Conceptual Model of Enterprise Information Systems ...

Conceptual Model of Enterprise Information Systems Innovation Impact on Sustainability Josef Basl, Alena Buchalcevova, Libor Gala 1

Prague University of Economics, W. Churchill Sq.4, 130 67 Prague, Czech Republic [email protected], [email protected], [email protected]

Abstract. The ICT innovations still have a significant potential for enterprise development and for its market position and further growth. New technology (e.g. grafen), new business models (e.g. cloud computing) and new information systems functionality (based for instance on the internet social networks like facebook or twitter) can be good example of current development of enterprise information systems. There is more and more clear that innovations of enterprise information systems are not only oriented on the economic aspects but on the environmental and social ones. These all aspects are known under the term „sustainability“ and the majority of ICT products and services has to react on it. The development and support of these trends, known also as “green ICT”, should be integrated in the strategic documents at the international, national and enterprise level. This paper deals with the description of the conceptual model of information systems innovation impact on sustainability assessment and it is the result of the research grant of the Czech Grant Agency GA CR P403/11/1899 Keywords: Enterprise information systems, ICT innovation, sustainability, green ICT, conceptual model

1 Introduction 1.1 Limited resource orientation The ICT innovations have become crucial for enterprise development and competitiveness since early 90’s. At the beginning, the competitive advantage for enterprises had mainly a form of ERP systems that were oriented mostly on the data integration with a resource-based orientation.(Johansson, Neman, 2010). The further development even more emphasized the importance of significant role of the ICT technologies, especially internet. The solutions like CRM or social CRM are the examples of the current trends based on the ICT aiming at better communication and decision support. The main goals of the enterprise information system (EIS) innovation have also changed or rather progressed for the last two decades. If the first step of the EIS innovations were oriented mostly on economic contributions, the next steps have brought orientation on the ecological and social aspects of ICT innovation. The EIS

innovations are now a part of sustainability. These new formulated resource-based enterprise information system solutions can help to deal with the tasks originally formulated already in 70’s by the Club of Rome. Their ideas could be considered as the first formulation of limited sources of the Earth. Although the conclusions of the Club of Rome were not filled up completely, the idea of limited sources has become recently more important. For example, OECD reports stated (OECD, 2010) that if current trends continue, by 2050, the global population is expected to have grown by 30% to around 9 billion. But it does not concern only the amount of the actual growth of inhabitants. The important fact is that the main growth is expected in developing and emerging economies where people will legitimately aspire to the welfare and consumption levels of developed countries. 1.2 Resource efficient trends Resource efficient trends have been reflected by many strategic documents on the national and international level. One of them is new strategy of the European Union till 2020 (EU Strategy, 2020). It alluded to the evolution that we have seen in recent decades, intensive use of the world's resources puts pressure on our planet and threatens the security of supply. The strategy pointed out that continuing our current patterns of resource use is not an option. In response to these changes, increasing resource efficiency will be the key to securing growth and jobs for Europe. Like many other documents, this one also looks optimistic for the future. There is an expectation that will bring major economic opportunities, improve productivity, drive down costs and boost competitiveness. The resource-efficient Europe formulated in Europe 2020 Strategy is one of seven flagship initiatives as a part of the Europe 2020 strategy aiming at delivering smart, sustainable and inclusive growth. It focuses on the creation of a framework for policies to support the shift towards a resource-efficient and low-carbon economy. To achieve a resource-efficient Europe, the technological improvement is needed. There are some specific areas of interest for this improvement like transition in energy, industrial, agricultural and transport systems. The ICT plays naturally in this strategy a significant role. The primary level for contributions of ICT products and services is situated at the enterprise level. Higher performance of companies and the emphasis on increasing the role of ICT in innovation have brought the economic growth with more products and services for more people. On the one hand, it has caused higher living standard in developed countries. But on the other hand, this growth has also its reverse side. It causes new higher demand for more sources. Furthermore it is very often followed by higher amount of waste. 1.2 Role of ICT in sustainable trends ICT sector has a significant influence on the effectiveness and competiveness of enterprises and generally on the whole society. ICT sector is generally understood like a “key enabler” of the economic growth but it is also consider as an important factor of sustainable “green growth”. Nowadays, the innovation of ICT is more and more

used in this way. The originally usage of ICT in enterprise for the “manufacturing resource optimization” (in a form of ERP system) is now spread about optimizing of “all resources” with ecological and social aspects. “Green” behavior of the ICT itself is not less important. But ICT is not influencing the enterprises, society and households. The ICT sector to be able to offer its products and services itself needs relatively huge amount of energy. ICT sector depends heavily on energy, the most of which comes from nonrenewable resources such as fossil fuel. ICT can improve environmental sustainability and contribute to greener trends in a number of ways. Heavily used ICT equipment includes data centres, servers, PCs and printers. Many companies have therefore dramatically reduced power consumption by adopting efficient ICT technologies, efficient processors and virtualization of equipments. There are some examples to illustrate this situation. The energy consumption of ICT is really enormous. It is expected that information technology (IT) industry for example accounts for approximately 2% of global carbon dioxide (CO2) emissions (Gartner 2007; Marwah et al. 2009b). About 75% of the ecological footprint comes from the use of ICT products and 25% embodied carbon in ICT products. The embodied carbon is emitted during extraction, manufacture, distribution and operation of IT products. The ICT carbon emission is estimated to grow at 6% each year until 2020 (The Climate Group 2008). This current growth in energy consumption and carbon emission puts ICT industry in an unsustainable condition. The ICT industry needs to proactively consider life cycle analysis of its products and innovate to reduce environmental impact. ICT organizations have started to take environmental sustainability as a part of corporate social responsibility. In the ICT sector, sustainability could be achieved by better management of the ICT products and accessories to use less energy, and hence emit less carbon. ICT companies can manage their retired computers and other electronic products by handing over to others for reuse instead of holding them in storage. They should find environment-friendly way to recycle PCs, cell phones and other electronics. The sustainable paradigm shift is based not only on new technologies like ICT. The changes are not imaginable without the changes of behavior of producers and consumers of ICT. The ICT is really bringing about a fundamental shift in economic and social lives. It has already changed the way how producers and consumers interactively communicate. This communication is more interactive and multifaceted. It means that a consumer is active participant and not only passive recipient of products and services. Last but not least, the change of rules and metrics of effectiveness of ICT innovation in enterprises is important. All changes should be systematically integrated in all strategic documents. It is important that it is not only on enterprise level but also on the international and national level. Ehen speaks about the enterprise level from both sides – suppliers and consumers of this process are understood.

2 Conceptual model of information systems innovation impact on sustainability

It is very crucial for an enterprise to innovate continuously and to analyze all trends on the market. The analyses of strategic documents, reports and other relevant documents with appropriate context are also significant. To do it in an optimal way, the authors of this contribution have therefore created conceptual model of influence of ICT on sustainability. The model is based on the principles of sustainability, ICT impacts and “green” features.

2.1 Sustainability as a concept Sustainability and sustainable development are very frequent used terms and they have become also one of the modern buzzwords. There are more definitions and one of the most cited was presented already in 1987 in the Report of the World Commission on Environment and Development under the name Our Common Future: „Development that meets the needs of the present without compromising the ability of future generations to meet their own needs“(WCED, 1987). Sustainable development has two basic levels – macro and micro level. The influence of external factors of technology, market and legal conditions on the one hand and societal, culture and environmental on the other hand have the impact on three basic sustainability pillars – economic, ecological and social.

Figure 1 Corporate sustainability and its interdependences (Baumgartner, 2010)

The sustainable trends should in some way balance and bring complex and long term decision making at the micro-level as well. Sustainable development both at macro-level and micro-level is therefore urgent and information and communication technologies play a key role in addressing these challenges. As the technological and market trends are usually better known, the emphasis in the approach applied by the authors of this paper has been put on the legal aspects on the macro-level. 2.2 ICT impacts on sustainability The second very important set of influence represents the technological impacts of ICT. ICT products and services can have generally both positive and negative impacts on the environment. OECD defines for this purpose a framework of three analytical levels: direct, enabling and systemic impacts (Figure 2). (OECD, 2010)

Figure 2 ICT impacts on sustainability (OECD, 2010) Based on the OECD document the main features of the impacts are following: Direct impacts of ICTs on the environment refer to positive and negative impacts due to the physical existence of ICT products (goods and services) and related processes. The sources of the direct environmental impacts of ICT products are ICT producers and final consumers and users of ICTs. Enabling impacts of ICTs arises from ICT applications that reduce environmental impacts across economic and social activities. ICTs affect how other products are designed, produced, consumed, used and disposed of. This makes the production and consumption more resource efficient. Potential negative effects need to be factored in, when assessing “net” environmental impacts, such as greater use of energy by ICTenabled systems compared to conventional systems.

Systemic impacts of ICTs and their application on the environment are those involving behavioral change and other non-technological factors. Systemic impacts include the intended and unintended consequences of wide application of green ICTs. The life cycle of ICT products and services is another important principle of proposed conceptual model. 2.3 Green ICT key features As it was already mentioned the information and communication technologies are the key enabler of “green growth” in all sectors of the economy. The importance of understanding the links between ICT and environmental issues is widely acknowledged especially in the management of sustainable resources. The term “green ICT” is used for ICT with better environmental performance. Sometimes the term “green IS” is also used. Although some authors use both terms as synonyms, there is a difference between them. Watson et al for example explains the key difference between “green ICT” and “green IS” in the following way. The first one is concerned with the usage of ICT equipment with energy efficiency goals. The second one refers to “the design and implementation of IS that contribute to sustainable business processes” (Watson et al 2008). Finally complementary feature of the bellow proposed conceptual model is based on the shift to sustainable business process demands the alignment of business with sustainability goals. It applied the specifications done by Dyllick and Hockerts in 2002, cited by (Watson et al 2010), claiming three sustainability goals co-exist: ecoefficiency, eco-equity, and eco-effectiveness:   

eco-efficiency concerns with satisfying human needs through progressive reduction of ecological footprints, eco-equity refers to the equity of all nations and generations in the access to natural resources. It implies planned and concerted actions for availability of resources for future generations and developing countries, eco-effectiveness is the most promising goal. It means doing the right thing, i.e. making the choices that make possible long-term prosperity and environmental sustainability. It requires a shift in societal values and business models to transform our current economy.

2.4 Conceptual model of enterprise information systems innovation supporting sustainability The above selected approaches are the basis of an integrated conceptual model of enterprise information systems innovation with influence on sustainability. Its main features come out from all three above mentioned concepts (e.g. sustainability, ICT impacts and green ICT specific approaches). The model integrates economical, ecological and social aspects and direct, enabling and systems ICT impacts.

It is important that such evaluation based on such conceptual model belongs to the era of technology assessment with following features: “systematic, complex and multi criteria evaluation of intended, prepared or projected technological solution incl. their impacts in time and space. It means the evaluation with the prognostic orientation” (Tondl, 1994). In other words the limits of the current knowledge of individual aspect and causality have to be considered in evaluation process, event. in a formulation of conclusions. The elaborated conceptual model is described on the figure 3.

Figure 3 Conceptual model This model is suitable platform for evaluation. Based on this model, it is possible to evaluate whether intentions and recommendations of business or national strategy cover all necessary aspects. The model has been already partly applied on the above mentioned EU documents like “Europe 2020 strategy” or “A Green Knowledge Economy” (EU Report, 2011). These documents have a strong emphasis on sustainability, ecological aspects of information system innovation and their impact on sustainability. They reflect the significant role of ICT in society and the emphasis is also given to specific meaning for enterprises, esp. small and middle sized enterprises (SME).

2.5 Application of conceptual model on strategic documents in the Czech Republic The most representative strategic document in this area in the Czech Republic is “The national framework of competitiveness strategy” (National Economic Committee, 2011) prepared by National Economic Committee of the Czech government in March 2011. This document is after a longer time important strategy for the Czech Republic. It covers all questions related to the competitiveness and formulates specific areas like institutions, education, labor market, market development and potential of technology and innovation. The last topic is for the role of ICT innovation and their sustainable impact the most important. The area of technological preparation covers not only information and communication but bio-, nano- and space technology as well. The ICT innovation reflects mostly the service paradigm in this document. The topic of contribution of ICT to sustainability and environmental aspects is mentioned in the introduction mainly. It emphasizes the ICT influence on sustainability. The “Digital agenda for Europe” is mentioned and factors like tendency to products and services with less resource demand, saving energy in buildings and networks are presented like examples. The report describes also the role of ICT like the tool given the information about CO2 foot print of enterprises. Main role of ICT in this document is understood during the modeling, analysis and monitoring of energetic profile of buildings and vehicles, cities and regions. The enterprises are understood not separately and exclusively (like in similar European documents) but they are like a segment within the wide context. It is also interesting that the topic of the SME is in the document of strategy mentioned rarely, only ten times, and there are only two real recommendations. There is only one direct recommendation towards sustainability. It is interesting because of another currently running large support of ICT innovation in SME in the Czech Republic in a period 2007-2013. The SME’s have significant support of investment (approx. 100 mil. €) from the ESF funds (European Social Funds) for their ICT innovation since 2007. The special program running under the Ministry of Trade and Industry till 2013 gives them opportunity of ERP II (ERP, SCM, CRM, BI etc) innovation for example.

3 Conclusions and Future Work The following work will be oriented on the analysis how the movement towards sustainability is followed by “demand” and “supply” sides. The designed conceptual model will be the basis for the main research questions oriented on the current green ICT penetration in the Czech enterprises. The survey is a part of the project “Sustainability support of SME based on ICT innovations” planned for 2011-2013 and financed by the Czech Grant Agency.

The first year is oriented on the analysis of the “demand side” – it means the analysis of the understanding and usage of ICT innovation in implementation sustainable principles. The next part of the research during the first year will analyze available case studies events and available best practices showing the ICT innovation application in SMEs.

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