ESG factors impacting telecommunication companies

The model that is used for scoring and evaluating the companies operating in telecommunication sector is based on ESG factors that are environmental, social and governance factors. Environmental factors accounted for environmental risks, management and opportunities. Social factors on other hand covered the management of human resources of firms, regulatory risks, partner and supplier’s risks and reputational capital and brands. Lastly, adhere of organization to business ethics and corporate governance practices and commitment of sustainable development are incorporated in the governance factors. Telecommunication companies are provided with the accounting metrics by the sustainability accounting standard that assist in accounting the measurement of sustainability performance. The two main segments of telecommunication industry are wireless and wire line and such segments are influenced due to expansion of usage of electronic gadgets. SASB has identified some accounting metrics that helps telecommunication companies in making disclosure about their sustainability performance (Clarke and Boersma 2016). In order to ensure completeness, comparability and accuracy of data that is reported by companies, the narrative disclosure of materials factors regarding sustainability is required. Some of the accounting metrics for measuring the telecommunication industry ESG priorities according to SASB comprised of activity and accounting metrics. Activity metrics are deemed to be useful for accounting metrics and a disclosure about contextual information of company is made theory this particular metric (Churet and Eccles 2014).

SASB has outlined the following accounting metrics for measuring priorities relating to ESG:

• Frequency and duration of average interruption are some of the metrics for measuring the technological disruptions.
• Data privacy metrics includes policies that help in collection and usage of information about customers. Some other metrics comprised of amount of legal and regulatory fines and customer settlements concerning privacy.
• Renewable energy percentage, grid energy percentage and total consumption of energy by cellular and fixed network.
• Data security number metrics involve addressing of security risk by management and breach of data security.

Some of the activity metrics are listed below:

• Wireless services subscribers
• Broadband service subscribers
• Wire line services subscribers
• Fixed and cellular network percentage and network traffic

A systematic approach has been pursued by association of European Telecommunications Network Operators’ (ETNO) that helps in integration of social, environmental and governance factors for enhancing returns and mitigating risks throughout the investment cycle. Association is committed to extend itself as role model in enhancing corporate sustainability by going beyond the business interest and creating positive impact alongside adopting the guidelines of global sustainability reporting. Such platform enables organization in communicating the performance of business and ESG factors in an integrated way.  In relation to sustainability, ETNO has a long history as it make responsible use of natural resources and significantly focuses on protecting environment (Etno.eu 2018). It furthers intends to make investigation into telecommunication role in driving sustainability of environment. Member companies of ETNO are convinced with the importance of effectively managing energy and natural resources along with maintaining healthy and safety environment at workplace that helps in enhancing the productivity and well being of workforce (Casey 2018).

Accounting metrics for measuring sustainability performance

British telecom intends to maintain highest standard in their financial and corporate reporting by carrying out their operating activities according to business integrity and ethics (bt.com 2018). In addition to this, organization manages its operations by measuring its material impact. The list of ESG priorities of British Telecom are as follows:

• Providing protections to customers from online threats by improving their relationship with suppliers and supporting human rights.
• Using technology to reduce the carbon footprints and helping customers in such measure by reducing the impact of carbon emission by three times.
• Saving energy by reducing its usage by installing energy efficient lights, energy efficient rectifier units and installing adiabatic cooling units in place of air intensive air conditioning (Delgado et al. 2017).
• Implementation of new tech literacy which help in extending the commitment to education in United Kingdom.

The nonprofit stakeholders of organization have been impacted by return on investments and loss of legitimacy. There is increased pressure on such stakeholders to enhance their performance. For nonprofit organizations, one of the most underappreciated elements is human resource. Valuing workplace and people, managing of ESG risks in business activities, advancement of environmental management, focusing on ESG for pursuing services and products of organization are some of the issues concerning nonprofit stakeholders of organization. Non profit stakeholders are also monitored in terms of environmental issues with further issues being reported on matters relating to integrity and compliance. Such stakeholders should be provided insight into the way company does the identification of key ESG risks and opportunities. ESG risks are prioritized in terms of the possible outcomes and likelihood of risk manifestation.

The timing of case study is the partial reason attributable to variances between the ESG priorities that have been identified above and those that are mentioned in the given case study. Modification in above listed ESG priorities along with its evaluation is done according to alterations in the standard due to changing environment of doing business and the information depicted in the vase study has happened or occurred long time back. The process of constructing scores of ESG relating to individual companies helps in generating of metrics that is presented in the case study. The given case study has identified a lower level of qualitative and quantitative metrics as against the priorities that have been identified above.  Furthermore, several facts and aspects are considered for rating the organization on ESG rating as lower or higher compared to facts and aspects that are different in determining today’s ESG priorities (Aziakpono et al. 2014).

Decision making within organization is attained by integration of ESG data with reporting on other data including financial figures in the annual report. In order to allow spreadsheet integration, it is essential to make reporting on benchmark data of industries along with raw data on ESG. Outlining the importance of ESG is considered essential and explanation of aspects would assist organization in implementing strategic decision (Jitmaneeroj 2016). Moreover, organization should determine topics relating to ESG that are relevant for current, future and own business activities of company. Analysts and financial investor’s expectations are met by communicating information with respect to completeness, scope, frequency and details. Such information should be adequately explained, transparent, consistent and quantified which would further provide assistance in comparing such information and facilitate decision making. The future prosperity and sustainability of business is determined by some non financial matters and such non financial information is of considerable importance in financial decision making of investors. Sustainable development information of company presenting the efforts of corporate social responsibility should be incorporated (Aragón et al. 2016). It is so because such information forms a fundamental part of statutory and legally sorted financial reporting.

It is required to take into account benchmark data for collecting of ESG data in a more efficient way. In relation to audit proof collection and data documentation, recommendation should be provided. There should be methods suggested for extrapolating information in an efficient manner along with reporting data in a systematic way so that data reliability is done at high level. The prepared ESG report and the data incorporated should be   reported, documented, analyzed and disclosed that would provide assistance in external and internal audit review (Daszynska et al. 2016). Reporting on ESG matters should be well aligned with the capital market. However, in relation to reporting on available data for facilitating decision making among investors, some of the recommendations can be made that are listed below:

• The methods used by organization for computation of figures should be disclosed
• Data relating to ESG should be well incorporated in the annual report of company.
• Alterations in the content and scope of data should be made when it is possible to provide justification for the same.
• The presentation slides should also present key financial data
• Principles of effective financial communication should be followed by company when it is required to make external presentation of ESG information (Ortas et al. 2015).
• The annual report should adequately make disclosure of key financial indicators in the table format. This would help in facilitation of extracting and comparing data with ease.   

References list:

Aragón-Correa, J.A., Marcus, A. and Hurtado-Torres, N., 2016. The natural environmental strategies of international firms: old controversies and new evidence on performance and disclosure. Academy of Management Perspectives, 30(1), pp.24-39.

Aziakpono, M., Bauer, R. and Kleimeier, S., 2014. Financial globalisation and sustainable finance: Implications for policy and practice. Journal of banking and finance, 48(11), pp.137-138.

Casey, T., 2018. Corporate Social Responsibility in Nonprofit Organizations: How Nonprofits Leverage CSR and Sustainability Reporting.

Churet, C. and Eccles, R.G., 2014. Integrated reporting, quality of management, and financial performance. Journal of Applied Corporate Finance, 26(1), pp.56-64.

Clarke, T. and Boersma, M., 2016. Sustainable Finance? A Critical Analysis of the Regulation, Policies, Strategies, Implementation and Reporting on Sustainability in International Finance. UNEP-Inquiry: Design of a Sustainable Financial System.

Daszynska-Zygadlo, K., Slonski, T. and Zawadzki, B., 2016. The market value of CSR performance across sectors. Engineering Economics, 27(2), pp.230-238.

Delgado-Márquez, B.L., Pedauga, L.E. and Cordón-Pozo, E., 2017. Industries Regulation and Firm Environmental Disclosure: A Stakeholders’ Perspective on the Importance of Legitimation and International Activities. Organization & Environment, 30(2), pp.103-121.

Etno.eu. (2018). [online] Available at: https://etno.eu/datas/positions-papers/2018/UN%20Global%20Compact%20CoE2018.pdf [Accessed 6 Aug. 2018].

Home.bt.com. (2018). Fibre Broadband, TV Packages, BT Sport & Mobile Deals | BT. [online] Available at: https://home.bt.com/ [Accessed 6 Aug. 2018].

Jitmaneeroj, B., 2016. Reform priorities for corporate sustainability: environmental, social, governance, or economic performance?. Management Decision, 54(6), pp.1497-1521.

Ortas, E., Álvarez, I. and Garayar, A., 2015. The environmental, social, governance, and financial performance effects on companies that adopt the United Nations Global Compact. Sustainability, 7(2), pp.1932-1956.

Ortas, E., Álvarez, I., Jaussaud, J. and Garayar, A., 2015. The impact of institutional and social context on corporate environmental, social and governance performance of companies committed to voluntary corporate social responsibility initiatives. Journal of Cleaner Production, 108, pp.673-684.