Corporate Risk and ESG Exposure in Telecoms: Navigating Geopolitical and Human Rights Liabilities in Emerging Markets

The telecommunications sector in emerging markets is at a crossroads. While rapid digitalization and 5G expansion promise transformative growth, the industry faces mounting geopolitical and human rights risks that threaten its sustainability and investor returns. From supply chain disruptions to complicity in digital authoritarianism, telecom companies must grapple with a complex web of ESG challenges. This analysis examines the sector's vulnerabilities and outlines strategies for mitigating exposure.

Geopolitical Risks: Fragmentation and Cybersecurity Threats

Emerging markets are increasingly shaped by geopolitical rivalries, particularly the U.S.-China tech cold war. Trade disputes and equipment bans-such as the U.S. restrictions on Huawei and ZTE-have fragmented global supply chains, forcing telecom operators to navigate conflicting regulatory demands, according to a McKinsey report. For instance, the Philippines and other Asia-Pacific nations now face a dilemma: adopt Western-backed 5G infrastructure or risk exclusion from U.S. security alliances, as noted in a Telecom Review Asia article.

Cybersecurity has emerged as a critical liability. State-sponsored attacks, such as the Salt Typhoon operation in late 2024, have targeted telecom networks, exposing vulnerabilities in critical infrastructure, as documented by a BHRRC briefing. According to EY, 51% of telecom companies now rank cyber threats as their top operational risk. The rise of generative AI further complicates matters, as firms must balance innovation with ethical governance and data privacy compliance, a trend highlighted by EY.

Human Rights Liabilities: Surveillance, Labor Exploitation, and Digital Exclusion

Telecom operators in emerging markets are frequently implicated in human rights abuses, particularly in conflict zones and authoritarian regimes. For example, MTN, a major African provider, has faced criticism for complying with government-mandated internet shutdowns in Sudan and Nigeria, stifling free expression during crises, as reported by Telecom Review Asia. Similarly, Vodafone Hungary's 2022 sale to a state-linked entity raised concerns about enabling surveillance under Viktor Orbán's government, according to BHRRC.

Labor rights violations are equally pervasive. Amnesty International highlighted exploitative conditions for migrant workers in Saudi Arabian telecom warehouses, including withheld wages and poor living standards. Meanwhile, the Business and Human Rights Resource Centre (BHRRC) found that 30% of human rights allegations against tech firms since 2015 involved companies operating in conflict-affected regions like Myanmar and Gaza-a finding also summarized in an Allianz report.

Digital exclusion compounds these issues. Despite robust 5G investments, many emerging markets lag in connecting underserved populations. EY notes that slow adoption in regions like Sub-Saharan Africa has left billions without reliable access to digital services, exacerbating inequality and undermining ESG commitments.

ESG Strategies: Decarbonization, Transparency, and Resilience

To mitigate risks, telecom companies must prioritize decarbonization and supply chain resilience. McKinsey emphasizes that Scope 3 emissions-linked to suppliers and customer device usage-dominate the sector's carbon footprint. Operators like Telefónica and América Móvil have improved scores by adopting clean energy and disclosing human rights impact assessments, according to Ranking Digital Rights, but industry-wide progress remains uneven.

Transparency is equally vital. Poor climate reporting and low response rates to human rights allegations-only 48% of telecom firms addressed BHRRC inquiries in 2023-undermine investor trust. Regulatory frameworks like the EU's Digital Services Act and Corporate Sustainability Due Diligence Directive (CSDDD) are pushing for stricter accountability.

Finally, diversification and cybersecurity investments are non-negotiable. As geopolitical tensions fragment markets, firms must adapt sourcing strategies and bolster defenses against hybrid attacks, a need highlighted by BHRRC.

Conclusion: A Call for Strategic Adaptation

The telecom sector's ESG risks in emerging markets are no longer abstract. From geopolitical supply chain shocks to complicity in digital repression, companies must act decisively to align with global sustainability standards. Investors, too, must scrutinize corporate governance and due diligence practices. As the sector evolves, those that embrace transparency, innovation, and ethical resilience will outperform peers in an increasingly volatile landscape.