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April 20, 2022updated 22 Jun 2022 11:52am

Buying power: The role of IT procurement in ESG

IT procurement has the power to make the technology supply chain more transparent and trustworthy.

By Pete Swabey

The emergence of environmental, social and governance (ESG) criteria for assessing an organisation’s impact has prompted boardrooms to think beyond their own operations and consider their supply chains. The environmental and social impact of the IT supply chain is complex, however, and achieving trustworthy transparency will require concerted effort from the IT industry. But by demanding suppliers prove their ESG credentials, IT procurement functions have the power to make it happen.

ESG IT procurement
Labour conditions in electronics factories are among the ESG issues emerging from the IT supply chain. (Photo by gorodenkoff/iStock)

Sustainability is quickly climbing the IT agenda. A survey of 218 European IT leaders by Coeus Consulting found that 90% consider sustainability a “core IT objective”. And for the majority of those (47% of the total sample), this is a recent change.

This has coincided with a growing acknowledgement that an organisation’s impact on society and the environment stretches beyond its operations. In particular, ‘net zero’ commitments have focused attention on ‘Scope 3’ emissions, which derive from an organisation’s suppliers, customers and employees and can account for as much as 70% of its carbon footprint.

The social and environmental impact of the IT products and services that organisations buy, and the companies they buy from, will have a significant bearing on their own ESG profile. IT procurement, therefore, has an important role to play in achieving sustainability objectives.

Coeus Consulting’s survey suggests that IT leaders acknowledge this but have yet to act on it: only 13% say that IT sustainability is a core part of their procurement process now, with the majority describing it as ‘moderately important’ or ‘a nice to have’. But 45% believe it will be key in three years’ time.

In Tech Monitor's Tech Leaders Agenda survey for 2021, only 39% of respondents had included sustainability requirements in their procurement process.

This is a missed opportunity, says Graeme Trevayne, managing consultant at Coeus Consulting. IT procurement is "an area where it's very easy to display your ESG credentials, because you force your suppliers to do all the work for you," he says. "But it's also an area where we think there's huge room for improvement."

ESG and IT procurement: cutting carbon emissions

Cutting carbon emissions is arguably the most urgent IT sustainability objective. The carbon footprint of enterprise IT is forecast to grow 20% between 2023 and 2025, according to an estimate by IT services provider Capgemini, reaching the equivalent of 463 million passenger vehicles' annual emissions.

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Twenty per cent of these emissions will be produced during IT equipment's manufacture, and the remaining 80% during its use, according to Capgemini's analysis. Procurement has a role in reducing both, by selecting equipment that is energy efficient and suppliers whose manufacturing processes - and supply chains - are sustainable too.  

The City of London Corporation, the governing body for London's Square Mile financial district, is one of many organisations to have committed to reduce its emissions to 'net zero'. "Our target is net zero by 2027 for all our operations, and by 2040 across the full value chain," explains Sean Green, director of digital, information and technology. "That includes our suppliers [and] all institutions operating in the Square Mile."

This objective is reflected in all the corporation's procurement tenders, including for IT equipment and services, and potential suppliers are assessed according to their own net zero plans.

It is currently up to suppliers to determine how they demonstrate their net zero credentials, but Green says the corporation plans to mandate compliance with the ISO 14000 family of environmental standards, which it applies to its own operations. "Increasingly we would be looking to build in those ISO standards into the prerequisites for our suppliers," he says.

To achieve its goal of net zero for its entire value chain by 2040, however, the City Corporation will need to somehow assess the environmental footprint of its suppliers' suppliers, Green acknowledges.

Currently, this is hard to do accurately, says Clare Hobby, director of purchaser engagement at TCO Development, which provides sustainability accreditation for IT products. "There's a need for more visibility and transparency deep into the supply chain right now," she says.

There are a number of certification schemes and eco-labels, Hobby says, but many depend on self-reporting by manufacturers. "One of the challenges with all of this work is how do you quantify emissions in a validated way? How can you really be sure?"

That said, Hobby explains, it is important that perfection does not become the enemy of good. "Like all things in sustainability, it's a work in progress. We shouldn't wait until we have the perfect solution." IT buyers should "get started with something, but always be asking the question: how can we move towards greater assurance and transparency about what's going on in the supply chain?"

Meanwhile, she adds, "one of the best things you can do to reduce your footprint is use your current products longer".

ESG and IT procurement: tech's social impact

The emergence of the ESG framework has brought overdue attention to organisations' social impact, says Hobby, and some IT buyers are beginning to think beyond purely environmental factors.

A recent IT services tender by the City of London Corporation, for example, included a requirement for suppliers to demonstrate their investment in social value. This contributed 10% to each supplier's score during selection.

The City Corporation was looking for a commitment to addressing socio-economic inequality within the Square Mile and in the London boroughs in which it operates academy schools, which include some of the most deprived areas in the country.

The supplier that won the IT services contract operates apprenticeships, workshops and mentorship schemes to support digital skills and social mobility within these communities, Green explains.

The negative social impact of the IT supply chain is only beginning to be understood. Emerging issues include the use of chemicals to clean devices before sale, says Hobby. To be TCO Certified, manufacturers must only use cleaning chemicals from TCO Development's Accepted Chemical List, which are deemed safe by the Green Screen certification scheme.

Another area of concern is working hours. During seasonal peaks of demand for electronic equipment, unscrupulous manufacturers often force employees to work more than 60 hours a week. "When you exceed 60 hours, you come up against all kinds of worker safety and productivity issues," Hobby explains. "Buyers need to be aware of issues such as forced overtime."

The power of IT procurement

Providing IT buyers with trustworthy information needed to make sustainable procurement decisions will require a concerted effort by the IT industry.

So far, not all vendors are being proactive.  "We've been involved in some strategic sourcing projects recently where we've put ESG requirements into the tenders," says Trevayne. "The responses have been varied, to say the least."

But IT buyers have the power to make it happen, says Hobby. "We've been doing this for 30 years, but it is now, when procurement is starting to raise its voice, that things are starting to happen," she explains. "There has to be a business case for the IT industry to do this."

"What we're telling the buying community is the power is in your hands," Hobby adds. "You have the budgets, you have the ESG requirements from your top management or regulatory requirements to address this issue. But if you don't raise your voice, you're not driving progress."

More on ESG and IT

Cybersecurity an ESG concern for investors but businesses hold back on transparency

The tech industry’s progress on carbon emissions has been mixed

Neurodiversity offers tech leaders an ESG opportunity

Can ESG investment change Big Tech?

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