Commentary

Break the Cycle

Tess Buckley, AI Ethics Senior Analyst, EthicsGrade, calls time on BigTech’s unsustainable business models.

BigTech often deflects scrutiny by attributing ethical issues to external factors such the actions of suppliers and regulators whilst neglecting their own unsustainable business models. While advocating for AI regulations, these tech giants may be serving their own self-interests by creating barriers to entry for smaller competitors, reducing competition, protecting their market position, and raising prices for other products. Technology companies also foist their lack of sustainability on others by asking their suppliers to embrace renewable energy sources without addressing the core issues of their own environmental impact.

Technology companies must take responsibility for their practices and reevaluate business models to move away from planned obsolescence and embrace a circular economy, where products are designed for longevity, repairability, and recyclability. Large technology companies are deflecting blame onto their suppliers and exerting undue pressure on regulators. In envisioning the future, what elements could form the basis of a viable sustainable business model for technology providers?

The technology industry: unsustainable business models 

Rather than deflecting accountability towards suppliers and policymakers, BigTech must confront an underlying culture that facilitates environmental harm and ESG risks. Technology companies must acknowledge the culture they have fostered—one that thrives on planned obsolescence, serving as both a facilitator and a beneficiary. Planned obsolescence refers to intentionally creating products with a limited lifespan. This tactic aims to stimulate sales of new products and upgrades with an artificially limited and purposely frail design, making the product obsolete. To truly address their environmental impact, BigTech needs to shoulder the responsibility intrinsic to its own practices rather than attempting to shift it elsewhere.

A striking illustration of technologies’ environmental impact is found in the training of models. The International Energy Agency highlights a staggering projection: data centre electricity consumption in Denmark is set to surge sixfold by 2030, accounting for 15% of the nation’s total electricity usage. Moreover, energy consumption is compounded when algorithms are set in motion to process data. The ramifications of large language models for CO2 emissions intertwines with domains like deforestation monitoring, climate crisis modelling, and AI tools for energy management. This landscape necessitates proactive approaches, such as Meta’s emission offset initiatives. However, a lingering question emerges: Do these efforts account for the multitude of unsuccessful models Meta trained to achieve milestones like LLAMA-2?

At times, pursuing immediate profit might eclipse a commitment to long-term sustainability for BigTech entities. They have shown a willingness to sidestep addressing fundamental issues inherent to their business models—ranging from privacy concerns to environmental repercussions—when such matters are perceived as potential detriments to profit margins. Crucially, these strategies extend beyond the bounds of BigTech, and permeate various industries, where dominant corporations strive to safeguard their interests. Yet, the ethical implications remain substantial, impacting suppliers, consumers, competitors, and society at large. This underscores the significance of raising public awareness. A concerted effort is essential in ensuring accountability and fostering an ethical landscape that transcends immediate gain in favour of long-term business sustainability.

The regulators: acting in who’s interest?

In their efforts to influence regulations, major technology conglomerates often employ strategies to deflect scrutiny from their own actions and practices. These technology giants possess considerable resources to sway regulatory decisions. Through these efforts, they can mold policies and rules to align with their business objectives. This manipulation of regulatory frameworks may establish an environment that favours their profitability.

While headlines suggest that BigTech seeks AI regulation, the narrative diverges between the United States and the European Union. While US BigTech industry leaders raise concerns, they display resistance towards oversight in the EU. Leaders of prominent companies including Alphabet, Google, Microsoft, OpenAI, and Anthropic, recently met with the Biden administration. During this meeting, President Biden emphasised the need for companies to ensure the safety of their products prior to public release. This encounter coincides with various White House initiatives to govern AI, such as evaluating existing generative AI systems, formulating new AI policies for public services, and investing in responsible American AI research and development.

These same BigTech CEOs also appeared before the US Senate, with the congressional hearings adopting an adversarial tone toward tech executives. Figures like Mark Zuckerberg and Jeff Bezos have faced tough questioning on Capitol Hill from lawmakers expressing dissatisfaction with their companies. A similar involvement can be observed in their opinions on the EU AI Act, with OpenAI CEO Sam Altman warning that excessive regulations could prompt OpenAI to exit the EU market.

Despite their calls for regulation, one can’t help feeling perplexed. The president of Alphabet, Google’s parent company, offered recommendations for AI regulation. Microsoft’s president outlined a comprehensive plan for industry regulation. OpenAI’s CEO even appeared before Congress to support proposals like AI tool licensing and a new federal regulatory agency. The paradox arises when these tech giants advocate for rules that would increase their costs and hurdles. Why would these major AI industry players endorse new regulations that seemingly constrains their operations?

These companies might prioritise their self-interest over public welfare even as AI regulations are introduced. While established firms would experience increased costs due to regulation, the burden on smaller startups would be even greater. Established companies with ample capital can absorb these expenses, but smaller AI firms may struggle, potentially leading to acquisitions or closures. Furthermore, the proposed regulations would create substantial entry barriers, hampering the entry of new startups into the industry. By impeding the growth of smaller firms, these regulations would safeguard the market position of larger tech corporations by eliminating potential competitive threats.

This inclination for regulation aligns with the interests of BigTech firms. For instance, they endorse the idea of licensing for firms employing powerful AI tools, which could place undue financial strain on smaller entities instead of considering their own unsustainable business model. Moreover, the regulations would negatively impact consumers by diminishing competition and enabling BigTech companies to raise prices for their AI products. Innovation could suffer as new entrants and fresh ideas are excluded, while established companies might lack the incentive to innovate as they have secured their market position.

The underlying motive behind BigTech’s advocacy for AI regulation becomes clearer when considering the benefits reaped by reducing competition. Instead of assuming that these tech giants’ champion regulation for public benefit, it’s important to acknowledge their self-interest. Their policy recommendations might not necessarily serve the greater good.

The suppliers: upstream and downstream

The dynamic between major technology corporations and their suppliers allows significant opportunity to exert influence on the supply chain. This can include negotiating for reduced prices from vendors, improved terms, or even subtly implying a potential switch of suppliers should specific conditions remain unmet. This power play establishes an asymmetrical relationship, as suppliers, fearing losing a significant client, might yield to these demands.

In the current landscape of environmental consciousness, companies are increasingly factoring in their carbon footprint and ESG metrics. This comprehensive assessment extends to the company’s supply chain. Corporations can obtain higher overall sustainability scores by creating an incentive for suppliers to pivot towards renewable energy sources, influencing the final evaluation. Consequently, the exertion of pressure on suppliers to embrace renewables becomes a strategic move to ensure eco-friendly practices resonate throughout the supply chain. The contradiction becomes evident when companies push for alterations upstream but do not address their own impact.

While the transition to renewable energy sources holds immense importance in the realm of environmental conservation, this shift alone might not guarantee an inherently sustainable business model. Challenges arise, such as the substantial initial investments required for renewable energy infrastructure and the intermittent nature of renewable sources like solar and wind. These factors can introduce financial and operational complexities for businesses. A broader perspective is imperative to attain a comprehensive and holistic approach to sustainability.

Even with the integration of renewable energy, a fundamental shift in how materials are utilised must be considered. The situation’s urgency stems from the accelerated depletion of Earth’s materials which necessitates a paradigm shift towards more mindful resource consumption and energy usage. The present trajectory of resource consumption is outpacing the Earth’s capacity for renewal, underscoring the need for change. A sustainable business model requires a multifaceted approach to be adopted. While renewable energy is a critical component, it must coexist with other strategies that mitigate resource depletion. This calls for embracing a circular economy, with technology products designed for longevity and recyclability. The strain on resources can be substantially reduced by shifting from a linear ‘take, make, dispose’ model seen in BigTech’s planned obsolescence culture to one emphasising a circular economy.

Technology that supports the circular economy should be conceived with a primary focus on its potential for disassembly and regeneration from its design. For instance, Apple’s immensely popular AirPods are comprised of tungsten, tin, tantalum, lithium, and cobalt, all wrapped in an unopenable plastic casing. Unfortunately, their operational lifespan spans merely 18 months, but like many other Apple products, AirPods are not intentionally designed for repair. The lithium-ion battery renders them potentially hazardous in landfills due to the fire risk. While Apple has introduced an AirPod recycling initiative, the cobalt can be reclaimed from the battery, but the recyclable materials’ value may not adequately offset the expenses incurred during the recovery process.

BigTech companies are making the upstream suppliers go renewable while they are not converting their own practices. They are foisting a lack of sustainability on someone else while not recognising the need to look at material waste. Even if BigTech were to convince all their suppliers to take on renewable energy, one must still consider material waste, adopting renewable energy is not enough to combat this waste without adopting a circular economy. It is not just upstream that matters, BigTech must consider its materiality.

Achieving a harmonious balance between renewable energy adoption, circular economy principles, and mindful resource consumption is paramount. This strategy constitutes a genuine step towards establishing a sustainable business model that respects our environment and our industries’ longevity.

Envisioning the future

What could constitute a sustainable business model for technology providers contemplating the future? Are there imperative shifts in the business model that technology firms should contemplate? A key challenge lies in steering away from the conventional approach of planned obsolescence, which relies on frequent product turnover.

Specific transformative shifts should be at the forefront of their considerations in shaping a sustainable business model for future-oriented technology providers. While some progress has been made, with tech companies touting their moves toward a circular economy as central to their sustainability goals. Recent developments, such as the mandate that all mobile phones, tablets, and cameras sold in the EU must feature a USB Type-C charging port by the end of 2024, with laptops following suit from spring 2026, is a step towards sustainable practices.

It’s evident that more than these initiatives are needed to drive the comprehensive changes required. Rather than solely focusing on these measures, the crux lies in embracing a systemic transformation intrinsic to a sustainable business model for BigTech. The concept of a circular economy takes centre stage, urging us to recalibrate our approach to technology production and consumption—a transition that ideally should have commenced years ago.

Amidst the current heightened environmental consciousness, the industrial landscape has begun to foster sustainable business models. Adapting to new business models effectively is vital to sustaining a competitive edge and enhancing an organisation’s sustainability achievements. In this envisaged paradigm, BigTech’s economic growth pivots from the consumption and depletion of finite natural resources to a circular economy based on judicious and sustainable resource use. This involves efficient recycling within a closed-loop system, while systematically curbing waste generation.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap