Antitrust regulator softens in the name of EU green deal

Greetings from New York, where it feels like spring in every sense: the sun is shining and as more people get vaccinated (including myself — hooray) a sentiment shift is under way. Could we be about to see a similar mood shift in the global battle to control climate change?

Next week will deliver one key clue when the Biden administration hosts its climate summit. Before this, however, there is plenty of action flying under the radar in the corporate and policy weeds in the EU (around antitrust), US (over pension investing and political rights) and Japan (about human rights). Read on.

Do antitrust laws impede climate change innovation?

EU competition regulator Margrethe Vestager (pictured above) strikes fear in boardrooms from Europe to Silicon Valley. She has shown “legendary toughness” (as the FT remarked in 2017) assessing billions of dollars in fines on Apple, Google and other global companies,

But when it comes to combating global warming, Vestager might be willing to soften a bit. Earlier this year, Vestager’s office began studying how competition rules could be changed to work with the EU’s green deal. In some ways competition rules have fostered green business development, but as she acknowledged in February: “We need to see if competition policy can do more.”

Competition rules have stymied corporate competitors from working together on sustainability projects, argues Amelia Miazad, a professor at the UC Berkeley School of Law, in new academic research.

For example, there was the EU’s infamous “detergent cartel” case in 2011, in which three companies tried to wean customers off large packaging on sustainability grounds, Miazad said. But when the trio agreed not to raise prices, alarm bells went off for antitrust enforcers. “Co-ordinating with competitors to offer a more sustainably packaged product is a per se antitrust violation,” Miazad said.

While any loosening of antitrust laws should be handled delicately, the EU should consider establishing safe harbors — with sunset provisions — that allow “companies the freedom to explore collaborating with competitors in order to advance the [EU] green new deal commitments,” she said.

And similar policies should be considered in the US, she said.

“This conversation is happening in the EU but it is almost completely absent from the antitrust debate in the US,” Miazad said. (Patrick Temple-West)

Chiefs look to prove that defending democracy isn’t ‘woke capitalism’

When Republicans in Georgia proposed changing election laws in ways that experts said would discriminate against black voters, some of the state’s biggest companies responded in time-tested fashion, lobbying discreetly behind the scenes to get the legislation changed.

Activists were unimpressed, staging protests outside Atlanta’s World of Coca-Cola and threatening to boycott local groups such as Delta Air Lines and UPS. Pretty soon, those companies were making stronger public statements, but it was too late to stop the Georgia bills from passing. 

With similar efforts to restrict voting rights pending in another 46 states, business leaders across the country have decided to hang together rather than hang apart. After a Saturday Zoom call featuring executives from Merck’s Ken Frazier to James Murdoch, formerly of Fox, chief executives have decided to co-ordinate their response.

Chiefs are still wary of wading into politics, and for good reason. Dan Schulman, CEO of PayPal, told the FT last week he has gotten “multiple death threats” because of the company’s stance on divisive issues. But, he added, “there is no way for a company like PayPal, with the scale we have, to stay out of the cultural wars”. 

So banding together with other companies makes sense, even as Republican leaders tell “woke capitalists” to “stay out of politics”. We have yet to see how many companies will pursue two hit-them-where-it-hurts proposals discussed on Saturday’s call: cutting donations to politicians advocating voting restrictions or pulling investment from states that enact such bills.

As Daniella Ballou-Aares, CEO of the Leadership Now Project, puts it, companies are already considering factors, from the regulatory environment to the tax environment, when investing. “Considering the democracy environment is a relevant factor too,” she said. (Andrew Edgecliffe-Johnson)

NY pension drops oil sands

The $246bn New York State pension will divest from a group of oil sands companies it has determined “are [not] prepared for the transition to a low-carbon economy,” according to state comptroller Thomas DiNapoli.

This is the second batch of divestments approved by the fund as part of its plan to reach net-zero emissions by 2040. Last June it sold its holdings in 22 coal companies.

The companies being purged by the pension include: Imperial Oil, Canadian Natural Resources, MEG Energy Corp., Athabasca Oil Corporation, Cenovus Energy, and Japan Petroleum Exploration. DiNapoli’s office also said the fund would sell its interest in Husky Energy, which merged with Cenovus in March.

DiNapoli’s divestment plan is noteworthy, as he has previously resisted calls to ditch high-emitting companies, preferring instead to “engage” with their management to push for carbon cuts. But it will be interesting to see how far he goes.

Tar sands and thermal coal companies are easy targets for divestment. The fund only had about $7m in total invested in the companies it is selling off. On top of that, the fuels themselves are falling out of favour from a purely economic standpoint.

Shale oil and gas companies will be the under the microscope next, followed by integrated oil majors and then fossil fuel exploration, servicing, storage and transport companies. There will be a lot more money at stake with these reviews, so it will provide a better read on how the fund is approaching climate risk. (Billy Nauman)

Ecommerce marketplaces take on role as ethical sourcing verifiers

For more than two decades, the Fair Trade logo has instilled confidence in conscious consumers that their purchases were, at least in part, ethically sourced and fairly produced. Now, online marketplaces are stepping in with their own digital stamp of approval for brand ethics.

Urbankissed, a sustainable online marketplace, is one such site. It works with a company called Good on You to verify the sustainability data of the brands it sells.

“Consumers have begun to rely on marketplaces to be verifiers for smaller, local brands,” Sophie Brunner, the founder of the Swiss start-up said.

A recent Moody’s report found consumers were indeed increasingly factoring sustainability into their purchasing decisions. But a separate survey from environmental technology company GreenPrint found that more than half of people do not believe company claims on sustainability.

This underscores the need for verification, and why it is especially important for online marketplaces, as Covid-19 has pushed more shoppers to shop from their phones or computers. And the opportunity for smaller brands is evident, Brunner said. (Kristen Talman)

Tips from Tamami

Nikkei’s Tamami Shimizuishi helps you stay up to date on stories you may have missed from the eastern hemisphere.

While chief executives in the US are getting more vocal on political and social issues, their Japanese counterparts are keeping their heads low.

“I stick to ‘no comment’,” Tadashi Yanai, president of Fast Retailing, the Japanese apparel company that operates Uniqlo, said last week, responding to a question about cotton produced in China’s Xinjiang region.

Yanai’s “politically neutral” stance is leaving human rights activists and ESG investors disappointed, especially as he has been known as a rare straight-talking executive in Japan.

With only 100 days until the Tokyo Olympics, pressure is also increasing on institutions such as Kirin, Muji operator Ryohin Keikaku, and the Japan International Cooperation Agency to declare positions on human rights and ESG matters.

Japan Inc has domestic support to be more vocal on controversial issues, too. The younger generation in Japan prefers brands with purpose, according to Masahito Namiki, chief executives of Interbrand Japan, a brand consultancy. Popular figures such as tennis player Naomi Osaka, have helped the Japanese society more embrace activist athletes.

Change is slow, but there is growing realisation among Japanese executives, especially with global operations, that “we must show where we stand on social issues to survive” after the Black Lives Matter movement last year, Namiki said. To avoid a huge backlash in the middle of the Olympic Games, it’s time for the heads of Japan Inc to come out and speak.

Grit in the oyster

Many companies and investors say they try to “do well by doing good”. As a reminder that many still fall short, here’s a little grit in the ESG oyster.

Corporate “net zero” announcements may be thick on the ground, but a new study from the Transition Pathway Initiative has found that no industry is cutting emissions fast enough to meet their 2050 goals. Yes, you read that right — none.

In fact, some sectors such as aluminium have increased their emissions intensity since the Paris accord came into effect.

Will 2021 be the year that companies step up to tackle climate change and inequality? Moral Money Summit will explore the concept of whole system transformation, including employee care, diversity and inclusion policies, environmentally friendly production and consumption practices, and inclusive capitalism. Book your complimentary ticket here.

Smart Reads

Mark Campanale, the founder of Carbon Tracker Initiative, said governments needs to start approaching climate change in the same way as nuclear non-proliferation.

“First, they must stop adding to the problem; exploration and expansion into new reserves must end. This must be accompanied by ‘global disarmament’ — using up stockpiles and ceasing production,” he wrote.

However before any of that can happen, we need a global registry to track how much CO2 is embedded in the fossil fuel reserves yet to be developed and gauge which countries and companies are responsible for overshooting the world’s “carbon budget”.

Further Reading

• Hasty, imperfect ESG is not the path for business (FT)

• Business schools urged to integrate ESG topics in core courses (FT)

• Biden’s Jobs Plan Is Also a Climate Plan. Will It Make a Difference? (New Yorker)

• Goldman Sachs Says Humans Beat Algorithms When It Comes to ESG (Bloomberg)

• SEC Review Highlights Potentially Misleading ESG Practices Among Funds (WSJ)

• Toshiba CEO Kurumatani to resign Wednesday (Nikkei)

• Why the decision to release treated Fukushima water took a decade (Nikkei)