The electronics industry as discussed here is comprised of various computer manufacturing and services sectors such as storage & peripherals, hardware, software, networking, and Internet services and infrastructure. Manufacturers of applied consumer and commercial electronics also fall into this scope. Builders and operators of data storage centers feature prominently in this analysis because of the energy intensity of these assets. It is difficult to put precise numbers on the worth of this combined industry scope,
Physical Exposure Risk. The physical exposure of the industry is very high with potential adverse effects on most manufacturing and operation assets. There are three features that increase the risk borne by manufacturing facilities: dependence on reliable access to inputs such as energy and water; reliance on just-in-time logistics; and clustering of manufacturing facilities. In climate change scenarios, hotter summers and colder winters add stress to the energy infrastructure and might result in disruptions or rationing. Water scarcity also poses a threat to semiconductor manufacturers, which are heavy water users. Climate change may also affect the reliability of just-in-time logistics due to increased frequency of weather-related disruptions. In addition, manufacturers of electronics tend to cluster in industrial parks or other areas with suitable public infrastructure. This increases the risk of major disruptions due to flooding or impairment of regions due to sea level rise or drought.
Policy & Regulatory Risk. Government plays a prominent role in the policies and practices shaping the electronics industry. In this industry, public policy appears to be proactive or at least responsive to many environmental concerns. The Energy Star program of the EPA has long encouraged manufacturers to increase the energy efficiency of products. Efforts to ban or restrict the presence and disposal of toxics in electronics are also effective tools to prevent high GWP substances from being released during manufacturing. As dealing with climate change rises to the top of the environmental agenda, more policies like these could be expected with potentially wide-ranging effects. As the energy intensity, both in the manufacturing and consumer-use phases, of electronic products and services come into focus, the risk of policy pressure becomes higher.
Reputational Risk. Electronics have much lower carbon intensity than other industries, however, there are material indirect linkages to higher carbon intensity, mainly through consumer use of appliances. Exploding growth in data volume also has driven higher the carbon intensity of the computing sector, most notably through the construction of data centers, which are high power users. Brand value at risk in these sectors depends upon whether customers will make the link to climate change issues, and if it matters if they do (Trust 2005). Our view is that risk is high because consumers are starting to make the link and become increasingly sophisticated about understanding product origin and impact. This precedes a stage in which consumers modify their purchase behavior to reflect their concerns about climate change (Trust 2005).
Competitive Risk. The potential impact of climate change on the electronics industry’s competitive landscape is high. Consumer-driven sub-sectors, such as consumer electronics and appliances, have a high degree of exposure to stakeholder pressure calling for an adequate response to climate change. Most component manufacturers also face business continuity risks associated to potentially unstable supply of raw materials and water. Sectors highly dependent on energy, such as large Internet companies and data warehouses also face increasing energy costs. Some technologies offered by this industry, however, will be in demand as companies decrease their carbon footprints, such as IP telephony, energy efficiency software, and GHG management solutions (Llewellyn 2007).