How CSRD and EED are Reshaping Data Center Sustainability Reporting

Corporate Sustainability Reporting Directive (CSRD)

The CSRD is a new regulation that mandates companies operating in the European Union (EU) to disclose their ESG performance and impact. This directive applies to both EU and non-EU companies, including US, Canadian and UK companies, with over 500 employees and listed on EU-regulated markets or operating in specific sectors like banking, insurance, energy, and transport.

The CSRD aims to enhance the availability and reliability of sustainability information for investors, regulators, customers, and other stakeholders, while supporting the EU’s transition to a low-carbon economy. It requires companies to prepare annual sustainability reports following the European Sustainability Reporting Standards (ESRS). These reports will cover various topics such as climate change, biodiversity, human rights, diversity and inclusion, anti-corruption, and tax transparency.

Moreover, the CSRD introduces assurance requirements for sustainability reports, necessitating independent verification by auditors. The CSRD will be effective from January 2024 for financial years starting on or after January 1, 2023. Companies subject to the CSRD should begin preparing for their new reporting obligations by evaluating their current ESG practices, data collection systems, reporting frameworks, and assurance processes.

One sector significantly impacted by the CSRD is the data center industry, which plays a vital role in the digital economy but also consumes substantial energy and resources. Data center operators will need to report on various sustainability aspects, including energy efficiency, carbon footprint, water consumption, waste management, biodiversity impact, human rights, labor practices, and cybersecurity. Reporting will require adherence to standardized frameworks like the EU Taxonomy, Global Reporting Initiative (GRI), and Task Force on Climate-related Financial Disclosures (TCFD).

The CSRD will have significant implications for data center operations, driving the need for reliable data collection and analysis systems to ensure accurate and comparable reporting. It will also incentivize the adoption of sustainable practices and technologies, such as renewable energy sources and circular economy models. As well, it will enhance the reputation and competitiveness of data center operators aligned with the EU’s sustainability goals.

Evidenced-Based Sustainability Reporting

As part of this initiative, the European Union’s Research Center for Energy Efficiency is transitioning the European Code of Conduct for Data Centers into an Assessment Framework. This framework will mandate reporting on data center energy efficiency under the CSRD, providing crucial information for assessing a company’s impact on people and the environment.

Starting from January 1, 2025, large companies and listed SMEs will be required to produce regular reports on their environmental and social impact activities. These reports will adhere to the ESRS, ensuring standardized and reliable information. The CSRD aims to prevent greenwashing and double-counting while promoting transparency and accountability.

The CSRD places strong emphasis on evidence-based reporting, accurate measurement of greenhouse gas (GHG) data, and detailed disclosure of Scope 1, 2, and 3 ESG emissions. These requirements guarantee a comprehensive assessment of a company’s sustainability performance.

Energy Efficiency Directive (EED)

During a recent event, Stephen Lorimer, the Group Technical Director at Keysource, expressed his belief that the data center industry is ill-prepared for the upcoming regulatory changes and reporting requirements. Despite the monitoring phase starting in May 2023, many data centers are lagging in their preparations.

By May 2024, the European Commission’s EED will mandate EU data centers with an annual energy consumption of over 2780 MWh to disclose their energy performance publicly. Steve stressed the urgency for enterprises and operators to publish energy action plans and for colocation operators to gather necessary data from their clients. The updated thresholds will impact most data center operators globally, encompassing reports on data traffic, storage, temperature, power, water, carbon effectiveness, energy reuse, renewable energy, and cooling ratios. [source: Digitalisation World].

How to Measure ESG Performance

To support organizations in evaluating their ESG Scope 2 and Scope 3 performance, the International Standards Organization (ISO) has published a globally standardized set of KPIs in the ISO/IEC 30134 series that provide provide valuable metrics for driving improvements in data center operations and resource efficiency. These are listed below:

• ISO/IEC 30314-2: 2018 – Power Usage Effectiveness (PUE)
• ISO/IEC 30314-3: 2018 – Renewable Energy Factor (REF)
• ISO/IEC 30314-4: 2017 – IT Equipment Energy Efficiency for Servers (ITEEsv)
• ISO/IEC 30314-5: 2017 – IT Equipment Utilization for Servers (ITEUsv)
• ISO/IEC 30314-6 – Energy Reuse Factor (ERF)
• ISO/IEC 30314-7 – Cooling Efficiency Ratio (CER)
• ISO/IEC 30314-8 – Carbon Usage Effectiveness (CUE)
• ISO/IEC 30314-9 – Water Usage Effectiveness (WUE)

The Role of Modern DCIM Software

In the pursuit of improving sustainability, Hyperview is integrating AI co-pilots into its data center infrastructure management (DCIM) platform. Leveraging the power of AI, Hyperview offers automated asset discovery, power monitoring, environmental monitoring, energy management, and comprehensive visibility into Scope 2 and Scope 3 emissions. By utilizing discovered, analyzed, and enriched data, Hyperview trains AI co-pilots that provide prescriptive and cognitive recommendations.

In summary, the changing landscape of ESG reporting, driven by new initiatives such as the CSRD and the EED, is pushing organizations to be more transparent about their sustainability performance. The EU’s transition from the Code of Conduct for Data Centers to an Assessment Framework sets the stage for mandatory reporting on energy efficiency. With the support of modern DCIM software and AI-powered platforms like Hyperview, organizations can meet these new standards, promoting accountability and preventing greenwashing. As we continue to navigate these evolving regulations, our collective commitment to ESG will drive us towards a more sustainable future.