The end of greenwash

Chris Pennington, Director Environmental Sustainability, Iron Mountain Data Centers

Over the last decade, the commitments and reporting offered by data center providers who lay claim to sustainability have moved from a ‘nice-to-have’ to a ‘must-have’ customer requirement. Colocation providers are adjusting to take this into account, with some more prepared than others.

Like most market shifts, this is customer-driven. Our customers want to take clear responsibility for the power they use in our facilities, and its environmental impact. Last year more than 23,000 companies - representing $67 trillion in market capitalization – disclosed their emissions through CDP. More than 4,000 businesses and financial institutions are now working with the Science-Based Targets initiative to reduce their emissions. According to Accenture, 37% of companies have set net zero targets. At the same time legislation is now being put in place to make reporting obligatory, such as the Corporate Sustainability Reporting Directive which covers over 75% of EU company turnover and imminent DOE and SEC requirements in the US.

Soon, nearly every business with a significant IT footprint will report its Scope 1 emissions (direct), Scope 2 (indirect, e.g. from energy) and possibly Scope 3 (other indirect emissions - things like business travel or supplier-related GHG like data processing in cloud facilities)

Despite the seriousness with which customers now take their climate targets, terms such as ‘carbon-neutral’, ‘green’ and ‘renewable-powered’ are still often used ambiguously to define sustainability performance. Considering the above, this is no longer a sustainable business practice. To end the era of greenwash, our industry needs to trim its sustainability terminology to tailored, attested reporting on customer power use. We need to align our metrics to eliminate any double-counting of renewables. And to empower our customers we will need to recognize the difference between hour-by-hour carbon-free power and general, annual claims.

Today companies recognize that outsourced IT functions count as part of their footprint, and that means equipment and processing in data centers of all types, whether it’s a dedicated colocation facility or an IaaS, PaaS or SaaS one.

We’re in the Power Business

At the heart of this shift is the recognition that, as the world continues its shift to a digital economy, data centers have become a crucial part of the customer energy supply chain. We provide power to customers in the same way that utilities provide power to us, and we have similar opportunities to support a clean energy transition.

As our customers report their Scope 1, 2 and 3 emissions, they need to know the details of the power they use in our data centers - not just the number of kilowatt hours, but the sources of those hours, and the provenance of those sources. Only then are they in a position to communicate clearly to their customers, investors and regulators how sustainable their digital footprint is. This is already happening. Our biggest customers want to know where the power comes from and what the mix is for power delivered to the data center. This validates our position on carbon reduction and monitoring as well as the investments we are making in building our own zero carbon supply portfolio.

We Need Consistent Counting

In the area of overall Scope 2 reporting, the industry doesn’t have full alignment. In the world of GHG accounting it is recognised as the highest importance to avoid double counting of emissions. Unfortunately, the GHG protocol set out two methods to advise Scope 2 power reporting, and these have created ambiguity. The first method is based on ‘financial control’ (who buys the power), and the second is ‘operational control’ (who controls the usage). While the colo operator procures energy for the site, the customer determines how that power is used. To be clear, some colo operators report IT load as the colo’s Scope 2, as it purchased the power, and others report IT load as the colo’s Scope 3 because the customer controls its use. As not all operators chose the same method, this has likely led to some double reporting on the CDP platform (which most of the industry reports to) with more Scope 2 being reported than is actually being used.

We are working on this, and as with many areas of good practice in sustainable reporting, the largest cloud service providers are aware of the issue and taking action, which is to take the path of ‘operational control’. We use this method at Iron Mountain Data Centers as well, reporting IT load as our Scope 3 so as to not double count with clients reporting it as their Scope 2, but not all data center operators are aligned on this. This will become an increasingly important topic as customer Scope 2 reporting obligations increase.

Renewables are Not Enough

I believe this year will also see a step change in the way we talk about the power mix. With the rise of generative AI and the huge power demands it is creating, the industry is recognizing the complexity of future power generation. A key realisation here is that wind and solar will not be enough on their own to meet the demand for a fully decarbonized grid. As Microsoft put it in their recent paper ‘Accelerating a Carbon-Free Future’:“Complete grid decarbonization will require a multi-technology approach that considers a range of carbon-free technologies such as wind, solar, geothermal, clean hydrogen, sustainable biomass, nuclear, fusion, energy efficiency, storage, and carbon capture and storage.”

This is a complex picture and it will be our job to simplify it for the benefit of our customers. A sustainable global data center provider will need not one but many energy generation sources, and the mix at each site will have to be defined and reported clearly to feed into customer Scope 2 reporting. While VPPAs will still have a vital role, and we will continue to match 100% of our annual power to encourage renewables investment (as we have done since 2017), the overriding metric in this reporting will be actual CO2 emission levels, and the framework within which the operator will fit these customer reports will be progress towards Net Zero GHG Emissions on a more granular basis.

24/7CFE IT – The Business Opportunity

We remain the only global colocation provider to have pledged to use 100% carbon-free electricity, 100% of the time (or #247CFE) by 2040. But we are in good company, as Google and Microsoft have also pledged to become 24/7 carbon-free. We have had to overhaul our energy supply chain to start this process, and have made excellent progress so far, and I plan to share a full update in my next blog.

Restructuring our power procurement in this way is creating a new customer opportunity. To support our goal we implemented ISO 14064-1 which allows customers to confidently include our accredited performance in GHG reduction as part of their reported results, and one of the most rewarding discoveries has been the level of interest we have seen from customers. Many of our largest customers already have extremely sophisticated sustainability reporting in place, and are keen to report on total decarbonisation. Some customers are going a step further, looking for a carbon-free matchmaking service, where, for instance, a long-term PPA with a solar project can be accredited directly to the power consumed by their servers in our facilities. The benefits of providing this sort of advanced sustainability solution are mutual. For the customer, the colocation provider becomes a clean energy partner that boosts their sustainability performance to new levels. For us, we can expand our role as trusted provider into new areas and over a longer timeframe. In other words, carbon-free power is a valuable solution that has the potential to differentiate our services in a competitive and commoditized market.

What the Customer Wants

As data center sustainability is reshaped into a foundational customer-focused solution rather than a piece of value add, I believe we can look forward to a much more rigorous and standardized use of metrics and terms in which greenwashing is naturally displaced by more accurate and granular reporting.

Day by day, sustainability is being treated more like compliance and is being specified in RFPs, assessed and reported in the same way. Data center providers need to look beyond PUE, WUE and CUE, and acknowledge that they offer not only low-latency connectivity, physical and logical security, uptime resilience and compliance, but also trackable transparent sustainability with a route to total decarbonisation. This is what the customer wants, so it can only be a good thing.