Akamai's purpose is to propel our customers faster forward by making the Internet business-ready: fast, reliable and secure. And now, also green and clean. Today we are committing, by 2020, to reduce our absolute greenhouse gas emissions below 2015 levels by sourcing renewable energy for 50 percent of our network operations.
Going Beyond Energy Efficiency
With hundreds of thousands of servers humming away in more than 126 countries and thousands of locations, our network operations are responsible for 93 percent of our electricity-related Scope 2 and Scope 3 greenhouse gas emissions (GHG). To date, we've been very successful in decoupling our business growth from energy use and carbon-emission impacts through efficiency and productivity gains. Despite a twenty-fold increase in network traffic over the past seven years, our energy and carbon usage has grown only 1/10th of that rate. But efficiency and productivity will never mean zero energy, and our carbon remains tightly coupled with energy. So decarbonizing this energy is a critical step along our journey to mitigate our environmental impacts.
Evolving Markets and Product Innovation
Beyond sustainability stewardship, the business case is not so much about locking in fixed energy pricing. It's about anticipating the market trend. Clean-powered, low-carbon content delivery is a differentiating feature desired by an expanding segment of our customer base. Over the past decade, there's been a strong trend among the Fortune 500 towards more sustainable operations, reducing waste and pollution, increasing energy efficiency, and more recently, decarbonizing energy. By 2013, sixty percent of the Fortune 100 had set targets to reduce greenhouse gas emissions and buy clean energy. RE100, an organization formed to recruit, track, and promote global companies that have 100-percent renewable energy commitments, now includes more than fifty major businesses. Other organizations have sprung up - such as RMI's Business Renewables Center (BRC), which recently formed a partnership with RE100; WWF/WRI's Corporate Renewable Energy Buyers Principles; BSR's Future of Internet Power; and RECS International - to facilitate and accelerate corporate procurement of renewable energy, until recently the sole purview of electric utilities. The world is going clean and green, and we want to help it go faster forward with a low-carbon-powered global delivery network.
Making an Impact
Once we understood the why and the what, we needed a strategy on how to get us there. There are many ways to procure renewable energy but we wanted to make sure that our investment would make a difference. After discussing various procurement mechanisms and their pros and cons with our customers, investors, and NGO stakeholders we established a set of guiding principles:
- Our investment should make an impact, putting more renewable energy electrons on the grid.
- The renewable energy generation should be co-located in the same power market as our operations, so we are adding renewable electrons to the same grid from which our operations draw electrons.
- Our procurement strategy should pass muster with our customers, truly augmenting their supply chain-sustainability efforts.
Renewables for Distributed Operations
These guiding principles set a high bar for us and make 50-percent renewables an aspirational goal. Akamai's network operations are highly-distributed globally; our data centers are outsourced, and power demand in each one is relatively small. We don't own any facilities and already pay the landlords for our electricity. Solar panels on roofs and wind-farm power purchase agreements for our individual facilities are not options for us.
But, thanks to finance innovation, a long-term contract for differences (CFD) with a renewable energy-project developer is a viable procurement mechanism that aligns with our principles. We agree to act as the long-term energy "off-taker" at a fixed price, called the strike price. With this commitment in hand, the developer can then secure funding for a project that will generate electricity commensurate with our annual energy usage in that power market. Once the project is up and running, the electricity is sold into the wholesale market, with the difference between the strike and market prices flowing to us as a debit or credit, along with the credits for the renewable energy generated (RECs) which are subsequently retired.
It is our hope that our procurement strategy can be a model for other companies with similar small-scale, distributed operations. We also endeavor to expand our impact through industry collaborations. We have joined the BRC to share our experiences, lowering the learning curve for others. And, as part of BSR's Future of Internet Power working group, we are developing guidance for colocation data centers to provide renewable energy offerings for clients.
The End Game: Emissions Reduction
The end game for our renewables strategy is to reduce our carbon emissions. With this strategy, we are confident that we can achieve an impactful 50-percent coverage of our network operations. We are starting in the U.S., where voluntary renewable energy procurement is well defined, with clear ownership rules that avoid issues of doubling counting of carbon-neutrality claims. But, while we predict that reaching our goal will reduce our business-as-usual GHG emissions by 35-40 percent, our absolute emissions will decrease by a considerably smaller amount compared to 2015 levels.
This is because of the combined effects of continued, demand-driven expansion of our network operations, and expansion in regions that have more carbon-intensive electricity than in the regions where we are targeting renewable energy projects, like California, for example. The higher carbon-intensity is a result of greater fossil-fuel use for electricity generation in regions such as Australia and India than in renewables-heavy California. But we believe that there will soon be similar opportunities for renewables procurement outside the U.S., so we can begin to globalize our impact and accelerate decarbonization. No one said this would be easy, or that we would have all the answers at the start. That's why it's called a commitment. That's why this needs to be a global, collaborative effort.
We are thankful for those companies and organizations that have paved the way for making corporate procurement of renewable energy a viable business strategy. Our expanding collective action, from customers upstream to the supply chain, is accelerating the decarbonization of global business operations. At Akamai, we are doing our part to help our customers move faster forward with their own sustainability.