Telecom emissions: Scope for real-world progress

• Telcos have been in the vanguard of industries working to reduce greenhouse gas emissions
• It is fairly easy for them to reduce their carbon footprint by about a quarter, if they address their Scope 1 and Scope 2 emissions
• But most emissions are beyond their direct control and spread across the supply chain (Scope 3), notes consultancy McKinsey 
• As if the challenges weren’t hard enough, authorities in the US and others countries are rowing-back on decarbonisation commitments and making sustainability targets harder to achieve

Back in 2009, the US government of the day published its finding that carbon dioxide and other gases are major causes of climate change and having a deleterious effect on the health and future of all of humanity. It was a warning that some, but by no means all, other governments around the world took seriously and, together with major industrial sectors, organisations of every sort and businesses, have devised (or are devising) agendas, strategies and programmes designed to lower the emission of greenhouse gases and, at least, slow the impact of climate change.

One industry that quickly took up the challenge was telecom. The sector has made ambitious, serious and successful attempts to decarbonise parts of its value chain and, during the past couple of years, such efforts have redoubled in the wake of the emergence of AI and the realisation that the massive power supplies required for AI datacentres could quickly negate the green network advances that have already been made.

However, the new administration in Washington DC is about to “reconsider” the 2009 finding and is set to repeal climate change legislation and revamp permitted pollution limits. Already the US Environmental Protection Agency (EPA) has issued a multitude of notifications that will undo the regulations the EPA made in an earlier, less radicalised, incarnation. Basically, the organisation is now eating itself.

Thus, it can hardly be termed anything other than ironic that global management consultancy McKinsey & Company has just published a new report, Telecom emissions: How to tackle the biggest challenges. It was evidently researched and largely written during the Biden administration but has been released into what is a very different world.

The report, co-authored by Andrea Travasoni and Nemanja Vucevic, accepts the premise that decarbonising the full value chain is a massive challenge but points out that meeting such objectives could result in 60% of an integrated operator’s emissions being very significantly reduced for a cost of less than $100 per metric tonne of carbon dioxide (CO2), which is a cost-effective figure. 

Understandably, most telco decarbonisation efforts to date have been in areas that quickly result in a reduced emissions footprint at minimal cost and effort – what the McKinsey team calls the “low-hanging fruit”. The report points out that it is relatively straightforward for a telco to fairly quickly and effectively deal with about 25% of its carbon footprint by achieving efficiencies in its own operations (Scope 1 emissions) and reducing the emissions related to the energy used to power networks and infrastructure (Scope 2).  

However, few telcos have “squarely taken on the much more challenging emissions from their value chain (Scope 3), which account for the majority of their carbon footprint,” note the authors. 

And the challenges they face will only be exacerbated by the runaway growth of data traffic related to AI and the deployment of infrastructure for 5G and, in due course, 6G.

Although the US is currently back-tracking on efforts to contain emissions, many other countries remain committed to containing climate change via legislation and regulation. For example, the European Union (EU) continues to pursue emissions-reduction goals, as does the UK, Ireland, Australia, New Zealand, Canada and so on. Companies will also have to comply with new mandatory climate reporting and new supply chain regulations. Simultaneously, some companies have scaled back their growth plans because of concerns about sustainability issues. Last year, major tech companies cancelled their own datacentre projects in Europe and Latin America for that very reason. Not all counties are following the new US template and not all is yet lost.

Four types of telco and four ‘decarbonisation levers’ to pull

So, how should a telco go about making further and faster progress to sustainability? Well, that depends on how you define ‘a telco’. According to the McKinsey report, “the four most prevalent business archetypes” in the telecom industry are: Traditional integrated telcos that own most of the required physical assets and operate a retail business; tower companies (TowerCos) and fibre companies (FibreCos) that are network-focused wholesale providers; and service companies (ServCos) that use other providers’ infrastructure to cater to retail customers. 

The report also notes that while the specific sources of emissions vary depending on the telco archetypes, for a typical integrated telco, the direct Scope 1 emissions (which are minimal – see chart above) come mostly from their vehicle fleets and generators, while Scope 2 emissions (up to 25% of the total) come from the energy used by datacentres and their fixed and cellular networks.

Scope 3 emissions account for the majority of the total and are split into two types: Upstream Scope 3 emissions, which account for the bulk, are related to services and the production of purchased goods, such as handsets and network equipment; and downstream Scope 3 emissions, which stem from the use and disposal of customer equipment, leased assets and investments and franchises.  

Regardless of the telco type, Scope 3 emissions account for at least 50% of an operator’s carbon footprint, but mainly much more (as the diagram above shows).

Given those factors, an integrated telco must gain a highly detailed, in-depth understanding of both its carbon footprint and the specific decarbonisation levers that can be used to remedy the situation.While an operator’s emissions are spread throughout their value chain, the main focus should be on Scope 3 emissions, such as handsets, network equipment, and construction materials, as well as the services provided by third-party companies that build and operate telecom networks. However, telcos cannot decarbonise their Scope 3 emissions on their own – they have to partner with their suppliers and customers to achieve their goals.

The McKinsey report finds that when operators have the right plans and apply the various remedial methodologies at their disposal across the whole value chain, it is possible, as previously mentioned, to abate 60% of emissions for less than $100 per metric tonne of CO₂. What’s more, up to 15% of decarbonisation measures can generate cost savings in excess of the initial investment. In a further example, McKinsey says its recent work with an unnamed business unit of a European telecom operator indicated that Scope 2 emissions could be reduced by 95% and Scope 3 emissions by 25%, resulting in a 5% uplift in earnings before interest, taxes, depreciation and amortisation (EBITDA) and a payback time of three to four years. 

The report also finds that, properly applied, the use of a combination of four “major levers” – using clean energy, deploying energy-efficiency measures, network sharing, and using green materials – will enable the majority of emission reduction. 

For example, a telco switching to clean renewable energy will cut Scope 2 emissions, and, typically, can reduce the total carbon footprint by up to 20%. Of course, in each individual case much depends on the availability and local price of the clean energy, but on-site generation is another option for telecom locations with sufficient local clean-energy resources, such as solar, wind or hydro power. Telcos can also make energy savings of up to 30% by combining technology solutions, site and equipment optimisation, energy storage, pricing and operational levers. 

At present, datacentres typically account for 10% of an integrated telco’s baseline emissions, and 40% of that can be abated through the use of highly energy-efficient measures, such as liquid immersion for cooling or artificial intelligence to optimise a facility’s base temperature. Software reconfigurations of networks to enable remote monitoring, managing and updating of equipment will also enhance energy efficiency and reduce costs while improving network reliability.

The installation of fibre cables is another lever telcos can literally pull across their networks as fibre is (at least) two to three times more energy efficient than legacy copper cabling. That said, whilst decarbonisation and energy savings can be significant, the deployment of fibre throughout the network is a huge capital investment and should not be undertaken piecemeal but rather as part of an operator’s overall network strategy.

Another highly effective tool to enable operators to reduce both costs and emissions is network sharing. It can cut up to 10% of total emissions (primarily from Scope 3). Network sharing can also reduce materials usage by more than 30% and deliver identical network quality. The downside is that it can be costly to implement depending on market conditions and spectrum allocation but it is particularly effective when rolling out new networks or with major network modernisation projects.

Then there’s the use of lower-emission “green” materials in network deployments and devices. That will directly reduce Scope 3 emissions but much depends on a detailed knowledge of the supply chain and future demand. Not all telcos have such knowledge or expertise – yet.

An earlier McKinsey report, Global Energy Perspective (published in 2022), predicted that the use of fossil fuels will hit a peak between 2023 and this year, and that emissions will max out “in all scenarios before 2030”. However, that prediction was over-optimistic given that in 2025 the US and other nations are rowing back on past green pledges. By September last year, in the 2024 edition of the same report, McKinsey tacitly accepted the likelihood of changing times to come when it wrote that fossil fuel consumption will now plateau between this year and 2035 and will continue to play a major role until at least 2050. It will still account for somewhere between 40% to 60% of energy supply by the middle of the 21st century. 

It just goes to show that even paragons of research can be wrong, and it’s not the first time even for McKinsey. Back in the 1980s, the company predicted that by the year 2000 there would be only 900,000 US subscribers to mobile communications services. Having studied the report, AT&T cut back on its investment plans for the deployment of cell towers. As it turned out, by 2000 there were about 109 million mobile users in the US, the number was growing every day and Ma Bell was running to catch up with its rivals.

In essence, most of a telco’s emissions footprint is made beyond its direct operations and oversight. As the McKinsey report authors note, it’s everything “from the sand used to make silicon for smartphone chipsets to the old handset that ends up in a landfill” – telcos have to decide if they want to be commodores of the decarbonisation fleet or passengers on a vessel they do not command, left waiting to see where the winds of change will blow them and, perhaps, finding themselves stuck in the doldrums: “As idle as a painted ship upon a painted ocean” as Coleridge’s Ancient Mariner had it. 

An operator hoping for suppliers, such as utilities or network equipment makers, to become jolly green giants and hand them sustainability gains on a plate will be worse off for doing so. For telcos of any type, the opportunity is now and business leaders need to take responsibility and set an example if targets are to be met. 

– Martyn Warwick, Editor in Chief, TelecomTV