Archive for the ‘Product Life Cycle Analysis’ Tag

The critical role of IT in driving sustainability

In previous columns, I have written about how companies such as Nike, Walmart and SAP are using sustainability strategies like Product Life Cycle Analysis, green product development and the reframing of environmental standards to deliver on their sustainability goals. Now, we turn our attention to the important but often overlooked role of Information Technologies (IT) in supporting green business strategies.  In the past, many companies have been reluctant to consider IT for a host of reasons including the presence of significant legacy assets; the mission-critical nature of many IT systems and; the lack of a strong consumer impetus. 

IT systems and their accompanying data centers are a major source of carbon emissions, toxic waste as well as being a major consumer of energy. According to a study by A.T. Kearney, a consultancy, corporate IT departments creates as much as 1 million tons of obsolete electronic equipment each year and produces 600 million tons of carbon dioxide (CO2) emissions worldwide per year. For perspective, these emissions are equivalent to the annual CO2 output from almost 320 million small cars. As well, some data centers are so big that they consume as much energy and water as a small city.

With Internet-based services growing at healthy double-digits per year, IT’s environmental impact will continue to increase rapidly unless management does something to rein it in.  If most organizations are going to meet their aggressive sustainability goals, they will have to take a hard look at their IT operations. 

Where should they start looking?

Powering down

Energy usage is a key area to tackle first. According to the Interactive Data Group, a typical IT department in 1996 spent 17 cents of every dollar to power and cool a new server. A decade later, the rate jumped to 48 cents per dollar.  The firm predicts that number will grow to over 70 cents by 2012.

When considering ways to reduce power consumption, an obvious place to look is the data center.  A number of steps can be taken here including monitoring and improving HVAC efficiency; switching to more efficient blade server and virtualization architectures and; choosing cooler climates to build new data centers.

The front office is another fertile source of energy savings.  Every firm can benefit from quick wins such as installing power measurement and management software and introducing policies that require PC users to shift to low-power or shut-off state when not using their machines.  When Bendigo Bank in Australia mandated employees turn off unused desktop computers, monitors and printers that used to run constantly, they saved more than $300,000 a year in electricity.

Buy greener

Better purchasing governance is an important tool to reduce a firm’s environmental impact.  For example, managers could stipulate that new equipment purchases must bring the highest energy efficiency ratings as well come from companies that feature prominently in sustainability indexes and standards. Moreover, buyers might also look for products manufactured from recyclable materials and that generate minimum amounts of hazardous waste and carbon emissions.  Finally, in order to reduce the purchase of unnecessary assets, policies should be enacted that prevent buyers from over-buying equipment just because someone wants the latest technology.  One way to ensure this happens is by extending the life cycle of IT equipment.

Improve reporting

Some companies are using IT to improve sustainability reporting across the entire value chain.  Dow Chemical’s IT group, for example, acts as a green watchdog, tracking emissions, performance and vendor activity.   Dow is using this data to calculate a net environmental balance across a product’s entire life cycle to help them better understand how materials are consumed in manufacturing. These insights can identify environmental and cost savings throughout their operations as well as their vendor inputs.  Finally, improved tracking and reporting will enable companies to better meet customer sustainability programs like Wal Mart’s Sustainability Index as well as provide key environmental data to consumers.

Greening IT will be crucial to helping many organizations achieve their aggressive sustainability targets. Managers can ill afford to ignore this under-developed area.  

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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Making sustainability live in your organization

Most executives I speak with acknowledge sustainability’s strategic imperative. A few of them have understood the transformational impact of sustainability and have moved boldly to realign their operations and cultures in order to reap significant business value. This value creation includes tangible outcomes such as improved brand image and supply chain efficiencies as well as intangible benefits like enhanced employee morale and greater appeal to new recruits.   While the majority of organizations have similar ambitious goals, many are unclear how to turn intent into results.

Recently, MIT’s Sloan Management Review looked at how companies were responding to the emergence of sustainability as a mainstream business driver. The study found that most organizations fall into one of two groups: a select group of embracers and the masses of cautious adopters.  Embracers such as GE, Unilever, Walmart, P&G and SAP recognized early that they can leverage sustainability strategically to outflank competition, drive brand differentiation and revitalize supply chains. To bring this vision into action, the embracers quickly integrated sustainability strategies and practices into the core of their business and organizational models. The results have been impressive:  enhanced corporate reputations, significant supply chain savings, higher product margins and a lower environmental footprint .  

On the other hand, the cautious adopters have been more reactive and timid.  They see sustainability as important but within the context of efficiency gains and risk management.  In their planning, sustainability is pursued as a series of tactical initiatives executed within their current organizational model.  In most cases, results have been modest with little appreciable change in competitive position.  Not surprisingly, cautious adopters will be challenged to overtake the embracers as long as they continue to treat sustainability in such an incremental fashion.

Interestingly, capital spending was not a barrier to action.  Despite recent economic and political uncertainty, 60% of surveyed firms reported increasing their 2010 sustainability investments.  What then is holding back most companies?

To drive sustainability, executives need to change the way they do business.  The implementation strategies of embracers offer a number of lessons, including: 

Move early even if there is incomplete information

Brian Walker, CEO of sustainability-leader Herman Miller furniture believes that many sustainability decisions “can’t be reduced simply to a formula or financial return…it requires a bit of instinct, a gut feeling of where you want to go.” In most industries, there are sufficient best practices and case studies to help firms move forward with plans that improve sustainability competitiveness.

Balance a long term vision with concrete short term wins

While long term success favours the ambitious, the reality in most organizations is that short term project wins are needed to generate operational experience and catalyze change.  One IT CEO I worked with refused to implement a large scale sustainability initiative until the firm had garnered sufficient learnings from a couple of pilot programs. 

Integrate sustainability into the organizational structure and operations

Sustainability must be woven into the fabric of the organization and not siloed within a specific department.  For example, GE and Nike translated their bold sustainability mandate directly into their operating units, practices and cultures.  Santiago Gowland, Unilever’s VP of Brand and Corporate Responsibility, says that his company views sustainability as a key business growth lever, treated at the same level as HR, Marketing and Supply Chain Management. For Unilever, sustainability is a new way of doing business.

Leverage top down and bottom up commitment

While getting a strong mandate from the Executive Team and Board is crucial, much of the early effort and ideas must come from the lower ranks.  One firm I worked with gained environmental leadership in their industry mainly through the efforts of a highly motivated, cross functional volunteer committee of low and middle level employees.

Make sustainability integral to key product, service and supply chain decisions

Inputting sustainability criteria into decision making and operational analysis is essential for developing a business case and gaining external compliance.  Companies like SAP and Walmart have driven sustainability savings and compliance using tools like Product Life Cycle Analysis, which look for opportunities to reduce environmental impact while generating significant cost savings.

Successfully deploying sustainability strategies requires more than lip service.  As well as putting their money where their mouths are, practical executives will seek to embed sustainability practices and beliefs within their companies.

For more information on services and work, please visit the Quanta Consulting Inc. web site.