From CIO to Chief Energy Officer

From CIO to Chief Energy Officer

By some estimates, the information and communications technology (ICT) sector produces about 2 percent of the world's greenhouse gas emissions, roughly the same amount as the aviation industry, whose emission levels have been high enough to get government and regulatory bodies to take action on that sector’s climate impacts.

By 2020, the increasing demand for ICT products and services is likely to push the sector’s emissions up by almost 40 percent, to 1.4 gigatons of carbon dioxide.

At the same time, the ICT industry is uniquely positioned to provide climate change solutions by improving not only the performance of its own products, but that of other industry sectors as well. According to a 2008 report by Global e-Sustainability Initiative and the Climate Group, ICT can help reduce global carbon dioxide emissions by improving the efficiency of ICT products and services like PCs, peripherals, data centers, and telecoms equipment. But the showstopper in the report is ICT’s potential to “enable” large reductions of carbon -- to the tune of 7.8 gigatons -- in other sectors. Put simply, by improving efficiencies of motors, logistics, buildings, and energy delivery, ICT could increase its impact on emissions reductions in other sectors by a factor of five compared to the sector’s own projected increase.

At Business for Social Responsibility (BSR), we summarize these two aspects as the benefits "of" ICT (e.g. ICT product becoming more efficient), and the benefits "from" ICT (e.g. increasing efficiency of systems through the use of ICT products). Companies will benefit from understanding both aspects and thinking creatively about solutions.

Overcoming the Hurdles

Recently, companies like HP and IBM have been engaged in stiff competition to provide new energy-efficient products such as new servers. But many of the companies that would benefit from these solutions, both within and outside the ICT sector, face common challenges in trying to take advantage of them. It is critical that we identify and address these challenges if ICT is to realize its potential, and today’s CIO is well-positioned to lead the way. Following are a few of the big ones:

•    It’s difficult to do the math. Traditional incentive structures and internal payback periods and hurdle rates for proposed investments often miss the multiple, complimentary benefits of green investments. To build the business case, it’s useful to point to the benefits of back-end efficiency, which will better support the product strategy, meeting customer requirements, improving reputation management and stakeholder relations, and boosting overall alignment with the corporate sustainability strategy.

•    There are no generally accepted environmental standards for equipment across the supply chain. Common standards will allow equipment purchasers to make decisions aligned with their business and sustainability objectives. Such standards will also enable equipment manufacturers to better articulate the environmental attributes of ICT products, deepening the buyer-supplier conversation on product benefits. There are emerging standards, such as the Electronic Product Environment Assessment Tool (EPEAT), for waste and energy attributes of computer equipment, but companies have been slow to engage in the standards-setting processes. In a recent Wall Street Journal article, David Lear, Dell’s director of worldwide environmental affairs, contrasts shopping for a PC with buying a car: “What’s your miles per gallon?”

•    Carbon literacy is increasing slowly. Carbon is the common currency that allows the reduced fuel benefits of using teleconferencing to be compared in the same breath as the benefits of an energy-efficient power supply. The lack of a policy framework in the United States and an uncertain global framework post-Kyoto add hesitancy to decision making.

•    Solutions have yet to reach economies of scale. The largest benefits are realized when significant amounts of equipment are replaced. HP’s newly developed “sleep mode” for printers, or IBM’s energy-efficient “System X” servers, will make significant dents in corporate energy—when they’re adopted on a broader scale.

The CIO as CEO (Chief Energy Officer)

The CIO has the opportunity to expand his or her role from that of an information technology solutions provider to that of a “total resource solutions” provider for their organization -- starting with the management of energy.

Here are several ways the CIO can demonstrate value and lead the way toward creative energy-saving solutions:

•    Identify cost savings. “Smart” systems for building automation, RFID tracking, variable speed motors, and monitoring and sensor technologies can all help boost process energy efficiency by increasing the amount of real-time, actionable information.

•    Engage others in your company. The primary drivers of value creation and decision making at your company need to be involved, so build partnerships across important business units and functions like plant operations, strategy, marketing, and supply chain. Sustainability is, by nature, cross-functional, and an understanding of, for example, energy drivers across business units and their value chains, is critical to identifying opportunities to use information technologies to increase efficiency.

•    Understand the value chain. “Life-cycle analysis” -- considering the energy impacts of suppliers providing inputs to products as well as customers using your products -- will highlight hot spots of energy use several steps up or down the chain. Mapping these impacts will help you diagnose problem areas for potential reductions. One example is the work of the Electronics Industry Citizenship Coalition (EICC), which is currently engaged in carbon diagnostics across the ICT supply chain to better understand reduction opportunities.

•    Collaborate with allies in your industry. Find champions and allies where you least expect them. Customer collaboration is a good place to start, and you can also leverage existing partnerships within your industry. Engaging issue-based stakeholders from NGOs and other civil society organizations can help you better understand the sustainability challenges and opportunities—and ultimately articulate a stronger business case for action.

With pressure to grow revenues in a challenging market, the climate/energy challenge represents a real opportunity for CIO leaders to demonstrate to a broad set of stakeholders -- customers, governments, and civil society -- the contribution that ICT can make to can make to sustainability and the bottom line.

Raj Sapru is a manager of advisory services at Business for Social Responsibility (BSR).