At the heart of the innovation economy are software companies, whose total market value is expected to exceed $450 billion in 2013, according to DataMonitor – Abstract from Global Software Industry Guide. Software providers have grown to be amongst the largest and most competitive private sector organizations; the United States alone is home to over 45 software companies with annual revenues of over $1 billion. Many of these companies are at the forefront of integrating environmental considerations into operations while innovating for a more sustainable world.
The world’s largest software and IT companies have good reason to take sustainability seriously: 1) they must respond to the close scrutiny of the public and 2) they stand to benefit from new markets for their products that enable a greener world. However, a company does not need $40 billion in annual revenue to play in this space. Many software players in what we define as the top middle market, with $1 to 10 billion top lines, have built robust programs aligned with their corporate missions.
During the month of March, our team studied the drivers of sustainability and environmental initiatives at leading companies in this top middle market. To do so, we researched current industry best practices, drew on our own professional experiences, and interviewed leading IT companies in the top middle market with strong environmental platforms: Adobe Systems, Autodesk, Juniper Networks, and Teradata Corporation.
Our conversations focused on:
- Primary drivers of sustainability at software companies;
- Most relevant environmental issues for the industry to collectively address; and
- Advice and practices which industry peers just starting to develop environmental strategies should consider.
We found growing customer and shareholder expectations, emerging market opportunities, and cost savings to be the most common practical drivers behind environmental initiatives amongst these companies.
“In 2008 our executive team began to receive questions from customers about Teradata’s environmental initiatives and how our company was managing sustainability as a company,” shared Alan Lord, Sustainability Program Manager for Teradata and survey respondent of increasing customer demands, “sharing values around sustainability with our clients strengthens important relationships and helps us to win RFPs”.
With regard to new market opportunities, Lynelle Preston Cameron of Autodesk told us that “Autodesk’s corporate vision is to imagine, design, and create a better world. Our environmental initiatives, from providing software to clean technology innovators to developing design tools such as the Eco Materials Adviser, support a transition to a more sustainable world. They also help to grow Autodesk’s top line revenue.”
Mike Bangs of Adobe Systems spoke to cost saving as a driver of environmental programs, “Adobe began seriously considering our energy footprint during the California energy crisis in the year 2000. We began with simple things like turning off excess lighting and easily hit an initial energy saving target of 10%. Over time we increased this focus on efficiency and have realized significant savings with very little investment.”
The participants also offered an array of advice to peer companies just beginning to consider sustainability and the environment. These recommendations ranged from taking a close look at your corporate mission to engaging customers and shareholders about their concerns to finding some cost saving “quick wins.”
“Start with a materiality assessment,” said Autodesk’s Cameron, “look at impacts across your operations to determine where you should take action. More broadly, you should also ask why you are undertaking these activities. Is it reputation? Employees? A belief in a better future? The why cannot be underestimated.”
Brad Minnis, Senior Director Environmental, Health, Safety, and Security at Juniper Networks suggested a more outward-facing first step, “Speak with your customers and shareholders to learn about how they consider this issue. As for action items, start with little things which demonstrate that you can save money through environmental initiatives and build from there.”
With regard to when software providers should start developing sustainability initiatives, Adobe’s Mike Bang’s made an excellent point, “Don’t wait for a mandate, just do it!”
The findings from this study are explored in detail in a complimentary Malk Sustainability Partners white paper available online here.
Zach Goldman is a Partner with Malk Sustainability Partners (MSP), a specialty management consultancy that guides businesses to leverage resource and environmental management to maximize earnings and build winning brands. More about MSP’s work in the information technology sector can be found online at www.malksp.com/industries/sustainable-ict.