On March 10, Microsoft released its annual sustainability report, providing a comprehensive view of its progress during 2021 toward becoming a carbon-negative, water-positive and zero-waste company by 2030. According to the report, Microsoft has made progress on several of its sustainability improvement goals. Thus, through the purchase of renewable energy, it reduced its Scope 1 emissions -direct emissions produced by burning fuels- and Scope 2 emissions -generated by the electricity consumed- by 17%.
At the same time, the company is adding new measures to reduce its Scope 3 emissions, which have increased by 23% with respect to the previous year. These emissions correspond to the total generated by each company’s value chain, including external actors, and are the most difficult to control and reduce.
Microsoft is restructuring and increasing its internal carbon fee to help promote more aggressive measures that reduce Scope 3 emissions and enable it to better manage the underlying cost of carbon reduction. The Scope 3 business travel fee will increase to $100 per mtCO2e – net carbon dioxide removals – in its next fiscal year to support the purchase of sustainable aviation fuel.
An important challenge is to determine how those emissions are counted. “It will be interesting to learn how the $100 figure was arrived at and how Microsoft plans to close the gap between this and the actual cost of sustainable fuel required to remove its emissions — as one metric ton requires approximately 328kg of sustainable fuel to achieve this,” John Harvey, managing partner at consultancy Harvey & Heywood, told Skift magazine.
“Accepting that we have unprecedented fuel prices today, with fossil jet fuel at $1,118.96 $/mt average based on the Jet Fuel Monitor, and even if we use a low side example of say three times cost of sustainable fuel to fossil jet fuel, sustainable fuel could easily be over $3,000 per tonne. Therefore the Microsoft budget will buy just 10 percent of what’s needed.”
These results came against a backdrop of significant business growth for Microsoft in 2021, in which its revenues grew by 20%. The company significantly expanded the global footprint of its data centers to respond to increased demand for Microsoft cloud services and experienced growth in device sales, especially Xbox and its associated use in part because of the pandemic.
Microsoft is aware that this is a long-term effort and that, to be successful, it must be clear on the fundamentals that will enable them to achieve their climate goals. Last year the company focused on operational discipline, establishing a solid foundation across the company to achieve those goals by 2030.
In addition, it has adapted the way it sets its carbon reduction targets and increased the frequency and scope of its internal reporting to provide greater transparency and the ability to make data-driven decisions. It has also updated its Supplier Code of Conduct, requiring suppliers to report their emissions.
In addition, last year, Microsoft made the world’s largest carbon offset purchase of 1.4 million metric tons, and this fiscal year is on track to surpass that with the purchase of 1.5 million metric tons, while committing to increase its contracted volume year over year through 2030.
It will accelerate the establishment of annual carbon targets specific to each business group. To meet its 2030 targets in an increasingly competitive market, it will increase the annual rate at a higher speed, which will also improve energy efficiency and introduce design changes to use materials that carry lower carbon emissions.
It is also stepping up its measurement efforts to help accelerate the standardization and adoption of industry standards for carbon accounting. It has done so with its own figures, where the environmental information has been independently reviewed by Deloitte & Touche LLP.