Starbucks Tests a Greener Cup

Starbucks implemented new cups in various cities across the world to promote an environmentally friendly way of serving customers. The paper cups have a liner made out of biodegradable materials instead of the customary plastic option. Heather Haddon of the Wall Street Journal noted that “the coffee giant on Monday started using a prototype of a more sustainable paper cup in some of its cafes in New York, San Francisco, Seattle, Vancouver, and London.” Starbucks is still ensuring top quality coffee by asking baristas and customers whether their drinks are remaining hot and avoiding leaks.

Two years ago, Starbucks joined the movement for more environmentally friendly service by banning the use of plastic straws and setting a goal of eliminating the item from its stores by 2020. Starbucks also uses strawless lids for many of its cold beverages. In an article written by The Guardian, Arwa Mahdawi stated “cold beverages make up more than 50% of Starbuck’s beverage mix, an increase from 37% just five years ago.” In addition to implementing its no straw policies, Starbucks now turns to the cup itself.

Many people in the public are concerned with the environmental risks posed by plastic, and Starbucks does not take these worries lightly. Earlier in the year, Starbucks stated it wanted to cut the amount of waste generated by half in 2030, but there have been challenges to the company’s goals of being greener. Just before 2009, Starbucks recognized the issues surrounding the recycling of its cups and began to focus more on packaging efforts and other ways to help the environment. In 2018, both Starbucks and McDonalds “committed $10 million to a partnership among consumer companies working to develop more sustainable cups.” Also, internal research teams within the company have begun studying ways to have a cup for hot drinks that can be recycled and composted by 2022.

For now, Starbucks will begin testing the new greener cup in its stores. This new way of serving customers came after twelve prototypes were tested, but the final product’s coating inside is made of renewable material that can be spread onto paperboard before cutting. Starbucks will continue to think of new ways to achieve its goals of sustainability and environmentally friendly packaging, but for now, the coffee giant is on the right path towards success.

The Impact of the Coronavirus Pandemic in Stock Markets

It has been a crazy past few weeks for global stock markets. At the start of the month, the New York Times reported that after one of the worst weeks of global markets since the 2008 financial crisis, stocks surged following a promise that governments would step in to strengthen the global economy, which took a hit in the wake of the coronavirus pandemic. However, what investors and government officials were not expecting was an oil price war between two large oil producers –  Saudi Arabia and Russia – in response to the global coronavirus pandemic.

On Sunday, March 8, Saudi Arabia and Russia failed to strike a deal with respect to coordinating production cuts after demand for oil dropped as a result of the coronavirus outbreak. The failure led to Saudi Arabia and Russia flooding the market with cheap oil, where victory meant selling the most oil and grabbing the largest market share, irrespective of the price.

On Monday, March 9, the effect of the oil price war was seen in the stock markets. The S&P 500 fell by 7% just minutes after the stock market opened, triggering a circuit breaker that halted trading for 15 minutes. At the close of trade, the Dow, S&P and Nasdaq were all down roughly 19% from highs set earlier this year. Ironically, the last time stocks had bottomed out like this was on March 9, 2009, better known as Black Monday during the financial crisis.

With stock markets continuing to slide, the central banks on Thursday, March 12, led by the U.S. Federal Reserve and the European Central Bank, sought to intervene to calm the markets but failed. The primary tools used by central banks were to lower interest rates and provide easier access to credit; these tools, unfortunately, were not suited to address an economic crisis created by a global pandemic where consumers avoid traveling, shopping, and gathering in social groups. As a result of this failure by central banks, the stock markets dove into their worst plunge in more than three decades. Some have referred to this as “Black Thursday 2020.”

On Friday, March 13, Wall Street staged a comeback with a broad rally that sent the Dow Jones Industrial Average nearly 2,000 points higher, its largest point gain since 2008. The rally followed President Donald Trump’s national emergency declaration, which allows the U.S. to use the emergency powers found within the Public Health Service Act, the Stafford Act, the Social Security Act and other statutes to address the coronavirus outbreak in the U.S.

While Trump’s national emergency declaration will address earlier criticism with respect to helping cash-strapped workers, particularly those without access to adequate health insurance and healthcare, it remains to be seen when the recent financial rollercoaster will come to an end.

The Impact of the Coronavirus Pandemic in Stock Markets


Cash-Strapped Pakistan Determined to Combat COVID-19

Since the coronavirus outbreak in China and an increased number of those affected has been reported in the neighboring countries of Pakistan and Iran, Pakistan has put in efforts to curb the reported COVID-19 cases by sealing off its border. Such stringent measures has further jolted Pakistan’s economic stability, especially since the economy is already strangled nearly to its death by hefty debts and bailout packages from international lenders. International economic assessors, such as the Asian Development Bank (ADB), reported Pakistan’s economy may suffer a loss between $16.387 million to $4.95 billion. According to the estimates made by the United Nations, the virus could cause international tourism to plunge to 3% globally and it may wipe off the country’s efforts to attract tourism.

As stock prices hit their lowest, virus concerns are freezing up economic activities across the world. This has forced the New York Federal Reserve to inject $1.5 trillion into the American financial market to prevent a repeat of the 2008 credit crunch. But in light of the current shutdown, cash strapped Pakistan’s GDP will lose 1.57%. Additionally, there is fear that 0.9 million people may lose their employment. In the worst-case scenario, a country mainly based on its agricultural and mining export will suffer a $21.7 million blow.

With the rise of coronavirus and the scaling up of uncertainties in Pakistan, which has concrete trade and production ties with China, the estimated losses may be further aggravated. Ongoing projects under the banner of the Pakistan China Economic Corridor (CPEC) would now take longer to complete, after the Chinese workers would be quarantined for at least 14 days before their entry to Pakistan. This indefinite delay is yet to bring an additional burden and expense to the country, especially during this hard time. Pakistan received a fresh grant of $6 billion from the International Monetary Fund to combat the economic challenges. Additionally, countries such as China, Saudi Arabia, and UAE relieved Pakistan with deferred oil payments and interest-free loans to raise Pakistan’s registered currency reserves which dropped to an alarming level of $8 billion. This could have bankrupted the country.

However, with prevailing uncertainties in the market, Pakistan’s government has asked the State Bank of Pakistan to ease out the interest rate, and financial institutions are instructed to control the inflation that would encourage investors to do business. Prime Minister Imran Khan’s economic strategies have proven helpful in the present situation, after the country geared up to boost its textile exports to EU countries, while China’s manufacturing industry is partially shut down. Besides EU’s preferential trade status, Pakistan has succeeded to grab more orders than usual due to its free-floating exchange rate and increasing discount rate introduced in 2019.

Hopes are high that Pakistan may sustain through the economic challenges, though there are much left to be alleviated. Therefore, the country should have back up plans and a responsive attitude to the situation changing with each hour.

Cash-Strapped Pakistan Determined to Combat COVID-19

Growth-Minded Food Delivery Company DoorDash Files Confidentially For IPO

On-demand food delivery company, DoorDash, announced last week that it privately filed to go public. Privately filing may give the company a chance to prepare for a potential IPO while avoiding “public scrutiny,” according to TechCrunch. The company, which also operates in Australia, Puerto Rico, and Canada, is estimated to be leading the domestic market.

DoorDash was last valued at $13 billion and has raised $2.1 billion in capital during its lifetime as a private company. Its early backers include Khosla Ventures, Sequoia Capital, and Kleiner Perkins, which led sizeable rounds for the company from 2013 to 2016. In March 2018, DoorDash raised a $535 million Series D led by Softbank’s Vision Fund and went on to raise more than $1 billion following that round. The acceleration in capital infusions is not surprising—DoorDash operates in a cash-intensive, competitive industry. With players like GrubHub, Uber Eats, and Postmates, which have money-filled war chests of their own, along with a slew of smaller regional competitors, capital infusions can keep the marketing spend going.

Of course, with likely significant spending on owning market share, growth is expected to be taking a back seat to profitability for DoorDash, much like its competitor Uber Eats. Uber Eats was a major driver of growth for Uber in its fourth quarter of 2019, reporting $734 million in GAAP revenue—a 68 percent increase over the year-ago quarter. But the service reported an adjusted EBITDA loss of $461 million during that same period. In November, the company announced a new ad platform for Uber Eats, pointing to an effort to exploit additional sources of revenue on the platform.

Why is that important? Should DoorDash pursue a flotation, investors may look to Uber Eats—its growth and its losses—in assessing DoorDash. Some speculate that the WeWork debacle has increased investor skepticism of companies with “growth-first, profitability-second” strategies—even if they are technology (rather than real-estate) driven. DoorDash, unlike other companies, has not cut staff, but has slowed hiring ahead of the filing, according to Techcrunch, Whether the company decides to move forward in this chilling, virus-minded market, and whether investors will subsequently buy into its long-game strategy (at that hefty valuation) will be interesting to see.

Growth-Minded Food Delivery Company DoorDash Files Confidentially For IPO

Trump’s Proposed Roll-Back of Fuel Efficiency Standards Remains Incomplete

As part of his presidential campaign in 2016, President Trump promised Michigan autoworkers a jumpstart on the U.S. auto industry through a roll-back of Obama-era fuel efficiency standards. Since the start of his administration, Trump has eliminated or impaired roughly 100 environmental protections on climate change, clean air, clean water, and endangered species. That being said, the largest federal climate change regulation — Obama’s 2012 fuel economy rules to cut vehicle tailpipe emissions — remains in place.

The Obama-era fuel efficiency standards require automakers to sell vehicles averaging 54 miles per gallon by 2025, which is a 5% increase in vehicle fuel efficiency per year. Trump’s proposed roll-back would decrease the annual increase to 1.5%, which falls below the average 2% increase that auto companies achieve absent regulation. While the Trump administration cites economic benefit as justification for the roll-back, evidence from the draft rule and outside sources point to an economic deficit caused by the new regulation.

The proposed regulation, called the Safe Affordable Fuel-Efficient Vehicles Rule, actually increases the amount individual consumers spend per vehicle according to Consumer Reports. While the lower fuel efficiency standards may decrease the initial vehicle cost in the short-term, consumers will be forced to pay, on average, $3,200 more per vehicle in fuel. Cumulatively, American consumers stand to lose approximately $300 billion. While decreasing the manufacturing costs for large auto-manufacturers, Trump’s proposed regulation shifts those costs onto consumers, creating a net deficit in the American economy. This research is reflected in the draft rule itself. The rule indicates that the Trump fuel economy target would lower the prices of new vehicles by $1,000 but would simultaneously increase the amount consumers pay for fuel by $1,400, creating a $400 net deficit per consumer.

Not only does the proposed regulation fail to achieve the economic benefit promised by Trump, it faces serious legal issues. According to Mr. Lazarus, who specializes in environmental law at Harvard, “[i]f the costs to the economy exceed the benefits, and there are no environmental benefits, the courts would classically look at this as an arbitrary and capricious policy,” making it especially “vulnerable to being overturned.” Furthermore, the draft rule lacks two substantive components that are essential to its defense in court — the environmental-impact statement and the regulatory impact analysis. The former is required by law to accompany any new major policy affecting the environment and the latter details at length the legal, scientific, health, and economic impacts of a major new rule. For example, when proposing the original Obama rule, the accompanying analysis was 1,217 pages long, with supporting research by the National Academies of Science. However, the newly submitted draft by the Trump administration failed to include either of these two components, bringing the legal status of the rule into serious question.

Finally, five large players in the auto-industry have publicly declared opposition to Trump’s new rule, joining California in agreeing to maintain stricter standards. Honda, Ford, Volkswagen, BMW, and Mercedes-Benz have made a pact with California to adhere to stricter fuel efficiency standards, making the Trump administration’s proposed rule moot. Automakers fear that the aggressive roll-back will initiate a drawn-out legal battle between California and the federal government, essentially splitting the market into two, one with stricter emission standards than the other. This result would only add to the economic cost of the proposed draft rule without creating any kind of social, economic, or environmental benefit. Moreover, if enough automakers join California, the proposed draft would be rendered irrelevant. Already, the five automakers listed above account for more than 40% of all cars sold in the U.S. Likewise, 13 other states plan to continue enforcing their current, stricter fuel emission standards and sue the Trump administration if the proposed rule passes.

With the substantive and technical deficiencies in the proposed rule and the public opposition by both state governments and automakers, the probability that Trump’s promised roll-back of Obama-era fuel efficiency standards appears to be declining steadily. Even if passed into law, the inevitable judicial review will likely result in a repeal. In the meantime, the auto industry remains suspended. Without a definite standard, carmakers cannot begin the manufacturing process. Therefore, they have turned their attention to Asian and European markets, further delaying any purported economic benefit for the U.S.

Trump’s Proposed Roll-Back of Fuel Efficiency Standards Remains Incomplete

Change of Guard in the House of Mouse: Disney’s Longtime CEO Steps Down

Bob Iger, Time’s 2019 Person of the Year, surprised many on Wall Street and in Hollywood when he abruptly ended his tenure as CEO of The Walt Disney Company. Iger was Disney’s CEO for almost 15 years and oversaw massive changes while at the helm. When Iger assumed leadership in 2005, the company was stagnating from slow growth, but Iger spearheaded major Disney initiatives by expanding Disney’s existing theme parks and launching Shanghai Disneyland. Iger also oversaw Disney’s acquisitions of Pixar, Marvel, Lucasfilm, and 21st Century Fox, effectively transforming the company into a multimedia giant.

Iger delayed his retirement several times in recent years, but many expected him to remain as CEO until his employment contract expired in December 2021. The recent launch of Disney Plus – Disney’s streaming solution to changing consumer-viewing habits – may have provided Iger the needed cover to step down. Note that Iger will still remain at Disney and serve as Executive Chairman of the Board of Directors until the end of his 2021 contract. Iger reports that his resignation was planned for months and the strategic move allows him to focus more on the creative side of Disney’s businesses. Regardless, analysts hope that Iger’s residual role at Disney will allow for a smoother transition.

Disney’s incoming CEO is Bob Chapek, who previously served as the Chairman of Disney’s theme parks and consumer products businesses. Chapek has been at Disney for over twenty-seven years and is seen by some as a more operationally-minded, bottom-line, “numbers guy.” Other sources hail Chapek’s promotion as a logical next step due to the operational expertise needed to oversee Disney’s various product lines and expansions. Chapek most definitely has lofty expectations and big shoes to fill in a company whose stock price quintupled during Iger’s reign.

Whether Disney can continue its global entertainment dominance remains to be seen. In the meantime, Chapek’s management abilities for over 200,000 employees are already being tested as COVID-19 has forced the closure of Disney’s theme parks in Shanghai and Hong Kong. As for what the future holds for Iger, pundits predict future political aspirations and perhaps some well-deserved time on his sailboat.

Change of Guard in the House of Mouse- Disney’s Longtime CEO Steps Down

NTSB Calls for Regulation of Tesla Autopilot

As stated on the Tesla website, Autopilot functions to steer a vehicle within a clearly marked lane and to match the speed of surrounding vehicles in order to avoid collision. The driver remains in primary control, unlike in a complete self-driving system that entirely replaces human operation. Safety experts believe that Tesla’s current Autopilot system is insufficient in educating drivers and warning them not to rely too heavily on the Autopilot function. The function could encourage drivers to disengage from the task of driving, thus causing severe accidents.

In 2018, Walter Huang, an Apple engineer, was killed in a tragic crash while driving his Tesla Model X with the Autopilot system engaged. His vehicle failed to detect obstacles at 71 miles per hour and crashed into a traffic barrier. The driver ignored the system alert while playing a game on his phone. Unfortunately, Mr. Huang was not the first fatal case that Tesla’s Autopilot system has been involved in. In 2016, Joshua Brown was killed while driving a Tesla on Autopilot that was unable to avoid a turning truck. This was the first case raising concerns about the technical limitations of the Autopilot system.

The National Transportation Safety Board (“NTSB”) has released documents in its probe into four cases, including the two cases mentioned above, showing that Tesla’s Autopilot is unable to monitor whether drivers are engaged in active operation. The NTSB recommended that Tesla install driver monitoring safeguards to avoid misuse of Autopilot. For the sake of consumers and automakers, the NTSB also urged the National Highway Traffic Safety Administration (“NHTSA”), the main regulator for U.S. auto safety, to set rules for similar autopilot systems. The NHTSA has yet to take any proactive action or respond.

The NTSB also criticized the semi-autonomous system for misleading complacent drivers who are inclined to overestimate the new function’s capability, partially due to misunderstanding of appealing terms such as “Autopilot,” “Super Cruise,” and “Drive Pilot.”

Recently there has been vigorous debate regarding new regulation of Autopilot. Not only do these autonomous vehicles have the ability to alter the legal landscape, but the US has lagged far behind its European counterparts in this regulatory space. To comply with  Europe’s higher standard, Tesla had to update its Autopilot system by adjusting the steering angle and lane-change system, per Regulation 79. Approved in 2019, Regulation (EU) 2019/2144 places specific requirements on automated vehicles involving intelligent speed assistance, emergency lane‐keeping systems, driver attention warning and advanced driver distraction.

As the number of autonomous vehicle-related accidents increase, US regulators are reportedly starting off with a proposed rating system; however, no specific timetable or framework has been addressed. It is uncertain how long consumers will have to wait before a rating system is actually put in place.

NTSB Calls for Regulation of Tesla Autopilot

Coronavirus Highlights Apple’s Risky Reliance on China

Apple has revealed that the coronavirus is harming the company’s bottom line. In the wake of the disease outbreak and subsequent lockdowns across China, Apple warned that it will miss revenue expectations for the first quarter of 2020.

Apple CEO Tim Cook has bet big on China, and that bet has largely paid off. As Apple’s second largest consumer market and the anchor of the iPhone supply chain, China has been invaluable to Apple’s soaring market value. This is why Cook has continued to lean into the Chinese market despite several major setbacks and concerns raised by Apple’s operations team and investors. First, there was the spate of suicides and allegations of abhorrent working conditions at Chinese factories run by Foxconn. Next, there was the fallout from tariffs disputes. Now, there is the coronavirus.

Whether the epidemic will force Apple to shift its strategy in China remains to be seen. On one hand, a clean break with China may be impossible. Apple has started to experiment with moving production elsewhere, but has struggled to find a comparable source of reliable, cheap labor. Furthermore, employing millions of local workers has helped Apple gain favor with the Chinese government, which wields immense influence over how global brands are perceived in the nation.

On the other hand, Apple might not have a choice. Despite the company’s assurances that “Apple is fundamentally strong, and this disruption to our business is only temporary,” the coronavirus shows no signs of slowing down. The uncertainty surrounding the disease combined with pressure from executives and shareholders who want better resiliency and long-term sustainability may lead Apple to follow in the footsteps of rival smartphone-maker Samsung and downsize its operations in China.

Apple’s enormous cash balance of over $200 billion means it can likely weather a short-term storm. However, the coronavirus has highlighted the extent of Apple’s dependency on China and renewed questions about the long-term viability of that strategy.

Coronavirus Highlights Apple’s Risky Reliance on China

Supreme Court Challenge to the Affordable Care Act Slated for October

Earlier this week the Supreme Court granted certiorari to hear the latest case aimed at thwarting the Affordable Care Act (ACA).  The case, California v. Texas, challenges the constitutionality of the entire ACA based on the viability of the individual insurance mandate, a central part of the act. The foundation for the individual mandate, which functions as a tax on those who do not purchase health insurance, is rooted in Congress’ taxation power. However, in 2017, Congress passed legislation that reduced the individual mandate to zero dollars, seemingly disabling its function as a tax. Without this taxation authority, Texas now argues that the ACA is unconstitutional as a whole.

The 5th Circuit majority affirmed the federal district court ruling that the individual mandate is unconstitutional, but failed to specify if other key provisions would be dismantled by this decision (notably the popular protections for those with preexisting conditions). Meanwhile, the dissenting judges expressed their view that the ACA did not require the individual mandate to survive this challenge.

Upon review, the Supreme Court will likely address the issue of severability – whether the individual mandate can be excised from the ACA, leaving the remaining provisions intact, or if the individual mandate is so integral to the act that the rest of it must fail if the individual mandate does. Thus, the Court could rule one of three ways after hearing this case in October: it could invalidate the entire ACA as unconstitutional, invalidate only the individual mandate while upholding the remainder of the act, or it could overrule the 5th Circuit’s decision and declare the individual mandate constitutional, preserving the entire act.

The implications of this decision will have a sweeping effect on the landscape of the American healthcare system. While the total elimination of the ACA may be welcomed by the current administration, the act is at its all-time highest rating, with 55% of the public supporting the law. Given the uncertainty this lawsuit presents about the future of the healthcare system, it is likely to stoke political discourse as the nation prepares to vote in the upcoming presidential election.

Supreme Court Challenge to the Affordable Care Act Slated for October


Ninth Circuit Tears Down Equal Pay Act Loophole

For many women in America, discovering their male coworkers are paid more for the same job is not a novel experience. The gender pay gap – now a difference of about 21 cents per dollar – is perpetuated by employment practices that rely on valuing women’s salaries based on their past earnings. Historically, companies have used female plaintiffs’ past earnings as a defense in suits brought under the Equal Pay Act (“EPA”). On Thursday, the Ninth Circuit ruled in Rizo v. Yovino that defendants may not use prior pay rate as an affirmative defense to EPA claims.

As for the facts, the plaintiff, Aileen Rizo, was hired as an experienced math consultant by the Fresno County Office of Education at a salary well below that of her male counterparts and less than the male entry-level employees. After learning of the stark pay discrepancies, Rizo filed suit under the EPA. The EPA offers four exceptions for which a man may be paid more than a woman for “substantially similar” work: “(1) seniority; (2) merit; (3) the quantity or quality of the employee’s work; or (4) ‘any other factor other than sex.’” The defendants argued that female salary history is encompassed in the fourth exception. However, the court reasoned that the fourth exception is exclusively relevant to value-driven factors, and thus, past pay is irrelevant under this exception. This ruling closes a “loophole that perpetuated gender inequities,” allowing employers to justify discrimination by pointing to a past injustice and using it to avoid liability.

But not all jurisdictions follow the Ninth Circuit’s approach. Currently, there is a circuit split on the issue, which may prompt the Supreme Court to intervene. The Ninth Circuit’s holding is joined by the Second, Fourth, Sixth, Tenth, and Eleventh Circuits. The Seventh and Eighth Circuits, however, have found the language, “factor other than sex,” to include past pay. As a result, companies should proceed with caution and have an understanding of their jurisdiction’s ruling on the issue. That being said, best practices indicate cause for removing the practice entirely.

Recently, many companies have taken active steps to address the gender pay gap. A vast number of companies have removed salary history questions from their interview process and implemented standard metrics that determine salary based on the prospective employee’s value creation rather than the amount they were previously paid. Some states ban the inclusion of pay history questions altogether. As for the EPA’s regulatory regime, businesses may be held liable regardless of their intent. Thus, this places pressure on businesses to maintain an annual internal auditing system to identify any potential gender pay discrepancies and implement reasonable corrective measures.

The Rizo ruling functions to narrow the exceedingly broad definition of “factor[s] other than sex” and set a higher standard for business hiring practices. Companies must now look toward preventative measures to ensure equity for their employees and new hires. Hopefully, courts will continue to demand pay equity regardless of past injustice.

Ninth Circuit Tears Down Equal Pay Act Loophole