Beyond Carbon Neutral: Will Microsoft’s carbon negative commitment be realized?

Written by: Sarah Brook, Palak Kashyap, Amola Panda, Yuichi Yasaki

Business Model of Microsoft

Microsoft Corporation needs no introduction to anyone. Whether it be the Windows OS, the Internet Explorer browser, or the Xbox, we all have used at least one Microsoft product in our lives. The American technology company founded in 1975 started by developing and selling BASIC interpreters for the Altair 8800 and eventually rose to a $133 billion company it is now. Microsoft develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and related services, and operates through three major business segments – Productivity and Business Processes, Intelligent Cloud and More Personal Computing. Despite once being an exceptional leading technology company, Microsoft now faces stiff competition from companies such as Apple, Amazon, and Google.

Climate Change and Tech Companies 

One might wonder why a technology company should care about climate change. With a movement towards a digitalized world, a disruption of the industrial processes, functions and, consequently, the global economy is on the way through AI, IoT, Big Data, Cloud Computing and more. Hence, while there still is uncertainty on how a sharp rise in the need for computing power will drive carbon emissions, exploring climate cha

nge ramifications early on will allow technology leaders to make wise decisions and lead the charge when it comes to innovative climate solutions. Secondly, the technology sector can have a massive impact on the carbon emissions of its suppliers and consumers. The tech companies are an interface with global customers and touch the lives of millions of diverse people around the globe. Ahead of its peers, Microsoft took a strong stance on climate change earlier this year – and the actions it takes in the coming decade will serve either as a hopeful indicator or cautionary tale about big business and taking responsibility when it comes to climate action.

In Microsoft’s case, the key drivers behind its climate change response are: Preserving their existing supply chain, preventing a significant cost increase, and the creation of new growth opportunities for their business. Their global suppliers are often based in emerging countries and struggle with environmental issues such as pollution and water shortages. Further, rising temperatures cause direct incremental costs of cooling down servers. By investing into the cause, they have also created new business opportunities and core competencies for their future portfolio – efficient matching service of renewable energy procurement, Azure AI integration into clean energy production and Advanced Energy Lab services. In short, climate change is not only a threat for Microsoft but also an opportunity.

Ambitious Response to Climate Change

While most big technology companies are increasing their focus on climate change, Microsoft has made a few bold claims this year that make it a particularly interesting company to explore when it comes to climate change strategy.

In January 2020, Microsoft announced an ambitious goal and plan to tackle climate change. The tech giant aims to become carbon negative not only in terms of scope 1 and 2 emissions but also for scope 3 by 2030. By 2050, they intend to remove all the carbon the company emitted (directly or by using electricity) since its 1975 establishment. They are also committed to contribute to the challenges regarding ecosystems, water, and waste. All are intertwined to tackle climate change.

Microsoft reduces its carbon footprint by increasing the energy efficiency of Microsoft devices and engaging suppliers in a Carbon Disclosure Project, but further efforts are required to achieve these goals. To reduce emissions, Microsoft plans to shift 100% to renewable energy, electrify their campus vehicle fleets, and obtain environmental certifications for their campuses. Beyond scope 1 and 2 emissions, they will expand the application of their internal carbon fee to all scope 3 emissions.

Carbon removal is essential to become carbon negative. Microsoft intends to rely on negative emission technologies including afforestation, reforestation, soil carbon sequestration, bioenergy with carbon capture and storage, and direct air capture. However, a large portion of these technologies is under development. Therefore, Microsoft will invest in technological development. In addition to their past funding activities (e.g., AI for Earth grant), they are launching a $1 billion Climate Innovation Fund for financial support in the next four years.

Microsoft also admits that cooperation from suppliers, customers, and others are needed to tackle climate change. Carbon-related criteria for supplier selection will be set. Microsoft Sustainability Calculator, an application that provides customers information of emissions through Azure, is available now. Planetary Computer, a platform that gathers and analyzes data about how the planet is functioning, will be developed to involve a wider range of stakeholders. More collaborations with other companies such as Vattenfall will be pursued. And moving forward, they have committed to raising their voices for carbon-related public policy issues and encouraging their employees to participate in activities for sustainability, to extend their influence. Time will tell how committed they remain to policy advocacy.

Future Outlook

Looking to the future, Microsoft has an opportunity to lead both the big business as well as big tech response to climate change, but while bold carbon commitments and grants are promising, they must be followed with real action and progress. The actions Microsoft takes in the next ten years to create a more sustainable supply chain, ensure their suppliers are taking responsible climate action, and invest in other sustainability projects will either serve as a model for big business, or a cautionary tale about greenwashing. If they do successfully meet their climate goals, they will demonstrate that business not only has a responsibility, but a possibility, of minimizing their environmental impact. As a first step, they should complete what they can do on its own as soon as possible (e.g., Shifting 100% to renewable energy) to demonstrate their seriousness. Further, they can take a larger leadership role by not only pressuring their suppliers to reduce emissions, but also collaborating with those suppliers to develop mutually beneficial solutions. From a hardware perspective, this could involve continuing to invest in and promote reverse logistics for consumer technology products so that rare earth metals and recyclable materials could be reclaimed from expired Microsoft products and fed back to the supplier pipeline.

Beyond their climate goals, Microsoft is uniquely positioned to help others tackle environmental problems with their products and networks. In this way, climate change poses an opportunity that Microsoft is aptly getting ahead of with their Planetary Computer and AI for Earth grant program. The true test for Microsoft will be how they balance the opportunity to profit with the opportunity to make an impact – by choosing to monopolize or further democratic data and algorithms that could help monitor and serve as a solution to ecological, carbon, water, and waste issues globally. The Planetary Computer and Microsoft Sustainability Calculator are good first steps and AI tools that help track and protect endangered species make for a wonderful story; however, will Microsoft democratize their tools to create even more rapid impact if it does not satisfy their profitability criteria? Without democratization, Microsoft’s positive impact will be limited compared to their potential. Therefore, while their commitment to fund carbon-related technological development is important, they also need to develop and refine business models that will align their economic interests and social impact.