companies for sustainability? IBM and Intel as case study. Introduction. In 2020 it is expected that number of connected devices will increase up to 50 billion, ...
What drives processor manufacturing companies for sustainability? IBM and Intel as case study Introduction In 2020 it is expected that number of connected devices will increase up to 50 billion, which is even more that total world’s population. This big bang of electronic devices will create unimaginable changes in our life, while Information and Communication Technologies (ICT) are expected to grow even further in exponential manner and it was estimated that consist of ~8.7% of World’s GDP by 2020 (Webb 2008). Although ICT enhance our living standards however, it also indicates how we interact with each other and the environment. Report by time magazine (Walsh 2015) states that: “Our computers and smartphones might seems clean, but the digital economy uses a tenth of the world's electricity”, which puts a heavy load on grid-stations and may invoke grid instability. Not this entire chunk of energy is from renewable and so digital world contributing a lot in the GHG emissions. Apart from its operations, computers and smart phones pose severe environmental problems during its manufacturing and end disposal. Reacting to these challenging trends, the aim of this article is to focus on manufacturing of processor: which is a major part of every electronic device, to provide greater understanding of how processor manufacturers or semiconductor design and marketing (SDM) industries are reflecting sustainability. In this article we answer the vigorous research question that why SDM industries adopt green strategy? This article not only categorizes motivations but also identify the primary factor/s involved to adopt ecological initiatives. Understanding the motivation for green SDM industries not only helps to mitigate environmental risks but also improve economic growth which is important for people, environment and eventually for a company in a long run (Mines 2008). This article will also support to develop organizational theories towards ‘Green-computing’ which is one of important research area under green ICT. The research finding will indeed help to find solutions of potential challenges industry is facing due to unsustainable production and consumption patterns. This article will also helpful for computer manufacturers i.e Dell,
HP, and Lenovo or i-Phone manufacturers i.e. apple, to choose among big giants of processor manufacturers in terms of ‘ECO-ness’, and finally it will help end user to differentiate the ‘Green computers’ having high performance and less consumption of energy from battery. We will analyze IBM and Intel as case study to predict motivations of sustainability of this SDM industry. Concept of sustainability is not new; it was first discussed in 1987 after the report of Brundland commission. Since then this concept is reshaping, especially from last two decade, social scientists are working to define motives for sustainability. Before moving on into detail; by looking at bigger picture that why sustainability is required? In 2007, we consume energy which is equivalent to 1.5 planets and in 2030 it is expected that this world will require the capacity equals to twice of this Earth (“WWF Endangered Species Conservation” 2016; “Zoological Society of London (ZSL) - UK Zoos & Animal Conservation” 2016; “Global Footprint Network-ANNUAL REPORT” 2014). Even with financial instability, annual CO2 emissions have increased up to ~4.5%; in 2008 it was 29.3 Giga Ton and in 2010 it was 30.6 Giga Ton (Reference). These potential warnings indicate that our current energy production and consumption practices are, by far, unsustainable. A lot research theory has been proposed and adopted which generally applies to all corporate industries and few discuss specifically the broad field of Information and Communication Technologies (ICT), but none of the articles discuss motivational factors for semiconductor design and marketing (SDM) Industry explicitly. Hence this article fills the gap in literature by explaining drives of sustainability for these industries, which is important because attributes and influencing factors of this industry are different than other corporate industries. As mentioned by (McWilliams and Siegel 2001) that there is an optimal level of Eco-Friendly behavior for every industry which depends on number of factors which includes, “size, level of diversification, research and development, advertising, government sales, consumer income, labor market conditions, and stage in the industry life cycle.” The process of motivation towards sustainability is not very open, as it includes public interest in long run and private interest a short run. Motivation towards sustainability is also influenced by the ongoing debate of academic researchers and industrialists between business and environment. Corporate ethics and social responsibility are embedded in this debate of sustainability which makes this even more complex to comprehend. Therefore understand sustainable behavior of corporates; we need to analyze few definitions which consistently pronounced in literature: Corporate Social Responsiveness (CSR), Stakeholders and Corporate Citizenship (CC).
Corporate Social Responsiveness (CSR): Corporate social responsibility (CSR) dates back to 1950 but first notion of CSR was heard in 70’s when social scientists start a debate on sustainable environment. Vast literature has attempted to draw out this relations between social, environment and economic performance, but we are beginning with very famous definition, which is widely accepted and pursued in literature, given by Carroll in 1979 (Carroll 1979). According to Carroll the any corporation has four major responsibilities: a) economic responsibility b) Legal responsibility c) Ethical responsibility d) ‘philanthropic’ responsibility. This can be shown by a chart below in Fig.1
Fig.1. Defining Corporate social Responsibility (Carroll 1979) As depicted in figure.1 that two of the responsibilities economical and legal responsibilities are compulsory, while other two ethical and philanthropic are not compulsory for a corporation. Economical responsibility is simply to earn profit and legal responsibility is to abide by the laws, which are either government’s laws, social or religious laws. The other two ethical and philanthropic responsibilities essentially differentiate a company in terms of their sustainable behavior. Ethical responsibilities, which are also expected, oblige to voluntary do what is right, even when it is not legally bound to do so. Ethical values are much on debate side as it varies with market location and type of business and customer’s intellectual level. Lastly which is unexpected from capitalistic businesses is ‘philanthropic’ responsibility, includes such activities which are “anticipated” by local society i.e. putting resources to develop education, health-care systems and involve in recreational or cultural events. It also includes donations to NGO’s and local charity organization. Philanthropic practices are unexpected
as mentioned before, but it is necessary, as mentioned by (Wood 1991) that society and business relation is “intertwined rather than being distinct entities”. Stake-holders: Defining Stake-holder assists us to better understand the concept of sustainability and also helps to functionally operate CSR. Stakeholder theory first put forward by (Freeman 1984) where author observe potential groups in a society and examines the relationship of corporation with these groups. Freeman considers share-holders and investors as major stake-holder. With the development of new business strategies, (Evan and Freeman, 1993) said stake-holders are groups, which are harmed or get potential benefit from the corporation or their rights may affected directly or indirectly. Definition of stake holder is disputed as some authors considers environment also as stake-holders (Mitchell, Agle, and Wood 1997; Lenssen et al. 2007) but other deny this by saying that this will give us some unclear results (Gibson 2012). Corporate Citizenship (CC): This is relatively new term appeared in literature in early 2000 followed by definitions of stakeholder and corporate social responsibility respectively. Why this new definition was needed because previously defined terms are more focused on one sided responsibility of corporation while ‘citizenship’, as name reflects, highlight the role of society in return. Corporate citizenship emphases on all members of the society, protecting their rights and enlightened responsibilities which mutually interweaved (Waddell 2000). This moderate definition suits Multinational corporations (MNC) and therefore the term ‘corporate citizenship’ repeatedly used in their press releases. After defining CSR, stakeholder theory and CC, now we will examine the attributes to evaluate social responsibility. For SDM industries we will also analyze and discuss sustainability in three major spheres:
Manufacturing: This includes recycled or bio-degradable products and packaging, use of renewable materials.
Operation: The most important domain of sustainability for processor, where energy efficiency is required without compromising performance or speed.
Disposal: Lastly reductions in pollution by reuse or dispose the semiconductor properly.
Standard attributes of CSR differ with location as explained by (Matten and Moon 2008) because of firm’s nature, financial situations and political scenarios and also depends on the cultural, labor and education and systems. But all researcher are appears to have consensus regarding the three major
attributes of corporate sustainability in terms of financial feasibility, social equity, and environmental integrity. Measuring ECO behavior for industries is also controversial, some social scientist believe that it can measure from competitiveness and will of managers while some researchers focus on tangible things which gives a definite idea sustainable behavior (Gibson 2012). (Kolk and Lenfant 2009) emphasize the third party monitoring to precisely observe sustainable practices. Measuring and monitoring methods of sustainable practices are highly important as hypothesis and predictions are based on this but our main focus is on motivations to sustainable practices, where quite a bit research has already done.
Prior Research Corporate social responsiveness and sustainable behaviour can only be realistically understood from theoretical angles. A large theoretical literature has yet been established and growing in this area of social science. Critical part of this research is to combine these theories, which generally applied to all industries and using a combine framework to analyse SDM industry specifically, which come under the umbrella of broad field of ICT. The combined framework will push us toward answers of our research question, and prevent us from unnecessary research insights We will first focus on well-known theories which can generally applied on all corporations and then summarize some most cited relevant articles of ICT industries, with respect to date of publication. Prior to 2000, four major motivations towards sustainability was mentioned in literature ( for example, Atlas and Florida 1997) 1)Legislation 2)Stakeholder-pressure 3)Economic opportunities 4)Ethical motives. While Bansal and Roth in 2000, (Bansal and Roth 2000) proposed a very famous framework, by conducting a survey of 53 corporate industries, which includes 1) Competiveness 2) Legitimation 3) Ecoresponsibility. Competiveness has highest priority in order while Eco-responsibility has least priority. This means competition in market rather than care for environment is motivation towards sustainability. Later on in 2001, (Florida, Atlas, and Cline 2001) argue that Organizational factors i.e. innovation, resource, and monitoring of sustainable practices are most important driving forces for Green practices compared to geographic factors, for instance local governmental policies, which has minor influence on organization.
It is worth to mention here that factors involved for a given motivation mentioned above also differ with industry, for instance competiveness; Lau et.al (R.S.M. Lau 2002) studied computer and electronics firms and disclosed by a survey that high quality and low production cost in parallel with innovation are completive factors for this industry. Similarly (Tilling 2004) highlight the factors of legislations, which force a company to implement sustainable practices. Factors include are governmental legislation, religious and social legislation. Subsequently in 2006, (Husted and Allen 2006) conduct a survey on Multi-National Corporations (MNC) in Mexico and suggest that institutional pressures, rather than social and stakeholders pressure is guiding decision-making for sustainability. (Williamson, Lynch-Wood, and Ramsay 2006) argue on the basis of their study on Small and Medium Enterprises (SME’s) that business performance and regulation are the primary motivation for pro-environmental behavior.(Harmon and Auseklis 2009) did a inclusive literature review for sustainable IT and propose a framework based on this research saying that for a IT company, cost, awareness of sustainability, electricity security, governmental laws and trademarks are the motivates for green computing. Motivational factors given by (Dangelico and Pujari 2010) based on a survey has three motivations for sustainability legitimacy, responsiveness and competiveness. The priority order differ from (Bansal and Roth 2000) as for Roth at.al competiveness is most influencing factor for sustainability. (Zhang and Liang 2012) argue that recent notions of business ecosystem are drivers of innovation in ICT. (Curry, Sheridan, and Guyon 2012) analysis propose four drivers of sustainability for ICT industry. First and most important is to align business goals with sustainability objectives. Secondly propose and set strong business case as benchmark for Sustainability. Third comes for administration; give incentives to employees for Green-change in organizational culture. Fourth motivation factor is peculiar with their research: make a sustainable IT office for socializing. In a study done by (Williams and Schaefer 2013) reveals that, at administrative level, most distinguished motivation to involve with environment and prevent CO2 emission are personal values and beliefs. Organization support to sustainable practices, in parallel with manager’s commitment, is also required. (Gattiker and Carter 2010; David E. Cantor et al. 2013) (Blackstam and Clofsson 2013) provide a comprehensive framework based on research to date, in a research thesis says that companies adopt environmental certification because:
Internal benefits (organizational, financial and people benefits)
External benefits (commercial benefits, environmental benefits and Communication benefits)
Pressure and regulatory elements(regulatory pressure, market pressure and community pressure)
Theoretical structure prepared by (Yang, Li, and Tan 2013) after surveying chinses/Singapore companies, provide a summary of drivers in sustainability: a)Align company goals with sustainable goals b)optimizing operation costs c)Institutional pressure especially from government d)Corporate social responsibility of a company. (Hamid Moini, Olav J. Sorensen, and Eva Szuchy-Kristiansen 2014) proves a hypothesis by surveying Dutch companies that importance of documenting and implementing sustainable practices, is the key factor towards sustainable behavior of a company . (Sharma and Dey 2014) study concludes that green ICT ingenuities are determined more by economic factors compared to legislative factors. After analyzing literature regarding motivation to sustainability, we can instantly observe two major groups of researchers: some consider external drivers i.e. pressures from stakeholders (Kassinis and Vafeas2006), more influential for sustainability, while others (Aragón-Correa and Sharma 2003) accept internal drivers i.e. personal beliefs, as basic motivators for Eco-friendly behavior. In this section we will combine them to make a comprehensive framework which will cover all factors of motivation to sustainability. As observed from the literature review that for every motivational, either internal or external, there are few associated factors. The collective framework with factors involved in it is shown in Figure.2 below. In combined framework we gave priority to some factors which may differ with the priority of some frameworks mentioned earlier. Factors of internal or Organizational motivation not only includes the policies and monitoring but also includes the size of company (Baumann-Pauly et al. 2013). For instance Small and Medium scale Entrepreneurs (SME) are practically more sustainable compared to MultiNational Corporations (MNC), while MNC are efficient in external announcement and monitoring and publishing their Eco-Behavior. Factors involve for given motivation is not consistent in literature, for instance some authors considers environment also as stake-holders (Mitchell, Agle, and Wood 1997; Lenssen et al. 2007) but other deny this by saying that this will give us some unclear results (Gibson 2012), so we choose the most recent definition in this field.
Fig.2. Combined Theoretical Framework for Motivation to sustainability in ICT industry
Empirical Web Survey As mentioned above social responsibility secures companies future in long run. Therefore almost ~250 multinational corporations (MNC) globally implement corporate social responsibility (CSR) policies (Hollender 2004). As mentioned by (Stewart Lewis 2003): “Social responsibility has already made its mark on business priorities and communications”. Some companies mention with the old name like corporate social responsibility or Stake-holder management while most of the companies use the new terminology: Corporate Citizenship. It is expected that as globalization increase further, social responsiveness of companies will increase. This is mainly due to ease of communicating and increased costumers awareness by e-media (Hamann and Acutt 2003). This also foster business to markets in other part of world which makes companies even more sensitives about their perception on web. Perhaps this is the only communicating media for outsource companies, to publish their local practices globally (Brønn 2004). In this section we will briefly summarize how IBM and Intel communicate sustainability and social responsiveness through their web pages. Both Multi-National companies has multibillion brand values (Calculated brand value of IBM: 48.5 billion USD, Intel 32.3 billion USD (“Forbes” 2016). As stated before
brand value of a company has direct and indirect relations between their social and business achievements, therefore by performing this survey, we can achieve sufficient overview of SDM industry. We annotate our thought on web based information although, some companies are failed to portrait themselves as socially responsible although they are accomplish the requirements CSR (Stewart Lewis 2003). Reasons may include inefficient web pages and hierarchy of information or missing relative information on web pages. (Lynch and Horton 2004) argue that hierarchy of information reflects the level of interest and so authors suggest for a corporation to put most import and general data first then provided specific and detailed information. To analyze how companies communicate corporate social responsibility and corporate citizenship on web, we will use framework provided by (Moreno and Capriotti 2009) as a tool. Major attributes of this framework are given below: 1. Information regarding CSR/CC 2. Content analysis (mission statement, vision etc.) 3. Content distribution/Hierarchy of information(at which page it appears and at what levels it appears 4. Information regarding stake-holders 5. Open or closed loop of communication (No email, general email or Feedback option) 6. Third party evaluation/Energy star information
Comments and discussion: Every processor manufacturing industry, in general, have recognized for their socially responsible behaviour while each has its own priorities and goals. “IBM is the largest technology and consulting employer in the world, with more than 400,000 employees serving clients in 170 countries”. Primary motivation behind CSR of IBM which is prominently mentioned on its web page is to “aligning social value with in company goals”. This motivation is also part of our integrated proposed framework. In given hierarchy on webpage, IBM has prioritized environment in sustainability domains, followed by economic development, education and health. From IBM’s business policy, it can commonly observe that responsiveness is embedded in core business strategy. In fabrication facility, IBM implement sustainability within organization by monitoring water
and energy usage from thousands of sensors installed on site transmitting real time data of operations, which results in efficient use of water and energy by which IBM has saved 3million USD/year. IBM’s has also initiated a ‘Smarter Planet Program’, which mainly focus on conservation of energy and water waste. It also provides solutions to healthcare, traffic, construction and shelter and food waste. IBM also helps to monitor sustainable practices and suggest solutions like smart grids, which is relatively new and hot topic nowadays. Under Smarter Planet Program, IBM also proposes smart cities where state of technology will be used to optimized energy at every step and reduce and reuse waste. IBM CEO Sam Palmisano is quite excited to expand this programme, as cities are expected to expand with coming years. One of IBM’s report, after conducting survey of 1100 CEO(IBM 2008, p4), emphasis on internal or organizational factors, as mentioned above, for sustainable operations in manufacturing processes in SDM industry. IBM also working in health sector in Ghana and Peru to reduce HIV, IBM also working in Japan by giving grants to a research group working on child cancer(IBM 2014). IBM focus on education system by putting its resources to e-learning, consequently IBM has introduce a virtual tutor for instructor for free of cost named, Watson Teacher Advisor, to enhance the interaction of students and teachers worldwide. Similar to Cisco, IBM has initiated learning programs in different parts of world to reduce gap of potential students and researchers of their core R&D department. Responsiveness of IBM towards social and environment seems to be practical from the annual CSR report, also indicated from the message from CEO: “taking personal responsibility for all of our relationships—with clients, colleagues, partners, investors, and the public at large”, and also by implementation of its core value to all employs in hierarchy, which makes IBM leading organization in corporate citizenship. “Intel is one of the world’s leading chip manufacturers. It fabricates chips for PC, Laptops, smart phones and servers”. Recognizing its social responsibility, Intel declares in its vision statement: ‘enrichment of lives of every person on earth and “to care for our people and planet”, also by saying in its policy statements: “Global climate change is a serious environmental, economic and social challenge that warrants an equally serious response by governments and private sector”. Being socially responsible, Intel’s goal is promote youth education. Intel has also spent 96M USD of its resources having aim to promote technology, and also science and math education at primary level. Although this investment is under philanthropic motivation, Intel is also expecting return from this huge investment in future. On top Intel also devote its technical resources to developing countries to promote
technical education like in Philippines. Setting social goals to have economic benefits, Intel has also initiated programmes to promote local small scale businesses, which benefits both Intel and local communities. Apart from annual report which gave statistics about corporate responsibility, regarding environmental, health, and safety compliance, Intel has provided a lot more information on web regarding activities for sustainable world, which include reduction of carbon foot print and GHG emissions, installation of PV panels, reuse of waste water of Fabs (chip fabrication units), EV charging stations for smart cars, sustainable supply chains and packaging, and lastly most important energy efficiency and optimization. Especially environmental Pledge information given by Intel they clearly mentioned their planes up till 2020, in accordance with EPA and IPCC. Their target is to use 100% green energy in US and invest on green energy in other parts of world, also targets has been set for CO2 emission and carbon foot print including their manufacturing units and also for data centres. Intel has started “Design for the Environment”, mentioned at the top of hierarchy of their web page, “to minimize the environmental impact of our (Intel) products at all phases in their life cycle: development, production, use, and ultimate disposal”. Designing to optimize energy is not only legitimation requirement i.e. Energy star, but also required by customers. We will focus on motivation to these activities, which can be observed from their climate change polices (Intel 2015). Motivational factors for Intel towards sustainability, reflected from polices are summarises below:
Internal factors are dominant as mentioned by the director of Corporate Citizenship (CC), that sustainable practices have been practicing at every level of organization, which shows organisational support to sustainability.
Intel monitors and publishes its own GHG emission reduction progress having benchmarks of IPCC which makes them more responsible and accountable against ecologically. This also makes Intel transparent and credible towards stakeholders
Intel mainly motivated by completion, as seen from pragmatic statement in their policy, “US, china and EU countries are competing to show leadership (towards sustainability) and public commitment process”
Intel also believes that legislation can motivate US based corporations towards sustainability, by endorsing Energy-star regulatory policies to ICT products in US and Energy-Related Product
directives in Europe. Also Intel mention pricing carbon and providing emission reducing incentives are most effective regulatory policies.
On the other hand Intel also supports growth of the renewable energy market, which reflects their belief of opportunity as motivator. Intel believes that “innovation is a key to sustainable future for our planet” having energy efficient system which helps to reduces GHG emissions.
We also observed few discrepancies, one of them is datacentres; which are at bottom of their priority, as we know that data centre highest energy density among ICT and number it is expected that energy demand for Datacentres will overcome the total energy of ICT in future. Another statement we found alarming by saying “We (Intel) believe that climate change is a classic economic externality”, as climate change is not purely economic externality, it also reflects our attitude our priorities towards environment. We found information regarding corporate social responsibility in right order and also enrich in content and statistics. But is this information is easily accessible to user is questionable because on their main web page (“Intel | Data Centre Solutions, IOT, and PC Innovation” 2016) no direct link has been provided to reach CSR information. Regarding to information of stake holders, it is also sufficient and at correct place. Also there is bilateral or closed loop communication is possible because Intel provide feedback form on its web page to report environmental concern.
Conclusion A great deal of attention is needs to pay on implementation. This paper does not articulate actions based on these motivational factors although it is of vital importance because it helps to progress CSR strategies and enable us to achieve business goals with efficient manufacturing practices and cleaner disposal methods. Also these actions regarding sustainability for SDM industry differ from SME’s and several other businesses, because for a single fabrication facility it requires billions of dollars of investment. (Maignan and Ralston 2002) compared the CSR information on websites in USA, UK, France, and Netherlands and also found a lot of discrepancies amongst countries in the amount of CSR information that was conversed and also in the priorities of companies to act socially responsible. (Moreno and Capriotti 2009) concludes the limitation of web based survey as: “This high degree of dispersion means that it is difficult for the public to gain the full picture of CSR/CC/SD, as it is necessary to surf through
many sections of a web site to find information on all of its different aspects.” These remarks are significantly important; as our conducted survey is also net based only so comments and conclusion may not be very precise. In depth analysis in future and by conducting one to one interviews of corporate managers will help to precisely arrange the order of motivation which eventually strongly influences the policies regarding sustainability and act as benchmarks for this growing industry. Both Intel and IBM are comparatively following sustainable practices and communicate well on web. Company’s material available are more actions oriented, though Intel has mentioned few polices for their sustainable practices which reflects the motivations behind action. Therefore in our observation semiconductor design and marketing companies are more opaque towards their policies and practices which may be because they afraid of criticism. To sum up, we suggest some fundamental change with the organizations which are practically possible only if implemented incrementally. Also corporations should revise their core business values and also focus on other domains of society irrespective to their businesses. Standards of sustainability should same indifferent to local conditions, i.e. standards in Israel and Malaysia in case of Intel. Start sustainability Initiatives in ‘Your Own Backyard’ rather than only spending resources to outside world. Lastly both society and corporation need to collaborate by having inter and intra partnerships, in order to achieve economic benefits in a sustainable way (Burke and Bakan 2003). Corporations need to drop EGO and adopt ECO to sustain environment without strongly harm the economic benefits, as no one willing to have business without profit.
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