As the world becomes increasingly aware of the need to protect our planet, it's becoming clear that a company's sustainability practices are more than just good PR – they're also a key competitive advantage. For Indian IT companies, this is especially true as data centers continue to grow and contribute to global greenhouse gas emissions.
However, there is hope for the industry. During the Covid-19 lockdown, Indian IT industry carbon emissions dropped by 85%, from 2 million tons annually to 300,000 tons. While data centers are still doubling their energy consumption every four years, there are efforts being made to improve energy efficiency and reduce emissions.
For example, the Bureau of Energy Efficiency, along with the Confederation of Indian Industry (CII), published a manual called 'Energy Efficiency Guidelines and Best Practices in Indian Data Centers' in 2010. Additionally, the Ministry of Electronics and Information Technology's draft data center policy recommends using renewable energy resources.
But sustainability isn't just important for the planet – it's also beneficial for business. Multiple studies have shown that companies with strong environmental, social, and governance (ESG) propositions report better financial metrics, including return on equity, risk exposure, and credit rating. In fact, a comprehensive study covering 2,200 primary studies found that 63% reported positive findings.
In October 2021, an Infosys-commissioned research report found that investment firms using both internal and external ESG ratings outperformed the returns of the S&P 500 by 6.90%. This is because ESG-linked gains in financial performance are driven by all-round improvement in operations, talent management, employee engagement, product development, business resilience, and more.
ESG practices can also help lower operating expenses by saving on the cost of raw materials, natural resources, and waste. Infosys, for example, fulfilled 53% of the energy requirement of its data centers from renewable sources partly sourced from the 60 MW solar capacity installed in its campuses. The Power Usage Effectiveness at its Indian data centers has a weighted average of 1.67, which is better than the global average data center PUE of 1.8.
Furthermore, prioritizing reskilling in the ESG agenda can help address the global technology talent shortage. This involves reskilling the workforce, training underrepresented segments, and expanding the talent pool for the industry.
Apart from reducing energy consumption, data center operators should also deal with their hardware assets in accordance with circular principles to further shrink their carbon footprint. According to one report, 28% of organizations globally reuse or repurpose their IT assets, but at the same time, a comparable number – 26% – don't recycle adequately.
ESG practices also improve business resilience and risk management, as companies with a sound ESG stance have an easier time entering new markets and avoiding regulatory intervention and penalties for non-compliance.
Finally, ESG is becoming an important consideration for clients when awarding technology contracts. Organizations in every industry are looking towards technology providers to complement or enable their own sustainability initiatives. Building credibility in ESG and having a good record of driving ESG initiatives would help, increasingly so in the future.
In conclusion, it's becoming clear that being pro-ESG makes strong business sense for the IT industry, as it delivers long-term value and enables companies to adapt quickly to tightening regulations.
