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Calculating ROI for Green IT

Many IT companies are beginning to factor traditional ROI metrics into their green business strategies.

By Paul Korzeniowski

In order to differentiate themselves from competitors, computer and network equipment makers have been touting the greenness of their products. A few ingenious vendors are poised to take it one step further and tie greenness into the company balance sheet.

On the bottom of its Web page, Apple lists half a dozen key corporate components, including Hot News and Job Opportunities. Standing squarely among those items is a hyperlink dubbed Environment where the company pats itself on the back for the all of the steps it has taken to be an environmentally responsible consumer goods manufacturer.

Apple isn't alone; a confluence of events is forcing corporations to start similar initiatives and make like claims. Like the highway system, the nation's energy system is aging, and no one is sure how to update it. The environment has become a hotly debated topic during the presidential primaries. Talk about future environmental problems has intensified in the past few years. Most important, there seems to be growing support for environmental issues among consumers, and wherever consumers go, vendors naturally follow.

Greening Products
To date, most of the vendor initiatives have centered on ways that suppliers can make their products more environmentally friendly. D-Link has been selling D-Link Green network switches, which feature a few such features. The products detect when a computer is turned off, go into standby mode, and conserve energy. The vendor also claims that its device alters power usage requirements based on the length of an Ethernet cable (the longer the connection, the more power is needed), another step to reducing energy consumption. IBM has proclaimed that its BladeCenter and System x servers reduce energy usage and associated CO2 emissions because they feature low-voltage microprocessor technologies from AMD and Intel and energy-smart flash-based storage systems. Print cartridge suppliers, such as Hewlett-Packard and Lexmark, have undertaken massive recycling programs so their products don't fill up landfills.

The industry may eventually take another step: tying a product's greenness into the vendor's greenness, its bottom line. iLinc, a Web conferencing supplier, has been touting the reduction in carbon emissions that customers receive when they use its Web conferencing system. In fact, the company has developed the iLinc Green Meter that calculates the carbon emissions savings for each attendee and the organization overall.

The numbers are based on a mathematical algorithm that detects the locations of the people that attend a Web conference via IP address and measures the distance between the meeting participants and the meeting leader. The software then calculates the distance traveled that is eliminated and measures the amount of CO2 saved by using the Web conference. The program recognizes what means of travel would commonly be used for the distance (such as car, small aircraft, large aircraft, etc.) and keeps a running tab of the CO2 savings and its associated environmental and financial costs.

A Corporate Priority: CO2
CO2 reductions have become an emerging corporate issue. Currently, much of the U.S. energy comes from coal. The country consumes 1 billion pounds of coal per year, and by 2030, the U.S. coal-fired capacity may increase by as much as 120 GW, which will dramatically increase the nation's carbon dioxide emissions. Some scientists contend that U.S. companies have perhaps 40 years to reduce drastically their greenhouse gas emissions below current levels or face catastrophic consequences.

Consequently, pressure to reduce CO2 emissions is increasing on a few fronts. In fact, foreign governments, such as Switzerland, have started to tax various fossil fuels. The idea is higher taxes will lead to higher prices and force companies to seek out alternatives. There has been a slow but steady drumbeat for support of similar initiatives in other countries. Many pundits expect those proposals to not only take root from country to country but also work their way down to the corporate level. The U.S. government will have a couple of options for instituting such programs that will affect small and medium businesses. It could tax enterprises that do not meet certain emission standards. Another possibility is providing tax breaks to corporations that reduce their pollution.

So eventually, CO2 emissions may be become a tangible company asset, like desks, computers, and manufacturing plants. In addition to Web conferencing and purchasing more energy efficient products, IT has other ways to help their companies burn less fossil fuel -- for instance, telecommuting reduces employee driving time and therefore cuts down on pollution.

Many of these changes and much of the thinking about adding a green component to traditional ROI metrics is in a nascent stage. However, it is an area that some vendors have decided to use to help build their business and therefore is something that small and medium-sized businesses will be hearing more about.

Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.

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