Is Tesla Inc. (TSLA) a sustainable company?
An attempt to outline the key considerations.
This Insights article objective is to give a detailed overview about Tesla (TSLA) with a focus on ESG related topics. Furthermore, this Insights article intends to educate readers on the company, its impact on the environment and its approach towards sustainability. The goal is to provide a clear and concise understanding of Tesla while highlighting the positives and negatives in regards to sustainability.
This article is intended for a wide audience, including those who are familiar with Tesla as well as those who are new to the company. For those already familiar with Tesla, the blog post will serve as a comprehensive overview and a source of information for further research. For those who are new to the company, the blog post will provide a solid foundation for understanding Tesla’s sustainability impact.
An Overview of Tesla Incl. and Sustainability
Background of Tesla
Tesla (TSLA) is an American multinational corporation that specializes in electric vehicles, energy storage, and solar panel manufacturing. It was founded in 2003 by Elon Musk, JB Straubel, Marc Tarpenning, Ian Wright, and Martin Eberhard with the mission to accelerate the transition to sustainable energy and transportation. Tesla is headquartered in Palo Alto, California and has become a leader in the electric vehicle market, offering luxury electric vehicles with advanced technology and long driving ranges. In addition to electric vehicles, Tesla also offers energy storage products and solar panels through its subsidiary, Tesla Energy. The company has had a significant changed the traditional automotive and energy industry, pushing the boundaries of sustainable energy and transportation.
Tesla´s Financial Situation
Tesla has experienced rapid growth in recent years with revenues increasing from $24.6 billion in 2019 to $81.5 billion in 2022. This growth can be attributed to increased sales of electric vehicles, energy storage systems and solar products. The company has been consistently profitable since the fourth quarter of 2020 with a net income of $690m in 2020. The table below outlines important financial figures of Tesla Inc. (TSLA).
Overview and definition of sustainability
Sustainability is a critical issue in today’s world and has become an increasingly important topic in various industries, including energy and transportation. Sustainability refers to the ability to consider environmental, social and governance (ESG) factors alongside the purely economically driven performance of a company. In an ideal world, a company reaches its financial target while also taking care of the environmental, its employees and stakeholders.
In the context of this Insights article, the term “sustainability” refers to Tesla´s (TSLA) approach in regards to environmental, social and governance considerations. It is a holistic concept that encompasses the long-term health and stability of the natural environment, the economic prosperity of communities, and the social well-being of individuals. Sustainability does not refer to the company´s ability to generate profits or to continue its business operations.
To understand the sustainability of Tesla (TSLA), it is necessary to consider various factors such as its financial performance, its impact on the environment, and its commitment to social responsibility. This blog post will explore these topics in depth to provide a comprehensive overview of the sustainability of Tesla as a company. By examining the sustainability of Tesla, the reader will gain a better understanding of the company’s long-term viability and its potential for success in the future.
Tesla’s Impact on the Environment
Low carbon footprint from a product perspective
Due to the nature of Tesla´s (TSLA) business, the products of the company are directly contributing to fight climate change. The three main areas of its product development are the following.
Electric vehicles: Tesla is best known for its electric vehicles which are designed to be environmentally friendly and sustainable. By producing vehicles that are powered by electricity, Tesla is reducing its carbon footprint and helping to mitigate the impacts of climate change.
Renewable energy: Tesla is also committed to producing and using renewable energy. The company has invested in a number of renewable energy projects, including solar and wind farms, to support its operations and reduce its dependence on non-renewable energy sources.
Energy storage: Tesla is a leader in the energy storage industry, and the company is working to develop new technologies that can store and manage energy in a sustainable and efficient manner. These technologies will play a critical role in supporting the growth of renewable energy and reducing the need for fossil fuels.
Waste management and supply chains
Tesla (TSLA) has identified supply chain management, recycling and waste reduction as one of the priorities to limit any negative environmental footprint.
Reducing the carbon footprint through its supply chain management practices was identified as one of the major topics to be addressed in the upcoming years. The company is working with its suppliers to reduce their carbon footprint and promote sustainability, and it is also working to source materials from environmentally responsible suppliers.
Furthermore, Tesla (TSLA) is committed to reducing its waste and promoting recycling. The company has implemented a number of initiatives aimed at reducing its waste, including reducing its use of packaging materials, recycling waste materials, and developing new technologies to improve the efficiency of its operations.
Water usage and critics about Tesla´s new Gigafactory near Berlin
Water consumption is a critical aspect of sustainability as well and companies like Tesla are increasingly being held accountable for their impact on this finite resource. The production of vehicles requires large quantities of water for manufacturing processes such as painting and cooling. Additionally, water is required for the production of various components such as batteries, which are an essential part of electric vehicles.
When Tesla announced to build a Gigafactory at Grünheide close to Berlin, local communities and NGOs raised concerns as the factory is partially build near a water protection area. In addition, water is a limited resource in this area. The planned scaling up of the production from 500,000 to over one million cars per year increases the risk of water scarcity.
Tesla is acutely aware of the importance of water conservation and has implemented several initiatives to reduce its water footprint. One of the key ways the company has reduced its water consumption is by using closed-loop cooling systems in its manufacturing processes. This means that water is reused multiple times, reducing the need for fresh water and decreasing the overall water footprint of the company. In addition, Tesla plans to drill for new water sources to supply the expansion of its vehicle production in Grünheide according to recent media reports (read more here).
Some environmentalists argue that the company could still do more to reduce its impact on water resources, especially as the demand for EVs continues to increase. Politics are aware of this situation and increase the pressure on Tesla as well.
Controversies and their link to ESG
Environmental concerns
The following overview shows the concerns raised by different stakeholder groups:
Carbon Emissions from Supply Chains
Critics argue that Tesla’s carbon footprint is larger than it claims due to emissions from its suppliers and production processes.
Environmental Impact of Battery Production
The production of lithium-ion batteries for Tesla’s vehicles has come under criticism for the environmental impact of the extraction of raw materials and the disposal of used batteries.
Land Use for Charging Infrastructure
The installation of charging infrastructure for Tesla vehicles has faced criticism for its impact on land use, particularly in rural areas where charging stations are scarce.
Limited Recycling Efforts
Critics argue that Tesla could do more to recycle its vehicles and components at the end of their lifecycles.
Dependence on Fossil Fuels
Some critics argue that Tesla’s reliance on grid electricity, which is often generated from fossil fuels, negates some of the environmental benefits of its electric vehicles.
Social and governance concerns
But also, social and governance practices of Tesla raise question marks and are frequently discussed in the media.
Examples include reports of long working hours, high levels of stress, and safety issues in Tesla’s factories. From a labor practices point of view, Tesla faced criticism on the treatment of employees and union-busting efforts.
Autopilot safety concerns: Tesla’s Autopilot semi-autonomous driving system has been the subject of several controversies, including accidents and fatalities while using the system.
Elon Musk’s tweets and public statements: Tesla CEO Elon Musk has been known for making controversial tweets and public statements, leading to legal issues and public criticism.
Safety of Tesla’s electric vehicles: There have been reports of fires and explosions involving Tesla electric vehicles, leading to concerns over the safety of the vehicles. A crucial part of the vehicle is fore example the battery. Once it starts burning, it is difficult to stop the fire.
Intellectual property disputes: Tesla has faced a number of legal disputes over intellectual property, including disputes over the technology used in its electric vehicles and autonomous driving systems.
Tesla´s response to the critics
Tesla’s CEO, Elon Musk, has been an outspoken advocate for sustainable business practices and has been vocal about the importance of reducing carbon emissions and transitioning to a more sustainable future. In addition, Tesla has invested heavily in renewable energy and has developed several initiatives aimed at reducing its carbon footprint, including the production of solar panels and energy storage systems.
Moreover, Tesla has taken an active stance on environmental issues and has been vocal in its support of policies aimed at reducing carbon emissions and promoting sustainable business practices. The company has also actively engaged with stakeholders, including environmental groups and government organizations, to help promote its sustainability initiatives.
Despite the challenges it faces, Tesla remains committed to its sustainability initiatives and is confident that it will continue to play a leading role in reducing carbon emissions and promoting sustainable business practices. The company’s innovative approach to sustainability and its commitment to reducing its carbon footprint are inspiring, and it will continue to be a leader in sustainable business practices for many years to come.
Especially in the area of carbon emissions from supply chains, Tesla recognizes the importance of reducing emissions further and has set targets to reduce emissions from its suppliers. The company is also working with suppliers to find ways to reduce emissions and improve sustainability. The same applies to the impact of its battery producing in regards to longevity and recyclability.
In order to increase the transparency about its ESG practices, Tesla publishes an Impact Report which outlines current developments and areas of improvement. The report of 2021 consists of 144 pages and addresses the controversies mentioned above. You can read the full report here.
Summary and Conclusion
Tesla (TSLA) has made a significant impact on the automotive industry with its electric vehicles and commitment to sustainability. However, the company still faces challenges in terms of scaling its production, reducing its carbon footprint, and responding to criticisms. Despite these challenges, Tesla’s commitment to sustainability and the environment is evident in its approach to reducing its carbon footprint, investing in renewable energy, and continuing to innovate. In addition, Tesla publishes an Impact Report each year to provide stakeholders with more transparency. The report addresses common concerns and allows a view at the progress made.
In conclusion, while Tesla can still improve in certain areas, the company has made significant strides in terms of sustainability. Its focus on reducing its carbon footprint, investing in renewable energy, and its commitment to sustainability, make it a leader in the automotive industry. Despite the challenges, Tesla is making a positive impact on the environment and society, and it will be interesting to see how the company continues to grow and innovate in the future.