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Why Apple Took a Bold Stance on the Environment

Apple (NASDAQ: AAPL  ) CEO Tim Cook on Friday left little doubt among shareholders that his company is working to address environmental concerns head-on -- whether they like it or not. Investors can either get on board with Apple's sustainability initiatives or, in his words, "[Y]ou should get out of this stock."

Apple CEO Tim Cook. Source: Apple.

It was a bold proclamation from the leader of the world's largest company. It was a moment that MacObserver's Bryan Chaffin described as the "only time I can recall seeing Tim Cook angry." It was also, in my opinion, a huge step toward changing how businesses talk about their role in society.

The setting
Cook made his comment at Apple's annual shareholder meeting, which allows leadership to speak candidly about their goals and objectives and provides shareholders an opportunity to voice suggestions or concerns.

During the meeting, a representative from the National Center for Public Policy Research (NCPPR), an Apple shareholder and self-described conservative think tank, called for the tech giant to disclose more information about its participation in "certain trade associations and business organizations promoting the amorphous concept of environmental sustainability."

Taken at face value, the shareholder proposal seems harmless. Transparency, after all, is something most shareholders can get behind. We are avid fans here at The Motley Fool.

But, in this case, hardly anyone got behind the proposal. Only 2.95% of shareholders voted in favor, seemingly due to NCPPR's hard-line politics and profit-focused agenda.

A history of conflict
The conservative think tank believes climate change is not a man-made phenomenon, a point made clear on its website and blog. This puts the organization in opposition to former vice president Al Gore, a climate change activist and Apple board member. It also stands in contrast to a wide body of scientific evidence

But putting the science of climate change aside, NCPPR's uncompromising position has led it to publicly clash with the private sector's efforts to simply reduce its environmental footprint. For instance, NCPPR attorney Justin Danhof, contested an effort by the Retail Industry Leaders Association to pre-empt government regulations by "reducing waste generation, energy and fuel usage, land-use footprint, and other environmental impacts." Danhof claimed the trade organization's actions meant it was cooperating with regulators "in a misguided effort to stop so-called climate change."

The Retail Industry Leaders Association efforts appeared counterproductive to NCPPR. They stood between retailers and their goal of maximizing profit, which seems to be a common theme in NCPPR's initiatives. 

In a similar manner, NCPPR pressed General Electric to change its management approach. The organizations's proposal  to GE stated, "[S]hareholders are concerned that the Company may make some decisions in which the reduction of carbon dioxide emissions is a higher priority than maximizing financial returns."

On this issue, where environmental concerns could be emphasized more than profits, GE recently abided and changed its corporate social responsibility policy to reflect its intentions. At Apple, however, a significantly different scenario unfolded at the Friday shareholder meeting.

Apple's strong stance
According to multiple accounts, including NCPPR's, Danhof pressed Tim Cook on the issue of profitability from environmental investments. After some discussion on the specifics of the projects, NCPPR stated that Danhof asked whether "Cook was willing to amend Apple's corporate documents to indicate that the company would not pursue environmental initiatives that have some sort of reasonable return on investment."

MacObserver's Chaffin, who was reporting on the meeting, described Cook's response to this inquiry as follows:

What ensued was the only time I can recall seeing Tim Cook angry, and he categorically rejected the worldview behind the NCPPR's advocacy. He said that there are many things Apple does because they are right and just, and that a return on investment (ROI) was not the primary consideration on such issues.

"When we work on making our devices accessible by the blind," he said, "I don't consider the bloody ROI." He said that the same thing about environmental issues, worker safety, and other areas where Apple is a leader.

As evidenced by the use of "bloody" in his response -- the closest thing to public profanity I've ever seen from Mr. Cook -- it was clear that he was quite angry. His body language changed, his face contracted, and he spoke in rapid fire sentences compared to the usual metered and controlled way he speaks.

Cook was not pleased to have his capital allocation decisions questioned, but this wasn't the first time that NCPPR had been critical of Apple's motives and disclosures. Back in 2012, the think tank backed a proposal to force board member Gore to disclose an alleged conflict of interest relating to Apple's green energy efforts. This effort collected only 1.9% of shareholders' votes.

Though NCPPR has hardly backed down since, a response from Danhof on Friday could imply the organization is considering withdrawing its investment in Apple. In the press release titled "Tim Cook to Apple Investors: Drop Dead," Danhoff is quoted stating the following:

Here's the bottom line: Apple is as obsessed with the theory of so-called climate change as its board member Al Gore is. The company's CEO fervently wants investors who care more about return on investments than reducing CO2 emissions to no longer invest in Apple. Maybe they should take him up on that advice.

Based on Cook's words, losing investors who disagree with Apple's environmental efforts is a risk he's willing to take. As he put it in no uncertain terms, "If you want me to do things only for ROI reasons, you should get out of this stock."

A stakeholder tug-of-war
It's unclear at this point whether Apple's relationship with NCPPR will unravel. However, it is quite clear Cook is considering many different stakeholders -- which include everything that interacts with a business -- and balancing all of their interests. His message could reverberate across other organizations.

Apple is the largest company in the world by market cap and owns the most valuable brand, according to Interbrand. What it stands for matters to investors and the public at large. When Apple's relationship with a stakeholder is scrutinized, as was the case with supplier Foxconn Technology Group, the company's response echoes widely.

In that instance, Apple last year increased surveillance of its supply chain by conducting 393 audits, up 72% from two years prior. It also improved transparency and worked to distance itself from conflict minerals. These actions garnered praise from even its fiercest critics.

Cook's recent actions signal that Apple views the environment as an important stakeholder alongside suppliers, employees, customers, and investors.

While shareholders' desires have often taken precedent over other stakeholders, this manner of running a business is losing steam. My colleague Brian Richards noted that shareholder-obsessed companies often become distracted from long-term business objectives. Former GE chief Jack Welch -- a Wall Street idol for decades -- has remarked that, "On the face of it, shareholder value is the dumbest idea in the world." Likewise, organizations that embrace the ideals of conscious capitalism are redefining the purpose of business, which extends beyond profit-maximization.

Foolish takeaway
To be sure, Apple doesn't seem to be turning its back on shareholders. Nor is the company stating outright that climate change is in fact caused by human activity.

Instead, like every other business leader in America, Cook is walking a delicate tightrope and trying to create a "win-win" outcome over the long run for stakeholders.

Warren Buffett has a pearl of wisdom for CEOs: You don't get the investors you want; you get the investors you deserve based on your actions. On Friday, Cook heeded that advice. He took a step to align investors with the values of his organization. His actions could send a highly influential message to the rest of the business world.

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Read/Post Comments (14) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 03, 2014, at 7:12 PM, SimchaStein wrote:

    NCPPR'S Proposal gained less than 3% of the votes and no real role as shareholder activists. They just want to use Apple's fame to call attention to their propaganda.

    As for ROI, Apple's green initiatives may be payoff handsomely over the next 30 years. Some of the most promising advances in energy production and use require massive long-term investments.

  • Report this Comment On March 03, 2014, at 8:29 PM, dstb wrote:

    I've been a happy subscriber since 2005 but you guys at Motley Fool are starting to wear me out with your blatant liberalism. Man made climate change (oh didn't it used to be global warming before they figured out there was no global warming?) is flimsy science at best and a full blown hoax at worst, and likely the latter.

    Don't tell me about the "wide body of scientific evidence." It comes from "scientists" clouded by grants and other funding designed to push an agenda.

    Cook's statement about designing products for the blind or worker safety is a straw man. Of course these things make sense even if they are not particularly profitable. These are clearly people in need and these activities support the image of Apple. But the man-made climate change/global warming issue is an agenda item that MOST Americans do not believe is valid. Therefore NCPPR's questioning is valid.

    Tim Cook should get a grip. I guess he is against the Keystone Pipeline and all the jobs and prosperity it would provide. Enough is enough with this bad religion.

  • Report this Comment On March 03, 2014, at 10:50 PM, ctyank99 wrote:

    Tim Cook can go jump in a lake! This company is going downhill, anyway! If I owned the stock I would sell. And, I will never buy an Apple product as long as he is CEO!!!! I'm sick of tired of these freaks!

  • Report this Comment On March 03, 2014, at 11:55 PM, LazyCapitalist wrote:

    Was it really that bold though? Seems pretty much like a standard thing to say in today's corporate America. Even for companies not very environmentally-friendly, what CEO is going to actively and publicly speak out against the environment and sustainability? Not that would have been bold! Haha.

  • Report this Comment On March 04, 2014, at 12:14 AM, LazyCapitalist wrote:

    Typo in my above comment:

    *Now* that could have been bold!

  • Report this Comment On March 04, 2014, at 1:37 AM, wlweldy wrote:

    Tim Cook's arrogance is but another reason Wall Street is losing patience regarding the stock. If the big guys feel as if management could care less about the stockholders, why be in it regardless of how cheap it might be. What could Al Gore possibly bring to the board? Then they hire Sheila Jackson. What good could this acquisition possibly bring to shareholders? To believe this global warming hoax has become the single most important concern to Cook and now Motley is absolutely astounding!! Today, even a liberal like Warren Buffet even sees this as nonsense. Companies such as APPL should steer clear of this "politically correct" feel good stuff and think more of it's owners (stockholders). No wonder AAPL has been underperforming the market!!

  • Report this Comment On March 04, 2014, at 5:58 AM, Gr0w wrote:

    Well done Tim Cook! It's good to know that, even if he sometimes seems quiet and polite compared to his predecessor, the man has things he feels strongly about. I say that as someone who has been a customer of Apple for 30 years and a shareholder for 17 years.

    Customer-focus has always been one of its strengths and Apple has a lot of customers. Doing things that are good for the planet and good for humanity are ultimately good for Apple's customers.

    Knowing that Apple is managed with integrity gives the customers a feel-good factor when they pay a premium price for a better quality product, made by a better quality company.

    The management is clearly running the company for the long term. In the long term acting with integrity feeds the bottom line. Shareholders, well at least, the evidence would suggest based on the sample attending the shareholders meeting, 97.05% of them, clearly appreciate that. But then evidence, numbers and the long term are not things that NCPPR and other climate change deniers appear to value.

  • Report this Comment On March 04, 2014, at 7:28 AM, JarJarThomas wrote:

    Wow i know why i like to live in europe.

    Seems us americans sometimes are really blind and stubborn

    "No what i don't lile must not exist NANANANAAA !!"

    like small children.

    We in europe would just laugh about that stupid "manmade climate change does not exist" if it wasn't such an important theme.

    But well ... us americans also believe creationism is a valid theory of the sources of life.

    Well it is ok for us ... because that is what makes the us weak. Denying facts because they don't match into their image of how the world should function, where other countries accept it and earn a lot of money by accepting and adapting.

    Farewell US

  • Report this Comment On March 07, 2014, at 1:26 PM, eRtwngr wrote:

    I wouldn't call it a bold move to go green in a company where most of the manufacturing is in China. Even if Apple is the biggest company in the world, any changes they make to their carbon footprint here will be a footnote in terms of actual impact on the world's temperature rise or fall. This is grandstanding and PR of the worst kind - the kind that pits one group of people against another. It's the same divisiveness we see out of Washington, DC these days.

  • Report this Comment On March 07, 2014, at 1:33 PM, HoosierRube wrote:

    ..... and that's how you get invited to the billionaires only dinner parties...

    they will not quit until they have quietly destroyed low income families with all of the 'The sky is falling' silliness..

    And to JarJar, like the Europeans have a clue about anything. Like economies, or science.

  • Report this Comment On March 07, 2014, at 1:57 PM, billcarter3 wrote:

    ...which is yet another very valid reason for any right thinking individual not to be drawn into Apple's weird little world.

    I will not invest in Apple and only have an iPhone because work makes me (although, I stole the sim card out of it and put it into a Google Nexus 5 and am much happier, now).

    Man Made Climate Change does not stand up to any kind of scrutiny. The predictions of 'Climate Scientists' have been so woefully inaccurate, that any sane person would have to question the veracity of any statements made by these so called 'experts'.

  • Report this Comment On March 07, 2014, at 1:57 PM, HappyNdings wrote:

    I sold all of my Apple stock (from four different accounts) after learning of Cook's comments at the shareholder meeting and his pressure on Arizona's governor to veto a religious rights protection bill.

    Apple was by far my largest single holding.

    Besides the arrogance of it all, it's very difficult for me to see how encouraging investors to dump the stock is ever in the shareholders' interest. To me, that's Cook putting his personal politics ahead of his fiduciary duties to the investors.

    I've been concerned about any CEO being able to fill Steve Jobs' shoes and keep Apple moving in the right direction. If anyone can do it, I certainly think it will require 100% focus.

    Cook's latest actions say to me that he isn't close to meeting that standard, and that really sounded like the 'sell' signal to me.

  • Report this Comment On March 07, 2014, at 2:05 PM, idahozonie wrote:

    Even from a pure ROI standpoint, it is in Apple's best interest to have highly visible environmental initiatives in place. Apple is famous for it's brand loyalty, and a very large portion of those loyal customers have liberal leanings.

    Many commenters like to sneer at the Apple sheep and disparage loyal Apple customers as a cult. Ironically, many of those same commenters seem to think Apple should make business decisions that ignore things that are important to that same customer base. If they really believe that Apple customers are a bunch of whacky liberals, they should recognize the value of policies that appeal to the whacky liberals.

    For several years, I was lucky enough to work for a man who had built a business that generated more than half a billion dollars of revenue annually. He frequently stated that business exists primarily to improve the quality of life in the communities where it does business. Profit was not the reason for business, but it was necessary to allow the business to serve its primary function.

    It's sad that the political party that claims to understand business seems to have lost all understanding of any part of business that is not just simple greed and meanness.

  • Report this Comment On March 09, 2014, at 6:14 PM, VictorErimita wrote:

    Another FoolWatchWeekly article reciting current cliches from the leftist hive mind. "Conscious capitalism" sounds great, but often amounts to little more than shallow conformist adherents to the leftist myths of the day: climate change, GMOs, concern for everyone but the evil capitalist owners of companies. It's getting so I read the "conscious capitalism" articles to know what not to do.

    That said, Cook's grand proclamations address effectively token actions on Apple's part. Apple still manufactures its products in China, powered by highly-polluting soft coal. His supposedly eco-friendly initiatives are confined to corporate headquarters, where they will make a fractional impact on the 4-1/2% of its costs Apple spends there. But as the cool company, selling cool products to cool people, it's good PR to send signals to their customer base that will read as enlightened and, well, cool. Credulous followers like the writer of this article can assure themselves that they are making appropriate sacrifices to the climate change volcano god while continuing to purchase expensive consumer goods made with the dirtiest energy source on the planet.

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Isaac Pino

Isaac covers the companies that constantly push the world forward, from the engines of innovation like GE and Google to the rule breakers like Chipotle and Whole Foods. He admires the leaders that embody the philosophy of Conscious Capitalism.

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