sustainable economics

Master of Business Administration (International MBA)

Rouen Business School

Green Initiative Drivers, Role of ICT and Linkage between green performance

and financial performance

Master Thesis

Author: Ansuman PATRO

Supervisor: Dr. Bruno

COHANIER

5th

March, 2011

2 Rouen Business School, IMBA 2009-11

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I, Mr Ansuman PATRO student enrolled on INTERNATIONAL MBA

certify that pieces of information contained in the professional thesis

have not been plagiarised.

Date 05th March, 2011

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CONFIDENTIALITY CLAUSE

All information related to the company Cisco SYSTEMS contained in Mr, Ansuman

PATRO’s professional thesis is strictly confidential and should, under no circumstances, be

diffused outside Rouen Business School.

Mont –Saint-Aignan

Date and Signatures

Pascal KRUPKA Student

Head of Postgraduate Programmes


Acknowledgement

I gratefully acknowledge Dr. Bruno COHANIER, Research Head Performance Management

at Rouen Business School, for his priceless supervision and indispensable guidance and

providing clear direction to think. He has supervised and supported me throughout my

research. My special thanks to Dr. Gireesh SHREEMALI associate professor at Indian School

of Business, Hyderabad, interviewees at CISCO for being a source of inspiration and guiding

me throughout my journey of thesis. I further acknowledge, Dr. Pascal KRUPKA, Director,

Postgraduate programs and Dr. Marina BASTOUNIS, Head of the M.Sc, Global Management

Program at Rouen Business School for giving me vision and direction for the completion of

my research. Cisco corporate sustainable team provided information that helped me to make

headway. My special thanks to Cisco CEO France Green initiatives Mr. Olivier SEZNEC for

handholding, Valerie SIMIER for her thoughtful remarks on its workplace resources. Marie

HATTAR, Benoit SERRAF provided me legal and marketing perspectives. Finally, the

practical viewpoint that I gained through the dashboard demonstration done by Laurent

ROBERT was the final insight that I gauged from what should be done to preserve corporate

image without loosing the primary focus of making and selling products and services that is

what any corporation does.

I dedicate my thesis to the academic community and in specific to my brother who inspires

me to dream and shares his current competitive Indian management education experiences.

Ansuman PATRO,

March 2011


Executive Summary

This report provides an analysis of ―corporate sustainability‖ and the green initiatives

which corporates are undertaking, why the need for change, what are the drivers of those

changes, the stakeholders, what could be some of the indicators to track them i.e. What is

the business case of sustainability efforts especially ICT initiatives? Historical development

and areas of potential exploration are highlighted for the research community to advance the

area as the topic is highly interdisciplinary in nature. Disagreement at various levels and the

commitment to the cause by different players has been analyzed.

The financial crisis and the recent recessionary cycle have posed some fundamental

questions of the way operations were in capitalistic economic systems. Management

practitioners have been forced to rethink the corporate strategy and should include a

component of green targets for the managers in their MBO‘s (Management by Business

Objectives) so the Vision, Strategy and Execution is inline with the overall objective of the

corporate existence and the changing world especially the climate change which could bring

dynamism to halt. Different corporate entities are playing different roles in different market

segments in this increasingly globalized world. Resources are limited and wants are unlimited,

it is becoming increasingly important for the corporations to project themselves as good

corporate citizens. What are the short-term and long term implications of not having clarity on

the energy and especially the environment management system? What can information

communication technology do for changing the 20th Century old grid to a dynamic varying

sources of energy without creating too much of systematic changes or creating more

problems instead of solving them i.e. the argument of the waste in comparison to the value

delivered? Moreover, Is the study of sustainability inventive, when considering all the

parameters of triple-bottom line?

Today's electric utility companies have their hands full with myriad dilemmas: the grid

is old and increasingly insecure, the traditional one-way broadcast model is outmoded, supply

and demand patterns are changing, and utilities are under regulatory pressure to address

increasing energy demand much more efficiently. At the same time, consumers are calling for

lower energy bills, more reliable service, better visibility into their usage patterns and more

choice about where their energy comes from. In the case study performed at Cisco


SYSTEMS a list of products are laid down so that an intelligent communications network that

can meet energy generation, transmission and distribution, consumption, and security

demands can be achieved. Moreover, through Grounded theory approach of Corbin &

Strauss, Telepresence, a technology solution that increases collaboration among

stakeholders is analyzed in the light of it being a green solution.

The final section concludes by providing a review of the relationship between green

performance and financial performance of the companies so that environmental concerns

form one of important components of corporate strategy apart from other traditional goals of

maximizing market share, maximizing stock price among others because ethical corporate

conduct in doing the right things and the things rightly is important.


TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION .......................................................................................... 9

1.1 Brief Background ..................................................................................................................... 9

1.2 Overview of the issues ........................................................................................................... 11

1.3 Problem Statement ................................................................................................................ 14

1.4 Research Questions .............................................................................................................. 15

1.5 Research Method .................................................................................................................. 16

1.6 Significance of the Study ........................................................................................................ 16

1.7 Theoretical Framework........................................................................................................... 16

1.8 Literature Review ................................................................................................................... 18

CHAPTER 2: DRIVERS OF GREEN INITIATIVES ............................................................ 20

Macro Perspective ....................................................................................................................... 21

A. Competition for Resources .................................................................................................... 21

B. Climate Change ..................................................................................................................... 22

C. Economic Globalization ......................................................................................................... 22

D. Connectivity and Communications ........................................................................................ 22

Stakeholder Perspective .............................................................................................................. 24

Investor and Financial Perspective ............................................................................................... 26

Approach to Embed Environmental and Social Concerns .............................................................. 27

CHAPTER 3: SUSTAINABILITY STRATEGY .................................................................... 32

Eco-Efficiency imperative .......................................................................................................... 34

System change imperative......................................................................................................... 35

Eco-Efficiency vis-à-vis System Change ...................................................................................... 36

CHAPTER 4: CORPORATE SUSTAINABILITY REPORTING ........................................... 42


CHAPTER 5: GREEN ICT NETWORKS ........................................................................... 48

CHAPTER 6: CISCO: A CASE ANALYSIS OF SUSTAINABILITY ...................................... 57

Cisco Solutions to reduce Carbon Footprint .................................................................................. 65

Smart Grid Solutions.................................................................................................................. 65

Cisco Telepresence .................................................................................................................... 69

Grounded Theory Paradigm applied for qualitative research .......................................................... 70

CHAPTER 7: RELATION BETWEEN GREEN PERFORMANCE AND FINANCIAL

PERFORMANCE ............................................................................................................. 78

CHAPTER 8: CONCLUSION ............................................................................................ 81


CHAPTER 1: INTRODUCTION

1.1 Brief Background

Resource mobilization for national development has been the central focus of development

economics. Towards this, centrality of savings and investment in economic growth in

developing countries has attained enough focus of researchers (Oladipo, 2010). For

sustainable growth and development, funds must be effectively mobilized and allocated to

enable businesses so that the economies can harness their human, material and

management resources for maximum wealth creation.

In spite of the recession, sustainability projects are on track among the greenest of the

organizations (Longhurst, 2010). Businesses should be aware of the short-term agenda and

long-term sustainability issues of not switching to clean energy technologies. A study

conducted by Greenpeace International reasons out that attaining energy security as well as

local pollution from combustion of different fuels apart from combating against the growing

challenge of climate change are some of the compelling reasons to migrate to cleaner ways

of producing and selling energy for domestic and industrial usage (Zervos & Schäfer, 2007).

Environmental responsibility is quickly climbing up the strategy agenda of large companies

across many industries. Apart from the traditional utilities, sectoral companies in retail,

manufacturing, financial services and telecom due to the demands of the customers are

focusing on being greener than ever.

There is an increased focus of changing the context in which businesses are operating.

There are unprecedented and extraordinary sustainability challenges that the world is facing.

Businesses and capital markets are best positioned to profitably address the issues engulfing

the 21st century problems which are exemplified in new companies being registered to cater

to different processes in the value chain apart from existing energy companies planning for

making or buying. As per the stakeholder theory that identifies shareholders or stockholders

as the owners of the company, and the firm or more appropriately the management of the

firm has the binding fiduciary responsibility to put the shareholders interest at first, to increase

value for them. Only those companies that strategically manage economic, social,

environmental and ethical performance of the company will be able to serve the interests of

shareholders, over time (Moffat, 2010).


The financial crisis that began in 2007 has reinforced the fact that sustainable solutions will

be the primary drivers of industrial and economic development going forward. While present

day CEO‘s and other C-class executives are focused on growth, profitability, competitive

position and shareholder returns which indirectly refers to the increased focus on

sustainability and long-term value creation. Sustainable value creation encompasses

strategies that are developed for reputation management, cost control, competitive

positioning and revenue opportunities. Sustainable challenges are interconnected; the

climate crisis and poverty, pandemics and demographics, water scarcity, migration and rapid

urbanization all cannot be considered in isolation.

Fundamentally, use of natural resources and human resources are at the heart of all

economic activities. There are high expectations from businesses to incorporate the tenets of

sustainability into their strategy. Studies have been conducted to create key building blocks

for integrating environmental and social challenges into core business practices to achieve

sustainability. The topic of sustainability has evolved from taking cues from past

environmental sensitive events, establishing a code of corporate environmental conduct,

specifying an international sustainable reporting standard, and also coining a term ―climate

risk‖ which is embedded these days into corporate and investor dictionary. Incremental

progress in tackling global climate change may not be able to meet the sustainability

objectives therefore accelerated performance improvements from agents that reflect the true

scientific and economic impacts is an important step towards containing the climate change.

My primary research with managers from different industry segment confirms to this view and

slowly senior managers are allocating greater amount of time for greening their companies.

Many researchers have considered Brundtland‘s as the standard definition of sustainability:

―Sustainable development is development that meets the needs of the present without

compromising the ability of future generations to meet their own needs. It contains within it

two key concepts: the concept of needs, in particular the essential needs of the world‘s poor,

to which overriding priority should be given; and the idea of limitations imposed by the state

of technology and social organization on the environment‘s ability to meet present and future

needs.‖

Many industries have started to align themselves to a carbon-constrained world due to the

growing consensus among scientists and government to avoid catastrophic effects of climate

change and ensure their business continuity. Country specific economic, technological,

organizational and institutional drivers and barriers qualify the action that companies


undertake. Engels (2009) reports that EU companies encountered organizational hiccups

when the European Emissions Trading Scheme (EU ETS) came into being in 2005. How did

they learn to implement this or in scientific terms what is the cognitive basis of alignment of

the organization? They report that external consultancy and the internal assignment of

responsibility i.e. allocating responsibilities in the organization lays the basis of competencies

in which companies learn to carbon accounting. Organization financial and sustainable

reporting systems have to be adjusted to accommodate new accounts like carbon accounts.

1.2 Overview of the issues

There was a broad disagreement on the definition of sustainability in the research community.

In the beginning, sustainability was closely associated with maintenance of environment

quality. Analysis of sustainable development concept descriptions proved that none of

hundreds of sustainable development definitions found in the literature include all the aspects

of the concept and provide perfect understanding of it. Therefore there was less clarity on the

aspects of sustainable development that should come under the ambit of corporate goal

setting and decision making. Hence, believing in a common goal on the subject of

environmental climate change was challenging for institutions.

Corporate sustainability or corporate social responsibility is used interchangeably. Maharaj

(2008) statistically quotes that, out of 100 of the largest economic entities, 57 are

corporations, and not countries. There is an increasing accountability for global businesses

as the institutions adept to meet the long-term challenges. Coming to grips with them is more

than a corporate responsibility it's essential for corporate survival.

Climate Change Policy

Beginning 1994 the United Nations Framework Convention on Climate Change (UNFCCC)

began creating a momentum to reduce GHG emissions, however divergent positions

undertaken by different countries was the main reason for not making headway. In 2005, the

Kyoto protocol which was eye soothing to 163 countries and was passed in 1997 came into

force. The main mechanisms being

A. Joint Implementation

B. Emissions trading

C. Clean Development Mechanism


The EU Emission trading scheme became effective from 2005 and it sets limit on a number of

specific industrial activities in utilities and big industries emitters in the European Union. One

question that propped in my mind when I was researching on the topic of long term value-

creation or sustainability is, why should management‘s primary objective be long-term value

creation rather than reporting strong incremental Quarter over Quarter results? Upon reading

numerous authors I feel that companies which are dedicated to value creation are in good

shape or healthier and aid in building better and solid economies, better living standards, and

create more opportunities for individuals. There has long been other vigorous debate on the

importance of shareholder value relative to other measures such as employment, social

responsibility, and the environment. The debate is often cast in terms of shareholder versus

stakeholder. In ideology and legal frameworks, the US and the UK have given the more

weightage to the idea that shareholders are the owners of the corporation, the board of

directors is their representative and elected by them, and the objective function of the

corporation is to maximize shareholder value.

There are many non standardized processes because of diverse nature of human civilization.

Developed countries have been mainly responsible for research activities and showing the

path for policy implementers of developing and emerging markets. G-8 has been extended to

G-20 so as to make policies for a globalized world. Emerging markets defines the developing

states that are an important source of cheap raw materials and labor force for the

multinational companies, which are looking for competitive advantages (Laura, 2008). Aldy

and Pizer (2009) have focused on the issues in US climate change policy by analyzing six

key policy design issues that will determine the costs, cost-effectiveness, and distributional

impacts of domestic climate policy: program scope, cost containment, offsets, revenues and

allowance allocation, competitiveness and R&D policy. Similarly there are other divergent

issues due to the complexity of the nature of the problem and institutional issues in other

countries too.

The issue of non-CO2 gases has controversies around it. However as GWP (Global Warming

Potential) of gases are sensitive to damages, discounting, and time horizon (Schmalenesee,

1993).For example, methane has an extremely high GWP around 23 times CO2 by weight but

also has a very short life. So this adds to the complexity of quantifying the carbon footprint in

a holistic fashion. At a broader level warming effects of Carbon dioxide, methane, nitrous

oxide, Hydroflouro carbons, perflourocarbons and sulphur hexafluoride are considered for

scientific computations.


Globally, interest is growing in designing and implementing mandatory, domestic and market-

based climate change policies. The EU launched the Emission Trading Scheme (ETS) in

2005 covering roughly half of all CO2 emissions in the EU and announced its intent to

continue the ETS beyond the Kyoto protocols 2008-2012 commitment periods (European

Commission 2008). Iceland, Norway, New Zealand have developed a domestic cap-and-

trade program and EU has linked it. Governments in Denmark, Sweden, Finland, Norway

have pursued carbon taxation programs. Curbing greenhouse gas (GHG) emissions is a

critical component in what is believed as one of the most pressing environmental problem of

21st century. Taking into consideration only the debates which is happening in US the cost of

U.S. climate change policy likely will be comparable to the total cost of all existing

environmental regulation- perhaps around 1-2 percent of national income roughly comparable

to all other environmental policies combined. As it has been the general trend developed

countries take the lead in major changes that has an impact at a global scale due to their

potential to invest and harvest innovation through institutions of excellence. Well-designed

national greenhouse gas mitigation policies can serve as the foundation for global efforts and

as an example for emerging and developing countries.

A unitary consumer perspective

In an article published by Nova Scotia Business Journal ―Carbon Footprint which is the

‗corporate greenhouse inventory‘ refers to greenhouse gases emissions associated with a

particular activity over a specified period of time, generally one year for organizations or all

for production process for products.― This includes both direct and indirect (e.g. electricity

generation) emissions, and is typically measured in tonnes of CO2 equivalent (CO2e).

As per carbonfootprint.com at an individual level

A carbon footprint is made up of the sum of two parts, the primary footprint (shown by the

green slices of the pie chart) and the secondary footprint (shown as the yellow slices).

1. The primary footprint is a measure of our direct emissions of CO2 from the burning of

fossil fuels including domestic energy consumption and transportation (e.g. car and plane).

We have direct control of these.

2. The secondary footprint is a measure of the indirect CO2 emissions from the whole

lifecycle of products we use - those associated with their manufacture and eventual


breakdown. To put it very simply – the more we buy the more emissions will be caused on

our behalf.

Fig1. Elements which make up the total of an typical person's carbon footprint in the

developed world (source: http://www.carbonfootprint.com/carbonfootprint.html). Let us now

explore what are the qualitative problems which I am trying to address through this study.

Upon analyzing the above data following are the action items to work on to gain the

maximum mileage in achieving carbon footprint–

Home-Gas, Oil and coal –Mixing renewable energy sources

Home- Electricity – Mixing renewable energy sources

Transport – Switching to virtual mediums of conferencing, using public transport as

much as possible is strongly encouraged

Recreation and leisure

1.3 Problem Statement

The aim of the study is to investigate the genuine sustainable development initiatives and

sustainable reporting, dissect and present the business implications of supplementing current

energy demands of an organization through cleaner ways. The goal is three fold

1) Understand the drivers of green initiatives. I am presenting issues which the managers of

an organization should consider or the motivation behind initiating green agenda especially

http://www.carbonfootprint.com/carbonfootprint.html


related to green (Internet and Communication Technologies) ICT initiatives covered in latter

sections.

2) Conduct qualitative case study on Smart Grid and Telepresence solutions and present the

findings as-is from Cisco SYSTEMS.

3) Overview of the understanding of how green performance is related to financial

performance.

This study should be considered as an attempt to study an economic concept of sustainability

and its growing importance due to the climate change and ―greening‖ agenda which leaders

are propagating.

1.4 Research Questions

The content in this thesis is built around the following questions

Q1. Fossil fuels are limited and oil is bound to decrease as time progresses.

Q2. What is the relationship between business cycle and carbon emissions?

Q3. What are the drivers of green initiatives?

Q4. Do we need transformational (System-change imperative) changes or gradual

changes to achieve sustainability?

Q5. What are the current states of affairs in corporate sustainability reporting?

Q6. What can Information Communication Technology (ICT) do for greening the

environment?

Q7. How Cisco is self-changing and can help other organizations combat the climate

change due to energy consumption through its smart-grid technology and

telepresence technologies?

Q8. What is the relationship between green performance and financial performance

from a corporate perspective?


1.5 Research Method

This study is of exploratory nature which tries to exemplify among other things the social

aspect of technology specifically virtual solutions that could help in resource preservation.

Grounded Theory methodology of (Corbin and Strauss, 1990) helps in providing an analytical

framework to structure the phenomenon through multiple participants. I have used Grounded

Theory methodology (Corbin and Strauss, 1990) for analyzing the Cisco Telepresence as

one of the solutions to increase collaboration while decreasing the carbon footprint due to

reduced business travel and operate more effectively in the globalized world. The other

sections are synthesis of articles, Cisco intranet documents (confidential), and interviews with

multiple expert participants to confirm the literature and academic papers which I have read

from EBSCO.

1.6 Significance of the Study

The study aims at uncovering the hoopla which is built around green business, analyze

academic literature and content of frontline organizations that are setting the trend and

leading the “greening of the business” in terms of providing a context for both corporate and

consumers to migrate to smart digital solutions, increased governmental regulations and a

growing concern built around reducing carbon-footprint and introducing renewable sources of

energy in the overall energy-mix. The study is an attempt to inform the academic community

about the technological solutions with economic cost which can be used to combat the

climate change issues.

1.7 Theoretical Framework

Manikas and Godfrey (2010) argue that a manufacturer will always feel pressure to focus on

the economic bottom line and give least equal importance to the second and third bottom

lines (environmental and social performance). They propose a newsvendor model to estimate

a manufacturing company‘s optimal production quantity based on maximization of expected

profits given the cost of emission permits and penalties for exceeding emission limits allowed

by the permits. Different companies have different role to play and their carbon footprints are


also variable. What are the business models for sustainable energy is the theme of the next

section?

Business models for sustainable energy

In general, a business model can be defined as a description of a planned or an existing

business and its specific characteristics with respect to value creation on the one hand and

market-orientation on the other hand (Osterwalder & Pigneur, 2005). A business model

describes how a business creates value and that it is an important new unit of analysis, highly

relevant to both management theory and practice (Belz & Bieger, 2004). One of the largest

sectors of the economy, the energy sector, accounts for annual sales of about $2,000 billion

worldwide (SAM, 2002). Technological innovation coupled with environmental and security

concerns are currently leading to fundamental changes in the energy industry. For example,

a shift towards renewable and distributed energy systems turns consumers into co-producers

of heat and electricity (Sauter & Watson, 2007). Nearly 80% of the electricity worldwide is

generated from fossil fuel which is cited to be a primary cause of global warming or nuclear

energy which can exhibit security concerns and risky by-products. Energy sector has been

identified as a key target area for efforts to promote sustainable consumption and production

(BMU, 2005).More than two thirds of primary energy gets lost as a result of inefficiencies in

the energy sector and on the demand side (UNDP/WEC/UNDESA, 2000).

Sauter & Watson (2007) describe that following are some of the challenges in

commercializing sustainable energy technologies

1. Environmental Externalities -Difficult to assign ownership of shared environmental

resources. The discrepancy between private and public benefit (and cost) is an impediment

to both consumer and investor decisions of sustainable development.

2. Capital intensity and long lead times -Successfully marketing new energy technologies is a

challenging task, and finding investors for a new venture in this business is equally

challenging.

3. Incumbency powers -Change is not easy to achieve.


Fig 2: How business model configuration addresses challenges in commercializing

sustainable energy technologies (Source: Business models for sustainable energy.

Wüstenhagen & Boehnke, 2006)

In the section of Smart Grid solutions some of the challenges presented above are being

proposed to be met through industry wide efforts.

1.8 Literature Review

Development has different semantics for different entities be it organizations or countries. A

correlation study between energy usage and the rate of economic development (Ghouri,

2006) predicted that there is a strong correlation between electricity usage and wealth

creation, but no relationship between total energy use and wealth in G7-countries. Back in

1998 environmental compliance costs had been estimated to exceed $1trillion, and about

$120 billion continued to be spent annually for pollution control in US (Berry & Rondinelli,

1998). Business-as-usual approach is worrying. A Harvard Business Study by Johnson and

Suskewicz (2009) reports that the Obama administration has pledged more than $100 billion

for sustainable technologies; China plans to spend $200 billion and the G-20 industrialized

nations some $400 billion. 20-20-20 agenda of the EU is a step forward to set a

benchmarking standard for other economies to follow so as to objectively achieve reduced

carbon footprint. Hence attempts should be made to demarcate genuine sustainable


development initiatives from mere attempts of greenwashing and businesses be convinced

that sound environmental practices are worth it.

Organizations have to continuously strive for economic, financial and environmental

performance improvement (Ambec & Lanoie, 2008). The conventional wisdom of firms

loosing global competitiveness had been challenged by many analysts (Porter & van der

Linde, 1995) who have argued that improving a company‘s environmental performance can

lead to better economic or financial performance and not necessarily an increase in cost.

Better environmental practices can result in developing and launching products in new

markets, product differentiation, selling pollution control technology, risk management and

external relationship management, cost of material, energy and services, cost of capital, cost

of labor. According to Ambec and Lanoie, managers have long associated environmental

protection with additional costs imposed by government, which in turn erodes a firm‘s global

competitiveness. Ambec and Lanoie also argue that one of the prerequisites for the adequate

functioning of markets is the existence of well-defined ownership rights. In the case of

environmental resources available to all, such as clean air and water, these rights are very

difficult to assign. They point that the market mechanism generates too much pollution, and

government intervention is legitimate to reduce it to a tolerable threshold. Billions of people

surviving on $2 a day or less should also be able to use common resources of world and

businesses could serve the ―Bottom of the Pyramid‖ (Prahalad, 2002) without jeopardizing

the future generation. Marketing, technical and financial information have been the decision

making criteria for taking investment decisions. Indeed, the prevailing thinking is that

environmental concerns divert managers from their main responsibility, which should be the

maximization of profit. However, the concept of human development might be defeated due

to poor execution or half-hearted attempt of carrying out environmental impact assessment

and social impact assessment (SIA) of major projects (Dey, 2006).

McKinsey studies project that by 2030 India is likely to have a GDP of USD 4 trillion and a

population of 1.5 billion. It may have an opportunity to pursue development while managing

emissions growth, improving its energy security and creating a few world scale clean-

technology industries. India‘s aspirations on high growth rate and inclusive development is

challenged by the need for a funding of EURO 18 billion on average, between 2010 and 2030.

Other challenges are also due to supply and skill concerns, technology uncertainty, market

failures and need for policy mechanisms.


CHAPTER 2: DRIVERS OF GREEN INITIATIVES

What is the primary need for green initiatives at a global and further at an individual level?

This question boils down to analyzing the following question -

Are fossil fuels are limited and oil is bound to decrease as time progresses?

Energy is inherently required for dynamic economies to roll-on. Winters (2007) in his study

has reported that ―there are two kinds of oil-using nations those that produce enough to

export and can use as much as they want, and the rich nations that can afford to import the

dwindling supplies of oil available on the world market. Everyone else is going to be

squeezed until they give up on oil. What they'll turn to then, no one knows.‖ In a recent study

the status of world oil reserves is a contentious issue. Owen et al. (2010) report that there are

different opinions on the above issue. On one hand there are pessimists who predict that

production will soon decline. On the other hand major oil companies say there is enough oil

to last for decades. They predict that even though there is certainly a vast amount of fossil

fuel resources left within the ground, the volume of oil that can commercially be exploited at

affordable prices for the global economy is limited and will soon decline. Due to the above

scenario, oil as a commodity will change from demand-led market to a supply constrained

market. They propose that the disagreement aspects can be resolved through clearer

definition of the grade, type, and reporting framework used to estimate oil reserve volumes.

Much of the activities that we do through oil have to be diversified to be done from other

sources of energy. Herein comes the role of alternative sources of energy that are derived

from other primary sources like wind, biomass and bio-fuels, solar etc. Mitigation of

environmental and social costs will judge the successfulness in migrating to poly-fuel

economy. Organizations have to adapt their strategies and include in their plan the above

aspects if they have to adapt itself to the changing business environment.

Different researchers have identified much causality for the green initiatives and those could

be summarized from different perspectives.

Macro Perspective

A. Competition for Resources

B. Climate Change

C. Economic Globalization


D. Connectivity and Communications

Stakeholder Perspective

A. Government

B. Investors

C. Labor Unions

D. Civil Society

E. Business Partners and Suppliers

F. Consumers

G. Employees

Investor and Financial Perspective

Macro Perspective

A. Competition for Resources

World population increased exponentially throughout the last century. It has increased from

2.55 billion in 1950 to 6.396 billion in 2004, and is projected to reach 9.276 billion in 2050. A

maximum of 2 billion human population can survive and live on earth (Pimentel et al., 1998a)

while ensuring a high standards of living. Rising living standards will result in flooding of

goods and services. Renewable resources like water, forests have become finite when we

consider that human demands are growing rapidly than the replenishing rate of resources.

Exhaustion of commodities can be monitored and measured, but the impact of depletion is on

ecosystems is difficult to gauge and impossible to rectify.

Struggling to meet the basic needs poses a risk of conflict among the people. Water-

population growth, economic development, and climate change are straining the access to

fresh water globally. By 2025, two-thirds of the world population will leave in water-scarce

countries posing significant risk to the economic and social stability of the local demographics

and as well as for the corporate operating in those regions.


B. Climate Change

There has been an increase in the extreme weather events e.g. more severe and frequent

cycles of drought and flood, rising sea levels and other such events in the recent past due to

the growing concentration of Green House Gases (GHG‘s). Governments are putting forward

new policies and regulations including those designed to limit and put a cost on carbon

emissions. There has to be clear cut accountability on managers to adapt their organizations

or business units to new environmental policies that are getting increasingly hostile towards

carbon emissions. Comprehensive climate policies implementation has encouraged the

formation of groups like Business for Innovative climate and energy policy (BICEP), US CAP,

Investor network on climate risk (INCR). These entities recognize the opportunity to profit

from technologies that reduce emissions and create solutions to global warming.

C. Economic Globalization

With organizations becoming boundary less more and more companies operate in or source

from multiple countries with wide variations in enforced environmental and social standards.

Many stakeholders groups demand, at a minimum, that companies meet international

expectations.

D. Connectivity and Communications

Modern ICT has helped organizations disseminate information effectively and efficiently. This

mechanism has increased both the advantage of building a reputation and also the time it

takes to destroy the reputation. Communication is disaggregated across multiple social

networks like FaceBook and Twitter. These platforms help people to effectively track and

disseminate sustainability performance of a company.


Fig3. World Bank data showing the % of alternative and nuclear energy in the total energy

mix of 19 G-20 countries in 2007. These relative data points might aid in corporate in

planning for changing rules and regulations, systems and processes and other systemic

changes due to the total carbon footprint because of operations in high-priority geographies

and the technology transfers that might happen in this space. The better-off can help in

technology transfer to underprivileged to help combat the climate change issue.

Relationship between Business Cycle and Carbon Emissions

In a recent study published in Nature Geosciences, the fact that the recent economic

downturn resulted in the worldwide emissions of carbon dioxide is optimism which has

happened first time since the late 1990‘s. Rice(2010) reports that as per a scientific study in

(2009), ―There is a close link between the world's gross domestic product and emissions of

carbon dioxide ―.The study presents that the largest decreases occurred in Europe, Japan

and North America US decreased by 6.9%, U.K. by 8.6%, Germany by 7%, Japan by 11.8%

and Russia by 8.4%. However other emerging economies recorded substantial increases in

their total emissions, including 8% in China and 6.2% in India.

Have the emissions dropped entirely as a result of the economic crisis? The same article

concludes that it is not just the recession that is a major cause there are other factors that

have contributed to the decrease. Focused efforts to curb carbon emissions and invest in

clean energy in countries such as Germany and the UK could be a cause. Reduced

deforestation has also contributed positively to the reduced carbon emissions.


Fig 4: Source: Global Carbon Project, World Bank by Frank Pompa, USA TODAY

Let us drill down further and see from a corporate stakeholder perspective the actors and

their various Roles and responsibilities in the problem of climate change.

Stakeholder Perspective

Actor Roles and Responsibilities

Government

Governments in developing and developed countries are implementing

policies to address key issues in sustainability like greenhouse gas

emissions, toxic chemicals, water usage, labor and human rights. There

is a renewed interest in developing more effective oversight and

accountability for corporate activities that impact society and

environment. The regulations on carbon emissions will provide a more

level playing field for lower emitters.

Investors

Investors are seeking to know the sustainability risks and opportunities

in a company‘s financial disclosures. Sustainability performance is a

indicator of strong management, strong governance, long-term thinking

and future growth potential. Rewards are higher for companies that

have a component of sustainability built into their strategic planning.

Benchmarking on the corporate performance of sustainable-based

stock indices against peer companies puts pressure on the businesses


to meet increasing expectations. Some of the market indices like Dow

Jones sustainability index have been able to provide relevant

information for investors to take more informed decisions.

Labor Unions

Unions expect companies to address issues that affect employees,

whether they are socioeconomic issues such as wages and healthcare

or environmental issues such as safety and climate change.

Mobilization and representation of the members is their primary

responsibility through formal negotiations, engagement on public policy,

and collaboration with other organizations that support common

positions.

Civil Society

Legal action, public campaigns and collaboration with the companies

are some of the mechanisms through which NGOs and community

groups (main entities of civil society) pressurize companies to address a

wide range of sustainability issues.

Business Partners

and Suppliers

From a systems perspective, sustainability is like a cascade.

Companies expect that those they do business with will follow the same

standards that they do for integrating sustainability into their business.

B2B relationships therefore increasingly incorporate sustainability

standards and criteria reflected through changes in Request for

Proposals (RFP‘s) and procurement guidelines. Companies in the

automotive, apparel, electric utility, electronics and pharmaceutical

sectors are among those collaborating to raise sustainability standards

across their entire industry supply chains.

Consumers

Consumers are concerned about the conditions under which products

are made, the materials used and post-use recyclability. The economic

recession has not dampened customer enthusiasm with regards to

commitment to the environment. 78% of U.S. consumers in a 2009

Cone survey had indicated that they are likely or more likely to buy

environmentally responsible products as they were before the crisis.

Employees One of the strongest forces demanding change comes from within the

organization. Current employees and talented job candidates seek work


that us meaningful and socially demonstrable, and they are prepared to

receive a lower salary in exchange for work at a socially responsible

company. Employees seek employers that have a clear vision for their

sustainable global economy and once insiders seek to drive

improvements through their specific responsibilities.

Investor and Financial Perspective

The financial crisis has resulted in an increased focus on the risk management processes at

financial institutions, with a push for greater transparency, holistic risk identification and a

longer-term focus. Investors are rewarding companies that factor-in sustainability issues into

their business planning and that are implementing strategies and actions that will enable

them to persist in a sustainable global economy. Apart from the traditional stock market

indices like NYSE, EURONEXT there has been increase in sustainable indices e.g. S&P/IFCI

Carbon Efficient Index, HSBC Climate Index, Prudential Green Commodities Index, and

NASDAQ‘s Global Sustainability 50 Index. For example, KLD Research and Analytics (now

part of Risk Metrics) launched a Global Climate 100 Index and posted a 57 percent return (17

percent annualized) since its launch in 2006 (Fowler & Hope, 2007).

Carbon focused due diligence process is in place in many financial institutions including in

City Bank, Morgan Stanley, and Credit Suisse for any future lending for coal-fired power and

other carbon intensive projects. Bank of America has also shown leadership by setting a

specific target to reduce the rate of greenhouse gas emissions in its lending to the utility

industry, and by disclosing publicly that it is using a $20 to $40 per ton cost of carbon in

evaluating loans.


Fig 5: Classical role of Managers from a corporate finance perspective (Lecture notes from

http://pages.stern.nyu.edu/~adamodar/)

This thesis covers the relationship of manager‘s role in creating value from a societal

perspective. The fundamental puzzle is as follows; social costs cannot be factored explicitly

into analyses. It is quite challenging to generate value for all the 4 important components

equally attracted to the nature of business operations and some of the major problems that

are existing presently in the corporate circles is partly also due to the fact that corporate

leaders are forced to take short term decisions that could be myopic and in-turn contrary to

the overall sustainable goals.

Approach to Embed Environmental and Social Concerns

A generic approach to begin embedding environmental and social concerns into corporate

makeup includes -

1. Assessing the company‘s baseline environmental and social performance

2. Analyzing corporate management and accountability structures and systems

3. Conducting a materiality analysis of risks and opportunities


However a company has to formulate its own route to sustainability so as to maintain its

identity and competitive advantage. It will be guided by the corporate culture and the sector in

which it is operating. A maturity model can be thought of for placing different companies in

their evolution of sustainability. Now I am quoting a 20 point expectation map of Ceres from

an organizational perspective.

Governance for

Sustainability

Stakeholder

Engagement

Disclosure

Board oversight Focus engagement

activity

Standards for

disclosure

Management

Accountability

Substantive

Stakeholder dialogue

Disclosure in financial

filings

Executive compensation Investor engagement Scope and content

Corporate policies and

management systems

C-Level engagement Vehicles for disclosure

Public policy Product transparency

Verification and

assurance

Let us see in detail what the expectation map means.

Board oversight- The directors should provide oversight and accountability for corporate

sustainability strategy and performance. Within the charter there should be a committee that

provides the oversight.


Management Accountability- The onus of achieving sustainability objectives could begin from

the CEO and C-Suite executives and percolate down to the business unit and functional

heads.

Executive Compensation- Sustainable objectives should be a core component of the

compensation package and incentive plan for all the executives.

Corporate Policies and Management Systems- Embed sustainability considerations into

corporate policies and Risk Management Systems to guide operational level of activities.

Public policy- Clearly state its position on relevant sustainability public policy issues. Any

lobbying should be done transparently and in a way consistent with sustainability commitment

and strategies.

Focus engagement activity- Identify a diverse group of stakeholders and timely engage with

them on sustainability risks and opportunities including materiality analysis.

Substantive Stakeholder dialogue- Engage stakeholders in a manner that is ongoing, in-

depth, timely and involves all appropriate parts of the business. Corporations should also

disclose how they are incorporating stakeholder input into corporate strategy and business

decision-making.

Investor engagement- Address specific sustainability risks and opportunities during annual

meetings, analyst calls and other investor communication.

C-Level engagement- Senior executives should participate in stakeholder engagement

processes to inform strategy, risk-management, and enterprise-wide decision making.

Standards for disclosure- All relevant sustainability information should be disclosed using

Global Reporting Initiative (GRI) guidelines as well as additional sector-relevant indicators.

Disclosure in financial filings- Companies should disclose material sustainability issues in

financial filings.

Scope and content- Disclose significant performance data and targets relating to their global

direct operations, subsidiaries, JVs, product and supply chain. Balanced disclosures covering

challenges as well as positive impacts.


Vehicles for disclosure- Aim to disclose through a range of disclosure vehicles including

standalone reports, annual-reports, financial filings, websites and social media.

Product transparency- Provide verified and standardized sustainability performance

information about its products at point of sale and through other publicly available channels.

Verification and assurance- Verify key sustainable performance data to ensure valid results

and will have their disclosures reviewed by an independent, credible third party.

Further detailed explanations are beyond the scope of the thesis.

ISO-14001 is a best practice adoption to ensure that the participants of entire value chain are

good citizens and countries have been incentivizing ISO 14001 adoption.

Examples of incentives for ISO 14001 certification.

Country Incentive

Spain Services produced by ISO-14001 companies are favored within the public

procurement process and in service contracts.

Egypt Through its IMP (Industry modernization program) and funded by the EU and

Egypt some 200 companies (2004-2006) have benefitted.

France Beginning in 2008, Inspection will be done in 10 years rather than 5 years for

ISO sites as compared to non-ISO sites.

What are the different approaches towards sustainability is the next major question to be

answered. I am quoting the systemic and incremental changes that have been proposed in

the literature and a KPI based approach to measuring sustainability and keeping a tab on the

performance across different geographies. In chapter 3 I have tried to pose some questions

around building a sustainable strategy and then we will see what are some of the methods

through which corporates report their green performance or corporate social responsibility as

it is called otherwise. Green ICT networks have been presented which has to be embraced

sooner If energy consumption has to be managed inspite of the exponential increase of data

due to content explosion and convergence of Voice, Video and other forms of communication.

I would complement by presenting a case study that I conducted with the managers at Cisco


SYSTEMS to see one instance of how Environment Management System (EMS) functions

within the organization.


CHAPTER 3: SUSTAINABILITY STRATEGY

Nearly all industries, organizations and consumers are affected due to the ‗greening‘

initiatives. If we wish to halve the worldwide CO2 emissions by 2050 means that we have to

reduce worldwide energy consumption in 2050 to 1960s‘ levels. Since the current population

is double that of the 1960s, it means dropping living standards by half. By 2050, the world‘s

population is expected to increase by 3 billion beyond the current level. It will be impossible to

realize the goal of halving CO2 emissions without new ideas. Recent growing phenomenon of

living close to work, teleworking, and distance education will increase as people put growing

importance on travelling less.

Any program has to be conceptualized, then a thought leadership team has to be gathered

who need to oversee the execution at the field level which will in-turn lead to presentation of

metrics and measurement. This can be summarized as :-

Fig 6: Conceptualization to Realization and Sustainenance

Sustainable development indicators (SDI) have the potential of turning the generic concept of

sustainability into action. However there are disagreements of what constitutes a good

society so this has led to each institution offering measures or indicators for defining,

measuring, analyzing, improving and controlling initiatives within any strategy hence areas of

conflicts. Within the rest of the section let us see

What is the role of businesses in the greening of industry or rather why is business behavior

considered important?


As quoted earlier statistically, out of 100 of the largest economic entities, 57 are corporations

and not countries hence managing and monitoring the corporate sustainability strategy

activities closely is important step to take forward.

Some of the other reasons could be -

I. Businesses in general are the major user of energy and materials and also the

producer of pollution

II. Businesses also are the producer of solutions

III. They are examples or rather trendsetters for the society

IV. The greening of business will involve and transform many stakeholders in the

industrial function of society, including government, employees, suppliers, customers

and investors

The greening of industry should not be confused with sustainable development, which is

a goal for society as a whole. Integrating environmental and sustainability imperatives into

the structure, culture and action is the major task of sustainability managers of the

company. What kinds of knowledge generation and diffusion would be helpful in the

process of greening the industry for a sustainable future? It is quite difficult to generalize

the steps due to different priorities for different societies and industries. In Netherlands

Brand et al. (1997) built a strategic plan.

After conducting all analysis they identified the following major priorities

1. Transformation towards sustainable development

2. Changing consumption patterns

3. Finance, capital and performance indicators

4. Technological breakthroughs

The first theme is what they call an overarching question and the subsequent steps can

be perceived as the aspects of the transformational process.

The sustainability imperative: Eco-efficiency versus system change

Beginning 1987 when the concept of sustainable development gained momentum there

were two approaches being taken by industry practitioners and academicians. While the

former supported eco-efficiency the latter strongly advocated system change. There was


lack of consensus between the populations. I am again quoting the imperatives using the

normative language of its proponents.

Eco-Efficiency imperative

The eco-efficiency idea means that companies must come to terms with the new realities of

population growth, increased evidence of global warming, ozone depletion, loss of fertile-soils

and forests. These in turn will lead to tougher government regulation and change the markets

(consumer attitude) which ultimately would result in a change in the bottom-line of the

company. Eco-efficiency is about gaining ecological and economical efficiency i.e. value-

creation through minimizing resource input. Innovative processes help in creating

competitively priced goods and services and bring quality to human life. The ecological

impacts and resource intensity throughout the product-lifecycle progressively reduces to a

level at least in line with the Earth‘s carrying capacity. Some strategies to achieve this are

1. Dematerialization;

2. Minimize the energy intensity of goods and services;

3. Enhance recyclability;

4. Maximize the use of renewable resources;

In this methodology value-creation is sought by creating a solutions approach to

product offering rather than focusing on selling as much products as possible. Eco-

efficiency advocates do not ask for less government regulation, rather the current

weak and inconsistent set of rules and regulations are considered to be a policy

failure which needs mending. Changes they suggest are twofold

a. Regulations must ensure that ‗prices tell the truth‘ i.e. incorporate all

environmental costs e.g. In the price of electricity also calculate the costs of the

cleanup activities at the end of life cycle.

b. Governments are only entitled to determine the extent to which pollution

is acceptable.


System change imperative

Critics of the eco-efficiency imperative support the system change imperative paradigm, this

may be due to following reasons.

I. A high efficiency system may not necessarily prevent environmental degradation.

II. The concern is not only about the ecological impacts but also about the equity on a

global scale.

III. A eco-efficient company does not necessarily mean that companies are changing

their product mix and harmful products might still be in use.

IV. Sustainability means an eye for long-term value creation means companies are

operating on a wider horizon which could dampen short-term value creation and

money-related performance indicators.

The system change view is based on the idea that companies and the economic system

should be perceived as part of a larger ecosystem and not in isolation. To determine any

further action, a basic understanding of the ecosystem and the social system are critical.

Core values which drive this thinking are

Wholeness- Decision makers should understand the relationship between the internal

environment and the externalities. This will lead to shared responsibilities and community

among all stakeholders.

Care for future generations- Businesses have to listen to a new stakeholder i.e. appoint

some sort of future generation representative who closely works at the board level with

long-term planning horizon.

Smallness- Recent management theories have highlighted the idea of smallness and

organizations too are realizing the economic benefits of small work teams and defining

responsibilities at the lowest level possible. Sustainable development implies accepting

limits on the growth level of companies while producing value added and high quality

products for all stakeholders, including nature and future generations, without growth.


Eco-Efficiency vis-à-vis System Change

Both are ‗mental maps‘ which help in developing views on key uncertainties, strategies,

issues and desired futures. Eco-efficiency advocates stress the need to make a change now

and emphasize the importance of tool development (such as life-cycle analysis (LCA),

environmental management systems (EMS), performance indicators and new reporting

practices), showcases and guidelines. We will see in detail what each of these mean and the

issues around them. System change advocates view these tools as transformational process

aids which are important to bring about a change e.g. LCA helps in analyzing products in the

context of the entire production and consumption chain. Reporting activities acknowledge the

importance of the broader social context. Partnerships would be fostered for collective value

learning process. Much of the free-rider behavior of firms could be curbed when a direct

relationship is established between environmental, social and economic activities. Producers,

consumers and waste managers would be brought together to form a network which will

shape the nature and direction of the growth.

All the above discussion leads to some research priorities

Priority1: Analyze the tools in action. Some of the questions to be answered include

a) What is the effectiveness of the tools? What is the nature of the performance changes

that the tools deliver; Are they effective in shaping new values and developing new

partnerships?

b) What are some of the use cases involving management, external stakeholders such

as the financial community, environmental groups, employees and governments? Is

the relevant to meet the information needs of the above audiences?

c) What is the extent to which mandatory, international standards for performance

indicators, reporting mechanisms, LCA‘s and EMS‘s both feasible and desirable?

d) To what extent do these tools reflect the sustainability agenda and so incorporate

social and development issues?

Priority2: Understand what is the role of the government?

In both approaches the role of the government is central. Some of the questions to answer

include


a) How to shape effective government action to set conditions so as to achieve

sustainable development, including large efficiency gains and system change?

b) What is the role for economic instruments, voluntary agreements and command-and-

control regulation?

Priority3: What are the dynamics of emerging partnerships?

Development of partnership is central to the transformation process. Some of the questions

to answer include

a) What is the reason for the partners to enter into partnership? Which forms of

partnership are most effective in terms of original motivations but also in terms of

improvement of environmental and sustainability performance?

b) What factors dampen and accelerate the process of making partnership networks?

c) To what extent can partnerships become carriers of new activities which will change

existing production and consumption patterns in a more radical way?

d) How to classify, analyze and evaluate learning processes which takes place in these

networks?

Consumption Pattern Analysis

Any change towards sustainable development must involve changing consumption

patterns and life styles. Fundamentally we are seeking to answer, what if the poor in this

world and future generations were to embrace the present consumptions patterns of the

rich, mainly in the West today? Research points that the environment would be eroded

and destroyed beyond the ability of nature for repair, considering the current rate of the

population growth and the short-term technological opportunities to produce new eco-

efficient products and services. Consumption of resources has not been regulated and

most of the depletion of the resources occurs at the point of consumption. Most

consumption goods are used only once and many are expensive to recycle. The new

eco-efficient products enter niche markets and are not effective in substituting eco-

efficient products and hence new needs are generated without changing existing

unsustainable lifestyles.

What is the real need of the consumers? This is the real research question around which all

of the other questions are built. The flooding of products and services has created several

addictions and have led to unsustainable production and consumption patterns. Hence this


leads to aiming to find new ways of lifestyles which could quite vary between people, regions

and countries. The learning processes requires openness and access, however secrecy of

information precludes any such openness in present day organizations.

To sum it up, learning requires vision and any vision requires construction of scenarios which

in management literature is called as leadership by example.

Priority4: Deconstructing the sustainable consumption indicators

The goal is to define sustainable consumption and measure progress made towards that end

that will help in gauging the progress made.

Priority5: How to develop new consumption patterns?

What are the conditions, accelerators, barriers that help consumers and producers re-

evaluate their existing needs? Which methods like consensus conferences, dialogue

workshops, societal experiments etc will help producers and consumers reframe their needs

in a sustainable way?

Finance, Capital and Performance Indicators

Fundamental questions regarding the role of financial markets, including investors, bankers

and insurers, in a sustainable world needs to be analyzed at company level by changing

financial performance indicators. In the financial world Investors and bankers aim to increase

value and insurers target to decrease risk. A gap analysis suggests that there is a gap

between the know-ledge and application of the methodology and procedures to achieve

sustainability in the financial world. There has to be a fundamental paradigm shift in which the

financial sector operates i.e. depart from the emphasis on short term financial gains, and a

shift towards long term financial and other values as desirable business outcomes. However

If monthly ratings continue to evaluate the financial sector businesses then there may not be

much change.

GDP which currently is used a measure of national progress masks the breakdown of social

structure. Researchers have laid down the need of new models that do not allow for the

misrepresentation of social and environmental considerations which metrics like GDP do.

There is a need for standard system of environmental evaluation but is riddled with difficulties.


Techniques like contingency valuation method which were developed and improved upon still

do not allow the complete portrayal.

Dimensions of Sustainable indicators

Fig7. The above figure shows the dimensions which need to be analyzed for building a

sustainable corporate or national strategy. (Corina et al. (2009))

Due to the greater demand of the market forces for greater transparency and traceability of

the sustainable performance organizations should move ahead from making

sustainability only a public relations/ marketing device. Cash-strapped companies want

to make sure that their investments are targeted at the most high-impact projects.

Why Sustainability KPI’s?

Some of the reasons that I could gauge from interviewing managers during my research

process was

I. Doing the right thing for the environment

II. Reduce energy-related operating expenses

III. Historical and upcoming environmental compliance regulations

IV. Improve the perceived brand image of the company through customers and general

public

V. Competitive Differentiation

Economic

Population

Education

Innovation

Infrastructure

Environment


VI. Make the stock attractive for the socially responsible financial community

VII. Attract and retain best talent

The above list is not sorted in priority and as it would change who is voicing the concerns.

Presently, in U.S. sustainability reporting is voluntary but corporates have increasingly done it

even corporate websites in France also have a section on “développement durable” which

shows concerns for this topic. SEC and other agencies are evaluating mandatory reporting

on sustainability performance. In U.K. climate-related non-financial disclosure of certain

parameters is mandatory. The primary factors motivating companies to develop and disclose

KPI‘s are

A. Stakeholder demands- By including supplier‘s sustainability performance data a

corporate can align its sustainability goals and ensure that same set of practices are

emulated in its entire value chain. Ideas like carbon labeling are in corporate business

plans so as to influence consumers towards sustainable purchasing practices.

B. Shareholder expectations- In US the SEC has voted to provide public companies

with interpretive guidance on disclosure requirements. Just as internal controls are

present for material and financial reporting, Corporates should further develop the

proper internal controls and mechanisms to gather the necessary information for

reporting and disclosing how issues such as energy, emissions and access to natural

resources will impact business operations and shareholder value.

C. Evolving regulations- In US most of the sustainable reporting is voluntary, but as

trading systems for carbon credits and greenhouse gas emissions (GHG) regulations

mature, corporate will most likely be mandated for reporting key indicators such as

GHGs. Carbon and GHG emissions accounting will become more relevant as social

and environmental aspects are mandated to be in the public reports which corporate

publish. FASB and IASB are currently working on a joint project which began in 2007

to address GHG emissions accounting and the final report is not likely to be published

until 2011.

D. Performance evaluation of sustainability and corporate citizenship efforts –

Just as financial reporting is driven by metrics‘ to manage an organization‘s financial

performance, developing the appropriate processes for sustainability accounting is

essential for managing an organization‘s non-financial performance. Considering the

potential risks and opportunities of investments in sustainability it would become

increasingly important to manage green performance from the enterprise level down

to the business unit level and facility to maximize ROI‘s.


Realistically, If something cannot be measured then it cannot be managed. The

finance organization should work with business units to understand the Critical

Success Factors (CSF‘s) and key indicators that need to be managed, measured and

reported on. Presently solutions for measurement of sustainability performance are

evolving with GRI guidelines being the starting point. KPI development begins with an

assessment of an organization‘s key areas of impact and identifying where those

intersect with areas of CFO responsibility. A major change in the financial closure and

treasury processes would also incorporate carbon emissions trading as well wherein

one would try to answer the question Does the financial closure process present

timely and clear picture of assets and liabilities related to carbon offsets?

E. Relative Evaluations- Organizations should evaluate each indicator on a relative

basis like evaluating the GHG emissions per unit of product, or water used in a

specific process. Developing indicators that track stakeholder‘s expectations are

important. Such level of granularity is critical to understanding where there are areas

of opportunities and how can those specific initiatives be measured. Context based

sustainability could be handy and effective for managers to understand and control

the sustainability performance of organizations.

Sustainability of water use- Measure relative to the size of local supplies

Employee Compensation- Measure relative to livable wage standards

Social Impacts- Measured as per community needs

The above set of measurements can be thought as minimal. At a global level Human

Development Index (HDI) of the United Nations Development Program (UNDP),

Environmental Performance Index (EPI) of the World Economic Forum (WEP) is

gaining momentum but reluctance of policymakers and statistical services arising

mostly from conceptual and technical challenges and hence are areas of fertile

research topics.

Olivier Seznec, Cisco SYSTEMS France CEO, green initiatives too stressed on the

need of DfE (Design for Environment), LCA (Life Cycle Analysis) as some of the

underpinnings for developing products.


CHAPTER 4: CORPORATE SUSTAINABILITY REPORTING

In this chapter I am going to address the nuts and bolts of publishing two reports namely the

usual annual report and the CSR report that details out the regular operations, finance,

marketing and governance aspects among others both from an historical perspective and

presents forward looking statements regarding how it is going to perform in the future

considering the business environment, competitive landscape apart from other aspects. Over

the years there has been an increasing importance to publish the CSR or the sustainability

report that typically presents the CSR (Corporate Social Responsibility), Environmental

reporting, and triple bottom-line. It includes environmental impacts, employee programs for

healthier living, community development programs, customer safety programs, fair trade

practices and other aspects of organization functionalities not classified as the core business

of the company.

IFRS have been used as the framework for reporting business transactions and countries

have adapted to the versions of above to manage their economic activities. GAAP,

traditionally had provided the guiding principles for recording transactions and reporting the

leading indicators to the users of financial information. Customized versions of GAAP and the

above standards are being used to meet local rules and regulations e.g. at Cisco SYSTEMS

accountants in France record and report all transactions as per French rules and regulations

while the consolidated report presented to the regulators, SEC and financial markets

presents the global picture. Economic recession has brought about an increasing consensus

among practitioners and academicians to build a unified standard so that unique reality is

presented. Let me pose a question, does a global standard exists for preparing sustainable

reports? Sustainability reports present information material to an organisation‘s major

economic, environmental or social impacts and that substantially influences stakeholder

decisions. In other words it is a process for publicly disclosing economic, environmental, and

social performance (Geraghty, 2010). He mentions that more than 80 per cent of global

Fortune 500 companies now disclose on sustainability performance and hence having a clear

and lucid understanding of the subject is advantageous. 75 percent use the (Global Reporting

Initiative) GRI standards. GRI has developed a framework by taking into consideration inputs

from 3000 stakeholders from civil society and international business community and is

considered to be world‘s most widely used framework for sustainability reporting. Irrespective

of the size, sector or country the GRI‘s G3 sustainability guidelines is freely available as a

public good for the companies.


GRI‘s common framework aids businesses to report about generic and broader level issues

to internal and external stakeholders. Geraghty also stresses that national and international

policy; investors; and pressure from wider society are the major external drivers. By enabling

transparent disclosure of sustainability information the guidelines allows a climate for the

benchmarking of companies and, more crucially, allows for change to be made from within an

organisation. Companies have to move beyond the bottom-line and quarterly-results mode of

operating. Maximizing shareholder returns should be the main goal of any corporate however

not at the cost of degrading social and environmental value. When corporate earnings are

more than that of countries GDP e.g. GDP of Wal-Mart exceed that of Austria, Exxon-Mobil‘s

receipts are more than that of Argentina or Turkey the focus on social and environmental

agenda of the corporate becomes more important.

Is it a study in Ingenuity?

There has been too much of hoopla around sustainability in the recent economic recession

times. Aras and Crowther (2009) argue that corporate have been too much stressing on the

agenda of sustainability. They argue that the cost of capital for the firm is reduced as

investors are misled into thinking that the level of risk involved in their investment is lower

than it actually is. They analyse the effects of this misrepresentation and argue for a fuller

debate about sustainability. Reports which were designated as environment reports then as

CSR reports have been repackaged as sustainability reports. In academic circles CSR is

considered as a problematic because there is a dichotomy between CSR activity and

financial performance with one being deleterious to the other and corporate are obliged to

pursue activities to generate value for shareholders. Moreover there is no clear definition on

what constitutes as CSR (Martinez & Crowther, 2005) and therefore no agreement upon the

basis of measuring that activity and relating to the various dimensions of corporate

performance. Previously conducted studies have presented the issues and the problems in

developing widely accepted standards and reporting such activities (Crowther, 2006). Due to

the increasing pressures of different stakeholders for long-term sustainability, it is necessary

to develop some methods of analyzing and measuring CSR activities in an universally

acceptable manner so that it can also be evaluated by interested parties which could even

become a guideline to understand the decision making process in society.

Earlier analysis of sustainability (Dyllick & Hocketrs, 2002) began with a two-dimensional

approach of environmental and the social. A few other researchers (Spangenberg, 2004)

highlighted a third dimension related to organization behaviour. Aras and Crowther (2007b)


argued that such an approach is reductionist and may not lead to better understanding of the

issue. This is a dichotomous issue due to the fact that for a corporation optimizing both

financial performance and social/environmental performance are in conflict with each other

and hence most of the work done in corporate sustainability does not recognise the

importance of financial performance and hence a financial analysis is not performed.

Fig8. Model of corporate sustainability (Aras and Crowther 2007b)

My case study at Cisco confirmed to this model. It takes good amount of effort to really

influence change in organization culture.

Dimensions Meaning

Societal influence Impact that society makes upon the corporation in terms of the

social contract and stakeholder influence.

Environmental impact Effect of the actions of the corporation upon its geophysical

environment.

Organizational Culture Relationship between the corporation and its internal stakeholders,

particularly employees, and all aspects of that relationship.


Finance Adequate return for the level of risk undertaken.

Crowther (2000a) claimed that by quantifying environmental related costs and including them

in business planning strategies might result in firms reducing operating costs. There are

different definitions of socially responsible organizations and this leads to different

performance measurements. Pava and Krausz (1996) report empirically that firms as per

their definition which are ‗socially responsible‘ perform in financial terms at least as well as

firms which are not socially responsible, so why to be socially responsible when the primary

objective is to provide good returns to the shareholder?

Efforts are being made to provide a framework for certification of accountants who wish to be

considered as environmental practitioners and auditors. To quote an example the Canadian

Institute of Chartered Accountants is allocating a lot of resources to develop such a standard.

Technical implementation of social accounting and reporting has been laying forth the

philosophical basis for such accounting predicated in the transparency and the accountability

principles. Corporates have started to appreciate the business benefits of CSR activities in

their reporting, equally they recognize that sustainability is important and it plays an important

role in their reporting.

Extractive Industries

Heavy natural resources depleting industries or in other words extractive industries – which

by their innate nature cannot be sustainable in the long term – seems to be making

sustainability a very prominent issue. Clearly the vast majority do not mean sustainability as

discussed in this article, or as defined by the Brundtland Report. Their scope of definition is

just a bit more than business continuity.

Lets us see the above argument in a more detail. In 2006 BP reported that:

That is why we care about the sustainability of our activities and why, throughout the

company, we work to ensure that the things we do and the way we do them are genuinely

sustainable.

While later in the same report (on the same page even) is stated:

BP has now sustained itself as a company for almost 100 years through periods of dramatic

economic, social, political, technological and commercial change. This demonstrates that to


uphold corporate image and be in explorative business companies are projecting themselves

as green or sustainable.

Aras and Crowther argue that such treatment of sustainability is actually philistine and hides

the very real advantages that corporations obtain by creating such a false sign of

sustainability. BP has tried to project itself as an energy company with a feature of making

renewable energy as it even though it is a very small part of their actual operations. Does

sustainable corporates get access to easy capital?

Sustainability and the cost of capital

Cost of capital which a firm incurs is related to the perceived risk associated with investing in

that firm. Generally, the larger, more well-known companies are more certain about the

investments and the outcome of those investments and therefore have a lower cost of capital.

Henceforth most large companies discuss sustainability and frequently it finds place in the

business planning but lack of full understanding in the definition means that it is confused

with corporate planning and reporting and hence obfuscation occurs. Aras and Crowther

argue that such obfuscation may not be deliberate but suggest that it has an element of

disingenuity in it. The risk evaluation methodologies are often deficient in their evaluation of

environmental risk. The beginning step is the identification of costs and revenues which need

to be incorporated into the evaluation process. A firsthand identification of cost would lead to

quantifying such costs and incorporate qualitative data around intangible aspects. Many of

the beneficial aspects around sustainability are less tangible and are more related to image.

Some of the examples include -

Enhanced company or product image – this might lead to increased sales

Health and safety benefits

Ease of attracting investment and lowered cost of such investment

Better community relationships – this can lead to easier and quicker approval of plans

through the planning process

Improved relationship with regulators, where relevant

Improved morale among workers, leading to higher productivity, lower staff turnover

and consequently lower recruitment and training costs

General improved image and relationship with stakeholders


The above benefits of are not just intangible but will take some-time to realize. An appropriate

time horizon is needed for the evaluation of risk and its effects. Presently for the cashflows

that are generated, Discounted Cash Flow (DCF) or any other method of valuation is

employed and none of the steps would change drastically with the incorporation of

environmental accounting information except for risk assessment and the impact it has on the

cost of capital. A step by step integration of environmental accounting into risk evaluation

system can be summarized as

Perform cost-benefit analysis on environmental implications

Quantify the costs and incorporate qualitative data regarding the less tangible benefits

Identify and utilize appropriate financial indicators

Provision an appropriate timeline so that environmental effects are fully realized.

Some authors claim that sustainability is a little more than rhetorical instead of being a

serious attempt to mitigate the issues which are involved due to the insufficient understanding

of the issue and hence any evaluation would lead to being simplistic and could be error

prone. The extent of disclosure manifested through the reporting has increased through the

last century as companies have started to recognize the benefits of providing increased

disclosure. Firms have witnessed commercial benefits of increased transparency which has

brought about due to increased disclosures. Hence it is rational to argue that in future the

amount of information regarding sustainability will increase as firms would understand both

the implications and the benefits of greater disclosure.


CHAPTER 5: GREEN ICT NETWORKS

What is the fuss about green Information and Communication Technology (ICT) network and

how to design such a network? What is the role of ICT sector to the global GHG emissions?

There has been academic literature on green data centres, but fewer studies have been in

academic circles on green networks. Historically, IT and Networking have been enablement

of many business functions, Minoli (2010) reports that ICT possess the capacity to

significantly reduce emissions in other business sectors by improving and automating their

operations, overall the industry could reduce the emissions by 15 per cent in 2020 and

research at Cisco SYSTEMS also confirms to these statistics. Analyzing the evolution of

content these days one can witness a lot of multimedia rich video, audio, podcast and other

which is more natural mode of communication however the size of the data centres will be

increasing but CIO‘s are under a pressure of no-change or reduced budget because of

recession which means leverage more of the existing IT infrastructure.

From an implementation perspective it can be accomplished by replacement of goods and

services with other virtual equivalents apart from increased use of sensing, telecommand and

telecommunications technology all of which could be made more energy efficient. Techniques

employed in Green IT and data centres have been broadened for incorporating green

principles in the intranet, extranet and internet. In 2008, Cisco unveiled a 40-core networking

processor which took 5 year of development effort which has the power saving potential

when compared to existing single- or dual-core networking processors because of fewer

discrete networking devices. Similar other innovations and standards are ―work-in-progress‖

for hardware and enabling software.

Many of the past ‗substance‘ based human activities have been virtualized e.g. Audio

Teleconferencing, Video Teleconferencing/ Telepresence, internet-based Whiteboarding/

Conferencing, E-mail communication-/m-commerce including online travel bookings and

purchases; internet-based home businesses; multimedia applications such as music

downloading (as contrasted to CD-based distribution); commercial-grade video entertainment

such as video-on-demand (as contrasted to a trip to a theatre); and IPTV based digital video

recording (as contrasted to DVD-based distribution); grid/cloud computing/virtualization

(reducing space, power and heating, ventilation and air-conditioning (HVAC) costs).

ICT contributes to 2- 2.5% of global GHG emissions and 7% of GDP. ICT can bring about

significant reductions of emissions in other sectors of the economy such as smart motor


systems, smart logistics, smart buildings and smart grids. Some studies project that ICT has

the potential to reduce global emissions by as much as 15% by 2020, specific ICT chances

and introduction of more virtualized services to enable energy efficiency, can lead to emission

cuts upto five times which the sector contributes i.e. 7.8 GtCO2e. During day-to-day

conversations green, often refers to renewable energy sources, such as wind, solar, biomass

and fuel cells. Some of these technologies can be used for wireless networks in rural

environments and/or developing countries. Nevertheless, the short-term opportunities for

green networks are (i) the design of Network Equipments that make efficient use of energy

and the optimized design of IT rooms, particularly from a cooling perspective. Technical

standards and performance benchmarks to consistently ‗quantify‘ conformity to, or levels of,

being green are beginning to emerge now.

Service Provider Think on aspects, issues and opportunities. Strategy employing which a

wireless carrier can reduce its energy consumption?

User Community Strategy employing which large firm could reduce its data centre and

networking use of energy.

Strategy and Motivation to go green

ICTs can help the greening cause or in other words reduce the carbon-footprint by promoting

the development of more energy-efficient devices, applications and networks, by encouraging

environmentally friendly design and by reducing the carbon footprint in its own industry.

Following should be taken into consideration for developing an effective green network

strategy -

System load- It is defined as the energy efficiency of the equipment (servers, storage,

switches, routers, repeaters) in the data centre or telecommunications node. It is defined as a

function of the capacity utilization.

Facilities load- Support mechanical and electrical equipments are covered in this such as

cooling systems (ACs), uninterrupted systems (UPS‘s), Power Distribution Units (PDUs).

Increased Socio-political momentum towards environmental responsibility and the growing-

felt need to decrease run-the-engine (RTE) costs has given birth to a novel discipline of

green IT. Estimates have shown that 1 MW highly-available data centre will consume US

$20m of electricity over its lifetime. Studies have shown that electrical costs for operating and


cooling constitutes up to 35–45 per cent of a data centre‘s total cost of ownership (TCO)

moreover energy costs have replaced real estate as the primary data centre expense.

Studies performed by Uptime Institute (consortium of companies devoted to efficiency

maximization and data center uptime) report that 60% of the energy consumed during cooling

is actually wasted.

Presently, A desktop computer dissipates almost fifty percent of the power it consumes

as heat. A device with a power rating of 120-W (such as a computer or a laptop not being

used, but left on in sleep mode) runs for (say) 16 hours a day, 365 days a year,

consumes about 700 kW-h a year; this equates to about US$100 in power consumption.

A medium-sized company with 1,000 PCs obviously would spend US$100K/ year

needlessly and a company with 10,000 devices would waste US$ 1m per year. Studies

conducted by IDC (a market research firm) have reported that companies spend US$ 26

billion to power and cool servers.

Hence, there are good reasons for pursuing green IT and green networking approaches.

(Energy) efficiency is just one episode of the ‗greening‘ initiative. Some other initiatives like

use of green (renewable) power sources, reduction of waste and decreasing the carbon

footprint per unit of manufactured goods are some of the other important factors. Recent

studies have shown that best practices can effectively reduce the data center energy

consumption by 45 percent.

Just as Total Cost of Ownership (TCO) has been an important measure of an ICT project,

some researchers are proposing Total Carbon Cost (TCC) to be an important criterion for

evaluating a vendor.

Now that some of the motivations for going green have been created, How will it operate or

rather which segments will be affected?

The characteristic of making highly optimized and economized use of energy which might

include changing the energy mix to include more sustainable sources, utilizing sustainable

processes with a low carbon footprint with a closer watch on the triple bottomline is what

constitutes the green operations. Minoli (2010) also identifies the different segments like

Green power, Green IT/green networks, Green buildings, Green fuels and transport,

Government and regulatory bodies where greening can be harnessed. There are

corresponding stakeholders in each of the different segments. Possessing the high-end

network components which are energy efficient is not sufficient to build sustainable networks


but it is a good first step in moving closer to the goal. Classification of the green initiatives of

telecommunications and networking equipment vendors are as follows -

Reduce energy usage and heat generation and reduce equipment footprint, which in

turn reduces energy costs in networks and user devices (using an accepted industry

measurement metric).

Using renewable materials to manufacture products and recycled materials for

packaging.

Conforming to government regulations and recommendations for using renewable

energy.

Financial, environmental and legislative aspects are now inviting, if not forcing, IT

organizations to develop greener data centers. However, there is as no generally

accepted, standardized benchmark framework for the lowest energy consuming or green

data centers in terms of target architecture goals, benchmarks and scope. Following set

of practical principles and approaches has been in circles -

Improved Operation- This operates on a ―low hanging fruit‖ scenario and aims to make

use of the energy-efficiency improvements beyond currently existing operational present

day trends without any capital investment.

Best practice operation- Increased usage of best practices and technologies used in the

most energy-efficient facilities in operation today.

State-of-the-art operation- Attain the maximum energy-efficiency savings that could be

thought of utilizing available technologies. Servers and data centers will be operated at

maximum possible energy efficiency using only the most efficient technologies and best

management practices available today.

Metrics to measure greenness

Analytical metrics can help in preparing results that can be used across institutions.

In order to define a useful efficiency metric for NEs, one needs to normalize energy

Consumption E by effective full-duplex throughput T, namely:


Efficiency metric = E/T

The efficiency metric is typically quoted in watts/Gbps. Green grid (an industry consortium

formed in 2007) proposes two metrics which are emerging as industry standards for

measuring data centre power consumption power usage effectiveness (PUE) and data centre

infrastructure efficiency (DCiE).

The Green Grid defines these two metrics as follows:

o PUE = Total facility power/IT equipment power. PUE is a ratio; it should be less than 2;

the closer to 1, the better.

o DCiE = IT equipment power*100/Total facility power. DCiE is a percentage; the larger

the number, the better.

The further pending research question which needs to be done is to document ways to collect

power-consumption data and perform a comparative study on the efficiency of the data

centers in different organizations to establish best practices for different institutions. Energy

Consumption Rating (ECR) is a framework for quantifying the energy efficiency of telecom

and networking devices. Formed in 2008, due to the growing interest of the national and

international standards bodies to decrease the carbon footprint of networking equipments

ECR developed a methodology for reporting, measuring and regulating energy efficiency of

network and telecommunications components. Under the ECR specifications procedures and

conditions for measurements and calculations are laid out which can help in implementing

with industry-standard test equipment. Networking and telecom equipments are classified into

different classes and rules for measuring energy efficiency in each class of equipments are

provisioned in the ECR framework. Taking dynamic energy management features into

account the final ‗performance-per-energy unit‘ rating can be reported as a scalar or synthetic

(weighted).

ECR = Ef /Tf (expressed in watts/10Gbps)

Where Tf = maximum throughput (Gbps) achieved in the measurement Ef = energy

consumption (watts) measured during running test Tf.


In a nutshell, ECR means the energy required to move 10Gbits worth of user data per second

and is a notion of best platform performance for a fully equipped system within a chosen

application and relates to the commonly used interface speed.

ECRW = ((α* Ef) + (β* Eh) + (γ* Ei))/Tf (dimensionless)

Where

o Tf = maximum throughput (Gbps) achieved in the measurement

o Ef = energy consumption (watts) measured during running test Tf

o Eh = energy consumption (watts) measured during half-load test

o Ei = energy consumption (watts) measured during idle test

α, β, γ= weight coefficients to reflect the mixed mode of operation (ECR specifies

α = 0.35, β = 0.4 and γ = 0.25)

Similarly other metrics‘ like Telecommunications Energy Efficiency Ratio (TEER) and others

are modeled. Opportunities where greening can be applied are buildings, maintenance

services, publications/copier services, meetings, office supplies, electronics, IT/Networks,

fleets, landscapes, power, recycling and waste prevention. The above placeholders are to

meet some or all of the goals like increase energy efficiencies, decrease GHG emissions,

promote ‗reduce, reuse, recycle‘, promote business sustainability policies that are eco-aware,

support the potential for societal benefits.

From an IT perspective guidelines that could improve efficiency are

Consider energy efficiency and power management as important criterion in making a

procurement decision by considering lower energy costs and trends.

Provision for power management requirements into specifications as part of an

information communication technology equipment procurement process.

Choose equipments with the best possible efficiency ratings (when using an industry-

accepted efficiency metric).

Design for good system and network path utilization; keep off excessive capacity

reserves.


Include rack space, cooling and power conversion in the assessment, as these items

can make a big difference in monetary and environmental impact.

Do not multiply entities beyond necessity. Optimized core, edge and access

infrastructures provide the best in energy efficiency.

Suggested selection criteria for a green (network management) protocol include: reduce

carbon footprint by at least 10 per cent and be backward compatible with existing protocols.

Features like building layout, rack configuration, rack spacing, rack diversification to avoid hot

spots and the type/architecture of the equipment being used impacts cooling efficiencies.

Some strategies for the network designers include combining both high-density with low-

density equipment, spreading out racks, using cold-aisle/hot-aisle rack configurations among

other engineering techniques.

Efforts are in place for green communication protocols; most of the current networking

protocols are energy intensive and sensor-network protocols like ZigBee do incorporate

power control techniques. Simple integrated protocol of protocols (SIPP) and simple logical

ubiquitous reconfigurable protocol (SLURP); according to some observers this could be

revolutionary in nature. During a workshop of green communication following action items

have been identified as future research areas

Energy-efficient protocols and protocol extensions

Energy-efficient transmission technologies

Cross-layer optimizations

Energy-efficient technology for network equipment

Energy-efficient switch and base station architectures

Low-power sleep mode

Exploitation of passive NEs

Energy-efficient communications management

Architectures and frameworks

Hierarchical and distributed techniques

Remote power management for terminals

Context-based power management

Measurement and profiling of energy consumption

Instrumentation for energy consumption measurement

Energy-efficiency in specific networks


Mobile and wireless access networks

Broadband access networks

Management of home and office networks

Organic light emitting diode (OLED) technology

Green storage

E-recycling

Energy Star, Restriction of the Use of Certain Hazardous Substances (RoHS) and the

Waste Electrical and Electronic Equipment Directive (WEEE) are some of the

environmental regulations and initiatives that affects the businesses and end users e.g.

the aim of WEEE/RoHS is to increase the recycling and/or re-use of such products.

WEEE/RoHS also require heavy metals such as lead, mercury, cadmium and chromium,

and flame retardants such as polybrominated biphenyls (PBB) or polybrominated

biphenyl ethers (PBDE) to be substituted with safer alternatives.

Stakeholders of ‗green concepts‘

Stakeholder Classification Who and What constitutes

Industry/vendors/material and

equipment manufacturers

Integrators and investors from solar,

photovoltaic, wind, thermal energy, hydro,

biofuels, renewable heating and clean coal.

Green builders and architects

Including the construction industry, integrated

green communities, green building materials,

materials recycling and sustainable construction

transport.

Green material and equipment

manufacturers

Eco paints, sound protection panels, smart

buildings and controls, wood burning stoves,

rainwater collectors, energy efficient insulation,

solar heating, fluid applied membrane systems

and green illumination.

Law firms Energy audits and surveys.

Enterprise hardware and software Data centre vendors, network equipment

vendors, wireline and wireless service providers,


technology vendors semiconductor companies, virtualization,

consolidation and storage vendors, green IT

compliance vendors and consultants, and

equipment take-back and disposal programmes.

Vendors from the green fuel, batteries

and transportation sector

Biodiesel and ethanol manufacturers,

automobile vendors, mass transit equipment

manufacturers, lightweight material

manufacturers and hybrids.

Financial institutions Banks, Private Investors, Entrepreneurs and

Venture Capitalists.

Government and regulatory bodies

Non-governmental organizations (NGOs),

Environmental organizations and renewable

energy associations.

Green lifestyle Accessories, Food Manufacturers and suppliers

IT and network personnel in

enterprises

Consultants, system integrators, academics,

researchers and students.

Now that we have identified the stakeholders from a micro perspective an operational

level agenda can be devised to achieve the goals of green economy. Even though the

global recession of 2008-09 has impacted IT budgets, hindered capital expenditure and

curbed IT growth, Green IT investments are high on the corporate agenda and more than

ever they are driven by compliance with environmental legislation and cost-saving

motives. There has been a paradigm shift in the way organizations evaluate, plan/budget

and deploy green IT. From a business perspective efficient power designs enable

operational expenditure (OPEX) reductions and an increase of performance and reliability.


CHAPTER 6: CISCO: A CASE ANALYSIS OF SUSTAINABILITY

Until now we have seen approaches present in literature. Let us wade through a ―strategy in

action‖ through the case study of a frontline IT company which has been a pioneer in the

evolution of data networks and has been focusing on developing innovative solutions for

reducing carbon footprint. As theorized in the Chapter 3: Cisco is the proponent of Eco-

Efficiency approach of sustainability i.e. make existing products energy efficient by 25% by

2012 which would result in more energy efficient data centres inspite of exponential increase

in the amount of content which is generated across corporate LAN (Local Area Network),

MAN (Metropolitan Area Network), SAN (Storage Area Network) and other kind of networks

based on physical scope.

Internal Analysis

The Environment Management System (EMS) which is a core component of the

organizational sustainability strategy is classified under the Business Management System

(BMS). The EMS leverages the core BMS processes, drives environmental performance and

helps Cisco meet customer requirements. The EMS is aligned with the EcoBoard and Cisco‘s

business needs, while providing the framework for Cisco‘s green initiatives.

Overview

Cisco's ISO 14001 Environmental Management System (EMS) provides a continuous cycle

of planning, implementing, reviewing, and improving the processes and actions that are

performed to meet business and environmental goals. It influences all aspects of Cisco's

operations, products, and services, including compliance with environmental requirements

and regulations, in addition to driving ongoing improvements to environmental performance.

The EMS enables Cisco to conform to ISO 14001, which is an internationally accepted

standard for environmental management systems. Cisco utilizes ISO 14001 to drive its

environmental performance and compliance with environmental regulations and requirements,

while continually improving the EMS. Conformance to the standard is driven by corporate-

level processes, but is implemented on a site-specific basis, depending on local, theater-

based, or site-related environmental concerns. Certification to ISO 14001 is performed by

independent, third-party auditors. Cisco successfully passed its first ISO 14001 registration

audit in November 2000. In an effort to meet customer requests and support the ongoing


commitment to the environment, Cisco continues to expand and improve its ISO 14001

certification. The following figure shows the temporal list of ISO-14001 sites.

Fig 10. Certification journey of Cisco

(http://wwwin.cisco.com/process/bes/bmshome/env_overview.shtml)

Environmental Policy

What is an Environmental policy?

The environmental policy is a company‘s, as well as, top management's public declaration of

its commitment to the environment. The International Organization for Standardization (ISO)

specifies an environmental management system (EMS) as that "part of the overall

management system that includes organizational structure, planning activities,

responsibilities, practices, procedures, processes and resources for developing,

implementing, achieving, reviewing and maintaining the environmental policy".


In the context of Cisco, the environmental policy is the foundation of the Cisco's ISO 14001

EMS and green initiatives. Additionally, it provides the framework for Cisco to build its EMS

and align it with its business and green initiatives and needs. The ISO 14001 standard

requires the environmental policy to meet minimum criteria that include:

Definition by top management

Appropriate and relevant to Cisco‘s activities, products, and services

A commitment to environmental regulations and requirements, continual improvement

and prevention of pollution

Many business models in ICT have SaaS (Software as a Service), PaaS(Platform as a

Service) kind of engagements. Cisco believes Network as the platform for integrating the

increasingly globalized world and global actions that are required to issues like climate

change

Cisco’s policy on Climate Change

1. Cisco supports a substantial reduction in global greenhouse gas (GhG) emissions

through market mechanisms such as cap and trade and an international offset trading

scheme, accompanied by complimentary measures, such as the promotion of energy

efficiency initiatives in order to achieve GhG emission reductions.

2. Because climate change is a global challenge, requiring both global and local

solutions, Cisco supports multilateral approaches to reduce GHG emissions. A

comprehensive international and legally-binding UN agreement is needed to provide

context for national actions and policies, facilitate international cooperation and provide

businesses with certainty to innovate and scale up global investment in low-carbon

technologies.

3. Cap and trade mechanisms provide a clear market signal to reduce carbon emissions

by creating incentives for consumers and businesses to use energy more efficiently and

invest in long term low-carbon innovation.

4. The emerging global carbon market should begin by building on current institutions

and mechanisms, e.g. linking up existing and developing regional carbon markets.


5. Cisco believes that information and communication technology (ICT) has the power to

transform how the world manages climate change. Cisco supports policies that promote

the adoption of ICT as a means of driving energy efficiency throughout more carbon-

intensive sectors of the economy through means such as smart grids, smart buildings,

smart transportation, and travel substitution. ICT can measure, manage and improve

energy use, and should be embedded to help meet cap and trade, offset, and general

GhG reductions. The Global e-Sustainability Initiative report ―SMART 2020 Enabling the

low carbon economy in the information age‖ concludes that ICT could enable emissions

reductions of 7.8Gt CO2 by 2020 or 15% of business as usual emissions . This is five

times larger than the total expected emissions from the entire ICT sector in 2020.

6. Cisco believes that project-based emissions reductions, such as offsets, will be

important in crediting actions that verifiably lead to emissions reductions. Transaction

costs for validation, verification, and independent scrutiny of offsets can be reduced

through networked real-time monitoring platforms.

7. Cisco supports policies that increase tax incentives for the use of energy efficient

products, promote investment in renewables; increase funding for environmental/energy

R&D and provide incentives for the building of smart grids. Cisco supports governmental

leadership in its own operations through use of travel substitution, building/retrofitting

smart buildings and building smart grids for governmentally-owned electric utilities.

8. Cisco supports product efficiency standards that promote innovation by being

performance-based, take into account product functionality and rely on objective criteria,

real-world data and system-level efficiency.

9. Cisco is committed to creating efficiencies and innovations in its products to lower it

carbon footprint, and in its operations where it plans to reduce its global GhG emissions

by 25% world-wide by 2012.

Cisco uses the environmental policy as the framework for its ISO 14001 environmental

management system, including the identification of Cisco‘s environmental aspects and

the setting of objectives and targets. The policy is a high level policy that has the flexibility

to align with Cisco‘s changing business and environmental priorities, while still

maintaining consistent green framework to drive improved environmental performance.

The environmental policy is communicated to employees, contractors, vendors and


temporary workers in a variety of ways, including the BMS General Awareness Training

and the BMS website. It is the responsibility of those Cisco Employees utilizing or

overseeing contractors/vendors to communicate the environmental policy or ensure it is

available to those individuals working on behalf of Cisco. The policy is documented,

communicated to all employees and is easily available. There is a clear organization

policy and structure of approaching the issue of climate change.

Fig 11. A closed loop process for kicking off any environmental related projects ()

Environmental Aspect Teams

Aspect Team Dashboard

The Aspect Team (AT) is a cross-functional group of Cisco employees and contractors

which sets overall and supporting objectives and targets related to an environmental

aspect. Teams may be site specific, or have theater/global responsibilities. Each Aspect

Team (AT) establishes a program for achieving its objectives and targets, including a

timeline and appropriate responsibility designation for each objective and/or target. The

purpose of this dashboard is to provide a central location for all aspect teams to report

progress towards environmental goals as well as other program information.


Mission

By means of a cross-functional forum, the team is leading the effort to minimize Cisco's

impact on the environment by working towards compliance with environmental

regulations and requirements, while creating an atmosphere of continual improvement,

bringing Cisco's environmental management system to life. In the further sections we will

see in detail the following aspects which Cisco employs as the means to achieve its

environmental sustainability objectives.

Global Aspect Team Status

eScrap Management

Waste Reduction and Recycling

Green Task Force

Energy Management

Waste Water Management

WEEE Compliance

WPR (Workplace Resources) Vendor Environmental Awareness

Green Initiative

Manufacturing RoHS Compliance

Global Aspect Team Status

Cisco uses ISO-14001 dash boarding metrics‘ to track the Environmental objectives.

Following figure shows a quarterly tracked dashboard for the different aspects of the

environment.


Fig 11. EMS dashboard ()

Definition of the Color Codes

On track to meet or exceed set objective(s) by due date.

At this time, not on target to meet objective(s) by due date, but the issue has been

identified and the team expects to be on track to meet objective by due date.

Not on target or expected to meet objective(s) by due date. Objective(s) and/or

due date needs to be re-evaluated. Escalation is in process.

No data provided by the Aspect Team at this time

NA Not applicable - program not in place

Strategy of incorporating environmental compliance.

Design for Environment (DfE)


Ideally speaking, for a typical product, 70% of the costs of development manufacture and use

are determined in its design phase. By integrating environmental considerations into the

upfront product design, a company can avoid hazardous substances, increase energy

efficiency, reduce waste of materials and reduce costs.

The basic components of DfE are

Battery Usage- The EU council directive dated 18th March 1991 guides. Details concerning

the directive can be accessed at http://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1991L0157:19990125:EN:PDF .

Eco Labeling- The objective of the eco labeling step is the use of accurate and verifiable

environmental self-declarations that:

a. Increase potential for market forces to stimulate environmental improvements in

products

b. Prevent or minimize unwarranted claims

c. Reduce marketplace confusion

d. Facilitate international trade

e. Increase opportunity for purchasers, potential purchasers and users to make more

informed choices

In 1995 ECMA International developed ECMA TR/70 which catalogued product

parameters related to the environment. During the same timeframe IT Eco Declaration

system was developed in 1996 by IT Företagen to meet the rising demands for

standardized, comparable product environmental information. A synthesized widely

accepted standard called as the type II eco declaration resulted in ECMA-370. The Eco

Declaration – TED. TED meets the basic principles of ISO 14021 (environmental labels

and declarations / self declared environmental claims) and eco design standards such as

ECMA-341. A generic standardized template can be found at http://www.ecma-

international.org/publications/files/ECMA-ST/ECMA-370.pdf

Energy Efficiency- Regulatory Affairs, Corporate Compliance, Worldwide Supply Chain

Management and Engineering departments work closely to conceptualize, implement,

monitor what in Cisco Vocabulary is called as the ‗External Power Adapter Energy Efficiency

Standards’. Effective January 1, 2007, the EU Code of Conduct on Energy Efficiency of

External Power Supplies Tier-2 requirement becomes effective. Only those power adapters

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1991L0157:19990125:EN:PDF

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1991L0157:19990125:EN:PDF


that meet the more stringent efficiency target in Table-B below will be considered to be EU

Code of Conduct on Energy Efficiency of External Power Supplies compliant beyond January

1, 2007.EU Code of Conduct on Energy Efficiency of External Power Supplies is a voluntary

standard that has been adapted by the industry leaders in power supply efficiency.

Adoption of this standard will most likely give Cisco products a competitive edge in the area

of energy efficient design; however, compliance with this standard is not mandatory.

Considering that the old traditional way of energy distribution has to be gradually phased out

due to the fact that the current grid is 20th century old and energy produced from coal sources

is a primary source of carbon-footprint. Moving forward energy from renewable sources will

be integrated in the same grid as that of old grid. Let us see Cisco‘s efforts in place to build

solutions that are being modeled in the same way as the IP (Internet Protocol) for the energy

grid.

Cisco Solutions to reduce Carbon Footprint

Cisco being a frontline company for integrating this increasingly globalized world has

solutions that could be a value-add in decreasing the carbon-footprint through its Smart Grid

& Telepresence solutions.

Smart Grid Solutions

Customer Benefits

Together with the partner business model, Cisco offers end-to-end Smart Grid solutions and

provides the tools and expertise to deploy them. This includes an intelligent, utility

infrastructure that is:

Secure, resilient, and self-healing

Operationally efficient and cost-effective

Standards-based and scalable

Adaptable and easy-to-manage

Supported by an ecosystem of industry partners

Utilities face a number of unique challenges that are currently being addressed by multiple

vendors and associations. The useful cooperation of cross industry players is necessary to


build on existing standards and architectures. Cisco‘s all-IP based utility solutions can help

erect a utility infrastructure that is secure, intelligent, efficient, responsive, adaptable, and

scalable.

Fig 11. Showing the flow top level chain from production to consumption

Cisco and their partners are providing solutions that enable interaction of all devices,

technologies, applications, and agents for smart grid deployments. A Smart Grid enhances

energy delivery and management by providing distributed intelligence and control to more

cost efficiently deliver power based on true demand. This requires an integrated

communications network between energy generation, transmission, distribution, retail

operators, and business and residential customer premises (Figure 11).

What drives the necessity of Smart Grid?

As per Marie Hattar of Cisco Systems, it will improve the reliability of the grid through

proactive monitoring for aspects like faults and load conditions, which could lead to service

disruption and potential blackouts. The need and capacity alignment can be achieved after

adding varying production capacity through renewable sources only if it is monitored through

real time systems. For the utilities and customers the energy costs can be reduced by

optimizing consumption and giving them the ability to manage demand dynamically. Studies

have shown that managing demand could be equivalent of freeing 30% of the reserve

capacity. In economic terms there would be a greater management of information regarding


the demand and supply when renewable energy is introduced in the energy mix. However,

this comes with designing appropriate systems to track both the demand and supply of the

electricity and the traditional methodology of one sided energy transmission from producer to

the consumer would be changed.

What are the smart grid‘s main components and where will it they be deployed?

The smart grid will require solutions that will be in major areas of the grid and also on

household locations. The areas to change are substation automation, is really designed for

the transmission and the distribution needs of the grid. In this there will be two way

communications between transmission systems and energy management systems for grid

monitoring control which would require ruggedized routers and switches that are designed for

substation conditions.

Another key area is the smart meter communication and these are designed for the field area

network of the grid where the communication connects the smart meter infrastructure to the

core network for the transfer of the things like control and usage information and to increase

the transparency of the billing service so as to have the information in real time. This would

require wireless mesh communications and a gateway so as to get the information from the

meter and the home.

Grid security also would be modified. Hence, a solution that would ensure physical security,

cyber security, and reliability across the grid. The need to address regulatory requirements

and provide critical infrastructure to the grid operating systems, data and assets will be a

major area of action.

Data Centers would be another major area as lot of information and lot more analytics would

be needed, so designing data centers would be a design and implementation problem to be

tackled strategically.

Business Energy management, where solutions sit within business or industrial-type

customers that optimize the end-user consumption and cost by integrating lighting, HVAC

and building facility control so they can better monitor and report on their energy usage.

Cisco‘s network building mediator and Energy Wise are examples of this subtype.

Another key area would be home energy monitoring system that would help in better

managing household energy consumption.


So smart grid would encompass all the above types of varieties of components and there will

be multiple entities involved.

Who will supply the Smart grid components?

System integrators, power systems, technology vendors, and suppliers would be the major

players. Cisco has created an ecosystem of partners that would bring different parts of the

solutions together. Just as Plain Old Telephone System (POTS) was changed to the IP

based solutions, similarly a smart grid solution would be operating on an IP based solution.

Currently Cisco is working with Florida power and light and Duke Energy. Going ahead there

will be lot of different suppliers and hence a lot of collaboration among them.

Will the smart grid make any special demands on network components?

A primary requirement would be to operate reliably in some very extreme environments.

Compliance with specifications such as IEEE 1613 or IEC 61850 which are kind of protocols

that would enable network components that are ruggedized. These standards provide

stringent environmental as well as EMI (Electromagnetic interference) immunity requirements

so that components can tolerate a wide range of things like temperature changes, surges,

lightning strikes, radio-frequency interference, and even electrostatic discharges. Key aspect

would be to create components that comply with these standards.

How will security be handled by the smart grid?

The Smart Grid is going to require physical and network security to ensure that it remains

safe from intentional as well as accidental compromises. IP has the most tools for securing

and managing the transport of data. Moreover IP is flexible and is as secure as we want to

make it so that information is not intercepted or accessed by the wrong users. IP as a

protocol would provide security over both the private and public networks. A lot of the retail,

banking, and financial networks are public, and they‘re very secure. Similarly depending on

the design of the manner in which utilities decide to plan out the IP deployment, they can

choose how much they expose to a public network versus how much they keep private.

What will be the nature of evolution of the Smart Grid?

Most smart grid activities started from smart meter deployments. Moving forward there will be

increased activities in the substation and distribution automation areas, as the utilities focus


on reducing the costs of energy delivery and also improving the reliability or more efficiently

integrating some of the renewable energy sources. Then it could evolve towards more energy

management at real estate properties, starting with businesses and then moving to

households. Then there will be integration of transportation into the grid and the real estate

properties in the form of new charging facilities, management of energy to and from vehicles,

for example, and entities providing new services to those electric vehicle owners.

What are the sources to track evolution of smart grid?

Pike Research, Greentech Media, IDC, and Smart Grid News are some of the sources.

Leading utility companies such as PG&E and Duke Energy and partners like Cisco who are

designing new concepts are good sources of learning where the industry is heading.

To sum it up, If we review the progress of the Internet and the revolution it created in a short

20 years to becoming a staple of everyone‘s daily life, we can see a similar analogy

happening with the electrical grid and how we can better embrace the management of this so

we can be more efficient with our generation.

The above question gives an idea of a future upcoming solution that would help in radically

managing the new electrical grid.

Going ahead I would present the Cisco Telepresence technology that would avoid

unnecessary travels and help reduce carbon footprint without loosing the fun or the

interactivity we get in a live meeting.

Cisco Telepresence

Overview

To thrive in today's economy, employees have to collaborate with colleagues, partners, and

customers around the globe at a moment's notice. At the same time, companies want to

conduct the business in a way that enhances the quality of relationships.

Following are some of primary marketing promises of Cisco telepresence


a. Ease of scheduling as no IT support is required

b. Launching a meeting is as simple as making a phone call

c. In-room controls are intuitive -collaboration applications are plug and play

d. Participants can meet in many rooms at once-up to 48 locations in one meeting

e. Users can easily bring in collaboration applications like Cisco WebEx Meeting Center

f. Existing SD or HD videoconferencing systems can be easily integrated

However it eventually reduces unnecessary travels and helps to save costs and reduce

carbon-footprint.

Grounded Theory Paradigm applied for qualitative research

The qualitative study conducted is based on the seminal work of Glaser and Strauss (1967)

popularly known as Grounded Theory (GT).GT starts with observations, which are made not

to test existing theories, but to discover and generate theories closely resembling the reality.

This section shows the application of Grounded Theory (GT) methodology to study Cisco‘s

telepresence solutions role as a innovation to improve business processes and the potential

advantages which it can bring about while reducing carbon footprint.

Fig 12. Grounded Theory building process (Rodon &Pastor (2007)).

From primary and secondary data sources I started building the relevant repository and

began the coding process through open coding and then classifying those codes to find

patterns by using NVivo 9. Making sense of so many codes was an onerous task, however I

believe to have found some significant advantages which both business users and

consumers can have by using Cisco telepresence and would suggest a commonsensical


framework for taking into confidence the roles, point-of-contact, and the organizations

involved in choosing and implementing a solution.

Fig 13. Approach for stakeholder buy-in

Discussion of Results

Coding and classifying all the atomic units of data following is a sample model to think about

the why, what, how and other architectural questions one may ask before considering

telepresence or other similar industry solutions. I used secondary data found in Cisco intranet

and other public domain to extract the data and used interviews as the mechanism to


vindicate the secondary data sources from the green proponents of the organization.

Fig 14. Model showing the classification of the codes generated through Nvivo

Model and approach analysis

The beauty of the Grounded Theory approach is it helps in exploring an open system and underpin a

phenomenon and build theory that resembles reality. The role of the researcher is debatable as to

should structure be forced by more analytic techniques or the researcher should be unbiased until a

point trusting that theory will emerge. The system under study was a technical solution that could be


integrated within the operations of collaborative interactive systems and the increasing role of video

based collaborative efforts to bring more participative nature of development. Multiple iterations help

in refining the research questions and to offer a prescriptive definitive answer to a subjective question.

My field experience suggests that a combination of documentation and human involvement is

necessary to bring life to the case under study.

Field Entry and Literature Review

In a hindsight I had an open ended broad set of questions which could not termed as hypothesis per

se in the traditional strict sense. After joining Cisco I had the firsthand experience of collaborative

technology which drove me to think about some fundamental questions of whether I can relate this to

my academic thesis. Continuity of experiences or rather interactions and studying other authors work

helped me to proceed ahead and not take an U-turn in the said field of study. Considering the fact

that video is becoming a game changing application and one of the premier forms of communications

both at a consumer level due to the commoditization and the inherent human element of being at the

‗center of action‘.

Sampling

I started to build a set of department point of contacts with whom I wanted to interact first to

understand their perception in general and their outlook towards the questions I was trying to answer.

Acquiring technical knowhow of the tool (NVivo) was also important in realizing the steps required as

part of Grounded Theory. Sending emails and further telephone follow-ups helped me securing

appointments mostly during non-core business hours to take opinion from people who were involved

in selling and using the technology.

Data Collection

Firstly, I analyzed the existing secondary data found in intranet website while simultaneously building

a list of active participants who could be potential interviewees for my study. Once I read the RFP

(Request for Proposal) and the corporate intranet webpage I had textual information. Jotting down the

notes, extracting customer feedbacks from videos, conducting field surveys of what is that

departments ‗what-is-in-for-me‘ kind of feedback actually aided me to gather as much information I

deemed was enough to write the report. Distance, time zone and restricted viewpoints of some

participants due to confidentiality and unwillingness to share information forced me to adapt to the

situation at hand.


Data Analysis

There was a continuous interaction between data collection and analysis. Coding was really an

exhausting task.

A. Open Coding

The process of coding consists of fracturing, conceptualizing and integrating data to build a theory or

a business case per se. Iterative nature apart from participants background assisted me to go with a

clear head and with a repertoire set of questions before conducting an interview. Jotting down the

notes and extracting them in Nvivo and then coding were the immediate tasks to perform so as to

refine and move ahead in exploration.

B. Derived Concepts

Due to the lack of better vocabulary I preferred to classify all the open codes as Primary Advantages

(Product use-cases), Necessity (Why there was a necessity to think of making and selling the

solution), Economic conditions (external and internal), Customer preferences (the target

benefitted user group in mind ), Success stories, Market Segments that the solution was targeted

towards apart from the secondary advantages that could be realized were some of the classifiers

that I built around the code. I feel a collaborative work with an already expert practitioner could have

helped me to build a better model around the codes and a question of whatever I am doing am I doing

it correctly, Is this what I want were some of the thoughts bothering me during the whole process of

study. However all the process helped me to push beyond the comfort zone.

The whole process helped me to focus on conditions, actions/Interactions and consequences kind of

interplay happening both in the data and the code. Keeping an open mind in the whole coding

process was crucial of not to be biased and pass judgments out of past experience.

What is happening in the data? What patterns are occurring in the data? These two questions helped

in building classifications/abstractions around the data. From an academic perspective GT provides a

set of steps for coding, comparing and classifying which from an outset felt very mechanical but the

flexibility to generate dynamic models or rather the interpretive nature helps to apply this paradigm in

case studies rather than following the probabilistic pattern of testing micro-kind of hypothesis around

a set of fixed parameters. Deconstruction of already existing datasets to build incremental theories

can be achieved by following Grounded Theory. A GT study is very resource and time consuming.

Even though software cannot replace the human strengths of abstracting patterns occurring in data


but certainly helps in complementing human limitations of buffering large data sets. Video as a form of

interaction existed but unavailability of high bandwidth network equipment and optimized

standardized software, interruptive user experience were some of the causes for the lack of its

widespread usage as a form of communication, advertising channel 5-10 years before. The network

and globalization is changing the whole landscape. However innovations on technical, economic and

other front‘s pushes organizations to invest in innovations that help in serving customer demand.

Organizations undertake projects to change the current way of doing things which involves active

involvement of people.

Customers like P&G and other healthcare providers have deployed the solution for better

collaboration. Internally this solution has saved $200 million alone for Cisco and has a great potential

for other global commercial and enterprise customers. In a nutshell, I can conclude that the value

statement is ―Incorporate Cisco Telepresence to improve team collaboration and while doing

good for the environment”.

Fig 15. The Tag Cloud of the primary and secondary datasources.


Moreover, for a 4 hour usage of telepresence usage, and If 15% percent of employees will

avoid travel then the following metrics can give a first level estimate of the savings and the

ROI on the cost incurred. 5% employee travel avoidance is a conservative target and 25% is

too aggressive.

Number of

Employees

Company‘s Global reach

Regional‘s (1-5

locations)

Global(5-10

global locations)

Multinational

(20+ global locations)

0-249

A. 6,115 metric

tons of CO2 will

be avoided in 5

years

B.$ 2.3 mn saved

in travel

C. ROI is 5

months

A. 11,423 metric

tons of CO2 will

be avoided in 5

years

B.$ 4.1 mn saved

in travel

C. ROI is 4

months

A. 18,714 metric tons of

CO2 will be avoided in 5

years

B. $6. 3m saved in

travel

C. ROI is <3 months

250-1499

A. 5,948 metric

tons of CO2 will

be avoided in 5

years

B.$ 2.3 mn saved

in travel

C. ROI is 5

months

A. 21,545 metric

tons of CO2 will

be avoided in 5

years

B.$ 7.3 mn saved

in travel

C. ROI is <3

months



years

B.$ 9.2 mn saved in

travel

C. ROI is <3 months

1500-7499

A. 13, 374 metric

tons of CO2 will

be avoided in 5

A. 46,540 metric

tons of CO2 will

be avoided in 5



years


years

B.$5.1 mn saved

in travel

C. ROI is 5

months

years

B.$ 16 mn saved

in travel

C. ROI is <3

months

B.$ 25 mn saved in

travel

C. ROI is <3 months

7500+ A. 34,138 metric

tons of CO2 will

be avoided in 5

years

B.$13 mn saved

in travel

C. ROI is 5

months

A. 120K metric

tons of CO2 will

be avoided in 5

years

B.$ 41 mn saved

in travel

C. ROI is <3

months

A. 147K metric tons of


years

B.$ 50 mn saved in

travel

C. ROI is <3 months

The above table jotted from http://www.telepresencecalculator.com/Mobile.aspx is to justify

that it is possible to increase comfort while not loosing the personal touch required by

reducing unnecessary travel, save fuel, co-ordinate and collaborate and achieve quick

business results by embracing solid-foolproof technology. When Cisco alone has saved $200

million internally in a year of recession by using technology it can do a lot for other highest

waste-generating companies. Moving ahead let us see some academic literature of past

studies and development in the areas of sustainability market indexes. Further research

extension points which I would propose for future researchers would be company valuations

of clean-tech companies and adoption of the costly sources of energy in the mainstream.


CHAPTER 7: RELATION BETWEEN GREEN PERFORMANCE AND

FINANCIAL PERFORMANCE

Historically stock markets performance has been the indicator for the financial performance of

a publicly-listed company. Stock markets have evolved and new indices are propping which

claim to list sustainable companies, Dow Jones & FTSE being examples. Is there a business

justification for listing a corporate in a newly created market that claims to put more

weightage to the environmental aspect of the business operations?

History of Evolution and academic background

Domini 400 Social Index was the first sustainable index, subsequently Calvert Group (2004),

Dow Jones, E.Capital, Ethibel, FTSE4, Humanix, Jantzi, KLD Analytics, and Vigeo were

added into the list which has grown considerably. Study of the Dow Jones index through the

study conducted by Fowler and Hope (2007) presents interesting perspective on the triple

bottomline objectives for the corporation.

Some researchers classify the climate change issue and the related activities under

corporate social responsibility. In a study done on Indian companies Mishra and Suar (2010)

have found that stock listed firms exhibit creditworthy business practices and better financial

performance than the non-stock-listed firms. They also argue that favorable perception of

managers towards CSR increases both the financial performance (FP) and non financial

performance (NFP) of the firms.

Measurement of Green Performance

According to a virtuous cycle between the environmental performance and market value, a

firm that has more profits will be able to devote more resources to support its environmental

responsibility, and improvement in environmental and social performance will result in better

financial performance (Preston & O‘Bannon, 1997). Lindenberg and Ross (1981) reported

that a firm‘s market value can be expressed as sum of tangible and intangible values.

MV = VI +VT (1)

MV=Market Value; VT =Tangible Value; VI =Intangible Value


Market value is observable but the constituents are not. Konar and Cohen (2000) after

controlling the effect of a number of variables on firm-level financial performance conclude

that poor environmental performance has a significant negative effect on the intangible asset

value done on a sample of companies belonging to S&P 500. Eco-friendly investments, from

individual stocks to mutual funds and Exchange Traded Funds (ETFs) have outperformed the

Dow and S&P 500 (Scott, 2009).

Chen (2001) reported that receiving ISO registration influences abnormal returns. On Taiwan

stock market he had ascertained that the market reacts favorably to both small and large

firms but has no reaction to medium firms in terms of a firm's capital.

Earlier studies trying to correlate the firm‘s environmental performance with firm performance

fall into two categories:-

a. A temporal analysis of financial and environmental analysis

b. Analyzing the effect of environmental performance on the market value of a publicly traded

firm. Alternatively this is called as event-study methodology.

Past temporal studies have reported conflicting results. Spicer (1978) reported positive

correlation between the environmental performance metrics used by Council of Economic

Priorities (CEP) and financial performance in paper and pulp industry. However, Mahapatra

(1984) using larger sample of data and time period concluded just the opposite.

The event study methodology is based on the assumption that the capital market is

sufficiently ―information efficient‖ and is popularly called as the Efficient Market Hypothesis.

Further this hypothesis has weak, semi-strong, and strong versions. One recent burning

example of analyzing through event study is the series of events which happened in British

Petroleum whose market value has been eroded due to the Gulf of Mexico oil spill.

Socially responsible investment is gaining momentum in the investment community.

Responsible investment is a broader concept which involves components of climate focus,

ethical focus and community values-orientation. Derwall et al. (2005) have focused on the

concept of ―eco-efficiency‖ which can be thought as the value a company creates relative to

the waste it generates and have found that Socially Responsible Investment (SRI) produced

superior performance. They conclude that a portfolio with high-ranked eco-efficiency stocks

performed better than a portfolio with a low-ranked eco-efficiency stock.


Fowler and Hope (2007) through their critical review have outlined some questions to ponder

upon. Most studies conducted until then focused on the performance of the socially

responsible mutual funds and had concluded that socially responsible investment vehicles

had either under delivered or haven‘t performed better than the comparable market indices. I

could not perform any original research in this fertile area due to the time-constraints and the

data sources available through Rouen Business School research platform.


CHAPTER 8: CONCLUSION

Sustainability is becoming a mantra of corporate houses. The kind of products or broadly the

world which we had 10 years before now is not the same as the present and it will not be the

same 10 years hence. If the reports on climate change, green house emissions, and

corporate sustainability are synthesized they all predict that we need to change the way the

businesses and household consume energy so that our existence is not endangered. This

would mean a holistic understanding of the role of different agents involved in the process.

The study aims at posing some questions, analyzing the studies conducted by researchers

from different perspectives and presenting a qualitative case study on the approach of an IT

company towards propagating its Green IT agenda, letting the managers believe that making

their organizations more environmental friendly does not necessarily mean increased cost or

decrease their market value, on the contrary it could boost the corporate-image and put more

responsibility on the corporation agents actions and words. This work aims at helping

managers consider the efficacy and questions to ponder when migrating their organizations

to next generation in their people, product and process business practices and just not think

on profitability and creating more waste in the world than the value they are generating

through their operations. The world has witnessed the ecological damage which has occurred

due to the shortcut which might have been undertaken by British Petroleum and the market

value it lost due to ―unreliable unsafe operations‖ so as to achieve some $-savings or cutting-

corners and poor media handling.

Considering the fact that absolute dollar values are driving decision making and performance

management, in the short-term, if a large organization switches to renewable sources then it

would increase the energy bill due to high cost of energy, small organizations and other

growth companies would not have motivation hence, incentives from governments can help

in planning towards the future.

In a nutshell, If we consider the primary objective of a firm is to maximize firm or stockholder

value, subject to a 'good citizen' constraint, wherein attempts are made to minimize or

alleviate social costs, even though the firm may not be under any legal obligation to do so,

the definition of good would be different from firm to firm and from manager to manager.

Firms that are perceived as socially irresponsible could loose customers and profits.

Moreover investors would also avoid buying stocks of these companies and would cease to

exist going ahead.


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sustainable economics

Documents