Everyone knows that digital transformation is real. According to PTC, 70 percent of organizations have a digital transformation strategy, or are working on one.
Digital transformation is becoming the game-changing strategic business initiative for enterprises seeking to gain share, increase revenue, and boost profitability.
And everyone knows that ESG is also real – environmental, social, and governance initiatives are becoming an essential aspect of daily operations.
As of 2020, 88 percent of publicly traded companies, 79 percent of venture and private equity-backed companies, and 67 percent of privately-owned companies had ESG initiatives in place.
ESG matters, not just because it’s important for organizations to do what they can to save the planet and improve communities, but, according to the Accounting Review, a strong ESG proposition correlates with higher equity returns, from both a tilt and momentum perspective.
So we have two clusters of business initiatives – digital transformation and ESG, both important, both priorities, and both areas where stakeholders expect success.
However, there’s a problem. It’s a little-known truth that, in today’s world, digital transformation initiatives can negatively impact ESG outcomes.
Does that sound controversial? Well, it shouldn’t.
To do digital transformation well, organizations are shifting toward what’s being called, in the marketplace of ideas, IT 4.0, distributed across thousands of endpoints, Edge computing nodes, data centers and clouds.
These distributed infrastructures offer organizations the capabilities they need to provide game-changing services, like smart cities and omnichannel retail.
To do ESG well, under the environmental pillar, organizations have to quantify the impact of their IT footprint, because they cannot manage what they cannot measure.
And there’s a small secret in the world of IT – that all measures of IT footprint are antiquated, flawed, and don’t let organizations understand the environmental and social impacts of their digital infrastructure.
What? Surely not. After all, we’ve had a metric of data center energy consumption, PUE, since 2007. PUEs have fallen from an average of 2.5 in 2007 to around 1.6 today, and almost every organization today recognizes that measuring PUE and making efforts to reduce power consumption is an important goal.
The problem is that digital transformation requires organizations to add more Edge compute, data center, and cloud capacity, so they’re expanding their IT footprints. And even when they adopt technologies with low PUE, PUE only takes energy consumption into account. It overlooks, among other considerations:
- Energy sources: Two data centers can have the same PUE, but if one is using renewable energy and the other is using energy derived from coal, the real-world environmental impacts are very different.
- Water consumption: As the costs and complexity of mechanical refrigeration increased, data center and cloud operators relied more heavily on evaporative cooling – using water – to reduce the operating temperatures and costs of their data centers. Unfortunately, as of June 21, 2022, 39.84 percent of the US and 45.38 percent of the lower 48 states are in drought. Communities are pushing back against data centers because data center water consumption isn’t sustainable.
- Materials: New data centers consume vast amounts of raw materials, including concrete, the most environmentally destructive material on earth.
- Land use: Many new data centers are built on greenfield sites, destroying natural resources, including soil and timber. Data centers built on brownfield sites are more environmentally friendly.
Looking at these environmental considerations, it’s clear that PUE is a limited metric, and, working from the principle that you cannot manage what you cannot measure, we’re calling for a new metric that measures the total resource utilization of a data center or cloud.
What are some of the characteristics of such a metric?
It needs to capture all the relevant information, not just power. Ideally, it would take a lifecycle management approach to evaluating all IT inputs and outputs, including sources, short-term and long-term environmental impact, pollution, and materials disposal after equipment is decommissioned.
It needs to be standardized, universal, and transparent. Today’s ESG measurement tends to be proprietary, can be easy to manipulate, and makes it hard to compare one organization’s efforts against another organization.
Boards and investors want to understand just how well digital transformation and ESG initiatives are progressing, and a widely adopted measure would help.
Finally, an unbiased, “open source” organization needs to own it. It’s not useful for a corporation to own a standard metric. There might be room for a public-private partnership or consortium to define, create, and refine the metric.
Nautilus is working to influence the conversation around such a measurement, deciding what to measure so that any IT provider has a standardized yardstick.
Our aim is to give organizations a better way to understand and manage their IT footprint, reducing the impact IT has on communities, countries, and the world. We want a world where IT doesn’t stand in the way of environmental and social initiatives.
At Nautilus we are all about speed to market while reducing the impact to nature to enable the greatest outcomes for your business – and the environment.
To learn more, check out the 2022 Nautilus Impact Report.
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