Going above and beyond

The ICE365 and DigitalRG.com Materiality Matrix will be the first project to plot the gaming sector’s ESG priorities in the coming year. Click here to take part. Read the first part of the series here.

Take a look at the ESG, CSR or sustainability report of any gambling company and it’s pretty clear the most pressing issue the industry faces on this front is responsible gambling.

Indeed, failures in this area have been behind many of the biggest fines handed out by regulators in recent years and also some of the most damaging negative press surrounding the industry.

But while responsible gambling typically tops firms’ materiality matrices and there’s a growing awareness that safer gambling practices are the key to the industry’s sustainability, some feel that many firms are paying lip service to the area.

Anna Yuryeva (pictured), senior analyst at ESG ratings agency Sustainalytics, says that although the impact of its products and services is one of the most material ESG issues for the industry, the agency often finds companies lacking in detail.

“It is a common shortcoming; it is quite difficult to find a responsible marketing policy that meets best market expectations. A lot of companies don’t really have a formal policy on this and we have tried to point out there needs to be a standalone document where you outline all steps that you try to take in order to target the right customers and how you then inform them how you will educate them on responsible gambling,” she explains.

“What we generally tend to see would be very broad statements addressing responsible marketing but not really going into the specifics of it.”

She says she would also like to see companies tracking their performance on responsible gambling indicators, and reporting this information consistently so it’s clear how the company has progressed over the years.

Where’s the hard data?

In this regard, there have been some positive developments in recent times. For example, in February, Kindred became the first online gambling operator to start disclosing the share of its revenue derived from harmful gambling, announcing this alongside a goal to reduce the percentage to zero.

For the first quarter of 2021, it said its share of revenue from harmful gambling was 3.9%, a reduction from 4.3% in the last quarter of 2020.

Maris Catania (pictured), head of responsible gaming and research at Kindred, says having such a goal is important in embedding the importance of RG into the company’s structure and purpose. “It is great for someone in my position because you have the whole company supporting you. It is one goal, not just for the RG team but for the whole company.”

She says Kindred’s approach could easily be adopted by other operators. “When calculating the percentage of revenue from harmful gambling we have disclosed how we are doing this and in fact this is based on three groups: customers who close their accounts for addiction, customers who have used self-exclusion, which is usually used as a proxy measure for problem gambling in most research, and also those at the highest risk on PS-EDS [Kindred’s proprietary Player Safety Early Detection System].

“The first two are very easily replicable so this could be done by anyone because it is process driven. Even if others don’t want to go public, at least they could use this information to monitor what they are doing because we are finding it quite a good approach.”

The percentage of revenues from harmful gambling is something that Italian operator Sisal is also looking into, according to Giovanni Emilio Maggi, chief institutional affairs and communication officer.

“Currently we are using international expertise and practices to define different sets of KPIs to be used and then linked to business performances in order to disclose the percentage of revenues that come from problem gamblers,” he explains.

“But – evolving from compliance to commitment – we need to take a step forward. We are now testing some predictive data-driven solutions to forecast, for example, levels of ‘self-exclusion’ in the next 30 days, as well as the number of potential problem gamblers in the next months. Recently we analysed the gambling behaviours of more than 15,000 Italian online customers (the most comprehensive analysis ever in Italy) to define both the percentage of problem players and gambling patterns to identify and intervene with suitable actions to reduce and then avoid any potentially risk behaviour.

“However, we are strongly convinced that the overall objective to work on is not only to disclose the percentage of revenues that come from problem gambling, but to reduce the number of problem players and thus the revenues coming from them. The final goal is to become a ‘zero problem gamblers company’.”

Going beyond compliance

Another way firms could demonstrate their commitment to responsible gambling is to look at their responsible gambling policies holistically and globally, says Mike Llewellyn, director in the sports and entertainment industry group at law firm Squire Patton Boggs.

“For example, they could operate by taking bits from more highly regulated jurisdictions in terms of social responsibility and imposing those on their operations in other jurisdictions.”

But beyond showing an increasingly ESG-conscious investor community that they are doing as little harm on the social front as possible, gaming firms also increasingly need to go further and also show that are doing good on the social front, or that they have social value.

One way Llewellyn, whose work involves representing operators, data companies and sports rights holders, sees this increasingly happening is related to the sports that play such an integral role in gambling firms’ product offerings.

“This investment back into sport at a grassroots and community level is certainly something that is being promoted,” he says. “Gambling companies are also doing their bit to promote integrity within sport, so the partnerships with the data companies and the regulators and that whole ecosystem working in a way which promotes sporting integrity is something gambling companies certainly have a role to play in.”

While in Europe most operators would individually work to highlight their social purpose, in the US the American Gaming Association (AGA) has taken a prominent role in helping the overall industry convey the contribution it makes in this area.

Casey Clark, senior vice president of strategic communications at the AGA, explains the rationale as: “Investment groups are evaluating businesses differently, lawmakers are expecting different behaviour from business and so not only do our members understand and feed into these areas, but as an association we are really trying to do something unique and change the dialogue about who we are and look at where we are strong and identify areas where the industry can be better. I don’t know of any other trade associations that are trying to do anything like that in any industry.

“In the gaming industry in particular I always talk about our licence to operate that is granted through regulation, which in and of itself includes pretty stringent requirements for how you behave as a responsible entity, but it is also core to our social licence to operate, which is very different here I think than in other markets.”

For Clark, however, it’s less about moving gaming companies towards embedding social value into their companies and more about communicating that they’ve already been doing so for some time. “People have antiquated thoughts about who we are as a business and only tend to think about us in terms of economics, but really we have seen that changing over the last decade or so. If you look at what we did to support our communities throughout the worst of the pandemic, from giving supplies, giving food for the insecure in our communities, testing and tracing and creating vaccine sites, it was just remarkable.”

As was detailed in a report produced by the AGA, land-based casinos in the US played a significant role in the Covid-19 efforts, everything from donating, procuring and even making protective equipment, as well as supporting communities with food and financial contributions.

The diversity dilemma

The US was, of course, also the focal point for another one of the big issues related to the social pillar of ESG in the recent past: the resurgence of the Black Lives Matter movement last year, which brought a greater focus on diversity to the fore.

However, while there is work to be done here, as is the case in many other industries, Clark argues the gaming industry already has a “decent diversity story to tell”.

“Four in 10 in our industry are minority workers. We have a huge percentage, over 70%, of members that have recruitment programmes that are directly targeted at minority employees and that is to say nothing of what we are doing with them to create pipelines for partnerships or career opportunities from more diverse schools or communities and training programmes and things like that.

“There is a lot that we have been doing and continue to do in this area, but like other industries we find that our frontline workers – those you would see if you walked into an integrated resort in the US – are really representative of the communities we serve but like other industries, when you get a little higher up the ladder those numbers thin out and so we need to work together to create pipelines to management and longer careers for our workforce so that it more closely resemble the communities that we are working in.”

On this front, European operators are in the same boat, although thus far the focus has perhaps been more on gender diversity than ethnic diversity. Given that a number of European countries have brought in mandatory gender pay gap reporting but not yet done so for ethnicity pay gap reporting, this is unsurprising.

In any case, many gaming firms are still lagging on the gender front, though this is something many are now taking efforts to address. “We have a long-term ambition to increase the gender balance when it comes to senior leadership to at least 30:70 to ensure we have very inclusive leadership principles across the management group,” says Kindred’s Catania.

Similarly, at Sisal Maggi, (pictured) says diversity and inclusion has become a key issue in its sustainability strategy, especially since the company’s relatively recent expansion into new territories.

“Focusing on gender parity we have activated a specific cultural change programme, ‘Women in Sisal experience’ (the WiSe project), which has engaged the female workforce to better understand and explore diversity issues. The aim is to implement a certification programme on gender equality and to define a policy for gender parity.

“In 2020 women made up almost 40% of our employees at international group level. The short-term goal is to achieve 50% women recruited, even in management. At the beginning of 2021, three women have been appointed in our leadership team. At the same time, we are strongly committed to reducing the difference between the remuneration for men and women who are working for Sisal.”

On the diversity front then, it appears operators are at least taking concrete steps in the right direction. However, while there are certainly some standout examples in both this and other areas that fall under the social plank of ESG, it’s clear the wider industry still has some way to go before it is viewed by the investment community as having full marks in this area.