As Net Zero Emissions Goals Increase, More Outsourcers are Getting on Board

Unlike the steel or car manufacturing industries, it isn’t immediately obvious that outsourcing pollutes. There are no billowing smoke stacks nor churning heavy machinery to point at. No heavy material needs to be shipped from one side of the world to the other. 

Outsourcing looks clean by comparison. Its currency – information, in the form of data – is moved by unseen by wire and cable, and stored in faraway, modern-looking data centers.

But despite its appearance, outsourcing does of course pollute. Internet infrastructure, upon which the industry relies, is a major reason. According to the International Energy Agency (IEA), “global internet traffic surged by more than 40% in 2020 … This growth comes on top of rising demand for digital services over the past decade: since 2010, the number of internet users worldwide has doubled, while global internet traffic has expanded 15-fold.”

Within this, data centers are a culprit. In 2016, the world’s data centers already used almost 50% more electricity than the entire economy of the UK. By 2040, ICT and data storage could account for 14% of global emissions, surpassing both aviation and shipping.

“BPOs tend to use major data centers either in-country or through outsourced use. Little has been said so far about this practice,” Michael Zdanowski, a low carbon energy and industry specialist and advisor told Nearshore Americas recently.

Yet that looks likely to change. Worldwide, companies are coming under closer scrutiny regarding their environmental impact. The UK will soon become the first G20 nation to mandate  major companies to report on climate-related risks and opportunities to their business, a move intended to provide investors with greater understanding of risk and of a company’s efforts on sustainability. More nations will surely follow, and companies unable to keep up are likely to suffer, said Zdanowski.

“The world is moving toward a net zero goal. Countries including laggards like China, Japan and South Korea, have now committed to ambitious emission reduction goals. Commitments have been made at the government level but that feeds down in terms of legislation, public sentiment and, ultimately costs,” he said. 

“In the near future companies that pollute more and emit more are likely to be uncompetitive, unsustainable and caught up in legislation that will charge them for their emissions.” 

Emissions An Issue for Now, Not the Future

Major Nearshore players have already made net zero commitments. Uber, which outsources in various Latin American markets, has said it will be a net zero company by 2040. Microsoft has promised to be carbon negative by 2030 and to remove its historical emissions by 2050, while Facebook already claims to have become net zero in its operations.

Tata Consultancy Services (TCS), the global digital services giant that offers a wide range of IT-related outsourcing activities, has similarly promised to be carbon neutral by 2030. However, this goal is only for its Scope 1 and Scope 2 emissions. Scope 1 refers to direct emissions from its own premises and resources, while Scope 2 covers indirect emissions from services like cooling – important for data centers – that the company purchases. Scope 3 covers all other emissions in the company’s value chain.

TCS should be applauded for this aim, yet the wording of its promise points towards an issue present for many organizations: they can’t be certain about emissions along its entire value chain.

“Microsoft, Google and other tech companies are under real scrutiny to deliver on their net zero goals. Companies across industries are getting called out for their grand claims when few actions are made. Greenwashing is being called out and here are jurisdictions where reporting on these issues can be ropey, and that can have consequences for the company.” said Zdanowski.

“In the near future companies that pollute more and emit more are likely to be uncompetitive, unsustainable and caught up in legislation that will charge them for their emissions.” — Michael Zdanowski

Events in other industries like oil, where investor activists are taking direct action to radically alter the future of the most polluting companies, should serve as a wakeup call to any industry stakeholder that is not already planning for a sustainable future.

“If jobs have been outsourced then so too have emissions and the impact of that pollution. How does Microsoft or Google pull into their sustainability reporting the carbon footprint of operations in Bolivia, Western Cape or Egypt? How do they calculate their outsourced emissions? It’s incumbent upon wider stakeholders in society to be on top of this,” Zdanowski said.

First Steps Towards Sustainability

Considering this, Zdanowski has suggestions for BPOs wanting to become more sustainable organizations.

Sustainability and Safeguarding Reports: “BPOs need to ask for safeguards from data centers and dig into their policies in regard to sustainability. Issues like labor policies, labor protection and trade unions are looked at very, very closely by this sector, so why not sustainability?” Zdanowski asked.

BPOs should also demand that their data center providers have signed up to the 2030 Climate Neutral Data Centre Pact — Michael Zdanowski

Zdanowski says that data center providers should be able to answer questions like where they are getting their energy from, and from which energy source. Players in markets like Chile, generally considered a regional leader for renewables, should be able to offer some energy from renewable sources, while other markets will lag behind. 

“BPOs could demand that their data center providers give information about where they source their energy. They should demand that the data center providers sources X% of their energy from renewable sources. They should also demand that their data center providers have signed up to the 2030 Climate Neutral Data Centre Pact,” he said.

“This has potentially the most significant impact on the sustainability of a BPO’s carbon footprint.”

Easy Wins: Outside of data center provision, preparing a BPO’s premises sustainably is an easy win that should not be ignored. No, insulating an office will not help reduce emissions as much as ensuring power comes from renewable sources, but it will still play a part, especially for larger companies will hundreds of sites around the world. 

“Proper insulation, using sustainable materials, and controlled air conditioning that doesn’t run 24/7. And then there’s the behavioural aspect whereby employees turn off monitors that aren’t being used. This might sound like the boring side of energy reduction, but it all helps,” Zdanowski said.

Make it Your Mission: The explicit and intentional integration of sustainable actions into the operation of a business helps put sustainability at the center of business decisions and employee actions, Zdanowski explained. 

“What are the overall behaviours of a company from an operation point of view? Does it encourage sustainability? Is sustainability a stated part of the company’s value and missions? If it isn’t, then it really needs to be. The business world is moving towards a net zero moment and those companies who aren’t moving with it will lose out.”