The critical role that Telcos can play in sustainability

As the Service Providers (SPs) expand and modernize the networks to meet the ever-growing data demand across all regions, this is also the right time to rethink their strategies to reduce energy and greenhouse gas emissions.

Telecom networks form the digital backbone of global economies and enable several other industries to reduce carbon emissions and reach the net-zero target. The growing digital pervasiveness is then a massive opportunity for the SPs to grow the revenue and profit margins.

However, the telcos can better benefit from these opportunities if they accelerate initiatives to reach net-zero targets. Moreover, the telcos are facing pressure from several stakeholders, including employees, investors, regulators, consumers, and enterprise customers, to ramp up sustainability efforts.

The recent United Nations Intergovernmental Panel on Climate Change (IPCC) report says that the world will experience an increase in temperature of more than 1.5C by 2040 unless and until there is a concerted effort to bring down carbon emissions. This has led to a new urgency for businesses to adopt sustainable and environment-friendly processes.

While the SPs have undertaken several initiatives to reduce their carbon emissions over the last few years, they need to speed up the process. For example, in the Corporate Knights Global 100 of the world’s most sustainable corporations, only five are telcos, BT, KPN, Cogeco, Telus, and StarHub. Even so, 12 of the leading SPs have only managed to bring down carbon emissions from a total of 33.31 million tonnes of carbon dioxide emitted in 2016 to 30.53 million tonnes in 2020, as per the recent STL Partners survey.

The Region Play

Several telcos, including Telefonica, Telstra, KDDI, China Mobile, AT&T, Verizon, and NTT, have recently committed to reaching net-zero carbon emissions over different time frames.

The journey of each telco towards net-zero is different and, to an extent, is defined by the region in which it operates. There is also a wide variance between how different SPs approach sustainability.

“While some SPs are extremely active and have pursued sustainability for several years now, others are just starting to ramp up efforts in this. The regions in which they operate play a significant role in how they approach sustainability. An SP based in Western Europe, for instance, is likely to be much ahead of its peers in the APAC region, where adoption of sustainable practices is concerned,” explains Philip Laidler, Managing Director of Consulting at STL Partners.

The regions with well-defined and stringent policies and regulations such as in the European Union, ensure standardized measures and urgency to the sustainability efforts of the telcos. On the other hand, the countries where telcos are dependent on fossil fuels, like coal, gas, and oil, to run the networks make it harder for them to reduce their carbon emissions. As a result, telcos in these countries/regions are typically earlier in their journey in sustainability efforts.

Key challenges

For most telcos addressing emissions from Scope 3 is a key challenge. The carbon emissions are divided into three categories of scope 1, scope 2, and scope 3. In this, scope 1 and scope 2 make up less than 20% of the telecom industry’s overall carbon footprint. However, these emissions are easily recorded and reported, and several telcos have successfully managed to bring down these carbon emissions.

Type of emission | What constitutes | Examples
Scope 1 carbon emissions | Direct emissions from operations | Vehicles, emissions from company’s production activity (e.g. on-site generators)
Scope 2 carbon emissions | Indirect emissions from purchased energy | Purchased electricity for running operations
Scope 3 carbon emissions | All other indirect emissions from the telcos’ operations | Waste generated, purchased goods and services, fuel and energy-related activities

They face a challenge in measuring and reducing scope 3 emissions. This is compounded by the fact that this constitutes about 80% of the service provider’s carbon emissions. The Scope 3 carbon emissions capture the impact of the SP’s entire supply chain, including manufacturing the network equipment that they deploy. This category also includes carbon emissions arising from supplying customers with products and services that SPs sell to enterprise customers, like handsets or servers.

There are several challenges faced by the telcos in reducing carbon emissions. As per the recent STL Survey, 27% of the participants say that data capture and methodology for scope 3 emissions are SPs’ most significant challenges in their sustainability journey. Furthermore, 24% of the survey participants were struggling with the accelerating circular economy; 18% felt that standardization of emissions reporting for RFPs was a challenge.

On the other hand, 16% of survey participants believed that the lack of clarity around how 5G and virtualization will impact emissions was a challenge, while 12% struggled to get buy-in from key stakeholders. The survey was based on discussion with 40 service providers exploring the challenges, priorities, strategies, and best practices around reducing carbon emissions.

“Several SPs have taken the first crucial step towards more sustainable operations by setting up aggressive net-zero targets. The telcos are key enablers of a digital and sustainable way of life for retail and business customers. Now they must set up internal processes and policies and incentivize the middle management to reach the net-zero targets and set an example for other business sectors,” says Sanjay Kaul, President – the Asia Pacific and Japan, Cisco.

The role of telcos in sustainability?

Irrespective of the regional and other challenges faced by the telcos, there are some things that they can do to expedite their sustainable efforts. Ensuring internal engagement with CSR and senior management teams for greater awareness and management buy-in is crucial for any sustainability efforts. In addition, the SPs can drive efforts internally by incentivizing to hit sustainability targets, especially for middle management decision-makers.

To address the challenge of scope 3 emissions and drive the circular economy, the SPs need to set up a reporting system to track progress regularly.

Further, the SPs can collectively work through organizations like GSMA to enable standardization in new products. Several SPs are also working with third parties to create carbon reporting and disclosure policies and evaluate products with eco-design principles.

Energy Efficiency is vital

Reaching net-zero targets demands commitment from senior management and concentrated efforts across the organizations from all stakeholders. This is all the more pertinent, considering that the telcos are in the midst of setting up and expanding 5G networks and pivoting to meet the growing data demand. As the sector invests in new technologies and network upgradation, it needs to ensure that it adopts energy-efficient technologies to bring down its share of global carbon emissions and finally reach the net-zero target.