This article is part of our Rising Star Portfolio series.
I'm on the lookout for socially responsible companies for my Rising Star portfolio. The definition of a socially responsible company can include many aspects, but cruel profits knock stocks out of the running. Companies that fall back on inhumane treatment in the quest for profits simply don't make the grade.
The Humane Society of the United States frequently engages in shareholder activism against companies that use cruel methods that have become synonymous with factory farming's dark side. Its most recent shareholder resolution campaign targets pork producer Seaboard's (AMEX: SEB) use of gestation crates for pigs.
Gestation crates basically keep breeding sows immobilized for their entire lives until they are finally slaughtered. These crates are so confining the pigs can't even turn around; use of the crates is also linked to health issues such as weakened bones, urinary tract infections, overgrown hooves, and lameness. That's a terrible kind of life to lead on the way to our plates.
Interestingly enough, the HSUS also pointed out that an Iowa State University study came to the conclusion that group housing for breeding pigs isn't simply more humane, it's also more economical. In other words, such cruel paths to profits may not even be as profitable as die-hard factory farmers may prefer to believe.
Many major companies are backing away from using pork that has been bred in this atrocious manner; Whole Foods Market (Nasdaq: WFM), Chipotle (NYSE: CMG), Wendy's (NYSE: WEN), Sonic (Nasdaq: SONC), and Safeway (NYSE: SWY) are among the major companies that are trying to take the pain out of the pork products they distribute. The HSUS also pointed out that even Seaboard rivals Smithfield (NYSE: SFD), Cargill, and Maple Leaf Foods are starting to transition away from gestation crates.
Fast-food giant McDonald's (NYSE: MCD) may join Seaboard in seeming backward and behind the times on this issue. Although the fast-food giant's own animal welfare advisor, Dr. Temple Grandin, has said, "Gestation stalls have got to go," HSUS senior director of farm animal protection Paul Shapiro points out that McDonald's has failed to make headway in making its pork supply cruelty-free . The organization hopes Mickey D's will put this at the top of its agenda soon; its shareholders should hope so, too.
Why? Because these issues truly matter to many consumers, and awareness is growing. The American Farm Bureau recently found that 89% of Americans believe food companies that expect animal welfare from suppliers are doing the right thing. Food industry consultant Technomic also found animal welfare was the third most important social issue to restaurant patrons.
Cruel profits aren't good profits. Socially responsible investors expect better, and shareholders like HSUS advocate for more positive profits in the world.
