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In this Q&A, Ethical Corporation’s managing director Liam Dowd talks with Geert Paemen, director for sustainability and non-financial KPIs at the Spanish telecoms company, on Science Based Targets, engaging suppliers on climate action, the SDGs and opportunities for the next 12-18 months
Incentives and financing are critical elements required to fully incorporate the sustainability targets and key performance indicators (KPIs) into the strategy and long-term vision of the company. I talked to Geert Paemen, one of the speakers at Responsible Business Summit Europe, about how Telefónica is linking sustainability KPIs with employee remuneration, balancing growth and climate impacts plus SDG ambitions.
Q. What is your role?
A. I am Global Director for Sustainability & Non-Financial KPIs.
Q. Last year saw several reports indicating the need for greater action to address climate impacts. In 2017 Telefónica aligned itself with climate science, committing to reduce its greenhouse gas emissions (scope 1+2) in absolute terms (tCO2e) 30% by 2020 and 50% by 2030 from a 2015 base year. What have been the biggest challenges so far?
A. The biggest challenge for a company like Telefónica is that we are under enormous pressure to grow, expand and transform our networks as there is an exponential need for high-speed connectivity and data traffic.
This means we need to substantially increase our network activity every year, while aiming to decrease our energy consumption. The way to achieve this is through energy efficiency projects and a transformation of our network in which emission reduction is one of our strategic drivers, as well as turning towards renewable energies for our electricity consumption in all our markets.
Q. How are you engaging your suppliers to help you take action?
A. Telefónica is very conscious of the fact that an important part of our emissions (approx. 40%) are generated in our supply chain. We have analysed where many of these emissions are generated (categories of products and individual suppliers) and are engaging with these suppliers so that they set emission-reduction targets (if they have not already done so) and commit to science-based targets.
It is very important for larger companies to involve their supply chains, as the smaller suppliers are often not subject to investor or even regulatory pressure to reduce their energy consumption and emissions. By involving them in our own climate change mitigation efforts we can contribute to expanding the impact our actions are generating.
Q. Is your business integrating the SDGs into the business strategy? And if yes, what has been the most challenging aspect of this integration?
A. From our perspective, the SDG’s are a great communication tool to get the global sustainability goals out there and they have proven to be very efficient in generating awareness and even commitments in governments and the population at large.
For a company such as Telefónica however, the sustainability strategy is influenced more by the business strategy, the industry and the social and environmental contexts we are part of. We have had a strong sustainability vision and strategy for many years now and the SDGs as such have not significantly influenced this strategy. We have however aligned our targets with the SDGs in all our communication and reporting materials, as they are helping to structure the information being provided to our different stakeholders.
Q. Which SDGs are you engaging in – can you share some of the ambitions for 2019 around these particular SDGs?
A. The more relevant SDGs for Telefónica are the following:
• SDG 9: Industry, Innovation and Infrastructure & SDG 8: Decent Work and Economic Growth:
Through the deployment of reliable and sustainable infrastructure aimed at providing communities with excellent connectivity, which in itself contributes to the economic and social development of the communities and facilitates the deployment of digital services in health, education, transportation, e-administration, etc. aimed at improving people’s lives.
In addition to the transformation of our networks aimed at providing all the countries we are in with connectivity we implement projects aimed at internet for all and digital education and inclusion, financial services for the unbanked population, and innovation projects aimed at promoting start-ups.
• SDG13: Climate Action and SDG 11: Sustainable Cities and Communities:
We are reducing our impact on climate change by decarbonising our activity, committing to a decoupling of our business growth from greenhouse gas emissions. Our objective is to align our efforts with the level of decarbonisation required to limit global warming to under 2ºC.
In doing so, we will reduce our greenhouse gas emissions by 30% by 2020 and by 50% by 2030.Our carbon footprint is generated mainly by our network, as a result of the energy consumption required to provide our services. However, we are committed to ensuring our electricity consumption is 100% renewable by 2030. Our greatest contribution to the mitigation of, and adaptation to, climate change will be, without a doubt, increased digitalisation, supported by a renewable network and with solutions that are already providing answers to these environmental challenges.
Through our services, we have the capacity to reduce carbon emissions in other sectors and increase the resiliency of the communities in which we operate. We implement IoT and Big Data services, which are designed to improve our customers' mobility and energy efficiency; our cloud and video conferencing services also avoid greenhouse gas emissions.
We develop and offer digital services aimed at offering solutions with respect to climate change, resource management, pollution, etc.
• SDG 4: Quality Education: Telefónica has been a relevant player both from a business and social action perspective in the digital education field for many years now. Our business and social initiatives complement each other and are all about reducing the digital divide and preparing the new generations and not so new generations for the digital transformation and the new professions of the future.
Q. What do you see as being the single most exciting opportunity for your organization in 2019?
A. The single most exciting opportunity for our organisation lies in the full integration of sustainability objectives in the strategy of the company. We have already come a long way in this, but it is clear the timing and the context are right to complete this alignment. Telefonica has incorporated long-term sustainability KPIs in the variable remuneration of all its employees, and we have also issued, for the first time this year, a sustainable bond framework aimed at linking our financing to the implementation of business initiatives with clear sustainability objectives.
Incentives and financing are critical elements required to fully incorporate the sustainability targets and KPIs into the strategy and long-term vision of the company and they will be bringing Telefonica’s commitments to a new level.
Q. In June you will be speaking at the Responsible Business Summit Europe – why is it important for you and your business to be at this event, outlining the need for business to take the lead on societal and environmental issues?
A. At Telefónica we are very picky about what events and initiatives we participate in because we truly believe we must prioritize our “internal” work and initiatives, to support our business in setting ever more ambitious sustainability objectives. However Ethical Corporation’s yearly sustainability event is one of the best events in terms of quality and selection of topics and it is important to us to learn from and share our experience with others, so that we may all come back with new ideas and new ways to approach difficult issues.
Geert Paemen will be speaking at Ethical Corporation's 18th Responsible Business Summit Europe conference in London 10-12 June. She will join 600+ CEOs, investors and heads of business to share practical ideas on how business can take the lead and accelerate action on social and environmental issues.