Silicon Valley Could Change the Game on Climate—Will They?

There is no topic of greater global importance today than climate change. We all know the science and the dire consequences of failing to act, but what might be less known are the reasons for optimism. Recent BCG research found that most countries can already meet around 80% of their Paris 2°C contributions by using currently proven technologies. A spot of good news in a bleak situation, but this still begs the question: where will the breakthroughs come to achieve that remaining 20%?

Based on 25 years working in the technology industry, including as founder of multiple startups and later as a BCG consultant, I would argue that many of the needed tech advances can and should emerge from Silicon Valley. Given the potential for the Valley to be a catalyst for reducing the world’s emissions, we at BCG decided to dig into the reality today. We studied 48 leading companies to understand what they are doing now on climate, both in terms of reducing their own carbon footprint and in using their position as information platforms to influence others to make progress.

What we found might surprise people. Although many leading Silicon Valley players are making aggressive moves to decarbonize their operations and advance climate action, a significant portion are not.  Moreover, the outsized cultural influence many have is not being fully leveraged to drive broader climate efforts in business and society. Still, there are compelling examples of real climate stewardship and clear best practices that should be emulated by others across the tech landscape.

Our Findings

If Silicon Valley players have the tech savvy, public influence and financial resources to be a major force in fighting climate change, they also bear their own responsibility. That’s because data center operations are energy hogs. In 2020, US data centers will consume 140 billion kilowatt-hours per year, emitting 100 million metric tons of CO2 per year --the equivalent of 50 coal-fired power plants.

So what are leading Silicon Valley companies doing? We studied 48 of the largest tech companies in Silicon Valley and ranked them by their level of influence and participation in the energy transition. We pulled from a variety of data sources, including the Carbon Disclosure Project (CDP), Refinitiv, and corporate sustainability reports. (See Exhibit.)

First, the good news. Our work revealed some outstanding leaders, companies like Adobe, Alphabet, Apple, Applied Materials, Cisco, HP, Oracle, Salesforce, and Tesla. These firms are not just innovating within their operations to reduce their own carbon footprint, but are pushing on other climate fronts, including measuring what are known as Scope 3 emissions (indirect emissions throughout a company’s value chain), pursuing policy changes, and investing in initiatives beyond offsets.  

The not so great news? Thirteen of the companies are either doing nothing or have only announced commitments but not yet taken verifiable action. And, nearly 40% of the largest tech firms in the Valley do not yet publicly report environmental metrics, the low-hanging fruit in any corporate climate agenda and a basic necessity in driving progress globally. 

What the Leaders are Doing

Through benchmarking the actions of the leaders, we identified six best practices that every Silicon Valley company should embrace today:

·     Disclose. Companies must disclose key environmental metrics, including GhG emissions, to a common regulator, such as CDP. You get what you measure and disclosure is the first step in implementing a verifiable climate action plan. In 2020, there should be no excuse for any company to avoid this first critical step.

·     Drive Awareness. Companies need to improve awareness of environmental impact beyond their own locations and operation. This means measuring and reporting indirect the emissions of suppliers and customers. Netflix now works with service providers to measure and report indirect energy use, such as energy used by hosting provider AWS to deliver streaming services to customers.

·     Go Big. Companies need to set aspirational targets that meet, or exceed, what would be required to achieve the 2 degree target set out in the Paris Agreement. Case in point: Apple has a goal to transition the company and its suppliers to 100% renewable energy; it achieved this goal within operations and data centers in 2014 and is now extending company-wide. Not to be outdone, Microsoft just announced that it will be carbon negative by 2030 by paying to remove all of the carbon it has emitted from the atmosphere since founding.

·     Partner Up. Partnerships can magnify impact. That’s why companies should invest in Public-Private Alliances (PPAs) to develop renewable energy sources at electricity-guzzling sites such as data centers. At the same time, they should coordinate with players across the supply chain to find mutually beneficial renewable energy arrangements. Alphabet has achieved 100% renewable energy equivalent through PPAs, enabling 3 Gigawatts of renewable energy worldwide. For its part, Salesforce has developed Virtual Power Purchase Agreements (VPPAs) in communities where it operates data centers – in effect becoming an “anchor tenant” to allow the communities to develop green power, providing an impact well beyond Salesforce’s own emissions.  

·     Be an Influencer. Tech companies have significant clout and influence with policymakers, as well as with business customers and consumers. They should use it. They should engage with policymakers to encourage corporate incentives for renewable energy creation and use and promote climate and energy education for the general public. HP advocates for energy efficiency standards and policy globally, including as an original signatory of "We are Still In" which commits companies to continue to abide by the Paris Accord after the US Administration pulled out, and by lobbying for a production tax credit for wind energy. ]On Earth Day in 2019 Lyft offered free rides for the day through its bikeshare operations in several large cities to encourage carbon-free transport and educate customers about climate change.” 

·     Take the Lead. Silicon Valley players should consider moving beyond offsets and energy equivalents and invest in opportunities in renewable energy research, lobby for carbon pricing, or invest directly in carbon-mitigation projects. Stripe, for example, has vowed to make its operations emissions-negative by paying for negative carbon emissions achieved through carbon capture and sequestration. The company’s commitment is aimed at supporting the advancement, and ultimately the scaling up, of carbon capture and sequestration technologies.

No one would dispute that Silicon Valley is one of the greatest—if not the greatest—engines of innovation in history. Silicon Valley firms often talk about changing the world. In this case, they just might have the chance to help save it.