[This is the first in a series of three short posts examining how Spotify scores as an Environmental, Social and Governance (or “ESG”) investment. “ESG” is a Wall Street acronym often attributed to Larry Fink at Blackrock that designates a company as suitable for socially conscious investing based on its “Environmental, Social and Governance” business practices, that is “ESG”. See the Upright Net Impact data model on Spotify’s sustainability score. As of this writing, the last update of Spotify’s Net Impact score was before the Neil Young scandal and, of course, rocketing energy prices that compound the environmental impact of streaming. These posts first appeared on MusicTechSolutions]
Spotify has an ESG problem, and a closer look may offer insights into a wider problem in the tech industry as a whole. If a decade of destroying artist and songwriter revenues isn’t enough to get your attention, maybe the Neil Young and Joe Rogan imbroglio will. But a minute’s analysis shows you that Spotify was already an ESG fail well before Neil Young’s ultimatum.
Streaming is an Environmental Fail
I first began posting about streaming as an environmental fail years ago in the YouTube and Google world. Like so many other ways that the BIg Tech PR machine glosses over their dependence on cheap energy right through their supply chain from electric cars to cat videos, YouTube did not want to discuss the company as a climate disaster zone. To hear them tell it, YouTube, and indeed the entire Google megalopolis right down to the Google Street View surveillance team was powered by magic elves running on appropriate golden flywheels with suitable work rules. Or other culturally appropriate spin from Google’s ham handed PR teams.
Greenpeace first wrote about “dirty data” in 2011–the year Spotify launched in the US. Too bad Spotify ignored the warnings. Harvard Business Review also tells us that 2011 was a demarcation point for environmental issues at Microsoft following that Greenpeace report:
In 2011, Microsoft’s top environmental and sustainability executive, Rob Bernard, asked the company’s risk-assessment team to evaluate the firm’s exposure. It soon concluded that evolving carbon regulations and fluctuating energy costs and availability were significant sources of risk. In response, Microsoft formed a centralized senior energy team to address this newly elevated strategic issue and develop a comprehensive plan to mitigate risk. The team, comprising 14 experts in electricity markets, renewable energy, battery storage, and local generation (or “distributed energy”), was charged by corporate senior leadership with developing and executing the firm’s energy strategy. “Energy has become a C-suite issue,” Bernard says. “The CFO and president are now actively involved in our energy road map.”
If environment is a C-suite issue at Spotify, there’s no real evidence of it in Spotify’s annual report (but then there isn’t at the Mechanical Licensing Collective, either). “Environment” word search reveals that at Spotify, the environment is “economic”, “credit”, and above all “rapidly changing.” Not “dirty”–or “clean” for that matter.
The fact appears to be that Spotify isn’t doing anything special and nobody seems to want to talk about it. But wait, you say–what about the sainted Music Climate Pact? (Increasingly looking like a PR effort worthy of Edward Bernays.) Guess who hasn’t signed up to the MCP? Any streaming service as far as I can tell. There is a “Standard Commitment Letter” that participants are supposed to sign up to but I wasn’t able to read it. Want to guess why?
That’s right. You know who wants to know what you’re up to.
If you haven’t heard much about streaming’s negative effects on the environment, don’t be surprised. It’s not a topic that’s a great conversation starter and very few journalists seem to have any interest in the subject at all. I wonder why.
But if you’re an artist who is concerned about the impact of streaming your music on the environment or an investor trying to see your way through the ESG investment, this should give you a few questions to ask about Spotify’s ESG score. And if that slipped by you, don’t feel bad–Blackrock reportedly holds 3.8 million shares of Spotify that are worth less all the time, so they didn’t catch it either. And Blackrock coined the phrase.
Next: Spotify’s “Social” Fail: Rogan, Royalties and The Uyghurs