Our Thirsty Tech: ESG Key Issue of the Week
Posted on November 17th, 2016 by OWLinsightseducation ESG impact sustainability
We’re passionate about water issues here. Compared to some parts of the world, where water isn’t just scarce but scary, OWLshares’ home state of California has it pretty good. But this land of cyclical drought is also home to an enormous amount of tech — which puts us at the intersection of this week’s ESG Key Issue: Water and Technology.
So what’s the big deal? How much water does technology use?
Between cooling and electricity, US data centers consumed an estimated 626 billion liters of water in 2014 — that’s about 2,000 liters for every person in the US, or 5.5 liters a day — about 2.75 times the recommended drinking water for an average adult. That’s some thirsty data.
In places like Silicon Valley — where residents cyclically deal with drought by letting lawns die, taking shorter showers, and learning to ask for water at restaurants — public utilities and technology businesses are exploring changes in how they allocate, use, and reuse water, planning ahead to consume less fresh drinking water for functions that don’t require cleanliness. And of course businesses on the whole are always exploring technology with higher efficiency. But this is only part of the story.
In four of six technology subsectors, SASB recommends reporting on “Total water withdrawn, percentage recycled, percentage in regions with High or Extremely High Baseline Water Stress” — a set of data built on total consumption, efficiency of use, and impact on the surrounding community. (The criteria also include guidelines for reporting waste, but water use itself is an important enough issue that for this article we’ll focus on it entirely.)
According to the SASB industry brief, “Managing the energy and water footprint of the significant hardware infrastructure used in this industry is important for managing costs, obtaining reliable supplies of energy and water, and lowering reputational risks.”
Total water consumption clearly affects the bottom line as a cost; water stress may represent hard costs if water is priced higher for scarcity, but also represents the opportunity cost to the community; water recycling sits at the union of the two.
Even if efficiency and community stress are somehow not reflected in a business’s hard costs, they are still part of a business’s responsibility to account for its toll on shared resources. This is not just to forestall reputational risk; this is a good long-term strategy.
In a perfect world, every business would somehow bear their hidden costs of doing business — those effects borne somehow by the public, whether in resource consumption or pollution. These externalities are becoming less and less hidden as competition for resources grows and stakeholders focus increasing attention on the true footprint of business, particularly where the public foots an actual bill or experiences reduced quality of life.
A company which tracks and reduces its externalities now is not just a better corporate citizen, but stands to bear fewer costs down the road.
Our Thirsty Tech is part of our series, ESG Key Issue of the Week. Tune in weekly for new installments.
You’ve heard a lot of buzz about how ESG can help make good investments, but many investors still misunderstand the how and the why.
Environmental, social, and governance data has material value. Simply put, ESG helps reveal how well a particular company is run, how it relates to its stakeholder base, how it manages its risks for the long term, and so on.
The key issues, as outlined by the standards boards, include some obvious ones — for instance, energy management clearly tracks quantifiable costs — and some that at first glance may not seem to promise immediate benefit to the company’s bottom line.
Find out why each of those ESG issues has been recommended for a particular industry based on materiality. Every week we’ll translate another one into plain language. Stay tuned!