Europe wants to know – What do cloud companies stand for? – Chapter 4: Sustainability

Europe wants to know – What do cloud companies stand for? – Chapter 4: Sustainability

The European Green Deal is the EU’s collective vision to achieve a climate neutral continent by 2050, while still maintaining vigorous economic growth. As EC President von der Leyen has put it:

“The European Green Deal is our new growth strategy – it is a strategy for growth that gives more back than it takes away.”

Cloud computing has come under legitimate scrutiny for the amount of electricity consumed by data centers, which in Europe alone contain several million servers. According to some estimates,  the world’s datacenters collectively may consume as much as 1% of the world’s electricity. All of the leading cloud providers, both the global hyperscalers and the regional champions in Europe, have made major commitments to transition their datacenters to renewable energy on a rapid schedule, with most promising to reach 100% renewable energy by 2025.

Data source: IEA    Chart source: DW

Cloud providers assert that their datacenters are many times more efficient than the on-premise datacenters operated by individual enterprises or government agencies, due to their tremendous economies of scale and highly optimized designs,. A remarkable study by the OECD’s International Energy Agency shows that, due to the rapid progress of the cloud industry in making its datacenters more energy efficient, the share of the world’s energy used by the cloud has stayed flat in recent years even as Internet traffic has soared.

The reality is that scope 2 emissions, the indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling, from datacenters are far from the biggest source of greenhouse gas emissions by cloud providers. Rather, their biggest emissions sources are their supply and demand chains, which in the standard terminology of environmental reporting are called scope 3 emissions. For example, the scope 3 emissions of Amazon’s vast retail business dwarf the scope 2 emissions of the datacenters of AWS, Amazon’s cloud arm and the world’s largest cloud infrastructure service provider. Amazon reports that in 2020 its emissions from purchased electricity were less than 10% of its total emissions, which measured 60.6 million metric tons of CO2 equivalent (this standard metric is often abbreviated as mmt CO₂e). A similar story holds true for Microsoft, where scope 3 emissions due to consumer use of its game consoles and the carbon-intensive construction of new datacenter buildings were far larger in 2020 than the scope 2 emissions due to electricity purchased to operate the servers in those datacenters. Microsoft’s total emissions in 2020 were 14 mmt CO₂e, of which scope 3 supply and demand chain emissions accounted for nearly 98%.

All the leading cloud providers have committed themselves to specific carbon neutral or even carbon negative objectives. Amazon has pledged to be net zero carbon by 2040, which is an admirably ambitious objective given the staggering scale of its physical warehouse and delivery operations. Pure technology companies have an easier time of it because they don’t have the burden of Amazon’s retail business. German software giant SAP says it will have a net zero carbon footprint by 2023, an aggressive schedule perhaps aided by the fact that its cloud operations are far smaller than those of the global hyperscalers. Google has pledged to be net zero by 2030, while Microsoft has gone a step further and pledged to be not simply net zero but actually carbon negative by the same year. Since it won’t be possible for the company to eliminate all direct and indirect emissions by then, this pledge means that it will actually have to invest in services that remove carbon from the atmosphere. The Climate Neutral Data Center Pact is another interesting industry initiative in support of the European Union’s Green Deal, in which most of the players in the industry formalize their pledge to reduce emissions and consumptions.

Beyond the carbon footprint of cloud providers themselves, cloud as an important role to play in the green transition of other industries. An Accenture report notes that migration to the cloud can significantly help reduce emissions. Data centers and servers of cloud providers are more energy efficient than on-premises capabilities of most companies, meaning that they will produce less GHG for the same amount of computing power. That will be particularly true as cloud providers move to carbon neutrality. While harder to quantify, cloud computing also enables efficiencies for companies such as enabling easier work-from-home – a trend that we all experienced during the recent pandemic – or enabling collaborative work across several geographies, therefore reducing business travel needs. Lastly, by providing cheaper and more efficient computing power to other companies, from AI start-ups to logistics giants, it will play an important role in developing the new technologies that will be needed for the green transition.  

Addressing the climate change challenge is going to require collective action on a global scale over many years. The cloud industry has much to offer by way of both innovation and investment, and it is only right that the nations of Europe should have high expectations for the contributions of this industry.