Why your CPO is key to the future of the profession

As Procurement continues to take steps towards showing its value to organisations, the role of the Chief Procurement Officer (CPO) is becoming more and more critical to its success…

Why your CPO is key to the future of the profession

The future of procurement was a key focus of the Big Ideas Summit on the 30th of April, and continues to be so as more of the content and Big Ideas are shared across the wider procurement community.

In the past week alone, not one but two procurement experts, Jonathan Betts from Science Warehouse, and Peter Smith of Spend Matters UK, have both hypothesised that procurement will be ‘dead’ or will have ‘disappeared’ by 2030. This doesn’t mean the function will cease to exist entirely, but more that what we currently view as procurement will change to something completely new.

The Chief Procurement Officer

It’s against this backdrop that the CPO comes to the fore. At the head of a function that is constantly reinventing itself (for good or bad, we’ll let you decide), finding the right strategy to lead effectively is a tricky prospect.

To make it trickier still, a CPO can then be faced with numerous individuals, both inside and outside their organisations, second-guessing their moves and strategies. If you’re looking for what a CPO needs, a thick skin is a good place to start!

But it’s not all about the negatives for the CPO. They stand at the head of a developing function and have the power and influence to craft something that will bring value to their organisation. Whether it is in driving down cost or supporting their teams by spending time on professional development, these are other key aspects of the CPO’s role. 

The Challenges

Plenty articles are written about CPOs and the challenges that face them. Additionally, it has become more common for CPOs to be surveyed on what they consider to be the major issues facing them and the function. Since the end of 2014, the following have been highlighted as areas of concern and consideration for CPOs:

As expectations of procurement rise and the overall procurement agenda become wider, a CPO needs to ensure that they have the correct strategies in place, but also plans on how they are going to achieve them. This includes key steps, such as training for teams, but also how they are going to communicate their plans.

Community and Awards

What has become clearer in the past year is that willing communities exist to help CPOs in driving the procurement brand on. Campaigns such as the ‘I am a Procurement Leader’ from Procurement Leaders, which aim to highlight the great work that leaders in the profession are doing also offer a level of support to the senior professionals.

And awards also help to showcase the success stories from the profession that have often gone unnoticed in the past. The CIPS Supply Management Awards highlight best practice, while recognition for individual CPOs helps to set the bar that bit higher.

Last week, Richard Allen, CPO and Executive Director of Enterprise Services at Telstra (Australia), was named CPO of the Year by The Faculty Management Consultants. The annual award helps to highlight the importance of the CPO role in organisations and recognises CPOs who, amongst other things, demonstrate leadership influence within their organisations.

Initiatives such as this one show that the role of procurement is much broader than sourcing or cost saving, but is critical to the wider success of the organisation.

What do you think – can CPOs help to secure the future of the procurement function? Does your CPO deserve some good press for their work? Get in touch with Procurious and make sure you don’t go unheard! 

Meanwhile, here are some of the stories making headlines this week in procurement and supply chain.

Gartner announces rankings of its 2015 Supply Chain Top 25

  • Gartner, Inc. has released the findings from its 11th annual Supply Chain Top 25, identifying global supply chain leaders and highlighting their best practices. Analysts announced the findings from this year’s research at the Gartner Supply Chain Executive Conference.
  • “2015 marks the 11th year of our annual Supply Chain Top 25 ranking,” said Stan Aronow, research vice president at Gartner. “In this edition of the Supply Chain Top 25, we have several longtime leaders with new lessons to share and a number of more recent entrants from the high-tech, consumer products, retail and industrial sectors.”
  • The top five include three from last year — Amazon, McDonald’s and Unilever — one returning leader, Intel, and a newcomer to this elite group, Inditex (see Table 1). Three companies rejoined the list this year after a lengthy hiatus, with L’Oréal at No. 22, Toyota at No. 24 and Home Depot at No. 25. Those familiar with Gartner’s Supply Chain Top 25 may wonder why perennial leaders Apple and P&G are not included on this year’s list.

Read more at Virtual Strategy.com

Cisco Tests ‘Internet of Things’ in its Supply Chain

  • In one of the latest initiatives to get its own supply chain fully wired, Cisco has been installing thousands of sensors in a plant in Malaysia to monitor and reduce energy consumption. Mr. Kern said in an interview with The Wall Street Journal that the team leading the project believes that implementing the system throughout Cisco’s worldwide production sites will help reduce energy consumption by 20 to 30 per cent, translating into tens of millions of dollars in cost savings. “In 60 to 90 days we’re hoping to prove it,” he said.
  • Cisco has been looking at broader supply chains as a part of its efforts to spread the idea of Internet of Things, the term for the web-enabled connections that can allow devices to transmit information about such things as energy consumption or productivity. Cisco’s Consulting Services group, for instance, is working with logistics provider DHL on a project to send real-time data on warehouse operations, for instance.
  • The Malaysia project is a pilot program that is part of a $4 million fund the company established in which employees brainstorm and test projects to make the company more productive. The projects cover a wide range of supply chain issues and are relatively small-scale for a $47 billion company—the energy management project in Malaysia cost less than $700,000—with the understanding that most will fail. But those that succeed can provide innovative solutions and major savings, Mr. Kern said.

Read more at The Wall Street Journal

Europe’s Fast Fashion King clips Carlos Slim to become world’s third-richest person

  • Amancio Ortega, Europe’s richest man, has become the third-richest person in the world, passing Mexico’s Carlos Slim for the second time this year. The founder of Inditex SA, the world’s largest fashion retailer, has increased his fortune to $68 billion. It’s up 79 per cent since March 2012, when the Bloomberg Billionaires Index debuted. Inditex operates more than 6,600 stores under brands that include Zara, Massimo Dutti and Pull&Bear.
  • Sales at the Spanish company have increased 31 per cent since 2012 to $24 billion in the year ended January 2015. Since Inditex’s 2001 initial public offering, Ortega has received more than $3 billion in dividends and has invested the proceeds in commercial properties in major cities across Europe and the U.S.
  • The billionaire’s performance has eclipsed that of the three other richest people on the planet: Slim, and U.S. billionaires Bill Gates and Warren Buffett. Slim’s fortune has declined 1 per cent, to $67.3 billion, since the index debuted while Gates has increased 38 per cent and Buffett 62 per cent. Ortega has added $7 billion to his fortune since Jan. 1, while Buffett, Gates and Slim have lost a combined $8 billion.

Read more at Bloomberg Business

L’Oreal USA tracks lofty sustainability goals in annual report

  • L’Oreal USA, the largest subsidiary of the L’Oreal Group, reduced carbon emissions by 57 per cent last year.
  • The company’s 2014 Progress report, titled Sharing Beauty With All, attributes the reduction to projects put in place last year to cut carbon impact. One of those projects is a new biomass power plant in its Burgos, Spain, factory.
  • The L’Oreal Group sets lofty 2020 targets in the report that work toward its main goal: ensuring 100 per cent of its products have a positive environmental or social benefit. The company is well on its way to meeting that goal, as the report reveals.
  • Here is an overview of the L’Oreal Group’s progress:
    • 67 per cent of new products that have been screened have either an improved environmental or social profile
    • 46 per cent of new or renovated products have a new formula using renewable raw materials that are sustainably sourced or raw material from green chemistry
    • 54 per cent of new or renovated products have an improved environmental profile
    • 17 per cent of new or renovated products have an improved social profile

Read more at Triple Pundit

SMEs plan to spend average of $30,000 on supply chain software in 2015

  • Software Advice, an advisory that matches SCM software buyers and vendors, found small businesses – with revenues of less than $50 million (£31 million) – are preparing to invest an average of $30,000 (£19,000) on commercial supply chain management software this year. Medium size and large firms will spend an average of $171,000 (£109,000) for new software.
  • The research found that 21 per cent of large firms use supply chain management software, 6 per cent of SMEs do so but this is up from 2 per cent in 2013. Software Advice said software manufacturers were increasingly providing smaller businesses with lower cost solutions and subscription-based services.
  • Software Advice said the software was being used to strengthen supply chains, increase transparency and visibility, harmonise data flowing in and out through multiple channels and eliminate manual tasks, data entry or more complex warehousing operations.
  • The report said supply chain management software could streamline the purchasing workflow. “Procurement systems generally offer multi-currency support as well as tools that can automate purchases and purchasing approvals. These systems can also connect users with vast networks of qualified suppliers – a critical capability for supply chain professionals who are trying to identify the most reliable raw materials suppliers at the best price, wherever they might be sourced from.”

Read more at Supply Management

Can social accounting change our supply chains?

Olinga Ta'eed speaking at the Procurious Big Ideas Summit

I’ve said this before, but I think we get the supply chains we deserve.

As consumers we want the cheapest possible clothes, mangos in the middle of winter, low cost technology products and effective cosmetics.

When you couple these consumer preferences with the fact that the major players in our supply chains are ultimately answerable to shareholders whose sole motivation is a dollar return on investment, a level of unscrupulous supply chain behaviour appears inevitable.

We can blame big companies, CEO’s, CPO’s, suppliers or third party contractors all we want, but under the current model, consumers have to take some responsibility for what happens in our supply chains. It’s consumers that drive the competition and at the moment that demand seems to be based around convenience and price over everything else.

Are CSR and profit diametrically opposed?

Reading and writing endless stories on unethical supply chain practices has prompted me to think on these market dynamics a lot and to be completely honest, I struggle to come up with an answer as to how we can integrate social concerns and ethical business practices into a model that is in its very essence, profit driven.

For me, the two seem to be at odds with one another. That’s why I was interested to hear Professor Olinga Ta’eed speak about the importance of social accounting and including social metrics in our company reporting at the Procurious Big Ideas summit two weeks ago.

For a long time I’ve been sceptical about companies’ commitment to CSR and ethical corporate behaviour, they’ve always looked a little fluffy to me. Sure, it looks great on a webpage or in a brochure, but I can’t help but feel the majority (not all) of these initiatives are window dressing for marketing purposes or simply box ticking for the benefit of an audit.

I believe the reason that CSR initiatives have been fluffy for so long is that it is intrinsically difficult to measure something so subjective, so sentimental and we all know that (brace yourself for a painfully over used business mantra) “if you can’t measure it you can’t manage it”.

A shining light?

Olinga and the team at Seratio have set out to address this predicament with the development of a Social Earnings Ratio (S/E). A business metric designed to provide an insight into a firm’s social performance. The S/E metric claims to:

“Harness the full breadth and depth of information in the social impact marketplace to create visualizations that uncover key insights, translate any index or metric into a comprehensive set of measurements generated specifically for you. The S/E metric can be applied to whole organisations, projects and processes across public, private, third and community sectors.”

It is hoped that the S/E metric will be rolled out to one billion businesses by 2020. It has already gained traction in the UK with the Social Value Act 2012 and the Modern Slavery Act 2015.

The Model T Ford

As I mentioned earlier, social reporting is very much in its infancy. Many firms try to report on it, but the lack of a common metric, or group of metrics, has meant there has no been real standard for reporting success in this area. This combined with the vast amounts of time and resources required to carry out these initiatives had lead to an approach of reporting social value that has been piecemeal at best. This is precisely why the S/E metric was designed with the following parameters in mind, price, consistency, comparability, speed and accessibility.

Olinga outlined that the S/E metric can provide a window into a firms social performance in 10 minutes and for a cost of only five pounds.

It may be early days now, Olinga referred to the SER as a model T Ford for measuring social value, but perhaps if can we start to generate solid comparable social metrics, consumers will start taking companies ethical performances more seriously when considering purchases. Achieve this and perhaps it’s possible to envision a more sustainable and just global supply chain.

The challenges holding back true collaborative working in enterprise

Challenges must be overcome before true collaborative working becomes a reality in the enterprise

There is a growing awareness in the enterprise that collaborative working could deliver business benefits such as greater agility and reduced time to market. But there are challenges that first need to be overcome, and the first concerns what we really mean by collaborative working…

Facebook inside your business is not the answer. And neither is Yammer or any other Enterprise Social Network. They have their place in certain use cases, but they were not built to change how we work; just offer an alternative communication channel. To change how we work in the enterprise today is a far more challenging subject to tackle.

Change Managers are hampered by the fact that for the last 25 years, workers have been conditioned to working on a desktop PC; a pre-internet invention. The desktop and its attendant file and folder based working approach actively prevent collaboration, as content authoring is done in a silo before the secondary act of sharing occurs.

The second big issue to consider concerns organisational structure and the relationship desktop working has with it.

Teams within an organisation are tasked with specific remits and outputs, but they are also part of the same common goal; the company output. Often referred to as the Critical Path, the process of coordinating different teams’ activities to deliver company output reliably and on time can be a fraught process as, too often, one team doesn’t know what another is doing. This lack of visibility, despite ongoing efforts to restructure team reporting, can be traced to a body of critical work being authored in silos, with no obvious way of sharing in real time changes in plans and processes that often occur in day to day business.

Start with selfishness

In order for the promise of “collaboration” to be delivered on, it needs to be clear what specific collaborative processes need to be introduced and for whom. How can we recreate a sense of ‘synchronicity’ for businesses that have teams in different offices, often spread across multiple sites, and maybe even different countries?

It is not enough for just one team to introduce a collaborative working platform; the whole business needs to be networked in order to work synchronously and deliver on an optimum Critical Path. In order to create this ‘network effect’ businesses need to appeal to their employees’ most selfish instincts.

Before they change their behaviour, most individuals will want to know what’s in it for them – so businesses need to promote the benefits of collaborative working not just for the group, but for each employee. Start by showing how these new tools can make each person’s workload easier, for example, and how it can support their learning and development. More effective collaboration will also make them more productive and showcase their personal successes more clearly.

Forget about the file

The modern workplace also needs to reflect the world it operates in. Internet connectivity and speed have improved significantly in recent years, paving the way for on-demand content services and cloud storage. Firms like Spotify and Netflix have already smashed Apple’s iTunes dominance of the music and film market by negating the need to download a file before playing it. You just stream it when you want it.

We have this reality in our personal lives, and as a result, employees are starting to expect an application to deliver their work directly to the audience that needs to see and interact with it. Imagine if you had to write a Facebook update, upload it, notify people that it is available and then send them a link to go and read it – who would bother? Today’s workers want to work within a ‘followable’ environment that enables seamless, real-time information sharing automatically.

Share actions, not words

Businesses need to appreciate that collaboration is a behaviour, but one that struggles to work well with the wrong tools. Teams working within the same business are completely dependent on each other, and ‘cc’ emails, file sharing and social network postings are all blunt tools for keeping everyone up to date on what has been done and, more importantly, what needs to be done.

These forms of communication can lead to information overload via cc’ing, version control confusion through file sharing and channel fatigue through another social network. As a result some employees are left out of the loop and others buried under a deluge of information they don’t actually need to see. The next step along this inefficient path is then the ‘team meeting’, which tends to focus on what teams have been doing, rather than what they are doing or need to do.

Effective collaborative working removes communication lag and enables teams to see what is happening right now. It also has the knock-on effect of making it much easier to measure performance of teams across the enterprise. After all, it’s nearly impossible to measure productivity and effectiveness accurately when work is only being shared after it is completed. By comparison, if work is being measured and evaluated in real-time, within a cloud-base working environment, it is very easy to gain useful and actionable business intelligence.

The main benefit of this approach, however, is that more work actually gets done, instead of just being talked about. By having immediate access to different teams’ knowledge, work and progress, it is possible to create a truly dynamic working environment on a global scale. Businesses that are ready, willing and able to adopt this enlightened approach to collaboration will therefore continue to grow and flourish in the years ahead. Alternatively, you could just post an update about this article to your Enterprise Social Network.

The article was written exclusively for Procurious by Tristan Rogers, CEO of Concrete, the global enterprise collaboration platform used by retailers including J Crew, Gap, Kate Spade, Tesco F&F, George and Marks & Spencer.

YOUR Big Ideas: Procurement Will Be Dead By 2030

Jonathan Betts from Science Warehouse makes a startling statement in his Big Ideas video.

Controversial? Jonathan doesn’t think so, as he reminds us that in the past 15 years we’ve seen successive waves of technology disruption.

Want to add your voice to the conversation? We want you to share your point of view and ideas with the community by creating a video no more than 60 seconds long. What’s your Big Idea?

The ISM Mastery Model: what is it and how does it work?

A bold move to standardise roles on behalf of the profession.

The ISM Mastery Model

Standardisation. The supply chain profession is crying out for it, but it’s very difficult to achieve. If you’ve ever worked with procurement teams from more than a handful of organisations, you’ll have seen that people don’t speak the same language when it comes role titles and the competencies they entail. It’s day two of ISM2015 and I’m attending a press conference with some of ISM’s top brass – Thomas Derry (CEO), M.L. Peck (Senior VP Programs and Product Development), Cecilia Mendoza (Director Education and Training) and Tony Conant (COO). As the cameras zoom and flash, Derry clears his throat and announces his organisation’s biggest initiative of the year so far: the ISM Mastery Model.

This year ISM celebrates its 100th birthday and is using this milestone to create a model that will drive standards into the next millennium. ISM has plenty of experience in this area – they’ve been the hand at the tiller of the US supply chain profession since 1915, setting the standards and moving the professional boundaries as the responsibilities and expectations of procurement professionals grow at an incredible pace. As Derry says, “Procurement has moved so fast we’ve almost outstripped the ability to have formalised career structures.”

So, what is it?

The ISM Mastery model represents ISM’s bold move to standardise roles on behalf of the profession, with the goal that the model will become an integral part of the hiring process and career development for supply chain professionals. The model was built by drawing on ISM’s own experience over 100 years in the sector, including 50 years as the USA’s leading provider of supply chain certification. Two dozen supply chain professionals took part in validating the thinking behind the model. It creates a crystal-clear career path for young people, or rather a number of possible career paths by detailing the competencies required and how they can be achieved. The model is scalable and configurable to different companies’ needs, and surprisingly, it’s free.

Here’s how it works: the model is organised into 16 major competencies; namely business acumen, category management, corporate social responsibility, cost & price management, financial analysis, legal, logistics management, negotiation, project management, quality management, risk, sales & operations management, sourcing, supplier relationship management, supply chain planning, and systems capabilities & technology. There’s a mix here of core or “hard” competencies, and what we traditionally call “soft” skills, such as negotiation. Derry comments that it’s time to change this label to “critical skills” to reflect the importance of hard-to-learn competencies, as you’ll absolutely need these skills to advance in modern-day procurement.

The major competencies are then broken down into highly detailed sub-categories, in what Derry proudly calls “the world’s greatest collection of job descriptions”. The detail is superb, laying down in the plainest language what is required to master that competency. Take business acumen as an example – ISM has determined that procurement professionals will need to come to grips with no fewer than 10 sub-categories, ranging from business intelligence to strategy development. The model then lays out the expectations for these sub-categories at four different career levels – essentials, experienced, leadership and executive leadership. That’s 40 detailed competency descriptions under business acumen alone. The final piece of the puzzle is found on the website – I click on the competency “business acumen”, the sub-category “change management” and the “essential” experience level, and I’m directed to the ISM certification programs (online courses, podcasts, articles, seminars and more) that will equip me with this skill.

Who will the Mastery Model benefit?

  • Individuals – build your career path, identify the gaps in your knowledge and create a business-case to request training or personal development.
  • Managers – map out the skill-set of your team and pinpoint the exact training required to fill gaps. Create a clear roadmap for ongoing investment in training. Lock in key checkpoints for career advancement using this model.
  • Global organisations – use the ISM Mastery Model to raise your decentralised team to common levels of proficiency.
  • Private equity firms – use this model to assess the procurement functions of your portfolio of companies.
  • Recruitment organisations – use the Model to help identify the right candidates and speak the same language across every procurement organisation.

The Mastery Model is impressive, and my only concern is its sheer size seems overwhelming. Derry points out, however, that although a huge amount is expected of the modern procurement professional, we can only do so much. People can use this model to create a career path into an area of specialisation – for example, I might want to begin my career with a generalised “essential-level” skill-set, but concentrate on specialising in legal as I gain the upper reaches of the model.

The launch of the model has some interesting implications for ISM. Derry talks about the data they’ll be able collect, such as tracking a surge in interest in a particular competency in a particular industry. ISM can then research the reasons why and adjust their training programs accordingly. Derry also stresses that the model is adaptable and is expected to change over time – if procurement has altered so much between 1985 and 2015, just imagine how different the roles will be by 2030.

This model makes personalised growth possible. Having a clear roadmap and standardisation will help accelerate the development of younger teams and will be of immense benefit in attracting and retaining talent. Check it out at www.instituteforsupplymanagement.org.

Will consumers punish companies involved in supplier-driven scandals?

Survey finds that 74 per cent of respondents would be unlikely to buy products or services from a company involved in controversial supplier practices.

Consumers intend to punish companies involved in supplier-driven scandals

A newly published survey suggests that companies who are not actively monitoring the business practices of their suppliers, or who are engaged in questionable supplier practices themselves, are placing their reputations and their balance sheets in harm’s way.

The study of typical American consumers, commissioned by sourcing and procurement specialist Proxima, reveals that 74 per cent of respondents stated they would be unlikely to buy products or services from a company involved in controversial supplier practices. Furthermore, nearly 66 per cent would stop giving such a company their business even if that company was the most convenient and cheapest option.

“In recent years, we’ve seen a tremendous shift as companies are relying more heavily on suppliers for everything from their core offering to the market to back office services,” said Jonathan Cooper-Bagnall, EVP & Commercial Director of Proxima. “With this increased reliance comes increased risk and a requirement to engage suppliers with ethical and responsible track records. The results of this study suggest that companies who fail to appreciably vet and monitor their suppliers are at risk for significant commercial consequences.”

The survey, commissioned by Proxima and executed by Kelton Global, gauged the views of more than 1,000 American consumers over the age of 18 in March of this year. Other key findings of note include:

  • Even among financially-strained consumers (respondents with less than $35,000 a year in income), one in three would spend more money elsewhere to avoid patronizing a scandal-ridden company
  • Nearly a third of respondents indicated that they would proactively tell friends and family to stop spending their money with a company involved in controversial supplier practices

Cooper-Bagnall continued, “In recent years, supplier driven scandals have tainted the reputations and bottom lines of a number of well-known companies around the world. Yet, when these scandals arise, consumers are not drawing a distinction between company and supplier and are placing as much blame, if not more, squarely at the feet of the company. It is, therefore, critically necessary that companies not only vet suppliers properly before engaging them, but create a monitoring program to catch and address any improprieties before they result in public scandals.”

Walmart cops criticism over sourcing practices

WALMART criticised for sourcing water from California

Retail giant Walmart has come under fire in the US over claims the firm is sourcing water used for its bottled water products from drought stricken regions in California.

A report, compiled by a CBS affiliate in Sacramento, suggests that Walmart is sourcing bottled water stocks from Sacramento’s municipal water supply. The world’s largest retailer has drawn stern criticism for this practice given the region is in midst of a crippling four year drought that is devastating crops and forcing residents to face water restrictions.

Similar complaints have been made of coffee chain Starbucks, who were called out in a report in the Mother Jones magazine for sourcing bottled water stocks in parts of California the government has deemed as being in areas of “exceptional drought”. Since the report’s release, Starbucks has announced it will cease sourcing water from the troubled Californian regions, a commitment that Walmart is yet to have made. This lack of commitment was highlighted in the following email statement from Walmart spokesman John Forrest Ales, who outlined the company’s concerns over the drought, but stopped short of altering sourcing practices.

“The drought in California is very concerning for many of our customers and our associates. We share those concerns and are tracking it closely. Our commitment to sustainability includes efforts to minimize water use in our facilities. We have and continue to work with our suppliers to act responsibly while meeting the needs of customers who count on us across California.”

While the public outcry over this issue has been significant (a petition demanding Walmart take its activities elsewhere has garnered over 11,000 signatures), the International Bottled Water Association has been quick to stifle the issue, pointing out that bottled water accounts for less than 0.01 per cent of all water used in the US each year.

Greenpeace report urges improved transparency from Amazon

Apple, Facebook, Google progress toward a Green Internet, but coal-heavy utilities stand in the way.

Greenpeace renewable energy report

A recently published Greenpeace report urges improved transparency from Amazon, and more engagement from all major internet companies to overcome resistance to renewable energy from monopoly utilities.

Greenpeace’s research states that major internet companies including Apple, Facebook and Google continue to lead efforts to build an internet that is renewably powered, but an uncooperative utility sector and rapid energy demand growth for the internet places those ambitions under threat. Continued resistance to renewable investments from coal-heavy monopoly utilities in data centre hot spots such as Virginia, North Carolina, and Taiwan is causing the rapid growth in the digital world to increase the demand for dirty energy.

“Tech companies are increasingly turning to the smart choice of renewable energy to power the internet, but they’re hitting a wall of stubborn monopoly power companies that refuse to switch to 21st century sources of energy. Internet companies need to work together to push utilities and policymakers to provide them with 100 per cent renewable energy and avoid the creation of a dirty internet.” said Gary Cook, Senior IT Analyst for Greenpeace USA.

The report, “Clicking Clean: A Guide to Building the Green Internet,” also highlights the continued lack of transparency by cloud giant Amazon Web Services (AWS).  AWS has taken some significant steps over the last year, including committing to power its operations with 100 per cent renewable energy, but the lack of basic transparency about its energy use is a growing concern for its customers.  Although AWS did announce plans to purchase over 100 MW of wind energy this past year, Greenpeace discovered that AWS continues to rapidly expand in Virginia. Based on an analysis of permit applications by Amazon subsidiary Vadata, AWS made investments in new data center capacity in 2014 that would increase its energy demand by 200 MW in that state, where the utility Dominion powers the grid with only 2 per cent renewable energy.

The report found that Apple continues to be the most aggressive in powering its data center operations with renewable energy. Despite continued rapid growth, Apple appears to have kept pace with its supply of renewable energy, maintaining its claim of a 100 per cent renewably powered cloud for another year, followed by Yahoo, Facebook and Google with 73 per cent, 49 per cent and 46 per cent clean energy respectively. Greenpeace found that Amazon’s current investments would deliver an energy mix of 23 per cent renewable energy for its operations.

“Amazon needs to provide more information about its data center footprint and how it will move toward 100 per cent renewable energy, as Apple, Google, and Facebook have done – its rapid expansion in coal dependent Virginia should be a concern to its customers like Netflix and Pinterest who are fully dependent on Amazon for their online operations. Increased transparency will allow AWS customers to know where they and AWS stand on their journey to 100 per cent renewable energy,” said Cook.

The energy use of our digital infrastructure, which would have ranked sixth in the world among countries in 2011, continues to rapidly increase, and is largely being driven by the dramatic growth of streaming video services like Youtube, Netflix, and Hulu. Video streaming is estimated to account for more than 60 per cent of consumer internet traffic today, and is expected to grow to 76 per cent by 2018.

Apple continues to lead the way toward a green internet with several major renewable energy investments announced in the last year, including an $850 million deal to power its operations in California – the largest ever non-utility solar deal. Google’s march toward 100 per cent renewable energy is threatened by monopoly utilities like Duke Energy in North Carolina, a major hub for data centers.

Currently, customers are not allowed to buy power from anyone other than Duke, which gets only 2 per cent of its electricity from renewable sources, but North Carolina legislators are trying to increase the options for consumers to buy renewable energy from parties other than Duke Energy.

Colocation companies, the internet landlords that rent out data center space, continue to lag far behind consumer-facing data center operators in seeking renewable energy to power their operations, but Equinix’s adoption of a 100 per cent renewable energy commitment and offering of renewably hosted facilities is an important step forward and puts the company at the front of the colocation pack.

Greenpeace contacted every company assessed in the report to request data on their energy use. When companies did not respond, as was the case with Amazon, Greenpeace estimated their energy consumption using conservative assumptions and publicly available information.

Greenpeace is calling on all major internet companies to:  

  • Make a long-term commitment to become 100 per cent renewably powered.  
  • Commit to transparency on IT performance and consumption of resources, including the sources of electricity, to enable customers, investors, and stakeholders to measure progress toward that goal.
  • Develop a strategy for increasing their supply of renewable energy, through a mixture of procurement, investment, and corporate advocacy to both electricity suppliers and government decision-makers.