AND THE MAIN FIELD OF STUDY INDUSTRIAL MANAGEMENT, SECOND CYCLE, 30 CREDITS STOCKHOLM SWEDEN 2020,
Green Cloud Transition &
Environmental Impacts of Stock Exchanges
A Case Study of Nasdaq, a Global Stock Exchange Company
NILS FRISK ARFVIDSSON DAVID ÖSTLIN
KTH ROYAL INSTITUTE OF TECHNOLOGY
SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
Green Cloud Transition & Environmental Impacts of Stock Exchanges
A Case Study of Nasdaq, a Global Stock Exchange Company
by
Nils Frisk Arfvidsson David Östlin
Master of Science Thesis TRITA-ITM-EX 2020:216 KTH Industrial Engineering and Management
Industrial Management SE-100 44 STOCKHOLM
Grön molnövergång & miljöpåverkan av börser
En fallstudie av Nasdaq, ett globalt börsföretag
Nils Frisk Arfvidsson David Östlin
Examensarbete TRITA-ITM-EX 2020:216 KTH Industriell teknik och management
Industriell ekonomi och organisation SE-100 44 STOCKHOLM
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Green Cloud Transition & Environmental Impacts of Stock Exchanges: A Case Study of
Nasdaq, a Global Stock Exchange Company Nils Frisk Arfvidsson
David Östlin
Approved
2020-06-08
Examiner
Cali Nuur
Supervisor
Frauke Urban
Commissioner
Nasdaq Technology AB
Contact person
Magnus Haglind Abstract
To address the issues of climate change and reduce the emissions released into the atmosphere, society and companies, including the financial markets, need to adjust how they act and conduct business. The financial markets are vital in the transition towards a more sustainable society and stock exchanges are a central actor to enhance green finance, enabling green securities to be traded.
For stock exchange companies to stand tall and encourage a green transition, they need to be aware of their own internal environmental impact. As society is changing to become more service- oriented, so is stock exchanges. A part of enabling servitization is the usage of cloud services which not only enable companies to focus more on their core business, it also has the potential to reduce companies’ environmental footprint. This study examines the environmental impact of a stock exchange company and how it can be reduced by transitioning to cloud computing. The study uses Nasdaq as a case company and examines environmental performance data from major stock exchanges worldwide. The study furthermore uses the Multi-Level Perspective (MLP) to understand what enables and disables a cloud transition for stock exchanges.
This study concludes that the main environmental impact of a stock exchange is Business Travel, electricity and heat for Office Buildings and Data Centres, although the order of these varies throughout the industry. Further, it is concluded that a stock exchange can reduce its environmental footprint by transitioning to cloud computing, in the best-case scenario, emissions are reduced with 10 percent and electricity usage reduced with almost 30 percent of the total usage. However, the impact of a transition is dependent on the rate of renewable energy used for the data centre. The study finds that a cloud transition includes enablers and disablers on all three levels on the MLP and it will most likely be incremental innovations together with a business model shift and technical traits of cloud that will enable and open the window of opportunity for a regime shift. It is concluded that technology or IT-security of cloud computing is not hindering a cloud transition, rather it is organizational culture, assumptions, financial lock-ins, and landscape protectionism that are disablers for a transition. To overcome those, and reduce the environmental footprint, stock exchanges need to work together with cloud providers to create use cases that are in line with the regulatory and financial requirements of a stock exchange.
Keywords: Cloud computing, Green cloud, Environmental impacts, Environmental footprint, Financial services, Stock exchanges, Cloud transitions, Multi-level perspective
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Grön molnövergång & miljöpåverkan av börser:
En fallstudie av Nasdaq, ett globalt börsföretag
Nils Frisk Arfvidsson David Östlin
Godkänt
2020-06-08
Examinator
Cali Nuur
Handledare
Frauke Urban
Uppdragsgivare
Nasdaq Technology AB
Kontaktperson
Magnus Haglind Sammanfattning
För att hantera klimatförändringar och reducera utsläppen i atmosfären måste samhället och företag, inklusive de finansiella marknaderna anpassa hur de agerar och bedriver verksamhet. De finansiella marknaderna är vitala för övergången till ett mer hållbart samhälle och börser är en central aktör för att utveckla grön finans och möjliggöra handel av gröna värdepapper. Om börsbolag ska stå rakryggade och uppmuntra till en grön övergång måste de vara medvetna om deras egen interna miljöpåverkan. I takt med att samhället förändras till att bli mer serviceinriktat, förändras också börserna. En faktor för att möjliggöra servitisering är användningen av molntjänster, som inte bara möjliggör mer fokus på kärnverksamhet utan har också potential att minska företags miljöpåverkan.
Denna studie undersöker miljöeffekterna av ett börsföretag och hur det kan minskas genom en övergång till molntjänster. Studien använder Nasdaq som ett caseföretag samt undersöker data om miljöpåverkan från de stora börserna världen över. Vidare, för att förstå vad som möjliggör och förhindrar en molnövergång för börser använder studien Multi-Level Perspective (MLP).
De viktigaste resultaten från denna studie är att den största miljöpåverkan av en börs är affärsresor, el och värme för kontorsbyggnader samt datacenter, dock varierar ordningen på dessa mellan börser.
Studien konkluderar att en börs kan minska deras miljöpåverkan genom att övergå till molntjänster, i bästa fall kan molntjänster minska utsläppen med 10 procent och minska elanvändningen med nästan 30 procent av den totala användningen. Effekterna av en övergång är dock mycket beroende av andelen förnybar energi som användas av de olika datacentren. Studien konstaterar flertalet faktorer på alla tre nivåer av MLP som både möjliggör och förhindrar en molnövergång. Det kommer sannolikt vara inkrementellinnovation tillsammans med affärsmodellsförändringar och tekniska egenskaper för molntjänster som möjliggör och öppnar fönstret till regimskifte. Studien konkluderar att det inte är tekniken eller IT-säkerheten för molntjänster som förhindrar en molnövergång utan det är organisationskulturen, förutfattade meningar, ekonomiska inlåsningar och landskapsprotektionism som förhindrar en molnövergång. För att övervinna dessa och minska miljöpåverkan måste börserna samarbeta med molntjänsteleverantörer för att skapa use cases som är i linje med lagstiftningen och de finansiella kraven på en börs.
Nyckelord: Molntjänster, Grön molntjänst, Miljöpåverkan, Miljöavtryck, Finansiella marknader, Börser, Molnövergång, Multi-Level Perspective
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1.Introduction ... 1
Background ... 1
Problem Formulation ... 3
Purpose ... 5
Research Questions ... 5
Delimitations ... 5
Disposition of Thesis ... 6
2. Literature Review ... 7
2.1 Financial Services ... 7
2.1.1 Technology Adoption and Innovation for Stock Exchanges ... 8
2.1.2 Environmental Impact of Stock Exchanges ... 9
2.2 Cloud Computing ... 10
2.2.1 Principles of Cloud Computing ... 10
2.2.2 Cloud Computing for Stock Exchanges ... 12
2.2.3 Green Cloud Computing ... 14
2.2.4 Environmental Impact of Cloud Computing ... 15
2.2.5 Methods for Reducing the Environmental Impact of Cloud Computing ... 16
2.2.6 Environmental Performance Variables of Cloud Computing ... 19
3. Theoretical Framework ... 22
3.1Sustainability Transition ... 22
3.2Multi-Level Perspective ... 22
3.2.1 Niches ... 24
3.2.2 Socio-Technical Regime ... 24
3.2.3 Socio-Technical Landscape ... 25
4. Methodology ... 26
4.1Research Design ... 26
4.2Research Approach ... 27
4.3Research Process ... 28
4.4Data Collection ... 30
4.4.1Primary Data - Quantitative Data ... 30
4.4.2Primary Data - Interviews ... 32
4.5Data Analysis ... 34
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4.6Case Study and System Boundaries ... 37
4.7Research Quality ... 38
4.7.1Validity ... 38
4.7.2Reliability ... 39
4.8Ethical Considerations ... 39
5. Results & Analysis ... 41
5.1Part 1 - Environmental Impacts of Stock Exchanges ... 41
5.2Part 2 - Environmental Improvements of Cloud Computing ... 43
5.3Part 3 - Enablers and Disablers for Cloud Transitions ... 44
5.3.1Niche Innovation ... 44
5.3.2Socio-Technical Regime ... 46
5.3.3 Socio-Technical Landscape ... 49
6. Discussion ... 52
6.1Part 1 - Environmental Impacts of Stock Exchanges ... 52
6.2 Part 2 - Environmental Improvements of Cloud Computing ... 53
6.3 Part 3 - Enablers and Disablers for Cloud Transitions ... 55
6.4Main Research Question ... 58
7. Conclusions ... 60
7.1General Conclusions ... 60
7.2Practical Implications and Recommendations ... 61
7.3Limitations and Future Research ... 62
References ... 64
8. Appendix ... 75
8.1 Interview Guide ... 75
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Figure 2 - SPI Models 12
Figure 3 - The Data Process 16
Figure 4 - Data Centre Power Structure 17
Figure 5 - Energy Usage per Part 18
Figure 6 - Multi-Level-Perspective 23
Figure 7 - Alignment of Ongoing Processes in a Socio-Technical Regime 25
Figure 8 - Research Process 28
Figure 9 - The Collection & Analysis Process 29
Figure 10 - Data Centre Sample 32
Figure 11 - Interview Process 33
Figure 12 - Codification Tree 36
Figure 13 - System Boundaries for RQ2 38
Figure 14 - MLP of Cloud Computing 58
List of Tables
Table 1 - Investigated Data Collection 31
Table 2 - Summary of Interviews 33
Table 3 - Environmental Impact of the Case Company 41
Table 4 - Environmental Impacts of the Stock Exchange Industry 42 Table 5 - Environmental Impacts of Transitioning to Cloud Computing 43
Table 6 - Niche Innovation 45
Table 7 - Socio-Technical Regime 47
Table 8 - Socio-Technical Landscape 50
List of Equations
Equation 1 - Emissions per Cubic Meter Water 35
Equation 2 - Power Usage Effectiveness (PUE) 35
Equation 3 - Green Energy Coefficient (GEC) 35
Equation 4 - New Data Load 35
Equation 5 - New Total Emissions for Cloud Providers 35
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DC Data Centre
IaaS Infrastructure as a Service
ICT Information Communication Technology
LCA Life-cycle Assessment
MLP Multi-level perspective
On-Prem On-Premises
PaaS Platform as a Service
SaaS Software as a Service
SSE Sustainable Stock Exchange
ST Sustainability Transition
TT Technology Transition
Glossary
Multicast A communication method used to communicate data to multiple actors at the exact same time
Renewable Energy Certificates (REC)
A market-based instrument that gives the owner the right to use a defined amount of renewable energy. They are tradable instruments and can be bought and sold on the market.
Servitization The development of services instead of products is also defined as transitioning from a product-oriented business model to a service- oriented business model.
Sandbox A trial and error environment used to enhance development and innovation
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This thesis was performed on behalf of KTH Royal Institute of Technology at the Department of Sustainability and Industrial Dynamics, at the School of Industrial Engineering and Management in Stockholm, Sweden. This thesis was the last piece of the puzzle for our Master of Science degree, designed as a 30 credits course and was written during the spring semester of 2020. This thesis has been achieved with support from Nasdaq, Inc.
During our master thesis, we have had the opportunity to gain valuable knowledge in areas that need and will gain more attention in the future. Thanks to all dedicated people being part of this thesis. First of all, we would like to thank our supervisor at KTH, Dr Frauke Urban, thank you for the guidance, meetings, and feedback during this process. Secondly, we would like to express our appreciation to Magnus Haglind and Michael Rexestrand at Nasdaq for opening the door to Nasdaq and guiding us throughout the process. Thirdly, we would like to express our gratitude to all the people participating in interviews for taking the time and for sharing your knowledge and thoughts, thank you.
Lastly, we would like to thank the classmates that go under the group name of Lambda, life at university would not have been as fun without you, thank you.
Stockholm, June 2020
David Östlin and Nils Frisk Arfvidsson
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1. Introduction
This chapter presents an introduction to the thesis subject, which is to assess the environmental impact and investigate a transition to cloud computing, for a stock exchange. The research examines both quantitative data about environmental performance and qualitative data about conditions that enable or disable a cloud transition from a Multi-Level Perspective. This chapter will firstly present a background of the widespread industrial transition towards services. Then cloud computing is presented and specified towards stock exchanges. Thereafter, the sustainability transition of cloud computing in stock exchanges is problematised. Lastly, this chapter presents the research purpose, research questions, and the expected contribution and delimitations.
Background
In the year of 2020, the global climate agreement, known as the Paris Agreement, will be in effect and will bind all parties involved in the climate goals (Regeringskansliet, 2016a). To fulfil the agreed agenda, nations and companies need to adjust their emissions, evaluate and take actions in order to reduce their carbon footprint, and the time to do so is now (Rockström, 2019). Electricity and Heat production constitutes the largest emitter by sector on a global scale (IEA, 2020a) and the demand for electricity is expected to drastically increase in the coming years (IEA, 2019). One of the largest consumer of electricity is the Information and Communication Technology (ICT) industry with around 10 percent of the total electricity consumption globally, and it is expected to increase to 21 percent by 2030 (Andrae and Edler, 2015). The increase in the ICT industry does not only consume much electricity, but it enables people to have better living conditions and participate in the global economy. The least developed countries are increasing their usage of ICT, increasing the economic well-being and it has a significant impact on improving health conditions by health informatics, telemedicine and guidance via phone and reducing poverty by digital financial services (International Telecommunication Union, 2018). Therefore, the increase in ICT energy consumption should be considered as something good, just and necessary to achieve modern living standards. Yet, it becomes increasingly important to understand the environmental challenges with increasing electricity demand.
Many companies are transitioning from a product-oriented business model towards a service- based. Since the late 20th century, there has been a shift towards a service-based economy (Bellos and Ferguson, 2017). As a matter of fact, services constitute 65 percent of the global GDP (Worldbank, 2020). Today, people prefer streaming songs instead of buying records. The ICT industry has during the recent decade also seen a significant shift in their business models to enable the service economy with new emerging digital services, one of those is providing subscription-based services by leveraging the cloud infrastructure (Gartner, 2019). Cloud services or cloud computing provides the ability to access data, services, platforms, amongst other things, through the internet. It is usually provided as a service by a cloud operator that has large data centres (DC) to which it is possible to connect and access data. In other words, there is no need to possess servers physically, and it is common to only pay for the data that is used, just as a service (Microsoft Azure, 2020a). The use of cloud services has increased drastically during recent years and is expected to almost double from 2018 to 2022 (Gartner, 2019). Cloud
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computing has changed the way people work and collaborate and, also, how new solutions are introduced to the market (Balasooriya et al., 2016), and it is predicted that cloud computing will soon become a standard within IT solutions (Bajdor, 2016). Therefore, this rapidly increased demand for generated data has resulted in an increased demand for data storage, and thereby larger and more data service centres (International Data Corporation, 2017). As of today, data centres account for about 0.3 percent of global carbon emissions (Jones, 2018). As data usage and cloud services are expected to increase so drastically does the emissions for data centres, and data centres are predicted in 2030 to account for more than 2 percent of global emissions, the same amount as the aviation industry has today (Jones, 2018).
The shift towards a servitization of software, i.e. cloud services implies that companies do not have the same need to store data locally in private data centres and instead access their data and services through the cloud. This has led to the development of providing different cloud models with different service integrations where parts of the software are owned by the provider and delivered through the cloud, where customers either pay for what they use or through a subscription-based model (Garfinkel, 2018). Many industries have started the shift towards cloud-based solutions, and it has proven to have several benefits for corporations and the main reasons behind transitioning to cloud services are; to reduce cost, flexibility, to increase security better and faster reactiveness and fulfil customer demand (Bajdor, 2016; Schniederjans and Hales, 2016). Companies also state that the ability only to use the data/storage needed without investing heavily in their own infrastructure is a significant benefit of transitioning to a cloud computing service (Bhardwaj et al., 2010). Even though sustainability and environmental aspects have become the main drivers behind a business model transition (Whisnant, 2013), this is not one of the main aspects of a cloud transition (Bajdor, 2016), but should be, considering its major environmental benefits (Microsoft and WSP, 2018). To push a transition towards greener IT, the major cloud providers Google, Amazon, and Microsoft have committed to rather ambitious goals to become greener (Amazon Web Services, 2020; Google, 2020;
Smith, 2020). Google, for instance, has been carbon neutral for over a decade already, and Microsoft has stated they will be carbon negative by 2030.
The financial markets can be seen as one of the most critical industries to fight the current social structures enabling climate change (Regeringskansliet, 2016b). The stock exchange plays a central role in the financial sector and is the place where financial instruments are bought and sold (Harper, 2020). The stock exchanges have undergone several initiatives to start a sustainable transition; making certified emission reduction derivates and European emission allowances tradable, listing green bonds, and providing rating tools for Environmental, Social, and Governance (ESG). The Sustainable Stock Exchange (SSE), created by; the United Nations, the World Federation of Exchanges and the International organisation of Securities is an initiative that seeks to promote sustainable development within the industry (Sustainable Stock Exchanges Initiative, 2020). Even though the SSE provides a learning platform for stock exchanges with regards to sustainability-related activities, and the most considerable cooperations within the industry are promoting green transitions, the actual sustainability work by financial companies is lacking. Common knowledge seems to be applied, yet common practice is not. One way to reduce energy consumption and, evidentially, emissions are to optimise the usage of electricity. Little to no information exists about the level of servitization
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for digital tools within the stock exchanges and nor for the usage of cloud services for stock exchanges and how this can promote sustainability. As mentioned, cost savings and flexibility are something that could influence a stock exchange to transition from a traditional on-premises (On-prem) solution to a cloud-based Software as a Service (SaaS). However, there is limited research on the environmental impacts this transition would have for stock exchanges and how these implications could be a driver for a sustainable transition within the industry. With the shift towards cloud services, it becomes increasingly important to understand the environmental benefits this transition would have for stock exchanges.
Today, cloud computing is an adapted and well-functioning service with proven environmental benefits, and the term Green Cloud has been initiated to highlight the sustainability aspects of cloud computing (Balasooriya et al., 2016; Di Salvo et al., 2017; Radu, 2017). However, for wider adoption, it is essential to understand mechanisms on several levels to grasp its full environmental impact. For instance, WSP and Microsoft (2018) explain how the cloud can be 72 to 98 percent more carbon-efficient than traditional on-prem data centres by transforming to a renewable energy powered data centres, more operational and equipment efficiency and better data centre infrastructure efficiency. On the other hand, other studies show that environmental impacts are rarely a factor when companies decide to transition to cloud computing (Bajdor, 2016). Studies have found that the rapid increase in cloud computing driven by financial benefits has harmed the environmental aspect and increased carbon emission (Balasooriya et al., 2016). Therefore, it becomes increasingly important for corporations to consider the environmental impact and not only financial benefits when choosing their cloud provider. At the same time, it becomes as important to investigate this issue further to define what variables that determine the environmental impact. The future will include more data and more cloud computing; therefore, finding and understanding solutions that decrease the environmental impact of this cloud transition is necessary. It will also be important to understand what factors that could enable or disable a cloud transition, not only from a technical perspective but also from a macro and regime level. The Multi-Level Perspective (MLP) has been widely used by previous research to understand the dynamics of technology transitions (TT) and how they transpire from multiple levels, including niche innovations, socio-technical regimes and the socio-technical landscape (Geels, 2011, 2002).
Problem Formulation
The future will inevitably include more consumption of, and rely more on cloud computing. To encourage financial service companies, especially stock exchanges to make a cloud transition it is vital that all aspects are considered, and in order to make a sustainable transition, the environmental impacts need to be taken into account.
Cloud computing can enable a shift towards a more environmentally friendly digital industry, and even though the transition seems valid in theory, the transition includes several challenges.
As known today, studies have investigated the environmental impact of the cloud and found environmental benefits, mainly improvements in resource- and energy efficiency (Bajdor, 2016; Balasooriya et al., 2016; Di Salvo et al., 2017; Garg et al., 2013; Lykou et al., 2018;
Williams et al., 2014). However, the academic field is scarce and unexplored. Most literature does not include all necessary technical significant variables and excludes practicalities that
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might impact the environmental benefits (Bajdor, 2016; Balasooriya et al., 2016; Garg et al., 2013; Schniederjans and Hales, 2016). Research has neither been conducted in a way that contextualizes the environmental effects of a cloud transition by analysing the potential reduction of emissions with regards to a company's total environmental impact. Since the financial benefits often are explained from a relative point and motivate cloud transitions, environmental benefits must so too.
Since cloud services with its large-scale data centres are associated with high electricity consumption and resource usage, it is crucial to comprehend from where the electricity is produced since it will have a significant effect on the total environmental impact. In Sweden, there are beneficial conditions that allow sustainable transitions for digital companies. Sweden is one of the best digital adopters in the world (Worldbank, 2016), fourth in ICT adoption and fifth in innovation capacity (Schwab, 2019). Concerning financial markets and its possibility for green cloud adoption, Sweden has one of the most advanced financial systems in the world (ibid), and large companies have chosen to locate their data centres in Sweden due to its beneficial geography with natural cooling, advanced grid infrastructure (Business Sweden, 2018) and 98 percent fossil-free electricity production (IEA, 2020b). Apart from the technical benefits, Sweden is known for its focus on sustainability and ranks as the most sustainable country in the world (UNSDSN, 2019). Recently the Swedish government initiated a policy forcing the country to have net-zero greenhouse gas emission by 2045 (Ministry of the Environment and Energy, 2017), forcing national operating companies to adapt. However, policies like this, which only include national emissions and the beneficial electricity apparatus of Sweden, might not have any effect on the decision-making process when transitioning to technologies (cloud computing) not limited to national borders with environmental aspects often neglected. Due to these circumstances, the green cloud transition becomes highly complex even in countries with beneficial conditions for a sustainability transition (ST), and therefore needs additional research both in these countries and in others.
Previous research about green cloud computing and the environmental implication of a company’s transition has mostly analysed the technical aspects from a cloud providers perspective. Little research has investigated a sustainability cloud transition from a user standpoint seeking to understand what is allowing and forcing this transition to occur. Research has neither comprehended different views on such a transition, including a multi-level perspective (MLP). To fully understand the environmental implication of such a transition, it is crucial to consider a broader perspective and to understand how STs in one specific context are interlinked and affect the development in a different context (Geels, 2014). Furthermore, unlike previous research, this study aims to contextualize the findings and provide practical recommendations for stock exchange companies about how to cope with this sustainable transition.
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Purpose
The purpose of this thesis is twofold. Firstly, the thesis has the purpose of assessing the environmental impact of transitioning to cloud computing and understanding the conditions enabling or disabling this cloud transition. Secondly, the thesis aims to contextualize the results of a cloud transition by identifying the environmental impact of a stock exchange company, and what parts of the company that has the biggest environmental impact.
Research Questions
Based on the purpose and problem stated above the main research question is defined as:
What are the environmental impacts for a stock exchange when transitioning to cloud computing?
To be able to address the main research question, three sub-questions are formulated, defined as the research questions. The first research question seeks to find the main environmental drivers for a stock exchange company, this to contextualize the main research question.
RQ1: What are the main environmental impacts of a stock exchange company?
The second research question will quantitatively investigate the environmental impacts of a transition to cloud computing.
RQ2: How much can a stock exchange company reduce its environmental impact by transitioning to Cloud Computing?
The third research question aims to qualitatively answer what conditions that are applicable in this transition and whether they enable or disables a transition towards cloud computing.
RQ3: What conditions enables or disables a transition to cloud computing for stock exchanges?
Delimitations
The thesis intends to contribute to the understanding of the environmental impacts of stock exchanges and STs for cloud computing. The research is analysed in the context of the case company. For the environmental impacts of stock exchanges, this research is focusing on greenhouse gas emissions, water usage, and energy usage. The total footprint has been converted to a total CO2 equivalent. The reason for this limitation is to make the results practical and measurable.
For the environmental impacts of cloud computing, the research is limited to the found data and the chosen parameters to comprehend the environmental aspect are presented in section 4.5 data analysis. Besides, this thesis will only consider the operational environmental impacts of data centres and is only focusing on energy usage and the emissions of the data centres.
Regarding the cloud transition, the research focuses on the context which the stock exchanges are operating in: organisations and cloud transition in the business-to-business market.
Available data and calculations will be explained in the method chapter, and the system boundaries for the different research questions are defined and presented in section 4.6 Case
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Study and System Boundaries. Lastly, this research is not limited to any geography and can be generalised for other stock exchanges and other companies similar to the case company.
Disposition of Thesis
This thesis is divided into seven parts which follow the structure presented below.
Chapter 1. Introduction: This chapter introduces the research problem, including background information and a problem formulation. Later the research purpose and overarching- and sub- research questions are defined. Delimitations of the study and this disposition end the chapter.
Chapter 2. Literature Review: This chapter creates the theoretical foundation by outlining previous research in the field. The chapter begins with the financial service industry and its historical technology adoption. Then the lack of literature about the environmental impact of stock exchanges is problematised. The biggest portion of this chapter is about cloud computing, its principals, green cloud, and the environmental impact of cloud computing.
Chapter 3. Theoretical Framework: This chapter presents the theories used as analytical frameworks for our thesis. The frameworks presented are sustainability transitions and a profound presentation of the Multi-level perspective.
Chapter 4. Methodology: This chapter motivates and describe the methodology of the research. The selected research design, approach, and the process are presented, followed by the different methods used to collect and analyse data. The chapter ends with discussing the research quality and ethical considerations.
Chapter 5. Results & Analysis: This chapter presents the results from the data collection of the case study. Later the results of each research question are analysed with the applicable framework. RQ1 is first analysed then RQ2 and so on.
Chapter 6. Discussion: This chapter discusses the findings from the previous chapter in contrast to the literature, explains its implications and highlight the importance of the study.
Lastly, the chapter answers the main research question.
Chapter 7. Conclusions: This chapter concludes the study with key findings answering the research questions. Lastly, this chapter outline practical implications and empirical contributions and lastly recommend future research.
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2. Literature Review
This chapter presents a literature review creating the theoretical foundation of this study. First, financial services and technology adoption in that industry is explained. Then the environmental impact for stock exchanges is discussed. After that, a description of cloud computing is presented, and the term Green cloud. Lastly, the environmental implications of cloud computing are presented with both methods and performance variables for reducing the environmental impact of cloud computing.
2.1 Financial Services
Financial markets and financial services are crucial for the economic growth and well-being of our society, and they are promoting economic efficiency throughout the society as well as establishing the foundation of businesses (Matthews et al., 2013). Financial services include a large variety of industries including, insurance, banking, real estate, and stock markets, to mention a few (Asmundson, 2011). The financial service sector could be seen as intermediaries of services. They do not sell a physical product, or a good and a mortgage or security is not considered to be a product of the financial service company. Instead, they provide the service to obtain a mortgage or security (ibid). The financial market transfers risk from buyers and sellers and provide the service to shift funds between the various actors, and one of the major functions is to match buyers and sellers to act as the intermediary for transactions (Matthews et al., 2013).
The market for the trade of securities can be divided into primary and secondary markets. The primary market is when newly issued securities are sold, commonly with the assistance of an investment bank that underwrites (guarantees) the price for the securities, it is a way for corporations and companies to raise money. On the other hand, the secondary market is defined as the sale of securities between separate entities, meaning that securities have already been issued and are now being resold (Matthews et al., 2013). The secondary markets are more commonly associated with stock exchanges. However, the secondary market could also be divided into two categories. The first one, as mentioned, is stock exchanges and the second is called over-the-counter markets. One of the major advantages of stock exchanges, which this report will focus on, is that they make it easier and smoother to trade with securities and other financial instruments and thereby increasing liquidity (Matthews et al., 2013).
The financial service industry is highly complex, and funds flow through various entities in intricate patterns to help put the customer’s money in productive use. Due to the vital role, the financial service industry has in the society, and the trust and transparency needed to function correctly, it is a highly regulated industry (Asmundson, 2011). Governments and institutions need to oversee and licence financial service providers, and, in fact, the financial industry is one of the most regulated industries. Within the financial service industry, the stock exchanges are one of the most regulated segments. To provide an equal opportunity and fair investments, transparency and price discovery is of high importance (Asmundson, 2011). The demanding social structures, as well as a shift in customer behaviour, has driven the financial industry and stock markets to adapt and seek new technological advancements.
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2.1.1 Technology Adoption and Innovation for Stock Exchanges
As mentioned, the stock market or the stock exchange is a secondary market where buyers and sellers come together to transfer assets and funds (Matthews et al., 2013). The usage of organised markets to transfer funds and equities can be seen as early as in the Roman age where investors were seeking opportunities to invest their capital and take risks, and, in return, receive some form of dividends (Smith, 2004). However, the stock exchanges as we know them today with functions of price discovery and provision of liquidity started in the 17th century in Amsterdam. By then, buying physical shares of the Dutch East India Company in the marketplace were possible (Petram, 2011). The usage of stock exchanges has since then grown, and today some of the most well-known examples are the New York Stock Exchange (NYSE), Nasdaq, and the London Stock Exchange (LSE). Traditionally, the basis of these stock exchanges has worked as the first marketplace in Amsterdam, where people got together to exchange physical funds and securities. However, as technology advances, so does the financial industry and the stock exchanges. In 1971 the world’s first electronic exchange was introduced as the National Association of Securities Dealers Automated Quotations (NASDAQ). Since then the technology adoption within the industry has rapidly developed (Terrell, 2020), and the U.S. Securities and Exchange Commission (SEC) stated in 1997 that “As computing power has become exponentially more powerful and comparatively inexpensive, technology has transformed trading in secondary markets” (U.S. Securities and Exchange Commission, 1997).
Figure 1 visualise the development of the stock exchange.
Figure 1 - The Development of the Stock Exchange, based on (Smith, 2004)
The technology adoption within the financial sector has today moved beyond electronic exchanges and computerized trades towards new and more sophisticated technologies, like many other industries. The financial sector is exploring the adoption of new emerging technologies, some of them being Blockchain, Artificial Intelligence and Cloud Computing (Browne, 2019; Soleymani, 2016). Some studies examine the usage and implementation of cloud computing within the financial service sector as well as the potential benefits and challenges. The usage of cloud computing within the industry is still new, and the technology shows great potential, and more banks are considering transitioning to cloud computing services (Yan, 2017). The literature argues that this transition is necessary for banks to remain competitive and the financial service sector has shown to have progressed the furthest with regards to advanced cloud maturity (Columbus, 2018; Singh et al., 2018). Literature also finds that one of the major challenges for cloud adoption within the financial service sector is the security issues as well as the regulatory requirements, which is a broadly studied area (Mahalle
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et al., 2019; Misra and Doneria, 2018). Although the literature has examined the usage of cloud computing in both the financial service sector as well as the banking industry, there exists little to no research about the usage of cloud computing for stock exchanges. Just like the banking sector, stock exchanges are seeing greater adoption of new technology with one of them being cloud computing (Nasdaq, 2020). The importance and usage of data and services will significantly increase, and the industry has started a shift towards a service economy and the potential benefits of cloud computing to transform the industry is enormous (Nasdaq, 2020).
However, little research has been done on the actual implementation and what enables such a transition for stock exchanges. Even though parallels can be made with studies from the financial sector as well as the banking industry, it is of importance to understand what enables a cloud transition for stock exchanges.
2.1.2 Environmental Impact of Stock Exchanges
The attention about environmental impacts of stock exchanges has during recent years increased. Today, more and more stock exchange companies are publishing sustainability reports explaining both their current initiatives and future targets (Hong Kong Exchanges and Clearing Limited, 2019; Japan Exchange Group, Inc, 2019; London Stock Exchange Group, 2019; Nasdaq, 2018a; SIX Swiss Exchange Ltd, 2018). However, the main focus for financial services and stock exchanges is to encourage green finance and explain to other companies how to achieve sustainability and reduce their environmental impact without disclosing how they are performing themselves. The focus on green finance is understandable, considering the self- made emission within financial services versus the amount of emission it could affect and control outside company walls (European Commission, 2016). Nevertheless, perhaps the attention to put one’s own house in order has been undermined for too long. An excellent example of this is a report by the World Federation of Stock Exchanges and SSE initiative (2019) which has outlined a long and intense report explaining how stock exchanges can embed sustainability within their operations, without disclosing any information about how their member exchanges are doing today. The report stresses the importance to leverage existing sustainability management resources to identify and thereafter manage the environmental impact of their own operations.
A similar example as the one above, but more broadly studied is a report trying to explain the issues around quantifying greenhouse gas emissions in the financial sector (ADEME 2016), this without firstly explain the related emissions or usual emissions for companies for the financial services. European Commission and Piraeus Bank (2012) has created a similar report without disclosing any information about the significant emitting factors for financial services.
Van der Westhuizen and Young (2018) has conducted a study which investigates energy strategies for the financial service industry; however, this report also follows the pattern and do not start explaining what parts of the industry that are consuming energy.
As may have been understood from above, the academic contribution about the environmental impacts of financial services is lacking, and especially about stock exchanges. However, due to external pleasure from stakeholders' financial companies are starting to display their environmental-related data. For instance, the European Investment Bank Group (2018) outlined their carbon footprint and has displayed their major emitters which are mobility (76%), mainly
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air travel, and electricity and heat for offices (24%). Also, due to new sustainability reporting obligations in Sweden (Bolagsverket, 2019), major banks state their emissions and energy usage (Handelsbanken, 2019; Nordea, 2019; SEB, 2019). What is shown from these reports is that the major energy demand comes from buildings, electricity and heating, which also is the second biggest emitter after business travels. Problematic is that the electricity from the buildings is one major category which therefore hides important information about what is actually consuming the electricity in the building.
To be able to understand what is driving the energy demand for digital companies like stock exchanges, the closest field of research is the information and communication technology sector. The usage of ICT has, as previously discussed, increased during the recent years, and is expected to continue to increase during the coming years. However, studies do not agree upon what is the major emitters within this sector. One study shows that the manufacturing sector is the major contributor to emissions (Zhou et al., 2019). In contrast, other studies find that the data centres are by far the major source of emissions with a contribution of 45 percent, followed by communication networks which contribute with 24 percent of total industry emissions (Belkhir and Elmeligi, 2018; Malmodin et al., 2010). Regarding stock exchanges, perhaps the energy demand and the environmental impact is a combination of ICT and banks. Stock exchanges compute much data but also have the infrastructure as banks, and this must be explored to draw any conclusions.
2.2 Cloud Computing
In this subchapter, a description of could computing will be provided as well as what defines cloud and its different service models: IaaS, PaaS and SaaS. Furthermore, Green Cloud Computing and the environmental aspects of the cloud will be discussed.
2.2.1 Principles of Cloud Computing
Imagine that there is a physical server on a computer at home where family photos are stored.
Now imagine that the server is stored in a giant data centre, connected to the internet. Instead of plugging in the server to the computer physically, photos can be accessed by connecting through the internet. This is a simplified explanation of could services, and as defined by Microsoft Azure (2020), cloud computing can be described simply as a kind of computing service delivered through the internet. Users do not need to own or have servers to install software, store data or access platforms (Microsoft Azure, 2020a). A more detailed and specified definition is provided by the National Institute of Standards and Technology (NIST), who defines cloud computing as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction” (Mell and Grance, 2011, p. 3). They furthermore claim that there exist, four deployment models, three service models and five characteristics of cloud computing (ibid). The deployment models are categorised in: private-, community-, public- and hybrid cloud. The main difference between the models is for whom they are provisioned. As the names imply, the private cloud is provisioned for private usage, and the community cloud is provisioned for a community of organisations with the same interests, and the same goes for the public cloud which is provisioned for open usage. However,
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the hybrid cloud is a mix of two or more of the above-stated deployment models. The five characteristics are what defines a cloud service, meaning that in order to be defined as a cloud service, the service needs to possess the following characteristics (Mell and Grance, 2011;
Metz, 2010);
➢ On-demand Self Service
▫ The customer can handle the capabilities by themselves when they want to without requiring interaction with the service provider
➢ Broad Network Access
▫ The provided capabilities are accessed through a network, I.e. the internet, enabling remote access.
➢ Resource Pooling
▫ The resources possessed by the provider are pooled to enable more than one customer to access the service, creating a multi-tenancy.
➢ Rapid Elasticity
▫ The service should have the ability to respond to demand rapidly by providing scalability.
➢ Measured Service
▫ The usage of the cloud service is monitored, controlled and reported both for the provider and the user, increasing the transparency of the service.
Cloud computing relies, as mentioned, on data centres and as the usage of cloud computing increases, so does both the size and amount of data centres (Jones, 2018). To connect to cloud services, both the data centre and the user need to be connected to the internet and have sufficient electricity capacity. This makes cloud services highly reliable on other factors that most cloud providers are not able to affect. For some businesses, it is crucial that the data can be accessed at all times, and they demand zero downtime. For hospitals, it can be crucial to access a patient's medical file in a state of emergency, and the stock market operators have specific responsibilities to solve technical issues within a specific timeframe (Riksdagsförvaltningen, 2007). Therefore, prerequisites for cloud computing are a solid infrastructure with a reliable power grid and an internet connection, and customers need to depend on the cloud provider to solve these challenges and be dependent on a third party.
The service models defined by the NIST are often called SPI (Service, platform, infrastructure) models and are categorised by the cloud provider integration depth for each service. The different models are: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Figure 2 shows the fundamental differences between the service categorise where cloud integration goes from disarranged to fully integrated. Following the SPI models will be explained more in detail (Kavis, 2014; Mell and Grance, 2011; Microsoft Azure, 2020b; Rani and Ranjan, 2014).
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Figure 2 - SPI Models, based on (Thakur and Chaurasia, 2016)
IaaS is a service that provides computing infrastructures such as physical machines or virtual machines or storage media or hardware. Cloud infrastructure services are made of automated and highly scalable compute resources and can be seen as a self-service for accessing and monitoring ICT related activities in a way that allows clients to not deal with any hardware.
PaaS or cloud platform services enable clients to share platforms where software and resources can operate on. This service is something in-between IaaS and SaaS, where the cloud provider controls most components of the service like hardware and operating systems and network, while the client control and manages the application.
SaaS is when a consumer is provided the possibility to run applications, i.e. software on cloud infrastructure, meaning a fully functioning program can be accessed remotely through various clients (Mell and Grance, 2011). Examples of this solution are web-based email services, social media platforms or even ERP systems. Furthermore, the software is, as the name indicates, provided as a service, meaning that the underlying infrastructure and capabilities including hardware and software are usually set and not manageable by the customer with the exception from minor settings (ibid).
2.2.2 Cloud Computing for Stock Exchanges
As seen from previous sections, the stock exchange and financial services have been brave when implementing digital technologies. According to some, cloud computing may be the next big thing within digital technologies (Bajdor, 2016), but how has technology been adopted for stock exchanges? By this date, there is not literature investigating cloud computing for stock exchanges, nor its possibilities. However, even though limited, there have been studies that have investigated cloud computing within financial services companies. In 2011 Gill et al.
(2011) stated that financial services had shown significant interest in cloud computing, amongst
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other digital technologies. Yet, the study’s result stated that the leadership of financial services is more cautious about the cloud than other technologies, especially regarding IT security. With the knowledge about cloud today, the other guidelines and conclusions of the study were bland.
One part of the financial service is the banking industry, and Ghule et al. (2014) investigate the possibility of cloud computing in that industry. The study states, wildly optimistically, that cloud computing cloud affect the whole banking business and with revolutionary performance be able to empower automation and manage processes. They further state that agility will be the future of successful financial companies and that cloud computing is a way to gain that agility. Ghule et al. (2014) conclude that cloud offers flexibility, speed and real-time information which is a few of the most vital aspects of the future banking industry. Ghule et al.
(2014) includes most technical benefits of cloud computing but excludes managerial hurdles which are crucial to consider for technology adoption (Tidd and Bessant, 2018).
Gai (2014) investigates private cloud computing in financial Service and investigates suitable implementations and enablers of the cloud. Gai (2014) further states that the main enablers of cloud computing for financial service institutions are in the following order: cost flexibility, market adaptability, masked complexity, and scalability. The author also states that the main concerns of investing in cloud are cost, development time, and IT security. A more recent study done by Misra and Doneria (2018) also investigated the implementation of cloud computing by using a bank as the case company. According to Misra and Doneria (2018) banks are already implementing parts of the business and an incremental transition is the most beneficial where core business units remain on on-premises solutions whereas supporting services are transitioning up in the cloud. The study also concludes that the cloud transition is most often driven by economic and technological factors, but the success of the implementation depends on the change actor’s ability and leadership. In line with earlier research it is also concluded that data security and privacy concerns remain a fairly big issue for cloud computing. Mahalle et al. (2019) conducted an intense investigation about cloud computing related to data privacy and system security for the financial services industry. The study found that there are several security hurdles to overcome for cloud computing in the financial service industry and that cloud security remains a priority for financial institutions. Yet, in comparison to the above studies security is not a significant concern. Also, Hon and Millard (2018) expressed that data security and privacy for financial services are highly regulated and if regulations and laws agree upon cloud usage, it should to some extent be considers as safe.
Hon and Millard (2018) also investigate the drivers and barriers of cloud for financial services.
The authors found that the main drivers for transitioning to cloud are cost and innovation, desire to move away from legacy systems and consolidation, and customer needs. The study’s identified barriers for cloud are: misconceptions about cloud (lack of cloud computing knowledge within the company, loss of control) conservative organisational culture, laws and regulations, organisational structure and processes (structure of IT department and lack of transition incentives, skillsets, procurement processes and standard clauses) commercial and technical barriers (investments on existing data centres, authentication, data retention requirements). Interestingly, the difference in the number of barriers versus drivers are not just a few, and to some extent, this shed the light of the current perception about the cloud as a technology for the financial services (ibid). Despite the identified barriers, the authors
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emphasise that most banks are transitioning to cloud computing and are showing more willingness to drive the transition forward both internally as well as pressure regulators and lawmakers. However, the cloud providers need to enhance education for the financial industry as well as the regulators to a greater extent (Hon and Millard 2018).
Rad et al. (2017) investigated, in more general terms, the barriers and benefits of cloud adoption, independently of any specific industry. The authors identified the main barriers to be:
security, confidentiality and security. On the other hand, the main benefits of cloud computing were; scalability, resilience, flexibility and efficiency. These benefits were also identified by Avram (2014), who also found operation cost and reduction in investment cost to be the biggest drivers. As previously stated, security and data privacy are the main issues for cloud computing.
However, some have identified that vendor lock-in is a concern, which evidentially means that once a company is choosing a cloud provider, it may be challenging to move to another cloud provider (Avram, 2014; Sahandi et al., 2013). El-Gazzar et al. (2016) conducted a Delphi study, including interviews with 34 cloud computing experts in different domains with the purpose to investigate the adoption issues. That study found, like other articles, that security, legal and ethical issues are the most critical issues to address, but the strategy was also considered an important issue, mainly to maintain operation over the cloud.
In regard to what is stated above, it is evident that research has identified the benefits and barriers of cloud adoption. Yet, no research has proactively identified what is enabling or disabling the cloud transition, which could be beneficial for companies looking to adopt cloud.
Besides, research has mainly identified the significant issues and benefits in regard to the technology, but not as the technology in a certain context which might be beneficial.
2.2.3 Green Cloud Computing
The term Green Cloud computing could somewhat be self-explanatory and aims to the sustainable adoption of cloud services, minimising the environmental impact. Green cloud computing came about during 1987 after the realisation that IT consumes large amounts of energy which resulted in shortages in energy supply and contributes to climate change (Singh et al., 2015). Green cloud computing can be defined as the energy-efficient and environmentally friendly usage of computer resources, and the provisioning of cloud services with minimal environmental impact has led cloud providers to adopt the term Green Cloud (Balasooriya et al., 2016). According to researchers, green cloud computing has problems with both maintaining the minimal consumption of energy and at the same time, make the service reliable and economically efficient (Singh et al., 2015). Yet, according to others, cloud computing is both economically beneficial and reduces companies' carbon footprint, and also argues that environmental and economic performance correlate (Schniederjans and Hales, 2016).
Reduction in direct energy consumption which evidentially will reduce emissions are however aligned with sustainability and the green term (Uddin et al., 2015; Uddin and Rahman, 2012) therefore, cloud computing is according to most literature supporting the concept of green ICT.
However, it is crucial to stand critical. Singh et al. (2015) investigated the different research areas within the green cloud and identified 22 areas, which shows the broadness and complexity of the term. The same study identified that energy efficiency and power management were most often the objectives of research in the area, whereas the reduction of carbon emissions or
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sustaining natural resources was rarely studied. It might seem like the objective of the studies are to help companies reduce the electricity bills rather than reducing the environmental impact, i.e. going green.
Several researchers have been critical towards defining cloud computing as green since they state that cloud computing often increases the total environmental impact (Cramer, 2012;
Murugesan et al., 2013; Sharma et al., 2016). The same authors explain that green cloud only considers the direct emissions related to the activity which undermines the total impact. Also, Cramer (2012) emphasise that the ICT industry often neglects significant parts of the life cycle which results in a biased picture. To include all aspects when analysing the environmental impact of cloud computing, Di Salvo et al. (2017) emphasises the importance to either conduct an LCA, embodied energy analysis or analyse the difference in emergy (a term defining the total resources needed to develop a product or service, converted and expressed in energy). The same study conducted a full emergy analysis between on-prem and cloud computing solutions and found that cloud computing demands 45 percent less annual emergy than on-prem solutions and cloud demands 85 percent less emergy to store a byte (Di Salvo et al., 2017). Important to remember is how the same study concludes that even though cloud computing uses less emergy, research needs to include energy sources to consider it to be green or not.
Even though some research is critical towards the environmental benefits of cloud computing, most research shows that cloud computing in comparison to on-prem solutions are greener and often much greener (Basmadjian, 2019; Lykou et al., 2018; Shirzad Talatappeh and Lakzi, 2019; Williams et al., 2014). However, as stated by many, it is crucial to locate data centres for cloud computing in places with beneficial conditions including both weather and geopolitics (Khosravi and Buyya, 2017; Wadhwa and Verma, 2014). Yet, when comparing environmentally aware cloud solutions including green data centres, it is rather clear that they outperform traditional on-prem solutions (Kaushal et al., 2019; Thakur and Chaurasia, 2016;
Wajid et al., 2016). Resorting to cloud computing has according to Steenhof et al. (2012) several environmental benefits including less wasted computing resources, flattening relative peak loads by serving several clients with different hourly peaks, and operating servers at optimal utilisation rates.
Often studies use different approaches when evaluating the environmental benefits of a cloud transition which for the practical users could result in confusion. The term green cloud or green IT is just a collective name of initiatives that seeks to reduce the environmental impact of ICT and nothing concrete.
2.2.4 Environmental Impact of Cloud Computing
Defining the total environmental impact of the cloud computing process could almost be considered as difficult to measure as to predict the weather. Even so, environmental investigations about cloud computing have been researched during the last years, and the significant emitters of cloud have been identified, and well-known environmental performance variables have been developed to measure the impact of cloud computing (Lykou et al., 2018).
Before explaining the different methods to reduce the environmental impact of cloud, it is vital to understand the operational processes. Williams et al. (2014) explain that cloud and traditional
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on-prem services follow a process of three stages, including a server, network transmission, and the end-user device, see Figure 3. For both on-prem and cloud, the end-user product will consume the same amount of energy for production and usage. For the network transmission, the cloud solution would probably demand more energy (ibid) but not that much more. Yet, both the end-user devices and the network transmissions will demand much less energy than on-prem and cloud data centres (Di Salvo et al., 2017; Lykou et al., 2018; Williams et al., 2014).
Figure 3 - The Data Process, based on (Williams et al. 2014)
2.2.5 Methods for Reducing the Environmental Impact of Cloud Computing
Di Salvo et al. (2017) investigates the total emergy consumption of cloud computing, it categorised the cloud process into seven major parts and 22 subcategories. The study shows that it is a big difference between the manufacturing of equipment and operations, where operations of the data centres constitute 98 percent of the total emergy budget for cloud computing and the same for on-prem. Included in the operation is both labour and electricity, where on-prem has much bigger emergy for its labour part. If excluding labour from the total emergy amount, the electricity of operations still constitutes 91 percent of the total emergy for cloud computing. Noted here is that the same article included a service scenario where services for hidden costs and additional R&D costs were included. However, this category includes major assumptions and misleading descriptions of how calculations were made and should, therefore, be neglected. In regards to LCA of emergy valuations, Belkhir and Elmeligi (2018) investigated the global footprint of the entire ICT industry and found that data centres will the year 2020 constitute 45 percent of the global footprint, and the communication networks will constitute 24 percent. Besides, the same article states that since data centres run 24 hours seven days a week, 365 days a year and have a rather long lifetime, the contribution of the production energy of the equipment could be neglected compared to the annual operational energy consumption (Belkhir and Elmeligi, 2018). This could be considered aligned with the findings from Di Salvo et al. (2017).
Due to the high energy demand of data centres, many initiatives have been developed. The EU Data Centre Code of Conduct is an initiative to reduce data centres energy consumption and environmental impact (European Commission and Joint Research Centre, 2018). This Code of Conduct suggests best practices and principals for technologies and methods for the different parts of the data centres. For instance, the conduct explains practices to improve data centre utilisation, management planning, to choose IT equipment and services, for cooling and power
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equipment and even for the building. Also, other initiatives have developed metrics to measure the sustainability of data centres (Energy Star, 2018; The Green Grid, 2010a). Academia is advocating much research on data centres and all its energy-demanding parts (Khosravi and Buyya, 2017).
Data Centres consists of several vital components, all of which demand big amounts of energy and have possibilities to be optimised and be greener (Di Salvo et al., 2017; Rong et al., 2016).
Figure 4 illustrates the different parts of the data centre facility (Lykou et al., 2018).
Figure 4 - Data Centre Power Structure (Lykou et al., 2018)
According to research conducted by Rong et al., (2016), the major energy consumers of a data centre are the cooling system and the servers, 40 percent respectively. Figure 5 shows the division between the components of a data centre; the total emergy is based on electricity consumption during operation of a cloud data centre (Di Salvo et al., 2017). Important to remember is how Figure 5 explains the division of electricity consumption and not emissions or total energy. Also, some studies state that cooling often constitutes 40 percent or more of the total energy consumption (Dayarathna et al., 2016; Ni and Bai, 2017; Zhang et al., 2014).
However, both these studies are more optimistic towards the potential cooling optimisation that may have and states that cooling can be reduced with 44 and 29 percent, respectively. Both articles state the importance of both has advanced techniques but also beneficial outdoor conditions. Rong et al. (2016) explain how just choosing a reasonable site for the data centres can reduce energy consumption with 15 percent, this since the outdoor climate can benefit indoor cooling. In regards to cooling techniques, Ebrahimi et al. (2014) investigates the best possible waste heat reuse techniques for data centres and found that absorption cooling and organic Rankine cycle are the most promising. Also, Zhang et al. (2014) investigate free cooling systems and found that the hear pipe system is best in regards to efficiency and capacity.
