Last week I mentioned that the UK Government has published a draft of the GHG reporting regulations due to come into force next year. The basic requirement is that all UK quoted companies report on their greenhouse gas (GHG) emissions, which will certainly stimulate the carbon management software market, but what about the impact on broader IT services?
We’ve been round this loop before with the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, which caught the IT industry off-guard. The problem with the CRC scheme was that it penalised heavy energy users, both financially and in PR terms, through the ranking of performance of the 3,000 companies covered by the scheme. There was no allowance made for IT services supplies handling the IT of their customers.
Changes by the coalition government have effectively turned the CRC into a carbon tax, reducing some of the sting for IT companies. By contrast, mandatory carbon reporting could work in the industry’s favour.
The reason is that the regulations are expected to only cover Scope 1 (directly generated emissions) and Scope 2 (indirect emissions from electricity use), not other indirect emissions (Scope 3), which include outsourced activities. So any emissions from off-site IT services or third party data centres are not included.
It means that companies that choose to use outside suppliers to help run their IT could reduce their reported GHG emissions at a stroke. And since mandatory emissions reporting will inevitably fuel comparisons between corporations, those with outsourced IT may well look greener to shareholders and customers. It could provide a significant boost to the take-up of cloud computing in the coming years as well as IT outsourcing, Business Processing Outsourcing (BPO) and other IT services.
Of course the IT suppliers will have to account for the additional emissions they generate in taking on the IT workload of their clients, but only if the supplier is listed on the London stock exchange. Even then, the emissions performance of outsourcers will primarily be compared with their peers, which should increase the competition to make services more energy efficient. IT services companies have already been vying to be seen as the greenest through greater data centre efficiency (in terms of Power Usage Efficiency – PUE – ratings) and also in their purchase of green energy.
As it is, the larger IT services suppliers generally (but not always)have more efficient data centres than most in-house facilities. Some have made their own comparisons of cloud computing versus in-house applications. Microsoft found that, for large deployments, its cloud solutions can reduce energy use and carbon emissions by more than 30%. For small deployments the figure is over 90%. Google has calculated that a typical organisation can achieve energy savings of 65-85% by migrating to Google Apps as a whole – documents, spreadsheets, email and other applications. It will clearly be an attractive proposition for companies looking to reduce the level of GHG emissions they need to report.
Cloud computing and outsourcing could benefit even more if the regulations are extended, which is more likely than not. The Government will review the first two years of mandatory reporting in 2015 and then take a decision in 2016 on whether to extend the coverage to all large companies. It’s not clear what the definition of ‘large’ is, but it’s going to be a much broader group than the listed company sector currently proposed.
This is a sponsored post, but, as always, the words and thoughts are mine.