The true profit of a hamburger It has been reported (Harvey, 2015; see www.businessinsider.com.au/one-hamburgerenvironment-resources-2015-2?r=US&IR=T) that the creation of each McDonald’s hamburger requires about 660 litres of water – this relates to the consumption of water by the cow, and the water used to grow the pasture. In addition, each burger requires 6 kilograms of animal feed, which relies upon the farming of 6 square metres of land. In all, one Quarter Pounder burger also has a carbon footprint of almost 2 kilograms. Yet we only pay a few dollars for the burger. Let’s consider whether these externalities are being accounted for.

Are the externalities being accounted for in terms of the price being charged for a hamburger? The cost of feeding the cattle and looking after the land would be included in the price of the meat going into the hamburger – these would be considered the private costs that are captured within the price of the burger. But the externalities, specifically the water used, are not being fully accounted for, as most of the water is being treated as a free good. Methane emissions and the carbon footprint are also likely to be unaccounted for, as they do not constitute an immediate private cost either. However, as water scarcity increases in some areas, it is likely that the amount of water being used to generate the final product will tend to be accounted for more fully. While the water use and methane emissions might not be accounted for in financial terms, an organisation can elect to provide information to interested stakeholders about these factors. Although perhaps if the consumers of hamburgers knew this information, then they might decide to consume fewer burgers.

Are these hamburgers generating a profit? From a financial accounting perspective, McDonald’s is generating a financial profit, given that the water being used is probably being sourced at no, or very little, cost. If McDonald’s was to develop a more holistic notion of profit and treated the water as a real cost, as well as consider the impact of a hamburger’s production on climate change, then it would become arguable as to whether McDonald’s is generating a true profit at all.