Being sustainable really can pay
by Mark Greenlaw, Cognizant’s CIO
Businesses across the globe are under severe pressure to decrease their carbon footprint and make their operations greener and more sustainable. But, with cost pressures stronger than ever, will the current economic climate dampen the enthusiasm for IT companies to proceed with sustainability initiatives?
A recent report by carbon market analyst New Energy Finance (NEF), suggests so. It highlighted that although reduced economic activity due to the financial crisis will decrease levels of CO2, in the long term a lack of funding for carbon-reduction initiatives is likely to have an adverse effect on emission levels. Nevertheless, the importance of reducing carbon emissions is an issue that will not go away, regardless of how the economy stands. As we’re frequently reminded, we need to act now. Worryingly, at the March 2009 Climate Change Summit in Copenhagen, scientists predicted that sea levels could rise by a metre by the end of the century - endangering 10 per cent of the world’s population. This new estimate illustrates the crucial need for organisations to take accountability for the environmental impact of their operations.
Businesses are already facing an urgent requirement to comply with upcoming environmental legislation as governments across the world look to reduce humanity’s impact. To help them, governments will provide much needed support for sustainable business practices through tax-breaks and incentives. For example, in the United States the green stimulus package recently signed by President Obama, includes $71 billion allocated towards energy and environmental initiatives and another $20 billion for green tax incentives. The aim is to stimulate economic demand and at the same time make it greener, cleaner and more sustainable. Britain, Germany and China are all using stimulus bills to make huge new investments in clean power and drive growth in smarter, more efficient and more responsible ways.
As a knowledge-based industry, IT outsourcing is not considered a major contributor to greenhouse gases compared with greenhouse gas intensive industries. However, the industry’s major players often have huge numbers of employees (over 63,000 in our case) who are distributed throughout the world, so there are opportunities to generate significant internal carbon reductions. At Cognizant, our aim is to reduce waste and improve natural resource productivity to reduce operating costs and green house gas emissions. These savings that can be passed onto customers, and lay a foundation of return-on-green-investment to prepare companies for upcoming regulation.
In addition to being green themselves, IT service providers now have to be prepared for environmental measures to be included in contract negotiations. Providers and their customers – the end-users – need to be clear on exactly what they want to achieve. Consider the following example; a company is trying to run its business as sustainably as possible. It decides to outsource a portion of its IT function, which currently contributes 100,000 tons of green house gases (GHG) per year. When it moves the work to the outsourcer, ideally they should meet the company’s business’s Service Level Agreements (SLAs), and should also be able to perform the work at a reduced level of GHG emissions, say 80,000 tons. If the outsourcer is less efficient and does the work at 110,000 tons, then the decision to outsource has actually increased the overall GHG emissions and is contradictory to their sustainability goals.
By collaborating to formalise targets at the planning stage, all parties can make sure that any goals set out in the SLA are tangible and realistic. This means that progress can be easily measured, reviewed and redefined as required.
In the public sector this has been formalised, with the UK government announcing last year that sustainability would be a factor in all procurement decisions. However, it remains an important issue in the private sector too. Government regulation and concerns about corporate accountability mean companies need to pay attention to sustainability, even if the recession has pushed it down the agenda. A survey conducted as part of The Brown-Wilson Group’s Black Book of Outsourcing revealed that 21 per cent of European and American companies that outsource have already added green elements to their contracts, with a further 36 per cent wanting to switch to a greener IT partner over the following 12 months. With this in mind, outsourcing providers who ignore the environment do so at their peril.
An effective first step in any sustainability process is to focus on reducing the demand for energy through conservation efforts; this yields the highest immediate environmental benefit and return-on-green-investments for both individuals and corporations. A McKinsey study has estimated at a global scale that there is $900 billion in energy savings, which could be captured with $170 billion in efficiency investment. Energy efficiency is now frequently referred to as “the fifth fuel” since it represents such a tremendous opportunity to reduce the consumption of the other four primary fuels: coal, oil, natural gas, and nuclear.
When Gartner included Green IT in its Top 10 Technologies for 2009, it suggested that shifting to more efficient products and approaches can allow for more equipment to fit within an energy footprint. Gartner also warned that organisations should consider the impact environmental regulations will have on the business and consider alternative plans for data centre and capacity growth. Outsourcing firms present a more sustainable option here, since they will generally use more efficient data centres and can exploit economies of scale.
Virtualisation also appeared in the Top 10 Technologies for 2009, both in terms of server virtualisation and virtualisation in storage and client devices. While virtualisation isn’t a panacea for carbon reduction, and if poorly managed can create a complex IT environment, it’s also a major tool in driving down overall IT costs and environmental impact. Cognizant has virtualised over 450 servers in its data centres to reduce energy consumption, virtualising eight per cent of current servers with the goal to reach 80 per cent over next three years. As a result of virtualisation, Cognizant reduced server procurement by 35% in 2008, despite growing by 32%. We’ve used our knowledge in this area to directly help our customers. We worked with a major PC peripherals manufacturer to reduce its number of servers by more than 50 per cent through server virtualisation. We also implemented a programme to help a major publisher reduce its data centre energy consumption by 40 per cent, resulting in comparable energy savings and a big reduction in carbon emissions.
There are, of course, less complex measures that can also be taken, such as individual power consumption, paper use and travel. These projects are often relatively simple to implement but provide dual benefits – a reduction in carbon emissions and significant cost savings. Service providers can also put these into practice within their own organisations, generating further savings that can be passed onto customers.
One such project Cognizant has implemented is a power management program that puts desktop PCs in hibernation mode after-hours. It’s a simple step, but one that will save Cognizant an estimated 18.75 million kWhs of electricity annually, resulting in $2.5M annual cost savings and an estimated 17,500 metric ton annual reduction of carbon emissions – the equivalent of flying back and forth between New York and India over 5,500 times (according to The Carbon Neutral Company).
When it comes to paper, any company irrespective of size can re-evaluate the need for printing and introduce simple measures that make vast differences. For example, Cognizant implemented a green BPM solution for a large pharmaceutical company, helping it save 1.2 million pages annually and resulting in a CO2 emissions reduction of approximately 20 metric tons annually.
Business travel in a global company can also be a major source of emissions. Along with others in our industry, we are working hard to reduce this. Cognizant is focussed on reducing its travel by encouraging the use of collaborative tools such as online meetings and telepresence. For example, we hold an annual IT management meeting in India to formalise plans for the coming year. This year, we conducted a virtual offsite meeting instead, using Microsoft Live Meeting to virtually bring together 25 of the management team from around the globe. Achieving a 10 per cent reduction in travel would lower our carbon emissions by 2,800 metric tons annually.
Environmental legislation will only increase over the next few years as the effects of global warming become more apparent. As legal requirements become more complex and far reaching, demand for green outsourcing partners and engagements will increase.
The business community needs to understand that going green and cutting costs are not mutually exclusive. Implementing a green initiative can be difficult as it requires a new mindset across an entire company – but often even simple steps can reap significant financial benefits, and the best outsourcing firms can often help. As inherently globalised businesses developing best practice across many fields of IT, outsourcing providers can draw on their experience of working with blue-chip IT firms and instil the knowledge and process developed internally within their client base. With increasingly demanding legislation expected over the next few years, companies should prepare now and let IT lead the way in their green programmes.