July 17, 2023
For technology providers not entirely convinced by the need to embrace sustainability in all forms – and those doubts do exist in private conversations – the realisation that the environment is now a defining tender requirement represents the most realistic chance of progress in New Zealand.
This awareness has the potential to move beyond virtue signalling and vendor after vendor competing to express a moral viewpoint on LinkedIn, without truly backing it up.
The cynical will cite this as a sales tactic – simply a commercial strategy. Because any commentator suggesting that the technology industry is doing this for the good of the planet is naive and out of touch. Follow the dollars, stupid.
That said, the why is not important. Motivations are irrelevant if the end result is a commitment to sustainable practices – mandated through request for proposal (RFP) processes.
“In an increasingly cut-throat economic environment, businesses with strong sustainability credentials win contracts and customers,” said Michael Worth, Sustainability and Impact Lead at Grant Thornton New Zealand.
“Sustainability is no longer an optional extra or a warm fuzzy for picky consumers. It’s a business imperative.”
For example, Worth said businesses providing services to government and other agencies within the public sector will already be thinking “hard” about sustainability.
“A few years ago, this category had a small weighting in most RFPs but now that weighting has become a pretty big chunk,” he added.
“Suppliers know they simply can’t win tenders without strong sustainability credentials; they need to be able to demonstrate how they’re positioning their business for long-term sustainability.”
Citing the Kiwi construction industry as a case in point, Worth said simply ticking boxes is no longer enough for organisations – now is the time to tell a story.
“You can’t get away with ‘we bought some forestry offsets last week when we saw the RFP come through’, or you’ll soon lose out on business to another company that’s prepared to make the effort,” he cautioned.
“It’s demonstrating an understanding of the risks and issues throughout the supply chain and taking steps to address them wherever possible.”
According to Worth – drawing on more than 30 years of industry experience – this kind of thinking has become business as usual in the construction sector.
“If they stopped thinking about sustainability, they wouldn’t win any contracts, and they would soon lose out on business to another company that was prepared to make the effort,” he noted.
“Standing still doesn’t cut the mustard either, because procurers expect continual improvement, so the standard keeps rising. It’s the Red Queen effect: ‘We must run as fast as we can, just to stay in place. And if you wish to go anywhere, you must run twice as fast as that’.”
Zero tolerance for headline commitments
According to Gartner, environmental sustainability has become a top 10 business priority for CEOs, demanding aligned environmental performance from all internal and external functions.
“Environmental sustainability directives require all functions to adjust in line,” said Stephen White, Senior Director Analyst at Gartner. “Sourcing, contracting and vendor management must all adapt with urgency by incorporating sustainability rigour into operations and objectives.”
With sustainability now viewed as a competitive differentiator during the vendor and partner selection process, forward-thinking technology providers are enhancing environmental capabilities to remain relevant.
By 2026, 75% of organisations are expected to increase business with IT vendors and partners that have “demonstrable sustainability goals and timelines” and will seek to replace those that do not.
“Organisations with sustainability targets have realised that technology vendors within their ecosystem will have a significant part to play in their success,” White added. “Sustainable sourcing, contracting and performance management are critical to minimise technology’s environmental impacts.”
White advised organisations to avoid being “dazzled” by providers’ headline commitments or greenwashing.
“Instead, review the detail behind headline commitments and validate merit and performance,” he advised.
White warned that the criticality of technology outsourcers with poorly aligned sustainability objectives will be identified by businesses.
“Ultimately, the services of those vendors will be scaled down and new alternatives will be found,” he cautioned. “Moving forward, sustainability will be a driver or fully operationalised in the decision-making process by default.”
As noted by White, organisations will continue to enable sustainable consumption of technology by executing key responsibilities – evaluating vendors, contracted vendor commitments and managing vendors.
Building sustainability credentials
According to Grant Thornton findings, 79% of Kiwi companies are currently implementing sustainable business practices – a statistic considered “commendable” but with “room for improvement”. Many are starting with low hanging fruit such as reduced energy consumption (57%) and travel (49%).
“Using less energy is an absolute no-brainer, because you’ll save money at a time when energy costs are high and rising,” Worth outlined.
“Swap to LEDs, turn everything completely off at night, have more online meetings – once you set yourself up for lower energy use, the savings pile up automatically every month.”
For Worth, this approach is understandable given the advanced ways in which companies can now tackle sustainability beyond simply reducing waste and sorting out recycling.
“And the cost of more sophisticated sustainability practices becomes a barrier,” he added.
This is particularly the case when 64% of respondents are also not optimistic about the outlook for New Zealand’s economy during the next 12 months. In other words, the cost of embracing sustainability can be a barrier when business confidence is low.
“However, the money saved through energy and travel reduction can be invested into next-level sustainability actions,” Worth added.
“This includes reengineering your business to include the use of recycled resources in your products, implementing a product-as-a-service model, or even switching to rail and coastal shipping logistics.”
In New Zealand, funding is also available to supplement such savings irrespective of company size and revenue.
“You no longer need to be turning over tens of millions to get funding; many of the major banks are offering sustainability-linked loans for projects like installing solar panels, buying electric vehicles or planting native trees,” Worth said.
“And if you have a bigger project like swapping a fossil fuel boiler for an electric one, you may be able to access government or local council funding.”
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