Amazon is on a Collision Course with its Stakeholders
Investors are asking questions about what is really going on in those warehouses. But the company maintains radio silence.
How long can Amazon ignore the rising chorus of stakeholders calling for more responsible labor practices before the criticism becomes a material risk?
The issue came into focus last week when Boston Common Asset Management managing director Lauren Compere – hardly a card-carrying union organizer – expressed her concern in a carefully worded letter to the Financial Times:
It seems Amazon’s business model depends on its own warehouse workers paying the price for faster deliveries and lower prices, while the company also continues to gain a reputation of being unresponsive to shareholders on labour issues.
Compere’s letter reminds me of 2005’s Wake Up Walmart Campaign, which demonized Walmart for externalizing costs onto taxpayers through unfair labor, community, and environmental practices. After mounting public concern over the “High Cost of Low Price,” CEO Lee Scott directed the company to leverage its massive supply chain as a force for good, and challenged other companies to do the same.
Like Walmart years ago, Amazon’s economic moat seems quite durable. So, too, is the perceived power of its tech peers, Apple and Microsoft. Both those companies have learned to respond to pressure from stakeholders and are evolving to become increasingly sophisticated at using their market power as a force for good. From toxics to human rights, to clean energy, to immigration and paid parental leave, a majority of investors, employees, and customers now feel these companies, while far from perfect, are genuinely engaged on social and environmental challenges.
But not Amazon.
Last year, the company reported $5.6 billion of U.S. profits but didn’t pay a dime of federal income taxes. Company head Jeff Bezos is working relentlessly – almost maniacally – to identify and eliminate “friction” in the purchasing process, purportedly for the benefit of his consumers, suppliers, and shareholders. In his worldview, the people who fill your order are replaceable and will ultimately be obsolete with technology.
To learn about three strategies that disruptive e-retailers like Amazon can embrace to build goodwill and trust with their stakeholders, see Page 17 of Future 500’s Top 10 Stakeholder Engagement Trends of 2018.
As Scott Galloway details in his 2017 book The Four, Bezos is an outspoken advocate for a guaranteed minimum income, because of robots. “He has seen the future of work and, at least in his vision, it doesn’t involve jobs for human beings,” Galloway writes.
“Amazon has clearly cemented itself as a global retailing leader. Now it needs to sell itself as a leader in labour practices.” – Lauren Compere
To be fair, Bezos’ company, the world’s second to attain $1 trillion in market cap, has taken some steps to embrace renewable energy, reduce its packaging footprint, and a more recent promising but thus far underwhelming effort to advance product transparency and traceability. But on labor and working conditions, Bezos is silent.
Amazon is like a jet aircraft cruising at 35,000 feet, figuring out its sustainability strategy while it barrels across the sky. It has, and has had, some great practitioners and thought leaders cycle through Seattle. So it is likely (hopefully?) doing interesting things. But the company remains opaque.
Until Amazon invites stakeholder leaders – change agents, opinion leaders, critics – aboard to help it address the harmful social and environmental impacts of its business model, it will face mounting stakeholder, investor, consumer and regulatory skepticism.
And that rarely leads to a happy landing.
This article was originally published on LinkedIn.
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