Cloud Operational Efficiency focuses on the optimization of cloud resources for best performance, scalability, and cost-effectiveness. It is key in this era where we see sustainability as the cloud operating trend focuses on sustainability and cloud services are in high demand. It is essential to ensure our cloud usage is sustainable by working with a Cloud ESG (Environmental, Social, and Governance) practice - a convergence of Cloud FinOps and Cloud GreenOps.
So, what is sustainability and what does cloud have to do with it?
Sustainability has become increasingly popular and a prominent factor in our lives, personal and business. What is sustainability and what should organizations aim for? On December 2015, 196 parties of the UN signed The Paris Agreement, a legally binding international treaty on climate change. The Paris Agreement provides a framework for countries to voluntarily commit to reducing their greenhouse gas emissions, and to regularly report on their progress toward meeting those commitments.
There is a framework for measuring and reporting an organization’s greenhouse gas (GHG) emissions and environmental impact – GHG scopes. These were introduced and developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).
Cloud FinOps & Cloud GreenOps As a Cloud ESG Framework
Over the past few years, the importance of incorporating sustainability as a business practice has been a key step for organizations and is thus being shared on companies’ websites and annual reports. Sustainability as a business practice is about making decisions and taking actions, scoping economic, environmental, and social considerations, while assessing the business’s impact on these aspects and taking steps to have a net positive impact.
This correlates with 2 points:
- Consumers manage their impact by choosing 3rd party vendors who add the most diminutive carbon footprint to their value chain and have provided target based ESG (Environmental, Social and Governance) solutions.
- New laws and policies are being introduced that require reporting on the organization’s sustainability practice and strategy. In the EU, this comes in the form of a non-financial auditable report, the Corporate Sustainability Reporting Directive (CSRD). This directive will be enforced in a phased manner, highlighting the need for a corporate sustainability strategy. [The proposal]
Thus, a well-thought-out sustainable business practice leads to operational optimizations, better market standing, cost savings and an improved reputation for the organization.
Cloud Sustainability for an organization can have two facets:
- An inward-looking practice concentrating on the cloud finance aspect: Cloud FinOps
- An outward looking practice zooming into a cloud environmental perspective: – Cloud GreenOps
One of the primary practices under the sustainability act within organizations is optimizing the usage of existing technology and adopting new technologies. To do so, an organization must develop a coherent strategy that includes a cloud ESG practice - a convergence of Cloud FinOps and Cloud GreenOps. Thus, it is sensible to merge the two practices while strategizing on cloud sustainability for operational effectiveness and efficiency.
There are several steps to develop this strategy:
- Assessment: What are the current architecture and requirements for the organization?
- Organization Goal: What do you want to achieve with this strategy?
- Implementation: How do you plan to implement the strategy?
- Monitoring & Reporting: Establish a system to monitor and report your progress towards your goal.
The latter is most interesting, as it helps the organization present itself to customers, investors, and stakeholders and be prepared for when it is required to declare these points by law. This is a focus for Xebia within our GreenOps practice.
Cloud Sustainability in Practice
Cloud Sustainability refers to the sustainable operation of cloud computing infrastructure and services, and it sits within the scope of the Cloud Center of Excellence (CCOE). The CCoE is a cross-functional team, responsible for driving cloud adoption and governance within the organization. Typically, you can find representatives from different parts of the business, such as IT, finance, security, and compliance.
The CCoE plays a significant role in promoting sustainable cloud adoption and operation within the company and focuses on the required convergence of processes. This will focus on developing and enforcing sustainability policies and standards for cloud operation, such as energy efficiency, reducing carbon emissions and sustainable procurement. To implement these, the team should also establish sustainability metrics and KPIs they will monitor, such as carbon footprint, energy consumption and waste reduction. This is all part of creating the business sustainability strategy and should align with the organization's broader sustainability goals.
The CCoE is where FinOps and GreenOps come together. GreenOps focuses on cloud ESG criteria and allows organizations to monitor and report on their carbon emissions and present the actions taken, such as aligning with the organization's sustainability goals and feeding into the CSRD. This is a step that would allow them to input this towards the CIO / CTO to reduce the carbon footprint in a targeted manner and push the cloud providers to adopt more sustainable operation models that prioritize energy efficiency, renewable energy, and carbon reduction. This is important for environmental reasons, but also economic and social ones as the cloud providers can reduce their operating costs and improve the bottom-line and. The data centers can contribute to local economic development and provide new jobs.
In correlation to this, FinOps supports the organization’s cost management. By combining these two, the organization will be able to present a reduction in carbon emissions and cost with an unclouded vision toward a sustainable business strategy that works on all levels.
The Need for a Sustainable Business Practice
Ample research has been done on the effect on investors. Consumers review companies’ sustainable commitments and reports as part of the buying process. This has also pushed towards migrating to cloud services and optimizing the cloud workloads, becoming a focus for many companies. The Corporate Social Responsibility (CSR) approach directly impacts brand reputation and stakeholders. Moving to the cloud reduces the on-premises footprint associated with power/cooling, hardware, and compute power and is a smart way to promote an organization’s CSR.
When architecting the cloud environment with a focus on reducing carbon footprint, one considers the impact of the services used and applies design principles and best practices to reduce these impacts.
Cloud computing enables consolidation of computing resources, resulting in more efficient use of energy than a traditional on-premises data center.
An important part of promoting ESG in the cloud is addressing Scope 3 emissions (indirect Emissions from sources not owned or controlled by the company), which can be done in several ways:
- Promoting energy-efficient use of cloud services by following best practices to optimize cloud usage to reduce the required energy.
- Focusing on cloud resource efficiency.
- Measuring and reporting scope 3 emissions.
- Choose cloud providers that invest in renewable energy to power their Data Centers.
The Sustainability practice in cloud computing requires a combination of energy-efficient infrastructure, renewable energy, and responsible resource management practices.
Direct Emissions from owned or controlled sources (boilers, vehicles)
Indirect Emissions from purchased energy (electricity, heating, cooling)
Indirect Emissions from sources not owned or controlled (production of purchased goods & services, employee commute, waste disposal, use of cloud services)
Xebia supports organizations in establishing their cloud sustainability business practice by concentrating on both FinOps and GreenOps as a base for the cloud operations optimization strategy. This embraces sustainability as a long-term value for the company by reducing cost and carbon footprint with their core technology and enhancing reputation and popularity by doing so.
Business Sustainability Frameworks
While establishing an organization’s well-defined business sustainability strategy with clear goals, it is a best practice to work with recognized frameworks and standards such as ESG, GHG Protocol, and SBTs, which we will cover in more debt on the next page. The ESG framework helps companies identify and manage risks and opportunities related to environmental and social factors and ensure they have strong governance practices in place. This is also valuable to the company as investors are increasingly looking to invest in companies with strong ESG performance, as these companies are more likely to generate sustainable long-term returns.
ESG (Environmental, Social, and Governance), is a framework used by companies to evaluate and report on their performance in these three areas. These can affect the long-term financial performance, reputation, and risk profile.
- Environmental: a company’s impact on the environment (carbon emissions, use of natural resources, waste management, and compliance with environmental regulations).
- Social: a company’s impact on society (treatment of employees, customers & communities, supplier relationships, and other stakeholders).
- Governance: How a company is managed and governed (board composition, executive compensation, and transparency in financial reports).
- GHG Protocol: the widely recognized international standard for accounting and reporting greenhouse gas (GHG) emissions. It provides guidance for organizations to measure, manage and report their GHG emissions consistently and transparently, aiming to standardize reporting. This protocol is recognized by the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP).
- Science-based targets (SBTs) are goals that organizations can set to reduce their GHG emissions in line with the Paris Agreement goals. The SBT initiative is a collaboration between several organizations that provides a framework for setting and verifying SBTs. It developed guidance specific to the cloud computing industry for cloud providers, including setting ambitious emission reduction targets that correlate with the Paris Agreement’s goal to limit global warming to well below 2 degrees Celsius.
- Increase renewable energy usage to power the data centers and operations.
- Optimizing the energy efficiency of data centers and operations using best practices (efficient cooling systems, server virtualization, energy-efficient hardware).
- Reduce embodied emissions related to their hardware.
- Engage with customers and encourage them to reduce their carbon footprints.
By adopting SBTs, Cloud providers can demonstrate their commitment to sustainability.
More regulations and tax laws are coming into place for companies, and there is a big awareness of sustainability reporting, due to the recent actions of the CSRD (Corporate Sustainability Reporting Directive) – a proposal by the EU Commission to expand the existing non-financial reporting directive. It aims to publish a comprehensive and standardized EU-wide sustainability reporting framework for companies. It proposes to require all large companies and all listed SMEs (Small Medium Enterprises) in the EU to introduce mandatory sustainability reporting standards. Companies would have to report on their sustainability strategy and targets, as well as their impact on ESG. This requires companies to ensure their sustainability reporting, and the reliability of the information provided.
The goal is to provide investors and other stakeholders with better information to evaluate companies’ ESG performance while encouraging them to improve their ESG performance. It is expected to be adopted in the coming years. This increasing focus on ESG highlights the growing importance of business sustainability strategies and practices in creating long-term value for companies and society.
Organizations are pushed to be transparent about their environmental impact and share sustainability efforts with their management and their customers. The requirements differ between countries. Some have mandatory reporting, while others still have only voluntary reporting. In the USA, for example, the Environmental Protection Agency (EPA), requires large emitters to report annually through the Green House Gas Reporting Program. The program focuses on companies with emissions greater than 25,000 metric tons of carbon dioxide to report yearly. It covers industries such as power plants, oil and gas production, and manufacturing.
In the European Union, companies listed on the stock exchange or exceeding Euro 150M net turnover will be required to report their emissions. (More about this can be read here.) Other countries like Canada and Australia implemented mandatory reporting as well. Reporting Scope 3 emissions is an important part of any company’s sustainability efforts and supports its commitment to environmental responsibility and sustainable business practices. This is why many companies choose to report their greenhouse emissions, not just to internal stakeholders, but to be transparent towards their customers as well.
GreenOps in Practice
Xebia is highly focused on sustainability practices within the cloud; therefore, we focused on creating the GreenOps practice. We find that FinOps and GreenOps share quite a few similarities in their operational framework, and both feed into the business sustainability matrix. To combine the two coherently, we introduce the cloud sustainability model, a union of FinOps and GreenOps.
GreenOps is a dimension of the cloud operating model that creates awareness and understanding to act on Greenhouse Gases (GHG), primarily CO2, emitted from resources deployed in the cloud. It has two outputs:
- Reduction in carbon emissions
- Input towards corporate sustainability reporting
Our GreenOps practice aims to provide concrete and measurable inputs to cloud users and stakeholders and make them carbon intensity aware. With awareness comes understanding and a sense of accountability, which is the first step to making a positive impact and reducing carbon emissions.
It is built on a defined framework determining various pillars with underlying principles of visibility, communication, shared ownership, and transparency.
With Xebia’s GreenOps approach and solution, customers can gain in-depth visibility and understanding of their carbon footprint on a near-real-time basis. It can allocate carbon emissions per project in alignment with corporate sustainability goals and transparency to stakeholders. Using Xebia’s solution will allow you to be prepared with reporting whether they are required or done voluntarily.
The GreenOps practice framework aims to make a positive impact on reducing carbon emissions and creating awareness of the same among cloud users. It shares various commonalities with the FinOps framework:
- Visibility, understanding & reporting on carbon emissions originating from cloud usage, all scopes included.
- Setup science-based target initiatives to decrease carbon emissions using global standards and timelines.
- Provide carbon footprint optimization best practices.
- Input towards Corporate Sustainability Directive Reporting (CSDR)
We believe that moving to AWS (Amazon Web Services) can significantly lower your carbon footprint. Studies by 451 Research have shown that AWS infrastructure is 3.6 times more energy efficient than the median US enterprise data centers and up to five times more energy efficient than the average in Europe. This study also found that AWS can lower organizations’ workload footprints by nearly 80% compared to surveyed data centers and up to 96% once AWS is powered with 100% renewable energy, which is their target to meet by 2025. We at Xebia have experienced a massive migration with customers onto AWS, which resulted in massive carbon footprint reduction of 76.4 MTCO2e, due to AWS renewable energy in EU. (AWS Renewable Energy).
So, while Xebia focuses with you on innovation, security, elasticity, etc., and best practices on AWS, we can also assist with lowering the carbon footprint and provide you with dashboards and reports to visualize and present this. According to Gartner:” Scope 3 emissions are the most challenging to measure, yet in some companies, they can account for over 95% of total emissions. Gartner expects carbon footprint measurement technologies to see significant adoption as organizations broaden their focus to all three emission types and increase reporting transparency.” (Gartner 2022)
This is why Xebia chose to be among the first to focus on this important topic and provide our customers with the tool that will help them reduce their carbon footprint, report it, and present it to their board members and customers.
Next Steps With Xebia
Xebia specializes in providing Cloud FinOps and GreenOps solutions that help organizations reduce their GHG emissions and cloud costs while improving performance. We have been active in FinOps since 2014 and are the founders of the FinOps Alliance. Xebia has launched a GreenOps service focusing on monitoring and reporting your cloud carbon footprint. We assist you with establishing the cloud sustainability strategy, aligning with your CCoE, and with the different frameworks and standards mentioned, focusing on 3 steps: visibility, understanding, visualization and reporting.