Tesla has played a significant role in cutting gas-guzzlers from roads around the world, and founder Elon Musk ostensibly acknowledged the company’s commitment to the environment, when he reversed his stance on Bitcoin due to the crypto-asset’s enormous emissions. So why then, has S&P decided to remove Tesla from its famous ESG index?
The answer lies not (completely) in its approach to environmental issues, but rather more in its poor approach to proper management of social and governance issues. Over the past few years, numerous reports of sub-par working conditions have been made against the automotive company. Multiple factories in the US and China had workers on shift for over 70 hours a week, but the centre of attention is the infamous Fremont case. This California factory has variously been called a modern-day sweatshop and a plantation. What occupational safety measures Tesla might claim to have, were clearly not being implemented, with numerous injuries on the production line amid the poor conditions. To rub salt in these wounds, the plant is being sued by the state of California for instances of severe racial discrimination. The suit alleges that Black and African American workers are “segregated to the lowest levels” while being harangued with racial slurs, hate symbols and professional marginalisation. This, along with the number of fatalities associated with auto-driving car tests, seems to have been the straw which turned it out of the index.
S&P’s decision is part of a wider trend in the sustainability landscape. Simply building electric vehicles doesn’t, ipso facto, make a company sustainable. Notwithstanding the fact that Tesla isn’t really very good at reporting environmental data either, it’s clear that its attitude towards such issues as employee wellbeing and racial equality, is sparking a reaction from investors to encourage it to properly measure, disclose and act on its social challenges. Doing so should force Tesla to take these metrics more seriously. Climate change is surely one of the most pressing crises we’re facing, but that doesn’t mean companies should lose sight of all the other aspects of sustainability that are moving us in a positive direction; such things as basic human rights, employee wellbeing and occupational safety. These things can be measured. And when measured, problems, and more importantly solutions, can be identified.
Author: James Scott