Data center capex is expected to grow, supply-chain willing, at a 10% compound annual growth rate (CAGR) between 2022 and 2026, according to Dell'Oro Group. Now the industry is grappling with how to achieve that growth sustainably, analyst Lucas Beran said during an Open Compute Project webinar.

Regulatory bodies, investors, and customers alike are "placing increased scrutiny and pressure on the data center industry's future," Beran said.

Data center moratoriums, like those in Dublin, Amsterdam, and Singapore, exist "around the context of rising carbon emissions and how these data centers can operate more sustainably," he explained. There are also emergent regulatory actions relating to equipment efficiency, the type of refrigerant or coolant being used, and the amount of generated e-waste.

A lot of the outside encouragement is coming from the investor community, Beran added. "The investor community is absolutely raising activism for companies to do more, starting [with] and absolutely factoring in sustainability as a risk factor for a company's future growth."

This means that now more than ever, sustainability is a competitive advantage.

Specific competitive benefits of pursuing sustainability include lowering capex and opex, lowering total cost of ownership of data center assets, attracting new climate-focused customers, and generating new revenue streams. For instance, environmental, social, and governance (ESG) reporting attracts investment via green bonds and company evaluations like the Carbon Disclosure Project's rankings, Beran explained.

Data center sustainability is still nascent and as it transitions to an industry norm it's important to understand who is at its center: the IT decision maker. "Their role is becoming a central actor in supporting corporate social responsibility goals, specifically as it pertains to the data center," Beran said.

According to Beran, data center sustainability encompasses the intersection of deploying efficient infrastructure and lowering the embodied carbon in data center components.

Deploying infrastructure designed with efficiency in mind reduces carbon emissions. "Relatively simple and straightforward," he said.

But lowering embodied carbon, or the amount of CO2 emitted during manufacturing of all materials that make up a data center throughout its entire lifecycle, is a more daunting task. "How do you use your equipment today? How will you use it tomorrow? And what do you do with it when you're done?"

Those questions all poke at the emissions monster lurking under most company's beds — scope 3 emissions.

Most recent actions from the industry have centered around scope 1 and scope 2 greenhouse gas (GHG) emissions. These include direct emissions resulting from day-to-day data center operations and the indirect emissions from purchased electricity.

Common strategies for lowering emissions that come from supplying data centers with electricity include renewable energy certificates (RECs) and power purchase agreements (PPAs) for renewable energy.

"While those are absolutely positive developments, the way these RECs and PPAs have materialized is that the renewables are not necessarily on the same grid or even in the same region that the data center is operating," Beran said.

This leads to "a slight imbalance" between the environmental benefits and burdens that data centers and their interactions with the renewable energy market have on various energy grids.

Another challenge lies in power usage effectiveness (PUE). There's significant financial incentive for data centers to reduce electricity use, which is often measured as PUE.

But in order to reduce data center PUE, "owners have been relying on water usage, which isn't necessarily sustainable. Really, it's just more of a trade off," Beran explained. Water is a non-renewable resource, which is why waterless cooling systems like immersion cooling are touted for their sustainability potential.

And while average data center PUE dropped significantly from 2007 to 2017, progress has slowed in recent years. "That's why when looking how to increase our focus on sustainability, amongst the backdrop of accelerated digital transformation, we're turning to scope 3 GHG emissions or indirect emissions related to the downstream supply chain," Beran said.

And "in order to do that, we need to standardize sustainability reporting. In order to compare two products, suppliers, or even two data center service providers, you need to compare similar, if not the same, metrics," he added.