7 tips on how to go green in the outsourcing sector

The Information Technology (IT) sector is growing fast. People are becoming more aware of its negative effects on the environment. It is not as visible as plastic waste on the streets, but people are realising that, for example, 1 Google search releases about 0.2gr of Co2. This means that it is important to become a green(er) outsourcing provider. Being a green outsourcing provider also gives you a competitive edge. And more and more often, European buyers are actually requiring providers to be green.

1. Becoming more environmentally friendly is increasingly important for outsourcing providers

The main environmental impact of the IT outsourcing (ITO) and business process outsourcing (BPO) sector comes from its energy consumption. Over the past ten years, major steps have been taken to reduce the environmental impact of the sector’s products and services. However, the sector has grown so much that green innovations and other energy-reducing measures have not been enough to compensate for the increased energy consumption.

The planet needs it

The effect of climate change is being felt in most countries around the world. To reduce the effect of climate change, we all need to reduce our energy consumption. In 2020, the Information and Communication Technology (ICT) sector (including data centres, communication networks, and user devices) consumed 4-6% of total global electricity use, and this figure is only growing. Electricity consumption from data centres is expected to more than double by 2030. This is mainly driven by Artificial intelligence (AI).

Up to now, most energy-reducing measures in the ICT sector have focused on increasing the computing power you can achieve for the same amount of energy use. This is like making your car more energy efficient but then driving more kilometres with it. It does not actually reduce the overall energy consumption.

For you as an ITO or BPO provider, the goal of going green must be to reduce the carbon footprint of your company and of the product or service you offer.

Buyers increasingly require it

European buyers increasingly require their suppliers to be green and socially responsible. European governments are currently issuing a large number of environment-related requirements. Green standards are becoming an important buyer requirement for large enterprises and Small to Medium-sized Enterprises (SMEs), so you have to be prepared.

From a contractual perspective, you should prepare for carbon service level agreements (SLAs). A standard SLA is a contract signed by the customer and the outsourcing service provider (you) that defines the services performed and the standards, responsibilities, and conditions attached to the project. A carbon SLA also covers the carbon footprint of these services and how both parties agree to reduce that footprint. At present, not all buyers require carbon reporting, but in some countries, it is already required by law. It is even possible that penalties will be placed on carbon emissions in the future.

Sustainability in the outsourcing sector

The ICT sector is a major global consumer of energy. By far the largest sustainability concern in the outsourcing sector is the electrical power consumption of data centres (see figure 1). However, if we look at ICT’s overall energy consumption, data centres are not actually the main consumer. In fact, user devices consume more energy than networks and data centres combined. According to some sources, approximately 60% of electricity consumption is the result of devices (excluding TVs). Networks and data centres account for 20% each.

Table 1: Sustainability concerns relating to global BPO and IT outsourcing

Source: inspired by ‘how green is my outsourcer’ by Ron Babin and Brian Nicholson

As an ITO or BPO supplier, you usually cannot – and do not – want to be involved in the buyer’s decision regarding what data centres are used (unless there are very specific technical requirements). Hardware is also a major contributor to the sector’s environmental footprint, but, again, you have little or no influence on the hardware your buyers use. The rest of this document does not focus further on energy improvement for your hardware. You can, however, make your office greener.

On the product side of outsourcing services, there are concerns about the amount of energy your software consumes. There are options available to make your product greener.

2. Make your product greener (product level)

As hardware becomes more powerful and energy efficient, the impact of software on overall energy consumption becomes even more significant. The University of Cambridge estimated that roughly 174 terawatt hours (TWh) are needed per year to maintain the Bitcoin network, which is about three times the energy consumption of the entire nation of Switzerland.

The end-user environment, for example workstations and monitors, uses almost 40% of all the energy used by IT. This means a lot of energy can be saved by making the end product more energy efficient. For example, the programming language you choose affects your software’s energy efficiency.

The Green Software Foundation recommends the following design and coding options.

• Focus on and control features with higher power consumption and common usage scenarios;
• Reduce data usage: adopt efficient cache policy, minimise data exchange, and manage the lifecycle of stored data, compressing and aggregating data and using smaller sizes for media and image when possible;
• Remove or refactor unused features to improve energy efficiency and make software easier to maintain;
• Detect and remove loops which cannot achieve their intended purpose and unnecessarily consume energy, such as polling an unreachable server;
• Adapt the behaviour of your application according to the device power mode or other operating conditions;
• Limit the computational accuracy of the application to the level appropriate for operational needs; and
• Monitor the real-time energy consumption of the application to identify the modules that can be optimised to produce fewer emissions.

3. Make your office greener (organisation level)

Another way to go green as an ITO or BPO provider is to go green at organisational level. You can reduce your company’s energy consumption or reduce the footprint of its output by creating less output or recycling your waste.

Energy consumption

Reduce energy consumption at your office by installing LED lights or less energy-consuming air conditioning systems. You can also insulate your office better and ask your employees to turn off their monitors when they leave the building.

Automation Implementing automation into existing or new processes will also help you increase efficiency. It gives you the tools you need to better monitor your operations so that you can reduce waste (and the costs associated with it) while increasing efficiency.

Automation by outsourcing

You can automate some of your business processes by outsourcing them to other companies. These companies might be able to process the same amount of work more efficiently, perhaps because they have more efficient data centres or can offer economies of scale through their facilities. Reducing the amount of energy this way can benefit your company and the environment. If you decide to use another company to automate some of your business processes, choose your service provider carefully.

Make good purchasing decisions

What you buy for your office impacts your carbon footprint. Greener options include:

• Buy green energy, if it is available at your location;
• Consider installing solar panels or solar boilers;
• Offer more vegetarian and vegan dishes in the cafeteria;
• Use biodegradable products to clean your office;
• When buying new hardware, consider greener options, such as sustainable laptops or Fairphones.

Improve your office habits

• Limit water use;
• Encourage working from home;
• Print less and/or print double sided;
• Encourage cycling to work (if safe).

Recycle your waste

Recycling electronic waste can be difficult in some countries, but you have to try to find a place where you can take your electronic waste for recycling. If recycling is difficult in your country, do not be discouraged. You can take small steps, such as:

• Using reusable cups;
• Recycling your office organic waste.

You may think these steps will have little impact. However, the important part is not one company doing everything perfectly; it is about many companies doing their best.

4. Become a green innovator

The world needs green innovations. Many of the best inventions in this area have come from the IT sector. One example is the invention of the cloud. At the start, cloud computing used significantly more energy than traditional datacentres, but cloud computing has since become significantly more energy efficient. Migrations to the public cloud can reduce CO2 emissions by 59 million tonnes per year. This has the same impact as taking 22 million cars off the road.

Another invention is the Internet of Things (IoT). This technology can be used to monitor and control energy consumption in buildings and other systems, enabling greater efficiency and energy savings. Then there are several inventions within IoT that contribute to a more sustainable world. Examples of such inventions are:

• Smart Agriculture: IoT sensors can be used to monitor soil moisture, temperature, and other factors that affect crop growth, enabling farmers to optimise their use of water and fertiliser and to reduce waste;
• Energy Management: IoT-enabled smart meters can monitor energy usage in real-time, helping to identify areas where energy efficiency can be improved and reducing overall energy consumption;
• Smart Cities: IoT sensors can be used to monitor traffic flow, air quality, and other factors that impact urban environments, enabling city planners to make more informed decisions and to improve sustainability;
• Waste Management: IoT-enabled sensors can be used to monitor the fill level of waste bins and optimise waste collection routes, reducing fuel consumption and the associated carbon emissions;
• Water Management: IoT sensors can be used to monitor water quality and usage in real time, helping to identify leaks and other issues and to conserve water resources.

There are two ways to become a green innovator:

1. Keep using the same products and implement measures so they use less energy;
2. Develop new green products or services that are very different from the existing ones.

An interesting sector to consider is clean tech. This is one of the fastest-growing markets in the world. The International Energy Agency (IEA) has predicted that the value of the global market for clean tech will rise from €618 billion in 2023 to over €1.8 trillion in 2035.

5. Inform yourself about green legislation and requirements 

Sustainability is becoming a must in the European Union (EU). Buyers require you to have sustainable business practices, and European legislation is also getting stricter. 

The European Green Deal is a roadmap for Europe to become climate neutral by 2050. It is a package of actions to reduce greenhouse gas emissions and to minimise the use of resources while achieving economic growth. This means products sold in the EU market need to meet higher sustainability standards.

If you are an ITO or BPO provider wanting to sell your products or services to the EU, this means you will have to start thinking about how green your company is and how you can make it even greener. Some legislation does not apply to smaller companies directly. However, if you want to be a subcontractor for a larger ITO or BPO provider, this legislation might apply to them. This means it is important to incorporate green practices yourself.

Corporate Sustainability Due Diligence Directive

As part of the Green Deal, the Corporate Sustainability Due Diligence Directive (CSDDD – EU 2024/1760) entered into force in July 2024. The Directive requires companies to act in a sustainable and responsible way in their own businesses and global supply chains. It sets rules for companies to identify and address problems that may harm human rights or the environment in their operations and subsidiaries, and among their business partners. 

The Directive applies to:

• Large EU companies: More than 1,000 employees and a net turnover of €450 million worldwide; and
• Large non-EU companies: A net turnover of €450 million in the EU. 

Although SMEs are not covered, the CSDDD may affect you indirectly through your buyers. As such, you should make yourself familiar with the CSDDD requirements and the kind of information your buyers may need from you. This makes it easier for European companies to work with you and comply with the Directive.

In February 2025, the European Commission adopted a package of proposals – the Omnibus package – to simplify sustainability due diligence rules. As part of this, the European Parliament has agreed to postpone the application dates of the CSDDD. The EU Member States have to adopt and implement the Directive in their national laws by 26 July 2027. It will start to apply to the first group of companies on 26 July 2028. The CSDDD will be fully applicable on 26 July 2030. The proposals to change the content and scope of the CSDDD are not final yet, so make sure to stay updated on the developments of the Omnibus package.

Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD – EU 2022/2464) came into force on 5 January 2023. The CSRD is a set of rules that companies in the EU must follow. It requires them to provide clear and comparable reports about how they are doing in terms of environmental, social, and governance issues. This helps people understand how companies are taking care of the planet and their communities. 

The CSRD started to apply on 1 January 2024 for the first group of companies. Non-EU companies will only have to comply with the CSRD if they have significant EU operations. This means: 

• Having EU branches with a net turnover of more than €150 million in the last two years; and
• Serving as a parent of the EU subsidiaries that are listed in the CSRD; or
• Having EU branches with a net turnover of more than €40 million in the previous financial year. 

For these companies, sustainability reporting will be required as of 2029, for the financial year starting on 1 January 2028.

Green Claims Directive

In March 2023, the European Commission proposed a new law called the Green Claims Directive. Its goal is to make sure companies give clear and honest information about how their products or services affect the environment. The Directive aims to stop greenwashing and help people trust environmental claims on products. With this proposal, the EU seeks to make the EU economy greener and help people choose products that are truly better for the environment.

The proposal sets strict rules on how companies can make green claims. Businesses have to prove their claims using clear rules and have them checked by independent and accredited verifiers. It also introduces new rules on the governance of environmental labelling schemes to make sure they are transparent and reliable. The proposal supports and implements the Directive on empowering consumers in the green transition, which entered into force in March 2024.

The Green Claims Directive will apply to voluntary claims about the environmental impact, aspects or performance of a product or its company that are not yet covered by other EU laws. Microenterprises (companies with fewer than ten employees and less than €2 million turnover) will be excluded, and the European Commission plans to support SMEs in complying with the requirements, such as by giving funding to provide data to support strong claims and to create calculation tools for SMEs.

The proposal is still under negotiation, so make sure to stay up to date by checking the EU’s Legislative Train Schedule.

Ecodesign for Sustainable Products Regulation

The Ecodesign for Sustainable Products Regulation (ESPR – EU 2024/1781) entered into force in July 2024. This Green Deal regulation aims to improve the sustainability of products on the EU market. It intends to improve products’ circularity, energy performance, recyclability and durability. The ESPR applies to almost all physical products on the EU market, regardless of where they are produced. If you provide services for a European client, the client is responsible for product sustainability. However, you should be aware of the rules.

The process starts with developing working plans. These plans list the products that will need to meet Ecodesign requirements and other measures that will be assessed. The first ESPR working plan will be published in the first half of 2025 and will apply for at least three years. Among the products prioritised in the first working plan are energy-related products, ICT products and other electronics. Once the first working plan is published, the development of product rules will start. 

The ESPR will replace the Ecodesign Directive (2009/125/EC). There will be a transition period until 2030 to make sure there is no gap. 

EU action plan on digitalising the energy system

In October 2022, the European Commission adopted the EU action plan: Digitalising the energy system. This is an initiative to accelerate the integration of digital technologies in the energy sector. It lays out key actions across six themed areas. One of these is controlling energy consumption in the ICT sector. As the ICT sector accounts for a large percentage of global electricity consumption, and its energy needs will continue to grow, it is important for the EU to control its energy consumption, especially due to the EU’s objective to reduce energy demand and achieve climate neutrality. 

In this regard, the EU will take the following actions to control energy consumption:

• Extend the ESPR to include new ICT products;
• Establish an EU code of conduct for the sustainability of telecommunications networks;
• Develop an environmental labelling scheme for data centres;
• Introduce monitoring and reporting requirements for data centres regarding their energy consumption, as part of the review of the Energy Efficiency Directive; and
• Develop an energy efficiency label for blockchain.

As the implementation is still under way, make sure to stay updated on the developments in the Digitalising the energy system action plan. The stricter goals of the EU, such as the introduction of monitoring and reporting requirements for data centres, might create opportunities for SMEs from developing countries.

Sustainable or Green Public Procurement

Green Public Procurement (GPP) is a process in which public authorities seek to purchase goods and services that have lower environmental impact than similar goods and services. GPP is voluntary in the EU. Member States can determine the extent to which they apply policies and criteria themselves. However, with the 2020 Circular Economy Action Plan, the European Commission has started to propose minimum mandatory GPP criteria in sectoral legislation. This is the case with ESPR, for example, for which the legal requirements are mandatory for all public buyers.

While voluntary, GPP is becoming the norm in many European countries. European governments increasingly require their suppliers to be green and socially responsible. The Netherlands already has such a system in place, similar to Norway and many other European countries. The Dutch government uses a points-based system for public tenders in which sustainability plays an important role. 

Global Reporting Initiative

The Global Reporting Initiative (GRI) made the world’s most widely used framework for standardising how businesses report on their sustainability. Most companies that use it are larger companies. However, as an SME, you can also apply GRI standards to your organisation. They can be used by any organisation, large or small, private or public, from any sector, location, or reporting background. Using these reporting standards will give you clear and comparable information to present to your clients. They can then easily compare your standards to those of others. These standards will also help you to set priorities, create accountability, and identify and manage long-term risks.

The GRI website has a resource centre that provides more information about reporting sustainability performances for different sectors in different countries and even in different languages.

ISO 14001

ISO 14001 is an internationally agreed standard on environmental management. It sets out the requirements for an environmental management system and helps organisations improve their environmental performance through more efficient use of resources and reduction of waste.

UN Global Compact

UN Global Compact is the world’s largest corporate sustainability initiative. Their goal is to align the strategies of larger companies with universal principles on human rights, labour, environment and anti-corruption. UN Global Compact is aimed at large companies, but their website can still serve as an inspiration. They have a section dedicated to the environment that helps companies address environmental challenges. You can also visit their Country Networks page to get an understanding of what responsible business means in different countries.

6. Incorporate green principles in your code of conduct

A Code of Conduct (COC) is a set of guidelines adopted by an organisation to address what behaviours are expected and appropriate. Every company should have a COC.

Your COC should include information about:

• The values your company believes in;
• Guidelines for behaviour;
• Day-to-day business practices;
• How your employees should interact with outside parties.

Most COCs in the ITO and BPO sector are 80% about social issues and 20% about green issues. For example, see AddNode Group’s COC. Green topics in their COC include their contribution to the circular economy, adjustments to their office space, and their travel policy.

Some companies have a COC for their suppliers too. This gives you an idea of what these companies expect from their suppliers when it comes to topics like environmental and social responsibility. You can also write a supplier COC for the companies you buy from.

7. Find funding, investors and/or partners

There are many initiatives by governments, companies, and organisations that aim to make the world a ‘greener’ place. Many of them are directed at - or at least involve - technological inventions. These funds can support your company in your journey towards becoming a greener company, or they can fund your green innovation.

The support other parties offer can be financial, but also educational. These parties can also help connect you to the right information or the right people.

Country funding

Several government initiatives in Europe aim to stimulate green innovation involving software. 

The NL-ECO programme aims to reduce the energy consumption of computers via green innovation. In 2022, this Dutch government-funded initiative awarded funding amounting to about €9.5 million to 12 research projects through the Open Technology Programme. Other companies and organisations contributed a further €2.5 million. 

The EU’s Digital Europe Programme focuses on supercomputing, artificial intelligence, cybersecurity, digital skills, and ensuring digital technology is used across the economy and society. It aims to help bring digital technology research to the market for the benefit of European citizens and businesses, especially SMEs. The programme’s investments support Europe's goals of becoming more environmentally friendly and digitally advanced and help to make Europe stronger and more independent.

These initiatives provide important support and funding for green innovation involving software, helping to drive the development of new technologies and solutions to tackle climate change and promote sustainability.

Crowdfunding

You can attract investments through crowdfunding. Fundable defines crowdfunding as a method of raising capital through the collective effort of friends, family, customers and individual investors via online channels, such as social media and crowdfunding platforms. By making use of different European crowdfunding platforms, you can find potential investment partners based in Europe and raise capital to help develop business ideas further.

Take a look at sites such as Crowdsourcing Week and Silicon Canals to learn more about crowdfunding and to find the best European platforms. Different countries use different platforms.

Greenly works with investment portfolios that align with ESG values. Individuals, companies, or organisations can use green funding to create products or services with environmentally friendly practices, or any product or service that has the goal to reduce its overall carbon footprint.

Examples of companies that use green funding are renewable energy companies, companies that purchase renewable energy sources, organic farms, and manufacturers of products that are created with clean technology and contain little to no synthetic chemicals that could negatively impact the environment.

Recommendations

Look for government grants and subsidies

Many governments offer grants and subsidies to companies that are investing in sustainable technologies and practices. Check with your local or national government to see if there are any programmes that your company may be eligible for. Green Climate Fund has programmes that fund projects in developing countries that contribute to lower emissions and/or climate-resilient developments. Other similar funds are initiatives such as the Green Guarantee Company and the EU’s Global Gateway. These examples and more can be found in this article by Impact Investor.

Seek out impact investors

Impact investors are individuals or organisations that invest in companies that are making a positive impact on society or the environment. Look for impact investing networks or platforms that specialise in the IT sector, such as the Global Impact Investing Network.

Research sustainability-focused accelerators and incubators

There are a growing number of accelerators and incubators that focus on supporting companies that are developing sustainable technologies and practices. Look for programmes that specialise in the IT sector, such as Climate KIC and the Cleantech Open.

Connect with industry associations and networks

There are many industry associations and networks that focus on sustainability and green technologies. Joining such a group can provide access to funding opportunities, as well as to valuable connections and resources. Examples are: Bitkom, NL Digital, Tech UK, BIMA, Association of British HealthTech Industries, African Agricultural Technology Foundation, Global Sourcing Association, German Outsourcing Association, and Sourcing Nederland.

Participate in sustainability competitions and challenges

Many organisations and companies host sustainability competitions and challenges that offer funding and other support to companies that are developing innovative solutions to environmental challenges. Look for opportunities that are relevant to the IT sector, such as the Cleantech Open Ideas Challenge. 

Globally Cool carried out this study in partnership with Laszlo Klucs and Christian Vezjak on behalf of CBI.

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