Three months ago, Tesla was removed from the S&P 500’s ESG (environmental, social and governance) Index for its approach toward sustainability and corporate social responsibility. Poor working conditions, including accusations about an ongoing culture of racism, have been part of the problem, but the company has also failed to track its carbon emissions. CEO Elon Musk responded by calling ESG reporting a “scam.”
Yes, Tesla’s mission is “to accelerate the world’s transition to sustainable energy,” but the company was also placed No. 22 on the University of Massachusetts Amherst’s Toxic 100 Air Polluters Index (above ExxonMobil). This week, Tesla’s reckoning over its environmental practices continues. The leader in electric car manufacturing has been asked by the majority of its independent shareholders to become more transparent about its water usage.
Draining regions of drinking water
“Be it resolved: Shareholders request the Board assess and report its ongoing water risk exposure, and all policies and practices to reduce this risk, from siting of facilities to preparing for water supply reductions associated with climate change, using quantitative indicators where appropriate,” reads the shareholder resolution, in part.
The proposal, which was filed by the nonprofit shareholder advocacy organization As You Sow, will be hard for Tesla to ignore. After all, when your investors request change, it’s your bottom line that’s at risk.
Then again, Musk has proven to be single-minded about what counts as sustainable in the past. When asked by a reporter in 2021 whether a new German plant would be a burden on the region’s water, Musk laughed at the suggestion. Meanwhile local German stakeholders fought the diversion of their water resources to the plant. Claimants said the factory could drain the region’s drinking water. The plant requires 1.4 million cubic meters of water a year, the equivalent of a 30,000-person town. Local interests won the lawsuit.
More than half of Tesla’s active manufacturing plants are located in regions that may face high to extremely high water stress by 2030, according to As You Sow. And still, shareholders can’t know the extent of the impact the company is making. One of the significant issues they cite is that, unlike competitor car companies, Tesla doesn’t disclose its water usage data to CDP, an organization that runs a global disclosure system for environmental impact.
Other EV companies have demonstrated that reducing water use is possible
While Tesla leadership laughs off concerns about resource use, companies like Audi and General Motors are diminishing their water impacts, and still pushing the boundaries for electric vehicle technology. Audi is installing water treatment plants to recycle waste water. GM has been recycling and conserving water, and now requires about 40 percent less water to produce a car than it did in 2010.
There may be a lesson here for other companies that have ambitions to be leaders in the environmental movement. Maybe the term “greenwashing” is dramatic in relation to Tesla, but as the company struggles to fulfill ESG expectations, it does still claim to prioritize the environment. And ESG standards do matter, as 3p's Tina Casey reported back in May. So, if you’re pursuing innovation in sustainable technology, investors are going to want you to consider the whole of your environmental and social impact.
Urging Tesla to rethink its definition of sustainability
And what would be a company’s motivation to pursue well-rounded sustainability? Here's what As You Sow’s president, Danielle Fugere, told U.K.-based edie: “Tesla’s leadership has been cavalier at times when responding to localized water concerns. Every company, especially those that assert themselves as environmentally forward-thinking, should hold themselves to the highest standards of transparency and accountability regarding their resource use.”
Setting internal motivation aside, perhaps it seems a stretch for investors to care about a company’s water use or employee treatment. However, if a company ignores its natural resources or neglects and abuses its employees, these are risks to its social license to operate in the eyes of the public and governing bodies. And this is the subtext to Tesla’s shareholder resolution. It reads like this: “We care about innovation, but we also care how you do it.”
Image credit: Austin Ramsey via Unsplash
Roya Sabri is a writer and graphic designer based in Illinois. She writes about the circular economy, advancements in CSR, the environment and equity. As a freelancer, she has worked on communications for nonprofits and multinational organizations. Find her on LinkedIn.