Addressing the carbon reduction challenge in data utilisation

The technology and software sectors are a key driver of economic growth, attracting private equity and venture capital investment thanks to their scalability and high margins. Global tech spend is booming, forecasted to reach £3.6 trillion in 2024, so what’s the catch?

One area of increasing complexity is carbon emissions, and their often understated role in data utilisation, which is central to both sectors.

We’ve looked closer at the scale of data’s carbon challenge below, applying knowledge from our ESG and value creation practice to provide practical steps for reducing emissions, and improving margins.

AI and the cloud are heightening data’s carbon challenge

Typically, when you think about sources of carbon emissions, we automatically think about power generation and transportation, but software and technology companies are also major contributors. The software industry is currently responsible for approximately 3% of global emissions, which is about the same as the aviation industry. However, in software, carbon emissions are harder to measure and are mostly driven by human behaviour in how they access, use, and store data and code.

Sustainability in software and data storage hasn’t been a priority for many companies, with leaders often believing that their software and data’s energy footprint is negligible or already optimised. But with the rise of AI, we’re already starting to see the significant increases in emissions output. It’s estimated that ChatGPT produces ~50 Tonnes of CO2 emissions per day from their queries alone. To put it into perspective, 1 Tonne of CO2 is the equivalent of 2.5 economy flights from Amsterdam to Rome.

The cloud as storage also creates carbon. Naturally as humans, we access a significant amount of email, social media, online shopping, streaming, and other internet services. Having been calculated that 5 billion YouTube views is equivalent in energy consumption to 40,000 homes, we might need to start rethinking how data is stored.

Overlooked opportunities for data sustainability

Opportunities for sustainability are currently being missed. Until providers start to properly measure and incorporate carbon impact into overall costs, data storage will remain cheap. But for how much longer can this impact be overlooked?

Data centres are a growing topic of concern, as the exponential growth in internet and digital services will continue to present the challenge of balancing growth aspirations and regulations to achieve Net Zero. Calls for tighter regulation and policies are being made, and while there are policies beginning to be put in place across Europe, in the UK (outside of London) there is no current policy to support carbon offsetting or reduction within data centres.

These misconceptions around data storage and utilisation have led to companies operating without constraints, resulting in areas of increased energy consumption.

Examples include:

• Overengineered apps
• Redundant communication
• Repeated computation
• Redundant and liberal data storage
• Low energy efficiency of infrastructure
• Duplication of software and data

Practical, cost-saving steps for carbon reduction

Technology and software providers have a responsibility to educate consumers about the impact that our 24-7 reliance on digital and data systems is having on the environment, and the conscious sacrifices needed to drive a reduction in usage.

Additionally, they need to assess their investment in renewable energy sources as part of their own energy transition journey. Alongside a whole industry strategic approach, there are practical steps that operational leaders can start to implement that will drive down cost and improve margin.

Key areas to consider are:

• To start, businesses need to focus on reducing the volume of data requests and better specifying what data is transferred. Communication in data accounts for most of the energy usage. Reducing communication by one megabyte equates to an energy savings of up to 4 tonnes of GHG per year.
• Computation consumes a large amount of energy. When developing software, whilst businesses need to consider the needs of customers, they can reduce their carbon footprint by reducing the amount of unnecessary features and functionality. Through applying lean type principles, they can also identify potential areas of energy waste through data cleaning and parsing, abstraction layers, caching, and in-memory storage.
• User experience and energy usage is affected by infrastructure location. Assessing this trade-off should be considered alongside more traditional cost to serve factors. For example, where is the added business or customer value in reducing loading speed by milliseconds?

To significantly shrink the overall footprint of software and data, companies must determine the biggest drivers of emissions and address the underlying sources, by applying a sustainability lens to decision making. This insight will provide them with the foundation to build a roadmap and action plan, addressing the areas where they can unlock their greatest value.

Our ESG Due Diligence and value creation services provide companies with a roadmap to address material ESG factors. This includes practical actions that can be implemented from day one, delivering positive impact to the environment, their stakeholders, and supporting the achievement of strategic and financial goals.

For more on carbon reduction, and how our value creation services can benefit you, contact Wade Robertson or Angela Tooley.