Smartphones represent the largest single industry in the consumer electronics sector, with the global market size exceeding US$50 billion, much larger than PCs and TVs combined.
In this article, MioTech Research reviewed the ESG implications of the smartphone industry, especially those pertinent to the points of concern for ESG professionals, (or “material topics”), e.g., GHG emissions, packaging and E-waste management, supply chain sustainability, etc. Seven major phone makers are examined by their ESG performance, notably Apple, Samsung, Xiaomi, Huawei, among others.
The research has found that, although smartphone companies do not directly exploit minerals for their environmental impact and are not involved in the disposal of hazardous waste, the environmental impact across the entire product lifecycle must be considered. If a company does not establish a low carbon footprint from production to final disposal, it not be able to fully claim a higher level of social responsibility. In addition, issues such as labor rights protection, product quality and safety, and corporate governance can affect a company’s image and hinder its long-term stability.
- Samsung Electronics, Huawei and ZTE ranked the top three in terms of total Scope 1 and 2 carbon emissions, possibly due to their energy-intensive businesses outside smartphone manufacturing. These three companies also have the higher carbon emission intensities of greater than 25tCO2e/million USD, while Apple, Oppo, Xiaomi and Transsion, companies that primarily produce smartphones, have much lower carbon emission intensity of less than 2tCO2e/million USD.
- Compared to other manufacturing industries, phone manufacturers generally have lower carbon emissions intensity within their own operations. Apple's Scope 3 emissions data show that carbon emissions from upstream part and component manufacturing accounts for about 70% of the full life-cycle emissions of smartphones, far exceeding those generated by phone manufacturers themselves and from the use phase.
- Apple is way ahead in setting climate change management goals, committing to achieve carbon neutrality in the full life cycle of all products by 2030, and has also made a lot of efforts in energy efficiency improvement, clean energy use and other topics in practice. Xiaomi and Huawei have also set some quantitative management goals relative to past greenhouse gas emissions and energy efficiency. According to data from MioTech AMI, only 11.82% of companies in the communications equipment industry has disclosed their GHG reduction targets.
- Packaging materials and electronic waste (E-waste) are still the main topics of concern to smartphone manufacturers. Samsung Electronics, Huawei and Oppo lack disclosure on packaging materials consumption. ESG reports show that companies are taking action to reduce packaging and switch to more sustainable materials. However, none of them have yet set quantitative targets on the subject. Samsung Electronics, Apple and Huawei have disclosed e-waste generation amount. With the exception of Oppo, all companies have established e-waste recycling programs in partnership with local recycling service providers, or have set up their own recycling programs.
- Recycling used phones could mitigate the GHG emissions for up to 25kg per recycled phone. ATRenew, China's largest trading platform and service provider for used consumer electronic products, disposed of 223,000 electronic devices in 2021, and brought a total benefit of 460,000 tonnes of carbon reduction in 2021, equivalent to the carbon sink of 1,500 square kilometres of urban forest in one year.
- Huawei and Xiaomi have received controversies regarding their labour management violations and poor working conditions. Xiaomi and Transsion did not include female board members. The other four companies (except Huawei’s 17.65%) all have 20%-30% female members on their boards, which is higher than the 20% average of all A-share companies.
- Smartphone companies have developed strategies and relevant management rules regarding the cyber security issues. Monitoring data from MioTech AMI show that Huawei, Oppo, and Xiaomi have controversies regarding their data privacy and data security, while Transsion and ZTE performed well.
- Overall, smartphone companies did well in establishing well-rounded ESG governance practices. Most companies have set up robust management structures, with only Transsion lacking designated organizations for overseeing and executing corporate ESG affairs. Samsung Electronics, Huawei and ZTE began releasing ESG reports before 2010, while the other companies have only begun to publish them in recent years.