Sustainability reporting in tech companies – the hardware vs software divide

Nature's fragility

Photo credit Koshyk

I wrote (and subsequently updated) a post a few weeks ago reviewing the Sustainability Reports of various companies in the technology space.

I updated the review again this afternoon (see the updated review below) with the 2009 reports from IBM, Adobe and SAS.

Something which struck me previously, and which hasn’t changed with the new rankings, is the yawning chasm in attitudes to sustainability reporting between hardware versus software companies.

Obviously this divide has a lot to do with risk – hardware companies who have significant manufacturing facilities, with massively complex supply chains, often containing toxic substances have far more exposure to risk than software companies.

This is reflected in the table below where eight of the top ten listings are hardware companies.

On the other hand, the bottom of the table is all software companies (with the exception of Apple – because they refuse to produce a sustainability report!).

The real odd one out though is the leader, SAP. Their sustainability reporting is out on its own. It is way ahead of any other organisation I have come across and this despite the fact that they are a software company!

One factor may be that they have a significantly European representation in senior management – they have a very different thought process when it comes to sustainability. SAP say they want to be an exemplar and an enabler – and, so far, they seem to be delivering on that.

None of the other software companies seem to take sustainability reporting anywhere nearly as seriously as the hardware companies.

Why do you think that is?

[table id=11 /]

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  1. jimmgreer says

    ‘None of the other software companies seem to take sustainability reporting anywhere nearly as seriously as the hardware companies.’

    hi tom
    this was very useful. One explanation may be similar to the reason that extractive companies take reporting seriously – their industries are inherently unsustainable, old economy/pre-crisis relics. Hardware firms’ rely on diffuse supply chains, low cost manufacturing and many other unstable variables. Like extractives, they realise they could get pulled up on any number of issues and so need to report well (show me a mining company that isnt A+).

    Also, the pressure just isnt there for software companies: e.g. 15th iteration of Greenpeace’s greener guide to electronics vs Cool IT leaderboard.

    Wrote a post recently* about a smarter future for consumer electronics. When you take into account conflict materials, labour disputes in low-cost manufacturing centres, pressure on China to allow currency to appreciate, toxic materials, ewaste and social utility/happiness factor of prodcuts, the industry (perhaps like extractives?) seems in need of some serious innovation/structural change if it wants to secure its future.

    Can anyone sense the disruptive opportunity?

  2. says

    Your assumption that most mining companies report to A+ level is actually very off the mark. Last I checked (January 2010), they comprised only about 25% of the 84 sustainability reports in the mining sector listed in GRI’s d-base (there are more reports not captured in GRI’s d-base). The distribution of the rest of the pie is as follows: A=8%; B+=18%; B=12%; C+=14%, C=2% – and drum roll please – Undeclraded = 22%.

    A few days ago, I posted a breakdown of GRI Application Level stats for all sectors on my blog which you can find here:

  3. jimmy greer says

    @ Mehrdad Nezari

    Fair point – my comment was a bit throwaway and your chart is indeed revealing. A few more layers to your chart would be great.
    For example lets say you take the top 20/quartile by marcap – where do they sit?

    on another note, re table above, a comparison i often find useful in benchmarking reports is to look at the vision/goal statements and ask yourself whether this is a generic statement (ie ‘we want to be the most sustainable …’) or whether it acts as a genuine lead for strategy.

  4. says

    Tom, your assessment raises an important point about sustainability and corporate responsibility reporting generally. There are a number of factors which drive a company’s level of comprehensiveness in reporting. The issue of risk disclosure is one issue that has already been identified, this can be unpacked to included materiality of environmental/social costs to the business, level of required regulatory compliance, and third, the demands from stakeholders – i.e. investors, customers & employees – for clear communications on sustainability performance. It is obvious why there is more pressure on hardware companies to report more comprehensively. This demand can also be enhanced by geo, as you’ll see the top 4 in your list are all European companies where arguably stakeholders are more demanding when it comes to sustainability reporting. Other business drivers which I think will shape this agenda over the next five years can be seen in this article –

    I would also say that maintaining high performance in corporate reporting can be difficult and that a company’s marketing budget without underlying structural changes can be to blame for peaks in reporting which cannot be sustained for more than a year or two. To ensure credibility in corporate sustainability performance reporting it is important to sustain a good level of performance for several years. If you look at the BT website they have Social & Environmental Reports dating back to 2001 and they have been setting the standard for sustainability reporting for many years. Likewise, Nokia have been producing a Corporate Responsibility report since 2002 and are known for their leadership in this space. This series of reports also shows the most important underlying trend and that is improvements in absolute environmental impact whilst allowing the businesses to remain competitive.