Addressing Carbon Emissions in IT: The New Business Imperative

Ann Marie Chow is Apptio’s VP of Customer Operations, leading the Global Practice and Customer Operations team who drive strategy, cross-functional collaboration, and operational excellence in order to scale. Her passion for sustainability guides her leadership of the Technology Emissions Management solution and GTM efforts. She’s focused on shaping the strategy for how TBM, FinOps, and GreenOps intersect, and how teams can leverage common processes to partner across the business.

While the momentum around sustainability initiatives has been growing for years, companies across industry verticals are feeling increased urgency to step up their efforts to reduce emissions. Although sustainability affects virtually every aspect of an organization, according to Forrester’s Q4 2022 Global Environmental Sustainability IT Buying Survey, a company’s IT estate contributes 26% of carbon emissions on average—and this number jumps to 40% in the technology and financial services sectors. At a macro level, McKinsey reports that enterprise technology is responsible for 350 to 400 megatons of carbon dioxide equivalent gases (CO2e) worldwide, equivalent to the total carbon emitted by the United Kingdom. Given the significant environmental impact of IT and the resource-intensive nature of technological innovations like generative AI, managing and optimizing technology’s carbon emissions is becoming increasingly critical.

Factors Driving Carbon Emissions Focus

Why has interest in technology carbon emissions measures surged recently? There are several factors contributing to this acceleration. Primary among them are legal and regulatory drivers. On January 5, 2023, the EU passed the Corporate Sustainability Reporting Directive (CSRD), which increased the scope of previous regulations and the specificity of sustainability reporting. Companies must adhere to these rules in their 2024 financial year reports, which are published in 2025. In the U.S., the Securities and Exchange Commission (SEC) has adopted rules to enhance and standardize climate-related reporting alongside California’s recent climate initiatives. Within the Asia-Pacific region, Australia is requiring climate-related financial disclosures, including climate-related plans, financial risks and opportunities, per Australian Sustainability Reporting Standards (ASRS).

As regulations become more stringent and precedents continue to be set, establishing carbon emissions tracking and goals becomes mandatory for global businesses. Non-compliance now comes with steep penalties, with countries starting to pass laws to enforce regulations. In Germany non-compliance can potentially lead to fines of €10M, and in some cases, up to 5% of annual revenue. On the flip side, there are also tax credits and incentives that make sustainability goals increasingly beneficial.

Beyond regulation, companies are recognizing the need for greater transparency within their culture, and this includes the environmental impact of apps, services, and infrastructure provided by IT. Customer demands are increasingly driven by environmental accountability and progress towards sustainability—and increasingly, companies are asking about sustainability when submitting RFPs to vendors. This sustainability-focused view also resonates with talent pools that increasingly want to work for environmentally conscious employers. Proactively addressing ESG issues can enhance reputation and bolster brand value. Tolerance for surface-level ‘greenwashing’ is thin—both customers and employees desire to see demonstrable progress.

On-Prem to Cloud: Understanding Technology’s Hybrid Emissions Impact

The modern technology footprint is vast, growing year over year in scale and complexity, making it challenging to monitor—especially since a great deal of IT infrastructure is distributed. According to the Greenhouse Gas Protocol (GHG Protocol), an internationally recognized standard, businesses need to consider three scopes to provide a full picture of their environmental impact: Scope 1 covers direct greenhouse gas emissions from sources owned or controlled by the company; Scope 2 includes indirect emissions from the generation of purchased energy; and Scope 3 encompasses all other indirect emissions occurring in the value chain.

Scope 3 is particularly challenging, given that it’s generated by third parties that track emissions in various ways—and this includes cloud service providers, a major component of modern IT’s footprint. Accurately tracking Scope 3 includes the supply chain for your own datacenters, which is fairly straight-forward, but also for cloud service providers who are often opaque in how they calculate the numbers they pass along to their customers (within which they bundle their own Scope 1 and 2 metrics).

While there’s a great deal of focus on datacenters along with exponential cloud spend of late, surprisingly, they’re not the biggest offenders in terms of carbon. That mantle goes to end user devices—laptops, tablets, smartphones, and printers—which emit 1.5 to 2 times more carbon globally than datacenters, according to McKinsey. Lifespans on these devices are often much shorter than those of servers and manufacturing new ones—especially the new semiconductors they contain—contributes the bulk of the carbon.

This complexity necessitates a hybrid view of an organization’s entire IT carbon estate, encompassing sustainability metrics for both on-premises and cloud to ensure direct and indirect emissions are accurately captured and tracked.

Bringing the Data Together to Improve Emissions

Before setting improvement goals, companies need a way to wrangle data across the organization—including Scope 1, 2, and 3 sources. With proper tooling, they can gather carbon (CO2e) and energy (kWh) data from on-prem and third-party sources, like cloud service providers (CSPs).

By leveraging the industry-leading TBM solutions from Apptio, an IBM company, including solutions for IT financial management (ITFM) and FinOps, companies can establish a culture of insight and optimization across on-premises and cloud resources. This hybrid approach involves benchmarking and developing a consistent methodology for measurement of costs and carbon emissions, which can be tracked regularly against improvement goals. By using allocation logic and focusing on carbon unit costs, IT departments can make this data actionable, linking usage and consumption back to specific business units. Apptio’s solutions simplify the task of integrating financial and operational data into one centralized view. This provides transparency on key spending drivers tied to business priorities, enabling leaders to focus on sustainability, business outcomes, and the value of each tech investment dollar spent.

Cost Alongside Carbon: Business and Environmental Considerations

When thinking through a sustainable technology strategy with a hybrid view that includes ITFM and FinOps practice areas, it becomes clear that cost and carbon emissions are often intertwined—being resource-efficient is a fundamental aspect of sustainability. For instance, regularly checking cloud programs for idle and unattached resources that are candidates for deletion is essential. Likewise, computing resources should always be right sized to prevent over-provisioning. Given that cloud computing is a significant source of carbon emissions and energy intensive, these maintenance measures can have a significant impact. This holistic, hybrid view has given rise to GreenOps, a sustainability-focused approach that integrates environmental impact considerations into cloud and IT operations.

However, managing cost versus carbon emissions is a balancing act. Cheaper regions are often less expensive because they rely on coal and other environmentally harmful energy sources. Therefore, using fewer resources and paying less doesn’t always translate to better environmental outcomes. There are many trade-offs to consider, and the data necessary for making optimal decisions is lacking.

Regarding on-premises impacts, unused applications can run in the background for extended periods, draining resources. Implementing an ongoing program to decommission these apps can help reduce energy consumption and costs.

When tackling these issues, companies that adopt tools and automation to allocate both cloud and on-premises technology costs back to business units (BUs) can start having productive conversations about costs and carbon emissions. This hybrid view provides IT and technology leaders with defensible, actionable data for BU stakeholders to make data-driven decisions that balance trade-offs and that increasingly skew towards being both cost-effective and carbon-efficient, whenever possible.

While tooling is important, it’s essential to note that software alone often isn’t enough to drive meaningful change. Achieving carbon emissions goals involves significant cultural shifts and change management efforts. Companies need to find a way to motivate employees to take action. This is where GreenOps initiatives can be valuable, providing a fresh perspective complement the existing tenets of FinOps and ITFM: responsible technology usage, workload efficiency, and rightsizing of apps and compute resources.

Building a Foundation for Technology Emissions Management

In the future, mere compliance won’t be enough. Leading companies are taking a proactive approach, establishing the foundation for a sustainable future by initially focusing on reducing technology’s carbon emissions. This approach, centered around thoughtful, strategic planning, benefits the planet and the bottom line.

To achieve this end, Apptio provides a single source of truth to optimize tech spend and drive better business outcomes by considering cost and carbon across on-premises and cloud technology. To support carbon emissions tracking, we’ve added a feature called Cloud Infrastructure Carbon Emissions Reporting to our IBM Cloudability solution, which monitors two key metrics: estimated carbon emissions (MTCO2e) and power consumed (KwH). IBM Cloudability leverages these metrics to analyze usage patterns and generate carbon emissions insights that consider important factors such as hosting region, utilization of resources, and CPU architecture. These insights allow customers to measure the impact of their cloud consumption and track carbon emissions down to the team, application, and resource level.

IBM Cloudability carbon emissions calculations were developed in partnership with IBM Research to ensure a robust, scientific methodology and to provide the most relevant trends and KPIs across the organization. Visit our Innovation Hub to learn more about this and our other latest solution updates, which not only help companies achieve their carbon emissions goals, but improve efficiency across all technology investments.