Human Capital

  • Labor Practices
  • Employee Health & Safety
  • Employee Engagement, Diversity & Inclusion
General Issue Category
(industry agnostic)

Disclosure Topics (industry specific) for:
Telecommunication Services

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Energy Management

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.

Customer Privacy

Data Privacy

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.

Data Security

Data Security

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

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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