How green credentials are shaping IT contracts

Green IT is not just a buzzword - sustainability is finding its way into contracts throughout the IT industry, says lawyer Mark O'Conor.

Being green does not come naturally to the information technology sector.

As most of us know, manufacturing IT equipment produces a significant carbon footprint; using technology is energy-intensive; and, following a typically short life, huge amounts of electrical equipment become landfill.

In May of this year, the International Energy Agency warned that the growth of IT could ruin attempts to control global warming.

However, businesses are starting to wake up to the environmental impact of IT. Legal development, branding opportunities and even opportunities to cut costs by running IT more efficiently are all raising its profile.

'Green IT' is now a recognised aspect of working and buying in the sector, illustrated by the fact the British Computing Society is in the process of launching its Green IT Qualification.

With this in mind, what sort of impact does - and will - sustainability issues have on IT contracts?

The bid stage
Although legislation aimed at minimising the impact of IT projects on the environment is limited, sustainability issues are starting to form part of the contracting process.

To suggest that the environmental impact of IT projects is a key concern in many pitching processes would be misleading. Nevertheless, requests for green credentials are starting to appear in requests for proposals.

In particular, the UK government's pre-qualification questionnaires now seek information about bidders' certifications under environmental management standards, such as the BS 7750 and ISO 14001.

The contract
For some years, certain IT customers in the private sector (typically, the bigger private sector purchasers with a fairly assertive negotiating stance) have included "ethical codes" in their commercial contracts. The contracts expand on the fairly standard requirement that the supplier must comply with "all laws" by specifying a list of voluntary code and behaviours to which the supplier is also contractually bound.

This list would commonly include, for example, an organisation's environmental policy, CSR and diversity policy, commitment to minimising environmental impact and so on. I anticipate more focused and detailed environmental standards and codes will become increasingly common within such lists.

The ISO 14000 series was developed as a result of the Rio Summit on the Environment of 1992. It provides a framework for the development of an environmental management system and supporting audit programme. ISO 14000 is the key standard, specifying the framework for a system which can then be certified by a third party.

Requiring that the contractor must behave "appropriately from an environmental perspective" pushes compliance risk on to the contractor. Such broad wording allows for flexibility in interpretation (as expectations rise in the environmental context, so the bar against which this requirement is measured will be raised).

It is worth noting, too, that the OGC's ICT Model Agreement obligation goes beyond the contractor's environmental behaviour in merely fulfilling the IT project in question. Instead it is drafted widely to catch behaviour in the contractor's business "activities", "products" and "services" generally.

Consequences of breach
Realistically, many IT companies are motivated as much by public perception as by corporate conscience in building environmentally friendly provisions into their contracts.

While it follows that a customer might be relatively relaxed about its supplier breaching its ethical code, this does not diminish the importance of the supplier meeting the code's requirements. It's not uncommon for the breach of an ethical code to be used by a customer in either the private or the public sector as the opportunity to renegotiate, or even terminate, a contract.

In both the private and public sector, when it comes to escalating green issues into measurable contractual obligations - for instance, to motivate the supplier to 'act green' as part of service levels or key performance indicators - it is fair to say that we have a long way to go.

Is failure to comply yet a termination event? Unlikely, unless in specific, environmental sector public procurements.

However with green issues becoming an ever-increasing concern and priority in business and society, it is bound to have a greater impact on IT contracts in the near future.

Mark O'Conor is a partner in the intellectual property and technology group at law firm DLA Piper.