Intel's Business Case for Carbon Reduction

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Greener World Media Contributing Writer Sarah Fister Gale met Dave Stangis of Intel last month while covering the Carbon Footprint Consumer Products Conference in Chicago. There, Mr. Stangis, who is Intel's director of corporate responsibility, spoke about the need to incorporate carbon reduction efforts into a company's business plan.

In this Q & A, Mr. Stangis will discuss the evolution of the company's carbon footprint and the challenges of making the business case for carbon reduction and efficiency improvements.

Sarah Fister Gale: Hi Dave. Tell me a little bit about Intel's efforts to reduce carbon emissions.

Dave Stangis: Our carbon footprint, for the most part, was made up of two major parts in our operations. One is something called PFCs or perfluorocarbons.

These are gases that we use in our processes. So they made up about half of our footprint. The other half was in the energy that we had to purchase. For a while now our total carbon footprint has been about 4 million tons of CO2, about half PFCs and half energy.

These PFCs are gases that have a high global warming potential, so a pound of PFC in the atmosphere has a lot more impact on climate than a pound of CO2.

So focusing on those would have a multiplier effect. The industry back in 1998 set up a goal to reduce these PFC emissions over the next decade or so and we've been working on that. That's what the early focus was on -- really driving down those PFC emissions. We made some great strides. We basically designed out those PFCs and designed in more environmentally-friendly materials.

SFG: Can you give me some examples?

DS: Not with chemical names but basically our process changed about every 18 months to two years. And we're designing and we're building those processes in with environmental engineers and setting goals probably two or three years before that.

So we have a group of environmental engineers sit with our process designers. They meet every quarter designing the next, and the next, process. They set goals for water use, carbon emissions, energy use, and to drive that environmental footprint down.

Then when it gets built into the system it then gets copied everywhere we go so we might have our first technology that is proliferated in Oregon, and then as we build those factories around the world, that built-in, better environmental design gets copied everywhere. And that's kind of how we've made these strides over the years.

SFG: Do you benchmark those efforts? Do you have statistics around the impact that they've had?

DS: Yes. There's two parts to your question. Number one is a lot of it is done with the industry. So, one of the things that we've tried to do in this -- because we're always at the front and because we have to invest so much capital and R&D dollars to be the leader in the semi-conductor industry -- we're always working with our competitors in the environmental health and safety space and even the suppliers, the people that supply the tools that manufacture our chips to try to make these improvements.

So it really is an industry-wide effort to try to drive these things down. There's actually a 10-year technology roadmap that the industry publishes publicly. It describes what we've done in that roadmap to try to drive these down. And we report -- to your question on indicators -- we've been reporting these numbers publicly both absolute and normalized now since that time in the late 1990s. We've been doing environmental reports since 1994, and corporate responsibility reports for the last six years.

SFG: When you say you work with industry together to achieve some of these efforts, this is a very competitive and secretive industry. How do you manage to get beyond the competition for the good of the whole?

DS: There's different parts to it. So, (on) the environmental stuff -- the environmental criteria and performance -- we've actually tried not to compete. The industry has been good about this, it's not just Intel. I have to give credit where it's due.

The industry's really tried to help each other improve in terms of environmental performance. The technology and how you get to the next level, or the next node on the technology cycle, is what's secretive. Equipment suppliers that supply equipment just say Intel or AMD or TI or IBM; they make equipment that serves the industry. They can't make equipment that only serves Intel or only serves IBM. It's too cost prohibitive to do that.

So working with them on ways to improve the environmental impact is where we share information.

We actually have this consortium is called Sematech. Each of the companies actually send their employees for a couple years to Sematech to go work on some of these environmental issues for the industry. And then they come back and we trade; those people come back to Intel and we assign new people to Sematech for several years.

We're actually working -- this is kind of related, but a little sidetracked -- we're actually working on a LEED standard, which is the green building standard, for fabrication facilities. We've assigned people to Sematech to help drive that industry.

SFG: Wow. That's exciting.

DS: Yes. It's going be great because right now we're stuck using existing building LEED standards to try to go back and retroactively certify our buildings instead of having one that's specifically designed for these complex buildings.

SFG: It's such a high energy-use industry.

DS: Yes, there's no doubt about it. The other half of our carbon footprint is energy and that's what we've been focusing on lately. But because it's so energy intensive, it's gotten a lot of attention in terms of driving it down. There's a lot of opportunity that's been taken advantage of in that energy space.

And the LEED standards cover so much more than just energy. It really is kind of a total sustainability. I mean, it's called a green building standard but it focuses on employees and materials and sourcing and everything else.

So just to touch on the second half, this energy piece. So, the PFC started early. They started to drive those down. Because we report the data quarterly inside the company to our executives, and actually we do it quarterly outside, you could see that the PFC half of the pie was getting smaller and the energy half was getting larger because we were continuing to grow and expand, and we were doing a great job managing our perfluorocarbons. So then we had to start focusing on the energy.

SFG: When was this? Around what time?

DS: This was probably 2003. There was always good conservation things going on but it was pretty clear that we needed to do more in energy. That's when we started to take our first public goals in terms of reducing energy use both in a normalized and absolute value. That's when we started to take a look at for the first time specific goals for our sites and specific initiatives outside the company.

We set up a capital funding program just for energy conservation projects that would help us find projects that didn't have the best payback period in terms of some of the other projects we were comparing them to but allowed us to drive some energy conservation efforts.

SFG: Can you give me some examples?

DS: Sure. There's a lot of work that's been done in that for the last five or six years. We spent $19 million on energy conservation programs in this special energy conservation capital funding program, and just last year the savings were $15 million. A lot of these things were focused on equipment inside the facility -- air handling units, chillers and things that we could build into the plant system and then copy everywhere else we needed to go.

So a lot of effort's there. As we're watching our data, we can see now a solid normalized reduction trend which means we're using less energy per chip year year after year as we go forward.

SFG: Is this mostly in new facilities or retrofit facilities, or are you going into existing operations and upgrading the technology so that it's more energy efficient?

DS: It's a little bit of everything that you mentioned. So where we can really hit it going into the new facilities is clear opportunity. Right? I mean it's built-in. It's lower cost and we can drive it going forward.

But a lot of the things that we've built or we designed (from) these special energy conservation projects have been in one facility that we then can go back and retrofit and then take it forward.

So there's a little bit of both. But we keep tweaking our goals, too. Our standing goal today is to reduce our greenhouse gas emissions per production unit by 30 percent from a 2004 level by the time we get to 2010.

SFG: Are you on track to achieve that goal?

DS: Yep, we're on track for that one and we're actually thinking about tightening that up and making it even a little bit more robust and extending the time period out to 2012 so it forces us to take even a longer-term horizon on it.

SFG: Let's talk about the business case for this. It is a tough sell to go to the leadership of Intel and say, "We need to make all of these changes. We need to invest these billions of dollars?" What's the payoff? What's the selling point?

DS: There's no doubt that we are scrutinized and we scrutinize these projects on a cost basis. So projects that don't have a strong ROI, and that might sound very good from a reputation standpoint, are a tough sell. If they're great from a reputation standpoint but have a positive ROI, they're much easier to sell.

We're a data-driven company. Everything is built into a system here. If you want to change things -- which a lot of these projects do, they changed the way we do business last year and they're changing how we do business going forward -- there's actually a change control process. You have to describe, "I want to install this piece of equipment. It's gonna cost this much money. The payback period is this period of time."

All the capital costs have to be defined up-front. There's very few things that we have done over the years that have been just because it sounds good or it might look good somewhere.

There are things that we've done at our sites where really working with the community makes a lot of sense for the long-term viability of the company. But these energy conservation projects, the ones we've put in place, have a positive ROI.

SFG: Was that surprising? Do you think that other companies might not assume that they have a positive ROI?

DS: This is complex and I don't want to point to any company in particular. But energy, once you get beyond the PFC stuff, when you're talking about energy it sounds like it's a uniform playing field but it really isn't. It's unique to where you're doing business. It's unique to the cost you're paying for your energy today. In Intel's case, we've been doing business for almost 40 years now and in a lot of our locations, we have long-term energy contracts.

So, for example, in Arizona or California or New Mexico where we do business, we may have negotiated a pretty good price for energy for a few years.

Where in the marketplace, some new entrant to that location might put up some solar panels and get a lot of press. Positive, right, because he's doing something in solar? But they would have been paying much more than we were to begin with so the switch to solar is much more of a switch from one source to another.

For us, at our negotiated energy prices, a lot of times we'd love to do things like solar or renewable power in some places but the cost is three or four "X" what we're paying already. That's the kind of thing that doesn't make sense. We'd really love to do it if it did.

SFG: Again, how do you make the business case for reducing your energy use if you're getting energy for low prices?

DS: There are smart ways to do it. It doesn't matter if we're paying a penny per kilowatt hour. We focus much more on conservation than on the renewable and offset path.

Even today, I think, if you had a philosophical argument, (with) conservation, you can see where that makes a real impact and it's not trading some impact across industries or into different geographies.

So we've focused on conservation for years. We're actually looking at some renewable strategies today and different things, but we've always focused on conservation because those are dollars you can count. What I spend today if I conserve 10 percent of my energy cost -- this is my savings.

Even with that, we're still the largest renewable purchaser of power in Oregon and one of the largest in New Mexico because those states have set up ways for us to participate that isn't a loss in cost. We're able to work with them within our own existing cost structures and still contribute to the market in those states.

SFG: Do you think in being able to make that business case, and showing to the world, especially in these industries that are such energy consumers, that it is cost-effective to go after these conservation efforts and that it's going have a larger impact (than) in (only) selling the "It's just what's good for the environment?"

DS: I don't think there's any doubt about it. I know there's no doubt in our minds here. I think that one of the things that's hard to tell, and you may have picked up on it at that conference, is there's so much out there now it's hard to tell what's real, what's not.

Is one company's announcement better than another company's announcement because they both sound great. You know, if two companies are carbon-neutral, which one is the better carbon-neutral company?

Focusing on conservation and driving the business case I think is really important. I know when I have interviews with Forbes or Fortune or the Wall Street Journal, they're always asking, "So what's in it from the financial aspect? Why do businesses do this?"

They know that more businesses do it today because it makes sense from a reputation standpoint. It's good for your perception. But they still know businesses just can't do everything they want to look good. They have to be focused on this business case, this financial analysis. That's what they're trying to get at.

Also, when we go to different countries or to different states to locate, we're still the kind of industry where those locations compete for us. They know Intel has a good name. They know that we work a lot in our communities and our employees are positive impacts to where they work so we're often courted in different places.

But you have to manage those relationships in a positive way if you want to remain a favorable neighbor. So there's a lot to it than just the cost impact. You want the community and you want the local governments and the economic infrastructure to value your input. But still when it comes down to it, the company has to decide these things on a cost-basis.

I think what we've tried to do is really shift. Our biggest impact I think is shifting from this "right now" cost. Am I saving money today or am I willing to put some capital investment in place today that will save me money in the future?

That's the thing that this conservation fund was set up to do is to push out that payback timeframe. We don't do things that are losers in terms of money. We're not going to do something that is clear on paper that it's a clear loser in terms of our profits and that it will hit our profits and we can't pay it back.

But what we will struggle with is deciding between a project that has a six-month payback period or a three-year payback period.

SFG: How do you make that business case to Intel leadership?

DS: It's tough. It's a challenge. I think a lot of what goes on today is really describing to them the impact. The energy conservation fund is one thing. That was actually set up to push that window back from six months to something longer.

But if you want to do something beyond that, it really does take getting the senior leaders of the company together in a room or on the phone and talking about the value -- just beyond the dollars -- of some of these efforts that we're doing.

A lot of the efforts in the citizenship space or the CSR space require minds that come together from a sales and marketing aspect, an operational aspect, an employee workforce aspect, and a technology aspect. They almost all have to come together. One person may say, "Alright. For me, this is really valuable."

Another person may say, "You know it's going to cost me a little bit more but I see the value you're going to see in three years out."

You have to bridge the gaps that most companies have in place already today. These decisions require input beyond the normal business group silos. And that's why they're so challenging.

SFG: Let's go back to more of the hands-on efforts and results. It's great to say, "Let's reduce our energy use by 30 percent." But how do you do it? How do you identify those areas in your business model that are the most energy consuming and then just go in and fix them?

DS: Well, for us it might be a little bit easier than other companies because we're so data-driven. We measure everything. We have 90,000 people around the world, 50,000 still close to working in the manufacturing and the engineering aspects of the company.

We're measuring the energy in and out of all the pumps and all the systems. The factories are on 24 hours a day. There's a lot of automation. There's a lot of data there to work from and we have pretty good pareto of where the energy uses are in our factories.

So we might say, "Oh, the air handling units take up 40 percent of our total energy bill, or lighting is 10 percent, or heating and cooling is something else." We have all that data at our fingertips and we know what it is 24 hours a day. We know what it is per building, per factory.

SFG: So how do you change it?

DS: Well, it gives us exactly what to go focus on so then our engineers can go take a look at ways to optimize that pareto. Which ones has the largest piece of the pie? Then our engineers go and actually take a look at ways to work on it. And we will take a look at the - pick one, for example - the conditioning of the air in our factories.

That's huge, right? I mean all these clean rooms are super-clean. They have laminar air flow. It's a big focus effort. It takes a lot of energy to maintain those environments.

So (we're) getting our engineers together with all the equipment that touches that air and all the suppliers, whether it's the conditioners, the humidifiers, the air flows, the heaters, the chillers. It's getting those people together and trying to find ways to pull energy out of the equation. And that's exactly what they do. They work and they actually compete.

Even inside our company we have one site that wants to be more energy efficient than another site. Our Ireland site has won some great energy sustainability awards in Ireland the last couple years for chillers in air conditioning impacts. And they take that and they copy it across the rest of the company.

SFG: So one last question, what advice do you have for other companies within your industry or in other industries on how to be successful?

DS: You can see this kind of playing out almost daily in our industry. People are actually sharing information. They're sharing benchmarks.

First, you have to be able to measure your footprint. You've got to know what it is. You've got to know what it is from the operations, from the products, and the best you can get it in terms of your total climate impact on the planet.

That might involve things that are harder to get, such as your employees or your logistics, but if you focus on your operations and your products first, get that down, then you can take a look at it. You can (then) do those prioritization methods that I described, such as taking a look at the biggest piece of the pie and focusing on it.

But once you get that part, the next level really is taking a look inside your sector. Companies are competitive. The people that run companies are competitive and people like me can use that competitive nature to drive performance in the company. So if I can share within my company something that one of our competitors is doing better than us, it'll drive a lot more improvement in here. Really getting that information out and sharing it. The high-tech sector is good in terms of sharing information.

I can go take a look at Sun and I can take a look at IBM and HP and Dell and TI and AMD and see what they're doing in terms of energy conservation. How are they managing it? Where they're making their big strides? Even what they're announcing and how they're advertising. And they can do the same thing for Intel.

SFG: So you're using your competitor's efforts and successes to spur competition within your own organization.

DS: Exactly. That's the exact same thing that's happened in the petrochemical industry. It's the exact same thing that's happening in the automotive industry. So (the) first thing, in industries that are coming to this, you first have to get your footprint and then start sharing it.

That's what will really drive improvement, competitive improvement. There's going to be legislative drivers. There's going to be regulatory drivers around the world. There's going to be cap-and-trade systems put in place like there are already in other places in the world, so there's going to be that environment.

But between the consumer driver, the competitive advantage in the marketplace and the competitive nature among companies, that's where all these announcements are coming from. Companies aren't announcing them just because. They're announcing (them) because one of their competitors announced something similar and they want to beat them or do better than they do. Or they want to differentiate themselves in the marketplace.

Those are the things that drive companies. Regulations can change the way companies behave but they don't drive companies to be better.

SFG: You say the first step is measuring your carbon footprint. What is the best place to start, if you're a company that has no idea?

DS: There are consultants that do this, and without naming them, you could find them. You could just search for carbon footprint or carbon accounting.

But the best thing, the simplest to do, is really get together with your local utility. That's the easiest thing to do. Basically take your meter, take it from beginning to end or get it on one day and measure it at the end of the day, or by month, and then they can help you then with their mix. They can give you the calculations in term of what your carbon footprint is as a company or as a business. Even as a service provider, you're gonna have a carbon footprint.

And they can help you determine what that is and then you can start to work on it. Start with your operations, and then take a look at what you provide in terms of the materials you buy, the services or the products you sell. Start with your operational footprint then move onto your products.

There are a lot of consultants out there that make a business in this now but I think, even small business can do something. They can just sit down, take their bill, have a phone call with their electrical utility and determine their carbon footprint and start working on it.

Sarah Fister Gale is a contributing writer for Greener World Media. This article originally appeared as a podcast on GreenBiz Radio.