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The FinOps Advantage in Cloud Sustainability

Reducing Costs and Carbon Emissions Simultaneously

The Role of Technology in Driving the Transition to a Low-Carbon Economy

Deloitte Global predicts that in 2023, the tech industry will ‘move faster’ on climate action than non-tech industries, meaning more tech companies are aiming for net zero by 2030¹. This trend is further supported by predictions from Google cloud experts, who anticipate that by 2025, most developers (3 out of 4) will prioritise sustainability as their primary development principle². These predictions highlight the growing importance of the technology industry in driving the transition to implement technology to decarbonise rapidly.

In addition, there are several broader factors driving businesses to address their environmental, social, and governance (ESG) impact, such as:

  • Investors and shareholders are pushing CEOs and board members to hold them accountable for their overall emissions, the effect of public sustainability measures
  • Governments are tightening environmental reporting requirements and regulations, so there is less ability for greenwashing (falsely claiming or promoting that a company is more environmentally friendly than it is) and more focus on action.
  • Customers are increasingly making buying decisions on ethical grounds, including the sustainability practices of the companies they are considering.
  • Employees place huge importance on how prospective employers address sustainability when selecting their next place of employment.

Cloud, a vital enabler of the technology industry, is an innovation that allows shared IT resources to be delivered and consumed on-demand as a service, enabling scalability and rapid elasticity. While moving to the cloud and shutting down on-premises data centres can assist the technology industry and other industries in reducing carbon emissions³, it is essential to note that this is just the first step towards a low-carbon economy through cloud adoption.

A ‘sustainable cloud’ goes far beyond reducing energy consumption for organisations adopting cloud technologies. It starts by incorporating sustainable goals into an organisation’s cloud strategy; it also involves a continuous effort to address the ESG impact of cloud computing and promote sustainable activities across the organisation and its ecosystem. A sustainable cloud may also include measuring and reporting emissions and setting appropriate reduction strategies. Luckily, the scalable and elastic nature of the cloud can also support the need to efficiently store the vast amounts of data used to create these reports.

At Deloitte, we recognise the economic benefits of implementing sustainable practices in the cloud. Some of the practices include:

  • Shutting down machines during off-peak hours: This helps conserve energy and reduce costs when resources are not in use.
  • Optimising network traffic: Efficient data routing and traffic management can lead to lower energy consumption and improved performance.
  • Reducing idle infrastructure: Ensuring that unused resources are promptly decommissioned helps save energy and costs.
  • Increasing server utilisation: By consolidating workloads and using virtualisation, we can better use existing resources and reduce the need for additional infrastructure.
  • Scaling cloud resources with demand: Implementing auto-scaling and load balancing ensures that resources are allocated efficiently, reducing energy waste and costs. 

Interestingly a recent Deloitte study suggests that CxOs often struggle to define the longer-term financial opportunities that sustainability measures offer. This is where implementing FinOps - a financial management practice focused on optimising cloud spend while maximising the business value of the cloud - comes in. Standard FinOps practices - real-time visibility, accurate reporting, budgeting, forecasting, rearchitecting, rightsizing cloud workloads, automation, and a collaboration between technology, finance and business teams - can underpin cloud spend optimisations and carbon footprint reductions. Conveniently, implementing a FinOps practice in organisations can create a win-win situation by aligning cost reductions with climate goals while maximising cloud value.

FinOps teams aiming to align financial initiatives better with sustainability value should develop a comprehensive framework to assess cloud FinOps opportunities against financial impact and progress on sustainability efforts. This framework should include a broad range of cloud cost-out and sustainability initiatives, such as decommissioning and rightsizing cloud infrastructure, using cheaper and greener cloud regions and providers, automation and AI to support operations, pricing options, IaaS vs PaaS models, and others.  

Each optimisation opportunity should be rated according to its financial and sustainability impact (low, moderate, high). Organisations should then use the financial and sustainability ratings to map opportunities on a simple 2 x 2 graph to identify opportunities with the best combination of strategic cloud cost optimisation and sustainability value per their business strategy. By combining these efforts, organisations can holistically unlock powerful benefits that drive financial and sustainability results.

It is worth mentioning that every organisation should analyse to determine the best options given their unique business strategy, ability to differentiate, industry and geography. It is possible that the ‘greener’ option will not always be the cheapest. (e.g. migration of cloud workloads to a greener cloud region due to a climate strategy could increase cloud cost significantly). Nonetheless, a mature FinOps practice can allow organisations to maximise business value by considering business goals, expenses, and an overall reduction in carbon emissions.

Gone are the days of solely focusing on the business and economic benefits and costs without regard for the environment. Now, with the right tools and increased awareness, we have the chance to approach business growth, transformation, and evolution with a more holistic view, taking into consideration both the financial and environmental impacts of our actions. In fact, 40% of businesses (in Australia & New Zealand) identify sustainability as among their top three business priorities.³

As we embark on the journey towards a low-carbon future, it is essential to remember that this process will take time and require developing new technical and interpersonal skills, competencies, and innovative methods. Delaying projects to optimise cloud implementations could result in negative consequences for the environment, finances, and regulations*, including carbon taxes or penalties, which could prevent the achievement of business objectives and desired results.

Alternatively, a coordinated strategy for spend optimisation and emission reduction associated with cloud operations can prevent conflicting efforts, opening up opportunities for an organisation to reap the significant economic and environmental benefits of an optimised cloud.

Since efforts to financially optimise cloud operations often overlap with efforts to optimise for sustainability benefits, actively leading sustainability activities can also help realise significant financial rewards in the long run. To achieve a low-carbon future through cloud transformations, it is crucial that organisations take a proactive approach, implement sustainable practices, and stay informed about current and upcoming regulations.   

As ESG becomes a critical global issue, organisations must ensure that new and existing FinOps teams have the tools and capabilities to monitor the organisation’s cloud decarbonisation journey by leveraging similar remediation steps and reporting patterns. Timely steps are essential to harness cloud optimisation's benefits while ensuring ongoing progress and success. A holistic framework prioritising actions that achieve cloud cost and sustainability targets in alignment with the organisation’s overall cloud and business strategies will avoid FinOps going against GreenOps initiatives.

At Deloitte, we understand the importance of a well-defined cloud strategy and the need for optimal business performance. Our team of experts can provide the vision, tools, and framework necessary to realise the cloud's full potential with a green lens. From strategy to leadership and culture, advice, measurement, and reporting - we provide full-service solutions to help organisations make operational decisions towards a greener future.