INTRODUCTION

Data has an economic and environmental side effect that is little noticed but very potent: it is highly energy intensive. The energy consumption of data centers alone is projected to rise from 200 Terawatt hours (TWh) in 2016 to a staggering 2967 TWh in 2030. By comparison: in 2022, China produced approx. 5,800 TWh of energy from coal.

Data usage and consumption are not only an increasing cost factor, but the subject is encroaching into environmental, social and governance (ESG) and sustainability discussions. This is especially due to data's vast and increasing growth and the tremendous consumption of energy — the CO2 footprint and other waste created when storing and handling data. As with the entire ESG movement, there is also a risk of revenue churn due to increased customer pressure for environmentally conscious behavior and actions.

Organisations, regulators and ultimately society must become much more conscious of the cost associated with data handling and storage organisations. This article attempts to describe how organisations might want to go about it. The bottom line: the use of cloud computing and the pursuit of ESG driven business models go together very well.

They also come with a similar set of challenges: the implementation of both needs to carefully navigate a jungle of rules, pitfalls and opportunities. In a recent article, our colleagues Vic Svec and Stefanie Weiler have outlined a number of ESG priorities in order to avoid getting lost in details: A&M ESG Viewpoint: Five Sustainability Trends to Drive Value in 2024. This article covers some ground with respect to cloud computing.

THE CLOUD AS A KEY DRIVER TO SUSTAINABLY MANAGE COST AND RESOURCES

Cloud computing has functioned as a key tool to optimise the cost and efficiency of IT departments across all industries for quite a while. This is done by leveraging economies of scale as well as enhancing an organisation's ability to respond and adapt quickly and easily to changes in demand with regards to computing power, storage and other factors.

These same effects can be leveraged to drive the journey towards sustainable operations and to get a better grip on the increasing cost of energy and CO2 management and while easily adapting to new ESG regulations. Cloud transformation — if done right — can help to drive fundamental business value through lower costs, higher revenues and increased valuations.

WHAT IS THE CLOUD AND HOW DOES IT RELATE TO THE COST OF DATA AND ASPECTS OF SUSTAINABILITY?

What exactly is the cloud? At its core, the cloud refers to a network of remote servers, typically hosted on the internet, that store and manage data, run applications and deliver services to users and organisations around the world. This virtual infrastructure has revolutionized the way we interact with technology, offering scalability, flexibility and accessibility that has transformed the way we work, communicate, and innovate. Cloud technology is the foundation to innovate in data and use artificial intelligence.

THE CLOUD HAS MULTIPLE FACETS

It is crucial to understand each of the facets of cloud technology.

Public Cloud

The "purest" form of cloud is the public cloud, leveraging infrastructure which is run and operated by a cloud service provider (CSP) and provided to multiple businesses. This does not mean that data or systems in a cloud are publicly available or shared — modern public cloud environments are built to cater to all privacy, security and regulatory requirements such as geographical limitations of a business — but that the infrastructure underneath is at a scale, which allows for much more efficient operations both from a cost perspective as well as from a sustainability view.

Private Cloud

This model involves organisations managing their cloud infrastructure within dedicated data centers. It offers even greater control over infrastructure, data and applications but is usually at a significantly smaller scale than public cloud environments.

Hybrid Cloud

A blend of both private and public cloud services, the hybrid cloud provides businesses with flexibility and scalability. It allows them to keep sensitive data on-premises while utilizing the cloud for other workloads.

Multi-Cloud

Multi-cloud strategies involve using multiple cloud service providers simultaneously. By leveraging the strengths of different providers for specific purposes, organisations enhance resilience and avoid vendor lock-in.

Multiple Hosting Options

These cloud models are shaping how businesses manage their data, applications, and IT resources in today's tech-driven world. Opposed to these various models of cloud technology are more traditional ways of hosting your data and applications. In many companies there is still some mix between cloud and traditional setups.

On Premise Hosting

This is the very early and initial way businesses stored their data and hosted applications. On premise hosting means using self-bought and owned hardware, typically in an organisation's own data center within business locations or dedicated sites. This model offers full control from hardware to data, but it is also the smallest scale and requires an organization to maintain and operate everything on by themselves, from data center facilities to networks and servers.

Colocation (Colo) Hosting

In this setup, businesses rent physical space in data centers to house their servers and equipment. This arrangement provides enhanced security, as well as increased scale and redundancy.

The economy of scale in a cloud environment offers sustainability benefits compared to traditional on-premises (on prem) and colocation (Colo) setups. Cloud providers operate large data centers that optimise resource use, enhance energy efficiency, and employ green practices. This shared infrastructure reduces waste, energy consumption, and carbon footprints. In contrast, classical setups often struggle with resource inefficiencies, higher maintenance costs and limited scalability, making the cloud a more environmentally friendly choice. Lastly, it is essential to underscore that both cloud providers and, ultimately, clients of CSPs will contend with soaring energy costs, akin to traditional data center owners. Therefore, efficiency and adherence to a strategic plan incorporating ESG components are imperative for achieving CO2, ESG, innovation and cost objectives.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.