The opportunity for telcos to act on climate

7 April 2020

Over the next decade or two, the global response to climate change will transform the world’s economy and could turn entire industry sectors upside down. Some of the changes, such as the shift from high- to low-carbon power generation, will be largely top down and mostly invisible to the end consumer. Others, such as the uptake of electric vehicles, will be consumer-led and highly noticeable.

For the telecoms sector, the response will be somewhere between the two spectrums. Many of its direct impacts – such as telcos’ use of energy or how underlying infrastructure operates – can be reduced without impacting the customer, but billions of customers do have an important role to play.

By harnessing growing concern about the climate and consumers’ increasing willingness to act, forward-thinking operators have an opportunity to grow margins, increase customer loyalty and at the same time reduce their potential environmental impact.

So far, the telecom sector’s response to climate change has been modest, arguably in line with its relatively limited direct impact. However, this direct impact is rising, and its indirect impact, through the ubiquity of the smartphone, is enormous.

However, the sector is beginning to respond. Most notably, its leading industry association, the GSMA, unveiled a climate action roadmap in September 2019, bringing together 50 of its members – who account for two-thirds of mobile connections globally. They have committed to disclose their climate impacts and begin working on a decarbonisation pathway aligned with the Science Based Targets initiative. This will involve an industry-wide plan to achieve net-zero emissions by 2050.

This will build on existing efforts by most leading actors in the sector to increase network efficiency. Here, the roll-out of 5G will help; even taking into account the increased data usage that faster networks will enable, 5G’s improved energy performance compared with 4G networks could lead to lower emissions.

In order to maximise these environmental efforts, the sector needs to go further and engage directly with customers on this topic – focusing on the smartphone. The manufacture of each smart phone requires around 35kg of raw materials and produces 55kg of carbon dioxide (CO₂) – a huge impact when multiplied billions of times.

Critical to reducing this impact will be a shift from a linear ‘use-once and scrap’ approach to handsets – where a considerable 43 per cent of old used phones are kept as spares¹ – to circular economy principles, where the handsets are returned and recycled. The good news is that customers are ready, the telecoms industry has the skills to deliver and the outcome is likely to be both economically and environmentally optimal.

Research commissioned by Macquarie found a clear consumer preference for handset financing models that require returning the phone (e.g. subscription models), thus enabling higher rates of recycling.

Meanwhile, evidence is growing that consumers are willing to pay more for a sustainable product or service: research from McKinsey found that between 60 and 70 per cent of customers (depending on the product) were prepared to pay an extra 10 per cent for a demonstrably sustainable product.

The desired outcome will be helping consumers make environmentally positive decisions with as little disruption as possible. The telecoms industry has become skilled at combining services to deliver convenience and build loyalty: they can use these skills to create ‘green bundles’ that could ultimately result in a carbon-neutral footprint for the phone.

There is a clear opportunity for first movers in the operator space to make a play for the climate-concerned consumer. The right offering could deliver a triple win with; higher margins, increased customer loyalty and the potential to reduce their own environmental impact.

Now is the time for telcos to act – the impact could be significant.