Relevant Issues (9 of 26)
Why are some issues greyed out?The SASB Standards vary by industry based on the different sustainability risks and opportunities within an industry. The issues in grey were not identified during the standard-setting process as the most likely to impact enterprise value, so they are not included in the Standard. Over time, as the SASB Standards Board continues to receive market feedback, some issues may be added or removed from the Standard. Each company makes their own determination about whether or not a sustainability issue may impact its ability to create enterprise value. The Standard is designed for the typical company in an industry, but individual companies may choose to report on different sustainability issues based on their unique business model.
GHG EmissionsThe category addresses direct (Scope 1) greenhouse gas (GHG) emissions that a company generates through its operations. This includes GHG emissions from stationary (e.g., factories, power plants) and mobile sources (e.g., trucks, delivery vehicles, planes), whether a result of combustion of fuel or non-combusted direct releases during activities such as natural resource extraction, power generation, land use, or biogenic processes. The category further includes management of regulatory risks, environmental compliance, and reputational risks and opportunities, as they related to direct GHG emissions. The seven GHGs covered under the Kyoto Protocol are included within the category—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).
- Air Quality
Energy ManagementThe category addresses environmental impacts associated with energy consumption. It addresses the company’s management of energy in manufacturing and/or for provision of products and services derived from utility providers (grid energy) not owned or controlled by the company. More specifically, it includes management of energy efficiency and intensity, energy mix, as well as grid reliance. Upstream (e.g., suppliers) and downstream (e.g., product use) energy use is not included in the scope.
Water & Wastewater ManagementThe category addresses a company’s water use, water consumption, wastewater generation, and other impacts of operations on water resources, which may be influenced by regional differences in the availability and quality of and competition for water resources. More specifically, it addresses management strategies including, but not limited to, water efficiency, intensity, and recycling. Lastly, the category also addresses management of wastewater treatment and discharge, including groundwater and aquifer pollution.
Waste & Hazardous Materials ManagementThe category addresses environmental issues associated with hazardous and non-hazardous waste generated by companies. It addresses a company’s management of solid wastes in manufacturing, agriculture, and other industrial processes. It covers treatment, handling, storage, disposal, and regulatory compliance. The category does not cover emissions to air or wastewater nor does it cover waste from end-of-life of products, which are addressed in separate categories.
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy
- Data Security
- Access & Affordability
- Product Quality & Safety
- Customer Welfare
- Selling Practices & Product Labeling
- Labor Practices
Employee Health & SafetyThe category addresses a company’s ability to create and maintain a safe and healthy workplace environment that is free of injuries, fatalities, and illness (both chronic and acute). It is traditionally accomplished through implementing safety management plans, developing training requirements for employees and contractors, and conducting regular audits of their own practices as well as those of their subcontractors. The category further captures how companies ensure physical and mental health of workforce through technology, training, corporate culture, regulatory compliance, monitoring and testing, and personal protective equipment.
Employee Engagement, Diversity & InclusionThe category addresses a company’s ability to ensure that its culture and hiring and promotion practices embrace the building of a diverse and inclusive workforce that reflects the makeup of local talent pools and its customer base. It addresses the issues of discriminatory practices on the bases of race, gender, ethnicity, religion, sexual orientation, and other factors.
Business Model & Innovation
Product Design & Lifecycle ManagementThe category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management
Materials Sourcing & EfficiencyThe category addresses issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. It captures the impacts of such external factors on operational activity of suppliers, which can further affect availability and pricing of key resources. It addresses a company’s ability to manage these risks through product design, manufacturing, and end-of-life management, such as by using of recycled and renewable materials, reducing the use of key materials (dematerialization), maximizing resource efficiency in manufacturing, and making R&D investments in substitute materials. Additionally, companies can manage these issues by screening, selection, monitoring, and engagement with suppliers to ensure their resilience to external risks. It does not address issues associated with environmental and social externalities created by operational activity of individual suppliers, which is covered in a separate category.
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics
Competitive BehaviorThe category covers social issues associated with existence of monopolies, which may include, but are not limited to, excessive prices, poor quality of service, and inefficiencies. It addresses a company’s management of legal and social expectation around monopolistic and anti-competitive practices, including issues related to bargaining power, collusion, price fixing or manipulation, and protection of patents and intellectual property (IP).
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
What is the relationship between General Issue Category and Disclosure Topics?The General Issue Category is an industry-agnostic version of the Disclosure Topics that appear in each SASB Standard. Disclosure topics represent the industry-specific impacts of General Issue Categories. The industry-specific Disclosure Topics ensure each SASB Standard is tailored to the industry, while the General Issue Categories enable comparability across industries. For example, Health & Nutrition is a disclosure topic in the Non-Alcoholic Beverages industry, representing an industry-specific measure of the general issue of Customer Welfare. The issue of Customer Welfare, however, manifests as the Counterfeit Drugs disclosure topic in the Biotechnology & Pharmaceuticals industry.
Disclosure Topics (Industry specific) for: Semiconductors
Greenhouse Gas Emissions
Companies in the Semiconductors industry generate greenhouse gas (GHG) emissions, particularly those from perfluorinated compounds, from semiconductor manufacturing operations. GHG emissions can create regulatory compliance costs and operating risks for semiconductors companies, although resulting financial impacts will vary depending on the magnitude of emissions and the prevailing emissions regulations. Companies that cost-effectively manage GHG emissions through greater energy efficiency, the use of alternative chemicals, or manufacturing process advances could benefit from improved operating efficiency and reduced regulatory risk.
Energy Management in Manufacturing
Energy is a critical input for manufacturing semiconductor devices. The price of conventional grid electricity and volatility of fossil fuel prices may increase as a result of evolving climate change regulations and new incentives for energy efficiency and renewable energy, among other factors, while alternative energy sources become more cost-competitive. Decisions regarding energy sourcing and type, as well as the use of alternative energy, can create trade-offs related to the energy supply’s cost and reliability for operations. As industry innovation adds complexity to manufacturing processes, new technologies to manufacture semiconductors are likely to consume more energy unless companies invest in the energy efficiency of their operations. The manner in which a company manages energy efficiency, its reliance on different types of energy and the associated sustainability risks, and its ability to access alternative energy sources is likely to impact financial performance.
Water is critical to the semiconductor production process, which requires significant volumes of “ultra-pure” water for cleaning purposes, to avoid trace molecules from affecting product quality. As manufacturing becomes more complex, companies in the industry are finding it important to reduce the use of ultra-pure water. Water is becoming a scarce resource around the world, due to increasing consumption from population growth and rapid urbanization, and reduced supplies due to climate change. Furthermore, water pollution in developing countries makes available water supplies unusable or expensive to treat. Without careful planning, water scarcity can result in higher supply costs, social tensions with local communities and governments, and/or loss of access to water in water-scarce regions thereby presenting a critical risk to production. Semiconductor companies that are able to increase the efficiency of water use during manufacturing will maintain a lower risk profile and face lower regulatory risks as local, regional, and national environmental laws place increasing emphasis on resource conservation.
Semiconductor manufacturing requires hazardous materials, many of which are subject to environmental, health and safety regulations, and generates harmful waste, which may be released into the environment in the form of water and air emissions, and solid waste. The handling and disposal of hazardous wastes produced during manufacturing can lead to increased operating costs, capital expenditures, and in some instances, regulatory costs. Companies that are able to reduce waste produced during manufacturing and ensure that it is reused, recycled, or disposed of appropriately, will maintain a lower risk profile and face lower regulatory risks as local, regional, and national environmental laws place increasing emphasis on resource conservation and waste management.
Employee Health & Safety
The long-term impact on worker health from chemical usage in semiconductor manufacturing is a major area of concern for the industry. Workers in fabrication facilities, particularly maintenance workers, are at risk of exposure to chemicals known to be hazardous to human health. Violations of health and safety standards can result in monetary penalties and additional costs of corrective actions, with an impact on net profits and contingent liabilities. Furthermore, such violations can also lead to non-monetary penalties and reputational impacts which can decrease revenues, as well as market share. Effective management of health and safety issues include implementing effective engineering controls, introducing less hazardous chemicals where possible or using smaller amounts, and seeking chemicals presenting the fewest risks to the workforce. In addition to protecting brand value, companies taking these measures can also protect themselves from adverse legal outcomes related to both regulated and unregulated hazardous substances.
Recruiting & Managing a Global & Skilled Workforce
Employees are key contributors to value creation in the Semiconductors industry. Companies face competition and challenges in recruiting qualified employees, including electrical engineers, research scientists, and process engineers, and compensation for such employees is a significant cost component for the industry. To respond to domestic talent shortages, semiconductors companies are increasingly recruiting foreign nationals, even as they offshore operations, resulting in associated human capital management challenges. Hiring foreign nationals to compensate for shortages in local talent can create risks related to perceived social implications in the host and home countries of workers. Semiconductors companies can improve their competitive positioning by establishing education, training, and recruitment policies that develop and leverage the talents of skilled, global employees to meet their human capital needs. Such initiatives can help drive innovation and improve worker productivity, thereby improving access to new markets and possible new sources of revenue, while also creating a more engaged workforce that is less likely to experience high rates of turnover.
Product Lifecycle Management
As an increasing number of devices become connected to each other and to the Internet, semiconductor companies face greater demand for products that will enable higher computing power and lower energy costs. Semiconductor machinery and device manufacturers can reduce the environmental and human health impacts of their products by increasing the energy-efficiency of equipment and chips and reducing the amount of harmful materials in products. As consumer demand grows for energy-efficient devices that enable a longer battery life, reduce heat output, and allow end users to lower energy bills, semiconductor manufacturers that meet this need can gain a competitive advantage, driving revenues and market share growth. Companies can also benefit from working to reduce and eventually eliminate the use of toxic materials from chips destined for consumer devices, which has implications for the end-of-life management of electronic waste, an issue of growing legislative importance in many countries.
Companies in the Semiconductors industry rely on numerous critical materials as key inputs for finished products. Many of these inputs have few or no available substitutes and are often sourced from deposits concentrated in few countries, many of which are subject to geopolitical uncertainty. Other sustainability impacts related to climate change, land use, resource scarcity, and conflict in regions where the industry’s supply chain operates are also increasingly shaping the industry’s ability to source materials. Additionally, increased competition for these materials due to growing global demand from other sectors can result in price increases and supply risks. The ability of companies to manage potential materials shortages, supply disruptions, price volatility, and reputational risks is made more difficult by the fact that they commonly source materials from supply chains that often lack transparency. Failure to effectively manage this issue can lead to an inability to access necessary materials, reduced margins, constrained revenue growth, and/or higher costs or capital.
Intellectual Property Protection & Competitive Behavior
While intellectual property (IP) protection is inherent to the business model of companies in the Semiconductors industry, companies’ IP practices can be a contentious societal issue. IP protection, on the one hand, is an important driver of innovation; on the other hand, some companies may also acquire and enforce patents and other IP protection in efforts to restrict competition, particularly if they are dominant market players. Industry standard-setting can involve complex negotiations over patent rights and licensing terms, and companies are using cross-licenses and patent pools to address difficulties around patent thickets. However, such industry cooperation can also raise antitrust concerns, for example, with provisions in portfolio cross-licenses that could enable price fixing. Adverse legal or regulatory rulings related to antitrust and IP can expose software and IT services companies to costly and lengthy litigations and potential monetary losses as a result. Such rulings may also affect a company’s market share and pricing power if its patents or dominant position in key markets are legally challenged, with significant impact on revenue. Therefore, companies that can balance the protection of their IP and its use to spur innovation with ensuring their IP management and other business practices do not unfairly restrict competition, have the potential to lower regulatory scrutiny and legal actions while protecting their market value.