Telefónica’s 10 steps to sustainable telecoms

Telefónica’s sustainability: A 20-year journey

Sustainability in the Coordination Age

As part of STL Partners’ research on the opportunities for telecoms operators and the wider industry in the Coordination Age, where the ultimate goal for operators, their customers, and society at large is to make better use of the world’s resources, we have explored how telcos can integrate sustainability into their activities. Previous research on this topic includes:

During the course of this research, we have identified Telefónica as one of the most proactive operators in sustainability. Through our interactions with Telefónica’s sustainability team, we have also found the team to be seriously committed, organised and successful in achieving buy-in to their vision from both the executive leadership team and several business units and opcos. This is a highly impressive achievement for such a large operator.

With the support of Telefónica’s sustainability team, through candid interviews with the team and their colleagues across the business, we have created this case study on their experiences in embedding sustainability across the business. We believe this will help other telcos intent on following a similar trajectory to understand how they can embed sustainability into their corporate strategies and day-to-day activities.

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How Telefónica got to where it is today

Since the creation of Telefónica’s first sustainability team in 2001, the operator has gradually built up its sustainability activities into a company-wide approach with cross team participation over the last twenty years. The first move in this direction came with the creation of the Climate Change Office in 2007, which included senior representatives from Operations, Procurement and Social Responsibility.

Over the last ten years Telefónica has implemented more than 1,400 energy efficiency projects and has carried an annual Energy and Climate Change Workshop with more than 30 vendors for 12 consecutive years, to exchange challenges and solutions to reduce their energy consumption and carbon emissions.

It has three main climate targets: energy efficiency and reducing energy consumption; utilising renewable energy; and reducing its carbon footprint to achieve net-zero emissions in 2040, including its value chain. Figure 2 outlines Telefónica’s sustainability journey and key inflection points through the years.

Key activities and inflection points in Telefónica’s

Telefónica's sustainability

Achieving buy-in across the organisation

Embedding sustainability into Telefónica has been a grassroots effort on the part of the small but hardworking Global Sustainability Department (hereafter known as the environmental team in this report) to find the proof points necessary to convince Telefónica’s senior management to build sustainability into the corporate strategy. The team has used a mixture of bottom-up and top-down approaches, with management support at crucial moments, which will be explored later in the report.

Through our many conversations with Telefónica’s environmental team, perseverance stood out as the most important characteristic within the team. When they recruit new employees, their priority is to find people with the ability to come up with innovative ideas for meeting sustainability targets, resilience, and perseverance.

This determined and visionary approach means that the environmental team works intuitively and pre-empts other departments’ needs. By the time colleagues from other departments approach the environmental team with their requirements for sustainability-related projects (for example the finance team’s interest in launching a Green Bond), the team is already armed with a range of data, materials and resources needed to put together a business case for the activity. As a result of this preparation, the environmental team has been able to quickly support and capitalise on new opportunities as they have arisen, ensuring they can keep the momentum going whenever it builds.

However, the process of embedding sustainability into company strategy has not come without challenges and difficulties. In conversations with STL Partners, the environmental team said that one of the challenges of working with different teams has been picking the right moment to approach them with ideas. Telefónica also stressed the importance of finding strategic alliances and internal champions on other teams. Through strategic, considered and strong relationship building, the environmental team has found internal champions in their Spanish core network operations, finance, procurement, enterprise, and sales teams, who are fully on board with the Telefónica sustainability vision and strategy.

Although the environmental team is currently working with the marketing team to ensure its sustainability message and efforts is more present in its brands, the environmental team cited this as one of its top priorities in 2022. Aside from needing to build stronger relationships and buy-in, part of the challenge is working with the marketing team on how to accurately and effectively market sustainability, without appearing to be ‘greenwashing’.

Another challenge is adapting to the different ways in which the other teams operate when implementing sustainability initiatives across the company. For example, the sales team generally work towards quick deadlines with short-term results, hence it may be harder to create an aligned dialogue with this team. Having a strong insight into the way Telefónica works as an organisation, by working directly within other teams e.g., helping the sales team to complete RFPs, helps this challenge.

By embedding sustainability into the company in these ways, all departments see the benefit and engage with the process. Telefónica told STL Partners that its employees believe in sustainability on a personal level as well as seeing the business benefit and commercial opportunity. Employees are genuinely engaging with sustainability issues themselves and want Telefónica to work towards sustainability goals as a company. As one employee said to us, “you don’t have to work in the environmental team to want to protect the environment”.

Ultimately, this rigorous, patient, committed and collaborative approach to sustainability has enabled the team to achieve broad buy-in across Telefónica’s business units and international opcos. Throughout the report we will explore how it has done this in:

  • Core network operations
  • Finance
  • Enterprise services
  • International opcos.

Table of contents

  • Executive Summary
    • What makes Telefónica different to other telcos?
    • Next steps
  • Table of Figures
  • Telefónica’s 20-year sustainability journey
    • Sustainability in the Coordination Age
    • How Telefónica got to where it is today
    • Achieving buy-in across the organisation
  • Why Telefónica stands out among telcos
    • High level overview of achievements so far
    • How Telefónica compares with other telcos
    • How Telefónica collaborates with its peers
  • Network operations: The first step to embedding sustainability in Telefónica
  • Sustainable financing: A pioneer in telecoms
    • How the first Green Bond came to life
    • Subsequent green and sustainable bonds
    • Challenges and benefits
  • Eco Smart label and consulting services: Expanding from networks to services
    • How the idea came to life
    • Consulting services through Telefónica Tech
    • Eco Smart label in 5G services
    • Sustainability as a core component of digital transformation
  • Implementing sustainability across a global footprint
    • Aligning goals with individual market dynamics
  • Conclusion
    • Ten takeaways from Telefónica’s holistic approach
  • Index

 

 

 

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5G regulation: Ensuring successful industrial transformation

How should governments regulate 5G?

The old regulatory models are less relevant for 5G

Regulators in different markets around the world have a tried and tested formula for making spectrum available for new networks and for regulating the operators that run those networks. They have successfully used this formula for 2G, 3G, and 4G.

However, 5G is different and may require a different approach for both licensing spectrum and for regulating mobile network operators’ services. As we outline in the section 5G benefits industry and society, unlike its predecessors, 5G is not simply a faster pipe which therefore benefits individual end-users. Instead, it has been designed with new capabilities that can have a profound effect on enterprises and entire industries.

These capabilities and how they compare to LTE and to other wireless technologies are outlined in the Appendix. Because 5G can create so much value to all constituents of society, STL Partners contends that the focus of governments and regulators should be in ensuring that:

  1. It is rolled out as quickly as possible;
  2. Regulation is sufficiently flexible and focussed to reflect the needs of different industries and of consumers;
  3. Mobile network operators are encouraged to deliver more value to their existing customers and potentially new ones by contributing to cross-industry activity that benefit governments, enterprises, and consumers.

Put simply, our analysis suggests that the upside from rapid 5G deployment far outweighs the short-term benefits of high spectrum licensing fees. From a pure economic perspective, 5G should contribute an additional $1.4 trillion of Gross Domestic Product globally in 20301. The higher rates of employment, corporate profits, and consumer spending associated with this increased GDP will translate into significant increases in receipts of corporation and income taxes, national insurance contributions, and sales tax for governments as well as enhanced national competitiveness.

These annual inflows to the public purse will be far bigger than the one-off payment from licensing spectrum. But these benefits only accrue if 5G is deployed quickly and effectively so that its full potential is realised by industry in each market. A slow 5G rollout risks enterprises investing in workaround solutions that do not require 5G and do not generate the same value.

Spectrum licensing: Auctions vs beauty contests

A focus on short-term auction fees could be counter-productive as it may inhibit operators’ ability to invest aggressively in rolling out 5G. But as we show in graphic below, it is easy to administer, shows the regulator is ‘doing a good job’, and results in higher short-term economic benefits. We believe that governments need to look at the longer-term sustainable benefits of 5G deployment and, potentially, opt for spectrum licensing ‘beauty contests’ – in which spectrum is allocated on a detailed raft of requirements such as rollout speed and network performance – rather than auctions. Such an approach may require input beyond the telecommunications regulator. For example, the treasury, health and social welfare, business, transport and energy ministries might also be needed to evaluate whether a spectrum beauty contest offers a better social and economic return than a spectrum auction.

And it’s not all about money, globally 5G could result in 1 billion patients with improved access to healthcare globally in 20302. Governments, therefore, need to evaluate the social benefits of 5G as well as the economic ones. But managing a regulatory approach for 5G via input from different government departments is complex and may require management at the highest level.

The 5G spectrum licensing conundrum

5G spectrum licensing conundrum

Recognising that not all markets are the same

While we have outlined above a bias towards spectrum beauty contests over auctions for 5G, it is important to note that the right approach will vary by country. Based on what we have already seen from the 5G deployments and announcements in 2018 and 2019, there is a clear delineation between countries in their 5G rollout speed. We have segmented markets into three types in Figure 2:

  1. Leaders: countries where all operators are pushing ahead aggressively with 5G deployment (in part owing to the role of the regulator in the way they have managed spectrum licensing);
  2. Followers: countries where 5G rollout is patchier and many operators are reluctant to deploy 5G and are essentially doing it under duress, in other words, they worry that they will suffer if they don’t deploy and their competitors do so they do enough to be seen to be ‘keeping up’;
  3. Laggards: (developing) countries where the current network deployment focus of operators is LTE rather than 5G.

The table below outlines reasons why segments are operating at different 5G rollout speeds and offers suggestions for how governments might wish to stimulate operator 5G investment in each segment.

5G spectrum licensing country segmentation5G spectrum licensing segmentation

Table of contents

  • Preface
  • Executive Summary
  • How should governments regulate 5G?
  • The old regulatory models are less relevant for 5G
    • Spectrum licensing: auctions vs beauty contests
    • Recognising that not all markets are the same
    • Local vs national regulatory issues
    • Principles and options for 5G regulation relating to industrial IoT
  • 5G benefits industry and society
    • Introduction: 5G is estimated to add c.$1.4 trillion to global GDP in 2030
    • Healthcare benefits
    • Manufacturing benefits
    • Telecoms industry energy efficiency benefits
  • Telcos (may) need encouragement to invest in 5G
    • Lower revenues, lower profits
    • 5G per se won’t change the game for operators
    • Fast 5G network deployment needs to be encouraged
  • Appendix
    • Comparing apples with apples: how to compare nascent 5G with established 4G
    • It’s not all about LTE: 5G must be compared to all available technology
    • 5G deployment: 5G will mature over the next ten years

Table of Figures

  • Figure 1: The 5G spectrum licensing conundrum
  • Figure 2: 5G spectrum licensing country segmentation
  • Figure 3: Managing national and local mobile networks and services
  • Figure 4: 5G will contribute around USD1.4 trillion to global GDP by 2030
  • Figure 5: Global impact of 5G on healthcare (annual cost savings USD Billions)
  • Figure 6: Benefits from 5G to global manufacturing (USD Billions) by use case
  • Figure 7: Annual global emissions from mobile networks under 4 scenarios (metric tonnes of CO2)
  • Figure 8: Global mobile services revenues 2009-2022 (USD Trillions)
  • Figure 9: Global mobile operators EBITDA margins 2007-2017
  • Figure 10: 4G rollout did not produce sustainable revenue increase
  • Figure 11: Mature 5G benchmarked against the capabilities of mature 4G
  • Figure 12: 5G can address some key shortcomings with existing technologies
  • Figure 13: Forecast of 5G deployment in major regions