Business leaders across India now face the daunting task of becoming more sensitive to their companies’ energy consumption and environmental impact. Organizations are realizing that being green is good for business, positively affecting brand image and fast becoming a competitive differentiator for customers, partners and suppliers. The fact that going green can reduce costs and thus improve the bottom line simply increases the level of interest ingoing green.
Reji Pillai, Leader for energy and utility industry, IBM India/South Asia
While environmental concerns may start with the chief executive, they quickly filter down to other C-suite executives and line-of-business leaders, who are being asked to quantify and reduce corporate energy use and environmental footprints, streamline supply chains, meet regulatory requirements and modify information technology (IT) departments to drive more energy-efficient operations. The total data centre capacity in India is expected to reach 5.1 million sq. ft by 2012 and is projected to grow at a compound annual growth rate of 31% from 2007 to 2012, according to Gartner.
These activities are not merely environmentally responsible: they can also drive cost savings—another universal corporate mandate. For example, according to IBM’s projections, energy costs eat 30-40% of a company’s operational budget—and these costs are projected to double over the next five years. A single dollar in energy savings can often drive an additional $6 to $8 in operational savings.
To develop policies that are both good for the planet and good for business, corporate leaders must consider these questions:
1. Are all aspects of the business, including operations, IT and product lifecycle management, efficient and protective of the environment?
2. As part of the overall strategy to increase business efficiency, should the organization be considering environmental stewardship and energy consumption as new business barometers?
3. Does the organization maintain a public commitment to meaningful and achievable goals, with transparency in reporting progress in meeting those goals?
Each of these issues can seem complicated when considered individually and perhaps overwhelming when viewed as an interrelated group. They require a framework that helps identify and prioritize environmental efforts by illustrating how problems and opportunities can be broken down into distinct areas and then segmented into manageable projects to be addressed. These projects can be joined to form a cross-organizational program managing energy and environmental issues.
Framework: This framework must address the needs of various executives in developing and implementing energy and environment strategies: the CEO’s need to respond to customer, government and employee expectations; the chief financial officer’s need to deal with changing cost dynamics for energy; the chief operating officer’s and line-of-business’ needs to design and implement new processes; and, the chief information officer’s need to increase computing power while managing energy consumption.
Overall, this framework must cover business components ranging from strategy to business operations—common to any organization dealing with energy and environment issues.
Strategy: The creation of an enterprise-wide energy and environment strategy as part of an overarching corporate social responsibility plan can help companies address “green” issues, resulting in improved financial and environmental outcomes. Issues to be considered include the alignment of a company’s environmental strategy into an overall business strategy and how environmental values may be translated into an improved brand image.
People: The impact of employee behaviors and policies on the environment is significant. Commute time and business travel form a large part of an individual’s carbon footprint. The use of online collaboration tools and policies that support reduction in commuting and traveling can also have an impact on costs. Companies also are discovering that their environmental policies and practices can impact their ability to attract and retain top talent.
Information: With data compounding between 35% and 70% annually in some industries, it’s critical for companies to better manage their data infrastructures. Optimized collection, analysis, tiering and storage of key information helps companies comply with reporting mandates while minimizing their data footprints. These same information strategies improve business operations by improving information access and system response. They help reduce storage needs through sharing, elimination of redundancies and compression.
Product: As companies begin to understand the environmental impact of their products or services across the entire product lifecycle, they can design products in a manner that has a lower environmental impact. Streamlining product development and manufacturing also means less material used, less waste created and less energy consumed. Concurrently, an examination of the product or service lifecycle often helps businesses find and exploit market opportunities. Finally, the need to reduce energy consumption is driving an increase in the energy-management intelligence built into certain products.
Technology: Information technology is putting increasing levels of stress on power and cooling infrastructures. According to IBM estimates, IT kilowatt-hour usage has increased fivefold in the past five years. This IT-related energy use contributes to the establishment’s greenhouse gas emissions. CIOs and IT managers view this situation as an economic and environmental crisis.
Corporations need IT energy efficiency strategies designed to help them focus their efforts. A thorough understanding of IT energy consumption, operations and constraints is the foundation for improvement. From this foundation, companies can devise strategies to help them improve IT efficiency and resiliency, address emissions, reduce energy costs and measure their success against business goals.
Property: Companies need to reduce the cost and greenhouse gas emissions of their physical assets-from office buildings to truck fleets. The process starts with determining and managing the environmental impact of physical assets and properly maintaining all property for energy-efficient operations and reduced environmental impact. Through improved maintenance and through improved tracking, deployment, location, and management of facilities and properties, reductions in environmental impact can be achieved.
Business operations: Corporations need to transform business processes to reduce environmental impact for operations end-to-end. Consider energy or water consumption, as a start. Understanding and controlling these costs can be achieved only once a company measures its existing use and compares it against conservation benchmarks. Through the use of “smart” systems, dramatic efficiency improvement can take place. Any transformation plan put into place must be communicated to key stakeholders.
As an initiative in the energy sector in India, IBM is working with several like-minded companies to form a consortium called the Intelligent Utility Network, or IUN. IBM’s IUN is an information architecture and infrastructure that enables the continuous automated monitoring of a utility’s assets and operations as well as customer electricity usage, and uses this “on demand” information to improve service, reliability and efficiency. This effort includes: facilitating an industry community for collaboration, knowledge sharing, education and innovation; working with energy industry and standards groups, and the development and deployment of IUN strategic solutions and technologies.
North Delhi Power Ltd (NDPL) is the first Indian company to join the IUN coalition, which also includes utilities in North America, Europe and Asia Pacific regions—all working together to accelerate the development of common standards, technology solutions and processes for intelligent networks.
The expansion of the coalition into an emerging market such as India is significant. By 2010, nearly 60 “mega-cities” worldwide—most of these in emerging markets—will have populations of five million or more, up nearly 50% since 2001. Governments, regulators and utility companies need to ensure that these mega-cities survive under the crush of demand for access to the power grid.
In conclusion, it is largely seen that addressing any of the seven key components of business can tangibly lower a company’s energy usage and reduce its environmental impact. Addressing them in combination, however, can dramatically amplify those effects in making a company more competitive, successful and social responsible.
Reji Pillai is leader for energy and utility industry, IBM India/South Asia. Respond to this column at firstname.lastname@example.org