January 31, 2010

Booz & Company Publish Paper Titled ‎ ‎“ICT for a Low Carbon World: Activism, Cooperation, Innovation” During ‎Davos‎

Estimates suggest the ICT sector will account for 3% of greenhouse-gas emissions by 2020, however the real potential ‎to be leveraged is the positive environmental impact the ICT sector could have on other sectors through developing ‎‎“Green” ICT solutions; which could help reduce global carbon emissions by about 15% (by 2020)‎.

In collaboration with the World Economic Forum, Booz and Company; in a workshop during Davos ‎presented a paper titled “ICT for a low carbon world: Activism, Cooperation, Innovation”. The paper highlights that ‎Companies operating in the information, communications, and technology (ICT) sector have a unique opportunity to ‎trigger significant environmental benefits by upgrading their operations and by developing greener products and ‎services for their clients. To date, the ICT sector has taken a fragmented approach to green ICT solutions, which could ‎harm the sector’s prospects to positively contribute to the environmental agenda and could limit the sector’s growth. ‎Worse, it could leave ICT companies in the position of reacting individually and defensively to patchwork regulatory ‎measures imposed by governments, according to a new study by Booz & Company in partnership with the World ‎Economic Forum.‎

ICT Can Contribute to Change

The ICT sector is growing considerably on a global scale, but as more and more people enter the digital age, the ‎environmental impact of ICT will only get worse, generating rapid increases in the carbon footprint of some subsectors. ‎Estimates suggest that ICT companies will have contributed roughly two percent of the planet’s total greenhouse-gas ‎emissions in 2009, and total ICT emissions are on track for an increase by 2020 to three percent of global emissions. ‎‎“The sector faces a clear imperative to reduce its direct footprint by reducing the energy consumption of its products ‎and by minimising waste derived from them,” stated Karim Sabbagh, a partner at Booz & Company.‎

However, ICT companies can trigger much larger environmental change by enabling energy efficiency in other sectors. ‎ICT therefore is in a unique position in regard to climate change. Just as the sector’s products can have a multiplier ‎effect in increasing efficiency and productivity among its clients, it can trigger leveraged reductions in emissions among ‎those clients as well, by creating products and services that allow them to more effectively monitor energy use, identify ‎inefficiencies, and transform value chains to become more eco-friendly. The Smart 2020 report, an analysis of ICT’s ‎effect on climate change that was commissioned by the Global e-Sustainability Initiative, estimates that ICT could ‎enable a reduction of up to 15 percent of global emissions by 2020.‎

“In addition to environmental benefits, there are significant economic opportunities for ICT products and services in the ‎sustainability category, but despite this potential, the ICT sector, usually known for cutting-edge solutions, is not yet ‎driving the sustainability agenda,” commented Danny Karam, a senior associate at Booz & Company.‎

In order to improve sustainability throughout the sector, industry-leaders must respond to four imperatives. Only by ‎working on all of these will companies in the ICT sector make the most of all environmental and economic ‎opportunities. ‎

Innovate: Companies must develop new ICT solutions to address environmental issues. The recently announced ‎Green Touch initiative, a global consortium organised by the Bell Labs research arm of Alcatel-Lucent which consists ‎of service providers, academic research labs, government and NGOs, and industrial labs, falls into this category. The ‎goal of Green Touch is a thousand-fold increase in the efficiency of communication networks and aims to assemble ‎reference network architecture and other necessary components within five years.‎

Grow: ICT players must adapt, enhance and grow ICT solutions to address green issues. For example, VMware ‎increased the market penetration of its virtualisation technology in part by demonstrating its environmental impact. ‎

Measure: Although several measurements exist to gauge the impact of green initiatives on a company’s internal ‎operations, none consider the leveraged effects of ICT products and services on a company’s overall client base. ‎

Enable: ICT players must work in conjunction with governments to establish a regulatory structure that can facilitate ‎the innovation and growth of green ICT solutions. ‎

Measures of Activism

Individual ICT companies have adopted a host of strategies to address climate change and other green issues, which ‎can be considered along an environmental activism spectrum consisting of four dimensions. “By looking at key ‎performance indicators along all four, an environmental activism index (EAI) can be assembled that allows companies’ ‎environmental efforts to be quantified and compared to each other,” said Gregor Harter, a partner at Booz & Company. ‎These include: ‎

  • Operational consciousness: This measures the degree to which a company takes steps to improve the sustainability ‎and environmental impact of its own operations. Key performance indicators include the carbon footprint from the ‎company’s internal operations, the percentage of equipment with an environmental certification, the percentage of ‎energy consumed from renewable resources, and the percentage of employees using eco-friendly travel alternatives. ‎

  • Product consciousness: This measures the extent to which a company considers the sustainability and impact of its ‎products. Key performance indicators include the carbon footprint of products, the percentage of toxic materials ‎contained within them, the percentage of suppliers audited for eco-friendly products and practices, the percentage of ‎recycled and recyclable materials used in manufacturing, and the percentage of sales that come from eco-friendly ‎channels. ‎

  • Green enablement: This measures how well a company reduces the carbon footprint of its customers through ‎improvements to current ICT equipment or services. Key performance indicators include aggregated emissions ‎abatements and energy-usage reductions generated through ICT solutions, and the percentage of workforce and ‎budget dedicated to R&D for green products and solutions. ‎

  • Green innovation: This measures the performance of an ICT company in developing innovative solutions that reduce ‎customers’ carbon footprints beyond ICT-related products and activities. Key performance indicators include non-ICT ‎emissions abatements and energy-usage reductions triggered through ICT offerings, and the percentage of workforce ‎and financial assets dedicated to R&D for developing products that can generate non-ICT environmental benefits. ‎

Business Potential

ICT companies that are currently taking bold environmental steps are reaping financial benefits and staking out ‎enviable market positions. A survey of IT professionals across multiple industries showed that more than 50 percent of ‎companies already have or are looking to implement green IT solutions within a year. Companies actively developing ‎Green Innovation initiatives will be able to target an even broader market, with products that are tailored to multiple ‎industries and that have an impact on environmental factors other than IT, such as energy use and waste. ‎“Current efforts represent a fragmented approach for the sector. The consequences of a more individualistic approach ‎could be missed business opportunities, diminished results, and lost potential to improve environmental conditions,” ‎noted Sabbagh. ‎

A more collaborative sector approach to “going green” would have several main advantages. Most notably, it would ‎grow the overall market for such solutions and speed up adoption, increasing potential revenue gains for all players. ‎Collaboration would also promote interoperability and standards that improve the customer experience, and would ‎result in stronger, more unified lobbying efforts to promote industry positions on green ICT, which can have a greater ‎impact on policymaking and regulation. ‎

The Role of Regulators

Government regulators play a catalysing role in enabling ICT companies to achieve environmental and economic ‎sustainability. Therefore, a regulatory framework is crucial to engage the ICT sector. The right framework will involve a ‎balance of “push” (i.e., enforcement) and “pull” (i.e., incentive) initiatives. ‎

Push measures include recycling mandates, labelling requirements, and efficiency standards, among other statutory ‎approaches. They tend to apply most directly to a company’s external products and services, as opposed to in-house ‎operations. Pull, or incentive, measures include ventures like education programmes, tax incentives, and R&D ‎financing. They are typically used to influence both internal and external operations in a given company or sector. ‎

‎“As regulators consider how best to encourage these technologies, they must consider the impact on companies and ‎other entities outside of the ICT sector. With such a wide range of measures available, there is a need for ICT ‎companies to play a greater role in helping governments tailor specific combinations of incentives and mandates that ‎can best serve given markets,” explained Karam. By being involved during the early phases of regulatory construction, ‎the sector will be able to define priorities, agree on technical standards, and ensure that governments spur positive ‎environmental change in the most efficient manner possible. ‎

The Way Forward

To move forward strategically and make the most of current environmental and economic opportunities, ICT ‎organisations should consider several internal and external measures: ‎

  • Internal Measures
    • Devote resources to develop solutions both through personnel to drive the organisation’s sustainability ‎agenda and through increasing the company’s R&D budget for environmental services and products. ‎

    • Incentivise management of ICT companies to include environmental sustainability in all facets of their ‎operations.‎

  • External Measures
    • Increase awareness throughout the sector of the value and benefits of adopting green ICT solutions. ‎

    • Encourage collaboration among sector companies to develop technical standards and establish ICT ‎sustainability centres of excellence and innovation networks. ICT companies should also collaborate with ‎academic institutions. ‎

    • Develop unified measurements to evaluate progress. Specifically, this should include a metric capable of ‎measuring ICT companies’ net environmental activism. ‎

    • Engage regulators and participate in shaping green policies with implications for ICT companies.‎

‎“There is a growing consensus among industry and activist camps that ICT can contribute significantly to ‎environmental sustainability,” noted Harter. This role can unlock significant business potential for the sector, but will ‎require companies to work together for developing and promoting green ICT solutions.‎

About Booz & Company and World Economic Forum Partnership‎

This collaborative initiative between Booz and The World Economic Forum, which started in September 2009 was ‎intended to shape perspectives of leading companies and industry innovators, regulators and policymakers on the ‎subject of ICT and sustainability; in addition to bringing about an understanding of policy, regulatory and business ‎implications in leveraging ICT to contribute to environmental sustainability.‎

Booz is a global strategic partner to the WORLD ECONOMIC FORUM and has been working with the Forum on a ‎number of projects, including the ICT sustainability project. Booz also worked with the Forum in preparing and ‎facilitating two major sessions on ICT sustainability—India Economic Summit, November 2009 and Davos Annual ‎Meeting, January 2010—which were attended by leaders of major ICT industry companies.‎