Experts of the Rosloto studio will tell you about the environmental, social, and corporate principles of the iGaming area. You will learn why the ESG influence in the industry is becoming stronger every year and how to adapt the casino business to these requirements.
The term stands for “Environment, Social, Governance”. It is a set of rules established for these areas.
Today, these principles are used by companies from various sectors of the economy, from construction and biotechnology to tourism and gambling.
The popularity of ESG is growing rapidly:
The concept of ESG was introduced in 2004 by Kofi Annan, UN Secretary-General. The principles were formulated as a response to the quick deterioration of the environment. Over time, the scope of their application has expanded to corporate governance and social relations within companies.
Shortly after, Kofi Annan turned to the CEOs of the world's leading organisations (Google, Amazon, General Electric, and others) with a proposal to include ESG algorithms in their business strategies. The appeal was called Who Cares Wins.
The concept proved to be very successful. Today, the annual profit of brands that adhere to ESG standards is increasing by an average of 12% annually. Such enterprises are becoming more and more attractive to investors.
The rules of environmental, social, and corporate responsibility are more and more associated with gambling.
In June 2023, Stephen Myers, a founder of the Praxis consulting company, and Robert Montgomery, an investor from First Maximilian Associates, published a joint work — ESG Fintel. It is dedicated to the impact of standards on the casino industry.
According to experts, at the beginning of 2023, the market capitalisation of the 40 largest iGaming firms reached $271.91 billion. Only those enterprises whose shares are listed on international stock exchanges were taken into account.
A slight improvement in the ESG reputation of the world’s leading providers will increase their total income by 2% or $5.44 billion equivalent.
Besides, companies will be able to:
Let us consider why ESG is used in the gambling industry.
Ratings of this concept exist in all developed countries. This is a critical indicator for private investors, venture and pension funds, as well as non-governmental organisations.
The most well-known ESG ratings are:
Grants from the budget, loans at reduced interest rates, joint gambling startups — all this is possible thanks to a competent ESG policy. KPIs (Key Performance Indicators) of companies are growing stably, and operators make a good profit.
Robert Montgomery noted:
One of the main problems of the casino industry is that it does not have sufficient funding. The introduction of ESG will expand the pool of investors in the iGaming sector and play a key role in the attraction of cheap capital.
The introduction of ESG can be an excellent newsbreak, and those entrepreneurs who ignore such standards can suffer a PR crisis.
In 2023, the most famous iGaming brands are following the principles of sustainability and actively talking about it.
Among the main communication tools, we can name:
In July 2023, Seventh Wave Corporate Training, an organisation that offers training in the field of ecology, social protection, and management, launched the “ESG Principles in iGaming” course together with the Casino Guru Academy online publication. It received rave reviews from operators and B2B providers and also became a good newsbreak.
The implementation of ESG is a guarantee of high-quality risk management in an enterprise and minimisation of costs caused by inefficient administration.
One of the key components of the strategy is the use of AML and FATF policies. They are aimed at combating money laundering and the financing of terrorism. The gambling industry faces these problems more than other sectors of the economy.
In the last year alone, the UK Gambling Commission (UKGC) has been paid more than $40 million in fines. Most violations are related to AML/FATF, so the introduction of ESG principles reduces the risks of sanctions to zero.
The social component of ESG has a positive effect on the position of gambling services providers in the labour market. The better conditions the employer offers, the more interesting it is for job seekers.
Adherence to ESG principles indicates that entrepreneurs care about the future of the country in which they operate. With such brands, it is possible to build reliable partnerships and not to lose money or reduce KPIs.
This aspect concerns how a business minimises its impact on the environment.
ESG initiatives can be related to:
At first glance, it may seem that the iGaming sphere has little to do with environmental issues but this is not entirely true.
Casino companies are large energy consumers, which means that they cause an increased amount of carbon dioxide emissions. The main sources of pollution are data and software development centres, as well as IT hubs.
According to the BBC, online entertainment is responsible for 3.7% of all global greenhouse gas emissions (by comparison, the aviation industry produces 4.8% of CO2).
Mike Hazas, a researcher at Lancaster University (United Kingdom), stated:
By 2030, the amount of CO2 emissions associated with games will increase by 30%. The main reasons for the changes are the active use of streaming devices, gadgets, and cloud storage.
Let us consider how the casino niche implements ESG practices:
In 2022, an American gambling software vendor joined the Science Based Targets (SBTi) global initiative. The organisation is dedicated to the reduction of CO2 emissions and minimisation of the environmental impact of digital firms.
IGT's initiatives have been recognised by the S&P Global Ratings independent agency. The provider ranked 88th in the list of top 100 companies with high corporate sustainability
The operator owns land-based and online casinos in the United States. In 3 years, the brand managed to reduce energy consumption by 31% thanks to the support of ESG principles.
The firm’s initiatives are also aimed at creating safer workplaces, reducing waste, and switching to renewable energy
The European provider has committed to the reduction of CO2 emissions by 40% by 2025.
To achieve this goal, several studios of Playtech were upgraded.
For example, the facade of the live content development centre in Lithuania was covered with a special sun-protective film. This helped lower the indoor temperature, thereby reducing the amount of energy needed to cool the building
This aspect is focused on how gambling affects society in general and workplace culture in particular.
Examples of the main business practices:
According to a study by the McKinsey & Company consulting firm:
How the best providers follow social standards:
Management standards are focused on decision-making and reporting processes, as well as effective interaction with key persons.
The main components of a correct corporate policy in an iGaming company are:
The Kindred Group provider is one of the industry leaders in the implementation of corporate ESG principles. The company was the first in the market to publish information on the income received from unfavourable gambling operations. The software vendor is aimed at achieving the 0 figure in the column of this indicator.
The UK, one of the most attractive casino markets, plans to introduce new sustainability disclosure requirements. This proposal was made by the FCA — the Financial Conduct Authority of the United Kingdom.
The new rules will require companies to publish full disclosure of key individuals and sources of funds. The changes will come into force no earlier than January 1, 2024, and will apply to all sectors of the economy, including gambling.
The goal of such updates is to make the UK a European centre for sustainable investment.
Environmental, social, and corporate responsibilities are integral attributes of licensed operators and B2B providers.
ESG principles are used by European and American jurisdictions, as well as offshore zones, which previously paid almost no attention to the sources of funds origin.
The Maltese regulator (MGA) is the most respected one in relation to the implementation of ESG practices.
The Corporate Sustainability Reporting Directive (CSRD) will come into force in 2024. From now on, all licensees on the island are required to report on ESG performance.
Carl Brinkat, executive director of MGA, said:
More organisations have already started implementing the ESG strategy. The main objectives of such innovations are to achieve a carbon-neutral economy by 2050 and increase the level of social and corporate awareness.
Among the initiatives of the Ontario Lottery and Gaming Corporation (OLG), we can name:
The creation of fair, transparent, and safe gameplay is a priority for any online casino. This is also a key requirement of regulators, without which operators will not be able to obtain a licence.
The following ESG standards are complied with:
The Entain European provider is an example of the competent implementation of the principles of responsible gambling. The enterprise offers financial support to the British GamCare organisation, cooperates with the NCPG (American Council on Gambling), and sponsors the EPIC Risk Management Committee.
Environmental, social, and corporate responsibility is considered the landmark for the iGaming industry in 2023.
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