Innovation, Design, and Price Once Dominated Apple’s Business Strategy: Is Sustainability the Next Competitive Frontier?

Tech giant Apple recently announced that the company is taking its sustainability initiatives up a level by applying pressure to its major manufacturing partners to decrease carbon emissions by 2030. Apple now requires the reporting of the progress of all Scope 1 and 2 emissions reductions related to Apple production, including running on 100% renewable electricity. The company will track supplier’s emissions progress annually. Within its own operations, Apple has been carbon neutral since 2020, and the company has set a goal to be carbon neutral across its global value chain by 2030. With this latest call for supply chain accountability, Apple says that “climate action doesn’t stop at our doors,” as the company wants to create bigger change through the ripple effect. Like a pebble dropped in water, as one company raises the bar on sustainability, reducing carbon emissions and waste throughout its supply chain, that company influences another and another, and so on. Apple has already used the ripple effect for encouraging renewable energy use. The company has powered global operations on 100% renewable energy since 2018 and has asked industry partners to do the same. More than 200 suppliers, including Corning Inc., Nitto Denko Corp., STMicroelectronics, SK Hynix Inc., Taiwan Semiconductor Manufacturing Co. (TSMC), and Yuto have committed to using green electricity, such as solar, wind, or hydroelectric power, for all Apple production.

These types of major carbon-reducing actions and announcements affect a company’s supply chain vertically, and they also influence competitors. In September 2022, Samsung announced a new environmental strategy, committing to net zero emissions for its non-Foundry businesses, including mobile handsets, visual display, networks, and digital appliances by 2030, and it also joined the RE100, a global initiative supporting the use of 100% renewable energy. Apple competitor, Microsoft, another corporate sustainability thought leader, has committed to become carbon negative by 2030 and has reported that 100% of its electricity consumption will be matched by zero carbon energy purchases by 2030, while Dell has a goal to reduce Scope 1 and 2 emissions by 50% by 2030, with 75% of electricity from renewable energy sources by 2030 and 100% by 2040.

For Apple, in the same week the new supply chain requirements were publicized, the company announced fourth quarter 2022 financial results, beating Wall Street expectations for revenue and earnings per share, in a volatile macroeconomic environment with foreign currency headwinds. Quarterly revenues were $90.1 billion, up 8% year over year, during a time when the tech sector has been affected by cutbacks due to inflation and other economic pressures. In fiscal 2022, Apple set records for iPhone, Mac, wearables, home, and accessories, earning revenues of $394 billion, with an annual growth of 8%. Apple, thus, ended fiscal year 2022 doing good (in protecting the environment) and doing well financially.

With much discussion worldwide about “greenwashing,” ABI Research’s intent is to highlight companies that are leading the way with sustainable technologies and best practices, while encouraging others to follow the sustainability leaders. Apple is one of the global companies that walks the walk for climate response. “Fighting climate change remains one of Apple’s most urgent priorities, and moments like this put action to those words,” said Tim Cook, Apple’s CEO, supporting the company’s recent announcement. In addition to actively auditing supply chain emissions, in the last three years, Apple has reduced its own carbon footprint by 35%.

• Apple has transitioned to 100% renewable energy sources for purchased electricity in its offices, retail stores, and data centers operating in 44 countries.
• Apple decreased the average product energy use throughout its major product lines by 70%.
• In Europe, Apple is contributing to the construction of several large-scale solar and wind farms to address the 22% of its carbon footprint that comes from customers charging Apple devices. 
• In 2021, nearly 20% of the materials in Apple products came from recycled sources, doubling its use of recycled tungsten, cobalt, and other rare earth elements.
• For a new circularity effort (that was government driven, not company driven), Apple has announced that the iPhone will be receiving USB-C ports (iPhones have the same physical design and make for every region in the world.) In October 2022, the European Union passed legislation requiring all phones and tablets sold in the EU to use USB-C ports by 2024. iPhone currently use Apple’s proprietary Lightning connector to charge and connect accessories.  
• Customers in the U.S. can now decrease the carbon footprint of their iPhone with Clean Energy Charging. Available through iOS 16, this new feature looks at the sources of electricity during typical or expected charge times and optimizes for when the grid is using greener energy sources, like solar or wind.

Apple is currently the largest company in the world by market capitalization, and it can flex its corporate muscle and put a ripple in the pond that positively affects supply chains across multiple industries and sectors. Supply chain carbon emissions, or Scope 3 emissions, are notoriously challenging and difficult to track and calculate, based on a lack of reliable primary source data, such as carbon emissions from individual suppliers themselves having their own complex supply chains (i.e., employees tracking a company’s total carbon emissions are often located across the globe from the manufacturing facilities where products are made and the mines where raw materials are extracted). Therefore, Scope 3 emissions are typically calculated by layering multiple assumptions about suppliers and providing “guesstimates” of value chain emissions. Apple’s recent announcement addresses the issue of improving primary source data, demanding a higher level of tracking and reporting of emissions from smaller companies in the supply chain. In the future, combining this best practice of higher quality, regionalized company data with global standards for sustainability reporting and requirements for third-party verification (auditing emissions like financial data) could all help improve the worldwide reporting of value chain carbon emissions.

Finally, these types of bold sustainability-related announcements require analysis of the costs versus benefits. Have these sustainability initiatives affected the company’s bottom line? Apple is a steward of the environment, a supporter of social causes, and a fierce promoter of consumer privacy. Yet none of these Environmental, Social, and Governance (ESG) initiatives seem to have been launched at the expense of profitability. In fact, many of these ESG efforts have likely strengthened Apple’s global brand reputation, furthered its sense of purpose with employees, and bolstered its stock price and resilience with investors. While simplicity, creativity, and humanity have all defined Apple and its products throughout the decades, today the company can also affirm that sustainability is contributing, too, as Apple takes environmental leadership to the next level with multiple new initiatives to decarbonize the global economy.