Are Businesses Getting Greener?

By Brian P. Watson  |  Posted 08-06-2008

Are Businesses Getting Greener?

Looking back, Bob Culver sees the post-Gulf War years as a pivotal time in the way the world engaged in environmental issues.

Simply put, the United States became a nation fueled on gas-guzzling SUVs, while Europe moved to curb its energy consumption. Today, Europe is far ahead of the United States in terms of environmentally friendly policies.

European companies have responded to the regulations: About 60 percent have green strategies in place, versus just over a third of their American counterparts, according to a study by the Cutter Consortium, an IT advisory firm. "We [in the United States] went down the wrong road," says Culver, senior vice president of Wells Fargo's technology information group.

Environmentalists could scream from the rooftops, yet the idea of proactively working to heal the environment just wasn't taking hold in corporate America. But we may look back at 2008 as the year when those businesses started playing an active role in helping the environment: About half of companies have launched--or have announced plans to enact--company-wide green strategies, and nearly the same number have already achieved their goals, according to CIO Insight's Green IT study.

The lack of regulatory motivation helped stall the green movement in this country, but past interviews with IT executives and industry experts revealed another reason for America's allergy to eco-friendliness: financial concerns. If businesses weren't seeing a return on their investments in green technologies, those initiatives promptly became non-starters.

That, too, seems to be changing, our study finds. When asked about their motivations for launching green strategies,

74 percent of IT executives claim environmental concerns. Following closely behind, though, at 73 percent, is cost savings.

"If you'd asked that question six months ago, the answer clearly would have been cost savings over corporate citizenship," says Simon Mingay, research firm Gartner's United Kingdom-based green IT expert. The shift in impetus, he says, has to do with a lowering of the financial bar: Businesses are still looking for a positive (or, at least, neutral) financial return, but that driver is diminishing.

In its place, companies are putting a higher premium on "softer elements," such as brand value and meeting corporate social responsibility goals. Culver agrees: "Now you can take something that might not have an amazing financial return and get it done because it's the right thing to do."

Wells Fargo is one of the companies that have initiated a green strategy. In 2005, the financial giant established a 10-point environmental plan, mandating everything from greening its own operations to financing environmental concerns.

Culver has helped lead the charge, playing a central role in designing two new data centers that use power and cooling technologies expected to save the company millions of dollars over the next few years. Wells Fargo is also working to get LEED certification (Leadership in Energy and Environmental Design rating for environmentally sustainable construction) for many of its data centers and branch offices. "I look at it almost as a necessity now," Culver says of going green.

Challenges Ahead

Challenges Ahead

Still, at least half the companies we surveyed don't have a long-term green strategy in place, according to our study and the Cutter Consortium. Harris, a $5 billion IT supplier and government contractor, has adopted some green initiatives, but doesn't have a formal strategy, says principal network architect Mark Pugh. The firm's motivation for those initiatives? First cost reductions, then customer requests.

Energy costs are a big driver for Harris. Each time a new server is purchased, the manager must document the expected power consumption level. The company is urging workers to carpool or use electric cars, which they can charge at work. Pugh and his team have also invested in virtualization, though he sees the technology as more of a cost saver than an eco-friendly move.

Despite these initiatives, Pugh sees a problem with green activism, especially for publicly traded companies. "Shareholders want us to be green, but they don't want their shares to decline," he says. "The minute your dividend drops, things change."

Wes Buxton, CIO of Seminole Energy Services, admits that his firm has not launched a comprehensive green strategy. His IT department has set plenty of eco-friendly policies--like powering down monitors, PCs and hard drives after periods of inactivity, and recycling batteries and hardware--but when it comes to his company going full-bore environmental, he sees the same obstacles as Pugh. "I honestly feel that if I stood up at a meeting and said we should do all these things to help the environment, people would say no," he says. "If there's no cost saving involved, nobody's going to do it."

IT executives and experts say that emphasis is shifting, but it won't happen all at once. Still, there is a larger driver at hand: Gartner's Mingay sees a growing public sentiment in the United States that mirrors what drove environmental legislation in Europe in the 1990s.

Clearly, federal legislation would force American businesses to go green. The best framework for new legislation, Mingay says, centers on a cap-and-trade system that would essentially require companies to buy carbon. In a low-carbon economy, companies that embrace change and experiment with different tactics will thrive, he adds. With IT at the heart of many green initiatives, CIOs have an opportunity to take the lead, as well as boost innovation within their organizations.

That hasn't happened yet, however. Respondents to our study say the CIO is a key decision-maker on green IT initiatives (42 percent) or an adviser to those leading the effort (32 percent), but less than one in 10 say the IT chief was, in fact, the person in charge.

At Harris, Pugh says the CIO has assumed the informal position of leading the green charge. For Seminole Energy Services, most existing green initiatives are spearheaded by IT executives.

Wells Fargo is one of the approximately one-third of U.S. companies with green strategies that have appointed an executive to oversee these initiatives. In Wells Fargo's case, the executive previously headed two different divisions and serves on the firm's managerial committee, reporting directly to the CEO.

That's exactly the type of leader companies need today, says Andrew Shapiro, founder and CEO of GreenOrder, a sustainability strategy and consulting firm. To be effective, Shapiro wrote on his "Leading Green" blog, the green-IT leader "needs to work with nearly every function in the company, helping them to look at their day-to-day decisions through the lens of green opportunity."

Will that new-age leader be the CIO? With so many green tactics emanating from IT, there's a good chance of that happening. The bigger question is whether the CIO has enough institutional clout to lead the charge effectively.

Click ahead to see the results of CIO Insight's Green IT study.

Green Policies Pick Up Steam

FINDING 1
Green Policies Pick Up Steam
Nearly half of U.S. companies now have formal "green" IT initiatives, and many without such initiatives have companywide environmentally friendly policies--particularly in carbon-emitting industries such as manufacturing, transportation, energy and defense. Halfway through 2008, nearly half of companies have largely achieved their goals. Green IT programs have had a strong beneficial effect--especially on power consumption, which is bound to make them popular in an age of exploding energy prices. Analysis by Guy Currier

Not Just About Image

FINDING 2
Going Green Is Not Just About Image
CIOs show a strong altruistic streak when it comes to evaluating the benefits of green policies. This fits in with their overall view of technology as a positive force in human progress. But they also see tangible advantages, such as cost savings for their companies. Only in carbon-emitting industries are environmental policies particularly important to improve company image. Analysis by Guy Currier

CIO is Key to Greening

FINDING 3
The CIO Is Key to Green Initiatives
Half of CIOs play high-profile roles in companywide green decision-making. This is especially important given the rarity of specially appointed or hired managers of environmental policy in IT, even where there are formal green IT programs. Analysis by Guy Currier

Data Center, The New Recycling Center

FINDING 4
The Data Center Is the New Recycling Center
Green-friendly data center technologies are beginning to rival the deployment of old-line environmental programs. Recycling and refurbishment programs have been around since the '70s, but penetration levels of consolidation and virtualization are catching up to them--and other more exotic space- and equipment-saving programs are showing much potential for growth. Still, initiatives that don't specifically involve technological deployments are most heavily used, showing the value of bread-and-butter policies like turning out the lights at night. Analysis by Guy Currier

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