An update on Microsoft’s sustainability commitments: Building a foundation for 2030

by Brad Smith, President and Vice Chair, and Lucas Joppa, Chief Environmental Officer

Today Microsoft released its annual sustainability report, offering a comprehensive look at our progress in 2021 to becoming a carbon negative, water positive, zero waste company by 2030.

When we announced our climate commitments in January 2020, we also committed to transparency in sharing our learnings. This year’s report includes several important lessons, and our goals remain consistent: we aspire to build a world better than the one we found, and to help our customers and partners do the same.

Microsoft sustainability progress chart

Progress is not linear

We made progress on a number of our goals. We saw overall reduction in our Scope 1 and Scope 2 emissions of about 17% year over year, through our purchasing of renewable energy.

At the same time, we saw a rise in our Scope 3 emissions, which increased about 23% year over year. We know that Scope 3 emissions (representing the total emissions across a company’s entire value chain) are the most difficult to control and reduce. Our experience this past year has provided us with critical and additional early learning on our path towards our 2030 carbon negative milestone, and we are applying this learning quickly with additional measures to strengthen efforts to reduce our Scope 3 emissions.

Our emissions outputs took place against a backdrop of significant business growth in 2021. In this time period our business revenue grew by 20%. We significantly expanded our global datacenter footprint to meet the increased demand for Microsoft’s cloud business and we saw a growth in devices sales, especially Xbox and associated usage due in part to the pandemic.

Focus on fundamentals

We know this is a long-term effort, and for us to be successful, we need to be clear about the fundamentals that will allow us to meet our climate goals. In the past year we increased our focus on operational discipline, establishing a solid foundation across the company that will help position us to achieve our 2030 goals.

This foundation starts with data – it is essential that we prioritize more accurate and comprehensive data tracking all emissions, especially Scope 3, to inform our actions.

We have adapted the way we set our carbon targets and increased the frequency and scope of our internal reporting, which will bring greater transparency and ability for informed decision making across the company. This is evident in our updated Supplier Code of Conduct, where we require in-scope suppliers to report their emissions. We now have data from more than 87% of these suppliers with the majority included in our carbon accounting reporting.

Last year, we made the world’s largest purchase of carbon removal at 1.4 million metric tons, and this fiscal year we are on track to exceed that by procuring 1.5 million metric tons. Looking ahead, we will set even bolder carbon removal targets, and we will continue to increase our contracted volume year over year through 2030. This has an added impact of helping drive greater market maturation in carbon removal – an advance sorely needed.

Today we are taking new and stronger steps to help us reduce our Scope 3 emissions even as we continue to grow as a company. First, in addition to the absolute carbon emissions cap we’ve set for Microsoft, we are accelerating work to set business-group specific annual carbon intensity targets based on fundamental business drivers. We will connect our performance against these targets with other business review processes, including with the company’s Senior Leadership Team.

In addition, we are restructuring and increasing our internal carbon fee to help incentivize more aggressive measures to reduce Scope 3 emissions and better match the underlying cost of carbon abatement. For example, the Scope 3 business travel fee will increase to $100 per mtCO2e in our next fiscal year to better support the purchase of sustainable aviation fuel. To meet our FY30 goals in an increasingly competitive market, we will continue to increase the annual fee at an accelerated rate, which will also help promote energy efficiency and design changes that utilize low carbon materials.

Finally, we are redoubling our efforts on measurement, to help accelerate the maturation and adoption of industry standards for carbon accounting. We did this when dealing with our own numbers, where specified environmental information has been independently reviewed by Deloitte & Touche LLP. But the need for a more holistic focus on measurement goes beyond Microsoft. It was the impetus for the Carbon Call, a new initiative we announced with ClimateWorks Foundation and 20+ other leading organizations. Together we will focus on solving companies’ carbon emissions and removal accounting challenges for a net zero future.

Collaboration and investment

Looking beyond the Carbon Call, we continued this past year to foster additional partnerships and solutions to galvanize greater action. We are investing to advance important climate initiatives, including:

  • We made a $100 million grant to Breakthrough Energy Catalyst to accelerate the development of climate solutions the world needs to reach net zero across four key areas: clean hydrogen, direct air capture, long duration energy storage and sustainable aviation fuel.
  • Additionally, we have allocated $471 million to date via our four-year, $1 billion Climate Innovation Fund to accelerate the global development of carbon reduction and removal technologies, as well as related climate solutions to reduce water and waste. Recent investments include LanzaJetBlocPower and Eversource.

We are also investing in product development to help our customers and our partners better manage their own emissions and begin to identify steps toward meaningful change. Last year, we announced the Microsoft Cloud for Sustainability, currently in public preview, to provide comprehensive, integrated, and automated sustainability management for organizations at any stage of the sustainability journey.

As a leading technology provider of sustainable solutions, Microsoft is supporting our customers and partners as they move toward a net zero, environmentally sustainable future. This includes our work with the energy industry. While we will continue to sell commercially available software technology and cloud services to all customers, inclusive of energy customers, we will partner most closely with those energy industry customers who have a net zero-by-2050 goal, in recognition of the transformational role they will play in delivering on the world’s renewable energy needs. You can read more about our energy industry principles here.

This commitment is a priority across every aspect of our business. The Xbox team today shared how they are doing their part to deliver on our goals. As we look forward, it is imperative we continue to build the foundations needed today and do the work that needs to be done to deliver on our commitments in 2030.

It’s what the world needs us all to do.

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