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Starting your net-zero journey as a software company

By Natasha Allard, Mathieu Springuel

Climate change is considered one of the greatest threats to the world’s economic stability by the WEF. Environmental sustainability is therefore a crucial characteristic when building a long-term, resilient business.

Although some software companies are at the forefront of efforts to reduce greenhouse gas emissions through innovative technology, the digital sector has come under recent scrutiny due to its ever increasing energy demand. According to a report by Ericsson, the ICT sector is currently responsible for the same amount of carbon emissions as the global aviation industry’s fuel consumption.

The pressure to adopt climate action is coming from all stakeholders. As corporate clients continue to set their own ambitious climate targets, they will increasingly expect their software suppliers to do the same. With the current shortage of digital talent, climate action can also set your business apart in the view of employees. Kite Insights reports that 70% of employees believe that acting on climate change at work was important to their personal sense of motivation and wellbeing.

Additionally, investors are growingly recognising environmental factors as drivers of value. For example, improving energy efficiency will lead to reduced operational costs, whilst the ability to access green bonds can help reduce cost of capital. Such drivers of value have caused investors to integrate environmental factors within their investment process.

Where to Start?
Establishing a baseline and setting a target can be daunting, especially as a small business.

The UN Global Compact has developed an SME Climate Hub which aims to provide a one-stop-shop for small businesses wanting to align their action on climate with the goals of the Paris Agreement.

For medium or large software companies, the Science Based Targets Initiative (SBTi) offers pathways, methodologies and third party validation to set targets in line with the Paris Agreement. At the time of writing, nearly 100 software companies have set science-based targets with the SBTi, and over 100 more have committed to.

Getting Your Emissions Reporting Right
Most software companies follow the Greenhouse Gas (GHG) Protocol, a comprehensive global framework, to measure and manage carbon emissions. This process of measuring emissions is crucial to identify where your carbon emissions hotspots originate from. Once identified, you should focus on these hotspots to maximise the impact of your climate action efforts.
The emissions profile of software companies, like other industries, can be separated into different scopes; scope 1, 2 and 3 emissions. The main driver of your scope 2 emissions is likely to be the electricity purchased to power office buildings, IT infrastructure and data centres.

Whilst often not mandatory, reporting your full scope 3 footprint will demonstrate your commitment to disclosing your full carbon impact.

Practical Steps
Here are some practical steps for software companies to start reducing their emissions today:

Switching to renewable energy is one of the most important steps that software companies can take to reduce emissions. This can be done by changing energy providers.
Digital companies can also reduce emissions by upgrading their existing technology to newer, more efficient technologies. For instance, a 4G mobile network is more energy efficient per gigabyte (GB) than a 3G network. A 5G network is even more efficient than 4G.
Companies operating data centres or using energy-intensive equipment can take various steps to maximise energy efficiency. Once equipment is purchased and installed, it is often in use for several years. Make energy efficiency a top priority when purchasing new equipment, and check out best practices for green data centres that are sure to help cut your energy and costs.
Much of the scope 3 impact of software companies will likely stem from their supply chain. Engage suppliers to align with your sustainability goals and reduce their emissions. The CDP enables companies to request emission and initiative data from suppliers.

The Role of Carbon Offsetting – Is offsetting right for your business?
In order to achieve carbon neutrality, many digital companies are compensating for their current emissions using voluntary carbon offsets. This is the removal of greenhouse gasses from the atmosphere to compensate for the emissions produced by the company.

It is important to note that offsetting can be susceptible to varying degrees of greenwashing. There are a plethora of offsetting schemes that are not legitimate solutions due to drawbacks such as double counting or lack of additionality. Companies should always evaluate offsetting schemes to assess their true impact.

Whilst carbon offsetting will play a critical role in accelerating the transition to net-zero emissions at the global level, it does not replace the need for rapid emissions reductions in line with climate science. Reducing emissions should be a priority over offsetting them. Luckily, reducing emissions also tends to be a lower cost solution than offsetting.

Are you a software company trying to start your net-zero journey? If so, you can reach us here.