Digitalization poses major challenges for companies. Be it in data protection, the use of AI, or the environmental and social impact of their digital systems. Despite progress, there is still a significant lack of transparency.
Good governance defines the quality of corporate management. This also concerns the digital responsibility of Swiss companies. Ethos, the Swiss Foundation for Sustainable Development, and its partner EthicsGrade are interested in how the largest companies listed in Switzerland deal with the challenges of digitalization. They have published a second study on this. Analogous to the 2021 study, they have examined how the 48 companies in the SMI Expanded are managing the digital challenges in seven areas: Governance, Transparency, Privacy, Use of Artificial Intelligence (AI), Management of Sensitive Activities, and Social and Environmental Impact. These areas relate to the seven principles Ethos has identified for digital responsibility.
Digitization increasingly determines our lives
In fact, the challenges associated with the digitalization of the economy have continued to grow in recent months. This is as much about cyberattacks as it is about AI or ChatGPT, which are increasingly penetrating our lives. In parallel, regulations are evolving and tightening, creating new obligations but also new risks for companies. The new Swiss data protection law will come into force next September, while the European Union is fine-tuning its legal framework around AI.
Awareness among companies is increasing
Ethos has noted that the number of companies willing to respond to the questionnaire has increased from 12 to 18 companies (out of a total of 48) compared to 2021. For the other 30 companies, the assessment is based exclusively on public information identified and analyzed by the EthicsGrade teams.
Companies have improved
The second observation is that the scores have improved considerably. For example, seven companies scored more than 50 points (out of 100), whereas last year only three companies scored more than 20 points. The average rose from 10.5 to 22.8 points, with a maximum of 87 points for Swisscom, which tops the rankings this year. Only five companies achieved a worse result than in 2021.
Environmental impact of digital technologies to be reduced
Other positive points are that 33 companies (25 more than in the previous year) now state that they intend to make efforts to reduce the environmental impact of their digital technologies. Also, 22 companies (18 more than in 2021) affirm that they would already take data protection into account when designing a product or service (so-called 'privacy by design' approach).
Transparency still has a glaring deficiency
But not all the results of the new study are encouraging, Ethos criticizes. Firstly, a majority of the companies did not answer the questionnaire sent out. While the average for the 18 companies that answered the questionnaire was 42.4 points, it dropped to 11.1 points for the 30 other companies.
Furthermore, the differences between the points based on the companies' responses and the points based on publicly available information (annual report, website, etc.) were sometimes significant. If only publicly available information were relied upon, the average would be 11.2 points (8.5 points in 2021) and only four companies would achieve a score of more than 20.
According to Ethos, these differences demonstrate that there is still a great lack of transparency on the part of companies. However, as public opinion shows, digital responsibility is becoming more and more important, and Swiss companies cannot afford to fall behind on these issues.
Investors can stimulate improvements
Ethos once again points out that investors play an essential role in encouraging listed companies to make improvements. However, the foundation admits that the dialogue needs to be further intensified. It is no longer enough to answer questions positively in a questionnaire. Rather, it is time for companies to become more transparent by publishing relevant information about what they are doing to meet the challenges of digitization.
A third study is planned for 2023.
