits.
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