Focus on ESG risks crucial in the telecom sector

In this era of mobile communication and cloud computing there is a huge increase in the volume of network data. It is therefore crucial for telecom companies to handle client and user data carefully. It has recently become apparent that this does not always happen. Companies that are unable to protect the privacy of their customers run the risk of losing them or being confronted with legal risks. In the event of data theft, confidential information can be placed in the public domain or an individual's privacy can be violated. Other major issues that affect telecom providers are the protection of client data from illegal government access and ensuring that freedom of speech is guaranteed. This means that it is also important for telecom companies to have procedures and directives in place to prevent possible financial and reputational damage.

The ICT sector is responsible for around 2% of global CO₂ emissions. As a result of the growth of social media, cloud computing and smart electronics demand for ICT infrastructure is constantly increasing. Data centers are responsible for a rapidly rising proportion of these emissions. As a sustainable investor, you therefore want to know what initiatives a company is taking to reduce the environmental footprint of its data centers, for example, by using renewable energy sources. Does this company put its clients in a position to reduce their environmental footprints? An electronic waste policy is also necessary, as is a way of sharing responsibility with the handset makers.

Human capital is crucial for many industries. This applies primarily to information-oriented industries. It is thus vital for telecom companies to recognize the importance of personnel development and the need to retain talented staff. Investing in sustainability is an increasingly important factor in attracting high-quality personnel.

Many environmental, social and governance (ESG) risks do not lie with the company itself but with its supply chain. In the case of mobile phones, and other electronic devices, raw materials such as tin can come from areas of conflict. It is therefore important for a telecom company to assess and manage the ESG risks in its supply chain effectively.

These examples demonstrate that sustainability is manifested in a number of different ways. Sustainability is not sector- or product-related - it is an issue that plays a role throughout all facets of industry.

This column appeared at an earlier date on FD.nl