There is widespread consensus among the scientific community that the Earth is warming due to human emission of greenhouse gases (“GHG”). Beyond this scientific consensus there is little to no agreement among governments, corporations and other stakeholders as to what should be done and who should be combating this issue. There are organizations that have chosen to use their power and influence to take measurable steps to combat climate change above and beyond regulatory mandates. The non-profit organization CDP runs a global disclosure system that enables companies and governments to measure and manage their environmental impacts. CDP has recognized Hewlett Packard Enterprise (“HPE”) as 1 of 29 companies amongst the 3,300 companies assessed for their commitment to combating climate change by working together alongside their suppliers to improve sustainability and taking advantage of low-carbon opportunities.
HPE’s largest revenue stream is the sale of servers and they lead the worldwide market for server sales. In a competitive environment with continued technological improvements, and decreased costs, the server industry is trending towards a commoditized product with low margins. To stay competitive in this market HPE has strategically differentiated itself by branding itself as a server provider that is combating climate change by taking direct actions to reduce the volume of greenhouse gas that is emitted in the production of its servers. They have publicly announced the goal to “reduce manufacturing-related GHG emissions on an absolute basis within their supply chain by 15% by 2025”. HPE believes that by achieving these sustainability goals they will be the “first IT company to establish a supply chain that is in line with climate science.” This they believe will result in avoiding “100 million tons of emissions. These reductions equate to taking 21 million cars off the road for an entire year.”
Will these supply chain upgrades increase the cost of HPE’s servers and will the consumer be willing to pay for a higher priced, ecofriendly product? HPE has set their strategy with the view that enterprises are focused on ESG policies and purchasers will be choosing their enterprise suppliers based on more factors than just price. Lara Birkes, vice president and chief sustainability officer for HPE said, “When customers use our energy efficient technology that is manufactured in factories with science-based targets, they will cut their own carbon emissions, achieving exponentially more with less environmental impact.” The question remains, will HPE’s customers react positively to this marketing program by purchasing more ecofriendly servers? Recent research from the Nielsen Global Survey would support HPE’s decision to focus on a sustainability program. They find that, “66% of global respondents say they’re willing to pay more for products and services that come from companies that are committed to positive social and environmental impact.”
The genius of this program is that HPE is pushing all of the required capital costs of this supply chain program to its suppliers while HPE is able to profit from these publicity of the GHG emission reduction initiatives. HPE stated that, “The program will also incentivize suppliers to set and achieve these goals by assessing them favorably through HPE’s social and environmental responsibility (SER) scorecard, which directly ties their SER performance into HPE’s procurement decisions.” HPE has been very vocal and transparent about these initiatives to garner free earned press as well as signal to its supply chain that there are real financial incentives in complying with this program. HPE has set a defined strategy for the next decade to grab the market for enterprise consumers that want to purchase servers from an ecofriendly supply chain. The questions remain:
- What type of customer, do you believe will be willing to pay a premium for HPE’s servers that were built using less greenhouse gas? What would an appropriate premium be for these “eco friendly” servers?
- How should HPE react to suppliers that refuse to cooperate with their greenhouse gas emission reduction goals? Should HPE sacrifice quality or price for these higher standards?
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 Henderson, Rebecca M., Sophus A. Reinert, Polina Dekhtyar, and Amram Migdal. “Climate Change in 2017: Implications for Business.” Harvard Business School Background Note 317-032, October 2016. (Revised July 2017.)
 “CDP Supply Chain Report 2016 | 2017.” www.cdp.net, https://www.cdp.net/en/research/global-reports/global-supply-chain-report-2017.
 “Worldwide Server Market Revenue Declines 4.6% in the First Quarter as the Market Prepares for a Major Refresh, According to IDC.” www.idc.com, International Data Corporation (IDC), 6 June 2017, www.idc.com/getdoc.jsp?containerId=prUS42707717.
 “HPE Launches World’s First Supply Chain Program Based on Climate Science.” HPE Newsroom, Hewlett Packard Enterprise, 25 Mar. 2017, https://news.hpe.com/hpe-launches-worlds-first-supply-chain-program-based-on-climate-science/.
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 “Green Generation: Milennials say Sustainability Is A Shopping Priority,” Nielsen website, November 5, 2015, http://www.nielsen.com/us/en/insights/news/2015/green-generation-millennials-say-sustainability-is-a-shopping-priority.html
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