Why TMT companies need to take greenhouse gas emissions seriously

By Rich Goode

As a senior executive in a technology, media and telecoms (TMT) business, how much time do you spend thinking about your company’s greenhouse gas emissions? If your answer is ‘very little’, you’re certainly not alone. 

Historically, tracking and reporting on companies’ climate impacts – primarily via emissions of greenhouse gasses (GHGs) like carbon dioxide, methane, nitrous oxide, ozone and CFCs – have been seen as boring technical tasks with little connection to the business’s creation or protection of value. As a result, the whole area was usually left to specialist engineers and regarded as plumbing.

Fast-forward to today, and if that’s the way you still think about GHGs, you may need to start paying more attention. Not only because climate change fueled by excessive emissions of GHGs is now recognised as the biggest single challenge facing humanity. But also because these emissions are now in the cross-hairs of global regulators – and any company that fails to keep a firm grip on them could face big penalties. Plus, it’s estimated that the information and communications technology industry is responsible for 2% to 3% of all global GHG emissions, which is similar to the emissions from airlines. This is no small impact.

So, what can ICT companies – and the rest of the TMT industry  – do to reduce it? The first thing to grasp about GHG emissions is that they’re categorized into three distinct types:

• Scope 1: Direct fossil fuel emissions from both stationary and mobile sources, and fugitive emissions such as refrigerant leaks.
• Scope 2: Indirect emissions from electricity, steam and chilled water purchased by the business.
• Scope 3: Upstream and downstream emissions all along the value chain, from suppliers to customers.

Across all three categories, it isn’t just regulators who are turning up the heat on heavy GHG emitters. Investors and concerned citizens – many of them your customers – are also demanding better disclosure and transparency around GHG emissions, and exerting pressure on organizations across all industries to reduce them.

As a TMT business, you might assume you’re not the main focus of this pressure. After all, you don’t run oil rigs or aluminum smelting plants. But again, you need to have a rethink, for several reasons.

For example, it’s widely assumed that companies’ “Scope 1” emissions – those produced directly from their operations – are made up solely of carbon dioxide from burning natural gas in industrial facilities. But those are just the most obvious part. Scope 1 also includes any fossil fuel burned in the course of your activities, such as running your vehicle fleet, or even emissions from refrigerants and other chemicals that are common when producing electronics.

A further major source of emissions is datacenters – which act as the beating heart of today’s TMT businesses. Everyone knows these are massive consumers of electricity, which is categorized as Scope 2 emissions. But far fewer realize that most datacenters have fossil-fuel powered generators as back-up in case the power supply fails. Best practice is to run this generator periodically to test that it’s working, which makes those emissions part of a company’s Scope 1 carbon footprint. The result: lots of emissions that are often unreported. The same can be said for purchased steam or chilled water – which are part of Scope 2 emissions but also frequently go unreported.

So, when it comes to GHGs, TMT businesses are  – quite rightly – under the spotlight with everyone else. And now is the time to get serious about measuring them. Why the urgency? Two sets of stringent new regulations now being readied on both sides of the Atlantic: the EU’s Corporate Sustainability Reporting Directive (CSRD), and the widely-anticipated mandatory reporting rules from the SEC in the US.

As implementation of these new rules draws nearer, your first step must be to pull together the information you’ll need to comply with them. This means doing three things:

1. Define the boundaries where you’re going to calculate your emissions: these will probably include company divisions, geographies, activities, and your supply chain. And be sure to be complete in your coverage. If you’re excluding any location or part of your business, be open and transparent about that fact, and explain clearly why it’s excluded.
2. Start gathering data to build into a GHG inventory. This may sound boring and easy but it’s actually the long pole in the tent. If you’re a multinational with hundreds of locations globally, pulling together the necessary information is neither straightforward nor quick. What can help is smart use of technology to support the data collection effort and minimize the amount of manual work required.
3. Be sure to keep track of the decisions you make along the way by creating a GHG calculation manual. If the person that calculates your emissions wins the lottery next year and retires, will you be able to work out your emissions in the same way, year in year out? Probably not. So it’s vital to keep a formal record of the approach and methodology applied as you create your GHG inventory.

The overall message is clear - as a TMT business you need to get on top of your climate impacts. Read the next article in the series to understand what potential pitfalls there are and how they can be avoided.