ESG: How These Norms Help iGaming Brands Grow

In the modern world, consideration of the ESG aspects is not just a popular trend. They are a mark of quality and a symbol of sustainability in the highly competitive iGaming market. Today, most of the investors are focused on compliance criteria.

Experts of the CASEXE studio will explain how these principles are changing the casino and sports betting industry. From us, you can order the development of a successful gambling project with a guarantee of quick payback.

ESG on the Current Global Agenda

The name stands for Environmental, Social, and Corporate Governance. These standards are used in many sectors of the economy, including finance, insurance, construction, logistics, and, of course, gambling.

The concept was introduced by Kofi Annan, former Secretary-General of the UN. In 2015, he proposed that large brands reduce hydrocarbon gas emissions, given the increasing risks of global warming.

Over time, new principles related to the formation of relationships with partners and employees have been introduced.

ESG is a kind of response to what is happening in the world, including environmental degradation, social inequality, and the risk of famine in certain countries. All this was a basis for the creation and expansion of the criteria.

Why the iGaming Sector Needs to Comply With ESG Norms

Attention to these issues is an important factor in the capital movement in the global casino market.

The trend is actively supported by:

• regulators that introduce new requirements;
• institutional depositors who use such criteria to estimate the business’ solvency.

Benefits of Implementing ESG Norms

Why it is profitable for entrepreneurs to follow the principles of sustainable development:

1. Image improvement. Today, companies need not only to demonstrate stable growth but also to have a good reputation in the market. Compliance with the described norms makes iGaming brands more successful and recognisable.
2. Attraction of capital. Obtaining a long-term bank loan or huge investments or the decision to participate in joint projects becomes much more difficult if the firm does not meet the above-mentioned criteria. According to Neri Tollardo, former vice president of the Tinkoff group, global funds will soon stop financing businesses that ignore the principles of sustainable development.
3. Performance in the legal field. The world’s leading casino jurisdictions are already implementing these standards into their operation and demand the same from licence holders. Currently, regulators are focusing their attention on compliance with the principles of responsible gambling, open-access publication of annual reports, and other issues.
4. Risk reduction. Adherence to corporate standards allows operators to minimise the perils associated with the disclosure of bank secrecy, money laundering, and other violations. The introduction of social management criteria helps entrepreneurs build a strong team and reduce staff turnover, as well as the costs of hiring and training employees.

ESG and Business Funding

The majority of the investors believe that eco-friendly, fair, and ethical companies are the best drivers of economic growth. The shares of such firms will increase rapidly because they use an integrated approach to doing business and are not aimed at obtaining quick returns.

Claudio Caruana, General Counsel of Gaming Innovation Group (GiG), noted:

Currently, 65% of investment pools around the world are blocking cash infusion in gambling brands. Implementation of ESG principles could become the solution to such a problem. As a result, the industry will receive a new impetus to the development and scaling.

In March 2022, Moody's Investors Service, an authoritative rating agency, extended its ESG profile by adding the gambling industry to it.

The organisation plans to evaluate casino enterprises based on several factors, such as transparency and timeliness of reporting, creditworthiness, relationships with stakeholders, etc.

Moody's rating has already included:

• Kindred Group;
• Entain;
• 888 Holdings;
• Betsson and other large gambling corporations.

Environmental Sustainability Criteria

At first glance, it may seem that the iGaming sector and the ecology are loosely connected. However, this is not entirely true.

Entertainment for money has a huge impact on the environment. While players immerse themselves in virtual worlds, software vendors are constantly pushing the boundaries of technology. Energy consumption, e-waste, and carbon footprints also continue to rise.

Ecological factors that gambling brands should consider:

1. Climate policy. This is how businesses can resolve one of the most pressing issues. Usually, entrepreneurs make donations to charities and non-profit organisations that deal with these aspects.
2. Energy use. The emphasis is placed on the amount of power consumed by market participants (operators, cloud solutions and hosting providers) and its sources, including renewable ones.
3. Waste and pollution. This includes the use of recycled raw materials (for example, for the equipment of technical support offices).
4. Preservation of natural resources. This refers to the specifics of using and protecting water, flora, and fauna.

Hydrocarbon Footprint and the iGaming Field

According to a report by Gambling Insider, CO2 emissions from the casino niche are increasing by 9% every year. This is affected by both the active digitalisation of the industry and the growth of the audience of online entertainment platforms and betting sites. Large data centres that serve the market also harm the environment.

Emissions produced by iGaming firms can be divided into 3 categories:

1. Direct. They come from the activities and sources under the enterprise’s control. Land-based casinos and sportsbook offices have a greater impact on the amount of CO2.
2. Indirect. They appear because of the purchased electricity, heat, or steam.
3. Contamination from sources that are not controlled by operators, including the supply chain, travel, and product life cycles.

Gambling initiatives aimed at reducing carbon dioxide emissions:

1. Involvement of cloud service providers. Business owners benefit from working with those developers who follow an eco-friendly strategy and use renewable energy sources.
2. Sensible travel policy. It includes the encouragement of video conferencing and economy-class flights, as well as the use of public transport and green taxis.
3. Certification of real estate according to ISO 50001:2018. The standard defines the requirements for the creation, implementation, maintenance, and improvement of an energy management system. Companies can construct buildings (offices or support centres) from renewable materials, promote the appearance of special areas, etc.

Initiatives of the Leading Gambling Brands

Let us consider how top operators and software vendors introduce ecological standards:

1. Entain. The supplier of casino and sportsbook solutions promises to become carbon-neutral by 2035. The corporation has developed a program to reduce greenhouse gas emissions as part of the international Science Based Targets initiative.
2. CIRSA. The Spanish provider of entertainment software plans to increase the consumption of renewable energy to 95% and completely reduce CO2 emissions by 2030. The firm also developed the Green Hall guidance for its B2B partners.
3. 888 Holdings. The gambling concern has created a special committee that deals with environmental issues. These are initiatives to combat climate change, reduce energy consumption, and switch to alternative energy sources.

Social ESG Criteria

They show how enterprises form their relationships with interested parties.

Examples of ESG standards in iGaming:

• fair wages for staff;
• diversity, equity, and inclusion (DEI) programs;
• experience and engagement of employees;
• health and safety in the workplace;
• data protection and privacy policy;
• fairness to clients and B2B partners;
• financing of social institutions and projects;
• support for human rights and labour standards.

Adherence to Responsible Gambling Principles

This step is an important and reasonable demand of any regulator. Operators can easily lose a licence if their activities violate the established rules.

Casino companies use the following effective mechanisms:

• multi-factor customer identification, including age verification;
• counters that track the total amount of time spent on the website and the duration of sessions;
• informing the users about the risks related to ludomania;
• restrictions on the number and cost of spins through the provision of breaks between each rotation of the reels;
• bonus program for clients based on their risk passports;
• publication of the addresses of crisis centres that provide assistance to people who suffer from gambling addiction.

Experience of Popular Brands

Entain is considered one of the leaders in the implementation of stable development principles.

In 2021, the corporation introduced the innovative ARC product. This is a virtual bot that works based on artificial intelligence and serves customers in real time.

ARC was created in collaboration with experts from Harvard Medical School. The solution takes into account the behavioural patterns of typical users and people with signs of ludomania and has 26 security markers, as well as an accuracy rating of 90%. The option is available to all Entain B2B partners in 22 jurisdictions.

The brand’s contribution to the entrenching of social sustainable development principles cannot be overestimated. The firm provided:

1. Support for addicted people. Each year, the company donates 1% of its GGR to UK funds dedicated to research and treatment (RET) of ludomania.
2. Gender equality. 33% of jobs in the enterprise are occupied by women. According to the plans, this figure will reach 50% by 2025.
3. Educational initiatives. Thanks to the Big Six compliance program, the average completion rate for mandatory employee training reached 93% (in 2021, it was only 82%).
4. Effective motivation system. 15% of the annual bonuses that managers and executives receive are based on the indicator of safe bets and games, and only 5% on profits earned.
5. Social project financing. Entain supports the development of community sport thanks to its Pitching In initiative.

EveryMatrix is another online casino software vendor that is focused on stable growth. The firm makes regular donations to BeGambleAware, the leading British charity foundation dedicated to the fight against ludomania.

In 2015, the manufacturer launched the Teachstream program. This is an educational mission for needy children from Romania. The company’s goal is to provide access to quality learning in such fields as computer science, mathematics, and English.

In 2023, the brand opened its sixth centre with IT equipment, furniture, TVs, and many training courses.

Effective Corporate Management

In this case, we are talking about how successfully sustainable development issues are integrated into the enterprise’s activity.

It is essential for investors, shareholders, and regulators to know the following aspects:

• who in the gambling firm makes decisions in the ESG area and exercises supervision,
• how executives interact with interested parties;
• what are the governance approaches, and how the results are evaluated.

IFC is a recognised expert whose opinions and recommendations are important to cross-border corporations, big holdings, and global FinTech companies.

In 2019, the enterprise released its Disclosure and Transparency Toolkit. Among other things, the document included ESG standards as well.

Nuances of Administration

As soon as an online casino overcomes the first difficulties and reaches a stable level of ROI, sustainable development issues become a priority.

ESG principles affect many aspects of the quality of iGaming platform’s management:

• transparency of reporting;
• compliance with licensing requirements;
• relations with shareholders;
• anti-corruption measures;
• timely payment of taxes;
• compliance with AML and FATF policies;
• ethic measures of running a business;
• fair competition.

ESG and Regulation

From January 1, 2024, the EU Corporate Sustainability Reporting Disclosure Requirements will come into force. The concept is going to become a key part of the management of all listed businesses, including the gambling and lottery segments.

The CSRD requirements will apply to all large companies that meet at least 2 of the following criteria:

• total balance is above €20 million;
• 7GGR for the reporting year is more than €40 million;
• the average number of employees per year is 250.

European operators will have to comply with ESG standards as well. The main emphasis is going to be placed on measures to combat corruption, money laundering, and terrorist financing.

The Malta Gaming Authority is the first regulator to publicly speak out about the need to introduce ESG into the gambling sector.

At the beginning of 2023, the local Commission announced the beginning of work on a voluntary ESG Code of Good Practice. The initiative, submitted for discussion in July 2023, is an excellent opportunity for entrepreneurs to strengthen their public image.

Carl Brincat, CEO of the regulatory body, noted:

MGA always strives to be at the forefront of legislative innovation and progress. We work to control and develop the industry, as well as to create a space where business owners can grow and improve. Our ESG code reflects a strong commitment to this approach.

The Main Things about ESG Norms in the Gambling Niche

Attention to such issues is one of the key trends in the modern casino market.

• It is beneficial to implement ESG requirements due to improved image indicators, growth of competitiveness, and investment attractiveness. Their support is an indicator of raising capital and a guarantee of risk-free activities in the selected jurisdiction.
• Compliance with environmental principles in iGaming means a reduction of energy consumption and CO2 emissions. The best software vendors make donations to charitable foundations that deal with issues related to global warming.
• Social criteria are aimed at building relationships with interested parties (investors, shareholders, and B2B partners), regulators, and players. Adherence to responsible gambling rules is also an important aspect of the ESG strategy.
• Management standards cover a wide range of matters. These are following the licensing procedure, timely payment of taxes, fair competition, compliance with AML and FATF requirements, etc.

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For all questions, please contact our managers.