Why Microsoft's carbon-neutral pledge matters

By making business divisions responsible for their carbon costs, the software giant sets a precedent that is likely to be followed by other high-tech companies.
Written by Heather Clancy, Contributor

With the start of its new fiscal year on July 1, 2012, Microsoft has embraced a carbon-neutral commitment across all of what it describes as its direct operations -- including (but not limited to) its data center and software development laboratories.

What's more, the company plans to create an internal carbon fee that it will apply to its operations.

"The goal is to make our business divisions responsible for the cost of offsetting their own carbon emissions," wrote Microsoft Chief Operating Officer Kevin Turner, in The Official Microsoft Blog.

So, that means there will be a chargeback for the energy they use, so it is in their interest to reduce it.

I'll get more into the specifics of how Microsoft plans to get there, but this statement of intent is especially relevant and significant as the software giant pushes more of its business out of the delivery of on-premise software licenses and into applications and infrastructure services delivered via huge cloud operations.

Much has been made of cloud computing's ability to help reduce energy consumption, but the emerging downside to this proposition is that it centralizes more of the world's software consumption into huge data centers that often have questionable "dirty" energy sources. At least in the eyes of organizations such as Greenpeace, which is closely tracking the data center site choices of the top players in the cloud computing world. Microsoft didn't fare too well in Greenpeace's latest report, "How Clean is Your Cloud?"

I honestly doubt Microsoft's carbon-neutral pledge for 2013 is in reaction to that report, given all the past measures it has taken to address the energy consumption of both its data centers and its office sites around the world. The fact is, the move just makes good business sense -- regardless of whether or not it is construed as a green business strategy.

For example, Microsoft's work to apply smart building technology across its campus in Redmond, Wash., should result in an energy savings of $1.5 million for the 2013 fiscal year. The payback on its investment comes in just 18 months.

Microsoft also managed to jump from nowhere into the No. 3 position on the U.S. Environmental Protection Agency's most recent list of biggest purchasers of green power. It purchases about 1.5 billion kilowatt-hours annually, which is about 46 percent of the company's overall consumption.

Mind you, those purchases are in the form of renewable energy credits (RECs), which some people see as a cop-out in the quest to become greener. But, heck, someone has to fund and finance renewable energy projects. Why not Microsoft?

Microsoft's carbon-neutral pledge casts a very bright spotlight on the need for high-tech companies to reduce power consumption, which is great publicity for the energy-efficiency movement as a whole.

"We recognize that we are not the first company to commit to carbon neutrality, but we are hopeful that our decision will encourage other companies large and small to look at what they can do to address this important issue," Turner wrote in the Microsoft blog.

As you would expect, the Greenpeace clean energy hawks are skeptical of a strategy that will allow Microsoft to continue using coal-generated power for its data centers while buying RECs in order to officially make its carbon-neutral claim.

In a statement, Greenpeace Senior IT Analyst Gary Cook said:

"Microsoft should move quickly to back up its goal by committing to renewable energy for its growing data center fleet and using its influence to demand a shift away from dirty energy, as its peers Google and Facebook has done. ... If Microsoft matched or exceeded those efforts, it would catalyze a shift from dirty to clean electricity and create the scale of positive change that Microsoft could be proud of."

The big difference between Microsoft and companies like Google and Facebook is that the power of Microsoft's customer base lies with businesses. Until the corporate world starts clamoring for clean energy, it is difficult to see why Microsoft would go out of its way to make clean energy part of its data center procurement process.

The timing of its pledge is actually pretty interesting, considering that Dell ended its own push for carbon-neutrality at the end of 2011. Dell said it would focus, instead, on making its operations as energy-efficient as possible without opting for REC purchases.

Still, Microsoft's move likely will pressure some of its competitors to consider adopting similar strategies -- especially if carbon-neutrality becomes part of the marketing game. For that reason alone, it is a significant stance. And, who knows, maybe eventually clean energy sourcing will become part of the data center sourcing equation.

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