How TMT companies can lead the charge towards a sustainable future

As TMT companies push for sustainability, they must navigate rising emissions, and energy demands while meeting stakeholder expectations.

The technology, media and telecommunications (TMT) sector faces something of a conundrum in relation to sustainability. On the one hand, it has a key role to play in facilitating the transition to a low carbon economy, while on the other it is responsible for an increasing proportion of global emissions.

This poses a particular challenge for a sector long seen as among the cleanest of industries due to its low level of direct emissions. Its impact largely arises due to electricity consumption. In a 2022 report, the UK parliament’s POST Research Team found that the industry accounted for an estimated 4% - 6% of global electricity use.

Increased focus translates into action

Set against that backdrop, the findings of the EY State of Sustainability study must be seen as very heartening. Some 80% of respondents reported a significant increase in focus on sustainability in their business in the last year, while 81% said stakeholders are increasingly enquiring about their organisation’s sustainability impact. 

This has translated into concrete actions with 71% of the organisations surveyed having an approved and implemented sustainability strategy in place. Almost the same number (70%) described their focus and actions on sustainability as established or industry leading, while just 10% said it was at a basic level. In addition, a significant majority (71%) have carried out risk and materiality assessments to identify the key sustainability issues which the business needs to address.

In 60% of cases the sustainability strategy is aligned with the business’s overall corporate vision. That alignment is critically important as it reduces the prospect of sustainability efforts falling by the wayside in the face of competing business priorities.

A significant proportion of respondents have seen an immediate return for those efforts with 59% saying they have had a positive impact on the bottom line. In some cases, at least, this appears to have come as a welcome but unexpected bonus with just 12% citing the ability to increase profits as a driver of sustainability efforts.

Interestingly, despite the growth in the sector’s large emissions footprint and the growing importance of the issue to stakeholders, just 13% said their sustainability efforts were motivated by a desire to do good for the environment. The key drivers were the views of customers with 85% of respondents saying the sustainability of their products or services were very or extremely important to customers and 75% saying the same for their business operations. Meeting the expectations of existing customers appears to be the primary focus with just 10% pointing to enhanced appeal to more customers as a key driver. 

Access to capital and finance was another key factor with 59% of respondents linking this with an ability to demonstrate that their business is more sustainable. 

Legislative and regulatory compliance was some way down the list being cited by 28% of respondents. It should be noted that the research for this study was carried out prior to the publication of the EU Omnibus Package which has proposed significant changes and delays to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). This may result in an even lower priority being placed on regulatory compliance.

Progress towards net zero

A refreshing degree of realism was in evidence in relation to the ability to achieve net zero targets. While 60% of respondents said they have a net zero science-based target in place, 28% said it was not at all likely or quite unlikely that they will achieve it. Just over half rated their success prospects as very or extremely likely. Those findings, while disappointing, were only be expected as only 36% of respondents said their organisation had a clear roadmap to achieve net zero. In the absence of a strategy or plan, a successful outcome is very unlikely.

Much of the TMT industry provides services and not goods which makes road mapping and articulating strategy and efforts tangibly more difficult. This challenge may explain the respondent’s view of their organisation’s roadmap and strategy (or lack thereof).

Also disappointing is the 12% of organisations that do not have a goal at all. There does appear to be some recognition that businesses could and should be doing more with 35% of respondents saying they don’t believe their organisation is taking the issue seriously enough.

The level of public scrutiny faced by this industry is comparatively less than that experienced by the energy, transportation, and industrial sectors, which compels many organisations to adopt impactful communication and branding strategies to tackle challenges effectively. However, the survey serves as a crucial reminder for TMT organisations that fostering employee engagement around sustainability is essential, regardless of the level of public attention their sector receives.

More positively, 50% of respondents said it was very or extremely likely that their organisation could reach net zero by 2030 if such a target was imposed on them.

In that context, 29% of respondents said they are looking to improve their position on sustainability by merging with or acquiring another company. The issue is also influencing M&A decisions with 30% saying they are increasingly assessing the sustainability status of target companies.

Organisations are also reaching into their supply chains in their efforts to improve sustainability performance with almost two-thirds of respondents rating their level of engagement with suppliers in relation to ESG impacts and dependencies as either established or market leading.

Some way to go on regulatory preparedness

While 68% of respondents believe that compliance with Irish Government and EU related sustainability standards means they have done enough from a sustainability perspective, just 48% described their level of preparedness to meet CSRD or ISSB reporting requirements as either established or market leading. Quite concerningly, 11% said they were not prepared at all.

Another cause for concern is the surprising lack of solutions in place for compliance purposes. Given the sector concerned, it might have been expected that more than 50% would have a solution in place for gathering data from our supply chain for compliance purposes and more than 47% would have a data management system to record sustainability related data.

Very disappointingly, just 38% have a system for greenhouse gas calculations while only 20% have one for ESG voluntary and mandatory regulatory reporting.

Almost half of the organisations surveyed (45%) have either not engaged or only had initial conversations with their value chains on ESG reporting requirements while 19% said discussions were at an advanced stage. Only 36% already had value chain reporting in operation.

These findings suggest that many TMT organisations may struggle to meet regulatory reporting requirements whenever they do materialise. This in turn may negatively impact their relationships with customers and other stakeholders as well as their ability to access capital.

Meanwhile, the Omnibus package has prompted several companies to pause or re-evaluate their priorities and ongoing delay of EU regulations causes a degree of uncertainty for many within the TMT sector.

Leadership and accountability

On a much more positive note, more than two thirds (70%) of TMT businesses have appointed a dedicated individual with responsibility or accountability for driving the sustainability agenda. Very encouragingly, 60% of respondents say that individual is at C-suite level with the MD or CEO taking the lead in 64% of cases.

Furthermore, 66% have set KPIs which are aligned to sustainability measures while 64% say there is clear accountability for measurable targets set in relation to sustainability. 44% of respondents say those targets are backed by incentives for employees to prioritise sustainability objectives.

Businesses are also enlisting external expertise to bolster their sustainability efforts with 50% already having third party engaged to provide assurance of sustainability reporting, results and measures while 55% of respondents say their organisation will be consulting external sustainability/ESG advisors in the next 6-12 months to help improve their sustainability approach.

That high level of commitment at senior leadership level along with the use of third-party advice indicates an appreciation for the importance of the issue and the need to accelerate progress both in terms of improving sustainability performance and in preparedness to meet reporting requirements.