How Telecom Services Industry Is Driving Sustainable Change

Telecom operators are pushing to the limit to use environmental, social and governance (ESG) measures and reporting to attract investments. ESG integration into businesses can help stakeholders align with consumers’ demand for sustainable products, foster employee motivation, underpin biodiversity, minimize carbon emissions and reduce operational costs. Amidst industry leaders grappling with unpredictable challenges, socially responsible investing can be the silver lining to underpin workforce diversity, digital inclusion ventures, employee engagement and cut e-waste.

Notably, frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accountability Standards Board (SASB) and Carbon Disclosure Project (CDP) have become paramount for ESG reporting that can serve as robust standards to satisfy regulators and boost access to capital. Companies are likely to invest in sustainability goals for strong governance, responsible business practices and effective leadership. Of late, regulators have shown an increased inclination for ESG as stakeholders foster their engagement with civil society, employees and customers.

Telecom services have been invaluable in propelling IoT services and applications amidst soaring carbon emissions. According to the International Finance Corporation, diesel generators power more than 90% of the one million off-grid and bad-grid sites, producing over 45 million tons of CO2 annually. Besides, the number of bad and off-grid telecommunications sites is likely to rise by 22% over the next ten years. In the midst of the cacophony, incumbent players are expected to emphasize renewable and net-zero greenhouse gas options.

Vodafone Relishes Shift towards Circular Economy

As stakeholders realize that business goals should not come at a cost to the environment, ESG performance has grabbed immense headlines. Since July 2021, Vodafone Group has powered its European markets with 100% renewable electricity (as per its 2023 TCFD report). The company is bullish on achieving net zero across entire operations by 2040. In a path towards net zero, the British company is committed to reaching net zero for its operations (scope 1 and 2) by 2030.

In April 2023, Vodafone joined forces with Citi Group and CDP to minimize scope 3 emissions. Vodafone and Citi Group unveiled plans to provide preferential supply chain financial rates for telecom suppliers exhibiting more sustainable operations, disclosing emissions data and scoring highly against environmental performance criteria.

Verizon Communications Bats for Inclusive Environment

Diversity across spectrums has become the talk of the town, while other social aspects, including health & safety, product safety & quality, privacy & data security, health & demographic risks, financial product safety and access to communication, continue to gain ground. Verizon has taken a giant leap in diversity and inclusion — 59.7% of employees are women or people of color in its U.S. workforce. Besides, it has injected around USD 55 billion with diverse suppliers over the last 10 years. In June 2023, Verizon-owned Visible rolled out the Pride Month campaign and contemplated donating USD 50,000 to SAGE, an organization advocating for older members of the LGBTQ+ community.

Innovators are taking a quantum leap towards providing healthcare benefits, including high-quality comprehensive medical, vision, dental and life insurance coverage to their employees. In 2022, Verizon poured USD 2.5 billion for around 460,000 employees, eligible retirees and their dependents, providing healthcare benefits and services. Additionally, recruiting diverse talent has long been the go-to strategy to stay ahead of the curve. The American company has teamed up with the National Academy Foundation to help high school students for college and careers in STEM.

Telefonica SA Prioritizes Good Governance

Telecom operators’ approach to leadership, transparency, internal controls, ethics and corporate governance can dictate the company’s trajectory in the ESG rankings. Operators can report on governance aspects, including whistle-blower schemes, tax strategies, executive pay, board diversity and data breaches. To illustrate, Telefonica claims it has provided training about the code of ethics to more than 91,000 professionals. The telecom behemoth reportedly performed over 18,000 audits on suppliers in 2022; it is contemplating representation of sustainability at 30–35% of the company’s financing in 2024.

As sustainability receives an impetus with the ESG integration, it is worth mentioning that the Sustainability and Quality Committee oversees the Responsible Business Plan implementation, while the Audit and Control Committee oversees specific aspects, including risk analysis, regulatory compliance and management process. In the Spanish company, independent directors and women account for 60% and 33% of the Board, respectively. Furthermore, the mobile network provider asserts there were no confirmed cases of corruption in 2022 and the preceding year.

ESG Creating Value for Stakeholders

The rising recognition of ESG in investment and business decision-making has leveraged telecom service providers to boost their reputation, manage risk, enhance financial performance, adhere to regulations and contribute to a circular economy. Investors are increasingly relying on ESG factors to assess companies and make robust investment decisions. The global telecom service market is likely to expand at around 5.4% CAGR through 2028. With climate change posing risks to the industry, commitment to sustainability could be worth a bet to undergird telecom services.