Why Green IT is critical for the sustainable future of your company

Climate change remains the greatest global challenge we will face in the years ahead. Many companies and governments have set themselves ambitious targets to achieve carbon neutrality before 2050. Where governments will foster political actions, companies will have to rethink their business practices. To accomplish the set goals, an immense shift along the entire IT value chain is required.

As each day passes, climate change is increasingly seen as the greatest global challenge we face and affects every latitude, culture and industrial sector. IT is no exception, although little has been said about its impact on the climate compared to that of other corporate functions. However, while IT emissions already amount to 3% of all CO2 emissions, by 2030 that figure is destined to triple due to the exponential diffusion of digital technology, thereby increasing the relevance of the role of “Green IT“(1).

 

In the plan that many companies and governments have drawn up to achieve carbon neutrality by 2050 (so-called Net-Zero), a process of strategic and organizational change that reshapes the entire IT value chain must necessarily be included. It’s an indispensable step towards improving IT efficiency and optimizing operating costs. In addition to that it will also bring tangible benefits for companies in terms of adapting to future regulations and the expectations of new customers and their employees, transforming organizations into leaders of sustainability.

But let’s take a step back to the current scenario.

 

Sustainability is a global trend that organizations operating in every area aspire to. Yet is the role of the IT factor in the path towards NetZero probably very often considerably underestimated. Digital companies are guided and supported by IT capabilities, but at the same time are also among the major contributors to emissions that hinder the achievement of sustainability objectives. The paradox is set to become even more evident because a greater use of new technologies will gradually cause a greater impact on the three main strategic resources:

Three main strategic resources

  • 1.

    Electricity

  • 2.

    Water

  • 3.

    Natural Minerals

    Today 3% of the global electricity supply (+2% of total GHG emissions) are generated by the impact of Big Data and Cloud Computing alone. By training a single model of AI more CO2 is injected into the atmosphere than five cars would emit during their entire life-cycle (2).

    Equally significant is the impact of ICT on water consumption. Suffice it to say that, with current technologies, a medium-sized data center (15 megawatts) uses roughly the same amount of water (130 gallons, roughly 492 million liters) as three medium-sized hospitals, more than a plantation of almond trees or two golf courses (3).

    Less quantifiable, but rather macroscopic, are the effects of the extraction of rare metals required to produce smartphones and hard drives. In many regions of the world that process is directly responsible for the desertification of entire areas once covered by vegetation, for soil erosion and an increase in air and soil pollution, as well as the production of wastewater rich in radioactive waste (4).

    All these trends are expected to grow along with the increase of the main digital trends. The growth forecast of the Big Data Analytics market between now and 2027 is estimated at +280% and that of Cloud Computing at +230% by 2023. Furthermore, the global AI market is set to increase tenfold (+988%) by 2027 and IT Gadget sales are expected to grow by +13% at least until 2024.

     

    To challenge the trends described, large technology providers are paving the way for new solutions. Some approaches are for example opening the way for cloud computing to replace existing Data Centers or anchoring sustainability to governance, thereby improving the ability to measure and monitor the environmental impact and optimizing the consumption of resources. Despite the enormous progress being made by many companies, there is still ample room for improvement in the efficiency of the IT architecture in terms of a green approach.

    Has your company already set targets and taken action on Green IT topics?

     

    The ambition to become trailblazers in terms of sustainability has prompted many large groups to confirm their adherence to the Net-Zero carbon emissions goal by 2050. Some have gone even further by bringing this target forward to 2040 (e.g. Amazon, NHS, Sainsbury’s) or even to 2030, such as Apple, Microsoft, Facebook, Sky, Google, Ikea and we at BCG. For the latter, it’s not a communication strategy, but a true operational approach that corresponds to a long-term vision and the desire to reach the goal of sustainability as soon as possible to build a new type of leadership and exploit the competitive advantages that derive from it.

     

    As mentioned, in addition to the objectives related to Net-Zero ambitions, there are many other good reasons why every company should intensify the conversion of its IT activities to a Green protocol as soon as possible. In this context, we’ve identified the five “diamonds” of benefits of Green IT.

     

    The five “diamonds” of benefits of Green IT

    Firstly, the contribution of IT to containing CO2 emissions can be articulated in numerous interventions, each of which has a direct impact on the reduction of operating costs.

    For example, reducing the emissions of hardware production means containing the overall cost of IT investment; optimizing the cooling processes of a cloud leads to a decrease in consumption and costs; in the same way, the use of shared infrastructure and on-demand resources lead to advantages.

     

    The issue of converting Data Centers to cloud based solutions constitutes one of the central interventions in the host of priority activities. This transition could lead to a reduction in consumption of between 10 and 40%. Further significant decrease of energy usage can be reached by the correct sizing of facilities, new cooling architecture, planning a correct layout and multiple other optimizations. Best-in-class data centers spend 91% of energy consumption on computing (corresponding to a PUE = 1.1), whereas an industry average is only 60% (corresponding to a PUE = 1.67). This means a huge potential for GHG emission reduction and cost savings (5).

     

    In this regard, there are use cases of large companies that have resorted to innovative solutions to improve the efficiency of Data Centers: Google has applied Machine Learning algorithms to optimize its servers by making sure that AI governs the operation of facilities and oversees cooling and the adjustment of settings in real time. The German company Windcores builds small data centers in wind turbines with a capacity of 60 kW that can be powered up to 90% by wind energy, even in case of weak winds. The Swiss company Helio and the Kubernetes container management platform combine their technologies to offer Cloud services on the most ecological cloud space available, switching locations in near-time. As mentioned, the issue of clouds is only one of the interventions possible and these are just a few examples of the innovative solutions offered by new technologies.

    The second lever that drives the rapid adoption of Green IT concerns the regulatory aspect. The European Green Deal will be logically translated into regulations, and Green Public Procurement (GPP), the requirements for the purchase, supply or implementation of Green IT, will be included in both public and private calls for tenders. Being already in line with the new regulations will provide an immediate competitive advantage.

     

    Customer and market behaviors in relation to sustainability are also bound to change. The new generations of consumers want to show that they’re different and are already privileging those that adhere more closely to green values ​​in their consumption choices. 73% of Gen Z say they’re willing to pay more for sustainable products compared to Millennials (68%), Gen X (55%), Silent Generation (50%) and baby boomers (42%) (6), and 88% of consumers want brands to help them become more environmentally friendly and ethical in their daily lives. Positioning oneself as a leader in the adoption of Green IT will therefore be an element of appeal that can be immediately exploited on the market.

     

    Offering sustainable products and adopting green models is a way to strengthen your company purpose. To obtain a “B certification”, corporations implement actions for the climate and work to adopt more ethical business models, in which the balance between purpose and profits is preserved and the impact of choices on workers, customers, suppliers, communities and the environment is taken into account (7). The ICT sector has agreed on objectives and methods to reduce GHG emissions, drafting the guides for sub-industries and setting the standards for calculating the greenhouse gases produced, with the aim of satisfying the Paris Agreements and achieving the target of -45% emissions by 2030.

     

    Lastly, demonstrating environmental responsibility will also be a key factor in winning the battle to attract the best talent. Some surveys have shown that, in 113 companies of the S&P 250, perceived environmental performance and green reputation led to higher levels of employee satisfaction and better economic performance, with no side effects.

    How can your IT contribute to Net-Zero 2030?

     

    The creation of a Net-Zero emission IT organization requires a strategic and organizational change on the part of companies that defines the entire value chain from a sustainable standpoint, from the identification of IT KPIs to the definition of governance, from the design of more efficient IT solutions to the development of their management models, from the procurement of new applications, hardware and services to the decommissioning and disposal of obsolete ones. To companies wishing to tackle this path of transition, BCG offers the support of a:

    1. structured, holistic approach based on a capability-based framework to set ambitions, measure the maturity of the technologies in use from a green standpoint, clarify the evolution path to achieve it
    2. sustainability control tower to continuously monitor the new performance, develop wide-ranging strategic thinking and insights, prioritize Green IT initiatives to anticipate proactively and accelerate with targeted actions the company journey to a greener future
    3. team of senior tech and business experts that can design, plan, and implement the client Green IT journey

    At BCG, we believe our single greatest impact will come through our client work since we are already delivering more than 350 climate and environment projects with over 250 organizations each year. In addition, BCG wants to lead by example by pledging to deliver net-zero climate impact by 2030. To reach this goal, we will take significant action:

     

     

    • to reduce negative climate impact of our own operations and value chain
    • to neutralize remaining climate impact by investing up to $80 per ton in leading-edge carbon removals in 2030
    • to help shaping the global climate agenda by fostering long-term relationships with several today’s most relevant and innovative organizations such as World Economic Forum

    Sources

     

    (1) UN environment Emissions Gap Report (2019); IEA (2019); Belkhir & Elmeligi (2017); Andrae & Edler (2015), Kleyman (2016)

     

    (2) Statista, Sloan Review, Forbes, Fortune Business Insights, BCG Platinion

     

    (3) Blog David Mytton; Bloomberg,based on permits for a Microsoft facility

     

    (4) Populationgrowth, Yale

     

    (5) Uptime Institute, Energy Star

     

    (6) First Insight, Futerra, Forbes

     

    (7) Bcorporation

     

     

     

    About the Authors

    Antonio Spanò

    Senior IT Consultant
    Milan

    Antonio has gained extensive experience in IT during his career, from agile implementation projects to multi-year digital transformation programs. He supports clients leveraging technology to accelerate their sustainability journeys. Antonio is a member of the Energy Practice and of the Green and sustainable IT topic.

    Jan Wulff

    Principal
    Hamburg

    Jan has gained extensive experience in IT during his career, from hands-on software development to managing large IT programs. He has helped clients in various industries mastering their challenges during their transformation journeys, particularly in banking and insurance. With a lot of experience in effective ways of working he specializes in scaling agile organizations. Making use of this experience, he’s now also incorporating sustainability as an important factor into the technological and organizational perspective on IT. He is a member of the leadership teams of BCG Platinion’s Insurance practice and Agile chapter as well as the Green and sustainable IT topic.

    Sebastian Hagen

    Manager
    Munich

    Sebastian is an experienced banking and IT expert with strong hands-on experience in strategic, digital, implementation and architecture transformations. Having worked across industries such as banking, insurance and energy, Sebastian specializes on core systems in banking. Driven by the desire to connect client impact with sustainability he is taking sustainability into account as an important factor in transformation journeys. Sebastian is a member of the leadership team of BCG Platinion’s banking practice as well as the Green and sustainable IT topic.

    Marek Molisz

    Senior IT Consultant
    Warsaw

    Marek supports banks and insurers in their critical IT initiatives. His track record includes setup of a digital insurance attacker, several PMI, data migration and technology due diligence projects as well as digital transformations. He is part of the Insurance Practice Area and the Green IT team with a passion for startups and unconventional solutions.

    Kim Tran

    IT Consultant
    Munich

    Kim supports clients in diverse areas of digitization. Driven by her hands-on experience, she supports clients solving different kinds of technology challenges. Ranging from creating the most value out of companies’ data through the set-up of a data strategy and governance, over IT sourcing and licenses optimizations for cost efficiency and reduction of technology complexity, to the IT strategy definition to centralize the IT and increase the IT delivery and quality. Kim is a core member of the banking and insurance practice area and part of the Green IT team within BCG Platinion.

    Giovanni Marinaci

    Senior IT Consultant
    Milan

    Giovanni is an expert in IT strategy and architectural design. He has supported several clients in shaping their strategic roadmap for large-scale digital transformations, providing both functional and technical advice in architectural assessments, IT strategy definition, software selections, vendor selections, PMI. During his experience in BCG Platinion, Giovanni mainly focused on Energy, Oil & Gas, and Consumer industries