Even with all the buzz around Amazon Prime Day’s discount blitz earlier this month, I didn’t join the legions shopping online. It was hard to click “proceed to checkout” while workers and employees protested in Germany, the U.K., and the U.S. A petition with 270,000 signatures was delivered to Amazon CEO Jeff Bezos calling for better worker rights and for the company to cut ties with US Immigration and Customs Enforcement (ICE), the federal agency responsible for rounding up and deporting undocumented immigrants. Although these protests didn’t amount to much action, they certainly shone a light on Amazon’s many problems.
There’s no denying Amazon’s growth has been astounding. From its humble beginnings as a book reseller, the company has grown to dominate online retail. Although it’s expanded into other areas including entertainment, robotics and cloud computing, about 85% of Amazon’s revenue still comes from online retail. Understandably, it wants people to keep buying stuff we don’t need as it corners the market on overconsumption.
Moving all this stuff around from warehouses to homes around the world comes at a large environmental cost. Amazon hasn’t publicly disclosed its carbon emissions but recently promised to start providing this information to investors later this year. It also launched a “Shipment Zero” strategy, committing to make all shipments net zero carbon with a 50% target by 2030. But will that be enough for investors and employees? Over 8,100 Amazon employees have signed a letter asking tough questions about the Shipment Zero strategy and calling for Amazon to do more.
Amazon factories are notorious for their unrelenting pursuit of efficiency. Employees have strictly timed quotas and are paid low wages to do strenuous work. There are stories of cheated overtime, limited bathroom breaks and mental health challenges leading to suicide attempts. The corporation is quickly moving towards automation, replacing workers with robots and drones while spending $700 million on employee training and ‘upskilling’ its workforce into more technical positions. It will take time to transition its workforce, and there are few assurances that Amazon won’t continue to treat people like robots while they perform tasks that robots currently can’t. According to thelogic.co, Amazon staff also “held closed-door meetings with Toronto delivery companies on how to identify and prevent union-organizing attempts.”
If all that’s not enough to get you to return your shares of the retail giant, employees and protestors are concerned that Amazon is selling web services to companies helping the US Immigration and Customs Enforcement (ICE) identify and deport undocumented immigrants. Amazon isn’t the only company profiting from these activities, but it certainly doesn’t help employee morale or Amazon’s public relations.
Amazon clearly has no qualms about working with controversial US departments, as they are competing for a $10 billion U.S. military contract called JEDI — Joint Enterprise Defense Infrastructure. When asked about doing business with the military, CEO Jeff Bezos seemed to get somewhat defensive saying “If big tech companies are going to turn their back on the U.S. Department of Defense, this country is going to be in trouble.”
Even still, investors do need to think about the financial cost of trading in their Amazon shares. Amazon Prime day set sales records last month, despite the protests. Online retail is incredibly popular but accounts for only about 12% of all retail sales globally. That means there’s still lots of room to grow despite failed Amazon ventures like the recent discontinuation of its food delivery service.
For some worker and planet-conscious investors, Amazon’s antics make it a hard no. So, we present a more sustainable alternative to Amazon: eBay. EBay is the next largest online retail company and is a much better performer when it comes to sustainability metrics. With a focus on selling pre-owned products, about 16% of eBay’s revenues are estimated as green. EBay also owns Kijiji, an online marketplace for secondhand goods which, last checked, was more popular than eBay itself in Canada. (I always make a point of checking to see if I can buy something used on Kijiji before buying new since it’s better for both my wallet and the planet.) EBay publishes a detailed Impact Progress Report that charts its progress on sustainability goals such as growth of sellers in “less-advantaged communities” and a 50% absolute reduction in Scope 1 and 2 greenhouse gas emissions by 2025.
eBay headquarters in San Jose, California. Photo by Leon7
EBay’s business model is tightly focused on connecting buyers and sellers, rather than dealing with logistics or providing web services. This focus removes many of the pitfalls around warehouse labour and services provided to odious organizations. However, it does remove many of the biggest revenue growth drivers. Amazon’s growth strategy has paid off over the past five years, outperforming eBay significantly. Amazon’s market capitalization — the size of the company as measured by the stock market — is more than 25 times larger than eBay’s. EBay pays a small dividend, while Amazon continually reinvests all of its profits into growing the business. But eBay has been less volatile with a lower beta, great for those investors who want less of a ride.
Bottom line: Sustainable investors will want to consider the financial trade-offs involved in walking away from a stock with Amazonian growth, but they’ll sleep better at night owning eBay and knowing its carbon footprint won’t swallow the planet at the click of a button.
Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. Lower beta means less risk.
The post Tim Nash’s Sustainable Stock Showdown: Amazon vs. eBay appeared first on Corporate Knights.
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