How telecommunications companies are facing up to ...

How telecommunications companies are facing up to sustainable development

P. ~ v o ~ a d r i ~ , G. ~armosino', S. ~ i l a n e s e ~ & ~ . ~ a s s a l l o ' I 3-General AfSairs, Environment Direction, Via A. Severo 246, 00145 Rome, Italy 2Arthur D. Little, P.zza della Repubblica 32, 20124 Milan, Italy

Abstract

The purpose of the work conducted by "3", the commercial brand of H3G, the first mobile video company of the Italian market, and Arthur D. Little was to develop a strategic approach and to set the directions for managing environmental and social issues in a fully integrated manner with the business strategy of the organisation. The work started analysing the current and future concerns of stakeholders, reviewing systems and processes adopted by major telecommunications companies and conducting an internal analysis of "3" organisation.

The work confirmed the actual health concern related to electromagnetism but highlighted also specific stakeholders expectations related to issues such as natural resource use, waste management, landscape protection and social impacts.

Furthermore, the work showed that telecom companies are responding to these concerns in both specific and strategic ways. Most now have a corporate policy statement and clear governance structures, particularly for environmental issues, and many are part of international initiatives to raise the profile and understanding of sustainability.

Based on these assumptions, "3" and Arthur D. Little developed a corporate social responsibility policy, a management framework and a detailed programme to deliver on the commitments established in the policy.

Transactions on Ecology and the Environment vol 63, © 2003 WIT Press, www.witpress.com, ISSN 1743-3541

l Introduction

"3", the commercial brand of H3G, is the first mobile video company of the Italian market. "3" is the global name for the 3G services of Hutchison Whampoa, that holds 3G licenses in Australia, Austria, Denmark, Hong Kong, Ireland, Italy, Israel, UK and Sweden. "3" have a strong commitment to manage environmental and social issues being aware of the business value that a systematic approach represents.

Telecom companies are playing an increasingly important role in the global economy: their telecom products are now used by almost all European citizens. There is now increasing attention paid to the environmental and social (particularly health) impacts of telecom infrastructure, product manufacture and use.

Leading companies are more and more conscious that effective management of social and environmental issues can bring benefits to the business as well as to society as a whole. Understanding social and environmental issues and stakeholders expectations is essential to maximise these benefits.

As a new company, H3G decided to seize the opportunity to develop a strategic approach to environmental and social performance management that is fully integrated with business strategy.

2 Business value generated by SD

Sustainable development is about taking into consideration the complete impact a business or activity might have on society and the environment, not just on the economy. Questions that business managers tend to pose are: why should we consider social and environmental aspects to a greater extent than required by regulators? What's the business case for sustainable development?

Answering such kind of questions in a convincing manner is the real challenge facing governments, non-governmental organisations, private enterprises, communities and individuals.

Business has entered into a new phase in which political, economical, ecological and social consequences of company activities and services can be an opportunity or a threat depending on how these are managed. Reasons for assuming responsibilities that go beyond the scope of simple commercial relations are:

Reputation enhancement and protection of company's value derived from intangible assets Management of wide range of risks such as capital, operational and legal Recruitment, motivation and retention of employees and talents Investors attraction and access to capital Creation of innovation and learning opportunities Capture new markets and increase competitiveness


Improvement of operational efficiency leading to bottom line benefits as cut costs by reducing material use or optirnising waste management practices Maintain Licence to Operate [l].

Stakeholders' pressure and scrutiny are the "root causes" of these sustainable development drivers. Consumers demand companies to produce goods and services in a socially and environmentally responsible way. Bankers and investors evaluate companies and make decisions, considering both environmental risks and environmental market opportunities. Employees consider company's ethics an essential factor for personal realisation in their professional life.

In order to develop an effective management framework and gain business value from sustainable development, companies need a clear understanding of environmental and social issues for their business, the expectations that their stakeholders have about how business should respond to these issues and an understanding of the approach that their competitors, regulators and others are taking to the changing environmental and social agenda

3 Understanding the "Issue Cycle" and stakeholders expectation

3.1 The Issue Cycle

Companies' reputation is acutely sensitive to social and environmental issues: it depends on addressing the right issues, meeting stakeholder expectations, and communicating performance appropriately. Companies cannot consider actions without knowing what issues currently affect their business and those that may do so in future,

There are a range of methodologies that can be used to understand current social and environmental concerns and how new issues are shaping up.

Using publicly available data (items included journals, web pages, news report from five main sources: academic literature, the press, consumer groups, pressure groups, government) is a simple but effective approach. Data can be gathered in a database populated with a large number of items gleaned from the various sources.

Individual items are grouped into categories (emerging, latent mature and institutionalised, see Table 1 and Figure l). Predicting whether emerging and latent issues will mature, if at all, is subjective as it depends on unpredictable factors such as public opinion, new research etc. Although using citations to evaluate relative risks is simplistic, this approach is appropriate to non-experts and easy to maintain. The ability of this method to predict the next issue to erupt would be expected to improve as the database continues to be populated and could be further improved by incorporating the opinions of experts and industry practitioners [2].


Table 1: Example of criteria used for categorising issues.

Category Maximum Age of Current Impact Anticipated Citations (Years) Future Impact

Emerging <2 Low Unknown

Latent <3 High Assured Mature >3 Well known Declining

More sophisticated approaches are based on scenario visioning using case studies as a basis for understanding the "Issue cycle".

Time

Figure 1: Schematic evolution of issues.

Understanding the maturity of issues is particularly important as the response to these issues will vary according to their position in the issues cycle. It is essential to understand how the agenda will develop in the future so that new issues can be anticipated before they become headlines, and proactive steps rather than costly reactive measures taken.

In general, stakeholders expect companies to deal with institutionalised issues as a matter of course and to have established systems for dealing with mature issues. Emerging issues are those that companies will be investing the most time and effort in managing, as these are issues which have come to the fore relatively recently and require new approaches or adjustments to existing systems and processes. Latent issues are those which have not yet become significant for many stakeholders but could become high profile in the future. These are issues which the company will need to keep a careful watching brief on in order to ensure that they can manage any risks associated with them and where possible gain advantages from proactive management.


Key to generating business value from the management of environmental and social issues is ensuring that stakeholder expectations of the company in this respect are understood. Understanding the stakeholder is a challenging problem because their expectations could be misunderstood, in conflict and unreasonable. However the first step is identifying the stakeholders and define their relevance for the business.

3.2 Stakeholders analysis

A first selection of stakeholders in telecom sector was gathered by reading press reviews and interviewing ICT experts. Then a Workshop, involving managers in "3", was organized to identify their key stakeholders. This was done considering that key stakeholders are those that:

Can significantly affect business Can influence other stakeholders Can enhance or harm company's reputation and image Can constrain company's freedom to operate Affect whether the company is living up to its values and principles.

The parties identified included international, national and local authorities, research bodies, non-governmental organisations (NGOs), telecoms companies operating in Italy, the financial community and the company's employees. These parties were then consulted to understand their expectations. Stakeholders were asked their opinions on six broad questions:

What issues concern you as a stakeholder of the telecoms industry? Can you rate each of these issues in terms of their importance or significance? Do you have any specific concern regarding the third generation telephony (3G)? What issues do you think will increase in importance in the near future? What do you think telecoms companies should be doing to address each issue you describe? What would you consider as innovative approaches in addressing ICT environmental and social problems?

Based on the outcome of the issue and the stakeholder analysis it was then possible to draw up a stakeholder-issue matrix (Table 2). Such a matrix managing the issues more effective and less onerous by focusing attention on the 'hot spots' in the matrix - the most important issues, dealt with and reported on in a way appropriate to the stakeholders who are most concerned by them.

3.3 Results

The report found the main issues were not altogether surprising. The two most commonly mentioned were based around health and safety, mainly related to electromagnetism from mobile phones and masts, and natural resources use, mainly related to waste management.


The concern about electromagnetic fields from both mobile handsets and base stations has been the major health issue associated with mobile phones. World Health Organisation (WHO) guidelines suggest that current levels of exposure to radio-frequency (RF) are not likely to be carcinogenic, but research into this and other health effects is continuing through the International Electromagnetic Fields (EMF) Project. The WHO also recommends strict adherence to health- based ICNIRP (International Commission on Non-ionizing Radiation Protection) "Guidelines for limiting exposure to time-varying electric, magnetic and electromagnetic fields (up to 300 GHz) and suggests some precautionary measures, if individuals are concerned,, such as limiting the length of time children spend on their phones, or using "hands-free" devices.

From the stakeholders surveyed, this issue is particularly critical to research bodies and the media, but was also seen as very relevant by authorities, NGOs and telecoms companies. Of the range of people sampled, several mentioned "electro-smog," especially from masts, as a key concern.

Table 2: Stakeholders identified five main areas of concern.

Health 1Pr Safet

= critically important to the stakeholder

0 = very relevant

0 = some relevancy

= issues of increasing interest

Recognising the significance of this issue, the telecoms industry has responded clearly, both through international bodies and within individual companies. For example, the European Telecommunications Networks Operators' Association (ETNO) has established a taskforce to follow the development of scientific research and to create a forum for exchanging experience and proposing action [l]. This links into the expectations of stakeholders, who hope to see further research into the issue and even the


involvement of citizens and local authorities in the siting of mast locations (Table 3).

The study showed the other primary concern of stakeholders in Italy is the use of natural resources, in particular the management of obsolete mobiles and masts. Furthermore, this issue was expected to grow in importance in the near future as telecoms companies come under increasing pressure from the European Union to take greater responsibility for so-called e-waste [4].

Table 3: Stakeholders highlighted a range of expectations.

Most companies now have programmes in place to reduce the volume of waste and, on a European level, the Environmental Charter of the ETNO states that all signatories should aim to have an environmental policy statement and consideration of environmental factors throughout the procurement process. This is particularly with regards to "energy-consumption, waste management, process and product requirements [and] the use of hazardous materials." National initiatives have also sprung up; for example, with pressure on consumers in the UK to 'do their bit', manufacturers have set up a scheme called Fonebak which allows customers to return unwanted handsets for reuse or recycling. These internal industry initiatives to combat mobile and mast waste will complement the "enabling function" [3] of the sector in transport substitution and energy efficiency. Despite this progress though, the survey suggests that the industry's stakeholders are yet to be convinced (see also Table 3).

Most of the issues raised during the stakeholder consultations are also on the international agenda as confirmed by recent reports on sustainable development in the ICT sector [3]. A part from health and safety and use of natural resources,


there are several other social and environmental matters. For mobile companies, these include the problem of visual impact of masts, personal privacy, social exclusion and reducing energy consumption.

Companies aim to use existing structures as much as possible, or where new structures are necessary, work closely with local authorities and communities to achieve a good balance between technical requirements and protection of the local landscape [3]. However, several stakeholders in the Italian case study, particularly local authorities and the media, mentioned the aesthetic (as well as the health risks) of mobile phone base station masts, indicating that their expectations are not yet being met.

Privacy was identified by stakeholders as an issue which will become more significant to them in the future. The power of international electronic networks may offer "tempting opportunities" for authorities and others to invade privacy and stresses the importance of industry and government co-operation to minimise this risk [3].

In many ways, telecommunications can act as an "enabler of development" by improving communications with previously remote regions, increasing productivity growth and aiding democratic participation. India's software sector, for example, grew by 50% through the 1990s creating a booming export market, a highly-skilled technical workforce and foreign attention and investment [3].

Social exclusion is a key issue because only those with sufficient capability in the first place can capitalise on opportunities offered by the technology. Otherwise the technology can add to exclusion by increasing the gaps between those with access and those without.

This is not just an international divide, but national economic and social Factors, such as gender, ethnicity, age and educational background also play a role.

Through environmental management systems and technological developments, the telecoms sector has made significant progress in reducing its own energy consumption. For example, since 1991, BT has achieved a 46% reduction in its CO2 emissions due to energy programmes and a 25% reduction due to transport programmes [3]. As stakeholders did not raise energy consumption as an issue in Italy, and as some significant advances have been achieved in this area, it appears that the issue is being managed well. When combined with the potential energy-saving benefits ICT can bring to other areas, the telecoms sector is perceived to play a significant role in reducing overall energy consumption.

4 How are companies facing up to sustainable development?

The way that telecommunication companies and leading companies in other industry sectors are dealing with the environmental and social issues have been analysed in detail to understand "best practices" and how "3" would position itself compared to competitors and peers.


The benchmarking exercise was conducted revising publicly available information (such as web sites, reports, articles) and through a set of interviews with telecom companies manager using Arthur D. Little benchmarking tool "Sustainable Growth Scorecard Template".

Suslalnabillty Vlslon Otgan~setran and Culture Reputabon Management Rlsk Manasamen! Transparency a td Sldkaholdw nl~loqlre .. - Buninass lntaqrnlion of Suslminmbilily lnnovatlon Products Partners and Alllances

llltlet and Operalms Emnronrnsntal Technology Performance Management Sodal and Rarponslblllty Employees Ethical C& of Conduct Economic Investments and Bend11 to Soomty

Figure 2: Sustainable Growth Scorecard Template.

The benchmarking highlighted that policy commitments and actions being taken by individual companies vary widely.

At the leading edge, companies demonstrate a comprehensive set of policy commitments and explicit corporate responsibility activities. Across the organisations, they actively deal with the entire range of issues concerning stakeholders.

Leading companies have dedicated Corporate Social Responsibility (CSR) teams charged with implementing the organisation's CSR commitments, including their own stakeholder dialogue programme to help identify new social and environmental concerns. They have environmental programmes to address materials and energy usage across the organisation, new product initiatives to tackle social exclusion issues, and training sessions with employees to raise awareness.

Companies approach social and environmental issues in different ways. Some adopt a top-down approach setting the framework for managing economic, environmental and social issues in an integrated manner. Other started with a bottom-up approach and they are trying to win the maximum business value from the range of activities conducted.

"3" and Arthur D. Little chose an approach of the first type being "3" quite a new company and as such having the opportunity to define strategies and a framework for developing specific activities in the short and medium term.


5 A strategic social-environmental plan

"3" and Arthur D. Little conceived a management framework based on a Management Process Model and a specific Implementation Programme.

The Management Process Model is a six steps process adopted to manage social and environmental (SE) issues and set directions for developing and implementing a management system.

The Management Process Model is based on the understanding of issues and stakeholders' needs to implement, operate and continuously improve SE issues' management (Figure 3).

Figure 3: The Management Process.

A more detailed description of the Management Process is detailed below: "Identify key issues and stakeholders" ensure that the company can identify and act on new issues that may present a risk to the business. "Establish values and missions" provide direction to the plan and ensure that appropriate governance arrangements for SE policy and management system are in place. "Set objectives, targets and environmental programme" set the pathway to take the appropriate action in addressing policy commitments and significant SE issues. "Implementation" fulfil policy commitments and the objectives set out in this plan. Set out how capabilities and resources should be developed and deployed to ensure effective implementation


"Monitor and Measure" ensure the continued effectiveness of the plan and operational compliance with policy commitments. Ensure action is taken to resolve non-conformances "Report, review and learn" ensure that internal and external stakeholders can learn of progress in management of SE issues and senior management can judge the continued suitability, adequacy and effectiveness of the system.

An Implementation Programme was then drawn to address specific issues of concern to stakeholders. The Programme, starting from the company's policy commitments, sets out objective, specific actions, indicators and target to reach.

6 Conclusion

Italian stakeholders to the telecommunications industry are many and varied, yet have corresponding views on two major social-environmental issues:

Electromagnetism from mobile handsets and masts Disposal of obsolete handsets, masts and base stations.

The questions about privacy and the visual impact of mast locations are also hot topics for the stakeholders as well as problems of social exclusion and energy consumption. These topics are also firmly on the sustainable development agenda.

Telecoms companies are responding to these seemingly disparate concerns in both specific and strategic ways. Most now have a corporate policy statement and clear governance structures, particularly for environmental issues, and many are part of international initiatives to raise the profile and understanding of sustainability.

"3", as other companies, is convinced that the best way to manage a business is to incorporate economic, environmental and social practices in an integrated manner in the formulation and implementation of strategy.

As the industry strengthens its role in our daily lives, stakeholder expectations will also continue to grow. The challenge for the industry now is to recognise the key role these expectations play in their businesses and to realise fully the potential of ICT as an enabler of sustainable development.

References

[l] Keeble 3., Brown D., The Business Care for Corporate Citizenship, Arthur D. Little, University Press, Cambridge UK, 2002.

[2] Ceppi P., Chen P., Elias R. Xin Y., Licence to Operate in the Food & Drink Sector, Arthur D. Little, University Press, Cambridge UK, 2002.

[3] Industry as a partner for sustainable development: Information and Communication Technology, Global e-Sustainability Initiative (GeSI) and United Nations Environment Programme (UNEP), United Kingdom, 2002.

[4] Directive of the European Parliament and of the Council on waste electrical and electronic equipment (WEEE), 200010158 (COD).


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