This article is part of our Rising Star Portfolio series.
McDonald's (NYSE: MCD) did the right thing when it fired egg supplier Sparboe Farms, but it's too bad it waited until the ugly truth came out. Being a reactionary instead of a visionary tarnishes the Golden Arches.
The Food and Drug Administration issued a warning letter last week to Sparboe Farms regarding major violations found in five facilities in Iowa, Minnesota, and Colorado. The FDA's charged with protecting U.S. consumers from food-borne illnesses like salmonella, and these facilities were reportedly dirty and elicited this diplomatic but dreadful description: "unacceptable rodent activity."
There's even more unacceptable (and unappetizing) news. An animal rights group infiltrated Sparboe Farms and recorded ugly incidents, like hens housed with dead ones, living chicks trashed along with deceased peers, and worker testimony about animal torture.
Even before this news, McDonald's has been slow to transition to cage-free eggs. Early this year, the Humane Society awarded Corporate Progress Awards to companies like Unilever (NYSE: UL), Royal Caribbean (NYSE: RCL), Subway, and Burger King for switching to cage-free eggs, and companies like Kraft (NYSE: KFT) and Sara Lee (NYSE: SLE) have made progress, too.
Meanwhile, McDonald's recently made the spotlight regarding its pork supplier Smithfield Foods (NYSE: SFD) (just in time to make Mickey D's limited-time McRib launch a lot less appetizing). The Humane Society of the United States filed a legal complaint with the Securities and Exchange Commission, accusing Smithfield of making false claims about its animal welfare and environmental policies. Smithfield still uses gestation crates for its breeding sows.
McDonald's has incorporated corporate social responsibility initiatives into the Golden Arches. It's implemented some interesting things, such as opening a few green restaurants here in North America. It's also worked on initiatives related to sustainable fish and palm oil sourcing.
Animal welfare resides under McDonald's general corporate social responsibility umbrella: "McDonald's cares about the humane treatment of animals, and we recognize that being a responsible purchaser of food products means working with our suppliers to ensure industry-leading animal husbandry practices. Our approach is based on our Animal Welfare Guiding Principles, which express our commitment to ensuring that animals are 'free from cruelty, abuse and neglect.' "
A company as large and influential as McDonald's could be a leader, but it's out of step here. Animal welfare fits within the factors at play when I examine stocks for my socially responsible Rising Star portfolio. The fact that McDonald's lags in a few such areas blocks it from my radar as a socially responsible stock purchase.
