Connecting 5G Hype with ESG Reality

Mirova's Louise Schreiber says 5G has a negative environmental and social impact but ICT has an opportunity to reduce sustainability risks

The European Commission estimates that the value creation of 5G will reach around €110bn per year by 2025. Our concern is whether this growth is sustainable. Many companies are using the energy efficiency argument to qualify 5G as a solution to address sustainable development goals. At this point, 5G has many challenges to confront before we can consider it a green or socially beneficial solution.

Various sustainable opportunities are expected in the future, whether that involves deploying a smart grid, enabling smart cities or connecting access to health. However, these solutions will need to be developed on a large scale before their benefits compensate for the immediate negative environmental and social impact of 5G.

The industry identifies three successive phases for 5G. The first step will be increased broadband to users because 3G and 4G are at full capacity. This new capacity is necessary for telecommunication companies to offer more services. The second step would be industrial application, e.g. connecting manufacturing robots to improve the efficiency of the production processes, which is likely to happen soon.

Then, the final scenario would be the large scale IOT, with some applications such as city or country-wide smart grids, where most environmental benefits are expected. But that’s some way off still.

Negative impact of 5G

First, 5G will be deployed as a new, additional network. While it might be super-efficient, any additional environmental footprint will be added to its existing 3G and 4G footprint. There’s also likely to be a major rebound effect in terms of internet data traffic, which might have a significant environmental cost.

Global IP traffic doubled between 2016 and 2019 and it is projected to double again by 2022, with 4G and 5G networks carrying around 60% of this traffic. Additionally, this increase is notably linked to video streaming, as videos are data heavy. By 2025, new broadband capacities are expected to support a further 15 points increase of video (streaming services, video contents in online media, increasing size and definition of screens, etc.).

In other words, 5G’s efficiency is more likely to encourage a rapid growth of data traffic than to reduce the footprint of the current data traffic. Due to this rebound effect, efficiency gains could be cancelled out by the increase in data consumption.

The International Energy Agency data shows data centres’ energy consumption has remained flat over the years at 1%, despite the increase of internet traffic and infra workloads. This is linked to the fact we’ve been able to enhance the energy efficiency of the data centres and the networks, but it doesn’t mean we will be able to deliver the same energy efficiency gains.

The semiconductor industry is at a point where it’s challenging the limits of physics. Innovation is still possible, but maintaining energy efficiency trends at a constant trend will be a huge challenge. There is no guarantee that the rebound effect will be compensated by these gains, which means that the overall footprint might increase significantly.

Aside from the climate issue, we should also keep in mind that any new telecommunication technology comes with significant biodiversity impact and social risks. We will have to produce significantly more semiconductors for the deployment of the 5G networks, whether it’s just an upgrade of the existing antennas or a full additional network, and to equip consumer electronics (smartphones, watches, smart-house devices, connected cars, etc.).

This translates into billions of electronic components – large amounts of minerals mined in high-risk areas, treated with toxic chemicals and, ultimately, tons of electronic waste that are difficult and rarely properly recycled.

Finally, there’s another type of risk that could arise from 5G: hyper-connectivity can lead to human rights abuses through data privacy – specifically, in certain countries where freedoms are comparatively more at risk.

However, the connectivity can also bring great opportunity. Smart grids will help increase the share of renewable sources in countries’ energy mix, in addition to generating efficiency gains. The question is, at what point does hyper-connectivity becomes more of a risk than an opportunity? Right now, we’re more concerned about whether the whole value chain addresses this risk properly.

Equipment manufacturers

Telecommunication companies are mostly deploying an additional network to provide more services to their current users, which induces major costs, but is unlikely to generate additional revenue per user at this point. Essentially, service providers will not market 5G phone subscriptions at a significantly higher price.  

Component and infrastructure equipment providers, on the other hand, are most exposed to this trend. Soitec, for example, is a very small company, but it is growing given its innovation on radio-frequency semiconductors. Ericsson is also benefiting from this trend.

Additionally, as they are European companies, they have the rather stringent regulatory framework. Although areas of improvement remain, their sustainable strategies are promising.

Reducing sustainability risks

The ICT industry is facing a major challenge: it will see its footprint increase significantly in the coming years, whereas other industries – that currently represent a larger global footprint – are on the path to reducing theirs. Telecommunications only represent 1.4% of global GHG emissions at present, but consumer electronics – mostly their fabrication and end-of-life – are already the main cause. A quicker turnover of consumer electronics is certainly a major issue, notably electronic wastes, will increase as a result.

For decades, ICT companies have reexported their electronic wastes to Asia,  which is also the biggest producer of hazardous waste and where it is rarely properly handled. As an illustration, approximately 70% of global e-waste is in China.

It has become a major sustainability issue caused by all the toxic substances released in the soil and water such as mercury or beryllium, in addition to inflammable lithium-ion batteries and greenhouse gases released during the degradation process. In the landfills, local people living in dire conditions are often in direct contact with those substances as they try to find scrap metals to resell (brass, iron, etc.).

Most of us will not even see the difference between streaming Netflix on 4G and 5G, specifically on a small mobile-phone screen. There is certainly no rush to upgrade consumer devices. On the contrary, there is an urgent need for smartphone and telecommunication companies as well as for public authorities to appeal to users to adopt responsible consumption practices.

Companies in consumer electronics face difficulties implementing a sustainable business model that promotes longer lifespan and appropriate take-backs. They are based on offering multiple new generations of devices yearly, which implies that their suppliers are required to produce large amounts of new and complex devices in a very short period of time. This creates the ideal situation for abuses: excessive overtime, underage work, etc.

We have been pushing these companies to offer services such as upgrading customers’ smartphone rather than changing it.

We are also pushing telecommunication companies to deploy recuperation programmes across the globe and build stronger relationships with recyclers and up-cyclers. That’s where the circular economy can happen. The minerals that are used in the chips are costly and they come with massive environmental footprints and great social risks. It’s a huge opportunity for the ICT industry and a great leverage to significantly reduce sustainability risks related to new technologies. Hopefully, a larger number of companies will seize it in the coming years because we cannot solely rely on the positive externalities that technologic solutions can potentially enable.

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Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...