WHY COVERING THE ENERGY NEEDS OF DIGITALIZATION SUSTAINABLY IS IMPORTANT

When the world locked down it also logged on, and the rapid digital adoption brought about by the Covid-19 pandemic will continue into the recovery – and beyond. But powering the new digital normal sustainably means taking a long hard look at the energy we use, and as companies are increasingly forced to report on climate emissions all the way along their value chains, they can no longer afford to ignore the environmental impact of the new digital economy.

Covid-19 turned digitization from a “nice to have” to a “must have”, and many of the quick fixes humanity came up with to keep the economy going during pandemic lockdowns look to be here for the long haul.

As Microsoft CEO Satya Nadella put it at the beginning of 2020, two years’ worth of digital transformation happened in two months – and the momentum has continued. Millions of people around the world have been introduced to online services including mobile banking, telemedicine, food delivery, online education, e-commerce, digital streaming services, and social media – and they don’t want to go back.

According to a global survey of executives conducted by McKinsey, companies around the world have sped up the implementation of remote working and collaboration capabilities by as much as a factor of 43 compared to business-as-usual estimates without the crisis. They’ve also accelerated the adoption of digital technologies for advancements in operations and business decision-making by a factor of 25.

And even though many businesses are now implementing phased returns to the office, more flexible working structures are to be expected in the future, with a sizeable proportion of employees saying they want to work from home more often. 

The pandemic has fundamentally changed the way we work, shop, and conduct our day-to-day lives. 

Electric clouds

This flight to digital means a huge upswing in investment into Information and Communications Technology (ICT). A recent report by KPMG found that two-thirds of global organizations have accelerated their digital transformation strategy, with 63% boosting their digital transformation budget. As a result, according to research by Western Union and Oxford Economics, the value of ICT services is projected to increase by 35% by 2025.

These ICT services – networks, servers, storage, and applications – are overwhelmingly based in the cloud. Take-up of cloud computing is forecast to increase exponentially, from US$1.3bn in 2019 to US$12.5bn by 2030, according to BloombergNEF.

This new, cloud-based digital economy is fueled by electricity – and lots of it. Just one data center can use enough electricity to power 80,000 US households, and collectively, these spaces currently account for approximately 2% of total US electricity use.

The carbon emissions from tech infrastructure and the data servers that enable cloud computing are now greater than those caused by air travel pre-Covid, according to a report from The Shift Project. And with IT-sector-related electricity demand expected to increase by nearly 50% by 2030, the French think tank says these emissions could continue to grow at a rate of 6% every year. 

Big tech goes green

Last September, Google pledged to power all of its data centers and campuses with “carbon-free energy” – such as solar – 24 hours a day, by 2030. Microsoft has made a similar commitment – saying that it will be “carbon negative” by 2030. Amazon, which runs the AWS Global Cloud Infrastructure that provides the backbone for much of the world’s websites, said that it, too, will aim for “net zero” by 2040.

However, not all of the pledges being made by technology service providers are equal. There are many ways to reach “net zero”, but not all of them have an equivalent impact on climate change.

To tackle this, a growing number of tech service providers have committed to power purchase agreements (PPAs) that include an additional requirement. These not only ensure the generation of new renewable supply but also come with a certificate of origin stating that 100% of the energy used within the facility is derived from renewable sources.

This isn’t just good for the environment – it’s good for costs, too. Ultimately, renewable energy is now cheaper than fossil fuels in most markets, and because electricity is the main outlay for data center service providers, by using solar or wind power, they can keep costs down in the face of soaring demand.

Scope 3 emissions

Oftentimes, data centers are sited many miles away from their end-users. But this doesn’t mean that companies can afford to ignore them. The new Scope 3 emissions reporting requirements mean that corporations now need to calculate their entire greenhouse gas footprints from everything involved in their business – including upstream suppliers and downstream functions.

If a business uses technology – and, thanks to the rapid digitalization brought about by Covid, this means almost every business – now needs to account for the emissions associated with the companies that deliver their software and services.

Numerous cloud computing services providers have begun to provide insights into the carbon emissions of their infrastructure, to help companies make more sustainable decisions. The Microsoft Sustainability Calculator, for example, enables companies to quantify the carbon impact of each Azure enrollment, while Google Cloud has launched a new Carbon-Free Energy Percentage (CFE%) tool that lets users see which data centers are cleanest and allocate workloads, where possible, accordingly.

A sustainable digital future

At Atlas, although we accept that the digital economy will require significantly more energy in the future, we don’t believe it necessarily has to lead to more CO2 emissions. There is another way – and, as we’ve discussed already, some tech leaders are already charting a path forward.

As more and more companies join the post-Covid digital revolution, it is vital that they be aware of the cl
imate impact this entails, and take steps to reduce it where possible. By selecting technology service providers that are transparent about their energy usage and that have committed to using 100% renewable electricity, companies can play a role in ensuring that the new digital economy is as sustainable as possible.