Sustainability Requirements in your Network Service RFP?

Sustainability Requirements in your Network Service RFP?

Deb:

Hello, today is Thursday, April 3rd, 2025.  I’m Deb Boehling from LB3 and this is Staying Connected. 

I’m excited to be on the other side of the microphone today to discuss what we’re seeing in regard to sustainability in the network services market and the potential impact on RFPs for ICT services.  I’m joined today by Tony Mangino, a Director at TC2, to get his perspective on the subject.

So, Tony – Even with the potential shift away from green initiatives under the new administration, sustainability gets talked about, a lot.  I know that you do a lot of strategic sourcing work with your clients at TC2 and I’m curious to understand if and how sustainability initiatives are making their way into your deals. 

Tony:

Hi Deb, thanks for hosting this discussion today, it’s nice to be on the other side of the table for once!  You’re absolutely right that the notion of sustainability in business operations continues to be an important concept across most all industry globally, and particularly so with our large enterprise customers at TC2.  There is focus and intention around being a good corporate citizen and environmental steward.  I’ll add to that that companies are starting to look to sustainability as a competitive differentiator and as a way to drive efficiencies and ultimately financial value into their operations.  The shift, perhaps evolution, that we’re seeing at TC2 is how these sustainability initiatives are beginning to extend themselves into the decision-making process and selection of strategic suppliers of IT services.  In fact, we’ve seen an increasing trend for procurement policies to include an even more expansive framework examining suppliers Environmental, Social, and Governance (commonly referred to as ESG) attributes.  And this comes up in different ways – questionnaires and surveys that enterprises send to suppliers, partly so they can use the outputs to bolster their own ESG credentials.  But also comes up as mandatory considerations in RFPs – e.g., a policy whereby RFP scoring criteria have to include ESG.

Deb:

As a lawyer, ESG laws are in flux in the US and evolving elsewhere. How do enterprises look at sustainability for their initiatives?

Tony:

There is a globally recognized standard known as ISO 14001 which provides a framework for organizations to design and implement an Environmental Management System or (EMS).  The standard focuses on improving environmental performance, reducing waste, and minimizing environmental impact.  Suppliers are not bound by law to comply with the standard however and compliance certification is not consistent across the industry.  For example, Verizon was certified as ISO 14001 compliant in 2024, while AT&T was not.  AT&T maintains an Environmental, Health and Safety Management system that aligns with the principles of ISO 14001 but is not officially certified.

Deb:

Ok, so have you been involved in an RFP where sustainability, or more broadly ESG, was a key determinant in the selection of a supplier?

Tony:

No, or maybe better to say, “not yet”.  The reality is that it’s generally difficult to evaluate the ESG attributes of a supplier as part of an IT procurement.  Not least because it’s a broad topic, and the people generally involved in the evaluation and selection of IT providers are not also experts in ESG.  Also, ICT suppliers all tend to have fairly similar tick the box style response to ESG topics in RFPs, even where there is variability in suppliers, true ESG initiatives can be quite wide – it often doesn’t come out or isn’t really accounted for in a meaningful way by the procurement process.  So, despite procurement policies to the contrary, it often ends up being a topic that is only given lip service. 

I think ESG has a bit of a soft benefits problem in procurement too – there is a long-standing issue in procurement in attempting to translate soft benefits into hard dollars, such as quantifying “lost hours”.  And people roll their eyes at soft savings, and perhaps quite rightly so.  Sometimes ESG can get caught in that trap – hypothetical translation of soft ESG benefits into purportedly hard dollars, when there really aren’t dollars to be saved or budgets that will be reduced (i.e., hard savings).

Deb:

This sounds somewhat similar to the discussion you had with Ben Fox recently about the role of user experience-based measures, or XLAs, as a supplement to traditional SLAs in outsourcing deals.

 Tony:

That’s an astute observation Deb.  As I mentioned earlier, service providers are looking for any way to differentiate themselves from competitive alternatives.  Demonstrating leadership regarding ESG initiatives can be viewed as part of that effort.  The challenge is that it’s nearly impossible to define ESG requirements that can be measured and enforced in a production environment over the term of a deal. 

Deb:

But there are almost certainly cost efficiencies that are realized by the suppliers as a result of ESG initiatives that do have a tangible, hard dollar, impact on their bottom line, right?  Can you talk about that?

Tony:

I think that’s right, Deb.  While there may be altruistic motivations that align with ESG initiatives, as with most things, follow the money.  There are a number of ESG oriented initiatives in the networking space in particular that should deliver measurable economic benefit, such as:

• Reducing energy consumption (per petabyte(!) of data) and improving overall network energy efficiency
• Improving asset utilization by decommissioning outdated network hardware
• Embracing the concept of “equipment circularity” whereby there is an intentional effort to increase the percentage of network hardware that is repaired, reused and/or recycled
• Another example is data analytics, machine learning and yes, even AI, is being used in supplier networks to identify anomalous spikes in energy consumption that may trigger repair work or other optimizations to drive energy efficiency

Now, what I’ve yet to see is any proposed transfer of these benefits to enterprise customers.  The gain sharing model that can drive year over year cost reductions in outsourcing deals for example, has not yet, to my knowledge, been embraced in the context of sustainability and as a competitive differentiator in a commercial proposal…but that would be a significant shift. 

And there are some pillars of sustainability that may be viewed as legitimate benefits for the customer that are at best as cost neutral for the suppliers, such as net zero emissions targets and leveraging increasing amounts of energy from renewable sources.  That may be a little removed from ICT procurements at the moment, but it will be interesting to see how such things evolve in coming years. 

Deb:

Any closing thoughts?

Tony:

I expect that sustainability and ESG focuses will ebb and flow with wider political and social trends, but in the long term are unlikely to go away.  The challenge for sourcing and IT professionals will be how to move beyond cursory and rudimentary thinking in this area, to more data driven analysis that can be used to genuinely distinguish between the ESG implications of different solutions, products, services and suppliers.

Deb:

Thanks very much, Tony, great discussion!  And if you would like to learn more about ESG and sustainability in the networking space, or if you’d like to discuss other ICT needs with Tony or me, or any of our LB3 and TC2 colleagues, please give us a call or shoot us an email. You can also stay current by subscribing to Staying Connected, by checking out our websites, and by following us on LinkedIn.