“This progress is not enough”
– US President Barack Obama
“The Copenhagen Accord may not be everything that everyone hoped for. But this decision of the Conference of Parties is a new beginning, an essential beginning. … We have the foundation for the first truly global agreement that will limit and reduce greenhouse gas emission, support adaptation for the most vulnerable, and launch a new era of green growth.”
– UN Secretary-General Ban Ki-moon.
The failure of the UN Framework Convention on Climate Change to deliver a legally binding agreement to tackle climate change last week was disappointing – but it remains an undeniable fact that politicians, legislators and businesses are now more focused on protecting the environment than ever before.
Businesses are acutely conscious of the need to objectively scrutinise their business models, to cater for and implement the next generation of low-carbon, waste and water technologies which will enable their existing processes and functions to be more cost and resources efficient, and to cope with future legal and market challenges.
However, many businesses have yet to comprehensively review: the contribution to their overall costs of energy, waste, water or transport; or the general impact on the environment of the Information and Communications Technology systems, infrastructure, devices and services that underpin and support their operations (ICT). The real cost savings, environment and other benefits achievable by focusing on the “green” or “clean” aspects of the procurement strategy for that ICT should not be underestimated.
In this series of articles we highlight some of the reasons why businesses should reinvigorate their focus on sustainable business practices, and some of the practical steps that can be taken in ICT systems and services procurement to optimise sustainable performance and cost efficiency.
Why develop a “green” ICT procurement strategy?
ICT is responsible for a growing proportion of businesses’ energy and waste budgets, greenhouse gas emissions, carbon footprint and general environmental impact.
We have become a knowledge society. Businesses’ ICT footprints grow daily, fuelled by the need to digitally store, access and communicate the ever growing volume of information and data they generate, applications growth and the implementation of new technologies such as smart metering and cloud computing and other new business models. In the UK, data centres alone are estimated to account for more than 2% (and rising) of all electricity consumption. In addition to the energy that ICT consumes during its use, the energy, water and materials used in its manufacture, the packaging and logistics associated with its distribution and the disposal of ICT equipment at the end of its useful life can all have a material environment impact.
Although the benefits of green procurement strategies are becoming better understood, it seems few procurers of ICT goods and services are taking significant practical steps to ensure suppliers deliver on promises relating to the sustainability or environment impact of the ICT goods and services they buy.
“…climate change is one of the greatest challenges of our time. We emphasise our strong political will to urgently combat climate change …”
– Copenhagen Accord. Policy makers are increasingly looking at ways to facilitate the transition to an energy-efficient, low-carbon and low waste economy. This along with significant political and economic concerns surrounding energy security and rising energy costs form the basis of an increasingly long and compelling list of reasons why now is a good time to start taking “green” ICT procurement seriously.
Why it is time to review the “green” aspects of your procurement strategy
ICT contributes materially to the energy consumption of most businesses. A focus on reducing the energy, water and other resources and consumables your ICT consumes, full life cycle costing, use of innovative technologies and the timing of equipment refreshes can have a material impact on your energy bills and operating expenditure. With an ever-growing number of ICT tools being developed for monitoring, measuring and controlling power usage, ICT is increasingly recognised as having the capacity to make a significant contribution to allowing businesses to reduce their consumption.
Government procurement policies:
Although the Copenhagen Accord only “recognised” the scientific case for keeping temperature rises to no more than 2°C and failed to set out any binding commitments to emissions reductions to achieve that goal, it did emphasise and prioritise the need to accelerate technology development. The EU Commission has already released a European Code of Conduct on Data Centres Energy Efficiency, and in its recent recommendation it clearly stated that governments should seek to mobilise ICT to facilitate the transition to an energy-efficient, low carbon economy.
Through the activities of the Sustainable Procurement Task Force and the increasing prevalence of sustainability guidelines and contractual requirements produced by the Office of Government Commerce (OGC), the UK Government is demonstrably beginning to push its sustainability agenda into the public procurement arena. OGC continues to look at opportunities to incorporate environment and sustainability requirements in its Model Contract for ICT services, with new provisions introduced in the recently released version 2.3 and further ones anticipated in version 2.4.
To meet their carbon reduction targets policy makers will need to actively promote behavioural changes in ICT procurement and use, as well as increased investment in clean tech research and development. As a result we can expect to see further regulation in this area, with the government using taxation and goods and services legislation to incentivise the development, production, location and use of (or penalise any failure to use) energy efficient data centres and ICT.
Increasing environment impact regulation:
In the UK we have already felt the effects of the introduction of the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive and the Waste Electrical and Electronic Equipment Directive (directives relating to the use of certain hazardous substances in electrical and electronic equipment and dealing with the end of life recycling and disposal of such equipment, respectively).
The impact of the Eco-Design Regulation will begin to be felt in January 2010 (see our recent Law-Now for further details). Similarly the European Commission’s action plan to boost the role of ICT in “greening” the EU economy, the Climate Change Act 2008 (the UK’s long-term framework to tackle climate change) and the Carbon Reduction Commitment (a mandatory scheme affecting certain businesses to promote energy efficiency and help reduce carbon emissions) are all having an impact, requiring organisations to scrutinise their business models.
Business reputation and saleability:
Environment impact reporting obligations, both driven by regulatory and corporate social responsibility requirements, are on the increase. Investors, employees and customers are increasingly looking at the “green” credentials of businesses, goods and services when making decisions regarding investment, employment and where to place their custom. A failure to keep pace with market trends in this regard could ultimately have a damaging effect on a business’ market share, ability to grow and attractiveness in the eyes of investors. The ability of a business to demonstrate vision and adapt to the demands of a low carbon economy and comply with the growing raft of environment impact legislation will inevitably become a significant feature of the transactional due diligence process, having a direct impact on business valuations. Businesses that are demonstrably environmentally-aware are becoming increasingly seen as indicative of a management team focussed on cost control and addressing future business risks – making them more attractive to investors.
Against the backdrop of the various factors outlined above, many businesses are taking steps to try and “green” their ICT procurement strategies. For this to be successful key performance and consumption baselines, covering all relevant stakeholders and functions in the business, need to be determined and considered in the context of the overall strategy. All too frequently the various functions within many businesses operate in silos in pursuing their individual green agendas, and there tends to be a lack of coherence in establishing overall aims of the business with regard to reducing carbon emissions and otherwise greening the business. This tends to result in a failure of each function to wholly recognise their respective green objectives. Although a business may have a coherent green agenda and procurements are commenced with “green” high on the list of priorities, all too frequently the focus moves away from “green” and “clean” requirements as the procurement progresses.
A well communicated “green” procurement strategy, drawing in all key stakeholders, with board-level sponsorship can help address these issues and add real value to your business – both in terms of short term operational cost efficiencies and long term shareholder value.
As the use of ICT by businesses will only increase in the coming years, procuring ICT equipment with an environment-friendlier focus becomes even more of an imperative. In the next article we will look at practical and contractual steps that can be taken as part of your procurement process to ensure your sustainable ICT procurement strategy delivers.