RESEARCH AND ANALYTICS

In 2013, Netflix began to release all episodes of a show at once, giving birth to the cultural phenomenon known as "binge-watching". The rising trend of binge-watching has certainly shifted our consumption habits, as 60% of young Americans aged between 13-17 years and 69% of adults aged between 18-29 years, have been found to indulge in TV shows or films in one sitting, according to a survey. A decade earlier, we were binging on VHS, VCDs, and DVDs, and now the medium has changed to mobile, laptops, and smart TVs. Netflix has also gone beyond "binge-watching" to "binge-racing," wherein fans complete a new show on the very same day it's released. Undoubtedly, we all must have "binge-watched" the latest Money Heist in one go, too.

However, there is another side to the story. Binge-viewing is believed to offer us an escape from the toils of daily life since binge-viewing a TV show produces a continuous stream of dopamine in our brains. There is a very fine line between enjoying and abusing, and, like any form of dependence, studies have shown that "binge-watching" shows might actually be less enjoyable and less memorable than watching new episodes on a weekly basis.

More importantly, the effects of heavy use of streaming platforms such as Netflix, Hulu, and Amazon Prime have been reported to include depression, weight gain, chronic illness, sleep disorders, and even a decreased libido. Netflix's CEO, Reed Hastings, himself, has admitted that Netflix is actually competing with users' sleep to make money. And they have been very successful so far, as evident from the increase in their paid subscribers, which grew from 71mn in 2015 to 204mn in 2020.

Did you know that mining the most popular cryptocurrency (bitcoin) consumes more energy (~140-160Twh annualized) than the Netherlands and many other countries? Not only this, a miner’s electricity cost accounts for more than 50% of their income.

At the heart of the issue is a decentralized network algorithm (known as proof-of-work) which the miners use to create new sets of transactions a.k.a blocks. These blocks need to abide by the code rules and are validated by other miners for them to get added to the blockchain.

The miner gets rewarded with a fixed number of coins and transaction fees for a validated block. Further, the bitcoin network is designed such that a block is added only every 10 minutes to the blockchain. The process has an element of trial-and-error and a rising number of miners globally are aggressively trying to get their blocks validated to get incentivized. Thus, miners use power guzzling super-fast computers making the entire process energy-intensive. With skyrocketing crypto prices, energy consumption is also burgeoning.

For this reason, bitcoin currently fails to adhere to the sustainability standards, resulting in many countries banning bitcoin mining (ex. China, Russia, etc.). But there are options such as maximizing the usage of renewable energy in mining, alternate mining algorithms like proof-of-stake (lower energy consumption), introducing carbon credits, or pre-mining the coins that can help mitigate sustainability concerns. However, such measures will take time to be effective. Until then bitcoin’s energy consumption is expected to remain volatile, just like its price.

Double-materiality - an extension of the “materiality” principle, was formally conceptualized by the EU commission in non-financial disclosure regulation in 2019. It encourages companies to disclose adverse business impacts on people and the planet i.e. “impact materiality” alongside “financial materiality” which covers financially material sustainability issues.

Materiality assessment is a major building block of corporate sustainability reporting and strategy. It ensures that the stakeholders have access to relevant ESG matters and drives companies’ efforts towards the most pertinent sustainability issues. The application of the double-materiality concept will not only measure the impact of sustainability matters on companies’ bottom line or enterprise value but also expects them to assess their impact on material environmental and community issues. This assessment of both inward and outward impacts will help the companies to identify, describe, and act on issues that matter most both from a financial, as well as a societal point of view.

However, identifying material ESG/sustainability factors is subjective in nature. Though there are a few frameworks that define materiality, such as SASB, GRI, however, it is not followed uniformly and often involves management discretion.

This is resulting in an ESG data deluge, where quantity is superseding quality and adding to stakeholder confusion – especially regulator and investor groups. Having said that, the principle of materiality is evolving, and stakeholder expectations are changing. With reforms in regulations, frameworks, and technological innovations, we will certainly see meaningful disclosure in the coming times and be able to reap the benefits of the “double-materiality” principle.