Google: a sustainable company?

Simon Clements, sustainable and responsible investment (SRI) fund manager at Alliance Trust Investments, looks at the sustainability credentials of an internet giant.

Google is a company that divides opinion within the world of sustainability. On the one hand it has one of the most forward-thinking policies towards the environment of all US companies, and particularly its technology peers. It understands the impact its products have on the environment, and goes to great lengths to mitigate and reduce that impact, and attempts to produce tangible benefits.

Energy efficient data centres, investment in new sources of renewable energy, and the purchase of carbon offsets are some examples of measures which Google takes to minimise its overall environmental impact. In 2012, Google was recognised by Greenpeace for its contribution towards promoting the economic benefits of investing in clean energy.

The company also ranks very highly from a social and human capital point of view. It understands its people, or ‘Googlers’, are the key to its success. Google has a policy that software engineers spend 20% of their time on independent projects, the source of many of the company’s most popular products. It also provides an incentive for employees to develop and nurture their innovation skills, as well as ensuring Google remains an employer of choice.

However, when it comes to its corporate governance structure, Google does not rank so highly. The existence of a dual voting share class ensures the two founders and the chairman control more than 70% of the effective voting rights, giving minority shareholders little influence.

The core Google search product has become such an integral part of life in the information age, and around 85% of searches on Google are provided for free. As a company, it has changed the way we access information, so despite this particularly poor governance, Google is a core holding for the Alliance Trust Sustainable Future Global Growth Fund. We feel the positives far outweigh the negatives, from an environmental, social and governance (ESG) perspective, and Google is an example of a company which will thrive in the shift to a sustainable economy.

Google has hit the headlines recently over whether it is paying an adequate amount of tax, particularly in the UK. We will be raising this issue with the company and will encourage them to adopt a progressive approach that goes beyond compliance, to better defend the brand against a public backlash.

This issue is complicated by tax laws that appear relatively easy to legitimately circumvent. We would welcome better transparency by corporations on where tax is paid and will encourage Google to adopt a more considered approach than the current default position by many companies embroiled in this issue, which appears to be little more than stating, “We have done nothing illegal.”

Simon Clements is SRI fund manager at Alliance Trust Investments. This article originally appeared in the Alliance Trust SRI Hub.

Further reading:

Responsible investment can help crack down on tax avoidance

MPs deem global companies’ tax avoidance as ‘an insult to British businesses’

How online ‘filter bubbles’ can reinforce climate scepticism

Google continues sustainability pioneering

The internet v sustainability