The focus by companies on environmental, social, and governance (ESG) considerations is a trend that shows no signs of slowing down. And while ESG criteria may have once been considered little more than an optional standard, things are changing. Today, ESG principles are increasingly becoming an integral part of companies’ strategies, including those operating in the telco sector.
In recent years, ESG principles have emerged as a transformative force globally, prompting organizations to review their policies and practices in order to adapt to an ever-changing business landscape. The telecommunications industry, a dynamic economic and manufacturing sector that is rapidly evolving, is no exception. ESG principles are making their mark and having a profound impact on the way telecommunications companies operate, innovate, and interact with the world around them.
This post explores the opportunities for companies, stakeholders, and customers as a result of integrating ESG principles into telecommunications, and points to a possible path for the entire industry toward a more sustainable and responsible future.
The impact of ESG criteria in telecommunications
As our reality becomes increasingly interconnected, the telecommunications industry not only continues to be the backbone of the digital revolution, it has also taken a clear stance on corporate responsibility and sustainability. This is according to a 2021 MSCI study, which found that more than $1.1 trillion of communications investments would be made up of ESG exchange-traded mutual funds.
If ESG criteria is the only criteria capable of simultaneously expressing a company’s environmental impact on the market and assessing its commitment in environmental, social and governance initiatives, it’s because an important paradigm shift has taken place. Today, the image and credibility of a company is no longer considered solely in a structural and operational sense, but concerns its sensitivity to highly relevant and topical issues, such as ecology and respect for human rights. In a world where the dissemination of news and exchange of opinions inevitably can impact an organization’s reputation, a company that employs ESG criteria is the ideal interlocutor for customers, investors, regulators, and the general public.
This is all the more true in the telco market, where ESG criteria play an important role in shaping public perception and investor trust. Prioritizing these principles not only enhances a company’s image, but also strengthens its competitive position, reduces litigation risks, and contributes to long-term sustainability. So, while adapting to the most advanced ESG standards is an arguably inevitable step for companies, it’s also an undeniable step forward toward creating an effectively sustainable and responsible telco industry.
Now that we’ve briefly described the impact of ESG in telecommunications, we are ready to delve into how these principles are relevant to the sector.
ESG in telecommunications
To understand the impact of ESG considerations in telecommunications we must look at these three dimensions: environmental, social, and governance. Companies must act on each of these areas to redesign their practices and strategies. Let’s elaborate.
Environmental impact: energy efficiency to reduce carbon footprint
In 2022, data networks consumed between 1 and 1.5% (source: Nossadata) of the electricity generated globally. Because of the energy required to operate data centers and network infrastructure and to dispose of electronic waste, the telecommunications industry makes a significant contribution to carbon emissions. The only way to reduce the industry’s overall carbon footprint and ensure the sustainable growth of digital infrastructure is through energy efficiency. By recognizing the severity of the current situation, telecommunications companies can reduce their carbon footprint by investing in renewable energy sources, optimizing network efficiency, and adopting environmentally friendly practices in manufacturing and disposal activities.
While reducing scope 1 emissions (direct emissions from owned or controlled sources) and scope 2 emissions (indirect emissions from purchased electricity, heat, or steam) is certainly important, scope 3 emissions are responsible for 80% of total emissions (source: Nossadata) in the telecommunications sector. Scope 3 emissions refer to the indirect GHG emissions that occur in a company’s value chain and are not directly under its operational control. For telecommunications companies, this often includes sources like manufacturing of network equipment and devices; supply chain activities; manufacturing and transportation of components; customer use of products and services (e.g., smartphone power consumption and data use); and end-of-life disposal of electronic equipment.
By taking action on scope 3 emissions, companies can increase the likelihood of influencing the industry’s environmental impact more broadly.
Social responsibility: bridging the digital divide to ensure inclusion
Telecommunications play a vital role in connecting people and communities, and this possibility of connection offers both opportunities and responsibilities. Telecommunications companies have a moral duty to ensure that their services are accessible, affordable, and secure for all (a duty often enshrined in individual countries’ regulatory systems).
Bridging the digital divide, providing connectivity in remote areas, and addressing cybersecurity issues are all part of ESG commitments in telecommunications. While this might seem somewhat abstract, in reality, this has a very concrete effect on communities as it relates to digital inclusion. Although the vast majority of the world’s population owns a cell phone, those in disadvantaged groups, such as the elderly or people with disabilities, are at risk of not being able to enjoy technology that is not adapted to their needs. Telecommunications companies that commit to ESG policies take responsibility for making their services universally available by adapting them to meet the specific needs of their audiences.
Governance and ethical practices: the ESG parameters for converting values into reality
By subscribing to high standards of corporate responsibility, telecommunications companies recognize the value of ethical behavior, transparent communications, and environmental sustainability. To pursue these goals and build trust and credibility, companies must have strong governance through which they implement the practices necessary to convert ideal values into reality. For example, in issues involving privacy and data security, telecommunications companies—which increasingly serve as central hubs for users’ personal data—must prioritize the protection of customer information while maintaining the balance between market competition and responsible data management, while always in compliance with national and international regulations. Initiatives based on compliance with ESG parameters can help prevent scandal and controversy, ensuring a positive public image.
The opportunities of ESG criteria for telecommunications
ESG criteria in telecommunications offer a horizon full of opportunities for innovation: from adopting renewable energy sources to improving social inclusion, and from promoting diversity to supporting ethical governance practices. The shift toward a corporate culture that prioritizes ESG principles in telecommunications not only responds to an ethical imperative, it also follows a certain strategic design: it offers the opportunity to meet evolving customer expectations, to gain a competitive advantage, and to attract investors who are ready to recognize this new, more caring and respectful business philosophy as a driver of growth and development. Here are four promising opportunities that ESG criteria create for telecommunications companies.
- Attract investment
Investors focused on ESG criteria are increasingly looking for companies who are committed to sustainability. Telecom companies that prioritize ESG criteria can access a larger pool of investors and secure capital at a lower cost. In addition, the benefit they gain from improved brand perception and customer loyalty can lead to increased market share and profitability.
- Regulatory Compliance
Compliance with ESG standards can help telecommunications companies avoid regulatory and legal problems. Governments around the world are tightening regulations for environmental standards, data privacy, and consumer protection. Companies that proactively adopt ESG practices are better able to navigate within constantly changing regulatory scenarios.
- Innovation and technological advances
The telecommunications sector is perfectly positioned to promote ESG initiatives through technological innovation. Beyond a number of environmentally friendly solutions that can significantly reduce environmental impact (more efficient hardware, 5G networks, the Internet of Things, cloud computing, and artificial intelligence applications can reduce energy consumption, minimize waste, and optimize resource allocation), digitization is the real driving force behind the changes taking place in the telco sector. And, it’s primarily through digitization that ESG goals can be achieved. Digital transformation provides the tools and platforms companies need to monitor, measure, and optimize their ESG efforts. It also improves communication, making it easier for companies to fully and transparently share their ESG initiatives with stakeholders (customers, investors, and regulators) in real time, through reporting and on online channels. In addition, the connectivity and accessibility provided by digitization are key to enabling companies to reach and interact with diverse communities and promote social inclusion and diversity.
- Consumer expectations
Consumers today have higher expectations of the ethical, social, and environmental practices of the companies they interact with, and this includes telecommunications service providers. The connection between ESG principles and improved customer satisfaction in the telecommunications industry is crucial in several ways:
- Alignment with the values of the target audience: by adopting ESG principles, telecommunications companies can address concerns related to environmental sustainability and business practices in a way that is perceived as more authentic and effective.
- Building trust through transparent communications: openly talking about ESG initiative in a timely and well-documented way strengthens trust.
- Customer engagement: meeting ESG expectations can help reduce churn rates, resulting in stronger long-term customer relationships. Involving customers in ESG initiatives through educational campaigns and challenges deepens their connection with the company and creates opportunities for active participation.
We could say that the adoption of ESG principles not only meets the expectations of telco customers by increasing their awareness and satisfaction, but by improving the corporate communication system, it establishes itself as a powerful new mode of customer care.
ESG principles and customer care in the telco sector
ESG criteria are not limited to a company’s physical operations; they extend to every aspect of its interactions with customers, including the area of customer care. Therefore, even in the telco sector where digital customer care services are now an entrenched reality, companies cannot underestimate the importance of ESG principles.
Commitment to environmental protection
ESG principles in telecommunications motivate companies to make an ongoing commitment to environmental sustainability. In customer service, this translates into reducing data center energy consumption, optimizing network efficiency, and promoting paperless transactions. These environmentally friendly practices not only help increase efficiency and reduce waste, they are also in tune with the sensibilities of modern consumers who are increasingly looking for companies that are seriously committed to environmental protection. Through digital customer service, telecom companies can create a communication model that directs consumers to new CTAs and digital touch points, including apps, portals, and payment links. In this way, digital transformation not only accelerates critical processes but also simplifies them, making them entirely paperless.
This approach results in significant cost savings associated with managing customer communication. The improved environmental impact achieved through digitization and simplified processes is not just an environmentally responsible choice, but something that can also be monetized. Doxee products, for example, enable telecommunications companies to turn their efforts into carbon credits, helping to make business operations more sustainable while also creating potential financial benefits.
Personalization that improves customer satisfaction
Personalization is at the heart of ESG principles: by simplifying complex procedures and problems through interactive digital experiences, telecommunications companies can significantly improve customer satisfaction. These personalized digital interactions not only answer customers’ questions, but also anticipate their needs, improving engagement and loyalty. Another key benefit of integrating ESG principles into digital customer service is the reduction in the number of service calls. By providing simplified video communications for complex procedures and issues, companies can proactively respond to customer concerns. This not only improves efficiency, but also minimizes the risk of customers feeling abandoned, misunderstood, and frustrated.
In conclusion, integrating ESG principles into telecommunications, and particularly into customer care processes, provides a competitive advantage that results in regulatory compliance and increased customer loyalty.
It enables cost savings, customer engagement at a deeper level, and operational efficiencies.
ESG practices support a holistic view of business that benefits not only the company and consumers but the entire industry, which becomes more sustainable, environmentally responsible, and customer-centric.