Tesla, a company with a market capitalization of more than US$1tn, recently announced its breakthrough 2021 profits of US$5.5bn. Yet there is trouble in the company’s supply chain. ESG - environment, social and governance - is a term used in sustainability circles, which pushes for positive change. Here is where Tesla has a few problems.
Electric vehicles are an integral part of the world’s transformation against fossil fuel dependency.
EVs, such as Tesla, need cobalt, a mineral found in the troubled Democratic Republic of Congo (DRC), which independent reports have verified gross human rights violations at cobalt mines, including:
- Child labour
- Worker exploitation
- Safety hazards
- Unstable working environments
Despite the need for cobalt, this supply chain issue is a huge one for ESG and Tesla must work with independent parties to verify where its materials come from and that all supply chain workers are supported.
Climate change changes things
Well, climate change is a problem for everybody not working in the renewable energy sector.
ESG investing has grown massively over the past 15 years and it has focused on climate change. Asset managers, such as BlackRock and Vanguard, hope to attract investors to funds marketed as ‘socially responsible’ while still being able to provide big returns. The value of such assets invested like this topped US$35tn worldwide in 2020 and it is expected to rise to US$50tn by 2025, representing almost one-third of all projected assets under management.
The question is, with everybody fearing climate change and joining in ESG investment, will other EVs take over Tesla (probably not…).
The bigger question is whether society would care about ESG at all, if it did not have the threat of climate change to motivate sustainable transformation.