By Debbie Carlson
Andy Jassy, the incoming Amazon CEO, needs to improve labor relations, reduce packaging waste and further its climate goals if it wants to be a world-leading company from an environmental, social and governance perspective.
Indeed, Amazon’s /zigman2/quotes/210331248/composite AMZN +3.31% role model could be Apple /zigman2/quotes/202934861/composite AAPL +0.75% , which advocates say has become a sustainability leader among megacap stocks.
Amazon is starting to make strong operational strides such as investing in electric vehicles for its fleet and running data centers on renewable energy, but remains a laggard in other key ESG pillars such as workplace issues, racial and diversity inclusion and has more work to do on carbon reduction, say ESG advocates. Because of that, only a handle of ESG exchange-traded funds and mutual funds own the company.
Outgoing CEO Jeff Bezos, the founder of the e-commerce giant, has “actually done the hard stuff, the hardest stuff being operations,” says Andrew Behar, CEO of As You Sow, a nonprofit shareholder advocacy group. “On other issues, though, he’s completely not even thinking about them.”
Bezos will retain an influential position in the company as executive chairman and one of its largest shareholders. Jassy, the new CEO, is now the head of Amazon Web Services, the company’s cloud-computing business.
In his letter to Amazon’s workforce , Bezos tried to burnish his ESG credentials:
“As Amazon became large, we decided to use our scale and scope to lead on important social issues. Two high-impact examples: our $15 minimum wage and the Climate Pledge . In both cases, we staked out leadership positions and then asked others to come along with us. In both cases, it’s working. Other large companies are coming our way. I hope you’re proud of that as well.”
Natasha Lamb, managing partner at Arjuna Capital, a sustainable and impact investment firm focusing on workplace issues for women and people of color, disputes Bezos’ claim of being a leader in these two areas, saying that there was great pressure on the company to increase worker pay and to sign the climate pledge.
“He is not the poster child of the American dream, but of what is eating America alive, which is growing inequality,” she says.
Amazon increased the minimum wage to $15 in 2018 after years of criticism that it mistreated and underpaid workers, and the company caught flak for what workers said were poor health conditions in the pandemic. It is also fighting a unionization attempt at a warehouse in Alabama .
Emanuele Colonnelli, an assistant professor of finance at the University of Chicago’s Booth School of Business who has done ESG research, agrees with Lamb. “A lot of the most promising steps toward ESG seem reactionary, as they have been taken only recently, at a moment in which regulatory and public pressure reached sky-high levels that became impossible to ignore,” he says.
Although Amazon installed a higher minimum wage, MSCI considers the company a laggard when it comes to corporate behavior and labor management. Overall, MSCI gives Amazon a BBB rating, saying it is average for companies in the retail-consumer discretionary space.
Lamb says Amazon has become what Walmart /zigman2/quotes/207374728/composite WMT +0.49% was in the 1990s, criticized for shuttering small businesses. During the coronavirus, “everybody has become so reliant on Amazon, and those patterns are sticky. It has grave implications for small business.”
Colonnelli says Amazon’s monopoly power can’t be denied and should be at the core of its ESG considerations. “It will be up to Jassy – and Bezos of course- to decide whether they want to be driving the change toward a business model that is less prone to anti-competitive practices, and therefore lead to a more equitable allocation of rents,” he says.