Over the past decade, companies have extensively migrated their workloads to the cloud. Despite this, cloud infrastructure continues to expand rapidly, with IDC predicting a 19.3% year-over-year growth in 2024. The primary driver of this growth is no longer standard cloud migration. Instead, it is the modernisation of workloads to enhance innovation and efficiency, coupled with the adoption of artificial intelligence (AI). This rapid evolution presents both opportunities and challenges. While it enables unprecedented innovation and efficiency, it also raises critical environmental concerns, such as rising energy demands, highlighting the urgent need for sustainable and efficient practices.
The energy dilemma: How Generative AI’s power hunger is shaping the future
The energy sector provides a striking example of both its promise and its challenges. GenAI use cases can support the simulation and optimisation of grid operations, enhancing overall reliability and resilience. Additionally, GenAI can generate insights from energy consumption data, factoring in elements such as weather and economic activity to boost operational efficiency. However, GenAI’s immense energy demands, powered by electricity from already strained power grids, pose a significant challenge.
According to Gartner, AI could consume up to 3.5% of the world’s electricity by 2030. The energy consumption of GenAI is becoming an increasingly pressing issue. As highlighted by MIT Technology Review, the electricity demands of AI are surging, with some advanced models consuming substantial amounts of energy. For instance, generating 1,000 images using an AI image generation model can emit as much carbon dioxide as driving a gas-powered car for over four miles.
A recent article in Nature underscores a looming challenge: the next generation of GenAI systems could demand as much energy as entire nations. This surge in energy consumption stems from the immense computational power required as well as the substantial quantities of fresh water needed to cool processors and generate electricity. Although the expansion of Cloud Service Providers (CSPs) infrastructure adds to the sector’s energy footprint, they are simultaneously addressing these challenges by embedding environmental principles into their designs. For instance, one CSP is leading the way with next-generation data centres that completely eliminate the need for water-based cooling, demonstrating a strong commitment to sustainable innovation.
FinOps and cloud: balancing growth, costs, and sustainability
This is where FinOps (financial operations, focused on optimising and managing cloud costs and driving financial accountability) and GreenOps (green operations, aimed at aligning IT usage with sustainability goals) have a role to play. FinOps is not merely about cost reduction; rather, it is the capability to manage IT expenditures while supporting business growth, thereby enhancing profitability.
Drawing parallels to other fields, with winter approaching, energy companies often advise on optimising household energy consumption. This not only helps reduce monthly energy bills but also encourages the use of locally produced, greener energy sources, reducing reliance on external, often fossil energy sources. Applying this principle to the cloud, and considering the intensive capacity demands of GenAI, we see how optimising IT infrastructure usage can achieve both financial and environmental objectives – the latter now with increased transparency and thus scrutiny from new sustainability reporting regimes coming into force. Here is why you should not consider such compliance exercises as a burden, but rather as an opportunity, if not a catalyst.
Aligning cloud sustainability with CSRD
The Corporate Sustainability Reporting Directive (CSRD) is transforming how businesses report their sustainability impacts, making this data crucial for investors and stakeholders. This EU directive mandates around 50,000 companies in the EU or with entities in the EU to disclose detailed sustainability information, emphasising the concept of “double materiality.” With over 1,000 data points to manage, and 74% of organisations still using spreadsheets, technology becomes essential for efficient, compliant reporting and insightful analytics.
Businesses face a choice: stick with existing systems or adopt new software to streamline sustainability reporting. Many are turning to cloud technologies for their scalability, real-time data access, and collaboration capabilities. These platforms simplify compliance by enabling what is often most important with handling sustainability data, e.g. data collection, integration, and aggregation; innovation for adaption given where the sustainability and especially the carbon IT market currently stands; and shared ownership of processes across functions like CSO, CFO, and CIO teams.
Key solutions include robust monitoring for energy usage, resource consumption, and carbon footprints. A GreenOps framework, building on an inventory of cloud resources, baseline measurements, and real-time capabilities, combined with FinOps, ensures cloud usage is both efficient and sustainable. It is simply “carbon out, cost out.”
Integrating technology with sustainability results in a win-win, allowing businesses to navigate CSRD requirements, improve reporting capabilities, and position themselves for a future where AI and cloud platforms drive both innovation and environmental responsibility.
Powering the future: How AI is revolutionising cloud sustainability
In our 2025 AI business predictions, we rank sustainability among the top five impact areas driven by AI. According to our 2024 Global Investor survey, two-thirds of investors believe that GenAI will boost productivity at the companies they invest in by at least 5% within the next year, with similar expectations for revenue and profitability increases. Additionally, 63% of top-performing companies are increasing their cloud budgets to leverage GenAI, while 34% cite sustainability considerations as a key driver for budget increases.
AI’s capability to collect and analyse data can significantly enhance organisations’ efforts to optimise sustainability across their operations, management, and supply chains. AI can enhance energy efficiency, reduce emissions, and improve environmental performance in various sectors. Examples include optimising building cooling, repositioning wind turbines, balancing electric vehicle charging, and refining manufacturing processes.
On the other side, AI can also automate data collection for sustainability regulations, analyse this data, and generate reports and insights for steering and investment decisions.
Data centres, as a key component of any cloud infrastructure, particularly those used by banks and insurance firms, consume significant energy. To show the impact: The data centre industry accounts for about 1.5% of global energy consumption, a figure expected to rise to 8% by 2030. Electricity costs make up 50-70% of data centre operating expenses. AI applications can help optimise energy use in data centres, contributing to overall sustainability efforts along the supply chain.
AI will accelerate the energy transition which will not only drive significant improvements in sustainability from reducing energy demand but generate substantial savings for companies. Research from PwC and the World Economic Forum indicates that demand-side energy actions can achieve a 31% reduction in energy demand without compromising output across all economic sectors. This presents a compelling opportunity for businesses to enhance efficiency and sustainability. Who wouldn’t want to seize this advantage?
A virtuous circle
Sustainability and IT—and IT and Sustainability—form a virtuous circle. Cloud technology represents state-of-the-art technology, with AI acting as an enabler to generate the necessary insights for a sustainable strategy. This includes data centres to support technology use and processing, value chains, and performance management and reporting. For this reason, the CIO must play a central role in any sustainability operationalisation and reporting initiative.
Research shows 91% of organisations are either already involved or plan to involve their technology teams in responding to CSRD requirements. However, fewer than 60% have done so to date, presenting a clear call to action. By engaging IT and technology leaders early, businesses can integrate emerging requirements into system road maps, ensuring smoother compliance and unlocking the full potential of cloud-driven sustainability solutions.
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Read More from This Article: The cloud’s green revolution: Balancing digital growth with sustainability in the age of AI
Source: News