Akanksha Sharma, Global head of ESG at STL shares her thoughts on ESG trends that will shape the world and seize the best opportunities of tomorrow.
A thorough environmental, social, and corporate governance strategy is no longer a nice-to-have; it’s a must-have. In fact, loans with ESG terms are growing to record levels, with assets set to reach the $41 trillion mark by the end of 2022, shifting from a niche in investment well and truly into the mainstream.
Shocking figures from BCG recently revealed that telecommunications companies were responsible for twice as many carbon emissions than the civil aviation industry. Since then, telcos have kick-started a plethora of initiatives to help green their industry and reach carbon neutrality, and clearly not a moment too soon.
However, the priority shouldn’t just be to tackle the sustainability gap and move towards net-zero, but that the telecommunications sectors’ position at the forefront of technology means that our industry is uniquely placed to drive greener business full stop. With that in mind, here are five key ESG trends in telecommunications will define 2023.
5G advancing sustainability – by design
Much has been said of the powerful technological change that 5G networks can bring individuals, businesses, and society, but a little less has been said about how intrinsic to sustainability 5G is by design.
It’s true that higher data demands enabled by 5G will lead to power requirement increases – perhaps as high as double by 2030, with the whole ecosystem predicted to meet the total energy consumption of Sweden by then.
But that’s why a third of wireless carriers have committed to energy efficiency initiatives in line with the Paris Agreement, and there’s a real awareness of this in our industry, with 83% of network professionals viewing energy efficiency as either very important or extremely important in network transformation.
It is not just the creation of these next-gen networks that must be greened, though: 5G is also set to positively impact sustainability across other traditionally carbon-intensive industries.
The low latency, enormous data capacity, and throughput made possible by 5G means manufacturers can transform the factory floor into one that’s more productive, less energy intensive, and with networks of IoT sensors and data analytics that can predict and prevent downtime and more intelligently manage hardware.
These same low-power, high performance principles will drive more sustainable, smarter cities, as planning can be optimized for creating green civic spaces with maximum efficiency. And in sectors like agriculture, the boost in connectivity without sacrificing battery life is expected to help farmers deploy better veterinary diagnostics, as well as a reduction of fertilizer use and smart irrigation systems to save water.
A holistic approach to net-zero – lifecycle view
Rising electronic and manufacturing waste worldwide isn’t only a contributor to climate change due to emissions and land-filling, but it can also pollute the soil or other ecosystems in the environment near production or waste sites.
Throughout 2023, the circular economy will become even more crucial in tackling these issues.
Manufacturers and operators will need to work in concert with each other to eliminate wastage at source, as well as reducing the impact of wastage around core components.
Some good first steps, suggests the GSMA, include applying eco-friendly design principles in tandem with thorough documentation and regulation around reliability, as well as funnelling a greater recycling of components and raw materials into re-manufacturing processes.
That includes reusing and repurposing existing network equipment: a focus should be on expanding the global second-hand market of equipment through greater cooperation of stakeholders.
The wider supply chain must have circular principles embedded into it; this isn’t just better for the environment, but good business. Here, lifecycle assessments – that is, a cradle-to-grave technical assessment of products – can illuminate the exact footprint of all resource usage, including water and carbon.
A strong push for connected solutions for social causes
Better connectivity opens the doors for better social programmes everywhere. In a recent study, the United Nations found that it’s connectivity, rather than urban migration, that will more effectively help develop rural areas globally. There are few sectors or services that will not benefit from improved connectivity.
As such, in 2023, we expect that involvement in social causes such as improving education with remote learning or healthcare via telemetry will become a key area of development.
By building wider access to critical services in rural areas typically cut off from them, the opportunities in those locations improves and citizens are no longer cut off from the wider global economy.
Although some in-roads have been made here, an issue with remote services is that local internet connections are not up to scratch to deliver them – but with the relatively simply process of rolling out 5G connections, this barrier simply does not exist.
Poor connectivity in rural or remote regions hampers the ability to apply the law in these areas. Take, for instance, illegal logging and poachers in the rainforests of Costa Rica, among the most biodiverse regions on the planet. To combat this problem, Rainforest Connection installed humidity-proof sensors that could recognise the sounds of chainsaws or other signs of logging, connected by 5G.
We believe sustainability cannot be separated from economy. So at STL we have worked to become water neutral at all of our facilities in India, with an ambitious goal of becoming water positive by 2030.
Aurangabad, Maharashtra, did not historically suffer from a water deficit, but today, with the amount of industry operating in the region, that is the case. The groundwater table is so low that extraction is becoming difficult. To address this, we partnered with the World Bank Water Group in creating groundwater recharge – and at the same time creating green cover in Aurangabad around our operating units. Although the financial benefits may not be immediate, the efforts will help to address the water deficit in the region and therefore reduce expenses around the water demand-supply gap in future.
An emphasis on impact investing (social bonds, ESG bonds, blended finance models)
Simply put, impact investing means investing in beneficial social or environmental impact in such a way that the investors also generate a financial return, covering the likes of social bonds, ESG bonds, and blended finance models.
This year has seen impact investing race past the $1 trillion milestone, according to the Global Impact Investing Network, and it’s unlikely to slow. Today, investors already are evaluating companies based on their ESG ratings before making investment decisions, and the fact that businesses are increasingly compelled to disclose their ESG status means it’s becoming a key topic for boardroom discussion. The UK continues to be the centre of global impact investment, but we expect this to extend into more activity in other territories.
Climate financing, meanwhile, is gaining a lot of traction – with a record $31.7 billion invested in the fiscal year 2022 – while green bonds, debt securities designated to finance environmentally friendly projects, are becoming increasingly attractive propositions.
And the Securities and Exchange Board of India has just launched social stock options, meaning that NGOs can list themselves on service stock options – another major indicator of finance interest in social causes – set to be a mutually beneficial arrangement that’s a source of income for financial firms while providing newfound funding for NGOs.
Stronger global frameworks with an emphasis on transparency
From the creation of sustainability reporting standards by the IFRS Foundation in the financial sector through to the aforementioned social stock option by SEBI and a slew of technology and climate financing announcements at COP 27, we expect even more of an international, collaborative focus on transparency across supply chains and finance throughout 2013.
But there are many examples of global sustainability partnerships, including in the telecommunications industry. For example, the European Union Commission on fibre rollout, the EuropaCable Sustainability Forum, aims to ensure that the cables and wires that power digital connectivity are environmentally sound and standardized.
Meanwhile, the European Commission is mandating sustainability standards globally, and anything imported to the European Union whatsoever must meet this set of 22 standards.
This ambitious effort from the EC will help to combat ‘greenwashing’, where businesses exaggerate or lie about their green credentials. But just as the GDPR forced organisations to get their houses in order regarding data, the emergence of new sustainability standards offers an opportunity for businesses to get ahead of regulations and better their own transparency and disclosure, leading to greener industry but also cost savings through greener business.