Although many ITAD companies have already published ESG reports, there is still more work to be done. | SWK Stock/Shutterstock
ESG stands for Environment, Social, and Governance, and is central to corporate strategy. Most large companies, especially publicly traded companies that must respond to increasing pressure from institutional investors, have or are in the process of developing ESG plans.
However, while the ESG movement is on the rise, there are significant challenges in measuring and achieving goals, primarily due to a lack of data. There are hundreds of organizations, associations, academic institutions, and private companies working to create ESG standards in their respective industries, all of which face a lack of data. As such, his ESG reports for major companies are often incomplete and non-standardized, but this is a step forward.
One of the key issues to keep an eye on as ESG evolves in the future is how it will affect companies that provide products and services to large corporations. A company’s ESG policy may require the company to evaluate the ESG policies held by its suppliers or vendors. This means that even if you run a small private company, you may be required to adopt standardized ESG rules to comply with your customer obligations.
This is important for the IT asset disposal sector because ITAD involves activities that may pose a risk to business customers in terms of environment and data security. In fact, where else in IT asset management can you find more stringent compliance requirements than ITAD? Compliance Standards predicts that ITAD companies will come under increasing scrutiny and pressure to upgrade their ESG practices if they want to remain relevant.
Current ESG stance in the ITAD industry
So, is the ITAD sector ready to address ESG? Clearly, many ITAD companies have already published reports clarifying their positions on corporate social responsibility. Large companies such as Dell, HP, and IBM already produce such reports, even though they often outsource their ITAD functions to third-party experts. Some smaller companies, such as TES and Blancco, have published important data related to their ESG and corporate social responsibility efforts.
Although the format in which these reports are released is not standardized, it provides minimal assurance to clients that the service provider is committed to improving the functionality and structure of ESG reporting. It will be some time before we see standardized reports such as those built into customers’ own ESG reporting platforms, but progress is likely to accelerate as new standards are accepted and deployed.
As mentioned above, one of the main challenges faced by organizations seeking to standardize ESG is the lack of comprehensive data. This is certainly the case in the ITAD industry. The ITAD industry is dominated by private companies, many of which are family-run and often reluctant to disclose data about their operations. ESG may eventually force change there, but this too will take time to achieve.
Without consistent data, we as analysts must rely on publicly available information to form opinions about a company’s readiness for ESG compliance. For example, data from customers and employees can help industry analysts build composite profiles and find powerful indicators of a company’s operating performance. For ITAD, Compliance Standards vendor reputation ratings and employee ratings can accurately portray the health of a company and, by extension, the health of the industry as a whole.
Focus on the “social” aspect of ESG
Compliance Standards research shows that, on average, ITAD companies are generally not far behind the largest U.S. companies when it comes to treating employees, a key component of the social component of ESG.
According to Compliance Standards, which compiles open-source data on publicly traded companies, the top 20 S&P 500 companies receive a total of 3.77 out of 5 stars from their employees. A rating of 3.77 stars is about average. Still, 11 out of 20 companies received his 4-star rating or higher.
The comparable rating at ITAD, represented by 29 ITAD companies tracked by compliance standards using reviews collected from employment and recruitment providers such as Glassdoor and Indeed, is 3.32 out of 5 stars. Although the rating is low, it is not far from S&P Group. This means that ITAD companies as a whole are not far behind their S&P peers, and some worthy initiatives by each ITAD company could help boost individual employee sentiment. means. However, only four companies in the group of 29 ITAD companies achieved a rating of four stars or higher, meaning they need to make tangible improvements in their HR policies.
Although the mean scores are the same, the groups are quite different on one measurement. In other words, the spread from the lowest rating to the highest rating is different. In ITAD Group, the lowest rated vendor received a disappointing 1.45 stars, while the highest rated vendor received 4.15 stars. The difference between the highest and lowest is 2.7 stars. However, S&P Group finds that there is no significant difference between the highest 4.4 stars and the lowest 3.5 stars, indicating that mature public companies have a similar profile in how they treat their employees and follow similar HR policies. Suggests.
Compliance standards aggregate shows that lack of career opportunities is the biggest issue, with employees across the ITAD group of companies reporting an average of 2.98 stars, the lowest of the six attributes analysed.
This situation is not surprising. Most ITAD employees tend to be workers involved in handling and processing IT hardware, from physically moving, diagnosing and disassembling assets to recycling, which involves repetitive and tedious tasks. In such an environment, it is certainly difficult for ITAD company executives to chart a career development path.
This is the same situation we see at some S&P companies with labor-intensive businesses, such as Amazon, Home Depot, and Costco. This is not an easy problem to solve, but companies need to include tools in their HR toolkits that provide a path for employee growth. With some creative ideas, you can bring career development services to your company at minimal cost.
Naturally, compensation and benefits were also rated low at 3.15 stars. This is not surprising, as in an industry with very low profit margins, this factor is likely to remain a persistent problem for a long time. In contrast, the highest rated factor was diversity and inclusion, with a total score of 3.37. Although this is a well-received feature, there is still much that needs to be improved as ITAD companies prepare for their ESG accountability.
Compliance standards data reveals mixed results regarding where the ITAD industry stands in terms of ESG metrics. While employee sentiment at ITAD companies may be a little lower than S&P Group, diversity in leadership is good news for ITAD.
There are no female CEOs in S&P’s sample of top 20 companies. In general, only 8% of companies on the entire S&P-500 list have female CEOs. Analysts calculate that only 5.4% of CEOs worldwide are women.
However, in the list of 29 ITAD companies, the figure is 17.2%. We note that companies providing ITAD services are led by women. SHI led by Thai Lee, Insight led by Joyce Mullen, Merrimak led by Mary Kariotis, CDW led by Christine Leahy, and HOBI International led by Cathy Hill.
Although these senior leaders may be distanced from internal ITAD operations, they are still responsible for the performance and direction of the ITAD department.
Adaptation to ESG becomes important
This analysis focuses on just one element of the ESG equation as an example of how to evaluate the ITAD industry’s position based on publicly available data. This will become even more important as companies face greater pressure to meet their ESG goals.
The ITAD industry has long been a small player in the technology industry, often considered an isolated function in the world of enterprise IT. However, the asset disposal sector will expand significantly and play an important role in the future. Consolidation is inevitable, and this trend is likely to continue, as weak ITAD companies without the resources to adjust go out of business or are acquired by more stable companies.
ITAD companies wishing to remain competitive must respond appropriately to industry evolutions, including the ESG movement. The ESG movement appears to have more staying power than what was once called corporate social responsibility or green IT concepts.
David Daoud is a Principal Analyst at Compliance Standards, a research and consulting firm that works with the ITAD industry. You can contact him at: [email protected].
