News & Publications

Sector Reports - 25/09/2018

The Technology Hardware sector displays limited CSR performance for 3rd year in a row

New Vigeo Eiris report analysing 192 companies from the Technology Hardware sector finds risk of conflict minerals in supply chains & no improvement on environmental criteria

The report provides Vigeo Eiris’ exclusive opinion on sector vulnerabilities, controversies and emerging risks, as well as strengths, innovations and best practice in terms of CSR. The report highlights sector ESG challenges and emerging issues, as well as performance scores and advanced indicators on critical issues such as energy transition, business ethics, due diligence on social and environmental risks in the supply chain, human capital and human rights, governance, executive remuneration, transparency on taxes, integrity of lobbying practices, the level of sustainable products & services, and contribution to the UN Sustainable Development Goals.


Key Findings:

  • Companies in the Technology Hardware sector are involved in the design, manufacturing and distribution (or combination thereof) of various electronics products, resulting in the following subsectors: consumer electronics, semiconductors, networking and broadband equipment, communications, and B2B products. The sector also includes the ODM and EMS subsector (Original Design Manufacturer and Electronics Manufacturing Services), which specialises in the provision of manufacturing services for business clients that outsource their manufacturing operations.
  • Vigeo Eiris awarded an average overall score of 31.7 to companies in the Technology Hardware sector, on a scale of 0 to 100. The sector’s limited CSR performance remains unchanged throughout the last three reviews.
  • The sector ranks 14th out of Vigeo Eiris’ total research universe of 4,500 companies, divided into 39 sectors. Previously, the sector ranked 13th.
  • Sector leaders are concentrated in Europe, whilst laggards are mostly listed in Emerging Markets.
  • The Technology Hardware sector disclosure rate is 54%, in line with the universe average (54%), with European companies being most transparent.
  • ESG risk mitigation scores are limited in relation to reputation and operational efficiency, and weak in relation to human capital but still slightly higher than the universe average. In terms of managing issues most affecting legal security, Technology Hardware companies display a limited average score which is higher than the universe average. Technology companies are typically subject to close scrutiny for issues relating to data protection, taxation and fair competition, and are susceptible to high fines and legal costs in the event of transgressions.
  • The sector’s capacity to tackle climate change and support the transition to a low-carbon economy remains weak (25/100). European companies lead the sector in efforts to integrate climate risk management into their activities.
  • The sector faces 209 controversies, of which 1% are considered critical. 70% of companies do not face any controversies. For companies facing controversies, the severity level is high for 15%, significant for 11% and minor for 4%. The most recurrent controversies relate to fundamental human rights, customer relations and business ethics.

Key Takeaways:

  • The global environmental performance and eco-design practices of Technology Hardware companies remain limited and hinder the industry’s capacity to respond appropriately to the sector’s serious environmental challenges: namely impacts of manufacturing processes, optimisation of resource use, and reduction of e-waste. The sector has shown no improvement on any environmental criteria, signalling the need for stronger regulations and corporate commitment.
    • The new EU legislation on data protection is expected to make companies operating in Europe more transparent and accountable with regards to respecting privacy rights. This could create new legal risks (including significant fines due to non-compliance) as well as operational impacts for tech companies that will need to adapt their processes. With regards to respecting privacy rights, sector performance has improved over the last two years but typically remains limited.
  • Major Technology Hardware companies tend to have a high involvement in antitrust controversies, such as price fixing and monopolisation. Although most companies in this sector report on formalised commitments to prevent anti-competitive practices, concrete measures appear to remain limited to reporting systems and internal controls, resulting in an overall limited sector score (33.4/100). Independent, external audits and more stringent risk assessments including the analysis of ESG criteria could help prevent such controversies.
  • The sourcing of key minerals (such as tin, tantalum, tungsten and gold) used in the production of technology hardware items are frequently linked to armed conflict, deforestation and child & forced labour in their countries of origin. While U.S. and EU legislation requires companies to conduct due diligence, the industry’s overall ability to trace conflict minerals in its supply chains appears to remain limited.

Best performing areas:
o Shareholders (48/100)
o Environmental strategy and eco-design (46.2/100)
o Audit & Internal controls (43.2/100)

Worst performing areas:
o Transportation (14.5/100)
o Responsible lobbying (17.7/100)
o Use and disposal of products (18.7/100)

Top Performing Companies:
o Europe: SEB; Nokia Corporation (63/100)
o North America: HP (50/100)
o Asia Pacific: NEC Corporation (57/100)
o Emerging Markets: AU Optronics (45/100)

Companies making best progress since 2017:
o Europe: Infineon Technologies (+10)
o North America: Garmin; Arrow Electronics; Marvell Technology Group; Microchip Technology (+1)
o Asia Pacific: No progress
o Emerging Markets: MediaTek (+11)

To view an excerpt of our 2018 Technology Hardware sector report, download the document below
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icon-download-34x36 Sector Report_Technology Hardware_August 2018
Keywords : ESG