Why Companies Will Look to Supply Chain to Drive Sustainability in 2020

Aaron Binkley, Sr. Director, Sustainability

January 30, 2020

With the influx of data driven by technologies like AI, VR, IoT, Blockchain and 5G, demands around data center services continue to increase. In fact, global colocation drove $38 billion in 2018 and is expected to surpass $50 billion by 2023 as more organizations strategically leverage data collection and analysis. While promising from a market growth perspective, this increases the demand for data center power and energy consumption. Transitioning to a low-carbon economy would not only mitigate climate change impacts, but can result in tremendous savings that could result in increased investment capacity and economic growth.

With certainty, sustainability is now more than just a “nice to have.” Earlier this year, we published six predictions showing how data centers will continue to play a critical role in enabling business transformation strategies in 2020. Now, more than ever, companies will look to their supply chains to drive sustainability in order to cut costs, strengthen business and mitigate environmental risks. Let’s unpack this important trend and discover how green data centers play a major role in helping businesses thrive.

Sustainability: No longer a “nice to have”

With the recent California and Amazon rainforest wildfires, a noticeable surge in climate change activism has taken place over the past couple of years. We’re seeing large-scale environmental destruction happen more often, most recently with the devastation in Australia caused by bushfires. Concern and activism are also playing a larger role in our relationship with businesses, especially among younger generations. About 40% of millennials and 25% of gen X would rather work at an environmentally responsible company than make more money at a company that lacks sustainability practices. These two purpose-driven generations make up the majority of today’s workforce. More pressure will continue to be placed on companies to lower their carbon footprint by reducing energy consumption and implementing more energy-efficient best practices. Ignoring sustainability comes at a hefty cost for businesses with suppliers reporting that environmental risks could have a financial impact of $1 trillion.

Environmental impact starts with the supply chain

The majority of companies’ environmental impact starts within their supply chains which produces more than 5x the emissions than their direct operations. Last year, suppliers removed the emissions equivalent to 119 million cars for an entire year (or 563 MtCO2e worth of emissions). This translated to a subsequent savings in costs of over $20 billion. While this may seem significant, only 29% of suppliers reported a decrease in their emissions to CDP, so there’s still a lot of work to be done.

McKinsey took a closer look at consumer companies specifically and found that their supply chains have much more of a financial impact than their own operations, typically accounting for more than 80% of greenhouse-gas emissions and more than 90% of the impact on wind, solar, geothermal and hydro-power energy resources. A focus on supply chains can thus significantly reduce overall costs.

One of the fastest and most effective ways to reduce emissions is to switch to renewable energy. According to CDP, suppliers have the ability to cut global emissions by 1 gigaton if they increase renewable electricity from 11% of their energy mix to 20%.

Green data centers fuel sustainable business operations

The amount of data being produced today demands more energy consumption than ever before. IDC forecasts that global data will grow to an astounding 175 zettabytes by 2025, which is equivalent to watching the entire Netflix catalog 489 million times. Data centers use more than 90 billion kilowatt-hours of electricity a year in the United States alone; on a global scale, approximately 416 terawatts are used by the data center industry which accounts for about 3% of the total electricity in the world.

It’s crucial for companies to demand more energy efficiency from the data centers powering their businesses. As the need to capture, compute, and securely store more data increases exponentially, companies will prioritize ways to offset the growing environmental impact of their data centers. Thus, enter the need for green data centers, with the biggest impact coming from sourcing renewable energy to power these high energy use facilities. A number of leading global companies are becoming more vocal in demanding that their data center providers source renewable energy for their data center energy use.

What can you do about your footprint?

With data center strategy at the backbone of infrastructure, in particular for digital businesses, it’s often the highest contributor to their energy consumption and carbon footprint. When planning your sustainability strategy, ask these important questions of your data center provider:

• What green building and energy efficiency certifications does your building have?
• How are you ensuring that the facility is using water and energy as efficiently as possible?
• What are your long term sustainability goals and metrics?
• What is your current carbon footprint and what measures do you have in place to lower your carbon footprint?
• Are you working towards using 100% renewable energy?

If you haven’t defined sustainability goals and strategy yet, get started by evaluating which aspects of your supply chain can drive energy efficiency, cost-effectiveness, and sustainable practices. Moving towards green data centers and sustainable energy solutions to power your business is an impactful place to start.