Previously I have written about the importance of the healthcare, resource transformation, food and beverage, consumption, extractives & minerals processing, renewables and alternative energy, infrastructure, and transportation sectors to the 17 Sustainable Development Goals (SDGs). The underlying data for that blog are based on a paper “The Relationship Between Investor Materiality and the Sustainable Development Goals: A Methodological Framework” that I wrote with Professors Gianni Betti and Costanza Consolandi of the University of Siena. A summary of our methodology is provided in my healthcare post. In brief, we mapped the 26 material environmental, social, and governance (ESG) issues (organized in terms of the categories environment, social capital, human capital, business model & innovation, and leadership & governance) in all 77 industries organized into 11 sectors, developed by the Sustainability Accounting Standards Board (SASB), to the 169 targets of the SDGs. Mapping these issues to the SDGs’ targets enabled us to assess how each industry is creating or destroying value for society while focusing on those ESG issues that create value for shareholders. Based on this mapping we created an index that ranges from 0 to 100.
technology smart city with network communication internet of thing. Internet concept of global ... [+]
In this post I will analyze the importance of the technology and communications sector. It’s overall score is 24.2—compared to 36.0 for food and beverage, 32.6 for healthcare, 30.4 for extractives & mineral processing, 28.4 for resource transformation, 23.8 for renewables and alternative energy, 21.4 for infrastructure, 20.1 for consumption, and 18.1 for transportation—putting it the middle of the sectors I have written about so far. There is variation with this sector of six industries. At the top end is electronic manufacturing services and original design manufacturing (32.2), software and IT services (29.1), and semiconductors (27.8). In the middle are hardware (24.1) and internet media and services (18.5). At the bottom is telecommunications (13.8).
This sector has its highest impact on four SDGs, all at about the same level: #5 (Gender Equality-34.3 [six of six targets]), #7 (Affordable and Clean Energy-29.0 [three of three targets], #9 (Industry, Innovation and Infrastructure-34.3 [five of five targets]), and #14 (Life Below Water-30.0 [seven of seven targets]). There are a number of ESG issues that are material to the industries in this sector. In SASB’s category of environmental with seven issues, four are material, to varying degrees: GHG emissions, energy management, water and wastewater management, and waste and hazardous materials management In the category of social capital with six issues the only material issue is data security and customer privacy In the category of human capital all six issues appear: labor relations; fair labor practices; employee health, safety, and well-being; diversity and inclusion, compensation and benefits; and diversity and inclusion and recruitment; and recruitment, development, and retention. The two issues of lifecycle impacts of products and services and environmental social impacts on assets and operations are material for the five issues in the category of business model and innovation. Finally, five of the seven issues in leadership and governance are material: systemic risk management, accident and safety management, business ethics and transparency of payments, materials sourcing, and supply chain management. The SDG on which this sector has the least impact is #4 (Quality Education-12.5). This sector is unusual in the low number of SDGs for which is has low impact, although the same is not true for some of the industries within it.
There are eight SDGs for which the electronic manufacturing services and original design manufacturing (EMSODM-32.2) industry has its highest impacts: #3 (Good Health and Well-Being-37.3 [eight of nine targets]), #5 (Gender Equality-38.9 [five of six targets]), #6 (Clean Water and Sanitation-39.4 [five of six]), #8 (Decent Work and Economic Growth-45.9 [eight of 10 targets]), #11 (Sustainable Cities and Communities-31.9 [three of seven targets]), #12 (Responsible Production and Consumption-41.9 [four of eight targets]), #14 (Life Below Water-45.0 [four of seven targets]), and #15 (Life On Land-39.0 [six of nine targets}). The high score for this industry is due to the fact that most of its seven material issues (water and wastewater management; waste and hazardous materials management; labor relations; fair labor practices; employee health, safety, and well-being; lifecycle impact of products and services, and materials sourcing) impact a number of common SDGs and their targets. For example, waste and hazardous materials management and lifecycle impact of products and all impact SDGs #3, #6, #8, #11, #12, #14, and #15. The SDGs for which this sector has no impact is #4 (Quality Education-0.0). The other lowest ones are #7 (Affordable and Clean Energy-13.0), #9 (Industry, Innovation and Infrastructure-11.1), and #10 (Reduced Inequalities-13.7).
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The next highest industry in this sector impacting the SDGs is software and IT services (29.1), Here there are six. Two of these are common to EMSODM and at about the same level: #5 (Gender Equality-50.0 five of six targets]) and #14 (Life Below Water-40.0 [four of seven targets]). and #15(Life On Land-39.0[six of nine targets]). Distinctive to this industry are SDGs #1 (No Poverty-31.8 [four of five targets]), #7 (Affordable and Clean Energy-47.4 [three of three targets]), #9 (Industry, Innovation and Infrastructure-55.6 [four of five targets]), and #10 (Reduced Inequalities-50.0 [four of six targets]. The relatively little lack of overlap between these two industries is explained by the fact the only material issue they have in common is waste and wastewater management. The other seven, and the top SDGs for which they are associated are: energy management (#7 and #9); data security and customer privacy, (diversity and inclusion (#10); recruitment, development, and retention (#9 and #10); systemic risk management (#7, #9, and #10); competitive behavior (#1, #7, #9, and #10); and supply chain management (#1, #5, #7, #9, #10, #14). The SDGs for which this industry has the least impact are #3 (Good Health and Well-Being-15.7) and #15 (Life On Land-14.6).
Close up of examining of test sample of microchip transistor under the microscope in laboratory.
Like EMSODM, semiconductors (27.8) also has eight highly rated SDGs and with a very similar profile, sharing six of them in common although generally to a slightly lower extent: #5 (Gender Equality-33.3 vs. 38.9), #6 (Clean Water and Sanitation-36.4 vs. 39.4), #8 (Decent Work and Economic Growth-31.3 vs. 45.9), #11 (Sustainable cities and Communities-31.6 vs. 31.9), #12 (Responsible Production and Consumption-32.3 vs. 41.9), and #14 (Life Below Water-35.0 vs. 39.0). Unique to semiconductors are #2 (Zero Hunger-35.0 [five of five targets]) and #9 (Industry, innovation and Infrastructure-38.9 [four of five targets]). Despite this commonality in SDGs, the material issues for these industries are quite different, illustrating how different material issues are relevant to the same SDG. The only issues in common are water and wastewater management, waste and hazardous materials management, and employee health, safety and well-being. Reflecting different business models and competitive conditions the other material issues for semiconductors are GHG emissions; energy management; compensation and benefits; recruitment, development, and retention; environmental social impacts on assets and operations, and business ethics and transparency of payments. The lowest rated SDGs are #1 (Zero Hunger-18.2) and #16 (Peace, Justice and Strong Institutions-8.7).
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The hardware industry (24.1) shares four of its top five SDGs with the EMSODM industry: #5 (Gender Equality-44.4 [five of six targets]), #12 (Responsible Production and Consumption-32.3 [four of eight targets]), #14 (Life Below Water-30.0 [four of seven targets]), and #15 (Life On Land-34.2 [six of nine targets]). Unique to this industry is #13 (Climate Action-33.3 [one of three targets]). In fact, it is the only industry in this sector where #13 appears. This is due to the fact that it is the only industry in this sector for which lifecycle impacts of products and services, materials sourcing, and supply chain management are material and all affect #13. Its two other material issues are data security and customer privacy and diversity and inclusion. It has a rating of 0.0 for #2 (Zero Hunger) and #4 (Quality Education). The other two lowest rated SDGs are #1 (Zero Hunger-18.2) and #6 (Clean Water and Sanitation-15.2).
There are only three SDGs for which internet media and services (18.5) has a significant impact: #5 (Gender Equality-38.9 [five of six targets]), #9 (Industry, Innovation and Infrastructure), and #10 (Reduced Inequalities-36.4 [four of seven targets]). The six material issues for this industry are energy management; water and wastewater management; data security and customer privacy; diversity and inclusion; and recruitment, development, and retention. Its lowest rated SDGs are #3 (Good Health and Well-Being-9.8), #10 (Reduced Inequalities-10.5), #11 (Sustainable Cities and Communities-11.1), and #15 (Life On Land-4.9).
Global communication network concept. Elements of this image furnished by NASA. 3D rendering.
The industry in this sector which has the least impact on the SDGs is telecommunications (13.8). There are only two SDGs where it has a significant impact: #7 (Affordable and Clean Energy-43.4 [three of three targets]) and #9 (Industry, Innovation and Infrastructure-38.9 [four of five targets]). This impact comes from the material issues of energy management, lifecycle impacts of products and services, systemic risk management, and competitive behavior which all impact #7 and #9. This is the only industry for which all four of these issues are material. The remaining one is data security and customer privacy which it shares with software and IT services, hardware, and internet media and services. This industry has an impact of 0.0 on SDGs #2, #4, and #5 (which is one of the top for the sector as a whole at 34.3). It has an impact of 6.1 on SDG #6 and 2.1 on SDG #8.
In my next post on this topic I will write about the services sector (15.7) comprised of nine industries: education (7.4), professional services (8.1), hotels and lodging (42.4), casinos and gambling (12.6), leisure facilities (9.1), cruise lines (29.8), advertising and marketing (4.7), media production and distribution (17.5), and cable and satellite (9.6).
