Chipotle’s Road to Redemption is Rocky

 

Photo: Tech Times

 

Last month, I wrote about ways for Chipotle to redeem itself following the devastating norovirus and E.Coli outbreaks in several of its branches in 2015. One of the three ways is through increased transparency. A company that has been through a crisis cannot afford to remain insular and closed off; investors want to know if it is doing all it can to address its problems.

Yet, on 25 March, news media reported that Chipotle’s board of directors are opposing a shareholder proposal for the company to release a sustainability report. The Denver Business Journal reported that the board wrote the following in a SEC filing:

“Chipotle has made a deliberate decision not to report in this fashion, preferring to devote our resources instead to taking actions, adopting practices, and communicating these efforts in areas that have a positive impact on the sustainability of our business… We do not believe that a separate effort to generate, distribute, and update comprehensive reporting on our sustainability achievements represents an efficient or prudent use of our resources. … We believe that preparing a sustainability report of the type proposed would involve significant additional expense and distraction, diverting time and resources from activities that can have direct benefits on the profitability and sustainability of our business.” 

It is true that any type of public reporting entails additional resources for a company, however, if the company already allocated resources for its regulatory filings and other types of communications, why not add a sustainability report to its report portfolio? At this rate, investors are largely interested in the Chipotle’s main issues so a sustainability report that address two to three main issues, such as supply chain management and labor, for example, would already be meaningful. Companies do not need to report on every single sustainability metric in the planet. For most investors, reporting on the main issues a company faces is more than adequate.

Chipotle has aggressively tried to woe back customers with a marketing campaign focused on free burritos. The free burritos may cost the company $60 million in sales but have not really lured back the pack to its fold. The company’s stock price continues to be below $480, suggesting that confidence in the company’s ability to bounce back to pre-crisis revenues continues to be low. With such prospects, isn’t the company better off allocating resources to a report that may bring back the public’s confidence in its food, rather than using them to oppose a well-meaning shareholder proposal?

 

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