Monday, March 2, 2009

Is CSR the industry's next big issue?

Welcome to the new frontier for the restaurant industry, and its big players in particular. Of course you’d never know that from the turnout of foodservice concerns at this first-of-a-kind meeting, a conference on corporate social responsibility. Representation from the trade amounts to two companies: McDonald’s and Sodexo, the giant contract catering concern. And Sodexho was thwarted from attending today’s event, where I’m writing this, by the snowstorm that hit New York City.

Full disclosure: I was only there because my wife works on conferences for the Financial Times, the event’s presenter. Indeed, I kept stumbling over the topic. Corporate what? Isn’t that the same as being green? And how much social investing is actually being done? It can’t be a big deal, right? And if it is such a major emerging trend, wouldn’t the restaurant industry be aware of it?

My ignorance was promptly corrected, and not for the first time.

Corporate social responsibility, or CSR, is already a familiar term in plenty of other businesses. Not so within foodservice, or at least not yet. Yum! Brands, the parent of Taco Bell and Pizza Hut, generated headlines in the trade media when it issued a CSR report in December, detailing what it’s doing in areas ranging from sustainability to sourcing, transparency in governance, hiring practices, community involvement and fighting obesity.

As usual, McDonald’s is also taking a leadership position on the matter.

Once you get past a handful of forward-thinking concerns, there’s virtually no talk of CSR, just a discussion of two important components, sustainability and workforce diversity. That’s puzzling, given the industry’s pride in being part of the social fabric, a veritable cornerstone of the community and economy.

That inattention could be a problem. As speakers here at the conference repeatedly stressed, more and more investors are now evaluating CSR in deciding what companies get their money. A keener interest is also evident among consumers. Employees, too, especially the generations marching behind the Baby Boomers. Wal-Mart, for instance, now works with its employees to help them identify and pursue a personal sustainability program, a component of the retailing giant’s ambitious CSR effort, as a speaker explained from the podium.

Indeed, CSR seems to be of as much interest within the larger business community as sustainability currently is in foodservice. It’s only a matter of time until restaurant operators realize that CSR isn’t a hit TV series.

“It is not a genie that’s going back in the bottle. It’s part of the new world we’re facing,” said Tim Smith, a senior vice president of Walden Asset Management, a socially responsible investment firm that handles a $1.7 billion portfolio for institutions and wealthy individuals.

One speaker noted that New York City and Florida, among other jurisdictions, now have CSR questions on the forms all fund managers have to fill out when they hope to handle any of the government's institutional funds, like pensions. The forms ask about the managers' social-responsibility investment strategies--what criteria they use to pick the companies whose securities they're willing to buy. If a restaurant concern didn't meet those standards, it's out of consideration.

Because the topic encompasses so much, from sourcing to packaging to board composition, and preoccupies investors as well as staff and patrons, it promises to hit foodservice with a wallop. Part of the impact, I fear, will be sheer surprise.

Fortunately for the business, much of the content at the conference dealt with the fundamentals of CSR—sourcing with social responsibility in mind, what socially responsible investors look for, how CSR can be pushed forward, what coalitions should be formed, and what all stakeholders could do to promote social consciousness in business. Much of the content dealt with sustainability, an aspect familiar to restaurants.

But the conference left no doubt that more and more restaurant companies will be forced by the attention of Wall Street and Main Street to make CSR a part of their vocabularies.

“It not something that’s nice to have. It’s not a new philanthropy. It’s not something that falls by the wayside when times get tough,” remarked an executive of Merck & Co., the pharmaceutical giant. It’s a new business reality, she stressed.

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