Tag Archives: supply chains

Anti-ESG Activists Come To Intel

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A shareholder proposal asking Intel to square its business in China with its ESG commitments looks like a Trojan horse.

The proposal (Proposal 7, p. 130) argues that “Intel’s environmental promises and human rights commitments are belied by its cozy relationship with China, a country that is controlled by the dictatorial and inhumane Chinese Communist Party.”

Doing business with China, which is the largest greenhouse gas emitter in the world and which commits genocide against ethnic minorities – [sic] runs counter to everything that Intel claims to stand for. It is therefore critical that the Board commission and publish a third party review that includes experts who are fully aware of the dangers that China poses to ensure that Intel’s actions as a company live up to its words.

It’s brought by the Free Enterprise Project at the National Center for Public Policy Research, a conservative organization that has been around since the Reagan era, with longstanding ties to the American Legislative Council (ALEC) and the State Policy Network. The Center also counts among its allies the National Legal and Policy Center (NLPC), which last year scored a small victory at 3M when one of its proposals on China and human rights garnered an impressive 12 percent support. Intel is a new target for these groups, who claim to be outraged by the company’s about-face apology on Xinjiang in 2021 as well as its sponsorship of the 2022 Olympics.

These days, the Free Enterprise Project is (predictably enough) all about “Woke Capitalism,” a product of “the Left’s Radical ESG Agenda” that will result in “the leftist capture of American corporations.” Or, as they put it in their 2022 Investor Value Voter Guide, “the ESG boosters, both in and out of C-suites, want to make our lives poorer, less reliable and less safe, while enriching the enemies of the West, for no possible good outcome except their own self-aggrandizement.” This is the reasoning behind their opposition to everything from DEI to decarbonization.

This year’s Proxy Preview from As You Sow includes an entire section dedicated to bad faith proposals that sound an awful lot like this one and are in reality “anti-ESG.” The Free Enterprise Project and its allies tend to copy

verbatim the resolved clauses of their ideological opponents, or use language in resolved clauses that makes the resolutions appear to support sustainability objectives—although the rest of the proposals cite right-wing opinion pieces and argue against their purported goal.

The objective is to find a point of leverage, call out corporate hypocrisy, and demonstrate that ESG commitments are a costly and destructive diversion of company resources.

When it comes to human rights in China, right wing activists see that this strategy can get results: “this human rights issue – involving both slave labor and genocide of the minority Muslim Uyghur population at the hands of the CCP – animates factions from both the political right and left.” That’s from the Free Enterprise Project Investor Value report, cited above. As You Sow concurs:

The ideas in anti-ESG resolutions have no traction with investors—nor with many companies—and on average earn 4 percent support or less. The sole exception concerns doing business in China, where the left and right agree that China’s authoritarianism is deeply problematic, as is its persecution of the Uyghur people.

That “exception” helps explain the self-righteous, combative tone of the Free Enterprise Project proposal, and the copy-paste approach they and the NLPC have taken for this year’s proxy season:

Proxy Monitor data showing human rights proposals submitted by the National Center for Public Policy Research and the National Legal and Policy Center.

The question before Intel shareholders is what practical effect voting for this proposal might have. The board of directors opposes it, for all the usual reasons, so it is unlikely to pass; but it could garner enough support to qualify for re-submission. That would bring the Free Enterprise Project back again next year.

More importantly, the proposal would require that Intel engage “experts who are fully aware of the dangers that China poses.” Those are not necessarily human rights experts or even China experts, but people who qualify as experts because they are “fully aware” — that is, ideologically aligned on China with the National Center for Public Policy Research. Think Peter Navarro (or worse): that’s who would be engaging with the company, and whose views the company would “publish.” This doesn’t sound like a constructive way to push the company to raise human rights standards (or improve its business performance); it just sets the stage for right wing bluster, fake outrage, and ideological preening.

It is difficult for me to vote against any measure that asks companies to do more in the area of human rights, and I am disappointed by the Intel board’s boilerplate response. They could do so much better. But in this case I am voting with them and against Proposal 7.

Update. The proposal received 4.31 percent support at the 11 May Annual Stockholders’ Meeting, falling short of the 5 percent needed to qualify for re-submission next year. For more on Trojan Horse proposals, see the brief write-up in this 2021 report (page 59) from Glass Lewis, which I had not read before I wrote this post.

No, the Shift to Renewables Will Not Be the End of Toil

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Energy derived from sources like the sun, air, and water, on the other hand, is imbued with immense liberatory potential. In principle every house, farm, and factory could free itself from the grid by generating its own power. No longer would power lines and gigantic, leak prone tankers be needed for the transportation of energy; no longer would workers have to toil in underground mines or remote deserts or rough seas; there would be no need for the long supply chains required by fossil fuels. (Amitav Ghosh, The Nutmeg’s Curse, p. 102, emphasis mine)

Context makes it clear Ghosh is thinking of coal mining, oil fields, and offshore platforms when he dreams of a world where workers no longer toil. But in his reverie, Ghosh neglects an important and undeniable feature of renewable energy: it is mining intensive.

The IEA sees demand for critical minerals surging from 2020-2050 even as the demand for and value of coal drops. In green growth scenarios, workers will likely have to keep toiling in mines as they now do in Chile’s Atacama desert, the cobalt mines of the Democratic Republic of Congo, or the copper and nickel mines of South Asia, South America, or Siberia. The list of potential sacrifice zones will grow and could someday extend from American public lands to offshore oil platforms converted to deep-sea mining.

This observation is not an argument against the transition from fossil fuels. It’s just to say that right now there are no signs the shift to renewables will undo the resource curse. Extraction for global markets continues to exact a local toll: serious human rights violations, unremediated (or irremediable) environmental destruction, conflicts over water (which Ghosh himself mentions briefly in a list of “conflicts that global warming will create or exacerbate,” p. 127), and social division. And for the foreseeable future, mineral supply chains will be nearly as long as those required by fossil fuels, strung across the globe and fraught with geopolitical tension.

A decisive shift from fossil fuels could see the end of the petro-dollar and the toppling of “global hierarchies of power,” as Ghosh imagines: “The liberatory potential of renewable energy has a very important international dimension as well: if adopted at scale it could transform, indeed revolutionize, the current global order” (p. 103). It could also precipitate another set of crises – environmental, humanitarian, and military — and it’s worth considering that eventuality.

Postscript, 20 January 2022: For more on the geopolitical risks of the energy transition, see Jason Bordoff and Meghan L. O’Sullivan, “Green Upheaval The New Geopolitics of Energy,” Foreign Affairs, January/February 2022.

The Social Costs of the Hardware Revolution – A Postscript

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For now, this can be only a short postscript to what I had to say earlier today about the CNN Money article by John Hagel and John Seely-Brown on “the hardware revolution.” It has to do with a question that occurred to me as I read, and to which I don’t yet have anything like an adequate answer. That will take some research. But I at least want to articulate the question.

Startups and smaller companies can now play in the hardware space in part because the barriers to entry have been lowered, Hagel and Seely-Brown observe. There are a number of factors at work here. New and cheaper technologies from 3D printers to more user-friendly software put the design and manufacture of hardware within reach of smaller companies. And “a new class of factories” will produce the smaller orders that new entrants and entrepreneurs typically require:

New infrastructural elements have also helped new hardware products move from the hobbyist’s basement to the startup garage. Before, to get a contract manufacturer’s attention, you had to commit to producing high volumes (say 50,000 or more units). But a new class of factories — mostly in China and Mexico — will manufacture batches as small as 5,000 units. By filling low-volume orders, these factories have filled an important structural hole in the market: They allow entrepreneurs to launch new products for small consumer groups with little investment.

My question is whether conditions and, for that matter, sourcing practices in this new class of factories, and the more fluid hardware market they serve, are not going to be terribly difficult to monitor. We’ve seen how challenging it is even to ensure fair labor practices in large-scale manufacturing facilities in China used by major global technology brands; now, as smaller-scale manufacturing facilities proliferate and Mexico becomes a technology “quicksourcing” destination for American companies, the problem will no doubt be aggravated.

The reasons for this are probably obvious. I would frame the issue in a few ways. First, how much visibility do these smaller players actually have into their supply chains? Second, how much leverage do they actually have with their manufacturers, since they are only placing small orders, and, depending on their success, may or may not be repeat customers? Third, there’s a question about whether these small businesses — the small hardware startups placing orders and, for that matter, the manufacturing facilities taking them — have the capacity to take on the human rights challenges that seem inevitably to accompany outsourcing.

In other words, the social costs of the hardware revolution deserve some careful consideration.