• The telecom industry has ambitious targets to lower carbon footprint. Environment and social governance (ESG) is becoming inextricably linked to overall corporate strategy and will be reported in financial results.
• Strategies differ by operator, but metrics like network carbon intensity (NCI) will help carriers to better understand, report, and improve energy consumption.
The Internet played a significant role in improving social cohesion and mental health during the pandemic. It has helped keep schools and hospitals open, and allowed for the high-street stores to move online. However, there is also an equally tall task of maintaining the health, welfare, and sustainability of the planet. The shift from offline to online has dramatically increased traffic on carrier networks and operating models for virtually all businesses. While the network is bringing many positive societal gains, spikes in network traffic upwards of 40-60% in 2020 alone is also increasing greenhouse gases (GHGs). With dramatic traffic increases, so does the need to reduce energy costs. Recently Huawei hosted the Better World Summit in Dubai to bring operators from the industry to discuss their sustainability goals. ESG is becoming as important to corporate strategy financial performance. The two are becoming inextricably linked.
Network Carbon Intensity (NCI)
During the summit, Huawei unveiled the NCI index for the CSP community. This metric measures the carbon emitted by all equipment due to electricity consumption of a particular network facility. This number is divided by the total amount of data volume (e.g., Gbps) handled by the network facility to measure the carbon footprint of the network.
NCI sets out to quantify the environmental impact of connectivity for fixed and mobile operators. Unlike power usage efficiency (PUE), which is used in data centers, NCI advocates measurements over time, such as a year. The problem with PUE, for example, is that it can be measured just once – potentially at the most optimal conditions – before being reported. PUE can be a great marketing message but does not necessarily correlate to real world conditions peaking and troughing over time. In Australia, a NABERS metric addresses this issue. Energy ratings are measured over six months by a qualified third-party. This approach became a local gold standard for data center operators for measuring energy efficiency. It is being considered elsewhere.
Second, energy consumption varies across ICT stacks (e.g., networks, clouds, data centers, grids, etc.). NCI zeroes in on what is in the direct control of network operators (e.g., a facility-based connectivity), and how it correlates to the business (e.g., data traffic). This can provide an important baseline measurement for setting and refining a net zero strategy.
While NCI has been put forth as a framework, the event had several operator participants discussing their commitment to ESG. While the need to align strategy with science-based targets and GHG protocols was universal, each carrier also had a nuanced approach which catered for their business.
• Telenor takes a multi-faceted approach to energy consumption addressing ways to lower direct and indirect emissions. This included network modernization, new battery technology to improve energy storage, power savings features, and increased usage of AI/ML tools to further reduce emissions. The company is also purchasing more renewables through larger PPAs.
• To influence the supply chain, the CSP has also set a target that 68% of suppliers (by spend covering purchased goods, services, and capital goods), will have their own science-based targets by 2025.
• The Orange Group sets out to achieve net zero by 2040 and has a first round of targets for 2025 include reducing CO2 emissions by 30% from 2015. In addition, 50% of the group’s energy needs to come from renewables by the same period. It will also mandate that all Orange-branded equipment, (e.g., wireless routers) adhere to eco-design approaches which will impact the supply chain.
• Orange discussed the challenges of its energy expenses, which are set to increase by 26% from 2019-2023. Some 80% coming from IT and networks alone (and 80% of this share is in the RAN). Like Telenor, Orange has a large presence in emerging markets and has also set out on a group-wide strategy to reduce its energy footprint across its local OPCOs. Given its large footprint, it reports to have over 50 programs underway.
• Like many of its peers, MTN highlights the importance of ESG as part of its corporate strategy. It has also committed to a net zero strategy by 2040 and a Road to Zero committee reporting directly to the board. As Africa’s largest mobile operator, its base stations produce over 85% of emissions.
• To reduce direct emissions, it will increase the usage of alternative grids and/or contract out to energy as a service companies (ESCOs) to provide cleanest fuel sources to meet its sustainability objectives. Indirect emission solutions will focus on suppliers of UPS, battery and genset technology, and cooling. It is also deploying AI-based energy management tools.
With each carrier following a corporate strategy for ESG, there are a few observations that can be made as operators embrace a net zero strategy. Sustainability strategies will differ by operator. And energy costs, if not controlled, will impact cashflow. Telenor Asia reports energy costs are 24% of OPEX, which is more than double that of the Nordics. Major markets like Bangladesh and Pakistan generate high subscription bases, but very low ARPUs. The inability to control rising energy costs, especially in markets that can face shortages, will impact the bottom line and local market competitiveness.
Second, the use of energy outsourcers will be more important in emerging markets. With some base stations on poor grids in remote areas, suppliers of alternative energy sources will be more important. Energy solution integrators (i.e., ESCOs) will likely work between CSPs and towercos in achieving Net Zero for 2040.
Third, ESG and financial performance will be more inextricably linked. Carriers, like Orange, are already developing energy dashboards linking energy OPEX to revenue performance. (This factors in other areas such as kWh/Gb in the RAN, plus renewable energy metrics.) Putting the pieces together, the industry may report energy consumption like EBITDA, which will make a complex issue easier to understand. Better reporting, ideally standards-based, is important for the industry going forward.