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
Business Model & Innovation
- Product Design & Lifecycle Management
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency The 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 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.
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Environmental Footprint of Operations
Individual telecommunication services companies consume substantial amounts of energy. Depending on the source of energy and the efficiency of its generation, electricity consumption by telecom network infrastructure can contribute significantly to environmental externalities, such as climate change, creating sustainability risks for the industry. Although network equipment and data centers are becoming more energy-efficient, their overall energy consumption is increasing with the expansion in telecommunications infrastructure and data traffic. The way in which telecommunication services companies manage their overall energy efficiency or intensity, their reliance on different types of energy, and their ability to access alternative sources of energy will become increasingly material as the global regulatory focus on climate change increases, bringing with it incentives for energy efficiency and renewable energy as well as pricing of greenhouse gas emissions (GHG). Since expenditures on energy can be significant in the industry, companies that are able to improve the energy-efficiency of their operation are likely to see cost savings and higher profit margins.
As customers pay increased attention to privacy issues surrounding cell phone, internet, and email services, telecommunication services companies will have to implement strong management practices and guidelines related to their use of customer data. Telecommunication services companies use growing volumes of customer location, web browsing, and demographic data to improve their services as well as to generate revenue by selling such data to third parties. Growing public concern about privacy has led to increased regulatory scrutiny over the use, collection, and sale of consumer data. These trends are increasing the importance to telecommunication services companies of adopting and communicating in a transparent manner policies about providing customer data to third parties, including the amount and type of data provided and the nature of its use (for example, use for commercial purposes). Additionally, telecommunication services companies receive, and must determine whether to comply with, government requests for customer information. Companies in the industry that fail to manage performance in this area are susceptible to decreased revenues as a result of lost consumer confidence and churn, as well as to financial impacts stemming from legal exposures.
The Telecommunication Services industry is particularly vulnerable to data security threats, as companies manage an increasing volume of customer data, including personally identifiable information, as well as demographic, behavioral, and location data. Recent examples of cyber attacks on critical telecommunications infrastructure illustrate the need for enhanced network security. 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. As the providers of critical infrastructure, the ability of companies to combat cyber attacks is likely to affect reputation and brand value, with a long-term impact on market share and revenue growth potential. Therefore, companies that can identify and address data security risks in a timely manner are likely to be in a better position to protect market share and brand value while also reducing risk exposure to cyber attacks. Additionally, new and emerging data security standards and regulations are likely to affect the operating expenses of companies through increased costs of compliance.
Materials Sourcing & Efficiency
Product End-of-life Management
Due to the rapid obsolescence of communications devices, particularly mobile phones, they represent an increasing proportion of electronic waste (e-waste) going to landfills, driven in part by a low recycling rate. Telecommunication services companies face growing regulatory risks related to this issue. Multiple jurisdictions have implemented e-waste recycling laws mandating that electronics retailers and manufacturers create a system for recycling, reuse, or proper disposal of electronic devices. While many of these laws in their early days covered a limited scope of products, newer laws extend to mobile devices requiring companies to finance the collection, treatment, recycling, or proper disposal of e-waste, as concerns around e-waste from communications devices increase. E-waste laws often require vendors or manufacturers to pay for the recycling of such waste or put in place product take-back and recycling programs. Penalties or costs, due to such laws, together with potential revenues generated from refurbishing and re-selling products, are increasingly providing incentives for companies in the industry to manage end-of-life impacts. Many telecommunication services companies work in partnership with phone manufacturers to bundle telecom services and mobile devices, and therefore have a shared responsibility for end-of-life management of such devices. Their relationship with customers provides an opportunity for effective management of product recycling, reuse, and disposal. Establishing take-back programs to recover end-of-life materials for further reuse, recycling, or remanufacturing can allow companies cost savings and more resilient supply of manufacturing materials.
Competitive Behavior & Open Internet
The Telecommunication Services industry contains classic examples of natural monopolies, where high capital costs can allow them to offer the most efficient production. Given the concentrated nature of telecommunications, cable, and satellite companies, they must manage their growth strategies within the parameters of a regulatory landscape designed to ensure competition. In addition to natural monopoly, many companies in this industry benefit from terminal access monopolies over the so-called “last-mile” of their networks, given their contractual relationship with each subscriber and the barriers for subscribers to change service providers. The nature of this relationship is the basis of much of the discussion around the need to protect an Open Internet, where all data on the Internet is treated equally in terms of performance and access. The industry faces ongoing legislative and regulatory actions aimed at ensuring competition, which could limit the market share and growth potential of some larger players. Merger and acquisition activity by dominant market players has come under regulatory scrutiny. This has resulted in companies abandoning plans to consolidate, affecting their value. Strong reliance on market dominance can also be a source of risk if companies are vulnerable to legal challenges, increasing their risk profile and cost of capital.
Systemic Risk Management
Managing Systemic Risks from Technology Disruptions
Given the systemic importance of telecommunications networks, systemic or economy-wide disruption may be created if the network infrastructure of telecommunication services companies is unreliable and prone to business continuity risks. As the frequency of extreme weather events associated with climate change increases, telecommunication services companies will face growing physical threats to network infrastructure, with potentially significant social or systemic impacts. In the absence of resilient and reliable infrastructure, companies may face lost revenue associated with service outages and unplanned capital expenditures to repair damaged or compromised equipment. Companies that successfully implement measures to address business continuity risks, including an identification of critical business operations, or to enhance resilience of the system are likely to substantially reduce their risk exposure and, hence, lower their cost of capital. While implementation of such measures may have upfront costs, companies are likely to see long-term benefits in terms of lower remediation expenses in cases of high-impact disruptions.
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