For many small businesses, ICT (Information Communication Technology) infrastructure is now one of the largest contributors to their carbon footprint. Driven by current economic times and environmental concerns, many small businesses are making green considerations an important factor in ICT purchasing decisions.
Up until very recently the green spotlight has focussed most on the big end of town—mining, petrochemicals and utilities industries. These industries have made attempts to develop robust environmental management policies and have been concerned to establish their green credentials. Whilst not always seen as shining beacons for the environment they have made significant efforts to address environmental concerns raised by their business practices.
That spotlight has altered and it is the IT industry which is under increased scrutiny. Now more than ever before the green credentials of information communication technology (ICT) providers are under the microscope and are seen as critical to their standing in the marketplace. As climate change, carbon emissions and energy consumption have become issues of mainstream concern, customers both large and small are now assessing providers on the environmental impact of their technology offerings rather than focussing only on more traditional criteria such as performance and value for money.
Impact of ICT industry on the environment
Businesses in Australia generate more carbon dioxide emissions from their use of ICT than the entire civil aviation sector – with ICT usage generating 1.52 percent of the total national carbon dioxide emissions compared to less than 1 percent for civil aviation. In the United States, servers alone account for 1.5 percent of all energy consumption (a figure expected to double in the next few years). Organisations are beginning to factor carbon emission costs into their pricing structures, as they recognise that use of environmentally friendly ICT is a market necessity.
For SMEs rising energy costs provide further financial incentive to pursue green ICT solutions. It has been estimated that electricity costs will probably rise by 50 percent to 100 percent by 2012 compared to an extra $20 per PC and $30 per server to introduce more environmentally friendly IT equipment into the office. Electricity used for operations and cooling accounts for 60 percent of the day-to-day running costs of a typical data centre and due to decreasing server prices, it is estimated that it will soon cost more to power and cool servers over their lifespan than to purchase them.
In response to the increasing market trend towards green ICT solutions, governments abroad and at home are imposing environmental compliance standards on IT procurements and emissions. Internationally the EU has implemented directives regulating waste electrical and electronic equipment and hazardous waste. The Australian federal government too has lawmaking in this area very much in its sights. Recently, the National Greenhouse and Energy Reporting Act 2007 (Cth)(the “NGER” Act) established the National Greenhouse and Energy Reporting Scheme (NGERS). Organisations both large and small will need to assess whether they meet thresholds for greenhouse gas emissions, energy consumption or energy production. SMEs falling within scope will need to budget for such assessments and any resulting compliance and reporting costs. Time is running out as the first reporting year is 2008/2009 and organisations will be required to register by the end of August 2009. Even if your organisation does not fall within the threshold for registration and reporting, SMEs dealing with larger companies subject to the new requirements are likely to find themselves caught up in the race to improve reporting on emissions and consumption to these companies whether they like it or not.
As one of Australia’s largest ICT consumers, the federal government has indicated that it may introduce grants of up to $1 million for secondary schools to invest in thin client technology. Thin clients have been singled out as the preferred technology for their reduced cost and improved energy consumption when compared to the usual desktop environment. As the federal government rolls out its National Secondary School Computer Fund, providing computers to every student in years 9-12, ICT vendors with strong green technologies who are able to meet the required standards appear likely to be well placed to profit from this initiative.
The New South Wales and Queensland State governments have also taken action, introducing green policies and requirements for government department purchases of IT services. In New South Wales, hardware procurements require certification that they will be disposed of sensitively, whilst in Queensland, departments may only purchase from approved suppliers who have proved that both the supply and disposal of their products conform to particular green standards.
Businesses and Industry Response
So what response have we seen from industry? Both consumer businesses and the ICT industry have reacted to global environmental concerns, and have introduced strategies to reduce their carbon footprints and power bills.
Corporate Australia has recognised the potential cost savings. The Australia and New Zealand Banking Group (ANZ) estimates that 40-50 percent of its power consumption is directly related to its ICT infrastructure. By simply banning the use of screensavers in the office, ANZ was able to reduce its energy consumption by 4 percent and save $500,000 in electricity costs.
In addition to cutting energy consumption through company policy, the environmental concerns of businesses are now also flowing through into contracts. Purchasers of IT services are increasingly including “green” standards in their vendor selection process. A survey conducted revealed that 18 percent of companies considered the “greenness” of their vendors a valid selection criteria, and 30 percent expect it to become a factor in the future.
One of the more nimble telco companies in Australia, Macquarie Telecom has comprehensively embraced “green” technologies. It recently awarded a major ICT contract to Sun Microsystems, passing over its incumbent supplier on the basis that Sun had better environmental credentials and would therefore help Macquarie to reduce its carbon emissions and power usage. 95 percent of the components in Sun’s products can be recycled, re-used or re-manufactured and steps have been taken to remove hazardous substances by replacing PVC components with steel or aluminium.
Many ICT providers have become involved in consortiums such as “Green Grid” and the “Climate Savers Computer Initiative” which aim to develop energy efficiency standards and metrics for the industry. At an operational level, a number of ICT vendors including Apple, Dell, HP, IBM and Sun Microsystems have all developed more energy efficient ICT products and services, and are branding their organisations as environmentally friendly. These vendors are focussing on enhancements to their product offerings in relation to cooling techniques, energy efficiency, recycling and green manufacturing.
New eco friendly technologies are diverse, and include:
- server virtualisation and thin client technologies;
- power management applications;
- more efficient server configurations and hardware;
- improved cooling systems for servers (especially in data centres); and
- the replacement of traditional telephone systems with IP phones.
Environmentally Friendly ICT Purchasing and Procurement
The shift in the ICT market towards environmentally friendly products and services is already having a significant impact on customer ICT procurement behaviour. Vendors who can demonstrate eco-friendly ICT solutions that respond to customer environmental concerns will win the business.
The move to more eco friendly technologies and tougher economic times present SMEs with a real opportunity to reduce technology spend whilst maintaining performance and capability. Whether customer or supplier there is no avoiding the green spotlight any more. As eco-friendly contracting becomes the norm, customers will vote with their feet. As an SME are you confident that you have the expertise to maximise your organisation’s ability to take advantage of an environmentally aware ICT market? Make sure you are not left behind!
—Dudley Kneller is a Partner with law firm Middletons (www.middletons.com). He specialises in information technology and outsourcing and has recently advised a number of clients on their green ICT contracting requirements.