IT and the environment A new item on the CIO’s agenda? potx

Although two-thirds of executives polled say that their organisation has a board-level executive responsible for energy and the environment, less than half 45% of firms have a programme

A report from the Economist Intelligence Unit

Sponsored by IBM

IT and the environment: a new item on the CIO’s

agenda? investigates the efforts being made

by organisations to measure and reduce the

environmental impact of the IT function The report

assesses how these changes are affecting the

purchasing, operation and disposal of technology

assets within businesses today The report was

commissioned by IBM

The Economist Intelligence Unit bears sole

responsibility for the content of this report The

Economist Intelligence Unit’s editorial team executed

the online survey, conducted the interviews and

wrote the report The findings and views expressed in

this report do not necessarily reflect the views of the

sponsor

The research drew on two main initiatives:

● The Economist Intelligence Unit conducted a major

online survey of chief information officers and

other senior IT executives from around the world

during June and July 2007 In total, 213 executives

took part in the survey

● To supplement the survey results, the Economist

Intelligence Unit also conducted in-depth

interviews with ten senior IT executives and other

experts from a range of industries and regions

Clint Witchalls was the author of the report and James

Watson was the editor Mark Samuels, Dan Ilett,

Richard Handford and Phil Davis also contributed to

the research We would like to thank all the executives

who participated in the survey and interviews for their

time and insights

August 2007

Preface

A green agenda has never been more important for organisations, yet it would appear that there is much more talk than action A recent study by the

US Environmental Protection Agency (EPA)1 found that US servers and data centres alone accounted for 1.5% of the country’s total electricity consumption

in 2006—more than double what was consumed in

2000 This is similar to the energy consumed by about 5.8m average US households, and accounted for some US$4.5bn worth of electricity Under current efficiency trends, consumption could nearly double again by 2011—delivering a $7.4bn energy bill to firms and potentially accounting for some 2.5% of total energy consumption

All this has a great environmental impact In 2005, the total power demand by servers and data centres was equivalent to fourteen 1000MW power plants2—and these figures exclude PCs, laptops and other IT infrastructure As concerns over climate change grow, this rising energy usage will come under greater scrutiny, putting organisations under increasing pressure to account for their IT policies and practices

The key findings of this study are highlighted below

● Relatively few organisations have any plans in

place to reduce their carbon footprint Although

two-thirds of executives polled say that their organisation has a board-level executive responsible for energy and the environment, less than half (45%)

of firms have a programme in place to reduce their carbon footprint And those that do have a carbon reduction strategy, the majority (52%) have no specific targets for it, although a small hard core (9%) aim to be carbon neutral by 2012

● Many people are aware of the impact of IT on

the environment, yet few firms are doing anything about it The majority of respondents (59%) polled

for this report believe that IT has either a significant

or moderate environmental impact Just 15% think it has no impact But in spite of this, more than one-half

of respondents (54%) strongly agree or somewhat agree that their organisation does not measure the impact of their IT systems and policies on the environment—compared with 32% who believe that their organisation does

Who took the survey?

A total of 213 executives took part in this survey All respondents occupied senior management positions: of these, 47% were CIOs or CTOs, and 44% were SVPs/VPs of

IT and heads of IT.

Executives were only accepted from organisations with

at least 1,000 employees, to ensure that the businesses

being polled had significant IT assets The majority (58%) hailed from firms with at least 5,000 people The survey focused on Western Europe (59%), but included Asia- Pacific (19%) and North America (19%)

By sector, the largest number of respondents came from manufacturing (17%), followed by financial services (14%) and healthcare, pharmaceuticals and biotechnology (11%) A full breakdown of all respondent demographics is given in the appendix

● Although IT consumes an enormous amount of

power, few IT bosses measure their department’s

contribution to the energy bill Most IT executives

say that their firm does not monitor its IT-related

energy spending (and a further 9% don’t know)

Of those that do monitor their IT-related energy

consumption, about one in four (24%) have seen their

energy consumption increase over the past two years

However, measuring the cost clearly provides an

incentive to change: 15% of respondents noted that

their energy use had actually declined

● When it comes to IT procurement, power

consumption is not a significant criterion

right now Reliability is the main deciding factor

when buying IT equipment, according to 63% of

respondents This is followed by price (32%) and

then after-sales support (30%) Despite rising energy

costs, dwindling reserves and ongoing geopolitical

tensions in areas of oil and gas supply, only 12% of

respondents believe that the energy efficiency of

IT equipment is a critical purchasing criterion In

comparison, 13% of executives rate delivery times as

being a critical factor

● Promisingly, IT holds much scope for

improvement Despite the current sense of little

progress being made, the IT function is well placed when it comes to reducing its environmental impact

By adopting existing energy efficiency methodologies and technologies—a “best practice” scenario, as defined by the EPA3—corporate servers and data centres could cut power use from current efficiency trends by 56% by 2011 For the US alone, this would reduce projected cumulative (2007-11) electricity costs from some US$31bn to US$17bn, providing an obvious cost saving incentive—and also delivering

a huge reduction in future CO2 emissions Beyond the data centre, simple initiatives, such as switching off PCs when not in use and minimising unnecessary printing, can improve an organisation’s green credentials and save money at the same time

One encouraging sign from this survey is that the green campaigns of yesteryear—reminding people

to recycle their paper and toner cartridges, or print more sparingly—are now widely in use This suggests that current initiatives, largely focused on promoting better energy usage, will become more commonplace over time Rising energy costs, increased legislation and greater public awareness will all help to drive these initiatives

3 US Environmental

Protection Agency, Report

to Congress on Server and Data Center Energy Efficiency, August 2007.

Barely a day goes by without a headline about the impact of greenhouse gases on the environment:

melting glaciers, vanishing coral reefs, floods and freak weather The Intergovernmental Panel on Climate Change—a network of 2,000 scientists—has warned4 that if the world continues with business-as-usual, the global average temperature could rise by up

to 6.4ºC by the end of this century

Climate change science was initially met with scepticism in some quarters, but few today would deny that it is a man-made phenomenon The debate is now centred on what to do about it, rather than whether it

in data centres around the globe “The carbon impact of the IT sector seems to have sneaked in under the radar,” says Trewin Restorick, director of environmental charity at UK-based Global Action Plan

However, it is becoming clearer that this impact is significant A study5 by the EPA estimates that carbon dioxide emissions in 2007 from servers and data centres in the US alone would be some 42.8 million metric tons On current efficiency trends, this figure would rise to 67.9 million metric tons by 2011 And these figures exclude the impact of the distributed IT infrastructure beyond the data centre, including the millions of PCs, laptops, networking equipment and

so on

So what are chief information officers (CIOs) and other IT leaders doing about it? Not a whole lot, according to the results of this survey

Who’s leading the way?

At first glance, the situation appears to be quite good Nearly two-thirds of the organisations polled for this report have someone at board level with responsibility for energy and environmental issues At a regional level Western Europe fares better, with 70% of organisations having someone at board level with this responsibility, compared with 65% in the US and 56% in Asia-Pacific Lloyds of London, a global insurance provider, is one example where the issue is being monitored at the highest levels “We’ve actually set up a working committee that now sits regularly and reports at board level,” confirms Peter Hambling, the firm’s CIO “We’re monitoring and reporting on all of our [environmental] initiatives, not just the ones in this office.”

For one in ten organisations globally, the CIO assumes this role And in Western Europe, this rises to one in five

These figures may sound impressive but, on closer inspection, only one-half (49%) of the firms surveyed

Introduction

No Yes, we have a director with a role specifically focused on energy and/or environmental issues

Yes, this role is handled

by our CIO / IT director Yes, this role is handled

by another director

No, but we plan to appoint someone within three years

Don’t know

34

17

10 29

6 5

Does your company have someone at the board level responsible for energy and environmental issues?

have a carbon reduction programme in place Overall,

however, large organisations with more than 10,000

staff are more likely to have a carbon reduction

programme in place (55%) than smaller ones (46%)

In fact, IT and telecommunications companies

perform worse than average in this category Just one

in three of these firms say they have a programme in

place to reduce their carbon footprint

Drill down further, and of those organisations that

do have a carbon reduction programme in place, more

than one-half (52%) have set no specific targets for

it Over the next five years, 15% of businesses aim to

reduce their carbon emissions by up to 10% Just 12%

of firms aim to reduce their carbon footprint by more

than 40%, including a small hard core of 9% that aim

to be carbon neutral

For the majority of firms, there is little action that

appears particularly ambitious While there is a high

level of awareness of climate change issues, when it

comes to firm commitments to reducing their carbon

impact, it would appear that businesses are in need

of a fillip For the IT function, this could come from a

Cuts of more than 40%

We plan to be entirely carbon neutral by 2012

52 15

11 10 0

3 9

If your company does have a carbon reduction programme, what cuts does it intend to make by 2012?

(% respondents; excludes respondents selected ‘Not applicable’ and

’Don’t know’)

Source: Economist Intelligence Unit survey, July 2007.

Energy costs, changing employee and consumer attitudes and increased regulation will all serve to push carbon reduction issues further up the corporate agenda

Energy issuesOne of the biggest drivers for change is the rising cost

of energy In 2006 research by IDC, an analyst firm, showed that 17% of IT’s total operational expenditure can be attributed to energy “The proportion of energy expenditure continues to rise and is expected to cross 20% in the short-term”, says Thomas Meyer, an analyst at IDC, “hence, companies face significant

pressure to reduce operational expenditure to which energy and power are major contributors Previously, the main constraint to data centre growth was floor space: how many servers can I physically fit into a room Today, the constraints are biased towards energy cost, energy availability and energy emissions.”

Already, the pinch on power is being felt In late July 2007, San Francisco suffered a huge power outage caused by growing demands on the electricity grid6 And there will be more to follow Various executives interviewed for this report suggested that a number of major cities, such as London, are operating

at the upper limits of their power supply

A recent report7 by the US National Petroleum Council said that the global supply of oil and natural gas is unlikely to meet the projected 50-60% growth

in demand over the next 25 years As supply has become constrained in some markets, prices have

soared (see table: Soaring energy prices, 1997-2007).

A good start for CIOs is to know their portion of the energy bill Our survey found that, in spite of rising energy prices, 42% of organisations polled still do not monitor their IT-related energy spend “I don’t have

an accurate reflection of what our actual consumption

is, but I can say that my bill is going up year on year,” says Mr Hambling of Lloyds of London

This is not an uncommon scenario “Most IT departments don’t pay—or have any ownership of—the energy bills,” explains Mr Restorick of Global Action Plan “So, for an IT manager, if they’ve got a problem their solution tends to be to buy some more hardware.”

Derek Liggins, data centre services manager at TNT, a logistics firm, believes that IT has to grow with the business “Growth is something that’s good for

Why change is on its way

6 Charles Arthur, The

problem of powering our

virtual worlds, Guardian

Unlimited, July 27th 2007.

7 National Petroleum

Council, Facing the hard

truths about energy, July

2007.

Soaring energy prices, 1997-2007

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Economist Intelligence Unit

Australia Dated Brent Europe (US$/tonne) (US$/barrel) (US$/mmBtu)

business, so we have to evolve our systems Gradually,

we get rid of old equipment that uses significantly

more power.”

However, this survey found that energy efficiency

is far from being the most important factor taken

into consideration when organisations procure

new technology Reliability is at the top of the pile,

selected by 63% of respondents This is followed by

price (32%) and then after-sales support (30%)

In fact, just 12% of respondents selected energy

efficiency as a critical purchasing criterion—behind

even delivery times as a concern, which was selected

by 13% of executives

“The reliability and the availability of systems is

still king,” says Bob Culver, senior vice-president

of the technology information group at Wells

Fargo, a financial services firm “I’m going to look

at the performance of a device and the secondary

consideration will be power consumption.” However,

although it is unlikely that the power consumption

of hardware will ever be a primary consideration, the operational costs of hardware are surely more important than delivery times

Part of the problem is that computer equipment

is generally compared on performance criteria:

processor speed, memory size and so on

Environmental attributes, such as energy efficiency, ease of recycling or the use of toxic chemicals in the manufacturing process, are far harder to compare

However, various initiatives are working to make this easier For example, the Electronic Product Environmental Assessment Tool (EPEAT) in the US—managed by Green Electronics Council, a non-profit organisation—helps businesses to compare the environmental credentials of desktops, laptops and monitors A global bank, HSBC, is one of a growing number of firms using the system to help make its purchasing decisions

Critical factor Important factor

Reliability

Price

After-sales support

Use of toxic materials within equipment (eg, lead, PVC)

Vendor’s financial strength/ reputation

Current vendor relationship

Delivery times

Equipment’s energy efficiency

Vendor’s equipment disposal/ recycling services

Vendor’s environmental credentials

Vendor’s offsetting scheme, to account for carbon impact of IT equipment’s operational lifecycle

When tendering for new IT equipment (eg, PCs, servers), how much of a factor does each of the following factors play in your

purchasing decision?

(% of respondents, selecting ‘Critical factor’ and ‘Important factor’ only)

Source: Economist Intelligence Unit survey, July 2007.

Other schemes, such as Energy Star, allow technology vendors to add their certification to any equipment that falls within a certain energy efficiency standard As these practices become more common, relevant comparisons between equipment will become far easier to make And the majority of executives (63%) polled agree that such schemes would cause them to change their procurement policies

Increased regulation Regulation and legislation will also be a strong driver for change The EU has already imposed tough regulation on how firms dispose of obsolete equipment In February 2003, it agreed on the Waste Electrical and Electronic Equipment Directive (WEEE), which dictates how firms should dispose of obsolete electronic equipment, such as computers

After years of deliberating, the UK implemented this directive in July 2007 And in the US, the Environmental Protection Agency (EPA) is looking into carbon emission legislation “I think regulations are going to get tighter and tighter over the next five years,” says Mr Restorick Mr Culver at Wells Fargo agrees: “The Environmental Protection Agency (EPA) has been charged, since Congress recently enacted

HR 5646, to improve energy efficiency in computing hardware and the design and operations of data centres We work directly with the EPA to continually improve, and we’re pleased that many of our practices exceed requirements.”

Changing attitudesBut there is more than just energy prices driving the need for change Various stakeholders, including employees, are demanding more from organisations

A study by Ernst & Young, a professional services organisation, in 2004 showed that 89% of graduates considered high ethical standards to be “imperative” when deciding whether to join a company As IT’s importance in the debate grows, expectations of the need to change will intensify

Shareholders are also making themselves heard, filing record numbers of resolutions8 on climate change, demanding that firms disclose plans for reducing greenhouse gas emissions While many of these resolutions have been defeated by management, it speaks of a groundswell of opinion that is likely to grow as the impact of climate change becomes more apparent Increasingly, stakeholders

of all stripes will be demanding more visibility and accountability on green issues

Finally, there is another, often overlooked reason organisations are adopting a socially responsible stance “There are a number of companies for whom this has become a strong moral issue,” says Mr Restorick In fact, he believes that companies are leading consumers in many instances when it comes

to changing behaviour “There is an expectation that consumers will shift over the next two or three years, but it’s not really that strong at the moment.”

Significant impact Moderate impact

An industry standard on energy efficiency on IT equipment would cause us to change our procurement policies

To what extent do you agree or disagree with the following statements, in terms of how they apply within your organisation?

(% of respondents, selecting ‘Significant impact’ and ‘Moderate impact’ only)

8 A recommendation by a

shareholder with at least

1% of a company’s voting

shares Companies are

legally bound to present

the issue for a vote by

other shareholders at

the AGM.

Not since Rachel Carson wrote Silent Spring in

the 1960s, a book credited with having launched

the global environmental movement, has green

awareness been such a publicly discussed issue Yet

there is still a surprising lack of knowledge about

the subject Only 16% of respondents polled for this

report believe that flights and other (non-commute)

business travel have a significant impact on the

environment An astonishing 26% believe that

business travel has no environmental impact—and

15% believe the same of IT

Another surprising find was that more people

believe that their commute to work (29%) has a

significant impact on the environment than those who

think the same of supply chains (23%) And nearly

one-half of all respondents believe that working from

home has no environmental impact

Getting the basics rightBut although there appears to be a significant amount of misinformation or confusion, older messages around saving paper and recycling seem

to have become entrenched For example, 84% of respondents say their businesses recycle paper and toner cartridges, and more than two-thirds (69%) have a printing policy, advising staff on how to reduce their paper consumption “Initiatives that were in the background in IT, such as reducing the amount of printing, are now coming to the foreground,” notes Mr Liggins of TNT

“We are very aggressive with respect to online banking initiatives, such as the use of image enablement and online statements,” says Marty Lippert, CIO at the Royal Bank of Canada “Millions

of our customers receive statements online—and many no longer get cheques, they just see images

of them online.” For the bank, this not only reduces its environmental impact, but also “significantly”

reduces its paper costs

Encouragingly, initiatives to cut energy consumption—and thereby reduce an organisation’s carbon impact—are also making headway Two-thirds

of firms polled for this report routinely advise staff

to turn off their desktop computer when it is not being used Others, however, admit to being laggards here “Unfortunately, nothing,” admits one banking executive when asked what his firm was doing

Working from home is popular with one-third of organisations, although it is a lot less popular in Asia-Pacific (15%) than it is in Western Europe (39%) Fully 60% of respondents believe that home working will be

an important way in which IT will help to contribute

to green practices Even so, in about one-half (47%)

The action being taken

Personnel (eg, daily commute to work)

Production and manufacturing

Supply chain (eg, shipping, freight)

IT (eg, energy use)

Delivery and customer services (eg, shipping)

Sales and marketing (eg, flights and other travel)

General back-office functions (eg, energy use)

Remote workers (eg, employees working at home)

In your view, how much of an impact does each of the following

parts of your business have on the environment (considering

their use of energy and resources and overall carbon

emissions)?

(% of respondents, selecting ‘Significant impact’ only)

Source: Economist Intelligence Unit survey, July 2007.

of the organisations that allow home working, less than 10% of staff are eligible to do so And few organisations allow many of their staff to work from home for more than one day a week

Also, teleworking is not necessarily the panacea it purports to be At least, not yet Research9 conducted

by Oxford University Centre for the Environment (OUCE) found that the extra heat and lighting needed

at home wipes out 80% of energy savings accrued through not commuting The team concluded that government and companies need to promote changes

in the way people use technology if the green advantages of teleworking are to be realised

Reforming the data centreBut there are other low-hanging fruit that are far juicier than recycling teleworking, delivering both cost and environmental benefits Much of this can be found in the data centre As the corporate thirst for

data increases, these centres have grown to the size

of aircraft hangars—and draw significant power from the grid

Mr Culver recalls his boss showing him a data centre, 20 years ago “The room was about 6,000 sq ft

My manager said to me: ‘One of these days all of this stuff will sit in one box.’ And he was right, but now

we buy hundreds of those boxes If you look at the increase in information storage it used to be measured

in terabytes; now it’s up to petabytes and continuing.” According to the EPA, US data centres and servers consumed 61bn kilowatt-hours (kwh) in 2006, equivalent to the electricity consumed by all of the country’s colour televisions—or about 1.5% of all electricity consumption in the country10 This energy use is estimated to have doubled since 2000, and could nearly double again by 2011, under current efficiency trends

“Systems which are standing idle consume power,” says Mr Meyer of IDC “Often, even production systems are at low utilisation rates of 10%-15% With the

Which of the following IT-related initiatives has your company implemented in order to reduce its overall environmental impact? Select all that apply

(% respondents) Recycling programme for paper and toner cartridges

A printing policy, advising staff on how to reduce printing

An energy policy, advising staff to turn off PCs when not in use Data centre server consolidation, to improve energy efficiency Server virtualisation, to improve energy efficiency Set printers to automatically print double-sided pages Automated system for turning off PCs and/or monitors when not in use Increased home working

Revised data centre design, to improve energy efficiency Energy management software within data centre, to improve energy efficiency Sourcing energy from renewable sources

Reusing heat generated within data centre (eg, for office heating) Other

84 69

67 63 47

41 35 31 30 21 16 8 6

Source: Economist Intelligence Unit survey, July 2007.

9.David Banister, The

Costs of Transport on the

Environment – The Role of

Teleworking in Reducing

Carbon Emissions, Oxford

University Centre for the

Public sector and education

IT, telecommunications, entertainment, media and publishing

Manufacturing and automotive

Financial and professional services

Retailing, consumer goods, logistics and distribution, transportation, travel and tourism

Energy policy (%)