Insights from Odgers Berndtson Global Gaming Practice and Chief Sustainability Officers, ESG Directors, CEOs and Chairs in Gaming.
Following Levelling up – Part One: How the gaming industry is approaching sustainability, we delve into how ownership structures and geographies impact both the effectiveness of sustainability initiatives.
Impact of ownership model
Through our conversations with Sustainability Leaders and Board Members, it became clear that mid-sized private organisations are trailing behind their publicly traded and early-stage venture-backed counterparts for a number of reasons:
1. The evolving investment landscape
Whilst we’ve seen a growing focus on a path to profitability across the digital media industry, the importance of sustainability-focused KPIs is also rising. This spans angel investors, venture capitalists, private equity and corporate investors. Over the last 18 months, there has been a reduction in late-stage financing and this suggests those mid-sized established studios/organisations are perhaps not being scrutinised in the same way.
However, this may change due to the slow and steady rise of private equity investment in the gaming sector. CEOs of acquisition target organisations need to understand that whilst recurring revenues and clear growth potential are critical, sustainability impact is not to be ignored as a future investment metric.
2. Investor and stakeholder requirements
Listed companies in Europe and the US are required to provide more specific investor and stakeholder information as part of their governance and reporting obligations, more so than ever before. Particularly with the Corporate Sustainability Reporting Directive (CSRD) entering into force in Europe in January of this year.
3. Strategic priorities
Early-stage studios and organisations have the opportunity to shape their values from the ground up and a large portion of founders are putting sustainability on the table as a strategic priority and ‘way of life’ from the beginning. Often, the ‘people & society’ aspect is being addressed subconsciously, with new founders specifically wanting to create a people-first culture that avoids pain points experienced in previous corporate roles.
The impact of consolidation
We have seen significant consolidation across our industry over the course of the last three years. This appears to be a positive move from a sustainability perspective, as access to knowledge has increased. However, it’s important for holding companies or parent organisations to foster a culture of knowledge sharing across their portfolio companies and, given thrusting ways of working on newly-acquired founder-led organisations is a delicate task that can stifle creative freedom, working towards building group KPIs TOGETHER is important.
The source of the pressure
The stimulant for sustainability for publicly traded CEOs comes from external investors. For those leading smaller-scale growth-stage studios or businesses that pressure comes from employees.
Interestingly, in our conversations, pressure from players was mentioned the least by organisations that did not have a dedicated Sustainability leader which is perhaps linked to the fact these organisations don’t have dedicated resource to think holistically about sustainability, and how it feeds into game design and production. Thus, creating a blind spot.
It became clear that as well as there being differences in the source of pressure, each of those sources (investors, employees and players) tend to have a stronger interest in one/two of the three outlined areas of sustainability (Climate & Environment, People & Society and Responsible Gaming). Let us explain…
Non-sector-specific investors appear to have a particular interest in understanding the social impact of gaming.
This largely stems from unwelcome stereotyping from those less informed about the industry and requires re-education around the many benefits of interactive entertainment and the pro-social nature of many games.
Employees typically apply pressure in areas such EDI (equity, diversity and inclusion) within the workforce. Increasingly, they are also carrying this pressure into the games they produce i.e. how diverse is the character base? Are we representative of our player community?
This pressure for diverse character representation within games is also being championed by players however, Playing for the Planet’s 2022 player survey showed a real demand for climate-focused content in games too.
As an immersive form of entertainment, the industry is in a privileged position to be able to captivate and inspire those players and others across the globe to take note of the climate emergency.
Scandinavian gaming organisations tend to have a greater focus on the Climate & Environment aspect of Sustainability whereas, US based organisations are largely leading the way in terms of the People & Society aspect of Sustainability and, particularly, EDI. This could be driven by significant societal issues and a number of high-profile harassment cases in the US.
Collaboration is key
The industry is naturally collaborative and this needs to carry through to approaching sustainability. As the industry continues to digitise, the climate impact becomes more difficult to measure and requires a collective effort across the gaming ecosystem – from 1st party to 3rd party, and from telco to software providers. The larger organisations in the industry have an opportunity to use their resources to benefit the sector, and we are already seeing this happen with the Playing for the Planet alliance – but it’s a long and evolving road.
Internal collaboration is also critical. An honest and communicative approach must be taken by the board and leadership team. This is a business challenge that affects everyone and should therefore be a collective responsibility, irrespective of whether there is a Sustainability leader or not.
There is one undeniable fact; for gaming organisations to effectively deliver against sustainability targets, all employees need to be engaged. Most importantly, the CEO must be a champion of the vision.
Odgers Berndtson supports the reduction in climate risk through its influence and work with organisations and their leaders around the world. The firm advises clients on finding board level environmental and sustainability specialists, as well as sustainability-conscious CEOs and other leaders. The firm has committed to, and set, science-based decarbonisation targets verified from the Science Based Targets initiative (SBTi), the global leader in driving corporate climate action through measurable targets backed by science. Read our full commitment here.
To discuss sustainability in the gaming industry or the introduction of a Sustainability leader to your studio/organisation, please contact Kathryn Spetch, Consultant, Global Gaming Practice directly or get in touch with us here.
To read more on our collected insights and opinions on the subject of Sustainability in the workplace and beyond, read our Sustainability Matters here.
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