Put the cloud at the service of your ESG strategy

1. CSR commitments and growing cloud strategy

The first observation to observe is the growing and simultaneous increase of CSR commitments and cloud strategies of companies.

Whether it’s creating more environmentally friendly operations, committing to diversity and inclusion, or participating in climate change initiatives, companies are making environmental programs, Social and Governance (ESG) is a priority. Engaged in CSR strategies aimed in particular at reducing their energy impacts and greenhouse gas (GHG) emissions, more and more companies are embracing Net Zero commitments. According to the New Climate Institute’s 2022 Net Zero Stocktake report, more than one-third of the largest listed companies have adopted this commitment. In France, 54% of the companies surveyed in the 25th CEO Survey had made or planned to make commitments in favor of the Zero net emissions target.

At the same time, the cloud is becoming one of the transformations in which companies are engaging on a large scale (74% of companies surveyed for the Cloud Business Survey 2022, PwC) because more than half of executives see growth and innovation prospects. As a result, companies are increasing their use of cloud services. Many are creating cloud, multi-cloud and hybrid environments as part of their digital transformations. In the first quarter of 2022, spending on cloud infrastructure increased by 17.2% compared to 2021. IDC forecasts a 22% increase for 2022 (IDC, Worldwide Quarterly Enterprise Infrastructure Tracker: Buyer and Cloud Deployment).

It is estimated that the volume of data will grow by 40% per year over the period 2020-2025 (Source Statista), a 30-fold increase over the past decade. This very significant increase results in net growth in greenhouse gas (GHG) emissions. Today, digital represents 3 to 4% of global GHG emissions and 2.5% of the national carbon footprint (Study on the environmental footprint of digital technology in France 2022, Ademe-Arcep). If no action is taken to limit these emissions, they could increase by 60% by 2040, to reach 6.7% of France’s GHG emissions. However, the cloud and data centers represent “only” 15% of the digital carbon footprint, the rest being generated by user devices and networks.

So, contrary to popular belief, could the cloud be compatible with a CSR approach? How to take advantage of the cloud to enter a Green IT approach?

 

2. Cloud for CSR

As all of the company’s stakeholders - employees, consumers, partners and investors - increasingly focus on environmental, social and governance issues, how can the cloudit plays a key role in accelerating your ESG efforts?

A PwC survey (PwC US Cloud Business Survey, 2021) shows that CEOs are beginning to understand the impact of technology in general, and cloud in particular, on governance, social or environmental aspects (about a third of CEOs surveyed). They are also starting to use the cloud (34% of them) as a tool for their CSR strategy, in terms of reporting in the first place (60% are already using it or have planned to use it). 59% say they use or plan to use the cloud to improve their CSR strategy. Are you one of them?

Let’s see how the cloud can be compatible with your company’s CSR approach, and to what extent it can even strengthen and facilitate it.

 

A) Standardize and automate ESG reporting using the cloud

Non-financial data useful for ESG reporting is becoming unavoidable and is increasingly important in companies' reporting needs.

Also, access to this ESG data, which is inherently protean and concerns several levels of the organization, becomes a crucial issue for companies. However, ESG reporting is inherently complex because the data used to implement these reports comes from a combination of financial and non-financial systems and, in some cases, from external suppliers. Indeed, all company management must be able to provide reliable, transparent and standardized information necessary for the realization of these extra-financial reports. This is precisely where the cloud can help. Indeed, its deployment can greatly facilitate data management and reporting creation, automating processes, facilitating data standardization, while ensuring greater transparency within the organization.

In June 2022, Microsoft launched Microsoft Cloud for Sustainability, a SaaS solution that enables organizations to optimize their efforts towards carbon neutrality, by unifying available data, building a more sustainable IT infrastructure and reducing the environmental impact of operations. Amazon Web Services (AWS), a global leader in cloud services, also develops products to address its customers' CSR issues, such as Data Exchange that facilitates the use of third-party sustainability data or the Amazon Sustainability Data Initiative (ASDI) which “aims to accelerate sustainability research and innovation by reducing the cost and time required to acquire and analyze a significant amount of sustainability data”.

 

B) Achieve your net greenhouse gas emissions reduction targets faster by 2050 with the cloud

The major and rather obvious advantage in the use of the cloud rather than an increased use of individual computer equipment and software (or on-premise), is that of the pooling of resources. The maintenance of the cloud server infrastructure is the responsibility of a third party, who optimizes and mutualizes its management. Unlike on-premise servers that can sometimes be underused, cloud servers are operated at their near-maximum capacity, and their cooling systems are often more efficient. This translates into material (fewer machines for an ISO need) and energy savings. By moving from an on-premise strategy to a cloud strategy, net greenhouse gas emissions decrease mechanically (because considered as Scope 1 or 2 emissions, supported by the cloud provider).

However, to stop at this analysis would be simplistic because from January 1, 2023, the mandatory carbon footprint will have to take into account the 3 scopes, where only scopes 1 and 2 were mandatory until then (According to the Decree of 2 July 2022, the carbon balance sheet integrating scope 3 applies to companies subject to the obligation to publish an extra-financial performance statement or DPEF).

Also, GHG emissions from cloud providers fall within Scope 3 emissions and must be integrated into the company’s overall carbon footprint reduction strategy. It is therefore a question of paying particular attention to the net zero approach of its supplier, the geographical location of servers in areas where electricity production is greener, as well as its efforts in terms of carbon emissions. Indeed, if your cloud provider also advances its CSR commitment, for example by generating 40% of its energy through renewable energies, its customers will also benefit and will be able to report on this progress in their own Scope 3 reports.

 

C) Cloud G&C Streams

Less obvious, but equally interesting, the cloud can help you improve your social and governance commitments. Indeed, the major players in the cloud have far greater investments in cybersecurity and data privacy than a company could make alone. As a cloud customer, you benefit from these investments and can ensure better data confidentiality for your customers, employees or stakeholders.

In addition, the cloud has been one of the pillars of the deployment of telework, today one of the flagship expectations of employees in terms of work organization. PwC’s Hopes and Fears 2022 study shows that 80% of employees express a desire to adopt a hybrid or full remote rhythm. The accelerated use of the cloud during the pandemic has made this possible and makes it an essential component of the social dimension of the company. Finally, the cloud can be a lever of transparency, promoting access and the circulation of information. However, this access to information is one of the promises of digital, allowing everyone to become an actor of change.

In conclusion, the cloud can be a great lever for your ESG strategy. However, to conclude that it has only CSR benefits would be simplistic, particularly on the GHG side of the data explosion. It is therefore necessary to adopt a comprehensive approach and to measure all the impacts.