Outcome: Successfully withdrawn following commitment to issue first sustainability report in 2017.
Managing and reporting environmental, social and governance (ESG) practices helps companies compete in a business environment characterized by finite natural resources, changing legislation, and heightened public expectations. Transparent, substantive reporting allows companies to gain strategic value from existing sustainability efforts and identify emerging risks and opportunities. Without proper disclosure, investors and other stakeholders cannot adequately determine how the company is managing these significant risks and opportunities.
Proponents believe that the recent E.coli outbreaks at Chipotle restaurants have damaged trust in the brand, warranting greater transparency about Chipotle’s supply chain management systems. Despite high profile and laudable commitments to “serving Food with Integrity” and environmental sustainability, Chipotle discloses very limited information on its policies and progress toward achieving these objectives.
These food safety issues have highlighted how supply chain management, food preparation practices and employee relations issues intersect and drive value for Chipotle. Further, food safety concerns may impact implementation of company commitments to fresh food and local sourcing, which are core to the value of the brand (“Chipotle Eats Itself”, Fast Company, October 16, 2016).
A 2012 Deutsche Bank review of 100 academic studies, 56 research papers, two literature reviews, and four meta-studies on sustainable investing found 89% of the studies demonstrated that companies with high ESG ratings showed market-based outperformance.
Corporate responsibility reporting is now a mainstream business practice worldwide, undertaken by seventy three percent of 4,500 companies surveyed in 2015 (KPMG). The Governance and Accountability Institute reports that 81% of the S&P 500 published a corporate sustainability report in 2015.
McDonald’s, Darden Restaurants, Dunkin Brands, Panera, YUM! and Starbucks publish sustainability reports.
Shareholders request Chipotle issue an annual sustainability report describing the company’s short- and long-term responses to ESG-related issues. The report should include objective quantitative indicators and goals relating to each issue where feasible, be prepared at a reasonable cost, omit proprietary information, and be made available to shareholders by October 2017.
The report should address relevant policies, practices, metrics and goals on topics such as: supply chain management, food safety, greenhouse gas emissions, pesticide use management, waste minimization, energy efficiency, labor standards and practices, and other relevant impacts.
We recommend Chipotle consider using the GRI Sustainability Reporting Guidelines to prepare the report. The GRI Guidelines are developed with representatives from the corporate, investor, environmental, human rights and labor communities, and cover environmental impacts, labor practices, human rights, product responsibility, and community impacts. The Guidelines provide a flexible reporting system allowing Chipotle to report on those areas most relevant to its operations. Seventy two percent of reporting companies worldwide apply GRI reporting guidelines in stand alone corporate responsibility reports (KPMG).
Chipotle should also evaluate the Equitable Food Initiative, a collaborative effort of retailers, workers and growers focused on reducing risks in food supply chains, including food safety risks. Its standard was adapted to reduce duplication of other industry-leading certifications. Costco and Bon Appetit are project partners.