Sustainability Strategies Still Nascent in IT Departments

Environmental Social and Governance reporting mandates are just starting to impact IT decision makers, according to the Enterprise Cloud Index survey.

By Joanie Wexler

By Joanie Wexler July 5, 2023

IT professionals have long been challenged to juggle many competing technical and business goals, such as increasing IT capacity while lowering costs. The situation is only growing trickier as new corporate environmental, social, and governance (ESG) considerations trickle down from the boardroom to the data center.

While the sustainability mantra has been loud and clear among executive ranks for several years, it’s just starting to resonate in corporate IT departments, according to Steen Dalgas, senior cloud economist at Nutanix. The nascent status of sustainability strategies in IT was evident in Nutanix’s Fifth Annual Enterprise Cloud Index (ECI) survey and report, published in early 2023. 

The vast majority of 1,450 IT decision-makers surveyed around the world for the ECI report (92%) agreed that sustainability was more important to their organizations than it was a year ago. However, as a driver of IT decision-making, sustainability ranked fairly low on respondent consideration lists (Figures 1 and 2). The implication is that while the value of ESG programs to a business’s long-term viability has hit IT’s radar, strategies and best practices for successfully deploying them haven’t fully jelled.

Figure 1. Top Infrastructure Investment Drivers
Infrastructure Investment Drivers % of respondents ranking each variable as their no. 1 decision criterion
Cybersecurity 13%
Data sovereignty 10%
Data protection, backup, and recovery 10%
Flexibility to run across clouds and on-prem 10%
Ability to easily move existing applications to the public cloud 8%
Data services 8%
Performance 8%
Regulatory concerns and compliance 8%
Data distribution across edge, datacenter, public cloud(s) 8%
Sustainability 7%
Application requirements 6%
Cost 5%

 Source: Nutanix Fifth Annual Enterprise Cloud Index report

Figure 2. Reasons for Relocating Apps in the Past Year

Reasons for Relocating Apps Percentage of Respondents
To improve our security posture and/or to meet regulatory requirements 46%
To integrate with cloud-native services (e.g., AI/ ML) 42%
To improve data access speeds 41%
To gain better control of the application 40%
To meet sustainability goals 39%
Faster app development 35%
Outsourcing IT management 32%
Disaster recovery 28%
Capacity concerns 27%
Executive mandate 24%
Cost 21%

 Source: Nutanix Fifth Annual Enterprise Cloud Index report

Executive Disconnect

Corporate sustainability initiatives, Dalgas explained, are being driven largely by a shift in investor strategies that now embrace the holistic, long-term health of a business. Rather than relying almost exclusively on a company’s financial balance sheet as in decades past, these strategies now also require solid ESG credentials. Moreover, bank lenders increasingly take into consideration ESG health when determining an organization’s eligibility and finance rate, Dalgas said.

“In other words, the bottom line is no longer the bottom line,” he quipped.

For these reasons, according to Dalgas, sustainability has weighed heavily on the minds of CEOs and CFOs since the 2020 time frame. However, CIOs are further down the line in receiving their ESG marching orders, “even though the biggest user of resources is the IT function and the biggest consumer of electricity is the data center.”

By some estimates, for example, data centers account for 4% of electricity consumption and 1% of greenhouse gas (GHG) emissions worldwide.


Attention Turns to IT Sustainability and ESG

Dalgas suggested that sustainability currently shows up in the job performance metrics of CEOs and CFOs far more often than in those against which CIOs are evaluated.

“If [CIOs’] bonus plans haven’t been updated to reflect sustainability, then sustainability is not on their list of priorities,” he said.

An Accenture 2022 survey of 560 companies with revenues above US$1 billion revealed similar findings. While every Accenture respondent ranked technology as either “important” or “very important” for achieving their sustainability goals, just 7% reported having fully integrated their corporate technology and sustainability strategies. Fewer than half (49%) of responding CIOs reported being involved in setting sustainability goals, and even fewer (45%) said they were assessed on achieving those goals.

The next couple of years, however, should see big changes in the integration of IT and sustainability strategies, said Dalgas, in part due to emerging reporting mandates and standards focused on the ESG side of the business.

What Will Turn the Tide?

“It has taken time to understand what ESG really means for organizations,” Dalgas said. Now, however, it’s starting to be taken very seriously, in part thanks to the European Union’s Corporate Sustainability Reporting Directive (CSRD), he said.

Starting in 2024, the EU CSRD will require that nearly 50,000 companies comply with sustainability reporting separate from their financial reporting, said Dalgas. The CSRD mandate covers companies with 500 employees or more that are headquartered in the EU, have subsidiaries operating within the EU, or are listed on EU-regulated markets.


IT Sustainability Becomes Business Imperative

In the U.S., the Securities and Exchange Commission (SEC) has outlined plans, expected to be finalized this year, that would standardize climate-related disclosures for investors as part of a growing awareness of the importance of ESG issues (emphasis on the “E” for “environmental”) among public companies. The new rules would require listed companies to not only disclose traditional risks “reasonably likely” to have a material impact on their business but also to share information about their level of direct and indirect GHG emissions, which are quickly becoming common metrics for assessing a company’s exposure to climate-related risks.

Given that the IT function accounts for such a large proportion of the environmental component of ESG measurements, said Dalgas, IT will need to soon fully embrace sustainability in ways that align with corporate goals for resource consumption and emissions, staffing diversity, social programs, and policy setting and enforcement.

What Steps Can IT Departments Take?

To do their part, IT needs to know what the company’s sustainability goals are, find a way to measure the relevant IT metrics, then build and continually hone an IT strategy that can meet the objectives for those metrics, said Dalgas.

Modernizing IT is one route to getting there, he said. Traditional three-tier enterprise data centers built on hierarchical core, aggregation, and access networks are quickly growing suboptimal as the number of data flows and time-sensitive applications escalates. In some cases, data may flow up and down all levels, from the access network through the core and back again. Not only does this approach create latency that some applications can't tolerate but it also unnecessarily consumes extra energy. By contrast, data center advances that collapse and virtualize functions improve efficiency end to end, both in terms of performance and power consumption.


Sustainability Reporting Uncovers Hidden Risks and Opportunities

Dalgas estimates that converging the data center using cloud and virtualization technologies can deliver an 80% reduction in CO2 emissions, whether the cloud environment is private or public. “Generally, the pricing for private cloud, especially over time, tends to be much better than for public cloud,” he said. He added that this is particularly true for software as a service (SaaS) offerings.  

Dalgas indicated that Nutanix is investigating how to help customers measure the real-time CO2 footprints of each virtual machine (VM) they run in their cloud environments. He said a financial industry customer of Nutanix was told to start measuring the carbon emissions of each VM it runs.

“Currently virtually no one is measuring per-VM emissions in real time,” said Dalgas.

He noted that there is a cost governance tool in Prism — Nutanix’s integrated and cloud-agnostic management and operations tool for virtualized data centers — that calculates the dollar cost to run each VM.

“Now, it looks like our customer would also like to how much carbon it ‘costs’ to run each VM,” Dalgas said. “That’s something we’re hearing that our customers want.”

Gaining dynamic access to IT energy consumption data across the board, he said, can allow IT departments to manage their workloads in real time so that peak processing happens when there are more renewables available in the power grid and pricing is cheaper. Currently, this information is difficult to get from public cloud providers, who tend to supply customers with a ballpark carbon emissions figure for their whole data center, rather than on a per-VM basis.

“They don’t have methods in place for properly measuring emissions for each customer or each workload,” said Dalgas.

Getting There From Here

In some ways, ESG represents another Big Data application that will require data aggregation, analytics, and AI to measure. IDC predicts that by 2024, 30% of organizations will use ESG data management platforms to route ESG key performance indicators (KPIs) to centralized reporting systems and enable real-time operational decisions that optimize resource utilization.


Sustainability Reporting Uncovers Hidden Risks and Opportunities

Within three years, IDC expects ESG performance to become a top-three decision factor for IT equipment purchases and believes that more than half of all requests for proposal (RFPs) will require metrics for carbon emissions, materials use, and labor conditions.

As ESG evolves into a key decision factor for corporate customers, investors, and even employees, it will be imperative for IT departments to find creative ways to mitigate the environmental impact of their data centers. Once they understand the overall business sustainability target, they can map out an IT modernization strategy for how to measure the relevant metrics and then use energy-efficient, eco-friendly solutions and best practices to meet their goals.

Editor’s note: Explore Nutanix’s ESG report.

Joanie Wexler is a contributing writer and editor with more than 25 years of experience covering the business implications of IT and computer networking technologies.

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