Sustainability in the telecommunications industry

A comparative analysis between five major European firms


Seminar Paper, 2011

32 Pages, Grade: 2,3


Excerpt

Table of Contents

List of Abbreviations

List of Diagrams and Tables

1. Introduction

2. Terminologies and Definitions

3. Sustainability in the telecommunications industry
3.1. Vodafone
3.2. Telefònica
3.3. Telecom Italia
3.4. France Telecom (Orange)
3.5. Deutsche Telekom

4. Findings and Summary

List of Abbreviations

illustration not visible in this excerpt

List of Diagrams and Tables

Figure 1: CR Structure in Vodafone Germany

Figure 2: Revenues by Telecom Italia worldwide Figure 3: Organizational Chart Telecom Italia Figure 4: CSR Department France Telecom Figure 5: CR organization Deutsche Telekom Figure 6: Verdantix Sustainable Telecoms 2010

Table1. Key Findings and comparison aspects

1. Introduction

In the current business world, corporations are dedicating continuously growing attention to matters of social and environmental engagement. As a result, various terminologies have appeared and gained much popularity in the field, such as ‘Corporate (Social) Responsibility’ and ‘Sustainability’.1

In the telecommunications industry, as in many other industries, the evolution of CR can be observed through the various instruments utilized by corporations to manage issues of responsibility towards stakeholders. Moreover, the industry offers a very interesting analysis possibility due to the recent growth of the industry and the importance of the analysis is further highlighted by nine telecommunications companies being represented in the DJSI (Dow Jones Sustainability Index) in 2006 and in 2007, whereas 65 companies participated in the Global Compact.2 Throughout this paper, sustainability management by telecommunications firms shall be analyzed more closely. The main aspects that shall be investigated are concerned with the governance structures introduced by telecommunications firms. In this light, the management of sustainability is perceived to take place at three levels within the organization. First, the level of corporate governance; which is mainly concerned with the individuals, departments and/or boards dealing with sustainability issues within the firm. The second level determines the areas that are addressed in the company’s strategy i.e. employees, customers, environment, etc. At last, the third level contains the specific tools and initiatives launched by each firm to implement its strategy in each area.

The analysis shall be carried out by conducting a comparison between five major firms in the European market that are considered the most dominating ones: Telecom Italia, Telefònica, Vodafone, Deutsche Telekom and France Telecom. The impact of these firms on the industry is measured in terms of the respective market capitalization and market share in Europe. The fact that these companies are international players cannot be ignored, but as their core business remains in their respective home countries (e.g. Telecom Italia generates 80 percent of their revenues in Italy)3, the focus shall be on the domestic market operations.

The aim is to critically analyze the current practices among European telecommunications firms. However, the actual measurement of performance is more complex; the descriptive comparison between these firms enables the analysis of the status quo in the field and therewith describes the general structure of managing sustainability issues in the telecommunications industry. In the second chapter of the paper, relevant terminology such as sustainability, corporate responsibility and corporate governance shall be briefly clarified. The third section then goes on with the main analysis, which is concerned with the first level of sustainability management i.e. the corporate governance level. This shall take place by comparing between the structures used by each of the above mentioned firms. At this point, aspects such as the closeness of a CR-board or department to top management shall be analyzed. Furthermore, it is interesting at this point to observe how different or similar firms integrate sustainability management systems in their businesses. Moreover, most firms undertake some form of self assessment and represent it in their annual reports; these measurements might be helpful to analyze how firms perceive themselves and to what extent they are self-critical. Furthermore, self-evaluations by firms offer an opportunity to be informed about future plans of the firms.

Nonetheless, the analysis shall apply only to the businesses of each of the five firms in the European market, as the analysis of each firm as a whole cannot be approached due to the limited scope of the paper.

After conducting the main analysis, a summary of the most significant findings shall be represented in the fourth section of the paper. Finally, concluding remarks regarding the management of sustainability in the telecommunications industry shall be briefly represented.

To summarize, the main aspect of analysis is the structure of sustainability management in the European telecommunications markets and the question of whether there is a certain common trend that applies to the industry exists or whether each firm has its own distinct system of approaching sustainability issues.

2. Terminologies and Definitions

In the following section of the paper, the relevant terminologies and their respective definitions shall be briefly represented. In the center of these definitions is that of Sustainability or Sustainable Development. The term ‘Sustainability’ first emerged in 1987, when the Bruntland commission stated that sustainable development means that a corporation has „to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs”.4 Moreover, the concept of the triple bottom line which has been developed by John Elkingten was adopted by numerous corporations. Elkington states that „business and investors should measure their performance against a new set of metrics—capturing economic, social and environmental value added— or destroyed—during the processes of wealth creation.”5 Consequently, the TBL mainly refers to sustainability such that corporations take into consideration economic, social and environmental aspects and influences of their businesses. A further term communicated by numerous corporations is corporate social responsibility. The probably most popular definition of CSR was proposed by Carroll and mainly states that corporations have economic, legal, social and discretional responsibilities.6 For this paper, the definition by Carroll shall be adopted since it includes the aspects of sustainability which is central for the analysis.

Furthermore, definitions regarding corporate governance and corporate citizenship are relevant and important to the scope of this paper. Corporate citizenship is generally referred to as the measures used by corporations to meet their various responsibilities towards the societies they operate within,7 and is often assumed to be a synonym for corporate social responsibility.8 Moreover, corporate governance is a central term for this paper. Generally, corporate governance is referred to from two different perspectives. First the narrow sense, where the governance of a corporation considers the interest of investors its main priority.9

In the broader sense, corporate governance is referred to “as the design of institutions that induce or force management to internalize the welfare of stakeholders”.10 The corporation’s management structure i.e. incentives system and control tools must be constructed in a way that allows the consideration of the impact on welfare of all stakeholders.11 Thus, for the purpose of this paper, corporate governance shall be contemplated in the broad sense, so that all stakeholder groups are respected and considered. Thus, when referring to corporate governance, the internal management structures that allow the consideration of the business’s impact on all stakeholder groups of the firm are meant.

For the sake of completeness, it shall be mentioned that in general, the stakeholders of a firm are very diverse and that each stakeholder group has its own demands and expectations. For example, a corporation’s stakeholders include customers, suppliers, society, the environment, employees, etc. All in all, the whole planet earth represents a group of stakeholders to the corporation made up of human beings, natural environment of animals and resources.12

To summarize, it can be said that corporations try to meet their responsibilities towards society and the environment by communicating the values engulfed in terms like corporate social responsibility and sustainability to their internal and external stakeholders. Then practically integrate these values into their core business through initiatives and measurements.

3. Sustainability in the telecommunications industry

In this section of the paper, sustainability in the telecommunications industry shall be analyzed. The main aspect of this analysis is how sustainability management is embedded in their organizational structures i.e. sustainability on the level of corporate governance. The analysis shall take place by comparing the structures of five major European firms: Vodafone, Telefònica, Telecom Italia, Deutsche Telekom and France Telecom. While it is a complex question whether the engagement of these firms is actually efficient or sufficient to cover the most important sustainability issues, the analysis aims to give an overview of what these firms do and how they attempt to address sustainability issues. Moreover, there have been various approaches to assess sustainability management of corporations, for example, by analyzing effects of sustainable or responsible funds,13 or by approaches like the environmental impact assessment (EIA) and strategic environmental assessment (SEA).14 The analysis represented in this section shall mainly take place based on the information communicated by the firms in the published reports and on internet websites.

An overview of the governance structures is represented and an analysis of the embedment of CSR/sustainability in each firms’ practices is discussed. Moreover, the focus shall be on the self assessment approaches of these firms and to what extent it can be considered useful for getting an overview of the status quo of the European telecommunications industry.

3.1. Vodafone

One of the leading European companies is Vodafone Group Plc, which is present in over 30 countries with around 341 million customers and 85,000 employees.15 There is no doubt that when a firm is that large, its influence on sustainability, whether positive or negative, is just as huge. In the following, the internal structure of how Vodafone manages sustainability i.e. is there a department or a board specifically responsible for sustainability issues management? Or is the aspect integrated into all organizational units? Or even a mix of both?

Structure of Sustainability Management

In its annual Sustainability report of 2010, Vodafone describes the process of CR reporting as follows: the group CR-director reports to the external affairs director, who at the same time is responsible for sustainability in the executive committee. During the year covered in the report, the group CR-director represented four times to the executive committee and once to the board. Furthermore, six monthly reviews with Vodafone’s three regional CEOs were conducted.16 This process describes how sustainability is reported on a group level. However, the firm states that its engagement and implementation of values takes place on a local level of management. This means that each local unit is responsible for integrating Vodafone’s values into its business practices, the results of all local operations are then evaluated on a group level.17 All in all, this structure implies that sustainability or corporate responsibility are being evaluated on two levels in the organizational structure, once on group level and then on local unit level. In the following diagram of Vodafone Germany’s structure of CR integration, the position of sustainability and CR management with regards to the organizational hierarchy can be observed.

illustration not visible in this excerpt

Figure 1: CR Structure in Vodafone Germany18

From the above diagram, it can be observed that sustainability management is

located directly below the executive committee. Therewith, leadership is directly involved in managing sustainability and responsibility issues. This aspect leads to the importance of ethical leadership within an organization, which strengthens employees’ commitment to ethical standards/sustainability values of the firm.19 Thus, a general organizational culture of commitment to sustainability can be created. Furthermore, it can be observed from the diagram, that once sustainability is evaluated and monitored on a local unit level, communication is directed at Vodafone group and then the previously mentioned communication process takes place on group level. Moreover, it can be observed that there is a direct linkage between the regional German CR unit and the Vodafone group CR unit. Furthermore, on the firm’s website, it is mentioned that in each local market, the firm has employees dedicated to sustainability issues who work directly with the group sustainability team and with local business functions.20 All in all, it can be concluded that the top management level is strongly involved in sustainability issues management, the interaction between local markets and Vodafone group is relatively high and thus, the group and top management as well, have high influencing potentials on the local markets sustainability issues and firm employees respectively. However, these implications do not in any way help in making a statement about how efficient this management structure actually is.

[...]


1 See, Steurer and Konrad (2009, p. 23).

2 See, Runhaar and Lafferty (2008, p. 481).

3 See, Telecom Italia Foreign Business (2010).

4 Quoted according to Pope et. al (2004, p.297)

5 http://www.johnelkington.com/activities/ideas.asp Retrieved: 09.01.2011 14:28

6 See, Carroll (1979, p. 499).

7 See, Maignan et al. (1999, p. 456).

8 See, Pinkston and Carroll (1994, p. 159).

9 Quoted according to, Schwalbach and Schwerk (p.2-3).

10 See, Tirole (2001, p. 4).

11 See, Tirole (2001, p. 4).

12 Quoted according to Svensson (2007, p. 93).

13 See, Fowler and Hope (2007, p. 243).

14 See, Pope et. al (2004, p.595).

15 See, Vodafone Annual Report (2010, p.6/p.23).

16 See, Vodafone Annual Sustainability Report (2010, p.10).

17 See, Vodafone Germany Corporate Responsibility report (2009, p.6).

18 See, Vodafone Germany Corporate Responsibility Report (2009, p.6).

19 See, Brown (2006, p.600).

20 http://www.vodafone.com/content/index/about/sustainability/approach/embedding_sustainabilit y/sustain ability_managementinourlocalmarkets.html Retrieved: 20.12.2010 16:00

Excerpt out of 32 pages

Details

Title
Sustainability in the telecommunications industry
Subtitle
A comparative analysis between five major European firms
College
Humboldt-University of Berlin  (Internationales Management)
Grade
2,3
Authors
Year
2011
Pages
32
Catalog Number
V165962
ISBN (eBook)
9783640817658
ISBN (Book)
9783640820948
File size
656 KB
Language
English
Tags
sustainability, european
Quote paper
Eike Luetjen (Author)Fatima Maatwk (Author), 2011, Sustainability in the telecommunications industry, Munich, GRIN Verlag, https://www.grin.com/document/165962

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