Forrester Report: An Action Plan For Greener IT Procurement

Prepared For Dell March 31, 2009

An Action Plan For Greener IT Procurement A commissioned study conducted by Forrester Consulting on behalf of Dell

An Action Plan For Greening IT Procurement

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Table Of Contents Executive Summary ...............................................................................................................................3

Introduction .............................................................................................................................................4

Study Background And Methodology................................................................................................5

The Case For Greener IT Procurement ................................................................................................5

Green Procurement Standards Should Be A Centerpiece Of Green IT Initiatives..........................6

IT Procurement Professionals Should Lead, Not Follow..................................................................6

Defining And Using Green IT Procurement Criteria..............................................................................7

Defining The Green Criteria...............................................................................................................7

Using The Green Criteria.................................................................................................................14

How To Put Green Procurement Criteria Into Action..........................................................................15

Conclusion ............................................................................................................................................16

© 2009, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com.


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Executive Summary Enterprise IT organizations are going green. Companies are finding that they can save money, streamline operations, and improve their environmental posture by applying sustainability and efficiency principles to their IT operations and infrastructure. This study is devoted to helping IT organizations improve one of their cornerstone processes — IT procurement; this will be a significant point of leverage for companies looking to improve the sustainability of their computing infrastructures.

IT procurement professionals are seeking guidance and best practices to assess the eco-friendliness of both equipment and suppliers as they develop and implement green IT strategies. Buyers struggle with this in part because there are no standard metrics and decision criteria that enable IT organizations to assess the green credentials of IT vendors. Dell commissioned Forrester Consulting to research and analyze the state of green IT procurement, with a particular focus on the criteria used to evaluate suppliers’ overall sustainability policies and practices. The goal was for Forrester to create a comprehensive set of evaluation criteria that buyer organizations could use to add such a supplier evaluation to their RFPs and vendor selection methodology.

IT procurement professionals must translate corporate-level sustainability objectives into their procurement strategy, in particular into a well-structured request-for-proposal (RFP) document. Procurement will supplement the quantifiable product measures, such as energy efficiency and asset disposal, featured in today’s RFPs with new questions and requirements about suppliers’ manufacturing processes, supply chains, and design-for-environment programs. The RFP document and process initially provides a framework for discussion and ultimately allows buyers to judge the suitability of vendors’ practices. We recommend specific criteria in five categories:

1. Corporate environmental governance. These criteria are designed to illuminate a tech vendor’s overall commitment to sustainability by examining its goals and the broad processes it has in place for measuring and reporting progress toward those goals.

2. Corporate operations. These criteria focus on how aggressively a supplier is tackling the environmental impact of its own internal facilities and operations.

3. Supply chain. This includes a couple of crucial criteria that examine how a vendor is managing the environmental practices of its suppliers.

4. Stakeholder engagement. These criteria look at how proactive and participatory a vendor’s environmental programs are. They ask about a company’s engagement with important stakeholders, including customers, employees, and the rest of the IT industry.

5. Design for environment. This section focuses on how the supplier translates its sustainability practices into the products and services that it delivers to customers.

Once criteria are defined and weighted, and vendors are scored according to the depth and rigor of their sustainability practices, procurement organizations face the challenge of incorporating those green criteria and vendor comparisons into their mainstream procurement process. The process that leading procurement practitioners are using is as follows:


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• Create a separate category for green criteria. If vendors’ environmental characteristics are lumped together with other supplier information like finances or diversity, they cannot be separately weighted or credibly judged.

• Educate employees on green procurement. Companies often find that they must educate their own procurement and IT people on the “how” and “why” of evaluating vendors on criteria that go beyond the traditional yardsticks of price, availability, and vendor viability. Often, vendors have standardized responses to RFP questions, and buyers need to know how to get underneath the boilerplate.

• Engage and encourage suppliers. Once firmly established in the RFP process, green criteria should become a measuring stick to hold suppliers to. Today, companies are finding that vendors are all too often unprepared to meaningfully respond to their requests for information about their sustainability practices.

• Identify and resolve tradeoffs. The most obvious tradeoff that firms run into is paying more for greener products and services. Companies need methodologies to look beyond the initial purchase price and toward a total life-cycle cost that includes factors like energy usage and equipment recycling. That way, the return on incremental investment can be calculated to see, for example, how long it would take to recoup the price premium on a highly energy-efficient server.

• Identify suppliers that are advantaged or disadvantaged. Ultimately, the sustainability criteria must be used to disqualify suppliers that cannot or will not improve their performance to meet standards. Very few procurement organizations are at this point today, but several told us that they would be using green procurement standards to create a “blacklist” of suppliers that would not be able to bid on new contracts until their environmental performance and reporting improved.

Incorporating sustainable supplier criteria into an organization’s procurement process is critical to the success of a green IT initiative. It embodies a sourcing strategy that balances cost and value alongside sustainability, and it provides a structured framework at both the pre-contract and post-contract phases of supplier engagements. Companies that incorporate such rigorous criteria will find their IT infrastructure rapidly becomes greener, and, more importantly, that they are influencing the actions of their IT suppliers to design and manufacture more sustainable computing systems.

Introduction Enterprise IT organizations are going green. Companies are finding that they can save money, streamline operations, and improve their environmental posture by applying sustainability and efficiency principles to their IT operations and infrastructure.

In its early years, the IT industry’s green conversation was dominated by introducing energy efficiency into the data center. Data centers got the lion’s share of the attention due to their highly visible “energy hog” status — and, for many companies, because of the relatively quick-win nature of many activities that could reduce data centers’ appetite and energy wastefulness.

Now the conversation is broadening to include IT infrastructure outside the data center, as well as some of the fundamental processes and activities that underpin the operation of the entire IT organization. This study is devoted to one of those processes — IT procurement; this will be a significant point of leverage for companies looking to improve the sustainability of their computing infrastructures.


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Study Background And Methodology IT procurement professionals struggle with a lack of standards and definitions for green computing products, services, and suppliers. As they move from evaluating the green characteristics of IT products to selecting IT vendors that align with their corporate sustainability policies, IT procurement professionals are seeking guidance and best practices to assess the eco-friendliness of both equipment and suppliers as they develop and implement green IT strategies. In part, buyers’ difficulties stem from a lack of standard metrics and decision criteria that enable IT organizations to assess the green credentials of IT vendors.

In the winter of 2008, Dell commissioned Forrester Consulting to research and analyze the state of green IT procurement, with a particular focus on the criteria used to evaluate suppliers’ overall sustainability policies and practices. The goal was for Forrester to create a comprehensive set of evaluation criteria that buyer organizations could use to add such a supplier evaluation to their RFPs and vendor selection methodology.

Forrester took a holistic approach to researching this topic. We drew upon our two years of extensive research in green IT, which includes more than 35 publications from six analysts, hundreds of client inquiries, and more than 250 vendor briefings on green IT hardware, software, and services offerings. We conducted 30 in-depth interviews with industry consortia, environmental NGOs, and a cross-section of internal stakeholders at Dell. We also held a set of interviews with enterprise-class user organizations in North America and Europe; please note that these user companies were not identified or selected by Dell and are not necessarily Dell customers. Forrester spoke with IT practitioners at these organizations to understand if and how they are incorporating green criteria into their evaluations and selections of IT systems and IT suppliers.

The Case For Greener IT Procurement Green IT policies and practices are becoming entrenched in most corporate IT organizations around the world. And despite the current economic recession, Forrester believes we are past the point of no return for corporate sustainability practices in general and green IT in particular. Two principal motivators will drive continued adoption of green IT:

1. Customer demand. The most powerful force for most companies adopting sustainability practices in IT and other operations is that their customers are increasingly expecting them to behave in a more environmentally responsible manner. Beyond regulators, investors, or their own employees, customer expectations have an extremely powerful influence on company behavior. And as customer preferences tilt toward greener suppliers, so will company policies and behaviors move in that direction.

“Our customers have green on their maps, so we want to be able to tell them that we are demanding our suppliers be green as well. It is not a show-stopper, yet, but we know that our clients are looking to us to be green.” (Global financial services organization)

“We will impose on our suppliers the same kind of green requirements that our customers are putting on us. We want our suppliers to be at the same level of ‘goodness’ as we are.” (Global defense manufacturer)

2. Cost savings. Companies are increasingly recognizing that green IT can be lean IT as well. Through infrastructure consolidation, power management, and hardware energy efficiency, among other efforts, IT organizations can simultaneously improve their environmental posture and their cost structure. This is particularly true for companies that can blend IT’s capital expenses with their ongoing energy costs.


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“Our IT organization is going green without any additional budget.” [Non-profit organization]

Green Procurement Standards Should Be A Centerpiece Of Green IT Initiatives Executives are implementing sustainable business strategies across their companies in an effort to become greener. While corporate drivers for sustainability vary, many green agendas are focused on reducing the carbon footprint, introducing energy efficiency and energy savings into the company, and using green strategies to improve their brand image and to differentiate themselves. Such corporate moves on sustainability influence IT strategy, changing the way organizations source and deploy IT systems and processes. It is certainly not the IT sourcing team’s job to set the sustainability agenda, but sourcing executives must understand the business drivers so that they know how to respond when called on to help implement a firm’s sustainability strategy.

IT procurement professionals must translate those corporate-level objectives into the procurement strategy, in particular into a well-structured request-for-proposal (RFP) document. Procurement will supplement quantifiable product measures, such as energy efficiency and asset disposal, featured in today’s RFPs with new questions and requirements about suppliers’ manufacturing processes, supply chains, and design-for-environment programs. The RFP document and process provides a framework for discussion and gives vendors insight into how seriously the buyer takes its green agenda.

Incorporating sustainable supplier criteria into the RFP is critical to supporting a green IT initiative. It embodies a sourcing strategy that balances cost and value alongside sustainability and provides a structured framework at both the pre-contract and post-contract phases of supplier engagements.

Companies should expect two outcomes from a greener IT procurement and supplier evaluation process:

1. Improvement in infrastructure. Given the fast rollover of many types of IT hardware, putting greener procurement standards in place will show results fast. Most large companies refresh their PC hardware on a 30- to 35-month cycle, even faster for data center gear like x86 servers.

2. Improvement in supplier behavior. IT suppliers pay careful attention to customer requirements as embodied in RFPs. Many are tracking the presence of green criteria in customer requests and are working to anticipate those requirements in the design, manufacturing, and marketing of their products and services.

IT Procurement Professionals Should Lead, Not Follow While IT procurement operates within the context of overall corporate sustainability goals, procurement should take a lead role in operationalizing those goals and highlight their ability to contribute to the company’s ability to meet its mandates. As such, it is imperative that IT procurement professionals take a leadership stance in efforts to green their company by:

• Understanding who and what drives sustainability. This will ensure that procurement’s contribution to the overall strategy will align best with stakeholder expectations.

“We have top-level engagement with our executives; green procurement is in our policies and strategic plan.” (Large government organization)


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• Translating corporate objectives into IT objectives. Work with the rest of the IT leadership to define IT’s role in achieving corporate sustainability goals. Greener IT infrastructure and operations will be a start, but there will also be initiatives outside of IT where technology systems and software can be enablers for other business processes to become greener.

“We work with our experts on environmental issues so we can ‘do what we preach,’ but sometimes it gets complicated because of budget issues. We get pressure to incorporate green into our procurement faster, but we get no extra budget for green.” (Non-profit organization)

• Establishing the importance of suppliers’ environmental commitments. Any firm’s sustainability objectives and policies have to extend out to its customers and back through its supply chain. For manufacturing firms in particular, the environmental footprint of the supply chain will be two to four times as large as the company’s internal operations footprint. This puts procurement, sourcing, and vendor selection in a high-leverage position to directly influence a company’s environmental progress.

“We already look at suppliers’ financials, quality processes — environmental practices are another set of criteria that we will add, looking at the whole supplier as part of our value chain.” (Global defense manufacturer)

• Lending RFP expertise throughout the organization. Help others define, quantify, and translate their green operations strategies into a well-structured RFP and vendor selection process. Help them further by making clear the limitations of the RFP process and how this needs to be followed up with appropriate goals and tactics in the negotiation and contract management phases of a vendor engagement.

Defining And Using Green IT Procurement Criteria The centerpiece of green IT procurement is using a set of criteria to define and measure the sustainability practices of current and prospective suppliers. We have leaned toward the comprehensive and the rigorous in creating this set of criteria, and it can look like a daunting exercise in data collection. Most of the questions here, however, can be answered unambiguously by the suppliers themselves, either in direct conversation or by exploring their Web sites and sustainability reports. Other sources for verification and second opinions are identified on page 14.

Defining The Green Criteria The figures that follow define the criteria that Forrester considers most important for buyers to incorporate into their vendor evaluation and selection process. They are divided into five major categories (see Figure 1):


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Figure 1: Green criteria are divided into five major categories

Source: A commissioned study conducted by Forrester Consulting on behalf of Dell, March 2009.

1. Corporate environmental governance. These criteria are designed to illuminate a tech vendor’s overall commitment to sustainability by examining its goals and the broad processes it has in place for measuring and reporting progress toward those goals (see Figure 2).

2. Corporate operations. These criteria focus on how aggressively a supplier is tackling the environmental impact of its own internal facilities and operations (see Figure 3).

3. Supply chain. This includes a couple of crucial criteria that examine how a vendor is managing the environmental practices of its suppliers (see Figure 4).

4. Stakeholder engagement. These criteria look at how proactive and participatory a vendor’s environmental programs are. They ask about a company’s engagement with important stakeholders, including customers, employees, and the rest of the IT industry (see Figure 5).

5. Design for environment. This section focuses on how the supplier translates its sustainability practices into the products and services that it delivers to customers (see Figure 6).


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Figure 2: Corporate environmental governance criteria



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Figure 3: Corporate operations criteria



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Figure 4: Supply chain criteria



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Figure 5: Stakeholder engagement criteria



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Figure 6: Design for environment criteria



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Using The Green Criteria Every company will use these criteria differently depending on their procurement process and the depth of integration between procurement and corporate sustainability objectives. Forrester recommends that companies use the following steps to put these criteria into action:

1. Select the best-fit criteria. Choose the ones that fit best with your company’s environmental policies and goals — and that you can readily incorporate into your overall procurement process.

2. Weight the criteria to reflect your priorities. We have included default weightings to use as a starting point, but it was abundantly clear in our customer interviews that procurement professionals have very different ideas about what’s important to their organization. So, you should modify the weightings (including setting some weightings to zero where appropriate) to reflect supplier characteristics that are most important to your company and to reflect the nature of the suppliers that your firm is considering. For example, if you are purchasing IT services instead of products, you should reweight criteria like “toxic materials reduction” and “packaging reduction” to zero.

3. Use the criteria as guidelines for supplier engagement. Incorporating these green criteria into the vendor selection process and into RFP documents will give IT buyers the tools to engage with their existing and prospective suppliers in new dimensions. They can be used as a catalyst for deeper engagement with suppliers and as guidelines for discussion about characteristics of the supplier that have not previously been part of a qualification or selection process.

4. Determine how a vendor performs. In order to enable IT procurement groups to score their vendors, we have included scoring guidelines that quantify the depth of the suppliers’ activities and commitments to more sustainable operations, supply chain, and product characteristics. In performing such a vendor scoring exercise, buyers will tap into several important sources of information:

• Supplier questionnaire and interview. Use the criteria and scoring guidelines in direct conversation with current and prospective IT suppliers. Gather responses directly from the vendors through interviews or questionnaires.

• Supplier reports. A tech vendor’s sustainability report will typically contain a comprehensive discussion, complete with statistics, of many of the criteria. Buyers should supplement the report with information from a vendor’s Web site and product marketing collateral.

• Government and NGO agencies. Organizations like the US EPA, US Green Building Council, the European Union’s Environment directorate, as well as business watchdogs like CERES and Greenpeace (among others), are useful sources for independent ratings and opinions about tech suppliers’ environmental activities.

• Industry consortia. Tap information from IT industry consortia like the Green Grid, Climate Savers Computing, and the Global e-Sustainability Initiative (GeSI) for additional illumination of suppliers’ activities.


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How To Put Green Procurement Criteria Into Action Companies that have put green procurement in place are slowly increasing the rigor and weighting of those criteria within their broader vendor evaluation and selection process. A vendor’s green characteristics will never displace fundamental decision criteria like product or service quality, availability, and, of course, price. However, we heard time and again in our customer interviews that the relative importance of IT vendors’ sustainability practices will surely increase over time.

The process that leading procurement practitioners are using is as follows:

• Create a separate category for green criteria. If vendors’ environmental characteristics are lumped together with other supplier information like finances or diversity, they cannot be separately weighted or credibly judged.

“We are about to define green vendor standards that will influence our procurement. IT vendors must satisfy these requirements before they can be approved. They will need to educate themselves on what our corporate standards will be.” (Large government organization)

“Today, we have criteria like product energy efficiency, but we are going to look at the fuller spectrum of a company’s practices, not just the products. We will ask how well a potential supplier’s green policies and practices align with our own. Our goal is to incorporate these criteria in the first quarter of this year.” (Global defense manufacturer)

“Our focus so far is only looking at products. But we have starting reporting on GRI, and so we will be looking deeper at our suppliers’ policies and at their supply chains.” (Global software and technical services organization)

• Educate employees on green procurement. Companies often find that they must educate their own procurement and IT people on the “how” and “why” of evaluating vendors on criteria that go beyond the traditional yardsticks of price, availability, and vendor viability. Often, vendors have standardized responses to RFP questions, and buyers need to know how to get underneath the boilerplate.

• Engage and encourage suppliers. Once firmly established in the RFP process, green criteria should become a measuring stick to hold suppliers to. Today, companies are finding that vendors are all too often unprepared to meaningfully respond to their requests for information about their sustainability practices.

“Our approach is to engage and encourage suppliers to improve their performance via an escalation process.” (Large government organization)

“If our suppliers can’t do it, we want to help them do it. We are willing to take on education and engagement with our large suppliers. We do it already with things like Six Sigma, diversity, and ethics; now we adding environmental metrics.” (Global defense manufacturer)

“Vendors are not articulating the sustainability pitch well. They may have green initiatives, but they are sending out uneducated people. Don’t just tell me you recycle your


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newspapers; talk about product design and supply base with some serious analysis about measuring and reporting.” (Global retail and manufacturing organization)

• Identify and resolve tradeoffs. The most obvious tradeoff that firms run into is paying more for greener products and services. Companies need methodologies to look beyond initial purchase price and toward a total life-cycle cost that includes factors like energy usage and equipment recycling. That way, the return on incremental investment can be calculated to see, for example, how long it would take to recoup the price premium on a highly energy-efficient server.

“In competitive tendering, our purchasing group is prejudiced to focus on price and not other benefits. We just went through a process of buying more expensive printers with power saving and duplex; until we can take a long-term, TCO view, it’s difficult to demonstrate those benefits.” (Global retail and manufacturing organization)

“We spend a lot of time evaluating life-cycle cost. We will pay an upfront premium for products — like LCD monitors — where we see a longer lifetime, lower energy costs, and a better user experience.” (Global software and technical services organization)

“We look at products from a total cost of ownership perspective, and we will pay a small premium upfront to get a more sustainable product.” (Large business services organization)

• Identify suppliers that are advantaged or disadvantaged. Ultimately, the sustainability criteria must be used to disqualify suppliers that cannot or will not improve their performance to meet standards. Very few procurement organizations are at this point today, but several told us that they would be using green procurement standards to create a “blacklist” of suppliers that would not be able to bid on new contracts until their environmental performance and reporting improved.

“Our vendor supply base is getting notice that [green] is important. Starting next year, we will let them know where they need to improve and where they are doing well. And in two years, we will start letting [suppliers] go.” (Global retail and manufacturing organization)

“We are a long way from complete standards of measurement, but I am far more inclined to do business with a company that makes an effort on the green issues.” (Global retail and manufacturing organization)

Conclusion Incorporating sustainable supplier criteria into an organization’s IT procurement process is critical to the success of green IT initiatives. Such an approach creates a sourcing strategy that balances cost and value alongside sustainability, and it provides a structured framework for supplier engagement. Companies that incorporate such rigorous criteria will find that their IT infrastructure rapidly becomes greener, and, more importantly, that they are influencing the actions of their IT suppliers and the industry at large toward the design and manufacture of more sustainable computing systems.

Forrester Report: An Action Plan For Greener IT Procurement

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