Also: Russian oil, Shanghai lockdown, and Canadian guns.
Good morning.
Davos in May, it turns out, is a lot like Davos in January. Well-heeled people and well-intentioned talk, a string of storefronts rebuilt to promote business service companies, a few can’t-be-missed parties like the Salesforce nightcap with the Black-Eyed Peas, a string of back-to-back meetings that begins early in the morning and continues until late at night. My 2022 favorite was the old church that had been extravagantly rebranded as a “Gateway to the Decentralized Web.”
But there were a few moments of importance. Top of my list was the announcement of an expansion of the “First Movers Coalition,” which is designed to speed up scaling of climate solutions. Bill Gates is The Godfather of the effort, and U.S. Climate Envoy John Kerry is its indefatigable champion, with the World Economic Forum playing an important supporting role. The idea is to get companies to commit in advance to buying specific amounts of green coal, green steel, green hydrogen, green cement, green aluminum and carbon removal so that companies, entrepreneurs and financiers have the confidence to invest now to meet that future demand.
“No one entity can do this alone,” said Google CFO Ruth Porat at the Coalition’s press conference, “and there is real impact in public private cooperation.” Salesforce CEO Marc Benioff said the effort would help ignite “an ecopreneur revolution” by encouraging investment in technologies. Microsoft’s Brad Smith said: “We need to build a market because that’s the only way things will scale.”
Will it work? Hard to say. But I spent several hours in Davos in conversations with business and finance leaders who talked about the difficulty of finding financing for large-scale green-tech projects in these “hard-to-abate” sectors. They are too big to attract venture funding, and too unproven to win bank financing. Having the First Mover Coalition send a clear “demand signal” that there is an economic prize waiting for those who act could unlock needed financing.
Companies in the coalition have made specific commitments to buy yet-to-be commercialized green products, and include Alphabet, Apple, Ford, FedEx, Microsoft, Boeing and about 50 more. It’s another sign of companies moving beyond Net Zero promises to action.
And a couple of books to consider for your summer reading list. One is out today about former GE CEO Jack Welch, written by David Gelles of the New York Times, called The Man Who Broke Capitalism. It’s less a biography than a cultural reappraisal, and in my view an excessively harsh one. Gelles blames Welch for nearly all the missteps of 20th century capitalism. But it’s worth reading if only as a stark reminder of how differently large corporations are run today than they were in the last two decades of the 20th century. Anybody who doesn’t see that, Delta CEO Ed Bastian told me recently, “isn’t running a large company.”
I spent much of the long weekend belatedly reading Patrick Radden Keefe’s 2021 Empire of Pain, about the Sackler family and its role in creating the opioid epidemic. Keefe tells a carefully reported story that makes for fascinating reading. I took two big lessons away. One is that profit is itself a powerful opiate that can blind corporate leaders to the consequences of their actions. And the other is that milking a company for profits without regard for social consequences might work in the short run, and maybe even the medium run, but eventually it catches up with you.
Other news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Bridging the Pay Equity Gap: Virtual Conversation, June 9 Join Fortune to learn how to bridge the opportunity gap, eliminate pay disparities, and help employee retention. With speakers from L’Oreal and Credit Karma, panelists will explore topics relating to rising inflation and compensation, pay transparency, the flexible workplace, and more. Register here for free. |
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Russian oil
Twenty-six days after its leaders declared an imminent, comprehensive ban on Russian oil, the EU has managed to actually agree on…almost what was promised. Thanks to Hungarian obstinacy, the embargo will allow for pipeline deliveries to Hungary, the Czech Republic, and Slovakia. Nonetheless, a 70% reduction in overall EU Russian-oil imports will come soon, and by the end of the year 90% will be gone. The breaking of the deadlock clears a wider sanctions package that also includes the de-SWIFTing of Sberbank. Fortune
Shanghai lockdown
Shanghai's two-month lockdown is finally ending at midnight. Citizens are delighted, but the lengthy shutdown has hit Shanghai local government coffers hard, so it's economic recovery time. Fortune
Canadian guns
Canada's government has responded to increasing gun violence in the country (and south of the border) by proposing a "national freeze" on the handgun trade, harsher gun-smuggling penalties, and "red flag" laws to temporarily disarm those who pose a danger. Washington Post
Luna 2.0
Crypto entrepreneur Do Kwon tried to resurrect his failed Luna cryptocurrency, but the launch…sorry, airdrop of Luna 2.0 was also a resounding failure. However, investors then seemed to pile back in. Fortune
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Managing consumer trust amidst historic inflation As inflation rises, over half of consumers (54%) feel companies themselves are taking advantage by raising prices beyond their own rising operating costs in an attempt to increase profit. Explore the latest data from Deloitte’s Global State of the Consumer Tracker and recommendations for improving consumer trust. Read the report
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German inflation
ECB hawks just got a boost from Germany, where May's inflation swept past expectations to hit 8.7%. That's the worst reading in nearly half a century. Overall, Eurozone inflation was 8.1% last month. A 50-basis-point increase is now more likely to arrive in the coming months. Reuters
U.S. and Ukraine
President Joe Biden: "We're not going to send to Ukraine rocket systems that can strike into Russia." Those words have led some to believe the U.S. won't be sending multiple-launch rocket systems (MLRS) to Kyiv, as the Ukrainians have been hoping. However, the White House was already signaling that it wouldn't give Ukraine its longest-range projectiles, so Biden may or may not have changed the story; time will tell. Guardian
Audit rules
The U.K.'s Financial Reporting Council is to be replaced with a tougher watchdog, as part of long-anticipated reforms of the country's scandal-prone auditing sector. The rule changes will also force large private companies to be more transparent with investors, and FTSE 350 companies will have to look beyond the Big Four for some of their auditing needs. Bloomberg
Imperial measurements
The Brexit-happy U.K. government is keen to switch from metric back to imperial measures, because tradition. However, retailers are less keen, not least because relabeling everything will inevitably lead to price increases at a time when the cost of everything is already going through the roof. Financial Times
This edition of CEO Daily was edited by David Meyer.
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