Tech Companies: Good Reporting on Environmental and Social Issues, Less on Governance

In the area of ​​sustainability, tech companies pay primary attention to the environmental, social and human capital dimensions (87.5% of the sample) but less to governance (62.5% of the sample) and business models (50%). In particular, the most covered material issues are those relating to DE&I policies (87.5%), customer privacy (62.5%), data protection (62.5%), energy resource management (50%) and actions to mitigate climate change.

This is what emerges from the Materiality 2024 research by Omnicom PR Group Italia, a communications consultancy company part of Omnicom. The analysis refers to tech companies that operate in the areas of hardware and infrastructure services, application software, supercomputing, cybersecurity, cloud computing, cybersecurity and digital payments and is the first of its kind carried out in Italy on the most relevant ESG issues for the sector.

The study highlights the awareness of the role that tech companies are called to play but at the same time also the need to fill some gaps, especially in light of the overwhelming impact that artificial intelligence is already having and that will redraw the entire technology landscape in the coming years from multiple points of view.

The research, part of a broader analysis on the 8 most relevant industrial sectors, analyzed and compared the choices of double materiality based on the 5 SASB (Sustainability Accounting Standards Board) reporting dimensions: social, environmental, human capital business models and innovation, governance. The objective is to understand the competitive and sustainable development of tech companies and evaluate the risk mitigation implemented and the material ESG most frequently chosen by companies and sectors.

“Tech companies have been placing ESG issues at the center of their attention for years, so much so that in some cases they have promoted best practices and represented a benchmark for other industries, such as environmental issues and those related to energy supply, personal data protection and inclusion policies. As a result, also thanks to pressure from their stakeholders, tech companies have developed precise reporting of ESG materiality results, thus increasing transparency and responsibility at a systemic level,” said Eros Bianchi , Vice President and Tech Industry Lead of Omnicom PR group Italy.

“Today, the overwhelming impact of artificial intelligence is placing tech companies in front of an epochal challenge, with growing pressure from investors, stakeholders and public opinion for an ethical use of this technology. Therefore, the challenge will be to responsibly exploit the power of AI, focusing efforts first on the less monitored dimensions of governance and business models and closely linking them to the SDGs while ensuring precise reporting of the transversal impact of artificial intelligence on all ESG dimensions.”

Critical issues in the sector and response from the tech companies analysed

The SASB issues identified as relevant to Tech are: energy management, customer privacy and data security, employment engagement, diversity and inclusion, competitive behaviour and systemic risk management.

Among the 8 industries analyzed, fashion is the best sector (average response rate of 93% to relevant SASB issues across the 5 dimensions), followed by food (91%), oil & gas (87%), pharmaceuticals (84%), automotive (83%), tech , which is third to last (81%), personal care (79%) and financial services (75%).

Presidium dimensions SABS and ESG materials most frequently used

Specifically in the response to the 5 dimensions, the “ tech champions ” demonstrate in the vast majority a deep attention to the environmental dimension (87.5% of presence), choosing more frequently (50% of the sample) the material ESG related to the management of energy resources and, again 50%, actions for the mitigation of climate change (SDG 13). This approach seems closely related to the growing demand for energy, which is expected to increase further in the coming years due to the construction of new data centers and the needs related to supercomputing and artificial intelligence.

With respect to the social capital dimension (87.5% of the tech companies analyzed), the sector places a strong emphasis on the materiality related to data security and privacy , both chosen by 62.5% of the sample. The current scenario cannot ignore, on the one hand, the increasingly stringent legislation to protect user data, on the other the media echo caused by the continuous cyberattacks that target companies and organizations.

In addition to this, a growing importance for the social impact of the sector is recognized and measured, the tech for good, or the way in which technological solutions help address social challenges and support the development of local or specific communities such as SMEs or non -profit organizations.

The critical SASB issue of Diversity, Equity and Inclusion (DE&I), belonging to the Human Capital dimension (87.5% coverage) and linked to SDG 5, is by far the one on which the greatest attention is paid in Tech, demonstrating its centrality in the sector, with players who have been at the forefront in this area for several years now through dedicated corporate policies that are subsequently taken as an example by other industries.

The deep attention to these issues also appears to be linked to the attraction of talent for a sector constantly looking for specific skills and their loyalty, as indicated by the adoption of policies focused on corporate well-being, to which 25% of companies dedicate reporting as a strategic aspect of ESG materiality.

In the dimension relating to business models and innovation, 50% of the sample analyzed communicates materiality choices of various kinds while the “innovation” factor is the most chosen with 25% of tech companies citing it. Innovation in many cases is also considered the key to adapting to the growing scarcity of resources and is seen as crucial to protecting shareholder value.

Even the innovations reported in the product design phase, aimed at reducing dependence on some of these materials (such as rare earths), are considered elements aimed at reducing overall business risk (SDG 9 and 12).

Leadership and governance is the SASB dimension relatively covered (62.5%) by the companies in the sample analyzed. In this area, the most selected material ESGs are ethics (37.5% of the sample) and compliance (25%).

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(Featured image by yeiferr via Pixabay)

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First published in ESG NEWS. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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