Sustainable IT and the Case for Carbon Accounting

 With the threats associated with climate change, IT sustainability is an initiative that is becoming imperative in today’s IT organizations. This initiative is often driven by corporate-level sustainability and responsibility efforts, rippling down to the CIO and their direct reports. In fact, across companies, IT leads the pack with the highest rate of sustainability adoption (75%), outpacing all other departments. For most companies, environmental sustainability and carbon accounting is a top priority in the IT domain. This emphasis stems from the rapid growth in spending on software and cloud services, accompanied by the consequential inefficient power consumption and computational resource requirements.

Leaders in IT sourcing, procurement and vendor management also hold considerable influence by integrating environmental objectives into software and cloud contracts. A substantial 93% of companies factor in sustainability considerations when making IT purchase decisions, with 58% incorporating these considerations into the majority (43%) or all (15%) of their spending choices.

Carbon Footprint Explained

A carbon footprint, or the footprint of greenhouse gas (GHG) emissions, serves as an indicator for comparing the overall volume of greenhouse gases emitted by an activity, product, company or country.

Note that we often talk about carbon footprint or carbon emissions, but other emissions lead to global warming, so generically we should talk about GHG emissions. These emissions are typically converted into carbon equivalents (CO₂ equivalent or CO₂e) so that we can simplify tracking and calculation by only talking about carbon footprint.

Carbon Footprint Accounting

The Greenhouse Gas Protocol (GHG Protocol) serves as the foundational standard, establishing the taxonomy and guidelines for carbon footprint data. It is the de facto standard for carbon footprint accounting that most, if not all, regulatory bodies refer to in their directives for corporate sustainability reporting.

As an introduction, the GHG Protocol defines three scopes for emissions represented in the image found below:

Image Source – GHG Protocol

While it is not required to understand the details of the GHG Protocol for this article, it is beneficial to have a basic understanding. For clarity, below are the examples within IT for each of the three scopes.

• Scope 1: Emissions you burn within your company to operate your business. For example, burning fossil fuel to test and operationally run a data center electricity backup generator.
• Scope 2: Indirect emissions that are generated from the electricity you buy from external power companies. For example, the electricity consumed by the (owned) data center and network equipment, as well as electricity used by IT employees developing and operating the IT solutions.
• Scope 3: The indirect emissions a company is responsible for outside its walls, from the goods it purchases to the disposal of the products it sells. For example, emissions related to the manufacturing, packaging, transport, etc. of purchased goods and services. It is important to note that emissions due to public cloud usage (these are ‘purchased services’) are always considered Scope 3 for the consuming company. The same applies to SaaS services such as CRM or ERP systems consumed by a SaaS vendor.

Regulatory Compliance is Forcing Action

Regulatory bodies globally are implementing — or have already introduced — mandatory sustainability reporting directives applicable to companies of all sizes. These regulations mark a significant global trend toward increased environmental, social and governance (ESG) transparency and responsibility.

Companies worldwide must not only adapt to meet these evolving requirements but are also legally obligated or will be mandated to provide compliant reporting.

But in addition to this, any enterprise that conducts B2B transactions likely needs to report the carbon footprint of the services and goods sold, so that the (downstream) business can calculate the Scope 3 contribution to their footprint.

Where to Start?

So, how do we tackle the challenge of collecting qualitative and auditable data? For ease, let’s split it into three categories: public cloud services, end-user equipment and on-premises data center equipment.

1. Public Cloud Services: Keeping in mind that cloud services are associated only with Scope 3, each hyperscaler (Azure, AWS, GCP, etc.) offers its own tools and APIs for gathering Scope 3 carbon footprint data. However, these hyperscalers vary in the data they provide and their transparency in data calculation is limited. A recommended approach is to utilize cloud services billing and usage data, employing an accepted algorithm, API or set of libraries to calculate normalized carbon data based on billing data. This ensures a consistent result across different public cloud providers.
2. End-User Equipment: This requires collecting estimated Scope 2 and Scope 3 data from the suppliers/vendors for each model and type of equipment. The Scope 2/Scope 3 for end-user equipment typically falls in the range of 20%/80%. While it is crucial to trust the supplier data, you can inquire about their calculations relating to the product’s carbon footprint (PCF). Considering these relatively small percentages and the impact of Scope 2, attempting to measure ‘true’ electricity consumption to optimize your Scope 2 numbers may not add significant value.
3. Data Center Equipment: Here too, you need to collect estimated Scope 2 and Scope 3 data from the suppliers/vendors for each model and type of equipment. However, the applied ratio is around 80%/20% — the opposite of the 20%/80% we previously observed in the end-user equipment. With data center equipment, it is critical to measure the ‘true’ electricity consumption of your data center resources and thus derive a more accurate Scope 2 carbon emissions reporting. Luckily, measuring electricity consumption at a device level for data center equipment can be easily achieved given the accessibility of such tooling. Additionally, a best practice is to collect system performance and utilization data to complement the electricity consumption data. This combined approach will let you make informed decisions regarding equipment rightsizing, while simultaneously considering environmental aspects.
4. SaaS Vendors: This is like the public cloud providers, therefore has a 100% Scope 3 measure. However, unlike the major cloud vendors, there is less clarity and openness around the carbon footprint of SaaS consumption. We recommend that you start making it a part of procurement contracts for SaaS vendors to report the carbon footprint of their offerings.

In short, to get insights into the IT-related carbon footprint, you must identify all your IT assets — whether on-prem, SaaS or in the cloud. Further, to be able to report the carbon footprint downstream to the business and customers, you need to allocate the footprint to the business services that IT delivers. A great starting point for this is the traditional IT asset management solution expanded with carbon footprint data combined with the CMDB to understand the usage of the assets.

Yes, it is a complex task, and no, it will not be perfect on day one, but there is no reason to delay. Let the journey begin today.