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                                                               HP Products Built to Protect the Environment

                                                               Sponsored by: HP



                                                               Jean S. Bozman                  Crawford Del Prete



                                                               CONTRIBUTING ANALYSTS

                                                               David Daoud                     Matthew Eastwood            Monique Gibelli

                                                               Chris Ingle                     Jed Scaramella              Raj Dalal

www.idc.com









                                                               February 2007





                                                               EXECUTIVE SUMMARY

F.508.935.4015









                                                               Eco-responsibility is an increasingly important item for customers. While the term

                                                               "eco-responsibility" may have different meanings for different customers, it's clear that

                                                               what was once an aspiration is now becoming more central to business planning and

                                                               purchasing decisions.

P.508.872.8200









                                                               Customers are becoming mindful of the ways in which their operations affect the

                                                               environment. This includes labor decisions, parts sourcing, research and

                                                               development (R&D), as well as in their IT decisions. While this paper focuses on the

                                                               role of IT and environmental responsibility in the enterprise, this new sense of eco-

                                                               responsibility is true for all customer types, including consumers. In fact, consumers

Global Headquarters: 5 Speen Street Framingham, MA 01701 USA









                                                               today are more aware that their everyday decisions impact the environment.



                                                               This paper outlines why these efforts are important, and what one supplier, Hewlett-

                                                               Packard, is doing to increase customers' ability to support eco-friendly initiatives.

                                                               Specifically, these initiatives address:



                                                               ! A global supplier code of conduct and partner programs ensuring compliance

                                                                 with environmental regulations and stakeholder expectations



                                                                    Energy efficiency and reduction in power/cooling requirements for HP products

                                                               !



                                                               ! A robust asset-recovery services program that protects the environment through

                                                                 reuse and recycling of IT products and safe disposal of hazardous substances



                                                               As an early supplier of eco-aware technologies, HP climbed a learning curve starting

                                                               in the 1990s and then leveraged what it learned to accelerate its program in recent

                                                               years. Importantly, HP's large PC and printer product businesses provided it with

                                                               early insights into developing products with environmental impacts in mind � and

                                                               programs to prevent environmental damage via reclamation of used products, proper

                                                               disposal of older products, along with supplier programs to ensure restricted materials

                                                               are not used in the components on which HP's products are built.

It's important to note that these efforts go far beyond any one aspect of eco-

responsibility. They span the entire product life cycle, from design to disposal. At each

stage in acquiring and using a product, customers have important decisions to make,

such as:



! Is this product consuming too much power?



! Can I easily and securely dispose of it?



     Will my data be properly protected?

!



Without proper planning, these can be very intimidating and expensive questions to

answer. However, with some forethought, these questions can be the basis for a very

strong customer eco-responsibility strategy that can not only help customers with real

business problems, but also be a basis for competitive differentiation.







SITUATION OVERVIEW



Introduction



Environmental friendliness has become a requirement for IT vendors. No longer a

"nice to have," eco-friendliness has been mandated by regulatory bodies around the

world. But this is only part of the story; importantly, it is also a matter of economics for

vendors and their customers.



Economic issues take two primary forms: operational costs and end-of-life disposal.

In a world in which a high dependency on fossil fuels is driving energy costs skyward,

concerns about operational costs associated with power management and cooling

have become top of mind for many businesses. As landfills approach or reach their

capacity around the world, businesses are seeking easier methods to dispose of

products following their useful product life. Many assets can be repurposed,

extending their end of life while bringing some recovery value to vendors and end

customers. Other assets can be recycled in order to reclaim valuable components

and raw materials.





Building for the World, Designing for the Future

Environmental considerations are becoming a "must" for IT products and consumer

products worldwide. In mature and emerging economies alike, IT users are realizing

that environmental consciousness is critical to the global economy. More immediately,

they are realizing that environmental consciousness brings very real business

considerations for them as well, such as reducing operating costs by reducing their

energy consumption requirements.



In addition to rising energy costs, customers pay for other "hidden" fees associated

with manufacturing. For example, regulations regarding the proper disposal of product

materials containing restricted substances are now in place across major geographic

regions. Improper end-of-life disposal can result in additional costs when products

reach the end-of-life stage and must be disposed of, repurposed, or recycled.









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Further complicating matters, the regulatory situation varies across geographies, with

leading roles played by regions such as Europe where governments and citizens alike

have long recognized the need to tackle the environmental effects of human activity

to reduce greenhouse gas emissions. Realizing that climate change is a global

problem over which it has only limited influence, the EU is looking to use its

considerable trading power to bring change via market mechanisms that include

consumers and businesses alike. A case in point is the British government report

recently released by Sir Nicholas Stern, which estimated the cost of global warming

could be up to 20% of worldwide GDP over the next century. This has resulted in a

number of EU initiatives including the RoHS directive to ensure that products contain

fewer environmentally restricted substances, initiatives to limit power consumption in

datacenters, and implementation both of carbon and emissions trading schemes.



All of this provides impetus for vendors to change the way they approach multiple

aspects of their offerings. In previous decades, considerations such as power and

cooling requirements or product end-of-life disposal may have been, at best,

afterthoughts during the design process; now, they are becoming forefront

considerations. New technologies are being developed to help customers monitor

energy use and to maximize energy efficiency. As environmental awareness

continues to rise, increased scrutiny will be placed on the eco-friendliness of

products. It is likely that even more improvements will be seen at each stage of the

product life cycle � from design through manufacture, installation, operation, and

retirement/disposal.





Eco-Compliance Driving Customer Buying Behavior

The days when customers are willing to pay a premium for products because they are

labeled as "eco-friendly" are over. However, it is clear that when there are

economically tangible benefits, such as reduced power and cooling needs, customers

are willing to consider the environmental impact of the products they buy. Additionally,

environmental regulations are widespread around the world, with some countries

requiring products to comply directly with lower carbon emissions, while others are

reducing the introduction of hazardous materials into the environment. As costs for

environmental compliance continue to rise and as these costs are passed on to

businesses and consumers, customer behavior will likely change with eco-friendly

products viewed in a more favorable light.





Designing Eco-Friendly Products from the Start

The effort to reduce environmental impact throughout an IT product's life cycle starts

with design. Careful materials selection and thoughtful construction lead to less need

for the removal of problematic material when products reach their end-of-life stage.

Working closely with supply chain partners triggers benefits in procurement of more

eco-friendly parts and materials. Designing for power and cooling efficiency reduces

demands on energy production as well as improving operating costs for the

enterprise.









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Worldwide Distribution Increases Burden on IT Vendors

Globalization of production and distribution brings global customers � that is,

customers that deploy the same product into all of their offices on a worldwide basis.

This has implications for IT product design and manufacturing processes: products

must be designed using parts and materials that can be sourced locally and

manufactured using processes that can be replicated in local factories worldwide.

These global processes ensure consistent quality across a worldwide distribution

chain. Equally important, products must meet the environmental regulatory

requirements not just of a single country or region, but of all major regulatory bodies

throughout the world. This increases the burden on IT vendors to design eco-friendly

products from the start and to design them to conform to all laws and regulations

everywhere.





Power/Cooling and Energy Efficiency



Power and cooling costs are climbing, inspiring some operators to locate datacenters

near hydroelectric plants, reducing utility costs for the datacenter and in turn leading

to lower costs that can then be passed on to their customers. But this is not a realistic

solution for most datacenters. With the explosion of servers and other IT products in

datacenters worldwide, vendors must step up to the challenge of keeping

power/cooling costs in check via environmental designs and new technologies.



IDC worldwide server research shows that the issue of power and cooling in the

datacenter has become a top priority for IT executives. As datacenters pack smaller

form factor technology into available spaces, they experience a twofold challenge:



! Dramatic increases in the power consumption of the IT infrastructure � IDC

  surveys show power demands surpassing supply in 40% of datacenters



! Requirements placed on the facilities organization to provide sufficient cooling for

  the heat load



Addressing these challenges requires the enterprise to adopt an integrated strategy.

On the technology front, there is the need to source systems and technology that

provide greater energy efficiency, while on the business side, enterprises must adopt

a more cohesive corporate philosophy toward energy conservation.





HP's Strategy for Eco-Responsibility



HP Legacy of Eco-Responsibility

HP has been paying close attention to environmental considerations associated with

its products for more than 15 years, and recycling its products for more than 20 years.

Leveraging its history as one of the first major vendors to place serious focus on

environmental responsibility, HP takes a holistic view extending from product design

to end of life and each stage in between. For a graphical depiction of these stages,

see Figure 1.









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FIGURE 1



HP Approach to Reducing Environmental Impacts and Engaging

Stakeholders Across the Product Life Cycle









Source: IDC 2007, adapted from HP









HP Playing a Leadership Role as a Global Citizen

Eco-responsibility can be seen as one aspect of continuing to do things "the HP

Way." This sense of responsibility, dating to the birth of HP in the 1930s, has been

extended to include programs that reuse and recycle materials. In the United States,

customers can donate working computer equipment through the HP Donate program

to the National Cristina Foundation (NCF) to be provided to people with disabilities.



HP is pursuing a wide variety of initiatives around the world. In Japan, over 600 HP

products qualify for the PC Green label, a certification established by the Japan

Electronics and Information Technology Industries Association (JEITA) to identify

products that incorporate environmentally conscious product design, manufacturing,

and end of life.



In Latin America, HP has channeled funds generated from inkjet cartridge recycling

programs in Brazil, Mexico, and Peru to support local initiatives. In Peru, HP is

working closely with the World Wildlife Federation (WWF) to help protect endangered

species. Similarly, in Mexico HP created a trust for the preservation of the wildlife in

collaboration with the Natural Resources and Environment Secretariat and Banamex.



As a manufacturer and vendor, HP has made significant progress in the area of

environmental impact � and HP works to continue to reduce that impact for the

products it builds. This includes working closely with its partner networks, which in

turn, affects the network of channel partners that distribute products around the world.

Further, by working closely with its partner networks, HP can respond quickly to

changes in the market. By sharing best practices with its partners, HP can have a

global impact for environmentally friendly products that is larger than its own product

"footprint" in the enterprise.









©2007 IDC                                     #205442                                      5

Product Design: Building in

Eco-Responsibility from the Start



For HP, reducing the environmental impact associated with its products begins in the

design phase. One example of this is materials selection. The goal is to reduce the

negative environmental impact of materials used in HP products and to reduce

power/cooling needs for products built using those materials.



Importantly, HP leverages the resources of HP Labs, with major Labs centers located

in the United States, Europe, and Asia to solve these complex challenges. For

example, the recently announced Thermal Logic technology incorporated into its

latest blade server offerings demonstrates HP's commitment to playing a leading role

using R&D to reduce customers' energy use and associated operating costs.



HP's commitment to environmentally friendly design can be further seen in its

development of Design for Environment (DfE) program, which supports the

development of products that exceed global regulatory requirements, and its adoption

of Design for Recyclability (DfR) standards to facilitate product disassembly and

recycling. These design practices help increase material and energy efficiency,

demonstrate conformance with international green procurement criteria, and ensure

effective recycling of products is possible at end of life.





HP Supplier Code of Conduct



HP's Supplier Code of Conduct is a foundation for the company's ongoing efforts to

ensure compliance with HP's Supply Chain Social and Environmental Responsibility

(SER) Policy. Demonstrating HP's commitment to minimize the environmental impact

associated with its product content and manufacturing processes, SER is a key

component the HP Global Citizenship initiative that has been in place for more than

four years.



HP started the SER Code of Conduct in 2002 and then recruited other companies to

join. Beginning with 50 top suppliers in 2003, the SER organization now includes 450

suppliers worldwide � addressing more than 90% of HP's supply-chain purchasing

needs. The top 5 points encompassing this initiative are:



! A clearly defined policy, vision, and direction supported by senior management



! Ongoing development and distribution of HP policies and standards, including

  the SER and HP's General Specification for the Environment (GSE)



! Conformity assessment and monitoring



! Corrective action planning based on continuous improvement



! Reporting results to internal and external audiences, including the publication of

  its Global Citizenship Report and local Social and Environmental Responsibility

  (SER) Reports









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Reducing Operating Costs Through Energy

Efficiency



For the past decade, HP has funded research and development initiatives to work on

products and solutions that deliver power and cooling initiatives. In 1996 HP formed

the "Cool Team," a companywide, cross-departmental team to focus on the

challenges of power and cooling. With an eye toward providing comprehensive power

and cooling benefits for the datacenter, the team made a holistic effort to examine the

issue at three different levels: the component level, the system level, and the overall

datacenter level.



Resulting innovations include power management systems, which automatically turn

off underutilized compute resources, and sensing technology with dashboards that

can play important roles in identifying systems that are developing hot spots or

exceeding thermal thresholds. These innovations have enabled HP to develop a large

number of energy-efficient products. For example, more than 1,000 HP products

qualify for the ENERGY STAR label, a voluntary energy efficiency program

sponsored by the U.S. Environmental Protection Agency and adopted by Australia,

the European Union, Japan, and Korea.





Innovations in Power and Cooling

One key innovation is HP Dynamic Smart Cooling, which HP recently announced and

expects to begin deploying by mid-2007. Realizing that ownership of only a portion of

the end-to-end infrastructure limits its ability to drive eco-friendly products and

practices, HP is building an ecosystem of solution partners to address power

efficiency and cooling interoperability. For its Dynamic Smart Cooling, HP is

partnering with EYP Mission Critical Facilities, a company based in New York with

U.S. offices in Chicago, Washington, D.C., Los Angeles, and San Francisco, and

offices outside of the United States in London, among other sites, and a series of

affiliate firms worldwide.



HP Thermal Logic is a technology that is already being built into HP's blade server

offerings. Incorporating an integrated approach to power and cooling, from processor

to enclosure design and from architecture to management, Thermal Logic pools and

shares power and cooling resources within the blade server infrastructure, then

efficiently delivers those resources based on the performance level required. It

enables IT managers to quantify power and cooling needs across the datacenter.

This ability to quantify these power/cooling requirements extends down to the level of

the individual server, where advances in power and cooling technology turn down the

temperature in the rack where many servers are housed, improving operational

efficiency.



HP Thermal Logic leverages a number of HP innovations, including Dynamic Power

Saver, to provide the most efficient use of power in each blade enclosure. Power

supplies are put in "standby" mode when the power demand is low and are

incrementally activated, balancing load requirements to ensure optimum efficiency.



There are cooling innovations as well. One is the Parallel Redundant Scalable

Enclosure Cooling (PARSEC) architecture, which splits each blade enclosure into

multiple zones. Sensors in each zone direct fans to manage blade temperature in







©2007 IDC                                     #205442                                     7

their particular zone, as well as to provide backup cooling for the entire enclosure.

Finally, HP Active Cool Fan technology leverages radio aircraft turbofan technology to

generate high-pressure differential airflow and provide dynamic levels of airflow to

match heat loads.



HP planners estimate that a large datacenter could achieve up to 20% energy

reduction compared with traditional power/cooling technologies. For a large

datacenter, this could prevent the release of up to 10,000 metric tons of carbon

dioxide compared to expected emissions levels from a comparable datacenter

running traditional power/cooling technologies.





Asset Recovery Services: HP's Approach to

Product End of Life



Long before these types of changes became mandated by governmental regulation,

HP embraced the requirement to address the "back half" of the product life cycle and

set up its Asset Recovery management program to offer customers eco-friendly

product end-of-life programs.



HP's Asset Recovery management program has three critical components:



! Elongate product life cycles through a refurbishing process



! Dispose of units that cannot be refurbished



! Extract useful components and materials from recyclable systems to use them

  elsewhere





Refurbishment and Reuse

Through its asset recovery service, HP handles the disposition of hardware products

using a strict auditing, testing, refurbishment, and resale or recycling process. The

ultimate path taken � refurbishment, resale, or recycling �- is based on the

condition of the hardware and its remarketability. For products that are remarketed,

HP shares the proceeds of its sales with its customers, extracting additional value for

the customer while elongating the life of the hardware. This is one of the ways in

which customers see an immediate business benefit from adopting eco-friendly

technologies along with their consumer or IT products.





Recycling and Recovery

For products that have outlived their usefulness, HP instituted a multiphase recycling

process that follows proper regulations regarding recycling methods and hazardous

materials controls. It includes sorting, shredding, and plastics and metals separation,

and provides transport and logistical services to guarantee the proper movement of

hardware to HP's facilities. Recycling is offered for a wide range of products including

servers, PCs, displays, peripherals, and print cartridges. The extracted products in

their final stage become raw commodity material recycled into other industries.



Whether the customer chooses to have its product remarketed or destroyed, HP also

offers a wide array of security services to ensure that the data residing on returned









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equipment is properly erased and destroyed. This ranges from secure disk wiping (as

mandated by federal requirements for data security) to physical drive destruction.



HP's recycling procedures are in strict compliance with local, regional, and

international regulations. In fact, HP has led efforts to establish proper recycling

policies in the United States, Europe, and in key markets where it operates. Further,

HP is looking beyond its own operations to those of its recycling partners by

implementing global reuse and recycling standards and by implementing a business

process to ensure that recycling partners conduct their operations in an

environmentally friendly manner.



In Europe, HP has been working with the EU and national governments, along with its

extensive channel partners, on the Waste Electrical and Electronic Equipment

(WEEE) directive to ensure it is implemented in a beneficial way. HP has taken a lead

in the EU by partnering with other companies to develop the European Recycling

Platform (ERP), a consortium of companies focused on developing and implementing

a process to collect and recycle waste electronic products.



In Asia/Pacific, HP participates in a number of regional initiatives such as Taiwan

Green Mark, an eco-label to promote recycling, pollution reduction, and resource

conservation, as well as Australia's Byteback program, chartered to divert end-of-life

computer equipment from landfills to environmentally responsible recycling.



HP has taken a leadership role in recycling printers and cartridges around the world.

In Australia, HP partners with Planet Ark in a program called Cartridges 4 Planet Ark

in which commercial and consumer customers have recycled more than 3 million

cartridges since the program's inception. In China HP joined forces with non-

governmental organizations to create Cartridges for Dragon Recycling, an initiative

that enables the return of end-of-life print cartridges for environmentally sound

recycling.



Such initiatives have helped HP recycle 750 million pounds (340,000 tons) of

computing and printing supplies to date, with a path toward recycling 1 billion pounds

(455,000 tons) by the end of 2007.





Meeting the Challenges



HP will need to overcome a number of challenges in designing, bringing to market,

and providing disposal services for eco-friendly products:



! Demonstrating business value. Like other vendors, HP will be challenged to

  show the business value associated with environmental considerations for

  product design, engineering, operation, and disposal. Customers will need to be

  educated on the economic benefits of items such as reduced operational

  expenses associated with energy efficiency.



! Making additional upfront investments to design and manufacturing

  processes. This will start with research and development (R&D), which can be

  addressed by HP Labs, and it will continue with factory fabrication processes that









©2007 IDC                                    #205442                                     9

     may require changes in the procurement of materials and assembly of

     components acquired from other sources.



! Reinventing some of the manufacturing technology already in place. This

  process is already underway, but it is by no means complete; furthermore, the

  requirement to continually meet new regulations means that this will not be a

  one-time effort, but rather an ongoing one.



! Maintaining its competitive position. HP's competitors in the IT and consumer

  spaces will also be working on the same sets of issues associated with the

  environment and energy efficiency. In a highly competitive marketplace, HP must

  continue to monitor the ways in which its competitors come to market and the

  product deliverables they provide.



HP can address these challenges, but it will come about through continued focus,

diligence, and effort. The company has already made a good start with initiatives such

as its Supplier Code of Conduct and continuing work with its suppliers, but it will need

to maintain its efforts to continue to meet evolving environmental regulations

worldwide.





Opportunities



HP's Environmental-Impact Efforts � Where It Can Go from Here

As it creates next-generation products, HP has the opportunity to build in benefits to

customers, manufacturing and channel partners, and communities around the world.

By employing a continuous-learning process, HP can bring improvements in materials

science, product design, and product manufacturing. These in turn can result in new

approaches to energy efficiency and in improvements in power/cooling.



Furthermore, environmental awareness will be literally "built into" the next generation

of consumer and IT products worldwide. It will be a key to getting business across

geographies � especially in places that have already gone down the path of limiting

or prohibiting the use of hazardous materials in consumer and IT products. As a

volume supplier both in consumer and business markets, HP has the opportunity to

build on its early experience in eco-friendly business practices and to replicate these

practices on a global basis.





Meeting the Needs of Global Markets

Perhaps the largest opportunity exists in bringing eco-friendly technology to fast-

growing emerging markets. Whether in the Americas, Europe/Middle East/Africa

(EMEA), or Asia/Pacific, emerging markets have the chance to "leapfrog" more

established markets and avoid the problems associated with products that were not

designed with environmental impact in mind. In addition, HP can extend its already

successful recycling programs to more emerging markets to demonstrate a continued

commitment to the environment.



Eco-awareness will also resonate with customers and prospective customers in more

mature markets, with the higher levels of attention customers in these markets pay to

reducing energy costs associated with power/cooling and as concerns about potential





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climate change grow. By tackling environmental issues early on, HP is well positioned

to replicate its earlier successes in a wide range of markets worldwide.







CONCLUSION

For decades, the IT industry has existed on the assumption that "more is better."

More processing power, more storage, bigger screens, bigger batteries, and lighter

composites, all have become core drivers of the industry. Until recently little concern

has been given to some of the larger questions facing these innovations, such as:



! Were these innovations created with the environment in mind?



! Can I legally and or cost-effectively dispose of them?



! Can I reuse any parts?



HP has taken a forward-thinking position in design and manufacturing for eco-

friendliness, based on its many years of experience both in the consumer space and

in managing product assets on behalf of IT end customers. Without compromising

performance or price, HP has given considerable thought to the overall impact of its

products on the environment, from the way they are designed, to how they are used,

to the most effective way for them to be discarded. Its eco-friendly focus is not about

any one step in the chain, or a "miracle" material or process that will make all disposal

problems go away. It's about finding ways to make incremental improvements in each

step of the chain. It's also about extending the thinking about the eco-chain itself, from

design to usage to retirement, to include every aspect of a product's life.



Eco-responsibility is a process that will evolve over time. It is important for customers

to understand that "kicking the can down the road" is not a long-term solution. In the

near-term, customers can realize the benefits of reclaiming and recycling assets that

can no longer be used. Further, customers with a holistic strategy to create a more

eco-responsible approach to computing will do themselves a great service due to the

operational benefits of being energy-efficient. While eco-responsibility will continue to

evolve in the future, it will not likely get any easier. The time to start is now.





HP Products and the Environment Document

Series



This white paper is part of a series of IDC documents commissioned by HP to discuss

its environmentally aware policies and practices. This series includes a core white

paper, HP Products Built to Protect the Environment, as well as standalone eco-briefs

focusing on specific product areas: product design, manufacturing, power and

cooling, and product end of life.









©2007 IDC                                      #205442                                       11

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Copyright 2007 IDC. Reproduction without written permission is completely forbidden.









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