Technology: Software & Services
Companies in the Technology Software & Services sector are playing an important role in addressing key sustainability challenges through the development of innovative software solutions and services. Search engines and online marketplaces, where millions of e-commerce transactions take place daily, allow users to make purchases without driving to stores and connects buyers to products previously owned, extending product lifespan and promoting reuse.
The sustainability risks and opportunities for this sector are growing as more consumers transition to use the Internet to conduct daily activities, including shopping, bill payment and communication. With more data online or in the cloud, access, freedom of expression, privacy, security and energy management are becoming prominent concerns for this sector.
While a handful of software and services companies have been considering sustainability risks and opportunities for well over a decade, the majority of companies in this sector are just starting to think about sustainability issues. Leading companies are addressing environmental concerns such as energy management in their operations, product development and procurement.
Software companies are also developing solutions to help other sectors measure environmental impacts from carbon, water and waste. Service-oriented companies are focused on making online transactions and data management more energy efficient for a diverse customer base.
Some companies in this sector are also investing considerable effort in managing their vast global workforce of employees and suppliers, developing employee policies on well-being and engagement, as well as training strategies deemed critical to long-term employee retention and business success.
The Technology Software & Services sector includes ten 10 data processors, eight software application providers, seven system software providers, six internet software providers, five IT consultants and two home entertainment software companies. Of the 38 companies evaluated, IBM, Accenture, CA Technologies and Symantec performed consistently well across The Ceres Roadmap expectations.
The analysis that follows includes a summary of the sector’s progress within each of the four chapters of The Ceres Roadmap: Governance, Stakeholder Engagement, Disclosure and Performance. Within the Performance section—which covers operations, supply chain, transportation and logistics, products and services and employees—those issues that are of greatest relevance to the sector have been highlighted.
GOVERNANCE FOR SUSTAINABILITY
Embedding sustainability throughout the business requires leadership from key executive decision-makers. This includes establishing oversight and accountability mechanisms and incentives for ensuring the implementation of strategies for achieving sustainability goals. Of the 38 companies in the Technology Software & Services sector, 16 percent (six companies) have explicit board oversight of sustainability issues and 29 percent (11 companies) have established executive management oversight. However, none disclose explicit links between executive compensation and sustainability performance goals.
The majority of companies in this sector have in place at least some policies that address ESG issues. More than 90 percent (37 companies) of the companies evaluated have in place a statement on bribery and corruption, provide whistleblower protection programs to encourage reporting of ethical or regulatory violations and have policy statements addressing discrimination.
However, although almost 70 percent of the companies in this sector have an environmental policy statement, less than half of the companies assessed have a formal environmental management system (EMS) in place. EMS is more relevant for certain companies within the software and services sector than other, which could account for some of the variability. IBM and Oracle stand out for having comprehensive environmental policies coupled with externally verified environmental management systems.
Open dialogue with a company's stakeholders can ensure that the most relevant sustainability issues are addressed. Yet, just 23 percent (nine companies) have ongoing stakeholder engagement to inform sustainability initiatives.
Symantec is one of the few that has linked identification of material CSR issues with stakeholder engagement and discloses in its sustainability report how stakeholder input informs company strategies. Symantec has identified privacy and freedom of expression as high priorities.
The Internet is a powerful tool for sharing ideas and expressing opinions, and software companies play a role in protecting the right to freedom of expression. As more people harness the web for communication, data storage and other functions, personal information is stored and transferred online. Therefore, privacy is also a critical issue and this sector is expected to maintain personal security and identity protection.
Symantec has published a corporate-wide position on privacy and human rights in consultation with the Center for Democracy and Technology, a participant in the Global Network Initiative (GNI). The GNI is a multi-stakeholder group founded by Microsoft, Google, and Yahoo!, along with civil society organizations, academia, and investors, working to build an accountability framework to address human rights risks related to privacy and freedom of expression in information communication technology (ICT).
Demonstrating a growing trend towards increased stakeholder engagement in the sector, companies including Accenture, CA Technologies, Computer Services Corporation (CSC) and Salesforce have indicated a commitment to expand their stakeholder engagement activities.
In order for investors and other stakeholders to understand and evaluate a company’s sustainability performance, detailed and comprehensive sustainability data must be disclosed in a timely and consistent manner. Of the 38 companies evaluated in the Technology Software & Services sector, less than a third (12 companies) have published a sustainability report, only nine are using the Global Reporting Initiative (GRI) guidelines and none have obtained third-party verification of their sustainability performance. IBM stands out for reporting in accordance with GRI application level A. Microsoft has taken an important step in encouraging its suppliers to implement their own GRI reporting.
Integrating disclosure of material sustainability risks and opportunities into financial reporting is one measure of meaningful disclosure. Yet, only 18 percent of the sector (seven companies) discloses sustainability information in financial filings. Accenture identifies how the sustainability needs of its customers present business development opportunities, particularly in relation to customer needs for increased energy efficiency and greenhouse gas (GHG) emissions reductions. The company discloses this information in its 10-K filing.
The transfer and storage of data has become increasingly important to the Technology Software & Services sector as economic and social activity migrates to the web. Data centers, the facilities that house large volumes of Internet infrastructure, are significant users of energy and, according to the Electric Power Research Institute, use 10 to 20 times more energy per square foot than a typical commercial building.1 Consequently, GHG emissions and energy consumption is a growing concern, particularly for service companies that are hosting and managing growing amounts of data for both consumers and business customers.
Approximately half of the companies in this sector are tracking and reporting direct and indirect GHG emissions. A smaller group (13 companies) discloses strong GHG reduction programs driven by clear targets and deadlines.
Having tracked its energy consumption since 1973, IBM has reduced its GHG emissions by approximately 64 percent from 1990-2010 and has established a “second generation” goal to reduce GHG emissions from energy use by 12 percent by 2012 (from a 2005 baseline).
Along with its GHG emissions reduction target of 10 percent of emissions per full-time employee between 2010 and 2016, Oracle has set a target of six percent improvement of power usage effectiveness (PUE) in its data centers over the same period. PUE is a metric developed and standardized by the Green Grid, a multi-stakeholder consortium addressing energy efficiency of data centers, that measures the ratio of a data center’s total energy usage (i.e., including cooling and lighting or other processes) compared to the amount of energy used for computing. As companies focus more attention on the monitoring and management of data center energy usage, PUE is becoming one of the metrics by which monitoring and management goals are articulated.
The significant energy demands of housing data can also be managed by shifting to clean energy sources. While almost 40 percent of the companies tracked (17 companies) note some efforts to increase the use of renewable energy, CA Technologies stands out as the only company in the sector to set a clear target to procure 25 percent of its annual electricity needs from renewable sources by 2015. Google has invested nearly $1 billion in renewable energy companies in the past several years to expand access to renewable energy.2
As a major global employer, the Technology Software & Services sector has a vast network of employees, and therefore how companies in this sector treat their employees has important sustainability implications. Whereas 90 percent (34 companies) of software and services companies disclose a relatively detailed statement on elimination of discrimination, only 16 percent of companies evaluated (six companies) address freedom of association for direct employees.
Symantec is a good example of a company that understands the importance of treating employees as a valuable asset to overall business success. Its employee policies explicitly refer to the International Labor Organization (ILO) conventions and the Universal Declaration of Human Rights (which explicitly refers to privacy and freedom of association) as the standards that govern its labor relations. Referencing internationally accepted human rights standards can help mitigate risks related to privacy and freedom of expression, which, as noted above, have become increasingly critical for the Technology Software & Services sector.
The Technology Software & Services sector faces less exposure to supply chain concerns than its Technology Hardware peers, although such exposure may be considerable for some of the more vertically integrated companies. Of the 38 companies assessed, 18 percent (seven companies) disclose broad supplier social standards including health and safety, minimum wage, maximum working hours and child labor, among other key human rights issues. Within this sector, leading companies, such as CA Technologies, Teradata, Adobe and Oracle, comply with the Electronic Industry Citizenship Coalition’s (EICC) code of conduct or comparable standards.
Moreover, 26 percent (10 companies) reference a policy on green procurement addressing environmental impacts embedded within the supply chain. For example, Salesforce, considers environmental and energy efficiency when contracting with data center providers and procuring IT equipment. IBM requires its first tier suppliers to address environmental impacts via a sustainability management system, monitor key performance indicators (KPIs), establish goals and ensure public disclosure.
PRODUCTS AND SERVICES
Products and services that provide solutions to sustainability challenges, such as energy and water consumption, present new areas for business growth for companies in this sector. According to Forrester, the market for private cloud solutions will grow from $7.8 billion in 2011 to $15.9 billion in 2020.3
One company focused on delivering efficient and innovative systems is IBM. The company markets its "Smarter Planet" as a range of solutions to address water management, energy efficiency of data centers, smart grid optimization and the development of renewable energy through photovoltaic technology.
CA Technologies offers a product called CA ecoSoftware that helps customers collect, monitor and manage environmental data—such as carbon emissions—and related strategy and target setting.
As more and more companies across different sectors look to address key sustainability challenges, the Technology Software & Services sector has a unique and expansive opportunity to meet customer needs.
Technology software and services companies require highly skilled talent to deliver innovative products and services. Some companies in this sector have developed reputations for being progressive workplaces with unique employee perks and engagement strategies for cultivating employee innovation.
The sector, however, has not yet expanded its employee activities to include engagement and training on sustainability issues, which is a critical step towards truly embedding sustainability within organizational culture. Noted exceptions in this sector are Salesforce, and CSC.
CSC reports that it is expanding its employee resource groups to include a corporate responsibility focused peer support initiative. To help employees understand their impact on the organization, Salesforce utilizes a desktop feedback tool to provide employees with information regarding their own and their team’s environmental performance.
One company harnessing the creativity of its employees is eBay. For example, members of its Green Team—which now includes more than 2,500 eBay employees across 25 countries—introduced an idea for a reusable box (in some cases used as many as seven times with different buyers) at the eBay Innovation Expo in 2010. This internal event encourages employees to come up with new and innovative ideas that benefit the eBay community. The new box design—which is durable and can be easily reused over and over again—significantly reduces the amount of resources consumed when compared to single use packaging. In fact, eBay estimates that if every box gets reused at least five times, nearly 4,000 trees, 2.4 million gallons of water and enough energy to power 49 homes for a year, will be saved.
The software and services sector has a unique opportunity to drive sustainability into the economy as commerce and business continue to increase online. Ensuring that all employees have the training and incentives to develop new solutions that address environmental and social issues is a key component of maintaining a successful business.
1. Fahey, Jonathan. “"Google Energy Use: Company Reveals Information To Show That Search Is Green.” Huffington Post. 9 August 2011.
3. Stefan Ried, Ph.D., Holger Kisker, Ph.D. with Pascal Matzke, Andrew Bartels, Miroslaw Lisserman. 2011. Sizing the Cloud: Understanding And Quantifying The Future Of Cloud Computing. Forrester, April 21, 2011.