IT Sourcing Must Embrace Sustainability for Environmental Impact
Environmental sustainability has rapidly become a top priority for CEOs around the world. To achieve sustainability objectives, a shared responsibility approach is required, with both organizations and vendors playing responsible roles. The sourcing function, which links these two contributors, plays a crucial role in achieving environmental outcomes.
While organizations can act internally on sustainability, they often face limitations due to their vendors’ priorities and capabilities in supporting decarbonization goals. However, by selecting sustainable vendors, products, and services that align with their sustainability requirements, sourcing can have a significant impact on environmental outcomes.
IT sourcing leaders cannot afford to be bystanders when it comes to environmental sustainability. As IT continues to drive an increase in energy consumption, including through generative AI, sustainability must be embedded in every IT sourcing decision. By setting clear but demanding requirements, sourcing leaders can direct the IT industry towards a sustainable trajectory.
The enterprise value equation is no longer just about technology, cost, and output; sustainability has become a fourth vector of value optimization. Therefore, evaluating the environmental practices of technology and service providers is now imperative.
Greenwashing, the practice of making unsubstantiated or misleading claims about being environmentally friendly, is currently widespread. IT sourcing leaders must ask difficult questions and demand transparency from prospective vendors. For example, cloud service providers should power their data centers and digital infrastructure with renewable energy to accelerate the transition to an environmentally sustainable economy. Software publishers should take responsibility for efficient design and asset utilization, while hardware vendors should produce durable, repairable, and upgradable equipment to enable a circular economy.
Incorporating a preselection process dedicated to environmental sustainability can eliminate vendors that do not comply with an organization’s standards. Meaningful criteria that contribute to beneficial outcomes, such as greenhouse gas emissions, renewable energy, asset utilization, energy efficiency, responsible water management, and circularity, should be assessed during the preselection process.
IT sourcing leaders must take on new responsibilities to demonstrate sustainable supply and ensure that vendors meet expectations. Partnering with vendors that follow a durable, circular, and renewable model and practicing responsible consumption management is essential. Trustworthy data and performance reporting should support each vendor’s execution of sustainability principles, enabling further reporting downstream.
Sourcing and comparing sustainability performance information can be challenging. Vendors often articulate audacious goals, but actual action may be limited, and reports on progress may be incomplete or dominated by marketing phrases. It is crucial to pursue specific details from vendors to obtain sufficient and consistent sustainability data.
Adapting the sourcing approach to include a prequalification and down selection mechanism can help comprehensively evaluate the environmental sustainability practices of prospective vendors. A detailed questionnaire that elicits measurable and comparable responses can ensure consistent assessment of vendors’ maturity and performance levels.
Sustainability is a shared responsibility. While organizations take responsibility for their internal sustainable consumption of IT resources, the role of IT suppliers in a sustainable future is significant and must be incorporated into the selection process. By embedding environmental sustainability in decision-making, IT sourcing can set organizations on a path to sustainability from procurement through contracting and vendor performance management.