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Microsoft leads Big Tech on a crucial issue: water scarcity


As large data center operators grapple with growing risks of water shortages, one company stands out: Microsoft (MSFT).

The Redmond, Washington-based company has outperformed its technical counterparts when it comes to managing water use and the risks associated with water scarcity, according to a new analysis by Morningstar Sustainalytics, a research and data company specializing in environmental, social and governance issues. (ESG) problems. The tech giant was just one of 122 companies assessed in the tech and telecoms sectors that scored top marks.

While Microsoft has excelled in the tech sector, the bar has been set quite low. Among the few companies with water management programs, 61% were rated as having a weak program, 33% had an adequate program, and only 5% had a strong program.

Microsoft has promised to achieve a positive attitude towards water by 2030, which means that the company has promised to replenish more water than it consumes. How? By improving the efficiency of water use and offsetting water consumption through conservation projects.

According to its annual sustainability report, Microsoft used 4,477,865 cubic meters of water, the equivalent of over a billion gallons, in fiscal year 2021 across all operations. In the same year, the company replenished 2,020,747 cubic meters of water – or 45% of the water consumed.

“Part of what they’re doing is they’re integrating water-related risks into their regular risk assessments and into their business strategy, which we didn’t see very much in our analysis,” Erin Johnson, Research Analyst ESG at Morningstar Sustainalytics told Yahoo Finance: “They are investing so much in water efficiency initiatives and technologies to reduce water consumption. We see that this leads to … a decrease in the intensity of the water.

Aerial view of Apple's Mesa data center near Phoenix, Arizona, USA, August 6, 2017. Photo taken August 6, 2017. REUTERS/Jim Todd

Aerial view of Apple’s Mesa data center near Phoenix, Arizona, USA, August 6, 2017. Photo taken August 6, 2017. REUTERS/Jim Todd

Tempering Microsoft Data Centers

Many of Microsoft’s initiatives focus on how the company manages approximately 200 data centers in 34 countries.

Data centers are notoriously thirsty and require significant amounts of water to cool computers that support data-intensive operations ranging from remote work to streaming. Even if warehouses are not directly cooled by water, they often consume water indirectly, generating electricity that powers these buildings and air conditioning systems.

Microsoft is leveraging innovations such as the Smart Water Navigator, a platform that tracks and evaluates water use and quality as the company relies more on recycled water.

The company has also experimented with raising temperatures in its data centers by implementing adiabatic cooling, a process that uses outside air to cool data centers when temperatures are below 85 degrees. At its data center in Arizona, which opened in 2020, Microsoft said it hasn’t used water in over six months.

Microsoft-managed virtual data centers like this one enable cloud computing and the digital economy.  (Image source: Microsoft)

Microsoft-managed virtual data centers like this one enable cloud computing and the digital economy. (Image source: Microsoft)

In addition, Microsoft has invested in 21 water conservation projects in nine watersheds, including the Verde River Basin in Arizona and the Columbia River Basin in Washington. (The company said that between 11% and 25% of water withdrawals come from water-scarce areas.)

As Microsoft, along with Google and Meta, looks to ramp up water saving initiatives, Kata Molnar, a water expert at Morningstar Sustainalytics, said corporations should focus their efforts first on the areas in which they operate.

“Retaining or replenishing are good strategies – they are definitely worth tracking, monitoring and evaluating for companies as a management practice,” Molnar told Yahoo Finance. He added: “You have to find out if these actions happened in watersheds where the company has a real presence and influence.”

Well water flows from pumps into a canal that will be used to irrigate a vineyard run by Charlie Hamilton on Monday, July 25, 2022.  Hamilton irrigates with water from a well because the water from the Sacramento River has become too salty to use for his needs.  grape.  (AP Photo/Rich Pedronchelli)

Well water flows from pumps into a canal that will be used to irrigate a vineyard run by Charlie Hamilton on Monday, July 25, 2022. (AP Photo/Rich Pedroncelli)

“Water is teeth”

While Microsoft appears to be taking the lead in tackling water use, tech and telecom companies in general are not prepared for water shortages.

The Sustainalytics report found that only 16% of companies assessed in industries such as enterprise and infrastructure software, data processing and telecommunications services disclosed water risk management programs.

Data center companies that report having a water risk management program.  (Morningstar Sustainalytics)

Data center companies that report having a water risk management program. (Morningstar Sustainalytics)

Analysts also noted gaps in the reporting of water use data by companies: 84% of companies do not disclose information on water abstraction and consumption.

This will likely change in the future. “Personally, I believe that companies will not be able to avoid the need to apply these management practices,” Molnar said. “There is a saying: if climate change is the shark, then water is the teeth. So it’s hard not to see these impacts and impacts caused by climate change. And this is not only a climate crisis, but also a governance crisis.”

Despite the low level of companies with water management programs, almost two-thirds (64%) of companies had physical climate risk management programs, suggesting that companies anticipate climate risks but have not yet incorporated water risk considerations into their strategic decisions. manufacturing.

The utilities, materials, and industrial sectors have the highest water intensity, as activities such as electricity generation and steel production consume vast amounts of water.  (Morningstar Sustainalytics)

The utilities, materials, and industrial sectors have the highest water intensity, as activities such as electricity generation and steel production consume vast amounts of water. (Morningstar Sustainalytics)

This can be a blind spot for companies that increasingly have to deal with water-related issues, including physical damage, operational disruption, increased regulatory scrutiny and damage to their reputation.

For its part, Microsoft claims that water-related issues are integrated into the company’s long-term strategy and company-wide risk assessment system. In a disclosure questionnaire, the tech giant said its direct use of fresh water was “vital” and its indirect use of water through its supply chain was “essential” to business success.

“This is a shared resource,” Molnar said. “We need a multi-stakeholder approach. So we need to see not only companies that manage resources better, but also an understanding that, for example, the rational use of water resources should go beyond their company.”

Grace is an assistant editor at Yahoo Finance.

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