Samjong KPMG "Tech Companies Face ESG Risks Including Energy Use and Security"

[Asia Economy Reporter Ji-hwan Park] It has been argued that tech companies need to manage ESG risks across various areas such as energy usage, supply chain management, and data/cybersecurity.

Samjong KPMG suggested in a report published on the 4th (Trends and Implications of ESG in Global Big Tech Companies) that tech companies should identify ESG risk factors according to their industrial characteristics and derive priority ESG tasks. The report also analyzed ESG management cases of big tech companies and introduced ESG management strategies of leading global big tech firms.

ESG has emerged as a growth driver that leads to new value creation beyond corporate risk management. ESG management is also spreading in the tech industry. According to a KPMG survey, 70% of tech companies have set carbon emission reduction targets. Fifty percent recognize climate change issues as risk factors, and 66% link their corporate activities to the UN’s Sustainable Development Goals (SDGs).

Tech companies consume large amounts of electricity due to data centers and production facilities, and human rights and environmental issues may arise in complex supply chains. They are sensitive to data security and cyberattacks, and the global trend of tightening regulations related to carbon emissions is also a major ESG risk factor. Pollution and waste can be generated during product manufacturing and distribution processes, and unintended social and ethical issues may arise during the development of new technologies such as artificial intelligence (AI).

Global big tech companies are adopting renewable energy to reduce energy consumption and greenhouse gas emissions from data centers. Microsoft is conducting Project Natick, an experiment to install data centers underwater with natural cooling capabilities as part of building eco-friendly data centers.

Tech companies are increasingly joining the Responsible Minerals Initiative (RMI) consortium to manage supply chains for responsible raw material sourcing and supply chain management. As issues such as child labor exploitation, human rights violations, and illegal operations have surfaced in cobalt mining, Tesla declared itself ‘cobalt-free’ and announced plans not to use cobalt in its electric vehicle batteries in the future.

With remote and hybrid work becoming widespread due to COVID-19, security vulnerabilities are increasing. The tech industry views data and cybersecurity as part of ESG and is expanding related investments. Google, for example, announced a $10 billion investment plan over five years to strengthen cybersecurity, including software supply chain and open-source security.

As reducing carbon emissions and protecting the environment have become corporate obligations, big tech companies are also strengthening their eco-friendly initiatives. Companies set carbon emission reduction targets and implement carbon reduction initiatives based on advanced technology and substantial financial resources. Tesla, through the XPRIZE Foundation, is conducting competitions to develop cost-competitive carbon capture, utilization, and storage (CCUS) technologies.

Global tech companies are focusing on the circular economy as an alternative to the linear economy of resource extraction, mass production, and disposal. The circular economy model focuses not only on minimizing waste but also on creating a virtuous cycle structure of resource extraction-production-consumption-recycling. Major global tech companies have joined the Circular Electronics Partnership (CEP) to apply a circular model throughout the entire product lifecycle.

AI algorithms developed by tech companies can be used to induce various biases, inequalities, and discrimination. On the other hand, voice and image synthesis technologies may be misused for inappropriate purposes such as voice phishing, fake news, and deepfake videos. Tech companies voluntarily create AI principles to ensure humans maintain control over technology, and governments have also announced policies to reduce AI side effects and misuse. Meta (formerly Facebook), for example, announced plans to develop metaverse services under the ‘Responsible Innovation Principles’ at the Facebook Connect annual event last October.

Seunghoon Yeom, leader of the Electronics, Information & Communication, and Semiconductor Industry at Samjong KPMG, explained, “Tech companies need to identify ESG risk factors that may arise throughout the entire lifecycle?from the initial planning stage of products and services to delivery to customers and disposal.” He added, “Tech companies targeting the global market, not limited to one country, must systematically monitor and prepare for the globally strengthening ESG regulations.”

This content was produced with the assistance of AI translation services.