Beyond the Bottom Line - Growth Consulting - Frost & Sullivan

Beyond the Bottom Line: Teleco-Sustainability
By Brian Cotton, PhD
Vice President of ICT Growth Consulting
Frost & Sullivan Canada
What is Eco-Sustainability?
Sustainability is a foundational concept that has found its way into many aspects of human activity, including commerce
and business strategies. A widely accepted definition of sustainability is derived from the 1987 Brundtland
Commission report, which characterizes an activity as sustainable if it “meets the needs of the present without
compromising the ability of future generations to meet their own needs.”
In today’s rapidly changing climate, dwindling natural resources, and a human population of 6.8 billion, sustainability is
being closely linked to environmental responsibility. Scientists and economists have warned that current practices are
leading to an unsustainable world (see for example, The Limits of Growth, The 30-Year Update, by Meadows, Randers, and
Meadows). In this context, companies are examining their role to become more sustainable. A small group of them
are also going a step further, investigating and creating ways to use sustainability to drive profitability beyond bottom
line savings and into true revenue growth.
The practice of sustainably-profitable, environmentally-respectful business can be labeled eco-sustainability. In the
commercial sense, eco-sustainability can be defined as a business that has a net positive impact on the environment, is
eco-efficient, and generates renewable value with a full lifecycle perspective.
In this definition, a net positive impact means that the overall impact or outputs of a business on the environment
leave it in better shape than the input to the business from the environment. Eco-efficiency is a term for leveraging
technological and process changes in order to generate solutions that offer more value than current offerings while
reducing resource use and environmental impact throughout the product or service's life. Copper for example, can be
used, recycled, and reused over many instances of product, each time adding value to the lifecycle (e.g., the value of the
copper is realized in each production and recycling process, which someone pays for), instead of adding value once and
then being discarded, such as in a landfill.
As a corporate business strategy, eco-sustainability focuses on qualitative development and controlled purposeful
growth, not only on physical expansion. The company extends its influence throughout the supply loop, so that costs
are lowered by using renewable resources and eco-efficient methods. Profit then becomes reflective of savings gained
on minimizing the opportunity cost of environmentally-unfriendly processes, and on the upside of the value of
sustainability distributed in the system.
Creating and embodying an eco-sustainable strategy to industries producing tangible products is relatively
uncomplicated, but applying it to industries that tend to produce more intangible products is not so straightforward.
One would not think that telecommunications operators contribute to climate change, but they do. The data center is
so central to supplying telecommunications services, and which underlie much of modern e-business, have a subtle, but

eal impact on the environment. Recent work by Stanford University, the Uptime Institute, and AMD suggests that
data centers contribute CO2 emissions in the same range as the airline industry, steel manufacturing, and ship building.
This work also suggests that the cumulative impact of data centers contributes more CO2 to the atmosphere than
does the country of Argentina or the Netherlands. Similarly, operating its network is the single largest source of
power consumption for a typical telecom service provider. Therefore, eco-sustainability absolutely has a place in the
telecommunications industry.
Frost & Sullivan has been covering eco-sustainability in the telecommunications industry since 2006. In that time, our
work has uncovered a strong, but largely hidden trend of telecommunications service providers creating and following
eco-sustainability strategies. Telecom companies tend to pursue eco-sustainability in three ways.
Compliance to regulations or other mandated criteria.
Eco-sustainability is pursued through adherence to defined limits and processes, which attempt to control
consumption of non-renewable resources and curb the amount of pollution that needs to be absorbed by the
ecosystem. This is the most basic level of eco-sustainability strategy. Examples of regulations that directly impact
telecom service providers include California’s 2006 Greenhouse Gas Bill and the mandate in China’s National Eleventh
Five-Year Plan to lower power consumption by 20 percent per GDP unit. Telecom service providers can also set their
own limits, such as BT’s goal to reduce CO2 emissions 80 percent from 1996 levels by 2016. Thus a compliance
strategy engenders eco-sustainability by discouraging or slowing the impacts of unsustainable business practices.
Commitment to sustainability through eco-efficiency.
Here, eco-sustainability is pursued by using more resource efficient technologies to lower environmental impacts. This
approach is often built on compliance actions, but adds a layer of pro-activity directed at lowering costs (saving on
OPEX). Eco-sustainability is achieved through eco-efficiency, and collateral benefits are accrued, such as lower CO2
emissions and recycling end-of-life network equipment. Higher CAPEX costs for renewable energy powered
infrastructure are more than offset by the bottom line savings through the use of “free” energy. Under a commitment
eco-sustainability strategy, Verizon has shown a savings in CO2 emissions with a trend of lower annual Carbon
Intensity readings, defined as a ratio of metric tons of CO2 emitted per $1 million in revenue. As well, TELUS has
demonstrated that from 2004 through 2007, its eco-efficiency -- the ratio of energy consumed to top-line revenues --
has steadily improved. This is an important check on telecommunications eco-sustainability strategies because it
shows that following such a strategy does not negatively impact overall revenue generation. Thus, a commitment
strategy brings about sustainability discouraging unsustainable business practices and translates sustainable ones into
bottom line savings.
Command of eco-sustainability to drive top-line revenues.
A command strategy goes one step further than commitment because it uses eco-sustainability to drive new business
and revenue streams. Building on compliance and commitment actions, telecom operators create new services that
meet their own customers’ needs for sustainability solutions. Telecom Italia, in partnership with the Roman city
government, has developed a service using cell phones that enables drivers to find the most direct route to available
parking. This reduces gasoline costs for drivers, CO2 emissions in Rome, and can be a revenue generating service for

Telecom Italia. Representing the apex of eco-sustainability, a command strategy applies eco-efficiency throughout a
service provider’s operations to generate value over and above current service offerings, it reduces resource use and
environmental impact, and it can be used as a competitive differentiator in increasingly eco-aware customer bases.
It should be noted that our eco-sustainable telecom service provider sits within a larger eco-system containing
suppliers and consumers, and other key stakeholders including government, the financial community, and the media. All
can play parts in a network of eco-sustainable relationships.
Eco-Sustainability is Here to Stay
More and more, sustainability is becoming a critical part of many companies’ CSR strategies. Telecommunications
service providers are evolving eco-sustainability strategies that can reduce their impact on the environment, yield
bottom line benefits, and can create new services for top line growth and competitive differentiation. These strategies
can be highly adaptable, being useful in good economic times and bad. Remaining consistent to its roots,
eco-sustainability is here to stay.
Brian Cotton is the Vice President of the Frost & Sullivan Global ICT Consulting Practice, and heads up Frost & Sullivan’s
Canadian operations. Brian believes that smart companies can help solve environmental problems, and be responsibly and
sustainably profitable doing it. His domain expertise lies in applying ICT to elements of these problems, generating new business
opportunities out of their solutions, and creating strategies to capitalize on them. Prior to joining Frost & Sullivan, Brian was a
Consulting Analyst with the Horizon Research Corporation in Los Angeles, and a Haynes Foundation Scholar in Social Psychology
at the University of Southern California. Brian holds a Ph.D. in Social Psychology from the University of Southern California, a
BSc. in General Psychology from Indiana University, and a Certificate in Political Psychology from the Ohio State University. He is
currently based in Toronto, Ontario.
Brian will be delivering the Executive Analysis on Marketplace Opportunities for Sustainable Solutions, at the Global Green
Revolution 2008 event in San Francisco on Wednesday, September 17, 2008.