Reputation Matters: Why Going Green Makes Business Sense

GSMA Intelligence has produced a series of three Green is Good for Business reports that provide best practice advice to the telecoms industry on why and how they can accelerate their response to climate change.  The first report was on embedding sustainability in digital transformation, the second outlined the financial case and the third analysed the reputational case, and reputation is the subject of this blog.

Reputation matters in business.  Increasingly consumers, enterprises, employees, suppliers, and investors are prioritizing ethical issues in their relationships with business that reflect their views of the world. 

A recent GSMA Intelligence survey across 16 countries found that around 80% of people now rate climate change as the number 1 global challenge, above inflation, economic stability, war and geopolitical conflict.  This view remains unchanged over the next 5 years.

Climate response is becoming an increasingly important part of reputation management.

The same survey found that on average 60% of people consider climate or sustainability criteria as an active part of product purchasing and 45% say they are willing to pay a premium for carbon-neutral certified products and services.

There is a clear correlation between green purchasing and those countries most exposed to extreme weather conditions induced by climate change.  The highest rates are seen in the Philippines, Brazil, Türkiye, Pakistan, and Indonesia. All are high-growth, emerging economies with direct exposure to warming and extreme weather events, something which has been painfully apparent in, for example, the Pakistan floods and Philippine typhoons.  The proportion of people holding these views is likely to increase as more people experience the effects of increasingly frequent extreme weather.  No country will remain unaffected.  More consumers will vote with their wallets.

Similarly, some 66% of people from the survey rate climate action very or extremely important in their choice of employer. How far does this go? Some 30–40% of people in Europe would take a pay cut to work for a company with a net-zero commitment. The figure exceeds 50% in the aforementioned countries on the front line of climate change.

When selecting a mobile phone operator, the attributes most highly prioritized today by consumers are privacy and personal data protection, price, network coverage, brand, and device range.  Environmental sustainability is still a second-level criterion for most consumers, but this is expected to become a higher priority as the impacts of climate change become more widespread.

Behaviour is hard to change individually.  However, it is affected by the prevailing culture, i.e. what a large number of other people are doing.  This not only shifts over time, but can reach tipping points and shift dramatically over a short period of time (much like climate change might).

Some 50% of consumers are willing to change their behaviours in response to climate change, although this proportion varies, depending on the personal sacrifice they need to make; e.g. a smaller number are willing to fly or drive less often than they are willing to use an electricity supplier or mobile phone operator that uses 100% renewable energy.

The fact that more than 50% of people are willing to pay a fee (premium) to offset the carbon impact of a purchase, or to pay for certified carbon neutral products or services, indicates a willingness to spend discretionary income before giving something up.  From an industry perspective, there is a latent ‘green premium’ available if product design and marketing can be embedded with sustainability criteria (such as carbon-neutral mobile tariffs) before regulation requires product adherence to strict environmental standards.

Telecoms operators that sell 5G and IoT to enterprise verticals offer a dual-value proposition in terms of productivity gains and higher power efficiency, which will lower their customers’ carbon footprint.  This can offer a significant reputational benefit.

Sustainable procurement will only grow in importance.  Some 75% of companies in the six industries GSMA Intelligence surveyed claim to have a sustainable procurement policy in place.  There is some variation on what goes into this policy.  However, the percentage of enterprises auditing more than 75% of their suppliers for compliance to this policy is essentially negligible.

Establishing sustainable procurement as the default will take time but is important. Scope 3 reporting and regulatory compliance will eventually require it.

Sustainability is no longer niche for investors and the investment and asset management sector has increasingly moved to incorporate ESG key performance indicators (KPIs) into company ratings and broker research.  Evidence suggests that companies with a higher ESG rating have achieved a lower cost of capital.

In the long run, governments and societies will need to make difficult choices that impact day-to-day lives, but much of this comes down to political will and regulation, not technology. The timeline for emissions-related regulations will vary by country and industry, but it has already started in some industries and is likely to extend further before 2030.  Any company on a 2050 net-zero timeline will have to cut CO₂ emissions by 50% in each successive decade.

In conclusion, an organisation’s climate response needs to be embedded in its business strategy to avoid reputational damage with key stakeholder groups and to plan for ever increasing climate regulations.

Read more about Huawei’s commitment to green technology, development, and sustainability.

Disclaimer: Any views and/or opinions expressed in this post by individual authors or contributors are their personal views and/or opinions and do not necessarily reflect the views and/or opinions of Huawei Technologies.