Apple

Apple, Cook, and the power of evil empires doing good

Tim Cook's boldest moves at Apple have come behind the scenes. Can he use the company's sustainability mission to reinvigorate the brand and stop the bleed of under-30 buyers?
 
Tim Cook at Palo Alto Apple Store
 Image: James Martin/CNET

If you think Apple is off-base with its new-found enthusiasm for sustainability, clean energy, and environmental stewardship, then I'll sum up CEO Tim Cook's message for you:

Tough.

Since taking over as CEO in 2011, Cook has drawn criticism for moving too slowly when it comes to Apple's product roadmap. However, Cook has made very aggressive moves behind the scenes in what the business world calls "corporate responsibility."

Leading examples include:

  • Instituting a charitable matching program for employees up to $10,000/year
  • 75% of all Apple buildings are now powered by renewable energy (up from 35% in 2011)
  • Apple's massive data center in Maiden, North Carolina is 100% powered by renewable energy
  • The company's supply chain has been cleaned up and made a lot more transparent, and hazardous substances have been removed from products—a move that drew praise from Greenpeace (which had previously given Apple a "bottom of the barrel" ranking in this department in 2007)
  • Hired Lisa P. Jackson away from the U.S. EPA to run Apple's environmental program

However, this whole initiative became a source of controversy at Apple recent shareholder meeting when a group of investors from the National Center for Public Policy Research objected to Apple's attention to environmental issues as a waste of resources and useless pandering to overreaching government regulations.

At that annual shareholder meeting on February 27 in Cupertino, the NCPPR put forward a proposal that Apple's board of directors should no longer approve any environmental initiatives that don't have an impact on the bottom line. The NCPPR general counsel also became a thorn in Apple's side by getting up to speak three times on the issue during the meeting.

Their proposal was rejected in a shareholder vote and Cook eventually ran out of patience with the NCPPR representative. The Apple CEO stated, "We do things because they are right and just and that is who we are... When I think about human rights, I don’t think about an ROI. When I think about making our products accessible for the people that can’t see or to help a kid with autism, I don’t think about a bloody ROI, and by the same token, I don’t think about helping our environment from an ROI point of view."

Nevertheless, Cook vigorously defended the economic impact of Apple's environmental initiatives. Then, he told the NCPPR lawyer, "If you only want me to make things, make decisions that have a clear ROI, then you should get out of the stock." At that, the room full of shareholders erupted into applause.

While I have no reason to doubt Cook's sincerity about corporate responsibility—his decisiveness in this department compared to his caution in product development tells us that he's obviously passionate about it—we also shouldn't underestimate the business value of doing good. While altruism may be part of Cook's motive, there's also some business judgment involved as well.

Cook emphasized, "That is who we are."

More accurately, that's the kind of Apple that Cook wants to create and he's making some progress. Steve Jobs was so legendarily laser-focused that he had minimal concern for corporate responsibility or the environment or charitable giving. And clearly, that's the kind of Apple that NCPPR thinks Cook needs to return to, and judging by Apple's product performance under Cook's leadership it's easy to understand the concern.

However, Cook's broader worldview on these issues increasingly looks like perfect timing for a company where so much of the sales of its products are tied up in the image of its brand. While Apple has highly functional products, a lot of people buy Apple gear because of the image of the Apple brand, which generally stands for things like simplicity, beauty, and quality.

In 2013, Forbes once again named Apple the No. 1 brand on the planet, stating, "Apple is the most valuable brand in the world for a third straight time at $104.3 billion, up 20% over last year. It is worth nearly twice as much as any other brand on the planet by our count."

The bottom line is that people are drawn to brands. They prefer to do business with companies they like and trust, they prefer to buy products and services that they feel good about, and they prefer to align themselves with brands that confirm and amplify their values.

Apple's less-than-stellar reputation in corporate giving, the reports of Chinese workers in its supply chain being poorly-paid and badly-treated, and Greenpeace excoriating Apple in 2007 over toxic materials in the iPhone were all issues threatening to erode Apple's reputation over the past decade.

As the Forbes brand rankings show, Apple has continued to fly high despite the negative publicity on these issues. However, the next generation of consumers cares more about these issues than their parents and grandparents did.

According to KPMG research from December 2013, 70% of U.S. consumers under 30 years old now contemplate social issues before they make purchases. The report stated, "Young shoppers are focused more on social issues when considering big-ticket purchases such as automobiles, computers, consumer electronics, and jewelry as opposed to everyday items such as gasoline, toys, and food. A combined 41 percent of customers under the age of 30 'always' or 'frequently' consider social issues before buying a big-ticket item."

This makes the timing of Cook's changes in corporate responsibility pretty important. Apple has always made marketing to schools and youth a priority and there are recent signs that Apple has been losing steam with this demographic. A Washington Post / ABC News survey in June 2013 showed that Apple's favorability rating with 18-29 year olds had dropped to 71% from 81% just a year earlier.

Some of this is naturally tied to the fact that Apple as a company is no longer a quirky upstart taking on the evil empires, but is now the world's most valuable corporation. That automatically vaults it into the evil empire club.

One of the ways that evil empires traditionally try to balance their effect on the world is by donating resources to worthy causes and being transparent about the impact of their operations on their community, on human rights, and on the environment. This is the "corporate responsibility" arena and CR Magazine does an annual ranking of "The 100 Best Corporate Citizens." For 2013, there were 19 technology companies on the list, including AT&T (#1), Intel (#5) IBM (#11), and Microsoft (#29). Apple was absent from the list.

Lots of other publications and organizations do these "good corporate citizens" lists and Apple has appeared on a few of them from time to time. It was 32nd on the Business Ethics in 2001 and 77th on the Forbes list in 2009. However, this has never been a core part of the company's mission or one of the key aspects of its brand. Cook is vigorously working to change that.

Nevertheless, corporate responsibility (also sometimes called "corporate social responsibility") also has its naysayers. Their often-touted example is Pepsi, where CEO Indra Nooyi touted "Performance with Purpose" and a philosophy that the beverage company would "do what’s right for the business by doing what’s right for people and the planet." This earned Nooyi the title of "most powerful woman in business" from Fortune for five years in a row. But, as Pepsi focused on healthier products, it struggled for market share against its rival Coca-Cola. Some of Pepsi's critics blamed the company's struggles on Nooyi's focus on doing good rather than zeroing in on profitability.

Other companies have been much more successful at integrating their corporate responsibility work with their core business strategies—and seen strong gains from it. Lexmark (#55 on CR Magazine's 2013 list) evaluated its business a decade ago and realized that its customers were becoming much more environmentally-conscious (and cost-conscious) about printing. The whole printing business for Lexmark and its competitors was based on getting people to print more by giving them discounts based on volume. CEO Paul Rooke realized that his business was aligned against the interest of his customer

Rooke decided, "We should turn this headwind into a tailwind."

As a result, Lexmark ramped up its managed print services business, sold off its inkjet printing business, and focused on helping customers print less. The company talked to customers about how "the cheapest page is the page you never print," said Rooke. The MPS business grew 16% during 2013 and has been a key component of Lexmark's transition from a pure printing company to a software and services company focused on capturing and sharing information.

SEE: How Lexmark is helping companies print less, and growing its business in the process

While unleashing the "Print less, Save more" campaign, Lexmark also got more serious than ever about its corporate responsibility initiatives, especially focused on the environmental impact of its products and its operations. In other words, it fully embraced sustainability in its product roadmap and baked it into the DNA of the company and the Lexmark brand.

John Gagel, the corporate manager of sustainability for Lexmark, said, "The approach to sustainability is a win-win-win. It's a win for us, it's a win for the environment, and it's a win for the customer."

In sustainability, Cook wants Apple wants to be a Lexmark.

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About

Jason Hiner is Editor in Chief of TechRepublic and Long Form Editor of ZDNet. He writes about the people, products, and ideas changing how we live and work in the 21st century. He's co-author of the upcoming book, Follow the Geeks (bit.ly/ftgeeks).

13 comments
iswayn
iswayn

One way for Apple to gain further traction with me, would be for Apple to really pay it's "fair share" of tax. Rather than paying the heavily manipulated, minimum Corporate Tax requirement, as spread across the various "Corporate" tax havens of this world feeding bonuses and dividends with "false abandon".

Making a change here, is where Corporate "responsibility" and "respect" may be judged...!!!

iswayn
iswayn

One way for Apple to gain further traction with me, would be for Apple to really pay it's "fair share" of tax. Rather than paying the heavily manipulated minimum Corporate Tax requirement as spread across the various "Corporate" tax havens of this world, feeding bonuses and dividends with "false abandon". That is where "Corporate responsibility" and "respect" starts for me....!!!

Bruce Meers
Bruce Meers

Waste of time ... can't reinvigorate crap ..

johnpinna
johnpinna

I don't think the average customer - who is making a purchasing decision as to what phone to purchase - could care less about any of the items listed above.

For example, "Instituting a charitable matching program for employees up to $10,000/year" - what has that got to do with anything?  Tim Cook is falling for all the nonsense and taking his eye off the big picture.

What is the big picture?  Innovation!  Not kissing ass...

Concorde1996
Concorde1996

Apple is a for profit organization whose sole purpose is to maximize the return on investment for its shareholders (the owners). That said. A company that engages in certain charitable initiatives can help foster an environment that is good for the bottom line. The problem occurs when these initiatives begin to adversely affect the financial performance of the company. When Apple's mission turns from making the best iPhone possible to making the most environmentally friendly iPhone then the company has violated its responsibilities to its shareholders and has endangered the profitability of the company.

johnh39
johnh39

This article omitted one of the NCPPR's main objections, in that Apple was defraying the cost of its green energy initiatives through government subsidies.  Essentially asking the question: Is it "right" for Apple to accept millions of dollars in taxpayer subsidies for their renewable energy strategies?

The Daleks
The Daleks

A hallmark of a bold CEO is to make big changes or reverse policy when warranted, so I have to imagine that if Steve Jobs was still CEO, he would be doing this, also. He started becoming more environmentally friendly in his final years. And Jobs' final advice to Cook was "Don't try to guess what I would do. Do what's right."

But I think the main reason Apple's mobile products have declined in the under-30 market is simply price. They don't have money to spend as before, so they gravitate to lower-priced Android devices.

RussellXPD
RussellXPD

A good article. I've been ill disposed towards Apple consistently for ten years and more - a non-customer if ever there was. But if anything was going to turn my head, that is the sort of news that would have me reconsider.  So a good business decision.

adornoe
adornoe

So, to Cook, ROI is not the foremost goal for him as the head of the biggest market-cap company on the planet?


That market cap didn't get so  big because the shareholders cared about the company being "a good citizen".  Those shareholders invested in a company in which they saw the prospect of a good return for their money.


Being a good citizen matters, but ROI matters more to the company owners, and if Cook doesn't put matters into proper perspective soon, he might find himself "retired" or job hunting soon. 

cpguru21
cpguru21

@johnpinna  I have to disagree.  Here is at least one consumer that would consider changing to purchase from a conscientious vendor.  I mean I make decisions about purchasing all day based on whether the company is local (we try to stay local) does the company donate locally etc..


A perfect example is there is a mom and pop grocery store that is more expensive than the big chains.  They are a customer of ours and they also donate a lot to the local football, baseball, basketball programs I help coach and my son is involved in.  This DEFINITELY sways my decision when purchasing food.


Yes cost is one of the most important things.  Yes I could get it cheaper else where.  There is a value there though to understanding what it takes to give back, and make economic decisions.


Another note is I know you care about innovation.  You are not necessarily wrong here either.  If this was an article about how employees tried to start a charitable matching program, and the execs turned it down, we would have a bunch of pit-bulls on this forum chastising them for not giving more.


I am not a huge apple fan.  They lost me when they got rid of x-serves.  I use an HTC one Max.  My laptop is an MSI windows 8 monster.  I do enjoy hearing about a company that is (at least on the surface) acting as I would expect them too.  I mean if it was you, wouldnt you feel awesome if your board backed you in some of these decisions?

jonnotjohn
jonnotjohn

@Concorde1996  

Apple is certainly a for-profit organization and they are about the best in the world at making them.  Their job is to design and manufacture consumer electronics and software--that is hardly the same as having the sole purpose of maximizing ROI.  We musn't confuse profitability, especially in the short term, for a larger strategic vision that helps ensure the future viability of the company.  Such shortsightedness has littered our economic history with corporate failures.  


Apple seems to be in a creative slump, but really, how many "next big things" can there be?  They've had an amazing run over the last 15 years, and that frenzied pace of innovation has left its mark.  Tim Cook is in clean up mode, essentially putting the polish back on the company and, I believe, buying his designers time to innovate.  No one knows if they will ever hit another home run--the pressure to do so must be enormous--but Tim Cook is doing what he can right now to ensure his designers get that opportunity.  That, in my opinion, is good for ROI.

greggwon
greggwon

@Concorde1996 One of the most amazing things about the general public is how ignorant they are of the manufactured economy they are surrounded by.  Money is manufactured by the FED and other world bank organizations working together, trying to create a "balanced" economy.   They attempt to look at the "opportunity" present in the economy, and print money at a rate (Via interest rates to large lending companies) that will grow the economy slowly enough to keep inflation from being a negative impact in contrast to the positive impact that more "opportunity" presents.

Any companies profitability is based on the "size" of the economy, not just on profitability.  If there is not enough cash in circulation to support owning an iPhone and owning a 4k TV, people will only buy one, or the other, because of the world banks in ability to grow the economy (sometimes they shouldn't).

On the other hand, Apple's attempts at reducing the impact on the planet, could cause less people to spend money on medical care for example.  Their reduction in energy use could allow natural gas, propane and other fuel prices to go down because of supply and demand changes that would allow more people to buy an iPhone and a 4k TV.

Short sightedness on profitability is what has driven many businesses to have huge environmental impacts.   Power companies should of moved off coal decades ago.  Cars should of moved to CNG decades ago.  Battery storage density research should be a much larger priority in research monies spent.

Money is entirely the wrong focus.  At this point, more and more people are figuring out how much of a shaft job the average joe worker gets from the "rich" who have access to huge sums of money and keep taking more and more out of our economy and sending it overseas.

More than 100 trillion dollars is owned by the most wealthy investors in the world.  All they are doing is growing that sum.  They created a world wide disaster last decade by trying to invest it in criminal and irresponsible ways.  This decade, some of the people are getting "charged with crimes", while the rest of the world can not function because 50% of the cash in circulation has suddenly disappeared from the economy and the FED and world banks are trying to print it as fast as possible, but aren't going fast enough to keep everyone from suffering.


It's all a big game.  If you just had  your local bank who was using real money to influence your success, all would be good.  The problem is we have the 10% of the world who own 85% of the cash in circulation, who play their own games and operate their own economy and keep sucking money out of our economy by operating "only for profit".

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