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The 'CVS Effect' in Effect: Apple, Disney and Chipotle Step Up
March 7, 2014
Five major brands have just made news for decisions that buck the bottom-line mantra. Could this be momentum for the "CVS Effect"? Take a look and see if you agree. And note too how brands are joining with allies on these issues, while one brand — Chipotle — is potentially breaking major new ground.
Feb. 28: Apple CEO defends doing the right thing — not just the bottom line
Last week at a shareholder meeting, CEO Tim Cook said that investors who don’t agree with the company’s commitments to renewable energy among other sustainability issues should divest.
Cook knew that he was on safe ground with this issue. A related shareholder proposal against pursuing renewable energy investment got less than 3 percent of the vote. And just two days earlier, Apple had announced that it had signed the Climate Declaration along with more than 120 other California companies.
I don’t know if these two issues occurred to or mattered to Cook before he spoke. But as a high-profile, profitable CEO, his stance creates more “safe ground” for other brand leaders to publicly talk about doing things because they are just and right, not just to make money.
Mar. 2: Disney stops Boy Scouts of America funding because of gay troop leader policy
According to CNN, Disney joins Lockheed Martin, Caterpillar, Major League Soccer, Merck, Intel, Alcoa, AT&T and UPS as companies that have ended partnerships with the Scouts because of its anti-gay policy. So, Disney wasn’t the first to make this move, but this is a noteworthy step because of Disney’s close brand identification with childhood and families.
Mar. 3: Kroger and Safeway say no to GMO salmon
This one is interesting because it’s about something that doesn’t exist yet. The FDA is currently considering whether to allow genetically modified salmon to be sold.
The US’s two largest grocery store brands — Safeway and Kroger — have joined other leading national retailers in saying they won’t carry the product if approved, which include Target, Whole Foods, and Trader Joe’s. Sure, this isn’t as big as CVS pulling tobacco off the shelf. But it still matters because it shows big companies saying "no" to a product that some customers might want, even if peremptorily.
Mar. 5: Chipotle names climate change as a material risk in its 10-K. Last month Chipotle listed climate change as a risk for the company in its SEC filing, explaining: “Increasing weather volatility or other long-term changes in global weather patterns, including any changes associated with global climate change, could have a significant impact on the price or availability of some of our ingredients,”.
As Climate Progress’ Emily Atkin pointed out, for a brand to bring the issue to light in this way is unprecedented: “The fact that Chipotle openly acknowledges climate change, even as a ‘routine risk,’ is news — as there are likely companies that wouldn’t mention the words ‘climate change’ if their business depended on it. And they do.”
Which leads to another reason why this is potentially a big deal.
It’s no secret that SEC disclosure requirements leave room for companies to be opaque about climate change risks.
Bill Russell, of Transitioning to Green (and a Green Accounting professor), noted that, “Chipotle taking this leading position on climate-change risk disclosure could allow shareholders of any competitor company to ‘demand’ that their company explain how climate change is not a material risk to their company. At any time in the future, should it turn out to be material and they had ‘demanded’ the question be addressed, they could potentially be set up for a shareholder lawsuit.”
While climate-change risk might still be a hard thing for some people to grasp, litigation risk sure isn’t. This is something that corporations are finely attuned to — and take action to prevent.
So with this move, Chipotle may have blown a transparency hole in climate-change risk disclosure for shareholders of other companies to climb on through.
I wrote earlier that I’m betting that forward-looking brands that make bold pro-health and pro-environmental choices will be rewarded by investors and consumers — and others will follow.
It’s just the “Diffusion of Innovations” theory in action. Innovators take the risk and go way out on the limb. Early adopters see it and spread the news. Then others follow it and it becomes normal.