Relevant Issues (6 of 26)
- GHG Emissions
- Air Quality
- Energy Management The 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 Management
- Waste & Hazardous Materials Management
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy The category addresses management of risks related to the use of personally identifiable information (PII) and other customer or user data for secondary purposes including but not limited to marketing through affiliates and non-affiliates. The scope of the category includes social issues that may arise from a company’s approach to collecting data, obtaining consent (e.g., opt-in policies), managing user and customer expectations regarding how their data is used, and managing evolving regulation. It excludes social issues arising from cybersecurity risks, which are covered in a separate category.
- Data Security The category addresses management of risks related to collection, retention, and use of sensitive, confidential, and/or proprietary customer or user data. It includes social issues that may arise from incidents such as data breaches in which personally identifiable information (PII) and other user or customer data may be exposed. It addresses a company’s strategy, policies, and practices related to IT infrastructure, staff training, record keeping, cooperation with law enforcement, and other mechanisms used to ensure security of customer or user data.
- Access & Affordability
- Product Quality & Safety
- Customer Welfare
- Selling Practices & Product Labeling
- Labor Practices
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion The 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 Management
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics
- Competitive Behavior The 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 The category addresses the company’s contributions to or management of systemic risks resulting from large-scale weakening or collapse of systems upon which the economy and society depend. This includes financial systems, natural resource systems, and technological systems. It addresses the mechanisms a company has in place to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure. For financial institutions, the category also captures the company’s ability to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements related to the complexity and interconnectedness of companies in the industry.
Disclosure Topics (Industry specific) for:
Software & IT Services
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Environmental Footprint of Hardware Infrastructure
With the growth of cloud-based service offerings, companies in this industry own, operate, or rent increasingly more data centers and other hardware; thus, managing the energy and water use associated with IT hardware infrastructure is important to shareholder value. Data centers need to be powered continuously, and disruptions to the energy supply can have a material impact on operations, depending on the magnitude and timing of the disruption. Companies face a tradeoff between energy and water consumption due to data center cooling needs; cooling data centers with water instead of chillers is a means of improving energy efficiency, but it can lead to dependence on significant local water resources. Decisions about data center specifications are important for managing costs, obtaining a reliable supply of energy and water, and lowering reputational risks, particularly as there is an increasing global regulatory focus on climate change and as opportunities arise from innovations in energy efficiency and renewable energy.
Data Privacy & Freedom of Expression
As software and IT services companies increasingly deliver products and services over the Internet and through mobile devices, they must carefully manage two separate and often conflicting priorities. On the one hand, companies use customer data to innovate and provide customers with new products and services and to generate revenues. On the other hand, there are privacy concerns associated with companies having access to a wide range of customer data, such as personal, demographic, content, and behavioral data. This dynamic is leading to increased regulatory scrutiny in many countries around the world. The delivery of cloud-based software and IT services also raises concerns about potential access to user data by governments that may use it to limit the freedoms of citizens. Effective management in this area is important to reduce regulatory and reputational risks that can lead to decreased revenues, lower market share, and regulatory actions involving potential fines and other legal costs.
Software & IT services companies are targets of growing data security threats from cyber attacks and social engineering, which puts their own data and their customers’ data at risk. Inadequate prevention, detection, and remediation of data security threats can influence customer acquisition and retention and result in decreased market share and lower demand for the company’s products. In addition to reputational damage and customer turnover, data breaches can also result in increased expenses, commonly associated with remediation efforts such as identity protection offerings and employee training on data protection. Meanwhile, new and emerging data security standards and regulations are likely to affect the operating expenses of companies through increased costs of compliance. Additionally, companies in this industry are well-positioned to uncover revenue opportunities by providing secure software and services to meet the demand for ensuring data is kept secure.
Employee Engagement, Diversity & Inclusion
Recruiting & Managing a Global, Diverse & Skilled Workforce
Employees are key contributors to value creation in the Software & IT Services industry. While the number of job openings in the industry continues to grow, companies commonly find it difficult to recruit qualified employees to fill these positions. The shortage in technically skilled domestic employees has created intense competition to acquire highly skilled employees, contributing to high employee turnover rates. To respond to talent shortages, companies often hire foreign nationals and offshore operations, creating employee management and sustainability challenges and related business risks. Some companies contribute to relevant education and training programs to expand the availability of domestic, skilled employees. Companies offer significant monetary and non-monetary benefits to improve employee engagement and therefore retention and productivity. Initiatives to improve employee engagement and work-life balance may influence the recruitment and retention of a diverse workforce. The industry is characterized by relatively low representation from women and minority groups; efforts to recruit from and develop diverse talent pools can serve to address the talent shortage and generally improve the value of company offerings. Greater workforce diversity is important for innovation and helps companies understand the needs of their diverse and global customer base.
Intellectual Property Protection & Competitive Behavior
Companies in the Software & IT Services industry spend a significant proportion of their revenues on IP protection, including acquiring patents and copyrights. While IP protection is inherent to the business model of some companies in the industry and is an important driver of innovation, companies’ IP practices can sometimes be a contentious societal issue. Companies could sometimes acquire patents and other IP protection to restrict competition and access to benefits from innovation, particularly if they are dominant market players. Due to the complexity of software, its abstract nature, and increasing IP rights protection related to software, companies in the industry must navigate overlapping patent claims to be able to operate. As a result, companies in the industry may find themselves constantly in litigation or subject to regulatory scrutiny either due to allegations of patent violations if they engage in unethical business practices, or are perceived as doing so, or because they are suing others for IP infringement. Adverse legal or regulatory rulings related to antitrust and IP can expose companies in the industry 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 potentially significant impacts on revenue. Therefore, companies that can balance the protection of their IP and its use to spur innovation while 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.
Systemic Risk Management
Managing Systemic Risks from Technology Disruptions
With trends toward increased cloud computing and use of Software as a Service (SaaS), software and IT service providers need to ensure they have robust infrastructure and policies in place to minimize disruptions to their services. Disruptions such as programming errors or server downtime have the potential to generate systemic risks, as computing and data storage functions move from individual company servers in various industries to data centers of cloud-computing service providers. The risks are heightened particularly if the affected customers are in sensitive sectors, such as financial institutions or utilities, which are considered critical national infrastructure. Companies’ investments in improving the reliability and quality of their IT infrastructure and services are likely to affect their ability to attract and retain customers, thereby impacting revenues and opportunities in new markets.
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