How The Cloud Forced SAP To Go Green

Last week, German software firm SAP announced it will only use renewable energy in its data centres. At first sight, this reminded me of the kind of PR-driven corporate greening we used to see before the financial crash, when companies felt they had cash to spend on looking good.

But it’s actually different. The days of greenwash are gone. We can assume that using renewable energy is likely to cost more in financial terms, so SAP and others will only opt for it if the sums work out, and it helps their business.

Green SAP rising…

Google and Apple are the biggest companies to make a similar commitment, and it’s caused anger amongst Apple shareholders. That anger is probably misplaced, since there may be actual financial benefits in efforts to improve Apple’s image, and using renewable energy can attract government support or ease concerns about relying on a single source of power.

SAP’s rationale for moving towards renewables is because of a shift in its business towards the cloud. When it sold software for customers to use on their own premises, it had no direct control over the emissions created by running that software. In the jargon of carbon accounting, they were down the supply chain, and referred to as “Scope 3”.

Now it’s moved to the cloud, it is running the software using its own data centres, where it pays for the electricity. It also has to include that electricity in its own carbon accounting equations.

Scoping the problem

“Obviously, we were comfortably counting Scope 3 [indirect] emissions in the past when our customers ran software in their own basements,” SAP’s chief sustainability officer Peter Graf told BusinessGreen, “ But now they’ve moved to the cloud we’ve inherited those emissions and what used to be Scope 3 now become Scope 2.”

It’s important to SAP employees that the company is environmentally responsible, SAP’s report says. It’s also a potential competitive advantage. As analyst Tom Raftery points out at GreenMonk, customers will be comparing SAP against rivals.

There’s another consideration too: as a German company, SAP’s home market is one where electricity generation has moved more quickly to renewables than in other countries, and this has produced some interesting results. The electricity grid takes renewables first, and the price of fossil-powered electricity adjusts according to how much is needed. There have actually been days where there is plenty of sun and wind, on which the price of coal-fired electricity actually went negative.

SAP is planning to generate a lot of its own renewable power but, in Germany, just being a consumer of renewable energy is a good thing. Using more renewable electricity will be a politically astute move, especially if it can help the country’s grid to balance its supplies and demands.

Data centres have a limited ability to do this of course, as their demand can’t be altered and timed to match the supply of different sorts of power – although moves to increase energy storage on site could change this – at least not until data centres have significant amounts of electricity storage on site.

But, taken all round, SAP’s renewable power move looks like solid sense. This could be the start of a new phase of corporate green policy.

A version of this article appeared on Green Data Center News

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