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February 21, 2022

ESG – Technology, Media and Telecoms: Macroeconomic trends

An emphasis on using renewable energy, improving energy efficiency, and removing carbon is widespread in the technology, media, and telecoms (TMT) industry. As a result, technology companies are investing billions in ESG to differentiate themselves.

Listed below are the key macroeconomic trends impacting ESG performance, as identified by GlobalData.

Misinformation

Public trust in Google, Amazon, Facebook, and Apple has never been lower. A consensus is emerging that governments should hold social media companies responsible for the content they publish, as it can encourage anti-social and criminal behaviour. However, action to mitigate misinformation must be balanced with the right to freedom of expression.

Despite the concern, we are starting to see legislation aimed at curbing misinformation enacted around the world. By requiring social media companies to remove illegal speech swiftly, such laws will reduce online misinformation. However, they also bypass important due process measures and incentivise social media companies to censor content rather than risk a fine.

Antitrust regulation

Big internet platforms control and monopolise user data, and many are accused of trampling on competitors to maintain their dominance. While regulators have attempted to take on big tech before, there is a growing consensus that new antitrust rules and approaches are needed to address the complexity of the digital economy. There is a strong case to introduce ex ante regulation, i.e., strict and transparent rules applied to digital platforms before they engage in any anticompetitive behaviour.

At the EU level, the proposed Digital Markets Act (DMA) aims to constrain platforms so that they do not become monopolies. The Department of Justice (DoJ) and Federal Trade Commission (FTC) lawsuits against Facebook and Google have raised the prospect of companies being forced to spin off specific business units or subsidiaries.

Data privacy

Reform of the digital advertising industry set in motion by the General Data Protection Regulation (GDPR) is at a critical juncture. Google’s Sandbox project is trying to redesign the ad-funded business model for the whole industry, using federated learning of cohorts (FLoC), which clusters large groups of people with similar interests together.

Against this backdrop, Apple and Facebook are battling it out over data privacy. Apple made significant changes to iOS 14 in spring 2021, preventing iPhone tracking users by default. Apps such as Facebook will be required to ask users for permission to track them, which is expected to dramatically impact advertisers’ ability to target ads as people are unlikely to opt-in.

This is an edited extract from the ESG – Top Trends by Sector – Thematic Research report produced by GlobalData Thematic Research.