A Blog by Jonathan Low


Mar 6, 2014

The Reason Chipotle's Warning of a Climate Change Threat to Guacamole Is News

For those who are not under the age of 35 or dont have children in that demographic, Chipotle is a wildly popular US restaurant chain that sells large portions of healthful, Mexican-oriented food. It has assumed pride of place over certain fast food alternatives because the food is prepared on site and is at least ostensibly better for the diner, calories aside.

Chipotle has become something of a cultural icon so when, in an annual filing with the US Securities and Exchange Commission (SEC), it mentioned the potential impact of climate change on the availability of the avocados that provide the basis for its justifiably famous guacamole, people took notice.

There was some controversy as those opposed to the very concept of climate change attempted to downplay the significance of Chipotle's announcement. As the following article explains, some charged that this was simply one of many routine potential risks the company is required to cite, along with foot-borne illnesses and business competition.

Others, however, noted that this was the first time the company had ever mentioned climate change in any of its required public filings, despite the fact that it is dependent on agricultural products for its core ingredients. What this suggests is that companies like Chipotle are beginning to assess the potential harm to their economic prospects posed by changes in the environment. The implication is that this is no longer a political or moral or ideological or philosophical issue: its an economic threat and, perhaps even more important to many in Chipotle's customer base, its becoming a matter of taste. JL

Emily Atkin comments in ThinkProgress:

The fact that Chipotle openly acknowledges climate change, even as a “routine risk,” is news — as there are likely companies that wouldn’t mention the words “climate change” if their business depended on it.
Climate Progress broke the story of Chipotle Inc.’s guacamole warning. If weather events “associated with global climate change” continue, the company said, the availability of some of its ingredients may dwindle. If that happens, Chipotle said it might choose to take products like guacamole or salsa off the shelves, rather than dish out extra money to provide them.
When Climate Progress reached out to Chipotle, spokesperson Chris Arnold told us that Chipotle’s guacamole warning — made in its annual 10K filing with the Securities Exchange Commission — was a “non-issue.”
“It’s routine financial disclosure,” Arnold said in an e-mail. “Nothing more than that.”
Questions were then raised by Business Insider’s Ashley Lutz, who after receiving a similar statement from a Chipotle spokesperson, wrote a post that agreed with the company’s assessment. “Risks like labor costs, food-borne illnesses, and competition from other businesses are also mentioned by Chipotle [as risks],” the story read. “In other words, this would be like writing a story saying that eating Chipotle could give you food poisoning.”
In one sense, Chipotle and Lutz’ assessments are correct — a public company listing risks in its annual SEC report is not only routine, it is legally required. News publications don’t generally write articles when companies warn their investors of food contamination risks, earthquake risks, or the risk of a terrorist attack. Those are normal disclosures of risk. So why write about the risk of climate change? Why alarm everyone about guacamole when it’s such a routine thing?
The answer is simple. Last month’s report from Chipotle was the first time the company has ever mentioned the words “climate change” in an annual report. The fact that Chipotle openly acknowledges climate change, even as a “routine risk,” is news — as there are likely companies that wouldn’t mention the words “climate change” if their business depended on it. And they do.
“Business understands the concept of dealing with risk, and climate change is the mother of all risks that we’ll face this century,” PricewaterhouseCoopers, the global business consulting and accounting firm, has said. “For business it is not about arguing with scientific consensus; it is about understanding the scale of the risk. This is about simple business risk and planning: where can you invest, how can you protect your infrastructure, where can you source supplies; what is the cost of commodities, what’s your plan B?”
Chipotle’s announcement is certainly not the first time any company has publicly acknowledged the risk of climate change. CDP, formerly known as the Carbon Disclosure Project, released a report in September that details which of the world’s largest U.S. listed companies are doing the best job to transparently make investments to cut greenhouse gas emissions and prepare for climate change. Climate Disclosure Leaders include News Corporation, Home Depot, Bank of America, and Johnson & Johnson.
When the effects of climate change are disclosed as a risk in a company like Chipotle’s annual 10K report, the definitive phrase “climate change” is not generally used. Other public companies that, like Chipotle, use some fresh ingredients — Jack in the Box, Ignite Restaurant Group (owners of Joe’s Crab Shack), and Nathan’s Famous Hot Dogs — all list weather and climate as risks, but don’t say the phrase outright.
Jack in the Box lists the possibility of “systemic or widespread adverse changes in climate or weather patterns,” which could result in vague “losses.” Joe’s Crab Shack says it is “susceptible to increases in food costs as a result of factors beyond our control, such as weather conditions (including hurricanes) [and] oil spills.”
Out of the three, Nathan’s comes the closest to specificity: “We purchase large quantities of beef and our beef costs in the United States represent approximately 80% to 90% of our food costs,” the company’s filing says. “The market for beef is particularly volatile and is subject to significant price fluctuations due to seasonal shifts, climate conditions such as last years’ drought in the Midwest, industry demand and other factors beyond our control.”
None of those disclosures say “climate change” outright, and they don’t threaten to take any of their ingredients off the menu because of it. Chipotle had both the business and scientific sense to disclose climate change as a risk, and suggest ways it could adapt to it. That is anything but routine.


Anonymous said...

Man made climate change is a myth. Weather patterns alter continually in the short medium and long term. Oceans were deserts and deserts were once oceans, it may be possible for humankind to affect weather patterns scientiffically and affordable renewable energy should be the goal of any civilised society.
Taxing the worlds population to line the pockets of climate change zealots and single interest groups is criminal. If its going to rain it will rain, learn to live with it, Mother Nature has a way of balancing things out.

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