ESG Strategies: A Gateway to Sustainable Profits
The ESG-conscious route to business success.
Traditionally, the concern of corporations has been one thing – the optimization of resources to achieve increased profits. In today’s world, that’s simply not enough, states Stephen Rose, GM of global telco industry and distribution at IBM, and emphasizes the need for enterprises to build business success and profitability on the pillars of conscious environmental, social, and governance (ESG) strategies.
Stakeholders of all kinds — from employees to customers to investors, all demand that businesses strive to make a profit and do good in the world. This has culminated in ESG policies which, in a world of conscious consumption and consumerism, have increasingly become a basic table stake in achieving financial success or simply to be a player in the game.
According to a new study from IBM Institute for Business Value (IBV), The ESG Conundrum, 68 percent of telco executives say ESG needs to be a higher priority in their organization’s strategy.
Delivering on these commitments is not simple — particularly on the environmental front. For telecommunications companies, the challenge is even more daunting. By some estimates, the industry is responsible for 2-3 percent of global energy demand, and demand on networks only ever goes one way – up. If we choose to design, operate and maintain networks and network services as we always have, we will witness the combination of new types of 5G cellular traffic and growth in the Industrial Metaverse exacerbate the divide between ESG goals and ESG reality.
Growing Pains
Compounding ESG concerns is the rise of mobile and IoT devices as a catalyst of network and service demand. Global mobile data traffic will nearly quadruple in the next five years, from 90 exabytes (EB) per month in 2022 to some 325 EB in 2028. While 5G networks are inherently more energy efficient than the 4G standard they are replacing, the elevated network demand will necessitate more coverage and capacity and, consequently, base stations. As a result, the net energy and emissions impacts of 5G will likely be higher than they are today. Telco companies will need to reconfigure their networks to make them more efficient, beginning with their architecture.
Like all strategies, nothing is free. Internet traffic rose 440 percent from 2015 to 2021, with the largest jump coming during the COVID pandemic in 2020 when data transmission surged by as much as 50 percent. As we head towards the Industrial Metaverse and unique B2C experiences, CSPs will be required to serve the traffic differently, putting even more pressure on CSPs to operate to the lowest Total Cost of Ownership and within ESG targets.
Fortunately, combinations of new network architectures, like edge computing, artificial intelligence (AI), and data and automation can play a significant role to enable telcos to optimize their network’s carbon footprint and, in the same process, address key issues in the ‘social’ component of ESG.
See More: The Impact of ESG Regulations
There Is No AI without IA
CSPs must think laterally and assemble multiple technology domains to deliver the desired ESG outcome, starting with data. Today, 80-90% of AI and hyper-data growth is unstructured, which provides the industry with the opportunity to galvanize the power of the privileged data it owns or can get access to.
Data strategies set the tone for the rest of AI and automation strategies. Done well, businesses can do amazing things to automate complex tasks and delight customers. Done badly and AI and automation strategies become peppered with a litany of bad decisions and unintended consequences. CSPs must start thinking in terms of knitting together the data as a fabric or information architecture (IA) to access, explore and exploit its potential. There is no AI without IA.
The Rise of the Edge
First off, it’s important we clearly define ‘the edge.’ As we look at the evolution of devices and chipsets, we can see the edge has to include the devices because this is where storage and compute also happens. As we design future services, we must take stock of the opportunity to distribute workloads between clouds in ways that minimize the amount of time and space it takes to deliver a service outcome or experience.
Here, physics becomes a forcing function for ESG strategy. Certain service experiences must be delivered in near-real time, and thus, servers must be located within 30 kilometers of the end device to keep the latency of data transmission within five milliseconds. By forcing the service traffic closer to the edge, we also get to operate workloads in a way that avoids lengthy transmission to distant servers. Thus, concurrently, environmental impact is minimized.
Hybrid Cloud as the Means to the Desired ESG End
Running mixes of services across blends of clouds will typically mean services will run across multiple vendors and locations. In this new model, the potential for running services to the ‘hottest’ extent possible (i.e., ensuring commitments to cloud spend and maximizing the resources of on- and -off-premise servers) presents the industry with a host of options to address ESG concerns with automation and AI.
For example, some server locations might be overloaded with network traffic—straining their processors and producing excess heat that the facility’s HVAC system must work harder to cool—while servers in other locations might be sitting idle, drawing electricity to run despite handling little, if any, network traffic. Using software to manage these workloads, administrators can automatically offload processes from a hot center to a cold one, greatly limiting wasted energy.
But as said before, no strategy comes for free. CSPs must invest in IA, AI and automation capabilities so that the performance of resources and changing topologies is transparent and thresholds, tolerances and associated policies allow for CSPs to dynamically shift workloads between available resources without the need for lengthy and complex reconfiguration work or loss of performance. Maturing the cloud mesh through integrated AI, IA and hybrid-cloud strategies will yield up to a 30% reduction in energy usage – great for ESG and OPEX targets.
Operating Radio Access Networks in the Best Way Possible
For telecoms, one of the greatest opportunities for energy savings lies in their radio access networks (RAN), which account for 60 to 85 percent of the power used at mobile sites. 5G RANs require a significant amount of energy to generate the high-frequency, high-bandwidth radio signals used to connect end devices like smartphones to the telecom’s core network. However, while these sites run continuously, the data traffic from endpoint devices is intermittent — rising and falling throughout the day and even minute to minute — resulting in a lot of wasted energy.
By employing AI-based energy management tools, components of the RAN can be quickly powered down and back up again in accordance with demand. In practice, this has been shown to translate to a 7 percent reduction in energy consumption without diminishing network performance. To further optimize load management, telecoms can deploy AI tools to share RAN resources across a coverage area — much like the above example with data centers — automatically offloading excess traffic to underutilized base stations or switching off sites where coverage overlaps.
See More: Sustainable Construction: Building Sustainability with AI
Decent Profits, Decently
As the Dean of the University of Oxford said in his speech to matriculating students, businesses should aim for “decent profits, decently.” In reducing their energy expenditure, CSPs can make strides toward sustainability initiatives and save significant resources in the process. In turn, they can re-vector this capital towards the ‘S’ of ESG goals – social – and ease the pressure coming from other stakeholder groups.
With lower operating expenses, telco companies can more easily invest in bringing connectivity to underserved locations that were previously cost-prohibitive and help bridge the digital divide.
Such efforts can also be performed in conjunction with existing operations. For example, automation can be employed at a cellular base station serving a remote mining operation to share the 5G connectivity with residents of the community who would otherwise have no network access.
As ESG metrics continue to rise in importance among financial stakeholders, telecommunications companies that adopt new technologies create new frontiers for making profits decently, as together we lower carbon footprints, elevate society and bridge the digital divide, and enhance brand reputation by doing what is right – a win-win-win.
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