Innovation in the Technology and Communications sector is playing a powerful role in improving the sustainability performance of companies, governments and individuals across the economy. Disruptive sector trends such as cloud computing, expansion of mobile device usage, machine learning and big data analytics present new risks and opportunities for companies in the sector. This year SASB conducted research and convened industry working groups to identify and refine a minimum set of material environmental, social and governance (ESG) issues and related accounting metrics for six industries. The following points outline some of the IWG input we received, as well as the feedback we’re hoping to gather during our (now open) public comment period.
- The sector’s environmental impacts are typically limited to energy, water and waste in manufacturing and the environmental footprint of data centers. After IWG feedback and further research, SASB expanded the scope of the latter issue to include energy and water consumption in data centers and carbon content of the energy used, which is beginning to influence company decisions on data center location and energy sources.
- Environmental impacts provide the opportunity for industry leaders to reduce hardware product lifecycle impacts through innovation, and to deliver software services that address customers’ sustainability challenges. However, IWG responses indicated that products and services that broadly enable environmental efficiencies and social benefits may not be material in some industries for which the issue was originally proposed. IWG members cautioned about the difficulty of identifying comparable metrics, without allowing greenwashing or being prescriptive. SASB conducted further research and decided to retain the issue only for the Software & IT Services, and Telecommunications industries, focusing on their customers’ growing and varied sustainability needs. To the extent that companies can provide intelligent IT and communications offerings to address sustainability concerns such as energy and environmental resource management and affordable healthcare, they will be able to meet evolving customer needs and expectations, expand their addressable markets and thereby improve profitability.
- Despite some environmental impacts, it is the impact and dependence on social and human capitals that this sector faces the most challenges from. For example, the privacy and security of customer data is coming under close regulatory and customer scrutiny; the Technology and Communications sector is particularly affected due to its control over rapidly increasing amounts of customer data. Furthermore, sustainability issues related to human capital can have direct impacts on the business. R&D and engineering positions are influenced by the availability of the right skills in the domestic workforce, and by immigration and protectionist trade policies, while greater diversity is important for innovation and addressing needs of diverse customers. There was consensus among IWG respondents on the materiality of such issues; SASB considered IWG comments to improve the focus of the issues and related metrics.
IWG respondents reached broad consensus on the material issues SASB proposed: For more than 80% of proposed issues, more than 75% of IWG respondents agreed on materiality. SASB also considered additional issues proposed by the IWG, and included new issues or modified existing issues based on such feedback.
Next, SASB’s research team will be updating standards via feedback gathered during the public comment period.
Here are the top five items on which SASB seeks public inputs:
- Delivering Sustainability Solutions for Customers
- Issues of Employee Recruitment, Inclusion and Performance
- Energy Management (for Telecommunications)
- Environmental Footprint of Data Center and Office Hardware (for Software & IT Services and Internet Media & Services)
- Supply chain management, hardware procurement and disposal (specifically for Software & IT Services, Internet Media & Services, and Telecommunications) — this issue is not currently included in the exposure draft for public comment, due to little evidence of materiality, but SASB welcomes additional evidence on this issue.
The full set of draft SASB standards for the Technology and Communications sector is open for public comment until January 2, 2014.
This post first appeared on the SASB blog on October 28, 2013.