As environmental, social, and governance (ESG) performance is becoming a top decision factor for IT purchases, I have expanded my role as a tech analyst to include how major tech companies are trying to positively impact and give back to the global community amid severe social and environmental challenges. This focus is necessary at Moor Insights & Strategy and encompasses several topics, from environmental sustainability and social governance to education, community growth, and much more. While some companies have better programs than others, the best ones are those that accurately measure and transparently make the results of their initiatives public. This is often visible in the form of an annual report highlighting a business's corporate social responsibility (CSR) objectives and the progress made toward achieving them.
Cisco released its 2022 Purpose Report last week; it provides detailed information about the global provider of IT and networking solutions’ efforts to reduce its environmental footprint. The report’s focus areas are organized according to three key pillars of purpose:
- Power to “ethically build and deliver technology that securely powers the world’s connectivity”
- Inclusive to “act boldly and deliberately to accelerate fairness, inclusion, and equitable access to opportunity”
- Future to “help ensure a sustainable and regenerative future for our planet”
Cisco has a public ESG Hub and has published corporate sustainability reports annually since 2005. Moor Insights & Strategy chief analyst Patrick Moorhead has covered several of the reports (see 2021, 2020, 2019 and 2018) which highlight developments such as a new energy management program, waste reduction efforts, and water conservation initiatives. They also detail the company's efforts to reduce its carbon footprint and increase the use of renewable energy sources, Cisco's commitment to green building construction, and its efforts to engage employees in sustainability practices. The Purpose Reports also include information on the company’s ethical sourcing program, which strives to ensure that all its suppliers comply with high standards of labor, health and safety, and environmental responsibility.
The company has pledged to pursue a net zero greenhouse gas (GHG) emissions goal by 2040, requiring a comprehensive approach to GHG reduction in its operations, supply chain, and product use.
The Science Based Targets initiative (SBTi) has approved Cisco's goal of achieving net zero emissions by 2040 across its value chain. To do this, the company has reduced its Scope 1 and 2 GHG emissions by 39% compared to its fiscal year 2019 base year. Furthermore, the organization has committed to cutting its Scope 1, 2, and 3 emissions by 90% from FY19 levels, and to offset any remaining emissions by removing an equivalent quantity from the environment.
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According to the 2022 Purpose Report, Cisco’s ESG reporting is aligned with standards set by the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and CDP (formerly Carbon Disclosure Project).
Measurement methodology is vital in how a company reports its ESG initiatives, and Cisco has clearly outlined the company’s methodology and sustainability metrics. These include reporting on the types of GHGs previously mentioned. Scope 1 includes emissions from fuels it buys and burns within its operations; Scope 2 includes emissions from the electricity it buys for operations, such as the power used in labs and data centers; Scope 3 includes emissions related to the company's operations but not owned or controlled by it. This can consist of the energy consumption of products sold, the energy usage of suppliers, the transportation of products and human capital.
The 2022 report also offers an in-depth look at Cisco’s CSR initiatives, which include its commitment to diversity and inclusion, philanthropy, and community engagement. Overall, Cisco's sustainability reports provide comprehensive information about the company's progress and goals in terms of sustainability. Here are some highlights of what the company attained in the past year:
- Reduced Scope 1 and 2 GHG emissions by 39% compared to the FY19 base year
- Increased system power efficiency for large rack-mounted equipment—from the input power from the facility to the board-mounted ASICs, memory, and other chip devices—to 87% from 77% compared to the FY 2016 base year.
- Sourced 89% renewable energy for the company’s operations.
- Committed approximately US$11 million to fund climate solutions through the Cisco Foundation.
- Provided approximately US$6 million worth of networking and emergency connectivity equipment to nonprofit partners, UN agencies, bomb shelters, and the Ukrainian government. Cisco Crisis Response (CCR) teams went to Krakow, Poland, to partner with Cisco volunteers to create and distribute communications kits tailored to the needs of response agencies.
- Launched a responsible AI Framework based on six principles: Transparency, Fairness, Accountability, Privacy, Security, and Reliability. Cisco states that its Responsible AI Working Group “continuously drives adherence to these principles by putting new technologies through Responsible AI Impact Assessments, offering guidance on how to manage risk to human rights, and providing accountability via incident reporting of human rights, privacy, and security concerns.”
Cisco focuses on sustainable data centers to reduce energy consumption and increase energy efficiency. It approaches sustainable design with the convergence of IT and OT networks. The company uses Nexus Cloud, Cisco Silicon One, UCS X-Series, Meraki MT, and other features such as warm-water liquid cooling and native DC power distribution unit (PDU) integration to achieve these goals.
The company is committed to intelligent environment automation for smart buildings and workspaces to decrease energy consumption and power and data network consolidation for increased energy efficiency. Sustainable design is accomplished using Catalyst Portfolio, Cisco Spaces, Meraki MT, and 90W PoE.
A new report from Accenture revealed that while 34% of the world's largest companies have declared a commitment to net zero by 2040, 93% of them will only be able to reach the goals if they at least double the rate of increase in emissions reductions. Inflation of energy prices and insecurity of supply are making commitments to decarbonization increasingly challenging, even though more companies in every region are now setting clear and visible goals to reduce carbon emissions. This year, there has been a record spike in the number of corporate targets verified by the SBTi.
Cisco is a leader in the tech industry when it comes to ESG initiatives. The company’s commitment to sustainability has set an example for others to follow, while its circular system of resource management offers benefits to both the environment and its bottom line. Cisco’s dedication to a higher purpose is evident in every aspect of the business, from providing stakeholders with insights into its operations and initiatives to creating a great workplace with values alignment for its employees. Cisco's commitment to sustainability and their dedication to doing the right thing for their stakeholders, employees, and the environment is truly inspiring. I am confident that Cisco will continue to reach its goals and remain the benchmark of excellence for years to come.
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Moor Insights & Strategy founder, CEO, and Chief Analyst Patrick Moorhead is an investor in dMY Technology Group Inc. VI, Dreamium Labs, Groq, Luminar Technologies, MemryX, and Movandi.
