Putting ESG and Green Cyber at the (data) centre of your strategy

The use of artificial intelligence is on the rise, and so too is the world's demand for connectivity and data storage. This has resulted in a substantial increase in the demand for data centres, which Savills, JLL, CBRE, and others in the real estate sector agree is set to continue. It is estimated that thousands of new data centres are required to meet demand across Europe over the next few years.

Almost every organisation either uses data centres or will have an interest in them, and the increased scrutiny of ESG impacts and sustainability means that managing these impacts should be at the top of your agenda.

Eyes on ESG

A significant number of ESG-related risks identified by the Sustainability Accounting Standards Board (who set industry specific standards for disclosing sustainability-related risk and opportunities) are relevant to data centres. These include greenhouse gas emissions, energy management, water and wastewater management, waste and hazardous materials management, ecological impacts and data security. 

Earlier this year, the European Union introduced a mandatory requirement for data centre operators to report on the energy performance and sustainability of the data centres that they operate¹. Reporting will be connected with a rating scheme designed to increase transparency and support the development of new designs and technology to reduce energy and water consumption, and promote the use of renewable energy, increased grid efficiency, and the reuse of waste heat.

Energy performance has also been the subject of focus in England and Wales, and there is increased pressure on businesses to understand the ESG risks throughout their value chains, including scope 3 emissions (broadly being indirect emissions that occur in an organisation's value chain). We are also seeing increased pressure on businesses (in particular data centres due to their high real-world emissions) to reduce, rather than offset, their carbon footprints, and to improve the transparency of reporting.

Green Cyber

The term Green Cyber came from UK government in considering how cyber, IT, ESG and data governance could be complementary. A huge part of demonstrating 'green cyber' could be linked to evidencing excellence in data governance, i.e. not retaining or holding data unnecessarily. This not only frees up data storage costs, but de-risks the impact of any potential cyber breach. When quantified, this is powerful in demonstrating a reduced carbon footprint as well as improving bottom line.

Improve your ESG performance

Octopus' £200 million investment into tech disruptor, Deep Green, demonstrates the need for and interest in using innovative solutions to mitigate ESG impacts, and confidence that improving ESG performance and financial benefit are not mutually exclusive. Deep Green has piloted using the excess heat from its processing centres to heat swimming pools, a process which in turn cools the onsite servers. This technology reduces energy use and consequently greenhouse gas emissions and demand on the local electricity grid, and can reduce reliance on water for cooling and, indirectly, for energy generation. It also improves operational expenditure as a result of the reduced energy demand, and reduces a business' vulnerability to increased energy prices. Other energy intensive businesses and heat networks can also use waste heat.

A more efficient use of water and energy reduces the constraints on where data centres can be located. This can open up the opportunity for other ESG improvements, such as access to renewable energy. 

Energy-intensive businesses, such as Amazon and Microsoft are already making the move to renewable energy. Amazon reports that it has more than 500 wind and solar projects globally and that it aims to use 100% renewable energy by 2025. Microsoft is taking a different approach to reduce its carbon footprint. In May 2023, Microsoft entered into an agreement with Helion to purchase electricity from its first fusion power plant.

Navigating change

Understanding the ESG risks associated with data centres is an essential first step to improving ESG performance and appealing to investors, who are increasingly more focused on the sustainability credentials of their investments. New designs, processes and technology are key to improving efficiencies. However, this often results in waste which may not be easily recyclable and can often end up in landfills. It is therefore important to take a holistic approach towards minimising the ESG impacts of data centres.

We have set out below some suggested steps to help you put ESG at the centre of your strategy: 

• Carry out a materiality assessment to identify what ESG impacts are material to your business and value chain, and the relevant ESG data and metrics you will need to gather. 
• Set clear targets which are measurable, have a reasonable timeframe for completion, and are achievable (but be ambitious!). You could consider whether you want to work towards a sustainability rating, such as a BREEAM rating, or certification to an international standard such as the ISO 50001 voluntary international standard for energy management systems.
• Identify and implement the changes needed to achieve those targets. This could involve obtaining expert advice on maximising efficiency and introducing new and updated policies and practices.
• Monitor the performance of your data centres and value chain against the targets that you have set. This will assist you to report on ESG performance and sustainability, provide information to stakeholders, and identify emerging risks and opportunities.
• Embed ESG into your business strategy and budget to ensure that ESG risk management can be effectively implemented and to secure long-term change. Using ESG data to inform your decision making should reduce your exposure to energy-inefficient data centres which may become 'stranded assets' that work against your greenhouse gas and other ESG targets.
• Consider ESG synergies with cyber and data governance; this is not a challenge that should be tackled in silos.

If you would like to discuss any of the above or explore how we can decrease your data centre costs and help to showcase your carbon footprint reduction, please get in touch. For more information on the key trends relating to data centres, please see accompanying articles on our Data Centres hub.

_{1 Data centres in Europe – reporting scheme (europa.eu)}