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Technology: Hardware

For the technology hardware sector to effectively address key environmental and social impacts it must examine and address all stages of the product life cycle—from sourcing and manufacturing operations to product use and end-of-life management.
Technology: Hardware Companies

Amphenol Corporation
Apple Inc.
Arrow Electronics, Inc.
Avnet Inc.
Cisco Systems, Inc.
Corning Inc.
Dell Inc.
EMC Corporation
F5 Networks, Inc.
FLIR Systems, Inc.
Harris Corp.
Hewlett-Packard Company
Jabil Circuit Inc
JDS Uniphase Corporation
Juniper Networks, Inc.
Molex Inc.
Motorola Solutions, Inc.
NetApp, Inc.
QUALCOMM Incorporated
SanDisk Corp.
Seagate Technology PLC
TE Connectivity Ltd.
Trimble Navigation Limited
Western Digital Corp.

Key Findings

  • Technology Hardware companies perform strongly on adoption of policies to manage sustainability issues.  For example, 88 percent (22 of 25 companies) have an Environmental Management System (EMS) in place, demonstrating a nearly universal commitment to tracking impacts throughout the sector.
  • However, only a small group of companies consistently demonstrate strong accountability for sustainability at the board and executive level.
  • Nearly half of the sector (11 of 25 companies) uses GRI Guidelines to publicly disclose sustainability performance.
  • Sixty percent (15 of 25 companies) disclose at least one material sustainability issue that goes beyond regulatory compliance in their 10-K filings.
  • Technology Hardware companies are not doing enough to mitigate their growing need for energy.  While many have some initiatives to improve efficiency and reduce emissions, too few are sourcing renewable energy at the level commensurate with the growth of their businesses.
  • The Technology Hardware sector continues to make progress on supply chain performance, addressing exposure and positioning it as a leader on this Roadmap expectation. Eighty-four percent (21 of 25 companies), have a formal sustainability policy or code for their suppliers. More than half of the Technology Hardware companies are working with suppliers to implement these policies by establishing formal programs to improve the environmental performance of their suppliers, extending responsibility across the globe.
  • Fifty-two percent of Technology Hardware companies (13 of 25 companies) are in Tier 1 for their focus on sustainable products and services. This signals that the sector is heading in the right direction toward helping to build a sustainable, low-carbon economy.

 

Introduction

The way consumers and businesses interact with technology has significantly shifted in recent years. Research firm Gartner predicts that in 2015, more tablets will ship than PCs, marking one of many transitions facing the Technology Hardware sector.1 Computers and smartphones are not the only devices connected to the Internet anymore; our cars, wristwatches and thermostats are constantly sending data to the cloud.2 International Data Corporation (IDC) estimates that by 2020, there will be more than 200 billion “connected” devices, many of which do not even exist today, as part of an “Internet of Things.”3 These devices create massive amounts of data, pushing the limits of data storage hardware, security and the energy required for making data accessible.  As the backbone of “Big Data,” the Technology Hardware sector is presented with an enormous challenge to support this growth in a sustainable way.

With more data being processed and stored, there are an increasing number of environmental and social impacts. Energy and water is required to power data centers and there are significant concerns about data security and privacy as cloud computing skyrockets.  Hardware companies also rely on complex supply chains to source,manufacture, and assemble many product components. Companies are expected to manage the lifecycle of their products ranging from responsibility for protecting factory workers’ rights, to tracing materials to conflict-free mines to addressing the proliferation of electronic waste, or “e-waste.”

While these are serious risks to manage, there is also great opportunity for technology companies to help all sectors innovate and collectively move towards a low-carbon economy. A report from one of the sectors' industry groups says that, while Information Communications Technology (ICT) companies represents only 2.3 percent of the global GHG emission footprint, the abatement potential is more than seven times that number because of ICT-enabled solutions.4 This is a promising analysis and signals the opportunity for companies to compete to be the low-carbon service provider.

The Technology Hardware sector evaluated for this report comprises 25 companies, which includes manufacturers and distributors of communications equipment, computer hardware and peripherals, electronic equipment, instruments and components, and office electronics. Technology Hardware companies lead other sectors in the development of systems to manage the environmental and social impacts of their business; and among their peers, a handful of companies—Dell, EMC Corporation and Hewlett-Packard (HP)—have demonstrated great strides towards meeting the expectations in The Ceres Roadmap for Sustainability.

Governance Section Icon

 

Governance for Sustainability

 

  • Technology Hardware companies perform strongly on adoption of policies to manage sustainability issues.  For example, 88 percent (22 of 25 companies) have an Environmental Management System (EMS) in place, demonstrating a nearly universal commitment to tracking impacts throughout the sector.
  • However, only a small group of companies consistently demonstrate strong accountability for sustainability at the board and executive level.

 

Technology Hardware companies are outperforming other industries in their adoption of strong corporate policies and systems to manage sustainability issues. Fifty-two percent (13 companies) have policies and systems that address at least some of their material sustainability issues, compared to an average of only 19 percent of companies across the other sectors.

For example, an overwhelming majority—88 percent (22 of 25 companies)—have an Environmental Management System (EMS) that covers at least half of their operations and 76 percent (19 companies) are meeting best practice standards for their EMS, which includes setting targets, monitoring and measuring environmental performance, and auditing.  With such systems in place, companies are positioned to drive reductions in GHG emissions, energy, water and other impacts.

While the sector has done well setting up systems and policies to manage sustainability issues, additional accountability measures are needed to meet expectations for strong governance of sustainability. Companies must establish board oversight, management accountability, and executive compensation links for sustainability to be systematically integrated into business priorities and ultimately drive performance throughout the company.  However, the sector has not demonstrated much improvement in these areas. As we saw in 2012, there is a small group of companies leading the pack on Governance for Sustainability, including Dell, EMC Corporation, Hewlett-Packard, and Jabil Circuit, though none score in Tier 1. Additionally, only one company—Molex Inc.—has established a link between executive compensation and sustainability performance.

To drive accountability and ownership of the company’s sustainability goals at Molex, the CEO's cash incentive for FY2012 was based on corporate operating income goals and individual performance goals. The CEO’s individual performance goals included supporting diversity and inclusion, implementing a talent management strategy, and continued development of Molex’s corporate citizenship and responsibility programs.

Stakeholder Engagement Section Icon

 

Stakeholder Engagement

 

  • Twelve percent (3 of 25 companies) perform in Tier 1 because they formally engage stakeholders in the materiality assessment process and disclose the insights gained from stakeholders, up from just three percent in 2012.


Technology Hardware sector has made some improvement in its efforts to identify and engage with stakeholders.  Forty-four percent (11 companies) are disclosing how they are engaging with their stakeholders—from employees to suppliers, customers, communities and investors—up from forty percent in 2012.  Companies are also starting to engage their stakeholders in the process of assessing and prioritizing their material sustainability issues.  Given the growth of frameworks and standards that recommend companies undertake a formal materiality assessment process, we expect this trend to increase in coming years.

Disclosure Section Icon

 

Disclosure

 

  • Nearly half of the sector (11 of 25 companies) uses the GRI Guidelines to publicly disclose sustainability performance.
  • Sixty percent (15 of 25 companies) disclose at least one material sustainability issue that goes beyond regulatory compliance in their 10-K filings.

 

The high performers in this sector have a long-standing commitment to reporting according to the Global Reporting Initiative (GRI) Guidelines, which remains consistent from 2012 to 2014, but there has been an increase in transparency through improved sustainability disclosure in financial filings. Responding to increasing demand for disclosure and transparency around its environmental and social performance, the Technology Hardware sector, like most other sectors evaluated for this report, saw a significant increase in the number of companies now reporting on their sustainability-related risk factors in financial filings. Fifteen companies are now scoring in the top two tiers, compared to just five in 2012. Only seven companies (28 percent) were in Tier 4 for not addressing any sustainability issues beyond compliance with applicable laws and regulations, a decrease from thirteen companies—or nearly half—in 2012.

EMC Corporation is explicitly disclosing sustainability risks and opportunities in its financial filings.  In its 2013 10-K, EMC states that investing in sustainability makes the company stronger, builds long-term shareholder value, and creates immediate financial benefits, for example, by making operations and products more efficient and by creating new business opportunities. The company also discusses how the integration of sustainability principles into product design, operations and business decision-making enhances its resilience and agility in the global economy and helps attract and retain motivated employees.

Performance Section Icon

 

Performance: Operations

 

  • Technology Hardware companies are not doing enough to mitigate their growing need for energy.  While many have some initiatives to improve efficiency and reduce emissions, too few are sourcing renewable energy at the level commensurate with the growth of their businesses.

 

The Technology sector continues to grow rapidly, as does its carbon footprint.  For the Ceres Roadmap expectation on GHG emissions and energy efficiency, we looked at indicators such as programs and targets to reduce emissions, energy use from renewable sources, carbon intensity and the scope of reporting on GHG emissions. The results were mixed. In 2014, the number of companies scoring in Tier 4 remained relatively flat at 40 percent (10 of 25 companies) from 44 percent in 2012.  Given the industry’s focus on efficiency and innovation it is surprising to not see greater improvement.  This can largely be attributed to the trends in carbon intensity for the sector.  The majority—16 out of 25 companies, or 64 percent—are either becoming more carbon intensive or did not disclose enough information to allow us to determine if their GHG emissions are trending downward. 

This is particularly interesting in light of the fact that 68 percent of companies (17) have in place some initiatives to reduce GHG emissions and more than one third (9 companies) have established a formal company-wide program to reduce GHG emissions with quantitative targets and clear deadlines. Together, these findings could indicate that while companies are setting goals and implementing programs, those efforts are not at the scale necessary to get the job done. This is why renewable energy must be a higher priority for companies looking to decouple business growth from a growing carbon footprint.  Yet 56 percent (14 companies) have not demonstrated any use of renewable energy.

Leading companies in the sector recognize this challenge and are working to develop a vision and metrics to address it.  For example, Dell released its 2020 Legacy of Good Plan, which establishes a unique “10x20” goal: By 2020, the “good” that will come from Dell’s technology will be 10 times as great as what it takes to create and produce it. Time will tell how the company is able to measure its positive impact and if this initiative will be game changing for the company and others in the sector.

 

Data Centers: At the Epicenter of the Energy Debate

 

Ten percent of global electricity and consumption is attributable to the ICT industry and is rising, according to a September 2013 report by UBS.5 Data centers are responsible for a considerable portion of this energy demand and represent a challenge that Technology Hardware (and Software) companies must address as part of their operations. Cloud computing relies on large data servers to process and store information, but it allows companies to have data managed remotely versus investing in private on-site facilities. While cloud computing has the potential for saving energy and lowering both GHG emissions and costs, it depends on the type of energy used to power the data centers behind the cloud. Increased access to renewable energy will determine whether Technology Hardware companies are supporting a “green cloud” or “dirty cloud”6 .  To expand access to renewable energy options more technology companies will need to engage directly with local utilities and policymakers.  EMC Corporation has demonstrated leadership in this regard and is one of more than 750 companies that have signed onto the Climate Declaration to demonstrate its support of federal action on climate change.

In addition to energy consumption, companies must also consider water use for cooling data centers. Dell helped customer, eBay, generate additional computing power without increasing energy and water use.  By deploying “Fresh Air” data center cooling technology, eBay is able to house nearly 2000 servers in a data center in Arizona, where temperatures often reach 100 degrees, using free year-round cooling.

 

In addition to its massive energy footprint, Technology Hardware companies must also manage the social implications of its manufacturing operations. Slightly more than a third (nine companies) score in Tier 1 or 2 for their policies and programs to protect human rights. Additionally, roughly half of the sector (12 companies) has a policy on working conditions, and 13 companies have a policy on freedom of association.  As companies begin to put the U.N. Guiding Principles on Human Rights into practice, we expect to see a continued rise in the focus on human rights throughout operations and supply chains.

Qualcomm has a human rights policy embedded in its code of business conduct, which is available for employees, contracted procurers and suppliers. The company makes reference to the U.N. Declaration on Human Rights, which provides the fundamental guidelines for companies’ human rights practice globally.

Performance Section Icon

 

Performance: Supply Chain

 

  • The Technology Hardware sector continues to make progress on supply chain performance, addressing exposure and positioning it as a leader on this Roadmap expectation. Eighty-four percent (21 of 25 companies), have a formal sustainability policy or code for their suppliers.
  • More than half of the Technology Hardware companies are working with suppliers to implement these policies by establishing formal programs to improve the environmental performance of their suppliers, extending responsibility across the globe.

 

Technology Hardware companies rely on complex, multi-tier supply chains that span the globe to bring products to market—from raw materials to manufacturing.  These factors make it critical that companies set clear sustainability expectations for suppliers, engage suppliers to support improved performance, monitor results and drive transparency. Given their high exposure, it is encouraging that Technology Hardware companies are among the leaders on supply chain sustainability.  For example, 84 percent (21 companies) have sustainability standards for their suppliers set forth in a formal policy or code, up from 70 percent in 2012. Notably, more than half (13 companies) have supplier codes that meet the highest standards by incorporating most or all of the human rights issues covered by the ILO Core Conventions; only 18 percent of companies across the other sectors in our evaluation meet the highest standards.  

To implement these codes, however, companies must incentivize suppliers to meet their standards and engage their internal procurement departments in the process. Technology Hardware companies were the top performers in terms of aligning procurement practices with their sustainability objectives—40 percent (ten companies) are in Tier 1 for integrating environmental and social considerations into procurement.  A larger group, 64 percent (16 companies), have formal policies that incorporate at least environmental criteria in purchasing decisions. Fifty-six percent (14 companies) have established a formal program to improve the environmental performance of suppliers, including Cisco, HP, Apple and EMC Corporation.   Additionally, 24 percent (six companies) offer training programs to their suppliers specifically on labor rights issues.

After many years of pressure from NGOs and adverse media coverage, Apple has set-up a more rigorous and transparent system for managing sustainability risks in its supply chain. In its 2014 Supplier Responsibility Progress Report, Apple reports that it achieved a 95 percent compliance rate with its 60-hour workweek policy, by tracking the weekly hours of more than one million workers throughout its supply chain. The company also launched the Clean Water Program pilot at 13 supplier sites, which aims to increase the re-use and recycling of water in the manufacturing process.

Performance Section Icon

 

Performance: Products & Services

 

  • Fifty-two percent of Technology Hardware companies (13 of 25 companies) are in Tier 1 for their focus on sustainable products and services. This signals that the sector is heading in the right direction toward helping to build a sustainable, low-carbon economy.

 

Technology Hardware companies stand out when it comes to sustainable products and services. The performance indicator for this expectation evaluates programs to promote or invest in sustainable products and services, and over half of the companies in this sector (13 companies) are performing in Tier 1. Companies in this tier explicitly describe the environmental or social benefits of their product(s) and/or service(s), have a target for increasing the impact of these products or services, and disclose total sales of those products or services.  It is encouraging, and not surprising, that so many companies in this sector are focused on product innovation for sustainability.  There are significant business opportunities in driving innovation and developing sustainability solutions. According to the GeSI SMARTer2020 report, ICT-enabled solutions have the potential to reduce GHG emissions by 16.5 percent, create nearly 30 million jobs and save $1.9 trillion across six sectors by 2020. Given the proliferation of technology, it is critical that hardware manufacturers continue to focus on more efficient and less-resource intensive product design.  By bringing to market new products and solutions, these companies can help both business customers and consumers to reduce energy and decrease GHG emissions.

One example of collaboration and innovation is HP’s partnership with AMD to bring unique modular data centers, also called “PODs” (performance optimized data center) to market. HP partnered with its supplier, AMD, NYSERDA (a New York State utility) and Clarkson University to design PODs, which can be networked together with fiber optic cables.7 While pods are not a new concept, this project has developed data centers optimized for using renewable energy sources, such wind or solar. If a renewable energy source is not available, the POD can transfer its load to another POD that does have power, making renewable-energy powered data centers a more viable solution. As much as energy efficiency can help slow the rise of energy demand from technology use, innovative solutions will be necessary to stem reliance on fossil fuels.

 

Explore the interactive data to see how the Technology Hardware sector performed across all Ceres Roadmap expectations in the 2014 Gaining Ground report.


1. “Gartner Says Worldwide Traditional PC, Tablet, Ultramobile and Mobile Phone Shipments on Pace to Grow 7.6 Percent in 2014.” Gartner. Retrieved from http://www.gartner.com/newsroom/id/2645115.

2. The cloud refers to software, platforms, or infrastructure that are hosted remotely and accessed by users through the internet.

3. Nagel, David.“212 Billion Devices to Make Up the Internet of Things by 2020.” Technological Horizons in Education Journal. Retrieved from http://thejournal.com/articles/2013/10/07/212-billion-devices-to-make-up-the-internet-of-things-by-2020.aspx.

4. “SMARTer 2020: The Role of ICT in Driving a Sustainable Future.” Global e-Sustainability Initiative. Retrieved from http://gesi.org/SMARTer2020.

5. “IT Hardware: Trends in Energy Demand in Technology.” UBS Securities, LLC. 24 September 2013.

6.  “Make it Green: Cloud Computing and its Contribution to Climate Change.” Greenpeace. Retrieved from http://www.greenpeace.org/international/Global/international/planet-2/report/2010/3/make-it-green-cloud-computing.pdf.

7. Mohin, Tim. “Power, Pollution and the Internet: Right Discussion, Wrong Conclusion.” The Huffington Post Blog. October 16, 2012. Retrieved from http://www.huffingtonpost.com/tim-mohin/power-pollution-and-the-i_b_1966893.html.