The digital sector’s environmental dilemma

By Cosmas Luckyson Zavazava, Director of the Telecommunication Development Bureau, ITU, and Lourdes Montenegro, Director of Research and Digitisation, World Benchmarking Alliance

Eliminating carbon emissions from industries, transport, and everyday energy use worldwide is an important and necessary way to avoid an irreversible climate catastrophe. But making the required changes is easier said than done.

Digital companies have emerged as critical players in the global transition to net-zero societies and economies. From optimizing energy consumption to enabling the widespread adoption of low-emission technologies, digital technologies hold vast potential to combat climate change.

Still, their environmental impact is a double-edged sword. While they drive climate monitoring and sustainability efforts, the industry faces its own significant environmental challenges, including high energy consumption, resource depletion, and a staggering 60 billion kilogrammes or more of electronic waste (e-waste) worldwide every year.

A recent report from the International Telecommunication Union (ITU) and the World Benchmarking Alliance (WBA) examines the carbon footprint of 200 of the world’s leading digital companies. And it reveals a troubling reality: while those companies invest heavily in renewable energy, their soaring energy needs – driven by demand for data centres and the race to dominate artificial intelligence (AI) – contribute significantly to the continued global rise in greenhouse gas (GHG) emissions.

Greening Digital Companies, now in its third edition, provides a detailed analysis of the digital sector’s turn toward renewables.

It shows that while companies headquartered in Europe are ahead in sourcing 100 per cent renewable electricity, companies in East Asia and the United States still rely heavily on polluting energy sources, as well as dominating in overall energy consumption. These regional disparities highlight a critical gap in the global approach to energy sustainability within the digital sector.

The most visible driver of increasing energy use in the sector is breakneck AI development.

Leading cloud providers – all competing for AI market share – have reported a 62 per cent increase in GHG emissions and a 78 per cent increase in electricity use since 2020, highlighting the growing environmental cost of AI technologies and the challenge of balancing innovation with sustainability.

The paradox of digitalization

Innovations like the Internet of Things (IoT), robotics, and AI promise improvements in climate monitoring, energy efficiency, and low-emission technology adoption.

Tech-driven optimization could reshape numerous industries, accelerating decarbonization and the move toward greener operations. In parallel, AI-powered smart grids can predict energy consumption patterns and maximize renewable energy use, reducing reliance on fossil fuels.

But digitalization is itself energy intensive.

For the 200 leading tech companies in the ITU-WBA study, direct operational costs – not including the downstream use of their products and services – already accounts for nearly 1 per cent of global GHG emissions and 2 per cent of global electricity use.

Figures for the entire tech sector are certainly much higher.

Tech is evolving, and consumer habits are changing, too. With generative AI platforms using 10 times more energy for online searches than traditional web-based search engines, tech-related emissions undoubtedly continue to rise.

Some US-based tech giants have made significant strides with purchase agreements for 100 per cent renewable electricity. Yet when they operate in regions where green energy is scarce, they continue relying on less sustainable sources.

This mismatch between growing energy needs and renewable energy availability is pressing governments and regulators to liberalize energy markets and accelerate infrastructure deployment for renewable-based power generation. Investments in energy storage technologies and grid modernization are crucial to ensure that digital companies can tap renewables wherever needed.

Additionally, industry leaders and regulators must also rethink how AI technologies are being designed and deployed. Countries worldwide need more transparent reporting to ensure that rapid AI advancement does not come at the expense of the planet’s future.

The reporting gap: Scope 3 emissions

While many digital companies have made strides in reporting their operational, or so-called Scope 1 and 2, emissions, a far larger part of their environmental impact remains hidden.

Scope 3 emissions – encompassing a company’s entire value chain, from suppliers to transportation and final product use – are on average six times larger than operational emissions. Despite this outsized contribution, few digital companies track or disclose their Scope 3 impact.

The lack of comprehensive reporting on Scope 3 emissions hinders any attempt to meaningfully reduce the digital sector’s carbon footprint. Without accountability across the entire value chain, any progress in reducing operational emissions is undermined by the larger, hidden emissions tied to a company’s products and services.

More broadly, the industry needs widely recognized standards and greater transparency. Companies must adopt more ambitious targets, disclose their reporting methodologies, and work closely with suppliers and service providers to ensure accurate and consistent data collection.

Check out “Greening Digital Companies 2024” from ITU and the World Benchmarking Alliance

Header image credit: Adobe Stock