Is Sustainability On Your Agenda?By Pat O'Connell | Posted 12-11-2013
Is Sustainability On Your Agenda?
By Pat O'Connell
As CIO of the Teledyne Technologies Environmental and Electronic Measurement Instrumentation companies, Corey Hirsch is very interested in sustainability. He recently came across "Leading a Sustainable Enterprise," a publication on sustainability from the IBM Institute for Business Value, and was surprised that the report didn't prominently include CIOs in its findings, given that data centers alone consume approximately 3 percent of global energy, with enterprise devices, printers, networks and other assets under the CIO's control easily doubling that. Hirsch thought that if CIOs worldwide were to implement virtualization, good pooling choices and cooling strategies, data center power consumption could be reduced by as much as 3 percent. Many data center operators consider 65oF optimal to reduce the mean time between failures, but newer equipment can operate in ambient temperatures as high as 85oF, thereby reducing energy usage for cooling.
Hirsch believes that CIOs can lead the way with sustainability, even though some are not currently focused on it. The International Organization for Standardization (ISO) 14000 framework, which addresses various aspects of environmental management, provides guidance for companies looking to identify and control their environmental impact and constantly improve their environmental performance. The benefits include the reduced cost of waste management, savings in the consumption of energy and materials, lower distribution costs, and improved corporate image among regulators, customers and the public. In particular, ISO 14001 provides criteria for environmental management systems and is something CIOs should consider advocating. Hirsch's primary drivers for a sustainability program include the 2013 IPCC report on the Climate Change, the tragedy of Bangladeshi garment factory fire in Nov. 2012 and garment building collapse in April 2013, and the broad themes of Corporate Social Responsibility (CSR).
Managers' views of sustainability vary by region, Hirsch notes. "In the U.S., managers are inclined to follow the Adam Smith view of management, which is that their mission is to maximize shareholder value, implying lower technology investments at a cost to the environment. In Europe, there is a greater sense of corporate social responsibility as an embedded thread in management decision-making expressed, for example, by the fair trade movement. There, managers have a greater bias toward balancing the needs of employees and community with those of the shareholder. Back in the U.S., there isn't a generally accepted weighting given in management decision-making for carbon reduction."
Hirsch believes the establishment of generally accepted sustainability standards and practices should be a government function in the U.S. Currently, 12 U.S. states allow for the incorporation of a Benefit Corporation (B Corp), whose key features include the accountability for company directors to consider the effect of decisions not only on shareholders, but also on stakeholders such as workers, the local community and the environment, as well as transparency with the requirement to publish a report assessing their overall social and environmental performance against a third-party standard. Whilst B Corps are recent arrivals, a growth in ethical investing could lead to an increase in number of them over time.
More and more business-to-business customers are asking about the Restriction of Hazardous Substances (RoHS) compliance, says Hirsch. The RoHS directive aims to restrict certain dangerous substances commonly used in the production of electronics equipment. "We are proceeding to become ROHS complaint, which entails building a database that contains the analysis of all components used in our manufacturing," says Hirsch. "Our customers are asking more frequently for ROHS compliance, and the absence of a RoHS program can be a block in selling. From the business perspective, we have a hard date to be fully ROHS compliance in 2016."
Sustainability ranks very high among Hirsch's priorities as CIO. "From a business perspective, the Adam Smith viewpoint, it is about getting what is required for the least cost and in the least amount of time. A CFO's perspective may be to only spend what delivers an ROI beyond the hurdle rate. For a COO, there may be other considerations, e.g., giant ovens for equipment testing, circuit board washing wastewater and soldering waste. We have some large customers who expect us to have sustainability initiatives in place. A CIO's natural allies in sustainability are the sales force, customers and regulators."
Is Sustainability On Your Agenda?
Hirsch also discussed some of the challenges of launching a sustainability program inside a company that doesn't have sustainability as a chief part of the corporate agenda. "It is contextual," says Hirsch. "If the CEO's team is on board, then it's easier. Getting internal support can be difficult if it does not align to managers' KPI list. Many efforts end up being large projects. Implementing RoHS, for example, may require man-years of effort along with ongoing monitoring once the project is finished. Looking at ROI, if it's cash neutral, most companies would do it. There is no formula for 'goodness.' There are relatively few Chief Sustainability Officers (CSOs) in the world. Otherwise, sustainability ownership should sit with the CEO or possibly the CIO. In some companies, like HP, sustainability is integral to the business."
Hirsch says his sustainability efforts "are mostly opportunistic in nature. I would look at the full lifecycle using the triple bottom line principles, where projects address People (employees, shareholders and the communities in which the firm does business), Profit (the company's balance sheet and income statement), and Planet (environmental considerations). I started by looking for the low-hanging fruit using the triple bottom line principles."
One of Hirsch's goals was to cut power waste in half. "You have to be careful with targets like this; for example, if the company is growing it could be a confusing measurement." As part of this energy-savings program, Hirsch had posters placed throughout the office and factory areas encouraging "Waste Less," as opposed to "Use Less," which might be confusing. To further encourage people to reduce their waste, Hirsch allocated 25 percent of the savings to the employee recreation committee. A second initiative was to put glass covers on the office thermostats to deter employees from changing the temperature in open air spaces served by more than one HVAC unit. Another major initiative involved replacing a liquid nitrogen tank in the back parking lot, which in itself caused no local carbon footprint. However, the liquid nitrogen tank was frequently filled by delivery trucks, which had a high carbon footprint. This system was replaced with a nitrogen-collector with a small carbon footprint, but which requires no truck deliveries, thereby reducing the system's total carbon footprint.
Other items on Hirsch's sustainability agenda include burying the power lines to the office and factory. While expensive in the short term, it is ultimately less expensive when one considers the cost of power outages. Hirsch also plans to offer free electric car charging to employees, which helps with talent retention and provides positive publicity, and deploy solar panels on company roofs.
Hirsch is impressed with how seriously some companies and industries take sustainability. For example, some of the big technology companies–Google, HP (mentioned previously), Microsoft and Amazon–are heavily committed to sustainability. Also, CIOs in the hospitality and restaurant businesses in Europe are very focused on sustainability, as are certain government agencies, such as the New York City Housing Authority. Hirsch wishes more organizations would follow these entities' lead and model their environmentally beneficial behavior.
About the Author
Pat O'Connell is the founder and president of The Conall Group, a consulting and research firm, and an adjunct professor at Columbia University in its Executive Masters of Science In Technology Management Program. Prior to starting The Conall Group, he worked for several years at three of the major global financial services companies, attaining the role of regional CIO of the equity division in one of the firms.
You can read his previous CIO Insight article, "Making a Successful CIO Transition," by clicking here.