How Software Asset Management Can Support Sustainability Through ESG Reporting

Building a sustainable future requires buy-in from all sectors, and that includes tech. Future-facing organizations are increasingly prioritizing Green Tech, which involves managing the manufacturing, use, and disposal of information technology in a way that minimizes negative environmental impact. According to a 2020 study by Lancaster University, the Information and Communication Technology (ICT) sector is responsible for up to 3.9% of global greenhouse gas (GHG) emissions. That roughly approximates the CO2 emissions of the entire aviation industry.  The ICT industry is expected to account for 14% of the world’s carbon footprint by 2024. 

Moore’s law states that computing power will double every 2 years as the cost lowers by half at the same rate, empowering exponential advances in computing capability. The operation of this law has been reliably observed over the last century and partially explains the huge leaps in AI capacity in recent years. However, environmental data suggest that relying on Moore’s law alone to mitigate environmental impact is a too weak branch to stand on. While consumers may reach a saturation point of the maximum ICT devices owned and used, the heaviest investments are seldom user-mediated, deriving rather from machine-to-machine communication from machines that run continuously. ICT demand is increasing too rapidly, and ICT GHG emissions continue to rise. 

This is particularly concerning given the massive energy demands associated with powering AI technology. According to MIT, “training an AI model can expend more electricity than 100 typical U.S. homes over an entire year.” Training of Meta’s LLaMA model took 1 million GPU hours, while the training of Open AI’s GPT3 consumed 1,287 MWh of electricity and emitted over 550 tons of carbon dioxide. The widespread adoption of such technology in business and society poses a question that technologists must answer with sustainable policies and practices for energy generation and consumption. To ensure a greener future, sweeping reforms are already being put in place. 

Sustainability Regulations and ICT: ESG, CSDDD, and CSRD 

Sustainability is no longer just a social movement. Corporations have an ethical imperative to contribute to environmental change. Research indicates that corporations are responsible for a vast proportion of GHG emissions globally. This imperative has led to the widespread focus on Environmental, Social and Governance (ESG) matters. ESG principles measure the non-financial impact of corporations. These factors include environmental concerns like energy efficiencies, carbon footprints, greenhouse gas emissions, privacy and data protection, social factors, and corporate governance practices that either help or harm these ends.  

The regulatory landscape of ESG disclosure is rapidly changing. According to Harvard, definitive duty to disclose data relating to ESG matters has been unclear in the past. 2024 will be the year this all changes. On January 1st, 2024, the EU’s Corporate Sustainability Reporting Directive (CSRD) came into effect. CSRD requires all large companies and listed SMEs that operate in the EU, as well as non-EU companies with a significant presence in the EU, to report on their climate impact and begin publishing regular reports starting in 2025 for the 2024 financial year. This marks a major milestone for corporate sustainability and takes us one step closer to quantifying environmental responsibility, as stakeholders increasingly evaluate companies based on their ESG disclosures.

The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) furthers ESG efforts and aims to prevent greenwashing. Greenwashing refers to the practice of using “green marketing” to give an organization the false image of being environmentally friendly. The directive requires companies to identify, prevent, mitigate, and account for negative human rights and environmental impacts in their operations, subsidiaries, and most importantly, their supply chains, expanding prevention to Scope 3 emissions, which are some of the most challenging to monitor and can account for up to 95% of a company’s emissions. Organizations have until 2026 to comply with the directive. 

Considering the growing regulatory attention towards ESG, forward-thinking organizations need to prepare. The first step towards this goal is to begin gathering high-quality data. This is where the SAM and ITAM departments come into the picture. They can provide valuable information on how the organization’s ICT systems contribute to ESG objectives. This data will become crucial for sustainable business in 2024 and beyond. 

SAM Meets Sustainability: How SAM Can Play a Major Role in CSRD Preparedness 

A typical staff desktop and screen used for eight hours results in GHG emissions equivalent to around 70kg of CO2 due to electricity consumption. And while software itself doesn’t consume energy, software runs on hardware, and certain software requires more computing power to support it. For example, training a single neural network AI model can emit as much carbon as five cars across their lifetimes.  

And yet, while almost all companies use some kind of financial reporting software, only a small amount use ESG software to track, analyse, and report on ESG metrics. This is where the SAM and ITAM departments could play a critical role. Before reporting on consumption trends of hardware and software, organizations must first achieve visibility across their growing hybrid IT estates of both hardware and software. You can’t report on what you can’t see. This is where an effective SAM platform can lead the way. 

An effective SAM platform enables total visibility and control of your IT estate through hardware recognition and software normalization. Your IT department can see every device and application across your organization, who’s using it, and how much. As SAM technology evolves, there’s an opportunity for platforms to offer data on the health and carbon imprint of all hardware. From this data, consumption trends can be established, enabling transparent reporting on ICT contribution to CO2 dumping. This could enable meaningful contributions from the SAM and ITAM departments to organizational ESG goals and CSRD reporting.

Green Practices to Reduce CO2 Emissions  

In addition to tracking consumption data, SAM and ITAM departments can take concrete steps to supporting sustainability now. One such way is to help their organizations evaluate software and IaaS providers based on sustainability metrics, selecting green software cloud center partners that are “reliant on low carbon energy, high-efficiency cooling, circular economy principles that prioritize the reuse of waste heat, and the recycling of hardware”, according to Alibaba Cloud Intelligence’s International President Selina Yuan. This brings organizations one step closer to tracking Scope 3 emissions further down their supply chain. EOL (End of Life) management according to circular economic practices also offers an innovative way to sustainably manage IT assets across their lifecycle and reduce waste.  

SAM and ITAM managers also have a crucial role to play in reducing Scope 1 emissions. Acting as an advocate in your organization for proper energy management practices can make a significant impact on reducing CO2 emissions. For instance, if a computer is left on for 24 hours a day for a year, it can release up to 1,500 pounds of CO2 into the atmosphere. By implementing simple measures such as enabling power-saving mode on laptops and encouraging employees to turn off computers and monitors at night, substantial cost, energy, and CO2 reductions can be achieved. 

While SAM and sustainability have not been traditionally partnered, the potential for a unique and impactful collaboration is clear. SAM and ITAM departments can be front runners for sustainability and ESG reporting in their organization. Early adopters in the SAM department can get ahead of CSDR and CSDDD regulations, employing creative solutions to support greener businesses and a greener world. By leveraging a SAM platform to streamline software procurement, usage, compliance, and disposal processes, organizations can achieve tangible ESG benefits while driving strategic IT initiatives forward. 

Learn More in the SAM Forecast 2024

Hosts Alex Geuken and Martin Tureniec discussed the intersection of SAM and sustainability in the SAM Forecast 2024, along with 4 other trends in the Software Asset Management industry to watch in the year ahead.