Why enterprises care about sustainability

Note: This blog post was written for the lecture “Enterprise IT” (113601a) during the summer semester of 2025.

Introduction

Sustainability in enterprise IT is no longer a niche topic, it has become a critical part of business. In this context, “sustainability” refers to the practice of designing, managing, and using IT in a way that minimizes its negative impact on the environment, while remaining economically, technically, and socially viable.

The relevance of sustainability keeps rising due to several factors: increasing regulatory pressure, rising costs of energy and resources, and growing expectations from consumers and stakeholders for businesses to operate responsibly.

Types of sustainability

Environmental sustainability

Enterprise IT has a substantial ecological footprint, from the environmentally damaging extraction of minerals for hardware, to the high energy demands of data centers, and the issue of electronic waste. To counter this, the concept of “Green IT” has emerged, promoting the adoption of environmentally friendly practices. (1)

A prime example of this is Google’s achievement of carbon neutrality for its data centers, which is accomplished through a combination of energy efficiency measures and the purchase of renewable energy. Furthermore, sustainable software engineering practices are starting to get used, focusing on the development of applications that are optimized for energy efficiency and resource conservation. (2) (6)

This environmental consciousness is also creating new expectations from consumers. The rise of power-intensive technologies like Large Language Models (e.g. ChatGPT) has sparked lots of debates, especially among younger, climate-aware generations like Gen Z. A recent Deloitte survey found that 65% of Gen Z respondents had felt worried or anxious about the environment in the past month (5). While large parts of Gen Z are rapid adopters of GenAI tools, there is a growing awareness of their significant environmental footprint. This can be interpreted as less of a complete refusal to use the new technology, but more about a rising demand for transparency and accountability. Consumers are beginning to pressure tech giants to disclose the energy consumption of their AI models and to power their data centers with renewable energy. For enterprises, this signals that a visible commitment to “Green AI” is important for maintaining brand reputation and meeting the expectations of a key demographic.

Financial sustainability

Financial sustainability in IT is about ensuring that technology investments are economically viable in the long run. A key aspect of this is cloud cost optimization. As companies increasingly rent instead of own their IT infrastructure through cloud providers, managing these operational expenses is crucial. Costs can be significantly reduced by carefully monitoring usage, right-sizing services to match performance needs without overprovisioning, and automating the shutdown of unused resources. Additionally, implementing strong governance policies, such as limiting usage rates of services to prevent overuse, and strict access controls for employees, helps manage load and prevent unexpected expenses. (15)

Another critical factor is managing technical debt, which represents the cost of fixing bugs or reworking a software caused by choosing an easy, “quick-fix” solution now instead of investing in a better approach that would take longer to implement, but also result in a higher quality result. Addressing technical debt early (or not letting it build up at all) is critical for maintaining a healthy and sustainable financial position.

Financial sustainability also requires considering the Total Cost of Ownership (TCO). TCO is a comprehensive financial estimate that helps an organization to determine the direct and indirect costs of a product or system by including all costs over the full lifecycle of an IT asset, such as maintenance and disposal. (3)

This is especially relevant when it comes to hardware for end-users. Choosing the right hardware and having favorable contracts with suppliers can have a significant impact on financial sustainability. For example, investing in energy-efficient devices can reduce energy costs over the long term. Furthermore, leasing agreements or buy-back programs can help to manage the lifecycle of hardware and reduce the financial burden of disposal. By considering the TCO of end-user hardware, organizations can make more informed decisions that are both financially and environmentally sustainable.

Technical sustainability

Technical sustainability refers to the ability of a codebase and IT infrastructure to adapt and evolve over time without becoming a bottleneck for the business. A sustainable codebase is characterized by its modularity, maintainability, and scalability. Modern architectural patterns like microservices (which break down systems into small, manageable services), combined with practices such as DevOps and Continuous Integration/Continuous Delivery (CI/CD), are key enablers of technical sustainability. They allow for the rapid and reliable delivery of new features and updates, while also ensuring the stability and resilience of the system (e.g. by running tests and security checks during CI/CD, having automated staging environments, etc). Furthermore, observability and automation play a crucial role in maintaining technical sustainability by providing insights into the health and performance of the system and by automating repetitive tasks.

A codebase that was not developed to be sustainable racks up technical debt, making refactoring, bug fixing and adding new features exponentially harder. Investing into clean architecture and code during early stages of the project will always pay off. At the same time, a tradeoff has to be made between future-proofing the project and decreasing the time to market – e.g. betting on microservices right from the start might not be a good call, because complexity increases and the architecture is harder to set up. These decisions are crucial and rarely trivial.

Social and ethical sustainability in IT is about recognizing and addressing the human impact of technology. This includes practices like inclusive design and accessibility, which ensure that technology is usable by everyone, regardless of their abilities. It also involves the ethical development and deployment of artificial intelligence, with a focus on fairness, transparency, and accountability. Beyond the technology itself, social sustainability also extends to the well-being of engineering teams, with an emphasis on preventing burnout and fostering a healthy work environment. Ultimately, social and ethical sustainability is about building trust with stakeholders by being transparent and responsible in the way technology is used.

This area of sustainability also includes the use of ethical frameworks, conducting ethical audits and upholding a culture where discussion about ethics are supported. (6)

Legal & Complicance-driven sustainability

The legal and compliance landscape for sustainability is evolving rapidly, with an increasing number of regulations that directly impact enterprise IT. Environmental, Social, and Governance (ESG) reporting is becoming a mandatory requirement for many companies, and IT plays a crucial role in collecting and managing the data needed for these reports. For instance, under the European Union’s Corporate Sustainability Reporting Directive (CSRD), IT departments are increasingly responsible for reporting on (8)

Greenhouse Gas Emissions: This includes detailed reporting on Scope 1, 2, and 3 emissions, encompassing the energy consumption of data centers, servers, and the carbon footprint of cloud services and the entire IT supply chain.
Electronic Waste (E-waste): Enterprises need to disclose the lifecycle of IT hardware, including policies and practices for disposal, recycling, and reuse.
Sustainable Software: Reporting on efforts to adopt green software development practices and optimize applications for energy efficiency.
Supply Chain Due Diligence: Assessing and reporting on the sustainability performance of IT suppliers, including labor practices and human rights.

Furthermore, the EU Taxonomy provides a classification system defining what constitutes an environmentally sustainable economic activity. For IT, this means data centers and related services must meet specific technical screening criteria, such as energy efficiency thresholds, renewable energy usage, and adherence to the “Do No Significant Harm” (DNSH) principle across various environmental objectives. These regulations also increasingly influence procurement and vendor management, as companies are expected to adhere to sustainability standards when acquiring IT products and services. (9)

Business value and strategic importance of sustainability

Sustainability in IT is not just a matter of compliance or corporate social responsibility, it is also a source of business value and strategic advantage. By aligning sustainability goals with key performance indicators (KPIs), businesses can drive efficiency, reduce costs, and improve their bottom line. Furthermore, a strong commitment to sustainability can enhance brand reputation and foster customer loyalty, as consumers are increasingly drawn to businesses that share their values. Finally, sustainability is a powerful tool for risk mitigation and future-proofing, as it helps businesses anticipate and adapt to emerging environmental, social, and regulatory challenges. (10)

Tradeoffs

While the long-term benefits of sustainability are clear, it is also important to acknowledge the challenges that come with making an enterprise sustainable. The initial investment in sustainable technologies and practices can be significant, and the return on investment will likely not be immediate. (14)

A significant risk in this area is “greenwashing,” where a company spends more time and money on marketing itself as environmentally friendly than on minimizing its environmental impact. For example, companies like Amazon and Microsoft have faced criticism for promoting their green initiatives while simultaneously providing technology to fossil fuel companies. Similarly, some tech giants have been accused of underreporting their greenhouse gas emissions. (11) To avoid accusations of greenwashing, it is essential to have a genuine commitment to sustainability and to be transparent about both successes and failures. Finally, achieving true sustainability in IT requires a cultural shift within the organization, with a focus on long-term thinking and a shared sense of responsibility.

Case Study: Microsoft’s Multi-faceted Approach to Sustainability

To make these concepts more concrete, let’s examine a real-world example. Microsoft has positioned itself as a leader in corporate sustainability, making it a core part of its business strategy with some of the most ambitious goals in the tech industry: to be carbon negative, water positive, and zero waste by 2030. (12)

Microsoft’s initiatives span all the dimensions of sustainability discussed in this article. Environmentally, they are investing heavily in renewable energy, funding carbon removal technologies, and establishing “Circular Centers” to reuse and recycle hardware. Financially, they have implemented an internal carbon fee, charging their own business units for their emissions to create a direct monetary incentive for reduction. On the social and technical front, their “AI for Good” initiative supports organizations tackling environmental issues, and they are actively promoting sustainable software engineering practices to reduce the energy footprint of their products.

However, Microsoft’s efforts are two-sided. While the company has generally enhanced their brand reputation through their efforts, it has faced accusations of greenwashing for providing AI technology to fossil fuel companies and has reported an increase in its overall supply chain emissions due to business growth. Additionally, they recently laid off lots of employees, replacing them with AI – all while revenue is at an all time high. An executive then suggested those who were laid off to speak to ChatGPT for counseling. This raises significant concerns around social sustainability. (13) At the same time, this move will likely increase their revenue even further, maybe making it financially sustainable. This highlights how different aspects of sustainability can often contradict each other.

Microsoft’s case shows that even well-resourced companies have trouble achieving true, multi-faceted sustainability. The path is a complex and expensive process where lots of decisions and tradeoffs have to be managed.

So, why should enterprises care?

The answer to this question has fundamentally shifted. While pressure from regulators and a sense of moral responsibility remain important, the primary driver for corporate sustainability has become a strategic pursuit of value creation. According to a 2024 Morgan Stanley survey of over 300 large companies, an overwhelming 85% of corporate decision-makers now view sustainability as a value creation opportunity for their business (14).

This marks a significant evolution from a purely defensive, risk-management approach to an opportunistic one. Enterprises are being pulled towards sustainability in the hopes of long-term business benefits. This includes enhanced brand reputation, attracting top talent and fostering innovation. The convergence of sustainability strategy with core business strategy means that it is no longer a peripheral concern but a central pillar of financial planning and success.

However, this strategic shift does not come without challenges. The same Morgan Stanley report highlights that the single biggest hurdle for enterprises is the high level of investment required to implement a sustainability strategy. This financial barrier was rated 1.5 times higher than other obstacles like a lack of corporate leadership or employee skills (14). This creates a crucial tension: while the long-term value is clear to many, the immediate expenses can be a major factor in delaying or shrinking sustainability strategies, especially during the current economic uncertainty.

Therefore, enterprises must care about sustainability because it is now linked to their own survival and long-term growth. It represents both a big opportunity and a tough challenge. The definitive conclusion is that sustainability has moved from a matter of compliance to a core component of corporate strategy, where the ability to navigate the high costs of investment will distinguish sustainability leaders from those falling behind in the transition to a more sustainable future.