Six ways climate change impacts the telecommunications industry - Takalani Netshitenzhe

Vodacom published its first Task Force on Climate-related Financial Disclosures (TCFD) report in June 2022, which focuses on key climate-related risks and opportunities to boost sustainability efforts and enable business success. The report sheds light on Vodacom South Africa’s business journey towards a sustainable future, and we use the report as a platform to map how far the business has come, and which direction we need to go to ensure a Just Transition.

A company’s TCFD report not only helps investors understand the risks and opportunities for the business in the face of climate change, but it also gives insight into sustainability initiatives. This leads to better strategic planning by the business and helps secure its place in a sustainable economy. The report maps out Vodacom’s commitment to delivering on its purpose against the United Nations’ Sustainable Development Goals (SDGs), including promoting sustainable economic growth, fostering innovation, making the cities and communities we live in more resilient, and taking urgent action to combat climate change. In South Africa, we are guided by the country’s Nationally Determined Contributions (NDCs) and advocate for urgent reductions in global greenhouse gas (GHG) emissions that align with the Paris Agreement.

The importance of climate-change mitigation by South African businesses, and indeed companies across the world, cannot be understated. In the context of business, mitigation requires thoughtful adaptation of new, greener ways to operate. Failure to adapt will spell disaster for our future: if businesses don’t come to the table with appropriate sustainable measures in place, we’ll continue to see the devastating impact of climate change in the very communities these organisations serve.

Challenges to overcome
The World Economic Forum’s 2022 Global Risks report reveals that five out of the top 10 global risks are related to the environment, while a South African Intergovernmental Panel on Climate Change found that Africa is one of the most vulnerable continents to climate change.

The TCFD report underscores the importance for corporates and governments across the region to be aware of the climate-related risks posed to business, while working together to mitigate them and reach climate targets. With a commitment to halve our environmental impact by 2025 – along with expanding our African footprint to become the continent’s leading Technology Company – here are three of the most pressing climate-related risks, as well as three key opportunities, highlighted by the report.

1. Risk: Extreme weather events

In April 2022, severe flooding affected South Africa’s KwaZulu-Natal region, causing the loss of 459 lives while leaving 44 000 people homeless. The event resulted in an estimated R17 billion in infrastructure damage. A significant portion of Vodacom’s infrastructure was damaged, including 400 towers. Customers in affected areas experienced intermittent mobile services, and the financial impact included the cost to deploy and run diesel generators, and lost service revenue.

Various opinions and reports attribute the recent devastating floods in South Africa, especially in KZN to climate change and the extreme weather events that come with it. Several studies show that temperature increases in Africa due to climate change are likely to be 1.5 to 2 times higher than the average global temperature increase, and higher temperatures bring about drought, rising sea levels, and increased cyclonic activity along coastlines. Flooding, storms, a lack of water, and wildfires have disastrous consequences for telco infrastructure, business- and supply-chain interruption, damage to essential equipment, and more.

2. Risk: Loss of revenue

Governments and regulators are putting more pressure on businesses to meet climate targets, and costs of renewable energy certificates and other carbon offsets are increasing. Corporate inaction and a lack of compliance could result in higher carbon emissions taxes and electricity tariffs, and indifferent businesses will pass these costs on to their customers through higher service charges. The TCFD report flags that climate non-compliance ultimately means penalties, and lost revenue.

Nearly 80% of Vodacom’s energy costs involve electricity consumption, and higher taxes on carbon emissions may include electricity providers’ emissions in the near future, resulting in skyrocketing electricity tariffs. This is why, as part of our commitment to reach GHG goals in line with the Paris Agreement, Vodacom places significant focus on sourcing its electricity from renewable energy by 2025, as well as halving GHG emissions from a 2017 baseline.

3. Risk: Market disruption

A Just Transition to a lower-carbon economy is a considerable undertaking, with investors and consumers expecting more from the companies they put money into and buy from. The TCFD report highlights that market disruption, due to shifting consumer preferences and investor behaviour, is a given, and Telco’s will need to be agile to meet both the consumer demand for climate-friendly goods and services, as well as increasing scrutiny by investors if environmental targets aren’t met.

Vodacom understands that to mitigate this risk, we need to ensure connectivity with the lowest possible GHG emissions, and provide goods that are manufactured, supplied, distributed, and discarded with the lowest possible carbon footprint – all within an appropriate, African context.

Opportunities to embrace
Putting the planet first – while forging ahead to become Africa’s leading Technology Company – forms a major part of Vodacom’s purpose-led strategy. Risks exist due to the climate-change emergency, but opportunities abound for a sustainable future. It goes without saying that planet-proactive businesses in a net-zero world will be the ones to unlock new markets.

4. Opportunity: Creating a meaningful relationship with governments

Working with African governments and regulators is a key area for Telco’s and responsible corporates to focus on when it comes to meeting climate targets and building climate-resilient societies. The private sector has much to offer by actively engaging with governments to push them towards embracing renewable and sustainable energy sources that can create jobs and deliver social progress.

By being compliant and integrating government climate objectives, running profitable enterprises without putting the environment first cannot be sustained. Profit and sustainability are not mutually exclusive. Within the global climate change community, proactive corporates can even play an important role in international climate negotiations, as the likes of CEOs and CFOs – essentially representatives of big business and industry – can bring expertise to the negotiating table, while spearheading and strengthening the implementation of sustainable development initiatives in line with SDG 17 for partnerships.

5. Opportunity: Driving innovation in a low-carbon society

With the existential threat that rising sea levels and extreme weather pose, society is prioritising a net-zero reality. Many businesses are embracing energy efficiency and carbon-neutral operations, while applying sustainable principles to the products and services offered. New, climate-aligned solutions can help customers minimise their personal impact on the environment, too.

For example, the Internet of Things (IoT) holds promise in building and shaping a low-carbon society. Through real-time monitoring and Artificial Intelligence, IoT technology can help businesses take proactive steps to reduce emissions and enable water and waste reduction. As Telco’s and businesses adopt new technologies – like IoT – the less they will be impacted by GHG requirements and regulatory mandates like carbon tax. This will ultimately lower costs and allow for favourable financing due to higher ESG ratings.

6. Opportunity: Building a reputation as an ESG champion

Meeting net-zero targets and the demands of carbon-conscious stakeholders and consumers is critical to mitigate market disruption. It also builds a reputation of being a Technology Company that enables business success without adding to the climate-change crisis. A pro-planet reputation makes a business more attractive, from attracting employee talent to investors who track ESG performance.

By driving and adopting ambitious climate actions, Telco’s can claim their stake as responsible and ethical contributors in addressing the climate crisis. And doing so ultimately makes them providers of choice among consumers – both current and future.

Benefitting our customers – and the planet
Vodacom is committed to reducing our environmental impact, and we understand that to transition into a low-carbon society comes with risks – and opportunities.

Understanding these risks, and how we can unlock opportunities to further our sustainability goals, will not only benefit our customers, but also the planet. We believe that supporting a sustainable society and connecting the next 100 million people in Africa go hand-in-hand, and together we can create a future where good business and doing good are the same thing.

Click here to read the full Vodacom Group TCFD report that covers key climate-related risks and opportunities.