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Publisher Nick Staunton

Editor Patricia Cullen

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Associate Publisher Brad Adams

Features Editor

Katie Winearls

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Paul Rogers

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Paul Matthews

Advertising Sales

Brad Adams

Tara Duckworth

Advertising Sales

Tara Duckworth, Mike Ray, Andy Ellis, Mark Holburn

Contributing writers

Patricia Cullen, Richard Fitzpatrick, Bala Murali Krishna, Shilpa Meen, Argee Laraya, Aimee Ni Mhaolcraibhe, Gordana Ristic, Jonathan Hooker, Jose Ignacio Latorre

Head of Digital Stephen Scott

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The information contained has been contained from sources the proprietor believes to be wholly correct however no legal liability can be accepted for any errors. No part of this publication can be reproduced without consent of the publisher.

As you may already know, Tesla’s stock prices have gone through the roof in recent months. This has come as a shock to many who wrote off Elon Musk and his now-thriving company after their rocky start to 2019.

There were concerns surrounding demand and profitability, as Tesla posted losses of around $1 billion in early 2019, however their stock managed to bounce back by the end of the year. Not only did it bounce back, it skyrocketed. Share prices reached all time highs, and the company reported profits in the final two quarters.

Tesla hit another big milestone when it became the first US automaker to reach a market cap of $100 billion in early 2020. This number has only increased since then, and means that Tesla is nearly double the size of General Motors and Ford combined, with only Toyota ahead of them.

But how did we get here? How did Elon Musk, the company’s CEO and biggest shareholder with a net worth of just under $40 billion, push Tesla out of the darkness and back into the shining light of success? Let’s take a look at some of the recent moves made by Elon and Tesla to figure it out.

Oppenheimer analyst Colin Rusch’s target price on Tesla went from $385 to $612, which is an almost 60% increase. Rusch cited Tesla’s risk tolerance, implementation of lessons from errors in the past, and more ambition than competitors and peers as reasons for this. He says Musk’s company poses a very real threat to others who are not able and/or willing to innovate at a pace that matches that of Tesla. Despite reporting losses at the beginning of 2019, Tesla proved profitable by the third quarter. This came as a delight to investors around the holiday season.

China

Elon decided to take his company to China, with the first vehicles being sold in December 2019. This step is a big one towards the CEO’s goal of Tesla becoming a global automotive company, spreading his electric vehicles all over the world. This move allows the Chinese to avoid hefty tariffs when choosing to purchase American cars.

Wall Street has been impressed by Tesla’s rising number of deliveries as well as their new China factory. The company has vowed to improve sales by over a third in 2020 in order to exceed half a million units “comfortably”. In 2019, the company delivered 367,000 vehicles globally. Tesla has plans for its China branch to deliver 150,000 vehicles per year alone.

Underground Tunnels

Musk’s drive to innovate and create something that strays from the norm shows both in his desire to create underground tunnel systems, as well as in the final product of his Cybertruck.

Unlike the Cybertruck, the tunnels have yet to fully come to fruition. However, this does not mean Musk is done with the idea, as he believes these tunnels could do wonders for congestion. The construction of the first of two tunnels has been completed underneath the Las Vegas Convention Center, and they are set to debut in January 2021.

This project is meant to help people get around the convention centre quickly and easily, reducing a 15 minute walk to a 1 minute ride. However, Musk has much bigger plans for these tunnels, with the end goal being to connect Los Angeles with Las Vegas.

Some believe this will only spread the congestion, but Musk thinks people are underestimating the potential of what underground tunnels could do: “The deepest mines are much deeper than the tallest buildings are tall, so you can alleviate any arbitrary level of urban congestion with a 3D tunnel network.”

The Cybertruck

When discussing the design of the Cybertruck on a Third Row Tesla Podcast episode earlier in the year, Musk said:

“You want to have these things that inspire people and feels different,”

Adding:

“Everything else is the same, like variations on the same theme.”

His inspiration for the unique design came partially from the car he bought in 2013 that had been used in The Spy Who Loved Me, the classic James Bond movie from 1977. Musk paid just shy of $1 million for the 1976 Lotus Esprit sports car.

The failure of the “bulletproof” windows demonstration at the unveiling of the Cybertruck did cause Tesla’s stock to decrease by 6%, however this did not impact the amount of pre-orders made. Musk announced on Twitter near the end of November 2019 that there had already been 250,000 pre-orders.

It’s important to note that a pre-ordering a Cybertruck only costs $100 for processing costs, however this is not the same as a deposit. For a pre-order to become a successful sale, there is a purchase agreement that must be signed. It has not been revealed how many of the original 250,000 pre-orders and the others that followed turned into actual sales.

The Future

The future is looking bright for Tesla, as ARK Investment Management updated their valuation model. The firm has estimated that the by 2024, Tesla’s stock could be priced at a whopping $7000 per share. They also say this could go up to as much as $15,000 in a best case scenario. While the company has yet to be profitable on an annual basis, the third and fourth quarter of profitability last year gives hope to Tesla and its investors that it will continue on this path. The company is not looking to be a niche manufacturer, but rather a global electric-vehicle producer. This transformation is looking more and more promising as the stocks have seen an increase of almost 170% in the last six months. However, the construction of Tesla’s new factory near Berlin has been temporarily halted due to environmental concerns, so this expansion is not without its obstacles.

Possible Issues

The coronavirus outbreak could lead to some issues for Musk and his company. While the factory in China has, until now, been seen as a purely positive, smart move for Tesla, that view may change very quickly.

The virus has already killed just under 2000 people globally, and has infected tens of thousands all over the world. The spread of the virus is terrifying to people across the globe, and this fear has the ability to negatively impact Tesla’s results.

Tesla has been on a steady road to recovery after last year’s rocky start, but will China be its next downfall?

Corporate environmental stewardship has never been more important. Consumers are savvy to greenwashing and putting their money where their mouth is: according to a 2022 IBM study, half of global consumers surveyed said they had paid an average of 59% more for sustainable or socially responsible products. Stakeholders, attentive to the trend, are putting pressure on companies to do the right thing. And now governments are, too.

The Corporate Sustainability Due Diligence Directive (CSDDD) making its way through the final stages of the EU’s legislative process will hold companies responsible for all adverse human rights and environmental impacts of their actions, not just for their own operations, but in their chain of activities inside – and outside – Europe.

The new rules will apply to three groups of companies: EU-based companies with 500 or more employees and at least €150 million global turnover; EU-based companies with 250 or more employees and at least €40 million global turnover operating in “high impact sectors,” namely, textiles, agriculture, metal product manufacturing, forestry, and mineral extraction, among others; and non-EU companies active in the EU with at least €150 million turnover within Europe. These companies will now have to conduct mandatory audits of all vendors or suppliers involved in their “chain of activities” – meaning anything from product manufacturing to waste disposal – to ensure that environmental and human rights standards are being met every step of the way. If any direct or indirect supplier is found to have adversely impacted the environment, companies will be liable for clean-up costs, proportionate to their involvement at the facility. The Directive goes further than that. If an audit finds that any direct or indirect supplier is at risk of causing an adverse impact, companies will be required to step in and financially assist those deficient suppliers to reach the Directive’s requirements. Those financial contributions will also be proportionate to companies’ involvement at the facility.

In sum, companies will not only be liable for damages caused by vendors and facilities in Europe and throughout the world, but for preventing them too. The Directive is slated for adoption by the end of 2023. Companies will have two years to get in line with it.

While the Directive’s objectives are sound, the new diligence measures

– namely, the mandatory audits –place a heavy burden on companies, which many are completely unprepared to shoulder. To get in line with the Directive, companies need a lot of help and guidance which, right now, they are not getting. Nowhere is this more apparent than in waste management.

In terms of sustainability, downstream waste management is arguably one of the most important and impactful parts of a company’s chain of activities. This includes everything from safely disposing hazardous chemicals to responsibly recycling cardboard boxes and other packaging materials. Waste and recycling management is a tentacular subset of most companies’ operations: large international companies can easily have upwards of 1,000 global waste and recycling vendors and facilities. Although the “polluter pays” principle is enshrined in national laws all over the world, companies in the

EU are often unaware of what actually happens to their waste or used materials once they leave their fence line.

Industrial waste management contracts in the EU are usually done through a brokerage system, meaning companies use a single vendor under a single contract at a fixed price to arrange the disposal or recycling of material waste. That broker vendor in turn shuttles each different kind of waste off to third parties to treat or dispose of them individually (or to transport them again to yet another vendor). The cheaper the outlet that vendor can find for each individual waste stream, the bigger its profit margins. This disincentivizes broker vendors from seeking out pricier, better environmental options. And until some kind of headline-grabbing environmental disaster actually takes place, companies may be none the wiser about where their waste is going, and how it’s being handled. Case in point: an EU Commission study showed that only 30% of companies checked suppliers, including their waste handlers and brokers. That’s exactly what the Directive wants to change. Companies will now have to figure out who each of their vendors are for each different kind of waste stream and monitor these facilities to make sure they are handling waste properly and adhering to human rights and environmental standards. This will require a gargantuan amount of planning. Many companies simply do not currently have the experience or resources to do this.

As a member trade association, we have seen a lot of confusion over the last few months, which is why we are raising the alarm. Several global organizations have told us that attorneys have given them conflicting opinions as to whether downstream waste management is even covered by the Directive. (The current draft explicitly covers waste from the company’s chain of activities.) When we approached several waste treatment facilities in the EU, some were unaware of the Directive or of due diligence laws already existing in several countries. Companies and associations that are aware of the Directive have issued statements asking for practical guidance. And amid all this confusion, we have seen several companies offer services to provide supplier ratings as a cure-all, or issue certificates that vendors could tack on their wall to assure their customers that they are compliant with all standards and regulations. (The Directive clearly states that ratings and certification programs do not count as due diligence; companies must conduct their own audits through third-party suppliers.)

Clearly, clarification, greater awareness, and guidance are all sorely needed. And not just for waste generators, but also for the facilities that may suddenly find themselves inundated with customers required to audit them, both in and out of Europe. To ease this complicated transition, they should know that there are existing tools at their disposal.

The CHWMEG organization and others like it, including the UK’s Waste Facilities Audit Association (WFAA) and the Western Canadian Auditing Roundtable (WCAR), have been conducting third-party audits of waste vendors and facilities for decades.

CHWMEG was borne on the heels of the passage of the United States’ 1980 CERCLA (“Superfund”) Law which, for the first time, held companies liable for downstream contamination. Unlike the EU Directive, the Superfund Law does not require companies to conduct audits of their US vendors and facilities. But companies started investigating their waste and recycling facilities anyway, and soon realized they kept running into each other at facilities while conducting their own audits, which were not only time consuming and expensive, but also frustrating and disruptive for the facilities. One facility reportedly hosted 250 customer audits in one year, meaning that every day of the week, it had anywhere between one and 15 people touring the facility. Companies realized that if they could agree on a protocol for gathering information, they could share a single report instead of elbowing each other at hundreds of locations around the US to gather the same information.

And that’s how CHWMEG got started. CHWMEG conducts reviews of waste and recycling facilities globally at the request of members, detailing the existing and potential future environmental risks associated with the facility’s environmental and human rights activities. Members pay a nominal annual fee and a fraction of the cost of producing each facility review report.

Ahead of the Directive’s adoption, companies should know that services offered by CHWMEG and others are available to immediately assist in addressing these new rules in a cost-efficient way. It is imperative that companies understand the scope of these new requirements and be prepared to comply. Only then will the Directive achieve its goal of fostering sustainable and responsible corporate behaviour.