Gordon Moore died last week. He was the founder and former chairman of Intel Corporation, the California semiconductor chip maker that spawned the Silicon Valley moniker. The New York Times credited Moore for bringing laptop computers to hundreds of millions of people and embedding microprocessors into everything from bathroom scales, toasters and toy fire engines to cellphones, cars, and jets.
Moore was also responsible for what became known as Moore’s Law, which held that technology advancements would allow the number of transistors placed on a silicon chip to repeatedly double within short times frames, thereby increasing exponentially the data-processing power of computers.
Admittedly it’s a pipedream, but I’d relish being remembered for the Starkman Approved maxim, which holds that those claiming superior virtue and ethics invariably prove to be among the most ethically compromised. It’s been a regular theme of this blog since the outset and it’s why I’ve long been opposed to supposedly “socially responsible” ESG investing, which is based on environmental, social, and governance metrics concocted by Wall Street’s virtue signalers.
ESG allows companies that do bad things or have harmful practices and products to claim moral superiority based on metrics that exclude the fundamentals of their businesses. Although I’m no longer alone railing against ESG, I was virtually a chorus of one forcefully challenging the metrics when I posted this commentary more than three years ago.
I’m pleased with how the commentary has aged, particularly as it proved my point that allowing ethically challenged companies to declare themselves “socially responsible” enables them to continue to do bad things. One such company is Pepsico, best known as Pepsi, the peddler of sugar-laden and increasingly alcohol spiked soft drinks, as well as addictive sugary snacks contributing to soaring global obesity.
I cited Pepsi as an example of companies with favorable ESG ratings that I wouldn’t deem socially responsible, given that its products literally kill people and dramatically increase the cost of healthcare in the 200 countries where they are sold. Pepsi also appears to have an aversion to paying taxes, as the company has run afoul of tax authorities in various jurisdictions, most recently in Illinois and Australia. According to the Institute of Taxation and Economic Policy, Pepsi in 2017 maintained 133 subsidiaries in offshore tax havens, where it was holding $50 billion for tax purposes.
Pepsi is among the most aggressive touting its commitment to ESG metrics. The company in July of last year issued this news release boasting of the great strides it made since launching PepsiCo Positive (pep+), “a strategic end-to-end business transformation with sustainability and human capital at the center of how the company will create growth and value.” Pepsi’s stated accomplishments include “economically empowering women” with “gender smart solutions along our agricultural supply chains in Dominican Republic, Ecuador, and Guatemala.”
Pepsi also talks up a storm about it diversity, equity, and inclusion efforts, seemingly making Silicon Valley Bank appear like it was run by a bunch of Republicans. The company also claims to be on a mission to safeguard the global water supply. Fortune last week published an urgent call to action by Jim Andrew, Pepsi’s chief sustainability officer, warning that about half the world could face a water shortage within two years.
“Water is a fundamental human right. It is indispensable to every community, ecosystem, and economy around the world,” Andrew said. “Yet water insecurity has become one of the world’s greatest crises–and one that is overlooked, or even worse, ignored entirely.”
Andrew said the upcoming UN Water Conference–being held for the first time in nearly five decades– represents “a transformative opportunity to ignite unprecedented collaboration among governments, NGOs (non-governmental organizations), and the private sector to address the growing global crisis.”
Pepsi, of course, is doing its part.
“When it comes to addressing water issues, we use a watershed management approach that encompasses our entire value chain, including on farms, in manufacturing facilities, along our value chain and in local communities, Andrew said. “Through PepsiCo Positive–a strategic, end-to-end transformation of our business–we have developed robust goals to support our ambition of being “net water positive” by 2030. The aim is that our presence and action should improve the local water resources where we operate.”
Given Andrew’s concern for a looming global water shortage, it would behoove him to do some research on the 36 Tesla Semis Pepsi took delivery of last month to enthusiastic media applause. The trucks were part of an initial 100 vehicle order, consistent with Pepsi’s plans to achieve net-zero emissions by 2040. Given Pepsi’s aversion to taxes, it comes as no surprise it received a $15.4 million California state grant and a $40,000 federal subsidy per vehicle to ease the financial burden on the company, with annual revenues exceeding $70 billion.
The Tesla Semi is powered by lithium-ion battery cells – five times the number used in passenger cars. Mining lithium is a major environmental hazard, particularly harmful to water. The Guardian reported in January that global demand for lithium, also known as white gold, is predicted to rise over 40 times by 2040, driven predominantly by the shift to electric vehicles. The Guardian said grassroots protests and lawsuits against lithium mining are on the rise from the US and Chile to Serbia and Tibet amid rising concern about the socio-environmental impacts and increasingly tense geopolitics around supply.
Lithium mining and processing have reportedly damaged the water supplies of Chile, Indonesia, and elsewhere. Environmental groups In Mexico have expressed concerns that Tesla’s planned Gigafactory might cause severe water shortages in the region where it’s slated for construction. As for the NGOs Andrew mentioned, Elon Musk appears to have ignored an open letter signed by dozens of them, including Friends of the Earth, not to invest in Indonesia’s nickel industry because of environmental concerns. The NGOs said in their letter that nickel mining for electric vehicles was causing increased deforestation and polluting rivers, lakes, and beaches.
Despite its concerns for a global water shortage, Pepsi has been silent on Ford’s plans to build a lithium battery plant on fertile farmland in Michigan near the Kalamazoo River, where residents have been advised they will have to test their water twice a year because of potential lithium leakage.
Pepsi understandably wouldn’t want to upset Ford’s China-based battery partner, which will get a 12.5 percent royalty on all sales, supposedly without having to fork out any money building the plant. It’s well known that Chinese companies of strategic importance have ties to that country’s communist government. Pepsi has 36 percent of China’s carbonated drinks market, where along with Coke has contributed mightily to that country’s dramatic rise in obesity.
Zero-emissions is an admirable goal, but I suspect Pepsi’s calculations don’t include the carbon footprint caused by the healthcare harm of the company’s products. Pepsi’s sugary drinks and snack foods like Doritos are known to be a major contributing factor to America’s rise in obesity, which the Obesity Medicine Association has declared “a public health crisis.” Here’s the CDC’s list of diseases caused by obesity, including death.
Any measurement of Pepsi’s carbon footprint should include energy usage for trips to hospitals and doctor’s offices resulting from consumption of its products, the manufacturing and transport of drugs to treat obesity-related diseases, and the manufacturing and use of equipment such as dialysis machines. Dialysis machines are so energy intensive that Kidney Care UK has called on the government to work with energy companies to provide support for vulnerable customers with medical conditions.
A new frontier for Pepsi is alcoholic beverages such as Hard Mtn. Dew, which has the same alcohol content of many popular beers.
From a story published last month in the New York Times:
As alcohol-related deaths in America reach record highs, regulators and public health experts are voicing concern that the new class of drinks and the expanding industry could alter how people buy and drink alcohol. Some also expressed worry that the convenience of the new products could reverse the long-term decline in alcohol consumption by young people. And recent studies show that consuming even one alcoholic drink a day increases a person’s risk of cancer and heart disease.
Pepsi has made efforts to reduce the sugar and fat content of its food and drinks, but that’s just good business. There’s a growing public awareness of the harm caused by excessive sugar and fat, and all food companies are looking to convince consumers of the “health benefits” of their products. Subscribers to Nutrition Action know the dishonesty of many of these claims.
Pepsi is an example why I so oppose ESG, and refuse to defer to the judgment of others about what constitutes a socially responsible company. It’s admirable that Pepsi is looking to reduce its carbon footprint and is seemingly committed to the loftiest of DEI initiatives, but as far as I’m concerned, anyone who buys or owns Pepsi stock should be ashamed of themselves.
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