Enabling business sustainability

There is now broad global consensus that greenhouse gas emissions directly contribute to increasing the earth’s surface temperature.Drawing up plans for a new business order

Human actions, particularly burning fossil fuels (coal, oil and natural gas), agriculture and land clearing are increasing the concentration of carbon dioxide (CO2) in the atmosphere, which traps heat and warms the earth’s surface. The projected changes in climate will have significant environmental, social and economic implications worldwide.Calling industry to actionIn New Zealand, the Climate Change Response Act 2002 provides a legal framework for the country to ratify the Kyoto Protocol and meet its obligations under the United Nations Framework Convention on Climate Change. Under the framework, New Zealand will:* Manage its target allocation for greenhouse gas emissions under the Kyoto Protocol* Trade greenhouse gas emissions allocations on the international market and establish a registry to record holdings and transfers of those units* Establish a national inventory agency to record and report information relating to greenhouse gas emissions in accordance with international requirements.In July 2007, the Australian Government introduced a policy to address the impact of climate change. This policy provides a framework that embraces:* Reducing emissions while minimising the economic cost by:* Maintaining emissions at 108 per cent of 1990 levels from 2008 to 2012* Setting a long-term emissions reduction goal in 2008* Establishing an emissions trading system by 2012* Continued investment in developing technologies that improve energy efficiency and reduce emissions.* Support for world-class climate science and finding ways to adapt to the impacts of climate change.* Pursuing effective international responses to climate change.The steps the Australian Government has taken leave a near-term gap that is not covered in this framework. Australia still requires:* A clearer framework for investment in sectors such as electricity supply before breakthrough low-emissions technologies become available. (1)* Early action to reduce carbon emissions and introduce carbon pricing to the market.In the absence of regulation, increasing community concern has led to the expectation that industry leaders will take decisive action on climate change.Addressing the challengeMany industries recognise climate change as a major business risk and understand they need to position themselves in response to this issue. However, companies face significant challenges in determining how and when to act and how much a practical response will cost.To bridge the gap from intention to action, organisations need to undertake the following series of steps to address the impact of climate change.Risk IdentificationOrganisations need to identify and classify the risks climate change presents to their industries and businesses. These may include regulatory, supply chain, product, technology, litigation, reputation and physical risks. Having identified these risks, organisations should consider the potential outcomes of taking no action and develop appropriate mitigation strategies. This assessment process may also help organisations identify new business opportunities and/or improvements in current operations.Develop a Sustainability StrategyOrganisations should develop a sustainability strategy based on their assessment of risks and opportunities. This strategy should be aligned with corporate strategy and endorsed by executives. The strategy should consider the boundaries and scope of the organisations' responsibilities, brand strategy, leadership opportunities and shareholder value.MeasurementOrganisations need to measure their carbon footprints. They should consider the boundaries for direct and indirect emissions and take into account the full lifecycle of their operations. They should design performance metrics and models to provide the baseline for ongoing measurement, transparency and benchmarking.Implement Strategic InitiativesThe strategy and measurement activities should set out a series of strategic initiatives to be implemented. Change initiatives to mitigate an organisation’s contribution to carbon emissions typically include one or more of these categories: reduce, replace, recycle and /or offset.These transformation activities may extend outside the organisation boundaries, such as, to customers. When choosing programs, organisations should pay attention to the transparency and accreditation of the programs under consideration.Performance ReportingShareholders and regulators will require organisations to report on the progress of the strategic goals and realisation of benefits. They will need to report on areas such as ongoing carbon emissions and compliance with regulations and standards. They may need to engage experts for regular sustainability auditing activities.IT Industry PerspectiveInformation technology (IT) systems consume large amounts of electricity, contributing to high levels of carbon emissions. Conversely, IT can also provide solutions and create opportunities to address environmental issues. This paradox presents a branding risk to the industry, as the market might consider IT a large contributor to environmental problems. However, it also presents an opportunity for IT organisations to position themselves as solution providers in reducing carbon emissions.IT departments face numerous challenges in reducing the environmental impact of their operations. However, there are a number of clear directions that can be taken towards reducing the effects of these issues, such as:* Using less electricity* Buying equipment with lower power consumption requirements and constructed in more environmentally friendly ways* Taking accountability for meeting carbon emission reduction goals* Developing strategies for IT data center outsourcing or collaboration where these can provide economies of scale in energy usage* Taking increased responsibility for environmental management when disposing of old IT equipment.Organisations wanting to deliver sustainable Green IT initiatives need to undertake the following five ongoing steps:Strategic AlignmentThe first activity is to fully understand the organisation’s strategic intent and business drivers.  Organisations need to ensure their sustainable IT strategies align with their overall strategic objectives and gain executive endorsement. According to Gartner analyst Andrew White, “If IT organisations only see green activities as corporate social responsibility, then they will miss a significant opportunity to help the business derive benefits from resource-sensitive activities.”(2)IT AssessmentIn order to assess the impact of its technology on the environment an organisation will need to develop detailed inventories of hardware, software and overall power consumption. IT departments will have to develop models and performance metrics and analyse financial cost and trends. (3)Strategy DevelopmentStrategy development focuses on creating a sustainable approach and should include incentives for:* Cleaning up operations. Identifying unnecessary equipment through the reduce / reuse / recycle approach.* Optimising infrastructure. Optimising IT infrastructure and assets using techniques such as consolidation, virtualisation and power management.* Managing energy use. Optimising the data center environment, power sources, policies and alternative technology communications.* Rationalising procurement and supply. Adopting a lifecycle-management strategy for procurement and supply and sourcing products and services through a low-carbon directory.Business Transformation and ChangeImplementing the changes required to achieve strategic aims includes: developing a project roadmap and delivery programmes, policy development and process improvements.Realising the BenefitsEvery sustainability initiative must be developed with a solid link to benefits for the business, such as:* Reduced demand for energy* More efficient use of infrastructure* Reduced carbon footprint* Optimised supply chain* Financial savings.There is increasing evidence that going green is good for business financially and provides an opportunity for market leadership.(4)Environmental responsibilities are becoming a core element of organisations’ social and regulatory licences to operate. The way companies manage their carbon footprints will either provide long-term sustainability or pose a threat to their existence.References1.     Australian Business Roundtable on Climate Change, The Business Case For Early Action, April 2006.2.     Andrew White, A New Wave of SCM Innovation Must Address Climate Change Concerns, Gartner August 2007.3.     Andrea Di Maio, Why Government CIO’s Need to Care About ‘Green IT’, Gartner 2007.4.     Jonathan Lash & Fred Wellington, Competitive advantage on a warming planet, Harvard Business Review, March 2007.