Big Tech’s AI Fever Could Kill Its ESG Credentials

On paper, Big Tech is an industry that’s big on renewable energy. The question is how much of that is just paper.

According to a Bloomberg report published Wednesday, Big Tech companies have found a workaround in the carbon credit system to downplay their greenhouse gas emissions, which are ballooning due to the extra energy required to feed the AI systems they’re all chasing to perfect. This comes a week after the Financial Times reported that Big Tech firms are heavily lobbying to change how pollution is reported. 

Accounting Acrobatics

Bloomberg found that Big Tech firms including Meta, Amazon, and Microsoft are buying something called unbundled renewable energy certificates (RECs) to balance the books in their carbon accounting. These credits let you offset emissions on paper; if you buy enough unbundled RECs, you can effectively swap power that you used from a fossil fuel power plant for renewables in your paperwork. 

Bloomberg calculated the difference in the companies’ emissions reporting if you take unbundled RECs out of the equation, relying on data they gave to nonprofit environmental watchdog the Carbon Disclosure Project:

• Amazon reported 2.9 million tons of carbon dioxide emissions, but Bloomberg’s analysis found that once you remove the REC offsets, the actual carbon dioxide emitted was around 11.4 million tons.
• Microsoft disclosed 288,000 tons, but Bloomberg’s analysis pegged its emissions closer to 3.6 million tons.

The FT’s report also found discrepancies between the emissions Big Tech reports on paper and what actually gets pumped into the atmosphere. The FT’s analysis of Meta’s 2022 emissions found its claimed 273 tons looked more like 3.9 million. Bloomberg was slightly more generous, putting Meta’s total emissions at 741,000 tons, so there is still some room for interpretation in terms of the math. Per the FT, Big Tech companies including Amazon and Meta have banded together to push a new kind of carbon accounting that one source said would “rig the rules so the whole ecosystem can obfuscate what they are up to.”

ESGee Whiz: The biggest Big Tech companies feature prominently in ESG (environmental, social, governance) stock portfolios because as big companies go, they’re seen as relatively clean and keen on renewable energy. But the guzzling of energy (not to mention water) by AI-focused data centers, plus a growing dissent over carbon-credit systems like the RECs, could send some tremors through their ESG foundations.