ESG investors take note: Companies are responding to pressure on digital rights

By Jan Rydzak

Telecommunication companies’ public reporting reflects increasing transparency on digital rights concerns, but the industry must adopt and implement stronger standards and engage more actively with the human rights community.

Human rights are finally going mainstream in the world of investing, and telcos worldwide are taking note. This year marks the first time that every telco we rank has published a report explicitly covering ESG (environmental, social, and governance) issues. Ooredoo, the Qatar-based company, was the last one to do so, in mid-2021. This puts swathes of new information in the hands of investors and the public, ranging from details about a company’s emissions to the measures it takes to expand connectivity and cultivate inclusion in its own ranks.

Earlier this year, the GSMA, the world’s largest industry group representing mobile network operators, released its first key performance indicators (KPIs) on ESG issues that it expects companies to address. Citing RDR as the authoritative standard setter on digital rights policies, the GSMA groups KPIs for issues such as data protection, digital rights, and online safety into an umbrella expectation called “digital integrity.” The GSMA’s focus on these issues provides a strong incentive for telcos to show progress in these areas going forward.

On governance issues, six telcos improved on human rights due diligence. Telefónica led, with a foray into reviewing the impacts of its targeted advertising and zero-rating programs—a first for the industry in both cases. On freedom of expression, for the first time, all 12 telcos shared at least basic information about when they might execute network shutdowns in response to government orders, though eight of them published no data about actual demands that were made. Ten companies improved on privacy issues, providing new disclosures in historically opaque areas such as private demands for user data. Mexico’s América Móvil and South Africa’s MTN published their first transparency reports, the first in Latin America and Africa, respectively. These publications contained information about both censorship and demands for user data, thus bolstering the two companies’ performance in both the freedom of expression and privacy categories.

But more pressure is needed to catalyze progress among companies that are behind their peers. In creating their ESG reports, most companies end up selecting whichever standard will show them in the most flattering light. The plethora of ESG rating providers they have to choose from, combined with vague or permissive ESG standards and large disparities between methodologies, means that telcos still face limited pressure to disclose information on key issues. As a result, ESG and sustainability reports offer an inherently incomplete picture of the risks to their users, especially on social issues, which encompass digital rights.

As many as 85% of large companies report progress on ESG issues using one of two common frameworks, GRI and SASB. But neither one asks companies to report on shutdowns or censorship demands –key threats to freedom of expression that RDR tracks–.

For example, as many as 85% of large companies report progress on ESG issues using one of two common frameworks, GRI and SASB. But neither one asks companies to report on internet shutdowns or censorship demands—key threats to freedom of expression that RDR tracks—and only SASB asks telcos to outline the demands for user data they receive. Yet all three are top threats to freedom of expression and privacy. Exposure to risk is a key factor for investors. Without information on these issues, they cannot accurately gauge risk to a company’s customers or to their own investments.

Transparency reports tend to focus on precisely these ESG blind spots, and RDR has tracked them closely since 2015’s inaugural RDR Index. For example, four of the companies we rank in Asia—Axiata, Bharti Airtel, e& (formerly known as Etisalat), and Ooredoo, all of which operate in censorship-prone environments—still fail to publish transparency reports detailing demands for censorship and user information. Yet this gap isn’t reflected in their ESG reporting, which spotlights topics such as increasing diversity, serving rural communities, and providing employee training, but remains silent on government pressure.

When companies fail to share this kind of key information, investors often try to voice their concerns through dialogue before escalating to more public strategies. Our experience shows a clear link between how responsive companies are to our research via our feedback process and how willing they are to talk to investors about human rights issues. Most of the ranked telcos delivered detailed feedback during the research process for the 2022 Telco Giants Scorecard, with three exceptions: Airtel, Axiata, and e&.

In the U.S., Big Tech platforms are used to facing shareholder proposals that ask them to come forward with information about human rights issues. The threat of a shareholder vote often compels them to engage in dialogue. Telcos face fewer such petitions, while proposals targeting companies outside the U.S. are exceptionally rare.

Shareholders and civil society doubled down on our recommendations that companies publish transparency reports and improve due diligence. These were areas in which telcos improved the most.

But direct engagement is not. Responsible investors have turned up the heat on all of the ranked telcos in the last two years, engaging in outreach and discussions coordinated by the Investor Alliance for Human Rights in partnership with RDR. These synchronized dialogues have helped yield new data and commitments, including from the three companies that made the greatest progress on transparency this year: MTN, América Móvil, and Telefónica. While many factors drive improvement, shareholders and civil society partners doubled down on our recommendations that these companies publish transparency reports (MTN, América Móvil) and improve due diligence (Telefónica). Those were some of the areas in which these telcos improved the most. Working hand in hand is a clear path to achieving tangible change.

But implementing strong human rights standards is not as simple as ticking issues off a list. Every telco has a responsibility to embrace human rights as the foundation for all of its operations. This will demand increased due diligence on human rights issues as telcos expand into new industries, such as e-commerce, and venture further into human rights minefields, like targeted advertising. Our findings this year show that more telcos are starting to understand this. Now the challenge is to make sure that safeguarding human rights in telco operations becomes not only a competitive advantage, but the prevailing norm.