Apple's AI Threat Hits Google Shares

Shares of Alphabet, Google’s parent company, dropped more than 7% on Wednesday after Apple’s Senior Vice President of Services, Eddy Cue, testified that artificial intelligence is ready to disrupt the traditional search engine market. Cue’s remarks came during the US Department of Justice’s antitrust trial against Google, where he revealed that Apple is “actively looking at” integrating AI-powered search engines, such as those from OpenAI, Perplexity, and Anthropic, into its Safari browser.

Cue stated that search activity on Safari declined for the first time in April, attributing the drop to users increasingly turning to generative AI platforms for information instead of conventional search engines like Google. He suggested that these AI tools could soon replace standard search engines, signalling a potential end to Google’s longstanding dominance as the default search provider on Apple devices.

The possibility of Apple ending its lucrative partnership with Google, which reportedly brings in up to $20 billion annually for Apple to keep Google as the default search engine, sent shockwaves through financial markets. Alphabet’s stock fell by more than $15 per share, erasing billions in market value, while Apple shares also dipped nearly 2% amid broader investor concerns about the shifting landscape.

Cue emphasised that while AI search engines may be added as options in Safari, they are not yet ready to become the default. Nonetheless, his comments highlight the growing impact of AI on user behaviour and the existential threat it poses to Google’s core advertising business, as users increasingly seek out personalised, conversational AI experiences over traditional keyword-based searches.

Coca-Cola to Clarify Recycling Claims

Coca-Cola has pledged to revise its recycling claims on plastic bottles across Europe after a greenwashing complaint led by the European Consumer Organisation (BEUC) and supported by environmental groups. The complaint, filed in November 2023, accused Coca-Cola, along with other major bottlers, of misleading consumers with statements such as “100% recyclable” and “100% recycled,” as well as the use of green imagery that implied stronger environmental benefits than actually exist.

Under the agreement announced by the European Commission, Coca-Cola will now clarify that its “100% recycled” claim applies only to the bottle’s body, not to caps or labels, which are typically made from virgin plastic. Labels like “I am a bottle made from 100% recycled plastic” will be replaced with more accurate wording, such as “This bottle, excluding label and cap, is made from 100% recycled plastic.” The company also committed to avoiding language and imagery that could give a false impression of a closed recycling loop or environmental neutrality.

Consumer advocates welcomed the move but said unresolved issues remain. BEUC Director General Agustín Reyna noted that even with clearer labels, the prominent “100%” figure could still mislead consumers into thinking buying plastic bottles is harmless for the environment, despite less than 60% of bottles being recycled in the EU and only about 30% becoming new bottles. Environmental groups stress that this is a baseline step, urging regulators to enforce stricter rules and push companies to reduce plastic production at the source.

Coca-Cola is already flagged in our platform for having a High Greenwashing Risk Score due to a substantial difference between its SBTi targets and the actual forecasted values. The company also have a Greenwashing Controversy Score of higher than 7, meaning they have frequently been flagged for greenwashing at a significant scale. On top of this, Coca-Cola currently hold a Waste Non-Recycled Intensity Score of 23, placing them 77th out of their 133 Beverages peers. National authorities will monitor Coca-Cola’s compliance, and similar scrutiny may soon extend to other beverage giants operating in the EU.

Rolls-Royce Faces Backlash Over DEI Rollback

Rolls-Royce, the UK-based aerospace and defence giant, has faced sharp criticism from unions, disability rights campaigners, and LGBT+ organisations after announcing a significant rollback of its DEI initiatives. The company has withdrawn formal support and funding for its employee inclusion networks, including Prism, its group for LGBTQ+ staff, and other minority support groups. While employees can still meet informally, these networks will no longer receive corporate backing, appear on the company intranet, or be permitted to promote events on company premises. In their place, Rolls-Royce is launching a new “employee voice network” open to all staff, regardless of background or identity.

The decision, communicated last month, was made in response to new anti-DEI legislation in the US, where Rolls-Royce employs around 6,000 of its 43,000 global workforce. Although these legal changes do not apply outside the US, the company has chosen to implement the new policy globally to ensure consistency across all operations.

Critics argue that the move represents a step backwards for a company previously recognised as a leader in workplace inclusion. Paresh Patel, regional secretary for Unite, expressed frustration, noting the lack of consultation with staff or unions before the change. Disability campaigner Amo Raju described the decision as “shocking,” warning it could lead to a decline in diversity within the company. Rolls-Royce had earned a ‘Gold’ rating for LGBTQ+ inclusion in 2022 and was featured on the UK’s ‘Stonewall Top 100 Employers’ list, making this policy reversal all the more striking.

Rolls-Royce is not alone: several other UK multinationals with significant US operations, including GSK and WPP, have also scaled back their DEI commitments in response to US political pressures and legal shifts. The backlash highlights the growing tension between corporate inclusion efforts and external legal and political pressures in the current climate.

As mentioned above, Rolls-Royce has long been a DEI leader, and this is reflected in its scores. The company currently holds a Workforce score of 71, placing it 11th out of 162 in the Aerospace and Defence industry. Across the board, it holds a series of positive scores, including Culture Values Rating, Diversity and Inclusion Rating, Employee Satisfaction Rating, and Retention Score, with these scores ranging from 78-100. This news is definitely a disappointing road for Rolls-Royce to go down, and we’ll be monitoring these scores closely to see how they’re impacted.

Wrongful Death Lawsuits Target Airbnb

A series of wrongful death lawsuits are putting Airbnb’s liability under scrutiny after multiple guests died from carbon monoxide poisoning in rental properties worldwide. The most recent and high-profile case involves Sebastian Mejia, a 24-year-old Fulbright scholar from Florida, who died in a Rio de Janeiro Airbnb in 2022. Mejia was found unresponsive in the shower after a malfunctioning, improperly ventilated gas water heater released fatal levels of carbon monoxide, a colourless, odourless gas, into the bathroom. Brazilian authorities confirmed the installation violated local building codes.

Mejia’s family, represented by The Ferraro Law Firm, alleges that Airbnb failed to require carbon monoxide detectors in listings with fuel-burning appliances, despite a pattern of similar fatalities in Mexico, Colombia, Chile, Taiwan, and Brazil. According to plaintiffs, at least 19 deaths globally have been linked to carbon monoxide exposure in Airbnb rentals; a figure Airbnb has not confirmed.

The lawsuits argue that Airbnb’s safety measures are inadequate and that the company ignored repeated warnings about the risks. While Airbnb claims to have distributed over 280,000 smoke and carbon monoxide detectors to hosts, and states that such incidents are rare given over 2 billion guest arrivals, it does not mandate detectors in all listings with potential carbon monoxide sources.

A key legal issue is whether Airbnb can be held responsible for safety in properties it does not own but lists on its platform. Airbnb initially sought to force claims into arbitration, but a San Francisco court ruled that wrongful death claims could proceed publicly, setting a precedent for industry accountability. The outcome could have broad implications for the responsibilities of short-term rental platforms to protect guests from preventable hazards like carbon monoxide poisoning.

Airbnb currently holds some strong rankings among its peers in the Hotels, Restaurants and Leisure industry, performing well in their Customer scores. However, if we look at the company’s Governance scores, there’s a different story, specifically if we look at the Risk Crisis Management score, where it ranks 288th in the industry. It will be interesting to see if this new development will not only bring attention to the company’s poor risk crisis management but also negatively impact its Customer scores.

Meta Under Fire for Child Safety Lapses

Internal Meta documents presented in court by the Federal Trade Commission (FTC) reveal that Instagram’s automated recommendation systems have actively suggested that users identified as “groomers”, accounts exhibiting predatory behaviour toward children, connect with minors on the platform. According to a 2019 internal report, these systems made it easier for individuals engaging in grooming behaviours to find and interact with minors, with minors accounting for 27% of the follow recommendations surfaced to these accounts. Over a three-month period, Instagram’s algorithms recommended 2 million accounts belonging to minors to users the company itself had flagged as potential groomers.

This disclosure comes amid heightened scrutiny of Meta’s handling of child safety and privacy on its platforms. The FTC is currently investigating whether Meta has violated federal laws safeguarding minors online, and similar concerns have prompted state-level investigations and lawsuits. In recent months, attorneys general in states like New Mexico and Texas have launched probes into how social media companies, including Meta, protect children from exploitation and abuse.

Meta has defended its child safety efforts, pointing to investments in technology and policy teams dedicated to combating abuse. However, critics argue that the company’s algorithms continue to prioritise engagement over safety, inadvertently facilitating harmful interactions. “The decoy accounts with which these suspects engaged mirror the experience children can and are having on these platforms,” said New Mexico Attorney General Raúl Torrez, whose investigation led to the arrests of men attempting to exploit minors via Meta’s platforms.

Legal experts and child protection advocates are calling for stricter regulations and more robust enforcement to ensure social media companies prioritise the safety of young users. The revelations underscore the ongoing challenges platforms face in balancing user engagement with effective safeguards against exploitation.

Meta has gained a bit of a reputation for issues regarding child safety and protection, and despite efforts to dissipate this, the scores tell a similar story. The tech giant has earned a shocking Customer score of 3/100 with a Consumer Protection Related Offences score of 7, ranking them last in the industry. Now that evidence has come to light about the severity of Meta’s actions, we’ll be monitoring the company’s scores to see if any improvements are made.

Key Takeaways

From Alphabet’s AI challenges and Coca-Cola’s greenwashing settlement, to Rolls-Royce’s DEI policy reversal, Airbnb’s safety lawsuits, and Instagram’s child protection failures, this week’s stories highlight just how quickly ESG controversies can arise and affect company reputation and investor confidence.

Each example demonstrates how compliance failures can trigger regulatory scrutiny, legal action, and public backlash. These events can often have a direct impact on ESG scores and, more often than not, can influence financial performance.

GaiaLens’ controversy detection platform is designed to catch these types of incidents as they happen. By monitoring news, regulatory updates, and stakeholder sentiment in real time, GaiaLens provides early warnings and assigns Controversy Scores, such as Coca-Cola’s high Greenwashing Controversy Score. This gives investors the information they need to react quickly and make informed decisions before controversies escalate.

In today’s market, where ESG risks can surface suddenly and have lasting effects, having a system that identifies and tracks controversies is essential. GaiaLens helps investors stay alert to these risks, supporting more responsible and proactive investment strategies.

And be sure to sign up for our controversy alerts for the S&P 500 here to receive a daily update on the latest controversies.