ESG, A Key Consideration for the Gambling Industry

As it stands in the world today, it is no longer an acceptable norm, for companies to just concern itself with profit generation, without being mindful of the impact their activities have or will have on the environment and society in general.

Across all industries, stakeholders’ expectations are rapidly increasing, with the public demanding for more transparency, accountability and better engagement in responding to social and environmental priorities; which brings us to Environmental Social Governance (ESG), which is fast becoming a key consideration for industries, including the gambling industry, as it grows.

What is ESG

We wake up every day to new formulas, aiming to make the world a better place. Enter ESG, which when incorporated into any business model, is lauded to identify and improve its social and environmental impact, in order for the business to become more socially responsible and sustainable.

ESG might mean different things for different industries, but for the gaming industry in particular, with an already perceived negative social impact, it would mean lessening the negative effects of gambling and increasing its positive social and environmental effects, with the most significant emphasis placed on responsible/safer gambling.

Before the emergence of the ESG as a policy, Corporate Social Responsibility (CSR) has been the expected defining factor for a lot of businesses. ESG can be said to be an advancement of the traditional CSR, and other key policies like sustainability etc. they tend to address the same issues; like a company’s efforts to address issues regarding its impact on society. ESG not only considers how a company operates and its direct impact on the society, but also the impact created by its suppliers or consumers.

Importance of ESG

With the way the gaming industry is structured, especially in Africa, issues related to environmental, social and governance, might not seem like an area of concern, however, with the rapid rise of online sports betting and other internet/online games, ESG is fast becoming a dominant factor to be considered and incorporated for sustainability.

A strong ESG model can set a vision for an organisation’s environmental and societal influence. It has become more than a responsibility to imbibe, it is now an opportunity to build a more sustainable business. It creates valuable impact within an organization, the community and the planet for years to come.

Pillars of ESG

Environmental Factor

This is somehow the most widely recognized and addressed concern. This factor typically looks at how the activities of companies impact on the natural environment and how any harm caused by such impact can be mitigated.

It can be argued though, that the gaming industry does not really affect the natural environment as some other industries might, and thus the environmental factor might not really be applicable to them.

However, argue it or not, the gaming industry plays a role that equally impact the environment, regardless of how minimal it might appear. For instance, the brick-and-mortar gambling shops create huge amounts of environmental issues that can be attributed to air pollution due to green-house emissions, and online gambling also harnesses a huge amount of energy for its online servers.

So while the gaming environmental impact might not be as visible and huge as other industries, it cannot be ignored and so the industry must understand its impact and act accordingly by creating opportunities for greater industry-wide positive environmental impact.

Social Factor

This factor bothers on how companies interact with communities both internally (staff), and externally, (customers and suppliers). Responsible/safer gambling is a concern considered under this second pillar of ESG.

Responsible gaming is now recognized as crucial aspect to operating business, throughout the gaming industry. It seeks to help vulnerable groups who are at risk of developing gambling harm, by preventing excessive and underage play. Most legislation now create policies and regulations making the practice of safer gambling by gaming companies, mandatory.

However, for the concept of safer gaming to be truly effective, it must be entrenched in the day-to-day operation of business across the industry, from designing low-risk games to creating a safe environment to play in etc. It must religiously address this three core areas; prevention, detection, and intervention.

Governance Factor

This factor addresses the way and manner that a company operates. It looks at the process and procedures a company employs to manage itself and the needs of its external stakeholders and how it also adheres to the rules and regulations, guiding its operations.

The gambling industry is a regulated industry and there are government structures in place for companies to abide in order to maintain licensing. However, this third pillar does not only concern issues such as sustainability and governance structures, but also issues of anti-corruption and anti-money laundering. A while ago, the Nigerian anti-fraud agency; EFCC, launched a probe to investigate local gambling operators, amid allegations of “money laundering activities”. They recently organized a training for KYC/AML to sensitize the operators, in conjunction with another agency, NFIU.

Indeed, to make a difference in the area of responsible gaming, organisational governance must reflect a commitment to creating a positive social impact through well laid out policies. Even though the global gambling industry has started to incorporate ESG factors in its business models, companies in the African region still has a long way to go in this regard.

There has to be stricter structures and deterrent measures addressing crucial issues relating to the incorporation of ESG, with companies being held accountable for failing to meet standards, because without this, fundamental change will not happen.

Incorporating ESG

Though for gaming companies, environmental concerns are often secondary, compared to social and governance matters. However all three aspects of ESG, work together and not in isolation.

To better incorporate the ESG factors in the gambling industry in any jurisdiction, there needs to be strict compliance with current licenses requirements and relevant legislation within that jurisdiction, and a code of conduct for ethical business practices, must be applied at all times. There is also need to collaborate with corporate sustainability experts on environmental matters.

Companies should strive for best practice regarding standards for responsible/safer gambling and adopt relevant policies, objectives and targets. Companies must also have clear and transparent ownership structure, with strong strategies for AML and counter terrorist financing and implement responsible marketing to protect vulnerable groups.

Companies must also ensure a sound data protection culture and use of personal data that is fully in line with the applicable data protection rules e.g. NIPR and other extant laws in Nigeria; and have established high security for payment transactions and solid KYC process.