Individual

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Environment

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Considerations for Investors

Emerging technologies influence the sector across numerous ethical domains relating to health, sustainability, and privacy. Evaluating product formulations, chemical safety, supply chain traceability, data stewardship, and transparent communication represents best practice considerations. Supporting companies with governance structures that proactively address risks, consult stake-holders, conduct impact reviews, and align innovations with ethical values will confer resilience against regulatory, social, and environmental challenges. By embedding ethical foresight into research, design, and deployment, prudent firms can avoid external pressures while establishing trust and goodwill among consumers. Overall, a proactive and accountable approach to addressing ethical considerations serves as both a risk mitigation and brand-distinguishing opportunity.

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Ofcom will investigate the world’s biggest tech companies to ensure their dominance in areas such as cloud computing, messaging and smart devices works for the people and businesses of Britain, the communications regulator has said. The cloud services investigation, which will take priority out of the three issues, will look at Amazon, Microsoft and Google. Between them, these “hyperscalers” control more than four-fifths of the UK’s cloud computing market, about half of which is made up by Amazon. Over the coming year, the regulator will begin investigating a wider range of digital services. WhatsApp, FaceTime and Zoom will come under the lens, with Ofcom looking at how their market power is affecting traditional calling and messaging, and whether the lack of interoperability “raises potential concerns”.
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Creating Future Us is the Not-for-Profit arm of Paradigm Change Capital Partners LLP

Consumer Staples - Individual

The key individual impacts of concern for investors are:

 

Surveillance of Workers: Increased monitoring of warehouse workers erodes autonomy and privacy through sensors, biometrics, and analytics.

 

Inaccurate Profiling: Flawed data sets and algorithms in credit assessments, insurance eligibility, and pricing can reinforce discrimination. Regular auditing and correction processes are vital for accuracy and fairness.

 

Labor Conditions: Opaque supply chains can lead to worker exploitation and health hazards, especially in developing economies with poor regulatory standards.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Lawsuits and fines if technologies like biometric tracking or facial recognition violate privacy when deployed at scale.

 

Revenue declines as consumers disengage from brands seen as unethical around issues like addictive interface design, exploitative profiling, or labor conditions.

Consumer Staples - Society

The key societal impacts of concern for investors are:

 

Biometric Data Collection: Biometric data collection, such as facial recognition at smart checkouts, raises concerns about consent, opt-outs, and regulation. Emotion detection and facial analysis for consumer targeting raise privacy and consent issues.

 

Job Losses: Automation technologies like warehouse robotics and cashier-less stores could result in significant job losses in the sector.

 

Health Risks: Lab-created organisms, gene drives, and edited nutritional profiles have potential health consequences. Engineering products to increase overconsumption of unhealthy or controversial offerings also present health risks.

 

Youth Protection: Targeting young people with hyper-personalized promotions through digital channels raises concerns about their protection and could create legal issues.

 

Privacy: Expansive consumer data collection for behavioral targeting and product customization raises consent issues without adequate data controls and protections.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Loss of public trust if technologies are seen to exacerbate issues like inequality, unemployment, or adverse health implications.

 

  • Fines for deploying technologies like automation or biotechnology without reviewing societal risks.
  • Difficulty attracting/retaining talent if technologies are perceived to undermine wellbeing through practices like persuasive marketing or youth data collection.

 

Stranded assets if substantial investments are made in innovations that later prompt a social backlash

Consumer Staples - Environment

The key environmental impacts of concern for investors are:

 

E-Waste: The growing reliance on hardware within the sector has led to an alarming increase in electronic waste, especially with the prevalence of single or limited-use products. While advanced packaging features like smart labels have reduced food waste, they often incorporate electronics, necessitating responsible end-of-life handling to prevent toxic e-waste. These include recycling, proper disposal practices, and designing products with sustainability and recyclability.

 

Energy Impact: AI and automation have enabled precision agriculture practices, optimizing resource use such as irrigation and fertilizer application. These contribute to reducing waste and greenhouse gas emissions in the agricultural sector. However, the energy consumed by data centers for big data analytics partially offsets these environmental gains. To mitigate this impact, organizations can focus on renewable power procurement to minimize their carbon footprint and promote sustainability in their operations.

 

Animal Welfare: Directly modifying the genomes of livestock to maximize production efficiency is a practice that raises significant animal welfare concerns. Without thoughtful regulation and ethical considerations, it can lead to animal cruelty issues, affecting animals’ well-being.

 

Environmental Impacts of GM: Gene editing technologies have the potential to disrupt natural ecosystems if accidentally released or intentionally deployed without sufficient safeguards. Normalizing non-medical genetic modification in lower-risk consumer goods sets a concerning precedent, as it could open the door for more ethically questionable applications in the future. Therefore, it is essential to establish robust regulations and ethical guidelines for responsible gene editing practices.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Fines, lawsuits, and cleanup costs from pollution and waste related to unvetted innovations.
  • Reputational damage and potential sales decline if practices like excessive packaging or planned obsolescence are not addressed.
  • Loss of access to green financing options or environmentally-focused funds.

Consumer Staples - Markets

The key market impacts of concern for investors are:

 

Legal Compliance: The handling of consumer data often falls short of compliance with relevant privacy laws across jurisdictions, given complex cross-border data flows.

 

Secondary Data Markets: Selling consumer data to third parties multiplies the risks of misuse and privacy violations without user consent. Prudent restrictions on secondary data markets can limit these risks, particularly regarding credit eligibility.

 

Product Safety: Incorrectly implemented IoT sensors and automated monitoring technologies can compromise product and service safety. Human oversight, rigorous safety standards, and protocols are essential.

 

Regulatory Lag: Rapid innovation may outpace regulatory frameworks. International guidelines and oversight are evolving in this complex area, requiring vigilance from investors.

 

Equity Concerns of GM: Patenting genetically engineered crops and animals raises issues concerning harm to traditional farmers, corporate control over food systems, and global technology access.

 

Algorithmic Pricing: Granular dynamic pricing based on detailed consumer profiles and demand optimization can result in inequitable outcomes, especially if processes lack transparency. Flawed algorithms may reinforce bias against protected classes if unchecked.

 

Transparency: Opaque data practices, algorithmic processes, and automation in sector operations, like food and drink product development, limit public and government oversight capabilities.

 

Unless the above are proactively addressed, potential ramifications include:

 

  • Antitrust fines if technologies improperly exploit data or market power.
  • Cybersecurity and remediation costs from breaches exposing consumer data.

 

Reputational damage if technologies degrade market integrity through deception.