Striving for heightened performance, increased profitability, and lower capital costs? Embrace resilience. Robert Montgomery and Stephen Myers, industry consultants and researchers, introduced a groundbreaking sustainability approach for the gaming industry last year. Now, as they prepare to unveil the inaugural FiNTEL Sustain industry ranking, they share crucial insights gained along this transformative journey.
The gaming industry finds itself at a unique juncture, presenting a rare opportunity to capitalize on sustainable development. This strategic move can elevate the industry's standing, shifting away from current reputational challenges and fostering robust business engagement. Beyond improved competitiveness in regulated markets, transparent reporting procedures yield additional benefits.
Distinguishing itself from sectors plagued by greenwashing and regulatory inadequacies, the gaming industry can build a new reputation as a conscientious and considerate player within highly regulated markets. Drawing inspiration from the alcohol industry, which has successfully embraced sustainability principles, the gaming sector can establish performance criteria consensus and a consistent measurement approach, reaping long-term benefits.
Adopting the UN Sustainable Development Goals and prioritizing responsible gambling aligns the industry with an attractive and profitable approach for investors, analysts, and shareholders. By coordinating and synchronizing sustainable development factors, the gaming industry can substantially enhance its bottom line.
Acting as consultants and researchers in the regulated gambling sector, Montgomery and Myers outlined key issues in a brochure published in June 2023. The positive response led to the establishment of FiNTEL Sustain, wherein they evaluated the 20 largest public gambling companies in Europe and the USA. Using their established system, Montgomery and Myers assessed both B2B and B2C companies, providing a roadmap for optimizing the industry's financial health. These ratings guide operating companies in developing and fortifying their sustainability strategies, translating into significant financial benefits for their shareholders.
Tailoring Sustainability Metrics for the Gambling Industry: A Necessary Paradigm Shift
In contrast to generic ESG (Environmental, Social, and Governance) and CSR (Corporate Social Responsibility) reporting tools, FiNTEL Sustain pioneers a distinctive approach. By incorporating operational and financial performance metrics, it offers a comprehensive statistical dataset that enables companies to pinpoint areas for improvement relative to industry peers.
Crucially, FiNTEL Sustain's metrics are custom-tailored for regulated gambling, encompassing key factors and variables unique to the sector. While traditional sustainability reporting tends to be industry-agnostic, these industry-specific metrics deliver more pertinent and valuable insights for companies, capital allocators, and regulators.
The assessment methodology relies solely on publicly available statistics from 11 diverse datasets, prioritizing full transparency. Five of these datasets align with the UN Sustainable Development Goals (SDGs) within the ESG framework.
The remaining six indicators are:
• Compliance with regulatory and financial requirements.
• Market impact.
• Responsible gambling.
• Executive and non-executive board composition.
• Regulatory indicators across different markets.
• Asset performance and shareholder risk.
Furthermore, the analysis incorporates an additional layer with 12 subsets of data, partially weighted by risk profile. These measurements utilize over 170 individual data points for each business. Rigorous review processes precede publication, ensuring adherence to specific metrics like percentage acceptability or deviation compared to the industry norm. In cases where companies possess measurement capabilities but lack transparency in reporting, supplementary assessment protocols come into play.
FiNTEL Sustain's rankings and assessments are rooted in evidence, transparency, measurement precision, and information availability, setting a new standard for sustainability metrics in the gambling industry.
Result: Land-Based Gambling Establishments Outshine Online Gambling
Remarkably, regulated operators with substantial physical presence secured top positions in the rankings, overcoming potential challenges posed by environmental factors. Surprisingly, this trend suggests that certain online companies exhibit relative inefficiency compared to their land-based counterparts.
Enterprises boasting extensive offline platforms demonstrate a higher degree of organizational structure and conscientious reporting practices, even in the face of ostensibly more rigorous environmental standards and a briefer history of sustainability reporting. Despite the industry's inherent compliance orientation, there remains a considerable gap between current practices and the optimal standards required for individual and collective benefits.
It is evident that companies must streamline their reporting processes, and the regulated gaming sector should unite to function cohesively. Emphasis should be placed on establishing universally accepted goals within the competitive group, allowing investors to gauge sustainability performance at both individual company and industry levels.
The imperative for significant progress looms large, serving as a catalyst for avoiding adverse consequences and unlocking the full spectrum of benefits in the gaming industry's sustainability journey. The path forward necessitates a collective commitment to excellence and a harmonized approach to compliance and reporting standards.
Exploring Opportunities to Enhance Industry Sustainability
• Upon scrutinizing 20 companies, a comprehensive analysis has unveiled several crucial insights:
• Reporting Deficiencies: Every company exhibited reporting gaps, inconsistencies, and variations in their focal points. These deficiencies present opportunities for improvement, with transparent evaluation criteria and goals being one avenue to enhance performance, particularly in responsible gambling approaches.
• Selective Information Presentation: Companies tend to share information that accentuates their perceived strengths or distinctive features. However, this selective reporting may not align with broader sustainability metrics. It underscores the importance of integrating specific operational and financial performance data, complementing general sustainability measurements like UN SDGs.
• Regulatory Action Influence: Companies with a history of regulatory actions, such as fines, tend to adopt a more comprehensive approach to responsible gambling. Despite showcasing this commitment in reporting documents, there is room for improvement in providing detailed and continuous measurements.
• Mergers and Acquisitions Risks: Online gambling firms are heightening their risk profiles through mergers and acquisitions, particularly in markets with lax regulatory frameworks. Integrating disparate systems during these processes often leads to disruptions, emphasizing the need for diligent planning and execution.
• Environmental Emphasis: Sustainability reports often disproportionately focus on environmental aspects, sometimes downplaying or neglecting responsible gambling reporting. Striking a balance in addressing both environmental and social dimensions is vital for a holistic sustainability approach.
Identifying and addressing these opportunities can catalyzepositive transformations, fostering a more sustainable and responsible future for the gambling industry.
Towards Unified Sustainable Gambling Development: A Win-Win Approach
The surveyed companies have a collective opportunity to enhance their FiNTEL Sustain rating and overall sustainability performance. The key lies in comprehensive reporting that aligns with a broader spectrum of assessment criteria, going beyond selective focus areas.
The current lack of consensus on crucial focus areas contributes to confusion. Investors, instead of assessing the industry holistically, gauge its relative sustainability risk and take responsive actions accordingly.
The subpar performance of individual sectors shouldn't be seen as apocalyptic for the industry. Rather, it opens up significant prospects. The gambling sector, governed by stringent regulations and risk-mitigating processes, surpasses many other industries in various aspects.
Embracing Transparent Reporting for Improvement
Transparent reporting is pivotal for refining sustainable development approaches and subsequently enhancing the industry's score. In an era of escalating reporting demands, elevating the industry to new sustainability heights is not only feasible but should align seamlessly with the compliance-centric nature of regulated gambling.
To unlock tangible financial benefits, the regulated gaming sector needs to not only prioritize sustainability but also adopt a unified and cohesive approach. The recent rating and ranking of the top 20 companies underscore the importance of a collective industry effort. Despite commendable initiatives at the company level, achieving a more favorable industry-wide position remains uncertain.
A unified commitment to sustainability promises remarkable positive impacts on all stakeholders involved. This collaborative approach is not just an opportunity but a strategic imperative for the industry's enduring success.
