Monday, June 13, 2011

Why Amazon rejected a shareholder decision to disclose how it deals with climate change?

Last Tuesday Amazon's shareholders rejected on their annual meeting a resolution calling the company to prepare and publish a report describing how is assessing the impact of climate change on the corporation.

This resolution was This resolution was filed by Calvert Investments, one of the largest sustainable and responsible investment companies in the U.S. and we also helped in the preparation of this resolution.

Why Calvert filed this resolution? Because as a shareholder it sees climate change in terms of risks and opportunities that Amazon can’t and shouldn’t ignore any longer. Rebecca Henson, sustainability analyst at Calvert, explained it to Seattle Times:

"We own this company and want it to do well, so we wouldn't want any poor performance to come from the release of a document. We just think it's something that would be beneficial and could save money in the long run."

Amazon's shareholders rejected the measure mainly because Amazon was opposing it. Why Amazon opposed it? Well, according to Seattle Times "Amazon opposed the measure, saying that preparing a climate-change report would not be "an efficient use of time and resources."

I think this is a poor reply and definitely not the one you can and should expect from Amazon. We're talking about a company that in the same shareholder meeting reported on $34.2 billion sales and $2.5 billion free cash flow.

Now, how much it costs to prepare the report Calvert was asking for? If Amazon would use the format offered by the Carbon Disclosure Project (CDP), which is used by 70 percent of S&P 500 companies that unlike Amazon disclose their emissions, then it would be about $80,000 (65% of the companies surveyed by CDP are spending up to £50,000 on reporting greenhouse gas emissions). Let's say for the sake of arguments that it would be $100,000 because Amazon is a large company.

$100,000 are 0.004% of Amazon's free cash flow. In other words it is such a marginal expense, Amazon wouldn't even notice it. Actually, according to the CDP, most companies believe the benefits of reporting outweigh the costs, so there's a good chance it won't even be an expense at the end, but a profitable investment.

It's not just Calvert and I that are positive that climate change represents material risks and opportunities that should be assessed and considered accordingly. A growing number of investors understand that climate change is influencing every business and ignoring it equals poor management of their money.

Only yesterday climate change investor groups published a report on global investor practices relating to climate change, and according to their press release "the majority consider climate change a material investment risk/opportunity and incorporate climate change risk assessments into their existing investments; public policy a key driver of investment decisions". This report is based on survey responses from 44 asset owners and 46 asset managers with collective assets totalling more than $12trillion.

Unfortunately the majority of the shareholders of Amazon doesn't see it this way and chose last Tuesday to follow the company's position against a measure that even doesn't propose to take action, but only to prepare a climate change assessment.

For a company involved in the manufacturing and sale of the Kindle, providing web services, relying on data centers and using shipping it just doesn't make sense. Not to mention the fact that Amazon is a company that is proud in making decisions based on “long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions”. We hope that Jeff Bezos and Amazon will understand it eventually, not just for the sake of the environment, but also for the sake of the company's future success.

More related articles:

Why Amazon Needs to Come Clean About its Carbon Footprint - Triple Pundit

Why Amazon is so hush hush about the Kindle's sales figures and footprint?

Dear Jeff Bezos, please make Kindle the greenest e-reader

Raz @ Eco-Libris

Eco-Libris: Promoting sustainable reading!