ESG has become front and center in corporate strategy. Virtually all major companies, in particular the ones that are publicly traded, who have to respond to growing pressure from institutional investors, have big ESG declarations and plans. Many of these plans are already generating metrics and data that highlight the position of the company in the Environmental, Social and Governance areas.

While there is clearly an ongoing ESG movement, the challenges are enormous. The biggest problem is the lack of data. There are hundreds of organizations, associations, academic institutions, and private companies that are working to create ESG standards in their respective industries.  All are facing data deficits. Therefore, a great number of published ESG reports from leading corporations are not complete, not standard, but they are a step forward.

One of the issues to watch in future ESG deployments is how they will impact the smaller companies that provide products and services to the larger corporations. Obviously, some ESG rules will require at some point in the future that a corporation must have visibility on its contractors and suppliers’ own ESG policies. This means that even if you are a smaller, non-public company, you may be required to adopt ESG rules to comply with your clients’ obligations.  This certainly applies to the IT asset disposition sector (ITAD). After all, ITAD is the most exposed function on the environment and data security in the entire ITAM discipline. Where else in ITAM would you have greater compliance requirements than in ITAD?  As such, we predict that ITAD companies will be under scrutiny and will be pressured to upgrade their own ESG practices, if they want to remain relevant going forward. Analysis continues below under the video podcast.

The ITAD Industry Current ESG Posture:

In this context, is the ITAD sector ready to adopt ESG?  Clearly many ITAD-related companies are already releasing reports to disclose their CSR positions, from TES to Blancco and many others. Although the format in which these reports are released is not standardized, the reports from these companies give some minimum assurance to their clients that they are indeed working on updating their ESG reporting capabilities and structures. It will take a while before we see standardized reporting that could feed into clients’ own ESG reporting platforms, but there is progress that is likely to accelerate as new standards are accepted and rolled out.

As stated above, one of the main issues facing organizations that took on the task of standardizing ESG is lack of comprehensive data. This is certainly the case in ITAD, an industry that is dominated by many private companies, often family owned, and not so willing to disclose data on operations.  Eventually ESG could force a change there, but again, this will take time to achieve.

In the meanwhile, how prepared are ITAD companies to move forward?  With lack of consistent data, analysts have to rely on publicly available information. Data coming from customers and employees, for example, can help industry analysts create a composite profile and bring strong indicators of a company’s management performance.  In the case of ITAD, Compliance Standards’ Vendor Reputation ratings and employees’ assessments can accurately depict the health of company and by extension, an entire industry.

ITAD vs. S&P Group Employee Ratings:

Compliance Standards’ research indicates that collectively and on average, the ITAD universe of companies, big and small, are generally not too far from America’s largest corporations when it comes to the treatment of employees, a major component of the S portion of the ESG, that is Social Responsibility. For example, the top 20 S&P 500 companies (see list at bottom of this page) collectively received 3.77 stars out of 5 stars by employees, according to a Compliance Standards’ tally. A 3.77-star rating is just about average. Only 11 out of 20 companies scored 4 stars or higher.  The equivalent in ITAD, as represented by 29 companies (see list) is 3.32. It is a lower rating but not too far from the S&P group, at less than 0.45. This means that collectively, ITAD companies are not too far behind their S&P peers and some worthwhile efforts in each ITAD company could help boost their employee sentiment. In the group of 29 ITAD companies, only four scored 4 stars or more, hence the need to make measurable improvements in HR policies.

But what sets these groups apart?  One metric used to analyze these two groups is the spread from the lowest rating to the highest. In the ITAD group the lowest rated vendor received a disappointing 1.45 stars, versus the highest rated at 4.15.  The difference between the best and the worst is a 2.7-star gap. In the S&P group, it is more stable. There isn’t a wide gap between best (4.4 stars) and worst (3.5 stars). The gap here is just 0.9.  This means that mature public companies have similar profiles in the way they treat their employees, following similar HR policies.  The weakest companies tend to be the ones that have more manual labor, including Amazon’s 3.6 stars, largely due to warehouse and logistics workforce.

In the ITAD industry, we note that there are some companies that have mature management practices, with better human resources policies. But there are also companies that have questionable HR practices, and ESG should help them reconsider their options. Unsurprisingly, the highest S&P company is NVIDIA, with its plethora of highly paid engineers and technical staff.

CEO Approval:

But while the S&P group has a slight edge vs. ITADs on employee ratings with more standardized HR practices, ITAD companies have some areas to be proud of.  Firstly, CEO approval by employees is on par with the S&P group. CEO approval in ITAD is 75.1%. The S&P group is exactly 70.0% according to Compliance Standards’ primary research.  This means that while there are some shortcomings in the way employees in the ITAD sector assess the way they are treated, there is a high level of respect for the CEO, obviously with fluctuations from company to company. Often employees do make clear distinctions between how they perceive the company and versus how they perceive its CEO.  The perception of the CEO is often higher than that of the company, and management, and therefore the sector’s top leaders should continue to enhance their personal relationships with staff, regardless of market and financial conditions. This situation does not reflect on the rest of the company’s senior management, but the good perception is specific to the CEO.

One indicator of how employees separate their perceptions of the company (and management) on the one hand, from their views of the CEO, on the other, is on whether they would recommend the company to friends. While CEO approval in ITAD is 75.1%, recommending the company to friends drops to 62.8%. In the S&P sample, the recommendation figure is 10 points higher, at 72.8%.  So, higher respect for the CEO in the ITAD sector does not necessarily reflect positively on the company as whole.

The Pain Points of ITAD Labor:

It is not so difficult to pinpoint the biggest challenges facing the ITAD industry as a whole, and where improvements should be made to adjust in the long run to the emerging ESG regulations.  Compliance Standards’ tallies indicate that lack of ‘career opportunities’ is the biggest problem, with employees reporting an average of 2.98 stars for the collective group of ITAD companies, the lowest of the six attributes.

Such a situation is not surprising. Most ITAD employees tend to be workers involved in the handling and treatment of IT hardware, from diagnostics of assets to disassembly and recycling, with tasks that are repetitive and often tedious.  In this environment, it is indeed difficult for ITAD company executives to chart a path for career development. This is the same situation we see with some S&P companies that have labor intensive operations, including Amazon, Home Depot and Costco. While this is not an easy-to-solve problem, companies should have tools in their HR toolkit to offer a path for growth for their employees.

Naturally, ‘compensation and benefits’ also rank low at 3.15 stars. This is not a surprise as we believe this factor will likely remain a permanent issue for a long time in an industry where margins are very low. In contrast, the best rated factor is ‘diversity & inclusion’ at an aggregate rating of 3.37. While this is the higher rated feature, there is still a great deal of improvement to be made by ITAD companies as they prepare for ESG accountability.

Where ITAD Companies Rank Better and Where to Improve:

The data from Compliance Standards reveals some mixed news on the ITAD ESG potential, Some of the data shows an optimistic profile, others are in need of improvements. In our S&P sample of top-20 companies, there is no single female CEO. In general, only 8% of the companies in the entire S&P-500 list have female CEOs. Globally, analysts calculate that female CEOs account for just 5.4%.  In our list of 29 ITAD companies, that figure is 17.2%.  We note the following companies as being led by women:  SHI by Thai Lee, Insight by Joyce Mullen, Merrimak by Mary Kariotis, CDW by Christine Leahy, and HOBI International by Cathy Hill.

Although these senior leaders may be distant from the ITAD unit in their company, since they are in charge of bigger and more diversified corporations, they are still accountable for the performance and direction of their ITAD units. While the higher female representation should be celebrated, however, collectively, this group of companies tends to under-perform in the broad ITAD group, highlighting the need for management to review their practices and adopt measurable improvements.  For example, while the entire ITAD group registered an employee rating of 3.32 stars, the five companies listed above produced a lower rating of 3.25. CEO approval for the five companies drops to 67% vs. ITAD industry of 75.1%. The percentage of employees recommending friends also drops to 57.8% for the five companies vs. 62.8% for the ITAD sector as whole. These indicators should be taken into account when reviewing the companies’ ESG stance in the future.

Employees Ratings versus Customer Ratings:

Next in our analysis we try to identify any correlations that may exist between employee reviews and Compliance Standards’ ITAD Vendor Reputation Ratings. The Vendor Reputation Ratings are generated from samples of actual customers of the 29 analyzed companies. There are two key findings:

• ITAD clients have fewer negative feelings and are less harsh than employees when it comes to their perception of their ITAD vendor. This finding is evidenced by the fact that clients are always subjected to better engagements than employees who are working inside the ITAD company, day-in and day-out. Obviously, and for the time being, customers are less concerned about ‘career advancements’ or ‘wage’ policies within their service providers, hence the higher ratings. This is, however, a situation that could evolve in the future as ESG reporting structures and requirements become the norm and clients demand more visibility on their contractors’ HR practices as part of their social impact and considerations.
• Data indicates however, that ITAD companies with best Vendor Reputation Ratings tend to also have
  best employee ratings (see charts). Similarly, those with the worst Vendor Reputation ratings tend to also generate the poorest employee reviews.

Data Release Schedule and How to Access:

In this update of Compliance Standards’ Vendor Reputation Ratings, we are enhancing vendor data with available employee sentiment data. This research initiative helps clients on the end-user side to form an opinion on the quality of the vendor(s) they contract to manage their IT assets at the end of life and accompany them in their ESG journey. The data is also important for ITAD companies so as to assess the competitive landscape and how they measure up.

The data looks at only two stakeholders: the client and the employee. Each week, Compliance Standards will release two ITAD company assessments of the currently tracked 30 entities. More vendors will be added over time to account for a broader section of the ITAD vendor ecosystem. The tentative schedule is below, with the schedule subject to adjustments when required:

Accessing the data:

Compliance Standards provides data free of charge to end-user companies that use ITAD services if:
(1) those accessing the data agree to join our ITAD.Academy panel to contribute to no more than two surveys a year, and  (2) they must be affiliated to a company that utilizes ITAD services. To register, follow this link. Please use your corporate email.

All others have access to the data and analysis through a subscription. This link provide details on how to subscribe.

If you have any question, please fill out the analyst free consultation form below.

Access to the data is available for clients here: Link.

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