The global digital infrastructure relies on data centers. These massive facilities process every email, every video, and every click on the internet. But this convenience comes at a hidden cost: data centers now consume more than 1.1% of the world’s electricity. At the same time, large tech companies announce ambitious ESG goals and carbon-neutral strategies. But are these commitments genuine or just attractive packaging around an uncomfortable truth?
The answer is complex. The industry is indeed improving its energy efficiency, driven by rising digitalization and public pressure. Total energy consumption has increased from 178.5 TWh in 2019 to 310.6 TWh in 2024. Meanwhile, emission intensity fell from 366.9 megatons of CO₂ per gigawatt-hour in 2019 to 312.7 megatons in 2024. This means data centers emit less CO₂ per unit of energy. But the numbers are misleading: the sector faces serious issues with transparency and accountability. Emission data reveals a wide gap between what companies claim and what they actually emit.
The truth behind the numbers: the scale of greenwashing
A Guardian investigation uncovered a shocking reality: Google, Microsoft, Meta, and Apple may be emitting up to seven times more greenhouse gases than they officially report. The scale of this greenwashing reaches up to 662%. Between 2020 and 2022, the actual emissions of their data centers far exceeded their public disclosures.
Examples:
- Meta reported 273 megatons of CO₂ emissions in 2022.
But when calculated using local grid emission factors, the figure soared to 3.8 million megatons. - Microsoft reported 280,000 megatons but actually emitted 6.1 million megatons.
This discrepancy stems from the companies’ choice of accounting method.
Corporations use market-based emissions reporting, which allows them to purchase Renewable Energy Certificates (REC) proof that renewable energy was generated “somewhere” in the world. But this energy does not have to power the company’s data center. In contrast, location-based reporting shows the true carbon content of the electricity consumed at the site. And this reveals that greenwashing is not an exception it is systemic.
The illusion of renewable certificates: why REC are not the solution
Renewable Energy Certificates sound promising, but most certificates on the market are unbundled REC detached from the actual source of electricity.
The Uptime Institute describes them as “a simple and cheap way to greenwash energy use.”
What REC do not solve:
- A data center powered by a fossil-fuel grid still consumes carbon-intensive electricity, even if it buys REC.
- Buying a REC resembles buying a flight ticket for someone else to “offset” your own flight emissions.
REC are often sold at extremely low prices, further suggesting their minimal real environmental value.
Nevertheless, the industry relies heavily on them. In its ESG report, Equinix disclosed that 45% of its claimed renewable energy originates from REC not from actual renewable power purchase agreements.
What actually drives real change
Some companies are beginning to move away from REC:
- Google has stopped using REC entirely and is aiming for 24/7 carbon-free energy by 2030.
- Microsoft plans to phase out REC by 2030 as well.
These commitments require a different model: 24/7 Power Purchase Agreements (24/7 PPA). Instead of purchasing generic renewable energy, companies buy specific clean power matched to their real-time consumption.
The challenge:
A 20-MW solar plant cannot supply a 20-MW data center around the clock. Solar power is intermittent; data centers are not. The solution requires energy storage, local matching, and new infrastructure. Microsoft is testing such models in the Netherlands.
Water: the invisible ESG challenge
Energy dominates the discussion about data centers, but water is equally crucial.
A mid-sized data center can consume 1.14 million liters of water per day, equivalent to the usage of 1,000 households.
Water is used for cooling server racks to maintain safe operating temperatures. In 2023, the average data center achieved a WUE (Water Usage Effectiveness) of 0.30 liters per kWh, a 39% improvement compared to 2021 (0.49 liters). Microsoft has improved water efficiency by 80% compared to its first-generation facilities.
But innovation is changing the landscape entirely:
In August 2024, Microsoft launched a water-free cooled data center using advanced chip-level cooling. A single such facility saves 125 million liters of water annually.
Regulation as a catalyst for transformation
Under growing regulatory pressure, the data center sector is undergoing structural change.
Since September 2024, all data centers in the EU with electrical capacity above 500 kW must submit mandatory ESG reports to a central EU database. These reports include:
- total energy consumption
- water usage
- renewable energy share
- waste heat output
- emissions
Although the first submission deadline was moved from May to September due to industry challenges, the regulation marks a turning point. For the first time, data centers cannot just declare they are green, they must prove it with verifiable metrics.
Other markets are watching closely:
- Japan is developing its own sustainability disclosure standard.
- The United States now requires ESG reporting for large corporations.
ESG transparency is becoming the global norm.
Metrics that truly matter
The most recognized efficiency metric is PUE (Power Usage Effectiveness):
- Best-in-class facilities achieve < 1.1
- Global average: 1.56
But PUE is limited:
A data center can operate efficiently and still rely on fossil-fuel grid electricity. Low PUE does not equal low emissions.
Other metrics provide a more accurate picture:
- WUE – water usage efficiency
- Location-based emission factors
- Hourly carbon intensity of the local grid
Only these combined can reflect a true ESG footprint.
The new reality: AI reshapes the energy challenge
Generative AI has dramatically increased energy demand:
- A single generative AI query consumes up to 10× more energy than a Google search.
- Morgan Stanley predicts AI-driven data center emissions may add 2.5 billion tons of CO₂e by 2030, more than the emissions of some entire countries.
Because AI requires instant, uninterrupted computation, renewable energy alone cannot meet demand.
Tech giants are therefore exploring new energy sources:
- Nuclear energy – Microsoft has already signed contracts.
- Biomass
- Low-carbon baseload technologies
This shows the industry understands the magnitude of the challenge and that greenwashing through REC has no future.
Facts over promises
ESG in the data center industry is not just a narrative. It is a real challenge requiring real solutions.
Current reality:
- Emissions per unit of energy are decreasing but total energy consumption is skyrocketing.
- Companies invest in renewable energy but often only through paper certificates.
- Greenwashing is widespread but meaningful solutions are emerging.
True progress comes from:
- 24/7 clean energy procurement
- water-free cooling innovations
- mandatory EU ESG reporting
- location-based emissions transparency
Conclusion: Greenwashing or progress? Both at once
The sector is changing visibly, but far more slowly than public announcements suggest.
Stakeholders should:
- trust verifiable metrics, not marketing slogans
- demand local emission data, not generic “green energy” claims
- evaluate actual clean energy contracts, not REC
- insist on full transparency
Regulation is tightening, competition for clean energy is increasing, and innovation is accelerating.
ESG in data centers is the future but it will be built on facts, not greenwashing.
