Video Game Industry ESG Thematic Report, 2023

Environmental, Social, and Governance (ESG) of the Video Game Industry

The environment, social responsibility, and corporate governance are three prominent factors that have been widely adopted by companies to mitigate sustainability-oriented risks in their respective industries. Multiple programs and targets in accordance with ESG standards are being implemented by organizations to prevent such sustainability-based risks. Industries that are aligned to the ESG standards play a significant role in the minimization of ESG risks.

In the gaming industry, the sustainability factor is not very substantial, but at a deeper level, the environmental, social, and governance aspects are linked to sustainability. Speaking of environmental impacts, gaming is highly connected to data centers, which contribute to emissions. Business travel is also one such factor that has a negative impact on the environment. To tackle these, top companies are transitioning towards the adoption of green energy or the increase in the usage of clean energy for their data centers.

Social factors mostly consist of negative aspects, but it also has positive aspects that can't be ignored, such as video games which enhance psychological outcomes by 69%, physical therapy outcomes by 59%, physical activity outcomes by 50%, health education outcomes by 42%, and pain distraction outcomes by 42%. Other benefits include improved concentration, creativity, memory, language, and teamwork. Lastly, governance also has a part in the gaming industry where the company’s tax contribution likewise forms part of its positive contribution to society. Aligning the tax strategy with the ESG standards contributes to a better understanding of a company's contribution to society.

ESG Trends

The gaming industry has evolved in a significant manner. One such concept is green gaming where it’s not just limited to saving energy but also minimizes waste and educates about key environmental issues like recycling and global warming. Furthermore, eco-friendly games are manufactured using green energy, materials sourced for building up a particular game are sourced ethically and responsibly which is disposed of in a safe manner. This has minimal impact on the environment, and games are also made using biodegradable or recyclable components.

Further, gaming giants such as Sony, Microsoft, and Nintendo strive to limit their emissions. Sony has set goals with its sustainability program to achieve zero environmental footprints by 2050, while Microsoft aims to be carbon-negative by 2030. The Nintendo company is devoted to eco-friendly design when designing video game systems and accessories. Furthermore, it considers the environmental impact of its products, such as chemical substance control standards, the energy efficiency of its consoles, and the ease of recycling its products.

The top known gaming brands each contribute around one to five tons of CO2 to the atmosphere every year per employee. According to research, Nintendo uses over 98% of clean power. In addition, the controllers of Microsoft's Xbox recently incorporated post-consumer recycled (PCR) resins for the first time ever in Xbox hardware.

ESG Challenges

There are several critical challenges faced by the video gaming industry, including the fact that data centers contribute to greenhouse gas emissions. Also, the manufacturing of gaming consoles should be ethically sourced, as improper management leads to waste, which is negatively impactful. Excessive video game play may also negatively impact physical health. For instance, if a child plays video games for long periods of time, he or she may be neglecting more active pursuits. This significantly prevents companies from achieving United Nations’ Sustainable Development Goals (UNSDGs) such as SDG – 3: Good Health and Well-being.

Video games with M ratings can have a negative impact on children that may lead to behavioral changes resulting in violence. There is also the issue of racial stereotyping in video games. There is a reason for this, since most popular games feature white male characters in most instances, while non-white characters tend to be the supporting cast. This form of display promotes an unhealthy diversity culture. Furthermore, the gaming industry lacks diversity, as a smaller number of women employees are recruited compared to men.

Growth of the Video Game Market

A compound annual growth rate of 12.9% (CAGR) is expected for the global Video games market between 2022 and 2030, which was estimated at USD 195.65 billion in 2021. As technology advances and innovation continues in both hardware and software, the market is expected to grow over the forecast period. The research also highlights the critical factors in the industry.

Key Companies in this theme

    • Activision Blizzard

    • Apple Inc.

    • Disney

    • Electronics Art Inc.

    • Lucid Games

    • Microsoft

    • Nintendo

Scope of the Video Game Industry ESG Thematic Report: 

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Benefits of the Video Game Industry ESG Thematic Report: 

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the video game industry, globally

    • Key insights into Infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment