Externalities & impact
To guide the transition towards a sustainable and inclusive economy, the United
Nations has developed the 2030 Agenda for Sustainable Development. The 17 UN
Sustainable Development Goals (SDGs) stimulate action over the years 2015-2030
in areas of critical importance for humanity and the planet. This should result in a
serious reduction in negative externalities. The corporate sector too is increasingly
working on the internalisation of externalities, which is a threat for some and an
opportunity for others (e.g., Schramade, 2017). However, even if the SDGs are
achieved, that does not guarantee that we stay within the planetary boundaries
identified by Steffen et al. (2015) – beyond which climate may change so
dramatically that life on earth becomes hard if not impossible.
3.3. Does the company generate serious externalities? Are they
positive or negative? How do you assess the chances of these
externalities to be internalised?
McDonald’s produces two seriously negative externalities:
1. Negative health effects;
2. Negative environmental effects.
Both these effects help make McDonald’s (meat) products artificially cheap, which
is not a sustainable situation.
NEGATIVE HEALTH EFFECTS
McDonald’s is famous for its burgers and fries, but such food is unhealthy, adding
to unbalanced diets and high rates of obesity and diabetes – which are on the rise
globally. Moreover, the use of antibiotics makes meat cheaper to produce but also
even more unhealthy for consumers. The latter is now being addressed as
McDonald’s recently announced a plan to reduce the use of antibiotics in its
supply chain . However, even after the removal of antibiotics, most of McDonald’s
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products are still unhealthy. That externality is likely to be internalized in two ways.
First, consumer awareness of unhealthy eating habits is on the rise, with rising
demand for healthier food in developed markets. So far, however, the impact on
McDonald’s has been small as such awareness is mostly limited to a subset of
consumers that isn’t part of the company’s core customer base. In fact, the
company’s experiments with healthier food have large been unsuccessful for that
very reason. Those experiments though, do show that McDonald’s has significant
optionality to deal with this threat. The same applies to the emergence of
suppliers of meatless burgers, such as Beyond Meat, which recently made
successful stock market entries.
The second way for this externality to be internalized is regulation. Governments
might impose stricter requirements on the nutritional value of food quality, or
even levy taxes on salt, fat and sugar. Such measures would lead to higher input