Home > Cases, Trends and perspectives > Sustainability Management and Risk Management in the consumer electronics industry

Sustainability Management and Risk Management in the consumer electronics industry

by Ruggero Golini, Greta Facoetti, Jury Gualandris

This post raises and briefly addresses the following questions: can companies in the consumer electronics industry benefit from the integration of sustainability and risk management in their supply chains?

The consumer electronic industry has a highly innovative rate, provides a wide range of devices and equipment and its global value chain is very complex. In the time of one generation, the high-tech revolution has spread worldwide, with tremendous impacts on the environment and society.

In the recent years, several scandals have hit some of the industry’s leading companies, such as Apple, because of issues occurred in their supply chains.

However, despite the increasing concerns, the heterogeneity of social and environmental regulations and policies around the world is working as a barrier to the development of more sustainable supply chains. In this context, developing countries are particularly vulnerable because they perform most of the assembly operations, but they retain a low share of the value added and there is little visibility on the final markets of what happens there. Moreover, governments in question are often focused on industrial growth at the expense of environmental and social aspects.

Because of that, leading firms are trying to address environmental and social issues at different stages of their supply chain.

In our analysis, we wanted to check whether the effort put by these companies to solve an issue is related to the risks potentially occurring because of that issue.

First of all, according to the Greenpeace sustainability ranking, we have identified a set of practices electronics companies can undertake to address sustainability issues along their supply chains. Next, we have selected a cluster composed by the 10 most profitable companies in the industry (Samsung, HP, Sony, LG, Toshiba, Nokia, Panasonic, Apple, Dell and Acer). After that, we have associated a score from 0 (low level of action) to 3 (high level of action) to each company for each one of the considered practices on the basis of the same Greenpeace report. Finally, we have calculated the average level of effort for each practice in the electronic industry (Figure 1).

Figure 1 – Average level of effort put into different sustainability practices by top 10 lead firms in the electronic industry

Image

Interestingly, energy efficiency of products is the practice that receives most effort. On the other hand, the policies on clean energy, recycling and recovery of plastic products seem to be least developed.

Next, we have calculated the risks for the leading companies associated to each issue previously identified. The global risk level, measured on a scale from 0 (no risk ongoing) to 3 (highly relevant risk), is built on considerations that concern:

  • environmental risks (pollution, relaxation / lack environmental standards)
  • social risks (workers’ exploitation, workers’ rights, health and life)
  • risks of supply (shortage, supply disruption, conflict zones)

The scores were given on the basis of information got from multiple sources (the complete list is indicated in the references.

Finally, a comparison between “level of effort” and the “level of risk” for each specific environmental issue has been performed (Figure 2). This analysis allows to reconnect potential sustainability risks with what the companies are actually doing.

Figure 2 – Comparison between the level of effort and the level of risk

The resulting picture shows that for the energy efficiency issues (the first 5) the level of effort matches the risk. However, the other risks, especially the last four related to the supply chain are associated to the highest level of risk but the effort is not apportioned.

This result can be dependent on the fact that working on the supply chain is more difficult than other areas. However, another reason could be that the effort of the companies is driven by the pressures of the stakeholders rather than by a critical analysis of the issues in the global value chain.

References

  • “Carbon EmissionsMeasuring the risk. An S&P 500 NFS International Sector Report” authored by Trucost
  • “Sustainable Water Management for Electronics Industry”, authored by Siemens
    “Green Management Activities and Performance” authored by Samsung, Electronics Sustainability Report 2012
  • “Responding to Climate Change Risk: Basic of GHG Emission Inventories”, authored by E Source Companies LLC 2006
  • “Managing Supply Chain GHG Emissions, lesson learned for the road ahead”, authored by EPA, 2010
    “COOL IT, Leaderboar December 2010”, authored by Greenpeace
  • “The Hidden Consequences, The cost of industrial water pollution on people, planet and profit”, authored by Greenpeace
  • “Effective action on global warming prevention by the electrical and electronics industries” authored by Liason Japanese Group
  • “Water Scarcity &Climate Change: Growing risk for business & investors”, authored by The Pacific Institute, 2009
  • ” Conflict minerals: What you need to know about the new disclosure and reporting requirements and how Ernst & Young can help”by Ernst&Young
  • “I costi umani di un Ipad”, authored by Internazionale n°934, February 2012
  • “Il disastro giapponese mette a rischio la fornitura di batterie e memorie cellulari”, Il Sole 24 Ore, 14 March 2011
  • “Building Resilience in Supply Chains”, authored by Accenture World Economics Forum, 2013
    ” Sustanaibility: A risk Management perspective”, authored by David Singleton www.sustdev.org SDI 1616/5
  • ” The case for integrating sustainability and risk management: why sustainability must be a priority for corporate risk managers”, authored by Aon Corporation, 2009
  • “Knowing your risk: managing the value at risk from sustainability issues”, authored by PWC
    eventuali report aziendali
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