Microsoft: How Boards Should Confront AI and ESG Challenges
AI continues to drive unprecedented demand, leaving the data centre industry faced with the challenge of balancing expansion with sustainability commitments.
Microsoft is one such technology giant grappling with rising energy demands on account of AI, as the global data centre industry faces rapid growth. As a leading cloud services provider, the company has set ambitious targets to become carbon negative by 2030.
However, the rapid expansion of AI technologies is putting pressure on these commitments, particularly as its data centres are consuming increased levels of energy and water.
Sorouch Kheradmand, Global Head of Sustainability at Schneider Electric, explains how Microsoft is navigating the complexities of AI with Mary Francia, an advisor on sustainability.
Sorouch explains: “With the speed of evolution and rush in investments that Artificial Intelligence is seeing, businesses see opportunities as much as risks.”
Microsoft challenged by AI power demands
In order to address these challenges, Microsoft is exploring innovative cooling solutions and more efficient power distribution. The company is also considering integrating AI-specific expertise into its boardroom by appointing advisors or directors with backgrounds in AI and technology ethics.
The company, therefore, has been advised to look to anticipate AI’s risks and opportunities whilst putting in place board and operational governance to maximise management of these.
Likewise, in order to maintain its leading position in ESG, Microsoft must be proactive when it comes to disclosing the impact of AI on its operations.
Sorouch and Mary highlight that the technology giant should also consider integrating AI-specific expertise in the boardroom by appointing advisors or directors with AI and technology ethics backgrounds.
Additionally, balancing ESG and financial performance is vital. It is suggested that strategic portfolio management could be a critical success factor in helping Microsoft navigate its next growth cycle with AI.
What’s clear is that Microsoft will benefit from a more integrated approach to AI in order to protect its ESG targets. The report highlights that board members, executives, employees and stakeholders should all be educated in AI’s ESG impact and how to measure and report this, according to Sorouch and Mary.
These frameworks must be regularly adapted to suit the evolving nature of AI technologies. To ensure Microsoft’s portfolio continues to evolve, sustainability objectives would do well to be embedded within the company’s existing processes alongside looking to enable quick, granular decision making from executives and managers.
Mary says: “I am grateful for the opportunity to collaborate with Sorouch on this important discussion about the intersection of AI and sustainability in board governance.
“This article captures our combined knowledge in Governance, ESG, Climate and AI to offer thoughtful approaches for enhancing board oversight in these critical areas.”
Making data centre operations more sustainable
In order to confront sustainability within the industry, Microsoft has committed itself to building its new data centres within the environment in mind.
For instance, the company is building its first data centres made with superstrong ultra-lightweight wood to further cut its carbon emissions.
The data centres are being constructed by using CLT panels, which are manufactured off-site and are both lighter and more fire-resistant than traditional materials. When exposed to high temperatures, CLT forms an insulating char layer that maintains structural integrity longer than steel, which deforms more rapidly under heat.
Progress so far has been mixed. While Microsoft achieved a 6.3% reduction in direct emissions over three years, indirect emissions rose 30.9% due to data centre growth.
These Scope 3 emissions include carbon from material extraction, manufacturing and transportation.
Microsoft is also powering ahead with its new zero water cooling solution for AI data centres to directly respond to water stress.
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