Covid-19 impact: WFH turns out cheaper and greener for IT companies

What does work from home (WFH) in the times of Covid-19 and hiring locally have to do with carbon emissions of top tier IT companies like Infosys, Wipro, TCS, and Tech Mahindra? And why does carbon footprint matter for their business?

Indirect emissions account for a major chunk of emissions by Indian IT firms. Business travel and commutation, together, are a key reason for it. If travel and daily commuting go down, so does carbon emissions.

Covid-19 forced IT firms to opt for the WFH model. And increasing visa restrictions in the markets like the US have been pushing them to source employees locally, reducing business travel. These, of course, have led to cost savings. But an unintended consequence is that the forced measures have brought down carbon emissions.

An increasing number of global companies are asking potential vendors for details on their carbon emission performance not only during the bidding process but also in the initial selection process. The performance of this front can now be the difference between winning and losing a bid.

IT majors, such as Infosys, are already giving information on their carbon emissions in bidding proposals. They say the failure to manage carbon footprint may adversely impact their ability to compete and win contracts. Tech Mahindra’s Chief Sustainability Officer Sandeep Chandna said: “There is a surge in the number of clients asking for the data on emission,energy, water, and waste during the bidding.” The firm aims to cut emissions by 22 per cent by 2030. 

Wipro, on the other hand, said it was too early to draw a trend.  Infosys, however, declined to participate, and TCS  did not respond to queries.

According to Bernstein, 50 per cent of Infosys’ emissions is indirect. And 80 per cent of the indirect emissions is due to business travel and employee commutation. In the case of Wipro, travel and commute account for 37 per cent of its carbon emissions. For Tech Mahindra, 26.8 per cent of its emissions is from indirect emissions.     

According to NASSCOM, 95 per cent of IT firm staffers were working from home during the lockdown. This percentage was as high as 99 per cent for TCS and Infosys. Tech Mahindra reduced commute by 90 per cent in Q1FY21 from that in Q3FY20.

IT firms are also increasingly hiring a local workforce in the onsite market to avoid the issues related to visas and also to reduce travel costs. Infosys, for instance, has announced that it would hire 12,000 more local employees by 2023; it already has two-thirds local staff members in a country.

NASSCOM said most top IT companies already had over 50 per cent their employees recruited locally onsite. As many as 337,932 jobs for locals were created in the US by Indian IT players, estimated NASSCOM. Also, Indian firms are increasingly hiring sub-contractors at onsite locations.  

Sangeeta Gupta, senior vice-president and chief strategy officer in NASSCOM, said:  “We had 4.5 million employees in the IT industry who commuted to work or were undertaking business travel every day. In the past five-six months, WFH, apart from growing local recruitment and increase in sub-contracting, has not only reduced travel, but also definitely led to a fall in carbon emissions. ”  

Gupta said while the current WFH  scenario may not be sustainable, the industry expectation is that a third to a quarter of employees working from home is going to be a reality.  

WFH and other initiatives have helped Indian IT firms reduce travel costs as a percentage of revenue. According to Bernstein, in TCS, it was down 0.7 per cent in Q1FY21, against 2.1 per cent in Q3FY20 or before the Covid-19 lockdown. Wipro and Infosys bought it down even more steeply: In Infosys, it went down from 2.3 per cent in Q3FY20 to 0.4 per cent in Q1FY21; in Wipro, the number came down from 3.2 per cent to 0.9 per cent.