From IoT to carbon: Microsoft’s drive for sustainability transformation

This article is an excerpt from our research publication SJ3: The pathway to regenerative business. A Japanese version is available on Note.

Introduction

Akiko Kubota, Azure Marketing Manager and Sustainability Lead at Microsoft, has been captivated by the potential of IoT and AI technologies to accelerate sustainability transformations around the world. The momentum continues to grow, and the world is witnessing the profound impact that these technologies can have.

Leveraging Microsoft’s products and services, she supports Japanese companies as they embark on their journeys towards social and environmental impact. Kubota-san discussed Microsoft’s own sustainability transformation initiatives, and shared about how the company is leading by example in climate action and addressing societal challenges.

How do you perceive the relationship between sustainability and business?

Sustainability has transformed from a CSR-driven pursuit to a vital component of thriving businesses. In terms of environmental impact, many companies struggle in the mitigation of greenhouse gas emissions within their supply chains, specifically Scope 3 emissions*. With its cloud data centres and array of technology products, Microsoft also finds itself in a situation where 97% of all emissions are attributed to Scope 3. That’s why we openly share our initiatives, including our challenges and failures, in a white paper. By being open and collaborative, we can all learn together and hopefully improve the entire industry.

*Scope 3 emissions are all indirect emissions (not included in Scopes 1 or 2) that occur in the value chain of the company, including both upstream and downstream emissions.

Could you share any case studies or any research that has helped your customers in their sustainability transformations?

Absolutely. For example, we use IoT to monitor offices, factories, and other facilities, optimising energy consumption by enabling remote operation and turning off unused equipment. By incorporating AI into data monitoring, we are able to identify potential equipment malfunctions and carry out preventive maintenance too. This proactive approach helps us to eliminate downtime that could disrupt business operations.

As a result, we have achieved a 30% reduction in electricity consumption. This, in turn, has led to significant decreases in both CO2 emissions and costs. Additionally, we streamline internal measures, such as replacing overseas travel with online meetings and migrating applications to the cloud, which have proven highly effective in curbing greenhouse gas emissions as well. Given that our mission is to support customers using technology, we consider our own experiences as examples that other companies can examine and learn from too.

What factors, in your opinion, have contributed to Microsoft’s sustainability transformation?

The unwavering commitment of our top management to integrating sustainability into business has been critical. Along with this, initiatives to transform employee mindsets have also yielded positive results. In 2012, we implemented a carbon tax system, levying costs on each department based on their CO2 emissions. This incentivised everyone to actively explore ways of reducing emissions. With design breakthroughs and the advancement of cutting-edge technologies, we have made major strides in reducing emissions in domains like cloud data centres and product development. Revenues from the carbon tax are then directed towards investments in startups focusing on innovative technologies for climate action. These top-down structural reforms serve as powerful catalysts for driving sustainable transformation.

What are the obstacles impeding progress for companies as they go through sustainability transformations?

While many companies show interest in our initiatives and are keen to hear about them, there is still a prevalent perception among companies that sustainability is merely a cost. Just like digital transformation, sustainability transformation is crucial for businesses. It not only enhances corporate value but also creates new and exciting business opportunities.

However, I feel that this understanding has not yet fully permeated the upper management of many companies. It is important to visualise concrete steps, such as simplifying emissions reporting through technology or reducing electricity usage, to create a clearer image of what sustainability transformation actually entails.

Do you notice any differences in perception between Europe, the United States and Japan?

In Japan, many people in their twenties inherently embrace the concept of sustainability and are driven to take action. However, as we progress to middle management and higher positions in companies, we see a lot of different perspectives, and the sense of urgency and awareness regarding sustainability is often lost.

On the other hand, Microsoft’s headquarters in the United States became the epicentre of a worldwide sustainability community that took shape three or four years ago, driven by dedicated volunteers. Today, some 8,000 employees from around the world participate in this community. They share information about internal products, collaborate closely with environmental NGOs, and organise annual Earth Day celebrations too.

Looking at Europe, legal initiatives like the Corporate Sustainability Reporting Directive (CSRD) are driving action and amplifying the urgency to tackle climate change. Our global offices are showing remarkable enthusiasm, embracing sustainability transformation as the new normal.

As the urgency for climate action intensifies, a clear disparity has emerged in sustainability efforts between Europe and the United States in comparison to Japan. Nevertheless, Microsoft sets a compelling example by strategically integrating sustainability into its operations, illustrating that sustainability is not merely a cost but also an opportunity. Japanese companies must now acknowledge the global sense of urgency, embracing sustainability as a fundamental pillar of their business strategy and driving collective efforts towards sustainable transformation.

Fabric is a Strategic Design and Sustainability consultancy helping businesses move towards more innovative, sustainable futures. Based in Tokyo, we’ve been consulting with global and local companies since 2004. We have extensive experience bringing together design thinking, sustainability, and human insight to deliver good strategy for clients.