When it comes to sustainability, chief financial officers (CFOs) are in a tough, but influential, position.
According to IBM’s Institute of Business Value 2022 CEO Study on sustainability — “Own Your Impact” — more than 80% of CEOs say sustainability investments will drive better business results in the next five years. Yet more than half of the 3,000 CEOs surveyed ranked “unclear economic benefits” as the biggest blocker to achieving their objectives.
For CFOs, bridging this “intention-action gap” between vision and real-world initiatives is a worthy and winnable challenge, despite how divided C-suite leaders can be on priorities. “An organization can say it cares about air quality and oceans, but the hard step is operationalizing the idea of sustainability at scale across an enterprise,” says Karl Haller, a retail industry expert for IBM Consulting.
With pressure to demonstrate progress from board members, investors, regulators and customers alike, CFOs are uniquely positioned to clear a path for the C-suite to prioritize investments and allocate resources in ways that align with business goals. In doing so, CFOs can become trailblazers for their peers, delivering on sustainability metrics and demonstrating ROI. “When you combine sustainability performance with financial outcome and operational improvement . . . that’s when you switch the mindset,” says Jane Cheung, an IBM global research leader specializing in consumer industries.
But where do you start? Do either of these scenarios sound familiar?
Your company manages a data center and leaves applications running that are only being used periodically, wasting energy and money. As described in the blog post — “Are Your Data Centers Keeping You from Sustainability?” — imagine driving your car to work, parking it in the parking lot and then leaving it running all day long just because you might step out for lunch at some point. You wouldn’t do that. And yet we do the equivalent of that in our data centers. Data centers account for 1% of the world’s electricity use and are one of the fastest-growing global consumers of electricity. And most every data center in the world is dramatically overprovisioned.
Your company manages a public cloud environment or hybrid cloud estate and can’t match application demand with supply in real-time. As described in the blog post – “Mastering Cloud Cost Optimization: The Principles” – it’s the seventh of the month and you, the CFO, received another large cloud bill — higher than the last one and higher than budgeted for. “The truth is that while the promise of cloud is that you only pay for what you use, the reality is that you pay for what you provision,” writes Asena Hertz, VP, Product Marketing at Turbonomic.
Automate this for sustainability and cost savings
There’s a practical first step CFOs can take on the road to greater sustainability and cost savings: get IT to consume less. Reducing (if not eliminating) resource waste in your company’s IT environment – without giving up performance – is the aim. In a world where our applications are our business, maintaining performance is key to maintaining a competitive advantage. Now, it’s also a path to carbon neutrality and green computing. In other words, let application performance drive cloud cost optimization, sustainability and green data centers.
But optimizing cloud and data center resources can be hard, especially as applications and the environments they run on become more complex and distributed. This is where application resource management (ARM) becomes so critical. Companies need to be able to continuously analyze every layer of resource utilization to ensure applications get what they need to perform, when they need it — debunking any misconceptions that overprovisioning assures application performance.
Beyond efficiency: Sustainability as a profit driver
Profit — that’s the goal of sustainability investments that work to reshape critical business functions, from how it develops products to the types of services it provides. For CFOs, this isn’t hyperbole. The “Own Your Impact” study shows that CEOs who implement “transformational” sustainability strategies achieve higher profit margins than those who don’t — up to 8% more. IBV research even shows purpose-driven consumers are willing to pay a premium on sustainable products — up to 70% more.
But the digital transformation that underlies these opportunities can be a multi-year journey, which often competes with focus on short-term returns. The key, then, is incremental, thoughtful transformation backed by technologies that exponentially increase capabilities.
For CFOs at organizations whose Environmental, Social and Governance (ESG) performance is already compliant with industry and regulatory standards, the goal is focus on operational improvements, which inherently demonstrate ROI. Technologies like application resource management make organizations more efficient through the orchestration and automation of apps, workloads, resources and infrastructure across platforms.
IBM Turbonomic: Cut infrastructure spend by 33%, reduce data center refresh costs by 75% and get back 30% of your engineering time with smarter resource management.
To learn about more practical approaches to transformational sustainability, read the 2022 CEO Study: “Own Your Impact”