Chipotle incentivizes executives to support farmers going organic — and it's upped the stakes

• Chipotle recently increased its executive bonus potential from 10% to 15%, based on how well the company does against its environmental, social, and governance goals.
• The restaurant chain's community initiatives focus primarily on helping farmers transition to organic farming.

When companies set out to help communities prosper, it's essential that their executives are truly on board.

Chipotle Mexican Grill ties its executive bonuses to progress toward its environmental, social, and governance (ESG) targets. The bonus scheme is just part of an overall culture shift that has refocused the company on its commitments to all its stakeholders.

In February, the company raised the bonus potential for its leaders from 10% to 15%, based on how well the company meets is goals across a range of categories, including reducing emissions, improving diversity, equity, and inclusion, and increasing the amount of local and organic food it serves in its restaurants.

Chipotle is into its second year under this bonus structure, and Marissa Andrada, chief diversity, inclusion, and people officer, said transitioning to it wasn't as hard as one might have expected. "For us, it's this really big commitment to living out our purpose," she said. "It's only natural that we actually put our money where our mouth is and hold ourselves accountable."

Andrada credits the culture change that took place after CEO Brian Niccol took over in 2018, following a difficult period for the company where it faced food-safety problems that resulted in sales declines. "We layered in people with integrity [into the company]," she said.

Sustainability goals are interlinked. In order for sustainability initiatives to be effective, they have to reflect the company's own culture. If a company lacks diversity, its opportunities to innovate and drive sustainability can be more limited. Diversifying the company's leadership ranks was one of Niccol's early goals.

"Our old leadership wasn't very diverse," said Andrada. "We made the decision to do a hard reset." Chipotle moved its headquarters from Denver, CO to Newport Beach, California the same year that Niccol joined, in part so that it could attract top talent. Andrada said the company enlisted a network of minority- and female-owned boutique search firms to fill leadership positions and has increased diversity at the leadership levels by 50%.

Focus on the farming community

Supporting farmers is Chipotle's primary community imitative, and its inception actually predates Niccol's tenure. But the programs have accelerated since then, as have the problems that farmers face.

"Over the last several years, US agriculture lost 40 times more farmers than it gained, challenging the future of small and mid-sized farms throughout the country," Chris Brandt, Chipotle's chief marketing officer,said. "Chipotle sources more local produce than any other national restaurant brand and our ability to serve real food relies on these local farms."

Lena Brook, director of food campaigns for the nonprofit advocacy group NRDC (Natural Resources Defense Council), has been following Chipotle since 2015 when it led the fast-food industry in the use of antibiotic-free beef and chicken.

"They have been an early adopter for the industry. Now their work on organic farming and their support of farmers is using procurement to positively impact local and regional economies and food systems," Brook said. "Given the state of our world, their procurement practices are also helping with food security."

In the sustainability report update, Chipotle said it has so far spent $1.3 million on the next generation of farmers as part of a five-year, $5-million commitment. It increased the total pounds of produce purchased from local farmers by more than 4.7 million pounds between 2020 and 2021.

Brandt said the company also partnered with growers "to convert 110 acres of conventional farmland to organic farmland via transitional growing methods in 2021."

Chipotle also offers three-year contracts to young farmers, including beef, pork, and dairy. Brook says farms need to be managed organically for that length of time in order for their crops to be certified as organic.

"Three-year contracts help mitigate the risk for young farmers looking to transition to organic," she said. "The longer-term contracts take the risk out of farming, and provide that incredibly important stability to keep them farming."

Julia Hood contributed reporting to this story.