Spotlight on Apple: Do Consumers Get a Say in the ESG Debate?
Apple has been forced into adapting the iPhone to have USB-C charging ports. The new feature, available to all regions, came with the launch of the iPhone 15 this past September. Consumers’ requests for change throughout the years had failed to garner a response from the tech giant’s executives, until new regulation propelled by Maltese MEP Alex Agius Saliba made them do it. No matter how annoying Apple owners may have found it to have three or more different chargers for their devices, it took European Union legislation to steer Apple to substitute ports for the benefit of more than a billion users worldwide. What can we learn from this impressive move that is predicted to save around €250 million in electronic waste?
Apple-fans like the “fruit company’s” products, but would also like if their wallets did not have to suffer so much from unnecessary charges. Indeed, iPhones have needed their own, proprietary, far-from-cheap charger, which, to top it all, is sold separately. The average consumer has had the right to reasonably ask why; is it not efficient for the market to have a single charger to suit all gadgets? If it is, then why it was not enough that consumers around the world asked for a change that would earn Apple the loyalty of thousands? Does this successful brand just want to mess with us? Maybe a simple answer is that by keeping proprietary chargers for its devices, Apple can cash in on a wide variety of revenue sources: connectors, cables, licenses, trademarks, accessories, advertising, and more. In the electronics industry, however, it hurts to see these motives gaining ground at the expense of customers’ interest. We should expect that neutralizing ESG dangers while protecting consumers’ incentives would signify a win-win exchange for tech manufacturers. It appears not to be the case with Apple.
This tension is made all the clearer by the California-based company’s adamant opposition to the change. Abruptly discarding the decade-old Lightning charger would result in the exact type of electronic waste that the EU’s agenda is purportedly aiming to prevent, Apple’s SVP of Worldwide Marketing, Greg Joswiak, suggested. Moreover, the iPhone maker has openly eschewed the possibility of legal coercion to switch to USB-C, though not in a stance to avoid compliance —notably, the European market amounts to 25 percent of Apple’s revenue. As such, the new regulation comes to resolve a battle waged between the producer and the customer, where the latter’s stake has preempted the former’s profit. But was it necessary to take it this far? Arguably not. Does this scenario have a governance implication that should pique our interest? I do believe so. Companies should hereafter expect regulation to correct governance deviations that are not being amended by voluntary corporate action.
The policy premise of the EU norm is to harmonize production for the sake of interoperability and environmental benefits. These are two very strong market arguments to curtail the expanse of individualistic drives in highly competitive industries. By promoting efficient manufacturing and preserving competition, it could be said that the regulator’s job is done. However, it does not appear that Apple needed a mandate to budge in favor of users. Is adapting devices to allow the use of a universal charger —that has already made its way into Apple’s line of products— need be forced by legislation? It certainly seems affecting that such large a company can blatantly impose business rationales to consumers in order to maximize its share value. The environmental upside to a voluntary USB-C adoption would have situated Apple away from backlash and gained approval from users and climate activists across the globe.
A market approach to stakeholderism buttresses an argument in favor of creation of value for various stakeholders, including consumers and the environment, as an obligation of a company’s board of directors. This model, however, faces several implementation issues, such as the cumbersome prioritization of some interests over others and the vagueness of directors’ fiduciary duties to address an amorphous group of stakes. In a world where boards focus heavily in maximizing shareholder value, it is not clear how the law can protect outsiders. Regardless of how desirable it may be to adopt this approach, Apple’s experience shows that interests are yet to be reconciled in our corporate governance framework.
These issues are manifested in scarce evidence of companies being actively, willfully concerned about protecting stakeholders other than shareholders. In this context, the USB-C case may signify a precedent that could affect consumer relations in the future. While it is not in best governance practice to disparage consumers’ legitimate interest under the pretext of profitmaking, the standard of requiring regulators to adopt climate-related measures may send a powerful message (one that worried Apple’s executives) to constituencies worldwide: if corporations do not offer stakeholder protection, the legal system will.
In consideration of the immeasurable costs of passing legislation for each stakeholder-oriented step that corporations are reluctant to take of their own accord, it is preferable to incentivize a best practices ordering where constituencies need not knock on regulators’ door to solve every single corporate nuisance they face. While this originates a new problem, there are elemental market mechanisms, such as synergetic manufacturing, environmental efficiency, and customer service, that could have been sufficient to bring us a USB-C iPhone long time ago. As for other companies facing similar challenges, it is advisable to bear in mind the extent of attention paid by regulators to governance action.
Ronny Vaisman is an LL.M. Candidate in Corporation Law at NYU School of Law and serves as a Graduate Editor for the NYU Journal of Law & Business. Before coming to New York, Ronny worked as a Corporate Associate at Cuatrecasas' Santiago office, where he focused his practice in M&A and finance transactions, advising international clients in the natural resources, financial, technology and payment card industries. He is a board member of the NYU Law & Business Association and member of the NYU Jewish Law Students Association.