McDonald’s new strategy to bring renewable energy to its supply chain
In December, McDonald’s became the latest corporation to execute plans that reduce supply chain-related electricity emissions.
McDonald’s strategy: Ink a 189 megawatt (MW) virtual power purchase agreement (VPPA) with its five logistics partners, Armada, Earp Distribution, Martin Brower, Mile Hi Foods and The Anderson-DuBose Company.
The deal is the first time a corporation has served as an anchor buyer for an aggregation deal specifically for its suppliers, according to Enel, the company executing the arrangement. That means McDonald’s is shouldering much of the legal and contracting aspect of the agreement, streamlining the complex process for its suppliers.
“They enabled smaller loads and smaller supply chain partners to be a part of what would otherwise be quite difficult for those types of partners to do independently,” explained Marcus Krembs, Enel’s head of sustainability for the U.S. and Canada. “That’s what made this deal unique and a first in the market.”
Companies as convenors to catalyze supply chain decarbonization
McDonald’s is not the first corporation using its power as a convenor to reduce Scope 3 emissions (a.k.a. the indirect emissions not controlled by the reporting company). Increasingly, companies looking to decarbonize supply chains are providing resources and pressure to nudge suppliers to transition to clean energy.
According to Enel, these strategies are part of a larger trend in which corporations are aiming to catalyze more holistic sustainability benefits.
“They’re conveners, they’re creating that platform for the accessibility to suppliers,” said Krembs. “And we’re seeing that it’s not commoditized. While the interface is ultimately looking at electrons and RECs and other sort of commercial deal parameters, [the corporations are] looking for solutions and that value-add.”
Notable examples include:
Apple, which has a goal to decarbonize its global supply chain by 2030, is working to convert manufacturing partners to clean energy. The tech giant does that through providing resources and live trainings, as well as engaging with suppliers to “identify effective solutions for renewable energy and carbon removal.” According to the company, more than 200 suppliers have already committed to using clean power for their Apple production.
Walmart is targeting its Scope 3 energy emissions through its Project Gigaton, which strives to avoid 1 billion metric tons (a gigaton) of emissions by 2030. Among its initiatives is the Gigaton PPA, where the retail giant plays matchmaker with interested suppliers to sign onto an aggregation deal.
AB Inbev also works to bring suppliers together to address its Scope 3 emissions. In 2020 the beverage company launched its Eclipse platform to encourage its network to collaborate on shared sustainability goals, which includes water stewardship, circular packaging and smart agriculture.
Scope 3 emissions’ tricky math
Decarbonizing value chains is critical to addressing climate change. For most organizations, the vast majority of emissions are buried in Scope 3 — often accounting for more than 90 percent.
Organizations are increasingly calculating and setting goals to decrease these emissions, but it is a tricky business. Data is often hard to get and quantify, and buyers have limited ability to influence suppliers’ operations.
McDonald’s, for instance, has Scope 3 emission reductions that it outlined in its Science Based Targets Initiative. According to the company, this new, 189 MW deal plant in Texas “means the electricity load of McDonald’s USA’s entire logistics supply chain for all its U.S. restaurants is expected to be 100 percent supported by renewable energy.”
That is a commendable effort, and more companies should follow suit. But as we become more nuanced about understanding Scope 3, it’s worth unpacking the qualifiers of this statement.
- When McDonald’s says “electricity load,” that excludes fossil fuels, the primary energy source used to transport goods. What this covers (as McDonald’s clarified in an email) is logistic partners’ distribution centers/warehouses and other facilities.
- McDonald’s is referring to just the portion of these facilities that serve McDonald’s, not all of the suppliers’ operations. This is common in Scope 3 accounting. For example, Apple specifies its supply chain goals is to “decarbonize [manufacturing partners] Apple-related operations.” While overall a good thing, this pressure can sometimes lead to suppliers carving out environmental benefits and attributing them to one buyer, rather than decarbonizing operations.
- For McDonald’s, logistics is a small portion of its Scope 3 emissions. The majority come from beef and packaging. Those emissions are being addressed through other initiatives in McDonald’s climate action plan.
I pick this apart not to criticize the companies setting these goals, but to highlight the liberties taken in PR framing that imply giant leaps of climate action instead of the excruciatingly little steps from dedicated corporate leaders. Inching toward decarbonization is a slow business. So let’s treat ourselves to a McFlurry, then do more, faster.