BUSINESS + POLITICS
Oatly Facing Boycotts Following Unsustainable Investment Links to Deforestation and Trump
29th September 2020
Oatly has made headlines recently for accepting an investment from Blackstone, one of the largest private equity firms in the world, which has links to deforestation in the Amazon, the Trump administration and the commercialisation of the housing market. The case of Oatly raises the question – is it possible to be 100% sustainable within our current economic framework?
Oatly is a plant-based milk alternative which has at its core a message of environmentalism. Oatly state that their mission is “to make it easy for people to turn what they eat and drink into personal moments of healthy joy without recklessly taxing the planet’s resources in the process.” Now Oatly has made headlines for accepting an investment of $200 million from private equity firm Blackstone. This means that Oatly is now 10% owned by Blackstone and receives financial support from them.
Blackstone has been criticised for their links to investment in the Hidrovias– a Brazilian infrastructure company that has been accused of contributing to deforestation in the Amazon. Blackstone denies this. Blackstone’s CEO has also been a prominent supporter of Donald Trump. The UN has accused Blackstone of contributing to the global housing crisis through the commodification of housing. In letters from the UN to Blackstone, this financialisation of housing focused on the Czech Republic, Denmark, Ireland, Spain, Sweden and the US. Blackstone dispute this claim. However, this means Oatly now earn money from a private equity firm which appears to be at odds with Oatly’s goal as a company wishing to create sustainable change for the good of the environment.
This case brings to mind the question of the role businesses should play in our society. Should businesses aim only for-profit maximisation or should businesses also have some social aspect to them? Do they have a responsibility to conduct their actions in a socially conscious way? Those believing the answer to be yes led to the evolution of corporate social responsibility (CSR). One of the most famous economists, Friedman, argued against CSR as he saw it as moving money away from profit maximisation. What Friedman fails to acknowledge here is that being socially responsible and engaging with stakeholders could actually provide for better business and may deliver profits.
Being socially responsible has, until now, worked for Oatly. Oatly’s total growth for 2018 was 65%, and a turnover of 1028 million Swedish SEK. This point shows that the sustainable message Oatly gives is one which is resonating through the population. Many people believe in Oatly’s mission and thus bought their product. Oatly’s high turnover gives the impression that Blackstone’s investment is not money which is needed for Oatly to survive, rather it is extra venture capital needed to expand. The argument that if Oatly does not accept these types of investment it will completely fail as a company falls short.
“This case brings to mind the question of the role businesses should play in our society. Should businesses aim only for-profit maximisation or do they have a responsibility to conduct their actions in a socially conscious way?“
Oatly states that they wish to show Blackstone that sustainable investment is the future. At the same time, they have acknowledged that they will have no control over what Blackstone invests in outside of their partnership. Therefore, their idea that they will have an influence on Blackstone’s investments in the future is naïve. Blackstone owns over $538 billion dollars in assets. Oatly is part of a $200 million deal. Blackstone cannot wave a magic wand, invest a fraction of what it is worth and become a sustainable investment company.
Rather, becoming sustainable takes work- work which Blackstone does not seem to be willing to do. Oatly needs to judge Blackstone not by their words but by their actions. Oatly states that the decision to engage with Blackstone was an intense thought process. This is very vague. Companies like Oatly have access to toolkits such as human rights impact assessments to gauge the impact their decisions would have adversely on human rights. Whether Oatly has completed this kind of assessment is not clear. If it had, I doubt that it would have come to the conclusion it did. Blackstone now shows on their homepage that they are supporting growth and sustainability. Private equity firms can, on the one hand, state they are supporting environmental goals, while on the other hand directly contribute to the opposite goal.
The language of corporate social responsibility has evolved. The UN guiding principles on business and human rights are responsible for this language change. This means that rather than the vague CSR, which is not based on international standards, that companies have guidelines on what they need to do in order to respect human rights in their operations and supply chains. These guidelines should be used in assessing whether there are human rights risks involved in projects. Companies such as Oatly should, in their operations, carry out impact assessments in order to deal with risks which may occur to rights holders.
An interesting fact with regards to Oatly is that it is not a publicly-traded company, meaning that the general public cannot own shares in Oatly. The only way for Oatly to be informed by the public that this behaviour is not seen as acceptable is through a boycott, which some have already called for. If the general public own shares in a corporation which they believe need to improve its human rights standards, then this may be an easier way of putting pressure on a company to conform to the human rights standards which the public sees fit.
This investment with Blackstone appears to go against what Oatly’s CEO stated in 2019- “If you say you’re ethical you have to back it up”.
Featured photo by Oatly