Note for the Nearshore Industry: Mind Tech’s Environmental Footprint

During the last few years, Latin America and the Caribbean have been producing good news in the technology sector. From record-breaking amounts of venture capital investment in the region’s startups and multiple new unicorns, to a dramatic increase in nearshore software outsourcing, e-government initiatives, as well as new training and technology upskilling opportunities driven by public-private partnerships.

Tech -as well as professional services outsourcing in the region- is having a moment. Leading corporations such as Amazon Web Services (AWS) are increasing their connections in the area. AWS launched AWS Local Zones in various regional locations just a couple months ago. The program is an infrastructure deployment tool that is now entering cities like Bogotá, Buenos Aires, Lima, Rio de Janeiro, Quéretaro and Santiago.

Business process outsourcing (BPO) companies are also expanding their footprint. Almost every day, market watchers wake up to the news of a BPO firm creating new jobs in established operations or expanding to a new market.

This growth is exciting for a region that has been heavily impacted by the economic consequences of the Covid-19 pandemic, inflation and capital outflows. But this time, Nearshore Americas goes beyond the headlines and wonders about the downside of this success, especially in the area of environmental impact of the software industry.

“Industry is really trying to come up with solutions to many of the environmental challenges we’re experiencing”–Fabro Steibel

What are some of the aspects that technologists in Latin America and the Caribbean should consider when it comes to climate change, the environmental impact of their activities and the political ramifications of these issues?

Fabro Steibel is the executive director of the Institute for Technology & Society in Rio de Janeiro (ITS Rio). He talked to NSAM and discussed some of the challenges and perceptions around the effects of the software industry in the environment.

ESG

“Industry is really trying to come up with solutions to many of the environmental challenges we’re experiencing. One of those is energy consumption,” said Steibel. “People understand the issues behind it, so we’re seeing today all sort of standards being established and corporations trying to be helpful in their implementation.”

An increasing number of investors are now considering environmental, social and governance (ESG) factors, which are a set of standards for how a company operates in regard to the planet and its people. From an organization’s energy use and pollution creation, to the way animals are treated, companies may damage their own ability to attract outside investment if those elements show negative indicators.

It’s not just about doing the right thing for the sake of it. For companies today, having policies and practices that don’t do enough to protect the environment represents a business liability. That’s why it is so relevant for operators in the software industry to be mindful of how they do business and what they contribute to the fight against climate change, as the quest for sustainability is an increasingly important part of any brand.

Data, Renewable Energy & Politics

It’s clear that the production and maintenance of software has effects on the environment; raw materials need to be extracted, greenhouse gases are emitted and there’s consumption of both energy and water. But what is the actual impact of the industry?

Today, data is being generated like never before. As a consequence, data centers consume increasing numbers of energy. Data centers are using around 3% of the global energy supply, a level of consumption that is expected to grow in the next few years. Major corporations have pledged to make their sites to carbon-neutral via carbon offsetting and investment in renewable energy infrastructures like wind and solar. In spite of these efforts, cloud services have today a larger carbon footprint than the entire airline industry.

“Energy transmission is really what we need to get better at. The current levels of waste in energy transmission are really high”–Fabro Steibel 

“It’s not really about storing data but processing data. Companies also try to avoid waste by storing data in jurisdictions where energy is cheaper. Some countries have provisions of data localization, but it is for storing and not processing necessarily,” said Steibel.

The issue of energy consumption is central for the software industry. For Steibel, this creates a larger opportunity for innovation as well as geopolitical challenges.

“Energy transmission is really what we need to get better at. The current levels of waste in energy transmission are really high. The next question is about using renewable energy to drive the industry,” said Steibel. “Latin America and the Caribbean could play a role in  this.

“Paraguay is one of those countries that can offer significant amount of clean energy, but it doesn’t have enough engineers,” he added. “China is a really interesting example, being currently the main wind energy producer in the world. But again, this is an issue of whether country-specific regulations allow for the processing and storing of data in foreign jurisdictions. Data is a strategic asset and countries want to protect it.”

This reality exacerbates the relevance of the political component.

“Generally, politicians have never fully understood issues related to technology. When it comes to energy and climate change, they have a constituency that they need to serve and that modifies policy outcomes. Also, more and more countries are passing laws that require their citizen’s data to be stored on servers located domestically. This challenges the opportunity to be strategic about data localization and energy optimization”, concluded Steibel.