Tech companies have historically been viewed more positively than other sectors when it comes to ESG issues, but over the past 24 months, impending climate-related regulations, and the rapid move toward greater accountability has meant that many tech companies are left exposed.
Issues such as energy consumption, workforce diversity, human capital, security, data privacy and political misuse of platforms are just some of the growing ESG challenges tech companies are facing.
In addition to preparing for regulations from the SEC and the EU’s Corporate Sustainability Reporting Directive (CSRD), tech companies also face risk of reputational damage from the latest crackdown on greenwashing.
Tech companies stand to put themselves at risk if they continue to demonstrate disconnected ESG and business strategies.
How big is the problem?
The most common topics referenced by U.S. tech companies in their financial reports include public health (ranking No. 1, a hangover from COVID-19), security (coming in second) and privacy (third). Climate change and risk management (33), GHG emissions (43), human rights (53) and biodiversity (81) have a lower priority and appear further down the list.
U.S. tech companies: Topics emphasized most in financial reports and 10K filings. Image Credits: Datamaran
For European companies, GHG emissions is in the top 20 most emphasized ESG topics, ranking 12th in order of priority. But, as this is the most regulated environmental theme, it does not signify a strategic approach to ESG. Climate change and risk management (22), and human rights (23), are comparatively high priorities, while compliance management (35) and biodiversity (72) are further down the table.