Evaluating a company's impact (the case of Tesla)

This week’s read time: 3 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

THIS WEEK’S COMPANY

Tesla

This week we dive deep into Tesla’s environmental and social impact.

Tesla is a leading manufacturer of electric vehicles (EVs) and a provider of sustainable energy solutions.

Some interesting facts:

• Tesla’s Gigafactory in Nevada, a massive lithium-ion battery manufacturing plant, is among the largest buildings by footprint on the planet. It produces batteries to power both Tesla’s cars and energy storage products.

• Tesla vehicles regularly receive over-the-air software updates that add new features and enhance existing ones over Wi-Fi, similar to how phones and computers do.

COMPANY’S IMPACT

Tesla’s overall impact score

Tesla has a general impact score of +0.53 (on a scale from -5 to +5). Its impact is spread across 9 UN Sustainable Development Goals (SDGs) and 9 topics, split between positive and negative analyses.

In the socio-economic sphere,

Tesla holds 17% of the global EV market and 50% of the U.S. EV market. The company is a pioneer in EV production, revolutionizing the automotive industry with accelerated mass adoption of EVs and exceptional performance. Tesla’s EVs are known for cutting-edge technology, long-range performance, and autonomous driving features, setting new standards in the auto industry. The company’s innovations continuously push other automakers toward electrification, reshaping both the automotive and energy markets. Tesla also operates the world's largest global fast-charging network with over 60,000 superchargers. Additionally, the company powers homes, vehicles, and the electric grid with clean energy through solar panels, solar roofs, and lithium-ion batteries like the Powerwall and Megapack. These batteries provide reliable backup during outages and help balance peak demand.

On the social front, Tesla has faced scrutiny over forced labor concerns in its supply chain, with reports of forced migrant labor from Xinjiang, China, involved in producing key parts and materials for the company. Allegations have also linked Tesla’s suppliers to forced Uyghur labor in manufacturing and mining in China. In 2023, Tesla faced further criticism for illegally laying off 39 employees following unionization efforts at its Buffalo site in the US. The company’s manufacturing sites have also faced multiple pollution violations, including fines for hazardous waste management, exceeding pollutant limits, and using harmful chemicals in vehicle coatings.

Environmentally,

although the company’s customers avoid releasing over 20 million tonnes of CO₂ equivalent into the atmosphere annually, Tesla itself emits over 39 million tonnes of CO₂ equivalent (2023), equal to the emissions of over 7.8 million homes’ electricity use for a year. The company also generates approximately 350,000 tonnes of waste, while recycling 83% of it.

_{*The impact score is current as of November 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Tesla’s ESG rating?

For comparison, Tesla has a BBB rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Tesla’s impact scores by SDG

Positively (and by weight), the company scores the highest in the Climate Action SDG (+1.23), followed by Sustainable Cities and Communities (+3.38), and Partnership for the Goals (+2.50).

Negatively, the company scores the worst in the Responsible Consumption and Production SDG (-2.39), followed by Decent Work and Economic Growth (-0.81), and Good Health and Well-being (-3.60).

*the analysis takes into account the weight of the SDGs

CONCLUSION

Materiality Map & Final Words

So, Tesla’s key social and environmental impact lies in …

its transformative role in driving the global shift toward electrification and clean energy. As a pioneer in the EV market, Tesla holds a significant share of the global and US markets, setting new industry standards with its cutting-edge technology and innovation. Beyond vehicles, Tesla’s clean energy solutions, such as solar panels, Powerwall batteries, and the world’s largest fast-charging network, have reshaped how individuals and industries approach energy use.

However, Tesla also faces ethical and environmental challenges. Allegations of forced labor in its supply chain and incidents of labor rights violations have drawn criticism, raising questions about the social responsibility of its operations. Additionally, the company’s manufacturing processes contribute significantly to GHG emissions and waste generation, despite strong recycling efforts and the emissions avoided through its EVs.

Tesla’s overall impact score of +0.53 reflects a balance between its groundbreaking contributions to clean energy and transportation, and the ethical and environmental complexities it must address in its global operations.

If you’d like to delve deeper into Tesla’s impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

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