Business and IT, does BT deliver on IT's sustainability promise

BIT,does BT deliver on IT‟s sustainability promise? Version 1.1 Maarten J. Gubbens June 20th, 2011

BIT, does BT deliver on IT‟s sustainability promise?Table of ContentsExecutive Summary .................................................................................................. 3Green IT hits the CIO radar ......................................................................................... 3Challenge..................................................................................................................... 31. Scientific modelling ........................................................................................ 41.1 Competitive Advantage & CSR ........................................................................ 41.2 Governance and Sustainability ......................................................................... 51.3 Green-IT – what makes a difference? .............................................................. 71.4 Green-IT – the extend of adoption .................................................................... 91.5 Green-IT and Governance .............................................................................. 112. BT Group practices ...................................................................................... 122.1 CSR strategy and governance ....................................................................... 132.2 Business Conduct ........................................................................................... 142.3 Green-IT portfolio development ...................................................................... 162.4 Recognition ..................................................................................................... 183. Confrontation ................................................................................................ 193.1 Competitive advantage and CSR ................................................................... 193.2 Governance and Sustainability ....................................................................... 193.3 Green-IT.......................................................................................................... 213.4 Conclusions and suggestions for improvement .............................................. 23APPENDIX I, References ...................................................................................... 24APPENDIX II, Risk Assessments ........................................................................ 25APPENDIX III, CSR KPI’s ...................................................................................... 26Nyenrode Business University, MBA Business & IT Page 2 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Executive Summary As one of the most influential developments, IT is quickly transforming today‟s enterprise infrastructures and reshaping the way people work and live. Enterprise‟s are under pressure to consider their impact on the environment. Governments, shareholders, management boards and customers are beginning to expect increased visibility of business environmental impact and measures taken to minimise this. IT leaders, as representatives of major e-waste producers, are obligated making green-IT-strategy mission critical. Green IT hits the CIO radar Greening IT is attracting a huge interest among IT vendors and consulting services providers mainly due to the increasing demand to power data centres. Green IT encompasses IT‟s overall role in causing and tackling emissions and covers policies,Green IT is now being technologies and practices from sourcing to disposing. Eco-friendly computingdriven as much by an practices have gained significant CIO mindshare. In an independent surveyelement of business conducted by Datamonitor, over 75% of respondent enterprises considered eco-strategy as by a sense friendly computing as an important element in their IT strategy, while a further 15%of corporate social rated it as their top IT priority. IT organizations face the dual challenge of shrinkingresponsibility budgets and increasing infrastructure footprints. Enterprises are now beginning to realize the full potential of eco-friendly computing practices; namely, significant cost savings, increased flexibility in managing IT resources and compliance with environmental regulations. Challenge Many industries and enterprises are initiating strategies or policies to reduce greenhouse gas emissions, there are many more that simply do not have the capacity, commitment or money to act today. This paper highlights the current status of business strategy of Corporate Social Responsibility from a competitive advantage perspective, Governance & Sustainability and Green IT adoption which can be used to benchmark for future development and improvements for BT. Discussion BT is going to deliver on its sustainability promise in 2020 rather than 2015. Delays are due to the financial and following economical crisis. BT is the global leader among leaders. Sustainability, for BT, is a means of survival. This has been recognised in the early ‟90 of the previous century. Governance, business conduct, and portfolio development is mature. BT has a competitive advantage and is well on its way to taste the benefits. Internal reporting and measurement however, can be improved. Suggestion is to follow the Eric G. Olson model of “Creating an enterprise- level green strategy”. Nyenrode Business University, MBA Business & IT Page 3 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 1. Scientific modelling 1.1 Competitive Advantage & CSR An enterprise framework, Porter & Kramer (HBR 2006), can be used to identify all of the effects they have on society and determine which ones to address. License toEnterprises should operate, moral obligation, sustainability and reputation are themes for CRSintegrate a social according to Porter & Kramer. The triple bottom line (economic, social, andperspective into the environmental) has a tendency towards Enterprise self-interest rather than thecore frameworks it mutual dependence of enterprises and society, the conflict between society andalready uses to business rather than on their interdependence. Enterprise and society have a sharedunderstand interest and goal with respect to CSR and business decisions and social policiescompetition and guide should follow the principle of shared value.its business strategy Inside-out linkages Enterprise activities have an impact on society in which they are active, creating positive or negative social consequences. Monitoring the obvious social impact by enterprises alone is not good enough anymore. Firm‟s very survival might be at risk when ignoring carefully identifying evolving social effects of tomorrow. Outside-in linkages Enterprises operate in a competitive environment with strong influence on the ability to carry out strategy, especially over longer periods of time. Of importance are social conditions hence competitive context is divided in four areas: 1. the quantity and quality of available business inputs 2. the rules and incentives that govern competitionThe essential test that 3. the size and sophistication of local demandshould guide CSR is 4. the local availability of supporting industriesnot whether a cause isworthy but whether it Three generic social issues affect the enterprise: Generic social issues, Value chainpresents opportunities social impacts and Social dimensions of competitive context.to create shared value Nyenrode Business University, MBA Business & IT Page 4 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Porter & Kramer define responsive and strategic CSR as:Through strategicCSR the enterprise Responsive CSR: act as a good corporate citizen, open to evolving socialwill make the most concerns of stakeholders, and mitigating existing or anticipated adversesignificant social effects from business activities.impact and gain thegreatest business Strategic CSR choosing a unique position – act distinct from thebenefits competition in a manner that cuts costs and/or better serves customer needs moving beyond good corporate citizenship. Address enterprise harmful value chain impact by initiating endeavours which benefit both society and business significantly and distinctively. Strategic CSR involves both inside- out and outside-in dimensions working in conjunction.Strategic CSR unlocksshared value byinvesting in socialaspects of context thatstrengthen enterprisecompetitiveness 1.2 Governance and Sustainability According to Aras G. & Crowther D. (2008), corporate governance is an environment of trust, ethics, moral values and confidence, a synergic effort of all ingredients of society stakeholders. This involves government, the general public, professional service providers and the corporate sector. Sustainability issues in relation to corporate governance is a topic of growing concern and is put on the board agenda. Ackerman (1975) concluded enterprises acknowledged the adaptation to a newSustainability implies social climate of community accountability however orientation of business tothat society must use financial results was inhibiting. Financial performance is an essential aspect ofno more of a resource corporate sustainability adding a further dimension for analysis of sustainabilitythan can be including a focus shift towards enterprise accountability to society (Aras & Crowther,regenerated 2008). Rubenstein (1992) explains the need for a social contract between a business and its stakeholders. Crowther‟s (2002) definition of sustainability; The concern of the effect which action taken in the present has upon the options available in the future. A sustainable enterprise can only exist by recognising environmental and social issues and incorporating them into its strategic long term planning Aras G. & Crowther D. (2008), Nyenrode Business University, MBA Business & IT Page 5 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Financial performance, as an integral part of sustainability is not recognised by most analysis of sustainability (e.g. Dyllick and Hockerts, 2002; Spangenberg, 2004). Güler Aras et all (2008) find financial performance is an essential aspect of corporate sustainability adding an extra dimension to the analysis of sustainability. Hence fourAn enterprise which aspects of sustainability must be considered as key dimensions of sustainability:has a completeunderstanding of 1. Societal influencesustainability and impact that society makes upon the enterprise in terms of the social contract andcorporate governance stakeholder influencewill address issuesmore completely 2. Environmental impact effect of the actions of the enterprise upon its geophysical environment 3. Organisational culture relationship between the enterprise and its internal stakeholders, particularly employees, and all aspects of that relationship 4. Finance terms of an adequate return for the level of risk undertaken The four elements of enterprise sustainability and governance performance are represented on a two-dimensional matrix along the polarities of internal versusCreation of value external focus and short term versus long term focus. Aras & Crowther (2008) arguewithin the enterprise is that sustainability is the distribution of effects – positive and negative – eliminatingfollowed by the conflict between all of these and pays attention to the future as well as the present. Adistribution of value to short term approach for enterprise is no longer acceptable for sustainability issues.the stakeholders andshareholders of thatenterprise and adds towelfare for society atlargeGood performance inthe financialdimension leads togood futureperformance in the Sustainability can be defined as; consciously addressing planning for the futureenvironmental concerned with resource utilisation choices today. Enterprises should consider:dimension and vice generating and utilising renewable resources, minimising pollution and using newversa techniques of manufacture and distribution. Present sustainability costs are an investment for the future. Aras & Crowther (2008); management from a financial perspective and its external environmental management coincide in this common concern for management for the future. Nyenrode Business University, MBA Business & IT Page 6 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Economic downturn and big corporate scandals have raised corporate governance as a topic of attention. In order to provide funding investors demand that enterprise implement rigorous corporate governance principles in order to achieve better returns on their investment and to reduce costs. Beiner et al (2004) find that investors are ready to pay a premium for enterprise to have good governance standards. Report‟s on corporate governance is a main tool for investor decisions.The amount of Enterprises are not able to ignore the pressure for proper governance frominformation regarding shareholders, potential investors and other markets actors.the relationshipbetween governance Transparency, accountability, responsibility and fairness are corporate governanceand sustainability will principles related to CSR. Corporate governance is vital for business performance.also increase, not just Enterprises must understand the rules and learn how to improve strategy to applyas enterprises gain a these principles.clearer understandingof that relationship but Enterprise senior management must develop and adhere to corporate governancealso as they procedures balancing both shareholder value and satisfy other stakeholders. Sethiunderstand the (2002), governance is balancing enterprise economic and social goals includingbenefits of greater aspects as efficient resources use, energy accountability, and the social behaviour ofdisclosure in this the corporation..respect Good governance & sustainability will address the: societal influence aspect of sustainability environmental impact aspect of sustainability organisational culture aspect of sustainability finance aspect of sustainability 1.3 Green-IT – what makes a difference? The trend towards green IT is a result of both the environmental impact of IT and the role IT plays as a potential source of solutions to environmental concerns. Enterprises are under pressure to act sustainably, environmental considerations are taking greater importance for organisations and IT. Environmental considerations form important dimensions in corporate sustainability (PricewaterhouseCoopers & SAM 2008), corporate social responsibility (St James Ethics Centre n.d.), corporate strategy (Enkvist & Vanthournout 2008) and the “triple bottom line‟ measure of organisational success, which is comprised of economic, social and ecological sustainability (Elkington 1998). Enterprise IT is a source of, and a solution to, organisational environmental degradation. CIO‟s expect that Greenness of IT suppliers become important (IDC 2008). Gartner (2009) predict green IT to be one of the top strategic technologies. Nyenrode Business University, MBA Business & IT Page 7 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?Factors influencing green IT are: 1. Motivational, understanding the motives for enterprise‟s environmental initiatives assist in predicting environmentally based behaviours (Bansal & Roth 2000) and can be a significant factor in the development of green IT in organisations. Bansal and Roth (2000) found three basic motivations that induce corporate environmental responsiveness: Competitiveness, focuses on profitability, reduce cost, generate revenues or efficiencies. Legitimation, is survival. Initiatives are based on satisfying government, local community, stakeholders and compliance & regulations to avoid penalties and lessen risk. Social responsibility, act from a sense of obligation, responsibility or philanthropy rather than out of self-interest (Bansal & Roth 2000) 2. Organisational, as green IT initiatives have impacts on human resources and organisational capabilities (Sayeed & Gill 2008), the extent of green IT will be influenced by organisational factors. An enterprise‟s human resources and capabilities must be leveraged to manage environmental performance (Russo & Fouts 1997). Senior management support has been identified as the important internal organisational factors, they facilitate the requisition of resources, and environmental policy seems to follow a top- down progression. 3. Technological (constraints), James (1999) identified technology facilitation as a factor in the decision making process towards environmental strategies. Molla (2008) suggested that technological context may also influence the extent of green IT in organisations.Research model showing the proposed factors which influence the extent of green ITin organisations:Enterprises that support IT to improve environmental performance are motivated byemployees - in an environment capable of change - as a sense of socialresponsibility rather than responding to external pressures or pursuing competitiveadvantage (Ben N. Kuo & Geoffrey N. Dick, 2009)Nyenrode Business University, MBA Business & IT Page 8 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 1.4 Green-IT – the extend of adoption IT is a factor in causing and resolving sustainability issues (Green-IT). Policy makers and IT managers recognise the importance of IT as a means of greening the enterprise. Two main and interrelated streams of thoughts can be identified in the discussion on Green IT: 1. Reducing of carbon emission and IT assets wasteA PC running for 2. Deploy IT in measuring, reporting and reducing greenhouse gas emissions,around ten hours per waste and water usageday produces 1200pounds of CO2 whichis almost 1/10 of what Adoption Green IT can be influenced by 3 generic sources of influence could bean a car generates identified as economical, regulative and, normative (Molla, 2008; Chen, Boudreau, &annually (Weiss, Watson, 2008):2007) 1. Economic forces, the need for pursuing internal efficiency and market performance, the main motivator of Green-IT adoption. Compliance, business continuity strategies and global expansion increase the need for more data storage. More data implies larger server farms and more demand for power (Rasmussen, 2006). 2. Regulatory forces, demand compliance to green or environmentally responsible regulation. Government bodies should force the adoption of Green-IT by rules and laws that allow or prohibit certain practices. E.g. limitations on greenhouse gas emissions, institutionalising emissions trading, banning the use of hazardous materials and imposing restrictions on e-waste disposal.Rasmussen, the needfor reducing the 3. Normative forces, the pursuit of legitimacy within the wider social contextpower, cooling and (DiMaggio & Powell, 1983). The need to meet social obligations and enforcereal estate costs and moral governance can induce certain Green-IT practices.increasing data centreefficiency might drivesome organisations to These forces are not necessarily mutually exclusive. The preference of a dominantturn to Green IT force can influence the adoption and extend of Green-IT activities and favour certain Green-IT practices. Nyenrode Business University, MBA Business & IT Page 9 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Green-IT is an enterprise‟s ability to systematically apply environmental sustainability criteria (such as pollution prevention, product stewardship, use of clean technologies) to the design, production, sourcing, use and disposal of the IT technical infrastructure as well as within the human and managerial components of the IT infrastructure (Molla, 2009). The definition can be split into 4 different but interrelated perspectives of Green-IT: 1. Sourcing, procurement practice of environmentally preferable IT purchasing through analysis of the Green track record of software and IT servicesInitiatives to replace providers, incorporating Green issues in vendor evaluation, and inclusion ofequipment with more social concernsenergy efficientequipment would 2. Operations, improving energy efficiency in powering and cooling corporategenerate a surge in IT assets and reducing greenhouse gas emissions.electronic waste andconsume additional 3. Services, the role of IT in enabling an enterprises overall sustainabilityresources if equipment initiatives including analytical IT tools, for Green supply chain management,is replaced before the environmental management and carbon foot print analysis and low basedend of its natural life carbon business solutions (among others; video-conferencing, thin client & web business service, desktop virtualization, corporate-wide PC power management). 4. End of IT life management, practices in reusing, recycling or disposing IT hardware and consumables in an environmentally responsible manner. Hoffman and Woody (2008) argue that the costs of being Green are high and costs must be seen in light of competitive, market and economic opportunities of becoming Green. Regulatory requirements and legislative actions play very significant roles in the adoption of Green technologies and can force some businesses to accept a technology (Olson, 2008; Gonzalez, 2005). Factors that influence the adoption of Green-IT, effort should be exerted to cover economical, regulatory and ethical issues. Nyenrode Business University, MBA Business & IT Page 10 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 1.5 Green-IT and Governance In a grim and green economic era information technology has an important role to play in creating sustainable businesses. Recovery from the economic crisis is going to demand and eventually lead to more greener and energy efficient industries. It is the technology–sustainability connection that “Green-IT” has emerged as a topic of concern for IT and business leaders. Alem Molla (2009) defined Green-IT as follows (Organizational Motivations for Green IT: Exploring Green IT Matrix and Motivation Models, page 4):Responses toenvironmental Green-IT is an organisation’s ability to systematically apply environmentalchallenges differ sustainability criteria (such as pollution prevention, product stewardship, usefrom of clean technologies) to the design, production, sourcing, use and disposal ofenvironmental the IT technical infrastructure as well as within the human and managerialpolicies for public components of the IT infrastructure.consumption togreen-washing Green-IT has 2 dimensions:their strategiesthrough recycling 1. Reach, the extent to which Green-IT touches an enterprise‟s IT activitiespractices from sourcing through operations to end-of-IT-life management. 2. Rich, the extent of maturity of Green IT polices practices and technologies. The Green-IT Definition Matrix: Maturity in Green-IT Reach and Richness provides evidence of an enterprise Green- IT strategy and commitment to the main goals of eco-sustainability, pollution prevention, product stewardship and use of clean technology (Hart,1997). Nyenrode Business University, MBA Business & IT Page 11 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 2. BT Group practices BT‟s present challenge originate from its previous crisis in 2002, after the dotcom crash, loaded with debt BT sold most of its international assets and span off itsBT has a huge mobile operation, leaving a fixed-line telecoms operator under pressure from bothpension burden in the competitors and regulators. Former BT Group CEO, Ben Verwaayen, championedUK. Its underfunded Global Services, which serves governments and big companies. In the financial yearscheme has 340,000 to March „08 sales reached £8 billion, almost rivalling BT‟s traditional business.members. Trustees Global Services margins were under pressure. In 07/08 Global Services contributedexpect scheme‟s almost 40% of sales but just 4% of operating profits. Global Services lost £800m inliabilities reach £40 the financial year 08/09.billion gross In 09/10 BT generated about £1.3 billion which had to support dividend payments and underwrite the giant and underfunded pension scheme. Hence BT Group, Global Services especially, is scrutinized by analysts from the City on financial performance. Investments are under pressure to satisfy shareholders and the pension scheme.BT is pushing cashflow above the £1.3-billion mark resultingin cutting costs. Infixed-line telecomsthat means cuttinglabour and focussingcapital expenditure Sources: internal reporting and BT communications 1. The Economist - BT’s Pension Problem - Aug 20th 2009 2. Accountability Report - The Materiality Report, Aligning Strategy: Performance and Reporting, November 2006 Nyenrode Business University, MBA Business & IT Page 12 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 2.1 CSR strategy and governance BT Global Services Benelux has ambitious goals for reducing the CO2 footprint for fiscal 2011/12. The governance aspects will be researched by interviewing the CFO, (guardian of CSR endeavours) and Jan Willem Leguit (senior consultant within BT professional Services) responsible for the ISO 14001 certification for BT Benelux. A program to reduce BT Group‟s global carbon intensity by 80% by 2015, from 1997 levels is delayed to 2020. On the other hand, in California, the solar array powering the offices and datacenter is in its first full year of operation.Eliminate, Reduce,Reuse & Recycle forelectronics devicesER3 principle is themost efficient rulemaking control forenterprise greenprojects (Taylor, R.2009) BNL is ISO 14001 certified and is following the PLAN-DO-ACT improvement scheme. Significant progress has been made on reduction of waste, car millage, air travel, use of natural gas for heating and use of water, see Appendix II. This is, however, mainly due to the downsizing since the beginning of the financial and the following economical crisis. Ambitious targets from London were met automatically. For the next fiscal 2011/2012 BT anticipate an increase of business volume and as a result an increase of the use of resources. This will affect BT‟s footprint negatively. Without additional measures, investment and financial commitment, the CSR goals will likely not be met. Green decisions are taken by and governance is performed on ad-hoc bases by BNL employees often without senior management being aware. One FTE for CSR governance is the BT Group norm, due to stringent cost reduction programs this function is not fulfilled. There is a definite need for a dedicated FTE for governance and ownership of “Green Development” within BT Benelux. Sources: BT PLC Sustainability Report 2011 http://www.btplc.com/Responsiblebusiness/Ourstory/Sustainabilityreport/index.aspx Nyenrode Business University, MBA Business & IT Page 13 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?2.2 Business ConductBT‟s CSR strategy translates in the following day to day practices: e-waste 98% of the IT equipment (mainly Cisco) is returned to the manufacturer at end of life. Green energy / CO2 reduction All energy used in BNL is nowadays green. Data centers are transformed to energy efficient operations in terms of cooling, energy used and supplying heat to nearby greenhouses. Here significant investments are made. As a simple measure the cooled environment temperature is raised from 21 to 25 degrees Celsius and the heating lowered to 19 degrees Celsius. Procurement BT is engaging suppliers to deliver products that operate effectively up to 50 degrees to reduce cooling cost in data centers. Eat for own dog food Benelux employees started using the BT mobility services enabling them to work flexible, experiencing the possibilities and limitations, and addressing ways for improvement. Right First Time RFT is about fulfilling our customers‟ expectations and our promises perfectly as perceived by the customer. For BT Global Services it implies improving the delivery and quality of services, removing the cost of failure and reducing cost to serve. RFT has had a positive impact on BT‟s global carbon footprint. Travel Due to telepresence solutions in Amsterdam and Brussels BT reduced air travel with 60% (CO2 reduction of 70 tonnes and savings of 300,000 euro) and car travel for BNL meetings (reduction of 81,259 Km, 15 tonnes CO2).Nyenrode Business University, MBA Business & IT Page 14 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? Flexible working Survey suggests that home working is reducing BT‟s work-related CO2 emissions by around 7,000 tonnes a year, on a net basis, professor P. James University of Bradford “Home working at BT - The Economic, Environmental and Social Impact “, 2008. BT is benefiting from higher employee productivity and morale, lower absenteeism, and reduced property costs. BT closed an office building in Amsterdam in 2009. Over 400 employees had to find a new way of working without much guidance from senior management. With only little disturbance the flexible working scheme had been adapted resulting in lowering cost for renting office space, less car millage and energy reduction.Sources: Proposition papers, product information, marketing analysis, publishedinterviews, reporting by research institutions and interview CFO.1. BT - Changing world: Sustained values: Our 2010 Sustainability Review2. BT - Planning For A Sustainable Future: Helping Organisations Reduce Their Carbon Footprints, Dr Daron G Green3. HOMEWORKING AT BT - The Economic, Environmental and Social Impacts Final Report June 15 2008 Professor Peter James, SustainIT and University of Bradfordhttp://www.globalservices.bt.com/AboutusHubAction.do?id=corporate_social_responsibilityNyenrode Business University, MBA Business & IT Page 15 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 2.3 Green-IT portfolio development BT Global Services is a Networked-IT business delivering hosted ICT commodities from 24 data centers via a global MPLS network to customers. Data centers are thePower and cooling is a fastest growing part of the ICT footprint (14% CAGR in USA) and have a largepandemic in the world potential efficiency gain. The principal measure of data centre efficiency is known asof the data center, the Power Usage Effectiveness (PUE) metric. This is defined as:said Michael Bell,Gartner research An ideal PUE measures 1.0 when all the facility power is used to power the IT equipment. A PUE of 2.0 implies 50% of the power is wasted – usually in cooling systems and uninterruptable power supplies. A typical legacy data centre has a PUE of 2.5. 50% of the data 20 years ago chips consumed 8 watts of power compared to 110 watts today. This centers are obsolete phenomenon - underbelly of Moore‟s Law - along with blade server developments due to insufficient can increase the concentration of processing power, and therefore power demand, 8 power & cooling times per square foot. A report by the American Society of Heating, Refrigerating, capacity to meet the and Air-Conditioning Engineers (ASHRAE) revealed that between 43-65% of data demands of high center energy is used to power equipment, between 20-25% is used to power density equipment cooling systems and between 1-3% devoted to lighting. BT recognized the above issues and is developing sustainable data centers delivering green cloud services to global customer taking the following approach: 1) Audit and learn Discovery contributed to BT‟s consolidation of 3,000 servers and reduced electricity consumption by 23GWh a year while reducing CO2 emissions by 3,300 tonnes. 2) Renewable energy BT Group is leading the largest enterprise wind power project outside the energy sector, which aims to produce up to 25% of its UK electricity consumption by 2016. 3) Switch to fresh air cooling Imtech is building BT‟s Data centers have enormous cooling requirements, which can amount to an Green data centers in enormous energy drain. BT data centers are able to channel the air that circulates Nieuwegein en outside the building into the data centre to help keep temperatures at an optimal level. Using fresh air instead of air conditioning to cool hardware is becoming a real Amsterdam, CO2 option. Its highly energy efficient, but it implies that datacenter equipment has to reduction 40%,Dec ‟10 tolerate a wider range of operating temperatures - 5 to 50 degrees Celsius, rather than 20 to 24 degree standard of today. 4) Move from AC to DC Computers operate of DC voltages, yet power is delivered in higher AC voltages. Avoiding the power conversion results in a 30% power saving. BT is introducing this power scheme globally. Nyenrode Business University, MBA Business & IT Page 16 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise? 5) Turn to multi-core processors Consolidate systems, multicore processors combine 2 or more processors into a single package. BT consolidated many small servers on to fewer, more powerful systems and thus cut power consumption and energy spend.BT‟s Virtual DataCenter is a green 6) Virtualisationvirtual networked IT The most exciting of all the emerging technologies is virtualisation, a technique thatinfrastructure that uses idle network power to use resources more effectively and efficiently. BTenables customers to reduced a 1,500-server data center down to just over 100.create, deploy, 7) Reduce infrastructuremonitor and manage Development of data centers which interact with the technology they house. Bytheir own service on building resilience and disaster recovery functions into the applications that managedemand through a self server hardware, the need for separate hardware to take care of these functions isservice portal removed hence the need for power and cooling for those systems. 2.3.1 Carbon impact assessment, an example SWIFT, The global provider of secure financial messaging services, planned to reduce carbon emissions by 60% towards end of 2012. BT performed a data center sustainability assessment to investigate its overall carbon footprint. The purpose of the audit was to support the following key business drivers: Reduce overall carbon footprint Reduce server population resulting in decreased infrastructure capital expenditure Leverage the existing investments in technology Provide cost-efficient high available technical infrastructure BT performed the assessment on Swift‟s data center hosting a large server base (rack mounts and blade systems) both Wintel and UNIX, storage and networking devices. The assessment resulted in a roadmap for Swift providing a comprehensive TCO and ROI study, implementation and an investment plan. BT provided a solid business case achieving a 72% reduction in server population. The reduction would not only reduce up to 851 MWh/Year in energy consumption and 177 Metric tonnes of CO2 emissions but also save up to €2.3 million over 5 years with a very positive ROI. Sources: Interview Senior Consultant Professional Services, study CSR reporting, Green-IT portfolio development material and IDC report (October 6, 2009): BTs Sustainability Practice Facilitates Green IT Initiatives for Enterprise Customers 1. BT - A realist’s guide to green data centres (whitepaper) 2. BT - Are ICT emissions running ahead of expectations? Produced by Chris Tuppen, BT Chief Sustainability Officer and Chad Raub, Dawn Capital Nyenrode Business University, MBA Business & IT Page 17 of 27 Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?2.4 RecognitionBT has been awarded the “2010 European Telecoms Corporate LeadershipGreen Excellence Award”. This award recognises BT‟s leadership in environmentalinitiatives designed to reduce carbon emissions. BT is giving top priority to projectsthat bring emissions reductions by changing behavior engaging employees to reduceenergy use is one of the most effective ways to cut emissions, whilst reducingoperational costs.In 2008, BT launched a new global energy saving campaign to save 75,000 tonnesof CO2 emissions and £15 million by March 2011. This resulted in new measuresthat will reduce the company‟s energy consumption by more than 53 GWh perannum and its carbon footprint by 20,200 tonnes a year.BT has done a remarkable job leveraging internal successes by turning them intosolutions, including energy efficiency management, remote working/collaborationpractices, virtualisation designs, use of conferencing facilities and datacenteroptimisation. BT Global Services has managed to grow a strong consultancybusiness focusing on sustainable solutions.Dow Jones Sustainable Index, BT has ended number one on DJSI for seven yearsrunning, until 2009 after which Telefonica has taken over de top position since. KPNhas entered the top five in 2010.Business Week & Boston Consulting Group, BT is one of the most innovativecompanies in its sector, 2008.Telemark (Platinum Award), acknowledges BT‟s success in capturing the heartsand minds of customers with excellence and ahead of global rivals.Gartner, BT Global Services is positioned in the "Leaders" quadrant in 3 key GartnerMagic Quadrants: the Global Network Service Providers, the Pan-European NetworkService Providers and the for Communications Outsourcing and professionalservices worldwide. BT have a strong vision that includes adopting more informationand communication technology (ICT) capacity which is a strategy they articulateclearly and openly."Accounting for Sustainability (Elaine Cohen CSR Wire, 2010), the case studythat I found most impressive was BT who published a first Environment Report in1992. The study of the sustainability evolution at BT shows how the Business Casefor CSR was developed, the business benefits BT expects from its sustainabilityprograms, the drive to assess materiality and the application of a more quantitativeassessment of BTs sustainability performance in financial terms.In its 2009 annual report BT includes a table of the Non-financial corporateresponsibility KPIs as a high level connected reporting summary of the mostmaterial sustainability issues and shows both direct and indirect enterprise impacts,most of which are translated into a money figure. Accountants will clearly love this,as will investors and analysts, and indeed, it does remove some of the fogginess wefind in many Sustainability Reports around sustainability initiatives.Nyenrode Business University, MBA Business & IT Page 18 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?3. ConfrontationThis section of the paper confronts the scientific modelling with BT‟s strategicplanning, governance, business conduct and Green-IT developments with respect toBT‟s competitive position.3.1 Competitive advantage and CSRResponsive CSR => BT has enormous pension scheme liabilities in the UK. BT hasto generate enough cash flow to fulfil its obligation to society resulting in neverending mitigation of risk, hence seeking efficiencies in the value chain.Strategic CSR => BT started reporting its impact on the environment in 1992,understanding that its energy consumption and raising demand would imposestrategic challenges in terms of sourcing and growing carbon foot print. Consumingabout 2% of the nation‟s energy, saving and sourcing of reliable, affordable andgreener energy became crucial and got boardroom attention.Competitive advantage => Due to the constant crisis it‟s in, BT was forced torethink its position and strategy with respect to CSR in the early ‟90. It set some bighairy audacious goals with respect to energy production and consumption, 21century network and involvement of employees.3.2 Governance and SustainabilitySocietal influence => As one of the largest employers in the UK, the extend ofwholesale and retail telecommunications and other services it‟s delivering, andfinancial obligations BT‟s impact on society in the UK is significant and vice versa.BT has an unwritten social contract to lead innovation and act as an example ofgood (corporate) citizenship and ownership thereof.Environmental impact => BT‟s actions take immediate effect on the geophysicalenvironment in terms of e-wast, carbon footprint and the landscape due to the buildof a wind farm generation ¼ of BT‟s energy demand in 2020. BT is scrutinised byenvironmental organisations and governments (local & central).Organisational culture => Employees have the ability to work flexible, this isstrongly promoted by BT, to save time and energy resulting in less pollution andstress. In 2009 75% of the BNL staff worked from home during the “BT Beating theQueue DAY”. The CSR culture, expectations and behaviour, is unwritten but lived.Finance => BT constantly has to balance finance (investments, dividends & pensionscheme liabilities) satisfying many stakeholders among which the government andsociety at large. Due to the 2008 financial and following economical crisis BT hadless funding for achieving its very ambitious sustainability goals.Nyenrode Business University, MBA Business & IT Page 19 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?Mapping BT Group behaviour to the 4 sustainability aspects results in the followingdiagram:Red is before October 2008.Blue is after October 2008. BT is focussed on financial performance, cutting internalcost but maintaining the commitment to the sustainability promise.Nyenrode Business University, MBA Business & IT Page 20 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?3.3 Green-IT3.3.1 The differenceMotivational => Green-IT is an instrument for survival for BT Group anddifferentiates BTGS from AT&T, Verizon and Orange Business Services. Competitiveness => Applying Green-IT is instrumental in BT‟s quest to reduce cost, increase profitability, generate cash and develop a sustainable networked-it portfolio and grow domestic market share against KPN and the black sheep. Legitimation => BT is under pressure from UK government(s), environmental organisations and Ofcom (the regulator). An overwhelming amount of rules, regulations and public expectations have to be met. Early initiatives with respect to greening IT are set over a long period of time to avoid cost and reduce risk. Social responsibility => BT Group‟s impact on British society is tremendous. It‟s doubtful if BT acts from a sense of obligation or philanthropy rather than out of self interest. At best it can be defined as “BT understood the rules of the CSR game”.Organisational => BT has the human and organisational capabilities to make thedifference. At BT Group awareness and attention is urgently present as a means ofsurvival. At BTGS Green-IT is a much needed portfolio ingredient. BT BNL seesGreen-IT as one of the business goals, it‟s present, but financial targets are moredemanding.Technological constraints => Technologies are developing quickly and are readilyavailable. Due to the size of the BT organisation and its presence in 178 countriesthe adaption of new green technologies is a constraint as portfolios (development)are commoditised which takes “some” time.3.3.2 Adoption InfluenceAdaption Influence:Economic => BT is in need of cash. Reduction of energy consumption is aneffective tool of cost reduction. BT has been successful in taking measures andapplying Green-IT in making BT Group financial thresholds by reducing cost ofoperations (energy, travel, housing, IT-infrastructure estate, delivery and number ofstaff).Regulatory => Vision more than regulatory forces have driven BT to sustainability.Normative => In many ways BT Group is normative for its sustainability endeavours.BT is seen as seen the leader among leaders by Ovum (2009).Nyenrode Business University, MBA Business & IT Page 21 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?BTGS ability to systematically apply Green-IT is described in the followingperspectives:Sourcing => BT‟s sourcing strategy is about efficiency and effectiveness; more forless, reduction of energy usage, joint communication & marketing, free pilots, betterservices, available stock and reliable delivery. Strategic partnerships are key withe.g., Cisco, Microsoft, HP and Cap Gemini. thOperations => On April 29 2010 BT BNL joined the MJA (MeerjarenafspraakEnergie Efficientcy, Ministerie van Economische Zaken) committing to an energyreduction of 2% annual YoY. ISO 140001 certified following DO-PLAN-ACT.Services => The Professional Services branch of BTGS has several enterpriseassessments services, based on internal BT experiences, analysing carbon impact,reporting and propositions for improvement. BT has introduced Green Bill (no morepaper invoices, only at an additional cost).End of IT life management => 80% of the equipment goes back to the originalsupplier.3.3.3 GovernanceA demonstration of BT‟s strategy and commitment, as a measure of governance,can be demonstrated by scoring the Green-IT definition matrix.Rating: X infant, XX in place needs improvement, XXX matureNyenrode Business University, MBA Business & IT Page 22 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?3.4 Conclusions and suggestions for improvementAccording to Porter & Kramer‟s CSR Competitive Advantage Enterprise FrameworkBT is definitely green in its strategy, governance, reporting, business conduct andNetworked-IT portfolio development. BT has a competitive advantage. Until Q3/2008BT was the unchallenged leader.The financial perspective of Aras & Crowther with respect to Governance andSustainability is indeed present and leading in BT. The financial and followingeconomical crisis forced BT to slow down programmes, postpone new programsstart-up and cut costs significantly. (Very) ambitious CO2 reduction and energysaving goals were pushed-out in time. The last 2 years this has resulted in losing theglobal lead to Telefonica and BT BNL being challenged by KPN. Even thoughfinancial commitment is more balanced towards pension liabilities and share holdersBT invests vast amounts in greening data centers globally, green-IT and professionalsustainability services. BT‟s 10/11 cash flow will approximately be 1.7Bn £.BT‟s employees are consciously aware of sustainability issues and are drivinggreening of IT and energy reduction fulfilling Kuo, Geoffrey & Dick‟s requirements formaking the difference in Green-IT. The extent of adoption of Green-IT, followingMolla‟s Green-IT enterprise‟s ability definition, is applicable to BT‟s ability to adoptand drive sustainability practises. With respect to Green-IT and Governance, Molla‟sOrganisational Motivations for Green IT, there is room and need for a BusinessConsultant Sustainability Practises advising both BNL senior management as well as(prospective) customers on CSR opportunities translating propositions in actualreduction (cost) and generating new business.3.4.1 A maturity assessmentBT is a complex organisation with many stakeholders, legacy systems, proceduresand reporting mechanisms not to mention the (Ofcom) regulation pressures. Withrespect to the “Sustainability Promise reporting” and measuring progress against thecompetition there is Maturity Level dashboard developed by Eric G. Olson, IBM.I recommend that for further BT internal research on the subject the above model isexamined and tested. Is can be used as a dashboard filling the gap betweenawareness and action and as a means of reporting.Nyenrode Business University, MBA Business & IT Page 23 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?APPENDIX I, ReferencesWatson R.T. et al. Department of MIS University of Georgia Altanta U.S.A. “IS andEnvironmentally Sustainable Development: Energy Informatics and New Directionsfor the IS Community” MIS Quarterly vol. 34 No. 1, pp 23-38/March 2010.Eward T. Chen U. University of Massachusetts U.S.A. “Enhancing corporateenvironmental management with green IT and Virtualization” Northeast DecisionSciences Institute Proceedings, pp230-235/March2010.Molla A. Et al. RMIT University “An International Comparison of Green IT Diffusion”International Journal of e-Business Management, vol. 3, no. 2, pp 3-23/2009Porter M. Kramer M.R. Harvard Business University. “ Strategy & Society: The LinkBetween Competitive Advantage and Corporate Social Responsibility” HarvardBusiness Review, 17 pages/December 2006.Lozenz M. Hilty L.M. Ruddy T.F. Empa, Swiss Federal Laboratories for MaterialsTesting and Research. “Sustainable Development and ICT Interpreted in a NaturalScience Context” Information Communication & Society, February 2010Olson E.G. Management Consultant, Strategy and Change Practice, IBM GlobalBusiness Services. “ Creating an Enterprise-level „green‟ strategy” Journal ofBusiness Strategy vol. 29 no. 2, pp22-30/2008Vykoukal J. Goethe University, Frankfurt Germany. “Grid Technology as Green ITStrategy?: Empirical Results from the Financial Services Industry” 18th EuropeanConference on Information Systems. 2010“Green IT hits the CIO radar” Datamonitor/April 2008Aras G. Crowther D. Yildiz Technical University Istanbul & Leicester BusinessSchool, De Monfort University UK “Governance and sustainability: An investigationinto the relationship between corporate governance and corporate sustainability”Management Decision, vol. 46, no. 2/2008Kuo B.N. Dick G.N. University of NSW Sydney Australia “ The Greening ofOrganisation IT” What makes a Difference?” Australian Journal of InformationSystems, vol. 16, no. 2/2009Xing R. Wang J. Chen Q. Montclair State University “The Contemporary ITTransformations” Operation Research and Management Information Systems/xxxxMolla A. School of Business Information Technology RMIT Univesity “The Extent ofGreen IT Adoption and its Driving and Inhibiting factors: An Exploratory Study”Journal of Information Science and Technology/2009Nyenrode Business University, MBA Business & IT Page 24 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?APPENDIX II, Risk AssessmentsNyenrode Business University, MBA Business & IT Page 25 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?APPENDIX III, CSR KPI’sBT Group Corporate Social Responsibility Key Performance IndicatorsNyenrode Business University, MBA Business & IT Page 26 of 27Ownership of Governance and Enterprise

BIT, does BT deliver on IT‟s sustainability promise?Nyenrode Business University, MBA Business & IT Page 27 of 27Ownership of Governance and Enterprise

Business and IT, does BT deliver on IT's sustainability promise

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Business and IT, does BT deliver on IT’s sustainability promise Document Transcript