2020
Environmental
Sustainability
ReportA Year of Action

Overview

Carbon

Water

Waste

Ecosystems

Appendix

2

Contents
Overview

Carbon negative

Water positive

Zero waste

Ecosystems

Appendix

Foreword

4

Our approach14

Our approach32

Our approach45

Our approach58

A – Commitments

70

How we work5

Getting to carbon negative

17

Getting to water positive

35

Getting to zero waste

48

60

A – Partnerships

71

Our seven principles

517

Driving innovation: Digital
tools for circularity

51

61

72

Replenishing water

37

Enabling systems change

53

73

7

19

B – Our environmental data

Putting sustainability into
practice

Reducing Scope 3
emissions

Driving innovation: Building
the Planetary Computer

A – How we report

6

Reducing our water
footprint

35

Defining focus areas

Reducing Scope 1 and 2
emissions

Taking responsibility for ourland footprint

Key learnings

55

C – Materiality

82

21

37

63

Removing carbon

Improving access to water

Enabling systems change

What’s next?

56

D – Governance

85

22

38

67

Driving innovation: Digital
tools for carbon reduction

Driving innovation:
Digitizing water

Key learnings
What’s next?

68

E – Policy

91
95

24

40

F – Assurance

Enabling systems change

Enabling systems change

Key learnings

29

Key learnings

42

What’s next?

30

What’s next?

432021 Outlook

82020 Progress

11

About this report

12

Links throughout the document
to further information
Link to web pages
Link to downloads
Find out more elsewherein this document

Carbon negative

Water positive

Zero waste

Ecosystems

metric tons of carbon
removal procured

water replenishment
projects funded to datemetric tons of waste diverted
from landfills

petabytes of environmental
data now available

1.3M 2060K

10For the best experience, we recommend
using the free software Adobe Reader,or iBooks if viewing on an Apple mobile
device. Interactive functionality may belimited when viewed in a web browser.
This report is part of the Microsoft CSR
and sustainability reporting suite. Accessall our reports at:
Find out
more here

Overview

Carbon

Water

Waste

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Appendix3

XxxxxxOverview

Contents
Foreword

4

How we work5

Our seven principles

5

Defining focus areas

6

Putting sustainability
into practice72021 Outlook

82020 Progress

11

About this report12Overview

Carbon

Water

Waste

Ecosystems

Appendix4

Foreword

Letter from
Brad Smith
In January 2020 we announced
a bold commitment and detailed
plan to be carbon negativeby 2030 and to remove fromthe environment all the carbon
the company emitted since its
founding by 2050.

Over the past year, we built on this pledge byannouncing a series of commitments to be water
positive by 2030, zero waste by 2030, and to protect
ecosystems by developing a Planetary Computer.
When we set out on our carbon negative journey ayear ago, we knew the climate crisis was urgent andrequired immediate attention. No one had yet realizedthat the world would be facing a global pandemic andlong-term shutdown just a few months later. Over the
past year, we’ve addressed both. COVID-19 is the crisisof the year, addressing climate change is the crisis of
the decade.
We grounded our sustainability strategy andcommitments in the belief that technology can help
solve the world’s biggest challenges. We began byasking three simple questions:

1. Are we doing enough?
The answer was simple: No. Microsoft has focusedon sustainability for more than a decade, and we areproud of our achievements. But those of us who canafford to move faster and go further should do so.
Using technology, we can do just that, including
minimizing the environmental impact of our own
operations and ensuring the resilience of ourinfrastructure to climate change. Importantly, we can
extend beyond our walls to help build the broader
solutions the world requires.

2. Can we make a difference?
We believe that by focusing on all the ways we can drivechange, we can make an outsized impact on climatechange. We, and other organizations that are serious
about an environmentally sustainable future, need topull all levers of influence we have—our operations andas a customer, supplier, investor, employer, policy
advocate, and partner in innovation to customers,organizations, and institutions around the world.

“We believe that byfocusing on all the ways
we can drive change, we
can make an outsized
impact on climate change.
We, and other organizations
who are serious about
an environmentally
sustainable future,need to pull all leversof influence we have.”
Brad Smith, President

2050

Microsoft will remove fromthe environment all the
carbon the company has
emitted since its foundingby 2050.

Microsoft can’t solve the world’s environmental
challenges alone, but we can play a significant role indriving a broader societal transformation if we use ourpositions of influence and our technologies to effectively
bring others along with us on our sustainability journey.

3. What should we do?
This is what we focused most on in 2020. It requiredbuilding a new sustainability vision and strategy for
Microsoft through a series of industry-leading
commitments to be a carbon negative, water positive,
zero waste company by 2030, and to develop a new
Planetary Computer to better monitor, model,
and manage the world’s ecosystems. We’re making abold bet to address climate change and the world
will need to too. To help do that, we want tobecome the world’s leading technology providerof sustainable solutions.

2020 Report
In Microsoft’s first annual sustainability report,
we look back at how and why we made ourcommitments, details about them,
progress to date, and key lessons wehave learned. We intend to not only
share our successes, but also share
our challenges. That is why, in eachsection, we’ve also included
additional information and resources
to help others accelerate theirprogress towards a prosperous, just,and environmentally stable future.

Brad Smith, President

Overview

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Appendix

5

How we work

Taking aprincipledapproach
Whenever Microsoft takes on a newand complex societal issue, we strive
first to learn and then to define aprincipled approach to guide ourefforts. In 2020, we did the samewith environmental sustainability.

Our seven principles

3

1

Investing in
new solutions
and technology.

Grounding in scienceand math.

2
Taking responsibility
for our footprint.

4
Empowering
customers andpartners aroundthe world.

5

7

Ensuring effective
transparency.

Enlisting our
employees.

6
Using our voice on
climate-related public
policy issues.

Overview

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Water

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Appendix

6

How we work (continued)

nt

Eco
sy

o

Ca
rb

4

on

programs

a
W

st
e

at
W

er

Through technology adoption by customers
and partners, we can drive positive impact
across the globe, accelerated by ourinvestments, engagement in policy, andcommitment to innovation.

ms
e
t
s

yees
plo
em
n,

While we start with our operations, our strategy
expands beyond our four walls by ensuring thosechanges also benefit the communities in which
we operate and flow into our product strategy.

C

We focus on four areas—carbon, water, waste,
and ecosystems—where we can scale by minimizing
the negative impacts of our operations andmaximizing the positive impacts of our technology.

ion, investments, policy, c
t
a
v
o
olle
ctiv
: inn
d
l
r
ea
o
cti
W
e
on
h
T
partners: technology
d
n
, en
rs a
ab
e
lem
m
o
n
u
i
t
t
i
m
e
s
m
,
e
o
supp
us
ns, c
l
y
o
i
ch
rat
ai
e
p

Mic
ros
of
t:

Defining focus areas

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Appendix

7

How we work (continued)
Driving global impact

Putting sustainability into practice

We support each of our four focus areas with five strategic pillars. They are:

Prod
uc
ts

Op
er

s
ion
t
a

We will develop new technology andservices driven by data, AI, and digitaltechnology to power environmental
sustainability.

Ca
r

n
bo

ers

Employees

We will use our voice on climate-related
public policy issues. We will support new
public policy initiatives to accelerate
carbon, water, waste, and ecosystems
opportunities.

Employees
We recognize that our employees are themost important asset and resource inadvancing innovation and will create newopportunities for them to contribute toour efforts.

st
e

an

d

icy

a
W

PolicylPo

We will help our customers and partners
around the world reduce their carbon,
water, waste, and land footprints throughour learnings, technology, and services.

pa
rtn

Customers and partners

ers
m
o
t
Cus

te
r

Products and services

s
m
e
t
s

ices
erv
ds
an

We will take responsibility for our carbon,
water, waste, and land footprints acrossthe way our products and facilities are
sourced, manufactured, operated, andmanaged at end-of-life, including our
supply chain.

EcosyOperationsaW

We also have programs that extend across all fivepillars to drive global impact, including investment
and climate science.
Climate Innovation Fund (CIF)
CIF will invest $1 billion over four years to help scale up
existing climate technologies and invest in newtechnologies that currently don’t exist or are too niche
for broad adoption. This work also supports Microsoft
sustainability commitments in carbon, water, waste, andecosystems. As we consider investments, we prioritize
those that:• Provide measurable climate impact in our four areasof focus.
• Bring additional capital to underfunded markets
where the capital need for climate solutions is not
being met.
• Ensure developing economies and underserved
communities benefit from climate solutions.
• Align to Microsoft’s core business and thatof our customers.
Find out
more here

AI for Earth
We believe that there is a massive opportunity for thetechnology sector to improve the way we manage theEarth’s natural resources. In 2017, we launched
Microsoft’s AI for Earth program to put cloud and AI
technology into the hands of the world’s leading
ecologists and conservation technologists, andorganizations around the world that are working toprotect our planet. The program increases access to
AI technologies through grants, provides education
on cloud and AI to increase collaboration throughour community, and fuels innovation through researchand strategic partnerships. So far, we’ve empoweredover 700 organizations in more than 100 countries
around the world working on game-changing
environmental innovations.
Find out
more here

Sustainability science
Our sustainability work is guided by science. We believethat overcoming society’s biggest sustainability
challenges will require working at the intersection oftechnology and the natural and social sciences. We havea growing team of sustainability scientists working withresearchers, businesses, governments, and non-profit
organizations around the world to help Microsoft, itscustomers and partners, and the world to build a moreenvironmentally sustainable future. This involves creating
new knowledge and tools that enable improved
management of environmental resources and mitigationof risks from local to global scales.

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Appendix

82021 Outlook

A lookahead from
Lucas Joppa
This must be a decade of ambition
paired with action. At Microsoft,
we appreciate the urgency,
responsibility, risks, andopportunities ahead.

For Microsoft to do well, we need the world to do well.
This belief is why our mission is to empower every
person on the planet to achieve more, and why our CEO,Satya Nadella, stated, “the purpose of a corporation is
to find profitable solutions to problems of people andthe planet.“
Unfortunately, 2020 brought an array of new challenges
to this already complex work. COVID-19 has devastatedhuman lives in every corner of the globe, while climatechange caused unprecedented environmental andeconomic damages.

“Addressing“Addressing six enabling
conditions will ultimately
dictate the success or failureof the sustainability agenda
this decade—for Microsoft
and the world.”
Dr. Lucas Joppa, Chief Environmental Officer

While vaccines are becoming available as a solution for
COVID-19, solutions for climate change will require
deploying a host of different tools to combat the many
drivers of climate change. For the survival of people andour planet, this is a battle we can’t afford to lose.
This will require the dedication of individuals, organizations,and governments, all focused on stabilizing Earth’s climate
and properly managing its natural resources.
We have a limited amount of time to accomplish what
will be the most significant behavioral and technologicalsocietal transformation in modern human history. By
2030, society must be well on its way to mitigating andadapting to rapidly changing climates, ensuring resilient
water supplies, reducing the amount of waste we
generate, and reversing the ongoing and catastrophic
degradation of ecosystems while halting the extinctionof species.
That is why this must be a decade of ambition pairedwith action.
At Microsoft we appreciate the urgency, responsibility,
risks, and opportunities ahead. That is why a little overa year ago we began a process to transform ourcompany’s work on sustainability to better align with thescope, scale, and speed of the world’s environmental
challenges and yet-to-be created solutions.

2030

By 2030, Microsoft willremove more carbon than itemits. By 2050, we will remove
all historical emissions.

Six enabling conditions
As we worked to set and implement ourcommitments to become carbon negative, water
positive, and zero waste and to deploy a PlanetaryComputer, some of these global challenges came into
sharp focus. There is a suite of enabling conditions
that must exist for Microsoft and the world toeffectively and efficiently achieve a more sustainable
and just future.
The enabling conditions that we must address inside
Microsoft are clear—broadening and strengthening
our governance and accountability frameworks whilebuilding a culture of sustainability investment andinnovation. But it will be the creation of six enabling
conditions outside Microsoft that will ultimately
dictate success or failure of the sustainability agenda.
Resolving or improving these conditions will ensure acoherent, coordinated, cost-efficient approach toindividual and collective action on climate change.
Risk recognition
Without a holistic assessment of risk, it isdifficult for companies to efficiently
manage their sustainability challenges.
Unfortunately, the scale and societal
interdependencies of climate risk makea comprehensive assessment difficult.
While many important efforts areunderway, there is not yet an exhaustive
framework for risk assessment
for businesses.
By 2030, a widely adopted andcomprehensive risk framework willneed to be in place to ensure every
business can fully integrate environmental
risk at the core of their corporate
governance process.

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92021 Outlook (continued)
Standards settingStandards and globally accepted definitions drive
efficiency, clarity, and interoperability. For corporate
sustainability commitments to be meaningful, we mustensure that everyone is working from the sametaxonomy. Without standards we won’t be able tocompare one company’s net-zero commitment to any
other, and more time will be spent trying to assess
whether a commitment is meaningful than will be in
making meaningful progress on sustainability. If we can’t
do basic math on carbon numbers from different sources
because they were created using different methods, then
how will we be able to track progress on emissions
reductions and carbon removal, or incentivize suppliers
or customers to improve their impact? Solving thismeans that society needs to make rapid advances onagreeable sustainability standards.
Companies are used to coming together within a sector
to collectively advance industry standards. By well before
2030, we must be operating in a world where companies
have come together across sectors to agree on common
sustainability units and methods of measurement.
Data digitization
Organizations’ sustainability data systems are often
analog, siloed, and one-off—if they exist at all. Digitalmonitoring and recording systems of carbon emissions,water consumption, waste generation, and ecosystem
health at an operational and planetary level will be thefoundation upon which the private sector will ensuretransparency, meaningfully inform policy advances,and unleash the creativity of markets to help build
new solutions.
By 2030, we must be operating in a world where digitizedand standardized sustainability data are the platformthat allows society to stitch together the incredible
dimensionality of the sustainability landscape fromthe bottom up, and analyze them from the top down.

More needs to happen

By 2030, we must progress on the six enabling conditions:

1.
Risk
recognition

2.
Standards
setting3.
Datadigitization

4.
Innovation
investment

5.
Marketmaturation

6.
Policyprogression

A widely adopted andcomprehensive risk
framework will need to
be in place to ensure
every business integrates
environmental risk at
the core of theircorporation’s corporate
governance process.

By well before 2030, wemust be operating in aworld where companies
have come together acrosssectors to agree oncommon sustainability
units and methods ofmeasurement acrosscarbon, water, and waste.

Digitized sustainability
data must become aplatform that allows
society to stitch together
the dimensionality of thesustainability landscapefrom the bottom up, andanalyze them from the
top down.

Most climate investments
will need to fit within awell-structured andaccepted framework thataligns investment vehicles
along an appropriate
risk-tolerance spectrum,targeted on the mostimpactful areas.

Carbon offset andremoval, water
replenishment, andecosystem service
markets can supply
greater and growing
demand, transparently
and with standard
insurance guarantees.

A globally coordinatedpolicy regime should be inplace that limits emissions
in line with a 1.5ºC future,
while respecting politicalsovereignty and thecross-boundary nature of
the Earth΄s life support
systems, and does so witha focus on the need toequitably share theseresources across culturesand communities.

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102021 Outlook (continued)
Innovation investment
Not all solutions to our sustainability challenges areavailable today, and those that are available are often
early-stage, too expensive, or don’t currently scale. Thereis already a large and growing amount of capital starting
to flow into the climate and sustainability markets to help
with these issues, but little agreement on the frameworkthat should guide these investments. This splinters thesolutions market, makes it difficult to understandinvestment gaps, and disempowers investors to quantify
both financial and environmental returns on investment.
Attracting the amount of capital required and deploying
it optimally means that by 2030, most climate
investments will need to fit within a well-structured andaccepted climate investment framework that places thelarge constellation of investment vehicles along anappropriate risk-tolerance spectrum while thoughtfullytargeting the most impactful areas of innovation.
Market maturation
Meeting the world’s sustainability goals will require theprocurement of new solutions, particularly in areas likecarbon reduction and removal, and water replenishment,
at levels many orders of magnitude greater than they
exist today. If these markets don’t mature rapidly, they
will be overwhelmed by the demand that will be placedon them in the coming years. Current sustainability
markets, such as those for avoided emissions offsets orcarbon removal credits, are opaque and poorly
understood by many current customers and most future
ones. Standard contracting templates, aggregating
demand through buyers’ alliances, and wellcommunicated pricing and delivery are all advances thatwill mature these markets and ready them for theonslaught of demand that will occur in the final years of
this decade and beyond.

By 2030, we must be operating in a world where carbon
offset and removal, water replenishment, and ecosystemservice markets can supply demand many orders ofmagnitude greater than today and do so withtransactional transparency and standard insurance andindemnification guarantees.
Policy progression
Policy action is the ultimate enabling condition to movethe world beyond the voluntary action of a few
corporations, and into a world where this work is
required of all organizations. We’ve seen a tremendous
amount of corporate action in the past several years.
Yet still only around 5 percent of the world’s largest
companies represented by the Global Fortune 500 havepledged to become net zero. We cannot depend on theleaders to bring up the laggards—that is what
government action must do.
By 2030, we need to be operating under acomprehensive and globally coordinated policy regime
that limits emissions in line with a 1.5ºC future, andholistically monitors and manages humanity΄s deposits
and withdrawals from the natural systems that support
our species. This must be done in a way that respects thepolitical sovereignty of nations around the world but
respects the cross-boundary nature of the Earth΄s life
support systems, and the need to equitably share theseresources across cultures and communities.

We will act in accordancewith what we think needs
to be done today to create
the world we need to be
operating in by 2030.
We are more convinced
than ever that Microsoft,and the rest of the world,
is up to the task.

The coming years of action
As you will see in the pages of this report, we have begun
work on all six enabling conditions. Sometimes ouractions may seem counterintuitive, and sometimes wewill be wrong. But over the next decade, our mentality
will stay the same—we will act in accordance with what
we think needs to be done today to create the world weneed to be operating in by 2030.
When we announced our carbon negative commitmenta year ago, we likened it to a moonshot—a grand goalthat will require exceptional organizational focus, anintegration of innovation from multiple sectors, and a
can’t-fail mentality. We know the work is monumental,
for all of the reasons outlined previously.
If the past 12 months of the COVID-19 pandemic andvaccine development have taught us anything, it is areminder that the human species is capable oftremendous scientific and technological innovation
when faced with a crisis. Our climate crisis may beplaying out more slowly than COVID-19 has, but thepotential impact on the global economy, livelihoods,
and human health is the same—and so, too, must be
the scale and speed of our response.
As we enter 2021, we are more convinced than ever that
Microsoft, and the rest of the world, is up to the task. We
are committed to playing our part and look forward toworking with all of you to help accelerate the world’s
transition to a more economically and environmentally
sustainable future for us all.

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112020 Progress
In 2020, we announced our four commitments thatwill guide our sustainability work for the next decade.
While we have much to do, we have already begun
to see progress.

Carbonnegativeby 2030

Water positiveby 2030

Zero waste
by 2030

Ecosystems

700+
Grew the AI for Earth
grantee community
to over 700 grantees inover 100 countries.

Build thePlanetaryComputer$30M
Zero waste

Invested $30 million in
Closed Loop Partners’
funds to help build a
circular economy.

Water positive

Carbon negative$10M 500MW
Invested $10 million in
the Emerald Technology
Ventures’ Global Water
Impact Fund to support
innovative technologies
for water conservation,access, and quality.

PPA with Sol Systems will
advance clean energy andenvironmental justice.

Zero waste

60K

In FY20, diverted over
60 000 metric tons ofwaste from landfills.

Secured 1.3 million
metric tons of carbon
removal via projects
from RFP process
for FY21.

Over 10,500 employees
engaged in Ecochallenges
to reduce personal
waste footprints.

$129M 10PB

Carbon negative

Carbon negative

Zero waste

Carbon negative

Water positive

Carbon negative

Water positive

Top suppliers reduced
their collective footprintby 21 million metric tons
CO2e as reported by CDP.

Delivered first tool toprovide CO2 transparency
for cloud via the Microsoft
Sustainability Calculator.

Achieved Zero Waste
Certification of datacentersin Dublin, Ireland andBoydton, Virginia.

Reduced emissions acrossall scopes by 586,683
metric tons CO2e in FY20.

Launched water
accessibility work toprovide 1.5 million people
access to safe drinking
water and sanitation.

All suppliers must reporttheir GHG emissions
through updated Supplier
Code of Conduct.

To date, funded nearly
20 replenishment
projects in six states
and two countries.

Carbon negative

Zero waste

1.3M 10,500

21M First

Ecosystems

Carbon, water, and waste

Invested $129 million across funds
and organizations innovating in
carbon reduction, water management,
and circular economy.

Zero 586,683

On-boarded 10 petabytes ofenvironmental and Earth observation
data to Azure that is now freely available
for the conservation community.

Zero waste

90%

Circular Centers, piloted
this year, can contribute toincreased reuse of servers
by 90 per cent by 2025.

Water positive

7X

Increased ourreplenishment project
portfolio by nearly 700
percent from FY19.

1.5M 100% 20

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12

How we report

About thisreportWe believe in transparency
and accountability. This reportis one way we will deliver onthese principles, which is why
we have shared our progressand challenges, as well as ourenvironmental data, which
was reviewed by a third party.
We intend to have additional
key portions of the report
reviewed by a third party by
our next annual report. This ispart of a multi-year effort toprovide leading transparency,
visibility and reliability in our
non-financial reporting.

How to read this report

The report structure follows our four areas of commitment, across carbon, water, waste, and ecosystems,with each as a chapter. Within each chapter, you will find sub-sections outlining the work we’ve done thisyear and where we are headed in the coming years across our pillars:

OurapproachGetting togoal

Drivinginnovation

An explanation of
why this is a focus area,
what our commitments
are, and a selectionof accomplishments.

Aligned to ouroperational and employee
pillars. An in-depth lookat our operational
roadmap and approachto reduce, replace, or
remove our footprint, as
well as employee andcommunity engagement.

Aligned to our customer
and product pillars. An
in-depth look at the latest
innovations fromMicrosoft to help ourcustomers and partners
reduce their footprints
in carbon, water, waste,
and ecosystems.

Enabling
systemschangeKey learnings
and what’s
next

Aligned to our policy andinvestment pillars, as wellas partnerships andresearch and development.

A candid look at what
we’ve learned in our firstyear and what is coming
next in each program.

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CarbonCarbon

Water

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Ecosystems

Carbonnegative

Appendix

13“While“
While the world willneed to reach net zero,
those of us who can afford
to move faster and go
further should do so.
That’s why Microsoft isworking to reduce andultimately remove ourcarbon footprint.”
Brad Smith, President

Contents
Our approach

14

Getting to carbon negative

17

Reducing Scope 1 and 2
emissions17

Reducing Scope 3
emissions19

Removing carbon

21

Driving innovation: Digital
tools for carbon reduction

22

Enabling systems change

24

Key learnings

29

What’s next?

30

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14

Our approach

Overview

The context
The science is clear—to avert the worst effects of therapidly changing climate, the world needs to transition
to a net zero carbon emissions economy by 2050.
To reach net zero emissions, the world must prioritize
making deep emissions reductions across all sectors,
thereby cutting carbon emissions by half over the next
10 years. In addition, to account for hard-to-abate
emissions sources, we must invest in reliable techniques
for permanently removing carbon.
Microsoft has operated carbon neutral since 2012.
Like many companies, our neutrality commitment relied
on investing in offsets that paid others to not emit
carbon, instead of removing carbon dioxide.
The science, and the social and economic impacts ofclimate change, drove our conclusion that carbon
neutral alone is not enough—leading to our carbon
negative commitment in 2020.

By 2030, we will be carbon negative,
and by 2050, we will remove from theatmosphere all the carbon dioxide
we have emitted since we were
founded in 1975.

Find out
more here

2030

Our progress to dateBy 2030, Microsoft willremove more carbon
than it emits.

Net Zero$50 million

1.3 million

Launched the Microsoft Sustainability
Calculator to provide transparency on
carbon to customers.

Became a founding memberof Transform to Net Zero.

Secured 1.3 million metric tons ofcarbon removal for FY21 from projects
via RFP.

Scope 3Extended internal carbon fee
to include Scope 3 emissions.

Microsoft received certification from the Science Based Target
Initiative (SBTi) for our carbon goals and targets in 2019.

Updated our Supplier Codeof Conduct to require a greenhousegas emission disclosure.

Invested $50 million in Energy
Impact Partners.

Named to the CDP A List for Climate
Change in 2020.

586,683

Reduced emissions across all scopesby 586,683 metric tons of CO2e in FY20.

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15

Our approach (continued)

Our carbon
commitments

Empowering customers
and partners
We will help our suppliers, customers,
and partners around the world reduce
their carbon footprints through ourlearnings and with the power of data,
AI, and digital technology.

In January 2020, Microsoft
CEO Satya Nadella, President
Brad Smith, and Chief
Financial Officer Amy Hoodannounced a new ambitious
goal and plan for Microsoft tobe carbon negative by 2030.
Nearly eliminating directemissions

Using our voice on carbonrelated public policy issues

We will reduce our Scope 1 and 2
emissions to near zero by the middleof the decade, through energy
efficiency work and reaching 100
percent renewable energy by 2025.

We will support new public policy
initiatives to accelerate carbon
reduction and removal opportunities.

Becoming carbon negative

Removing carbon

By 2030, Microsoft will be carbon
negative, and by 2050, we will remove
from the atmosphere all the carbon
dioxide our company has emitted either
directly or by our electricity consumption
since we were founded in 1975.

By 2030, Microsoft will remove morecarbon than it emits. By 2050, we΄llremove all our historical emissions.

Investing in the future
Reducing value chain
emissions
By 2030, we will reduce our Scope 3
emissions by more than half.

We have created a $1 billion Climate
Innovation Fund to accelerate theglobal development of carbon
reduction and removal technologies,
as well as related climate solutions.

We will help our suppliers,
customers, and partners
around the world reduce
their carbon footprints
through our learnings andwith the power of data, AI,and digital technology.

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Our approach (continued)

14M

Microsoft’s definitionsof carbon neutral andcarbon negative:

12M

Carbon neutral

Table 1
Table 1

Microsoft´s pathway to carbon negative by 2030
Microsoft´s pathway to carbon negative by 20301

1

A company is said to be carbon neutral
by reducing their emissions and/or
paying others to not emit an equivalent
to their remaining emissions.

Metric tons CO2e

10M
8M
6M
4M

Carbon negative

2M

A company is carbon negative when
it removes more carbon than it emits
each year. Our definition is that carbon
negative must be even bolder than net
zero—making deep reductions firstand foremost, then using removal only
for the residual footprint, and going
beyond that to cover even more.

0
-2M
-4M
-6M
1975

1980

1985

Net carbon emissions (after carbon removal)

1990

1995

 Microsoft and its supply chain carbon emissions

Microsoftemissions
emissions(Scopes(Scopes
1,3)
2, 3)
Microsoft
1, 2,
14M

Metric tons CO2e

12M
10M
8M
6M
4M
2M
0
FY17
 Scope 2

FY18
 Scope 3

FY19

FY20

Scope 2 and 3 emissions included in this chart are market-based.

2005

2010

 Microsoft operational carbon emissions

1

Table22
Table

 Scope 1

2000

2015

2020

 Avoided emissions offsets

2025

2030

 Carbon removal

Chart has been updated to reflect latest actual values which incorporate latest methodology and structural change adjustments.
Historic and projected emissions driven by latest actual data have also been updated for consistency. Projected removal values
have also been updated consistent with our latest projected emissions and procurement strategy.

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17

Carbon negative

Getting
to carbon
negative
Our strategy includes reducing
our Scope 1 and 2 emissions tonear zero by the middle of thisdecade, reducing our Scope 3
emissions by more than half by2030, and removing morecarbon than we emit.

Scopes explained
Scope 1

Direct emissions createdby your activities

This is the exhaust that comes from thevehicles on your campus, natural gas that yourbuildings directly consume, and the generators
you might run.

Scope 2

Indirect emissions fromthe production of theelectricity or heat you use
This type of emission comes from the traditionalenergy sources that power your office buildings
or your home.

Scope 3

Indirect emissions from allother activities in whichyou΄re engaged
These emission sources can be extensive.
They cover all parts of your supply chain, frommaterials in buildings, business travel for yourteam, and product lifecycle all the way to theelectricity your customers consume.
This is the largest category of all the different
emission scopes and poses one of the largest
areas for improvement.

Reducing Scope 1 and 2 emissions
We are driving down Scope 1 and 2 emissions to nearzero by the middle of this decade, focusing on our direct
and indirect emissions from our facilities and datacentersthrough the following methods:
Zero carbon power and diesel-free generation
We are working to scale up our consumption of zerocarbon energy in our campuses and datacenters.
• Our Puget Sound campus has been powered by zerocarbon Washington hydropower since 2019, and now,with our Puget Sound Campus Modernization project,
we’re going a step further and eliminating the use offossil fuels for all daily operations, including the useof natural gas in our kitchens.
• We will eliminate our dependency on diesel fuel atour datacenters by 2030. Cloud providers around theworld rely on diesel-powered generators for backup
power to support continuous datacenter operations.
We will shift to low-carbon standby power systems
including battery storage, and low-carbon fuel such ashydrogen, building on a successful test in 2020 usinghydrogen fuel cells as backup power for datacenters.
Zero carbon transport
We will electrify our global campus operations vehicle
fleet, over 1,800 vehicles, by 2030. This work encompasses
every vehicle that supports our office locations around theworld. With many vehicle types, ownership structures, andregional market variations, we have begun developing a
10 year execution strategy that will demonstrate market
demand for zero carbon transportation and interweave
technology to enable our goals.
Improving operational efficiency in buildings
Since 2012, we’ve deployed an energy smart buildings(ESB) solution that has reduced energy consumption andcosts by 6 to 10 percent at Puget Sound, Las Colinas,
Beijing, Shanghai, Fargo, Charlotte, Silicon Valley,

and Dublin campuses and sites. ESB, in addition toenergy optimization programs and modern workplacesolutions, has enabled us to reduce our energy
consumption globally by almost 25 percent since 2012,
while growing our building portfolio.
With new campuses, we will pursue LEED Platinum
certification. These projects demonstrate highperformance designs through innovations such as allelectric central plants, thermal energy storage, geothermal
wells, operable windows, mass timber construction, andembodied carbon reduction via material selection.
Improving energy efficiency in datacenters
We use a familiar industry calculation, power usage
effectiveness, to measure and improve efficiency, while
also evaluating new innovations and initiatives that wecan pilot on our own datacenters.
In 2018, a report showed significant energy and carbon
emissions reduction potential from the Microsoft cloud
when compared with on-premises datacenters. Thesegains, as much as 93 percent more energy-efficientand as high as 98 percent more carbon-efficient, aredue to Microsoft’s extensive investments in IT efficiency
from from chips to datacenter infrastructure, as well as
renewable energy.
We also prioritize supporting local communities in which
we operate datacenters with programs to reduce local
air pollution, improve air quality, and cut carbon
emissions. Projects include initiatives that enable theshift to clean, affordable, renewable energy and thattransform the grid towards a low-carbon future, suchas distributed renewables installations, community
ground mount systems, localized clean energy plans,
and renewable energy education.
Find out
more here

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Carbon negative (continued)
Moving to 100% renewable energy
By 2025, we will reach our 100 percent renewable energy
goal by purchasing enough renewable energy to match ourelectricity consumption at our datacenters, buildings, andcampuses worldwide. We are well on our way to reaching
this goal, as we began purchasing renewable energy via
long-term power purchase agreements (PPAs) in 2013, andhave steadily signed more deals in subsequent years,
purchasing renewable energy across three continents.
Our approach to renewable energy has two core tenets:
regional impact and additionality. We have focused onregional matching to operations, because where andhow you buy matters—the closer the new wind or solar
farm is to your datacenter, the more likely it is those zerocarbon electrons are powering it. Microsoft, as a result, issometimes a market driver, striking the first or the largest
corporate PPAs in a state or region that was notpreviously viewed as a good market for renewables. We
also focus on additionality, using our capital to fund new
projects that may not succeed without our investment.
We utilize on-site energy when it makes sense. For
example, we currently power 25 percent of our Silicon
Valley campus from on-site photovoltaic panels.
Our efforts go well beyond procurement because werecognize that simply adding more renewables isinsufficient. We are innovating ways to enable utilities toon-board increasing amounts of renewables in an
effective and efficient way, so more people can benefit
from renewable energy, including the following:
24/7 renewable energy matching solutions
In 2020, we launched a new 24/7 matching solution with
Swedish energy company Vattenfall—a first-of-its-kindapproach that allows an hourly-matched supply of 100
percent renewable energy. Microsoft Azure IoT gives
renewable energy suppliers, like Vattenfall, real-timedata on their renewable energy and energy storage

assets, as well as their customers’ consumption, to supply
them with continuous renewable energy. Azure IoT
solutions also allow users to adjust their business
operations to better fit the availability of renewables,
monetizing their energy flexibility and decreasing theircarbon footprint. This solution is being used at our
Swedish offices and, in the third quarter of 2020, we
announced that our new datacenter region in Sweden will
also rely on the solution—which is now available tocustomers throughout the country via Vattenfall.
Piloting distributed generation
We believe distributed energy generation has a key roleto play in the transition to a zero-carbon grid. In 2020,
Microsoft launched a new project to pilot this work. We
partnered with SSE Airtricity, Ireland’s largest provider of
100 percent renewable energy and a part of SSE Group,
to install and manage a large number of internetconnected solar panels, which are connected via Azure
IoT to Microsoft Azure. Software tools then aggregate
and analyze real-time data on energy generated by thesolar panels, allowing optimization and reduction of the
carbon footprint of electricity grids globally.
Grid-interactive energy storage batteries
Microsoft has successfully piloted, in partnership with
Eaton and PJM Interconnection, grid-interactive energy
storage batteries in Virginia and Chicago. Utilizing
Eaton’s EnergyAware technology, we used a battery thattypically sits in our datacenter as a backup system,
hooked it up to the grid to receive signals about when to
take in power, when to store it, and when to discharge tosupport stability, grid balancing, and integration ofrenewable energy. With thousands of batteries as part ofour backup power systems, this pilot demonstrates thepotential to rapidly scale storage solutions, allowing
datacenters to support grid stability, furthering thepenetration of renewable energy. Following the
successful pilots, we are investigating the suitability offurther deployment at new projects in other geographies.

We support local
communities in which
we operate datacenterswith programs to reduce
local air pollution, improve
air quality, and cut
carbon emissions.

Supporting climate equity and environmental justice
We recognize that climate and environmental issues don’t
affect every community in the same way and that we needto address environmental equity as a broader issue. In fact,
those most affected by climate change are those who havecontributed the least to climate change. Renewable energy
procurement can help address these inequities.
In June 2020, we announced our largest power PPA todate with this in mind. Our 500MW PPA with Sol Systems
is a first-of-its-kind initiative, tying the purchasing of
renewable energy to environmental justice and equity inunder-resourced communities. This partnership:• Prioritizes projects in under-resourced communities,
working with local leaders and prioritizing minority
and women-owned businesses.
• Provides at least $50 million for community-led grants
and investments that support educational programs,
job and career training, and programs that support
access to clean energy and energy efficiency.
• Ensures that community benefits are realized withaccountability measures, including using third-party
evaluators to quantify and document social andenvironmental outcomes of the initiative.
Outside of the US, we are also using our procurement insupport of climate equity. In the third quarter of 2020,
Microsoft purchased the first-ever Peace REC (P-REC), issued
by Energy Peace Partners from Congolese solar developer
Nuru’s newly commissioned 1.3MW commercial solar-plusstorage project in Goma, Democratic Republic of the Congo.
The purchase helped Nuru install and operate 35 mini-gridconnected streetlights in the Ndosho neighborhood of Goma.

In our datacenters, we’re measuring and improving efficiency.

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Carbon negative (continued)
Reducing Scope 3 emissions

Scope 38.9%

We are reducing our Scope 3 emissions by more thanhalf by 2030. While we do not have direct control overthe majority of emissions in the Scope 3 category, they
represent the bulk of our emissions and we are
addressing them in our carbon negative commitmentby the following methods:

Our Scope 3 carbon
emissions related todevices was reduced
by 8.9 percent (-524K
mtCO2e) from a 2017base year.

Improving supplier emissions data tracking
In 2020, as reported to us by CDP, our top suppliers
reduced their collective carbon footprint by 21 million
metric tons of carbon dioxide equivalents (CO2e).
Our Devices team built an Audit Management Systemusing Microsoft Power BI to embed compliance andsustainability into our business. Now, we can track
performance and enable continuous supply chain
improvements by tracking supplier maturity in socialand environmental accountability.
Improving supplier emissions reporting
In 2020, we updated our Supplier Code of Conduct tonow require a greenhouse gas emission disclosure. Thisis a first step to increase transparency and enable us towork collaboratively with our suppliers to help reduce
their emissions.
In 2021, this data will become an explicit aspect of our
procurement processes for our supply chain, including
informing buying decisions. We will continue working
with our suppliers to on-board them to our new
approach and ensure compliance.

Further improving energy efficiency ofdevices and software
In our devices and software, we are continuing to
reduce carbon emissions and environmental impact
from design to manufacturing. For further information
see the Devices Sustainability Report.
Surface
The Surface Pro X uses less power than the Surface Pro 6,
while providing similar high performance. Estimatedtotal energy consumption for the Surface Pro X is 13.1
kWh/year, compared with 18.2 kWh/year for the Surface
Pro 6, equivalent to a 28 percent reduction.
Xbox
Xbox recently added Regulatory Standby Plus (RS+) as a
new power mode. At a high level, RS+ will provide thepower savings and environmental benefits of RS with thebenefits of keeping the user’s OS and content up to date.
This can reduce power from 15W to less than 2W during
standby mode.
Windows
In May 2020, we launched the Windows Software
Sustainability Initiative. It aims to reduce the carbon
footprint of Windows software and will establish a setof best practices for energy-efficient Windows app
development. We will build on this in FY21, aiming to
reduce the energy consumption of the top 20 most-used
Windows experiences, which together represent 90
percent of active Windows energy usage.

Extending the carbon fee to Scope 3 emissions
We established our internal carbon fee in 2012 to fundour carbon neutrality commitment. In 2019, we raised
the fee to $15 per ton, which we charged to eachbusiness group across Microsoft based on their Scope 1
and 2 carbon emissions and business air travel.
In 2020, we expanded the fee to cover each businessgroup’s Scope 3 emissions. While we’ve initially set the
fee at a lower rate for Scope 3, it will ramp up over time
until there is one single fee across our entire emissions
portfolio. We are already seeing results, with accelerated
investments in the energy efficiency of our softwareand hardware.

Find out
more here

Above left: Surface Pro X
Above: XboxOverview

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Carbon negative (continued)
Reducing embodied carbon
In our 500-acre Puget Sound Campus Modernization
project, we are partnering with industry leaders to pilot
and fund a new tool, the Embodied Carbon inConstruction Calculator (EC3). EC3 enables data-driven
decisions in selecting carbon smart building materials
while highlighting which materials have the greatest
capacity for impact on the project—so we can prioritize
investments accordingly.
In our modernization project, we set a 30 percent
reduction target for embodied carbon. The commitment
to using EC3 via third-party verified environmental
product declarations (EPDs) led to the first manufacturespecific and product-specific EPDs for precast concretein the US. Based on our lessons learned, we are
expanding the use of the EC3 tool to our datacenters andother new campuses to reduce embodied carbon.

Shifting to virtual events
We began shifting events to a virtual format using Teams
with our 2019 shareholder meeting. With virtual events
becoming the norm due to COVID-19, we held all our2020 events virtually, including flagship events like Build,
Ignite, and Inspire as well as smaller regional andbusiness group events. We relied on Teams, finding
new ways to operate seamlessly and collaboratively—
and are beginning to calculate the carbon benefits ofthis approach.

For example, Microsoft’s multiple-day MVP Global
Summit event in March 2020 was migrated to a
virtual format on Teams. The Summit included over
2,000 attendees from around the world. By hosting
the event virtually as compared to in-person, the carbon
emissions were estimated to be lowered by nearly 5,000
metric tons. This is equivalent to removing roughly
390,000 cars from the road for one day, which is morethan the number of cars crossing the George Washington
Bridge per day, or the amount of carbon absorbed over 10
years by planting nearly 150 acres of forest, which is overhalf the size of Central Park. In 2021, we intend to shareadditional information on the carbon emissions impactsof our larger events, such as Build, and on remote work.

Reducing carbon from travel with SAF
When employees do travel, we want to use our travel
dollars wisely and in support of greener options,
including sustainable aviation fuel (SAF).
In October 2020, Microsoft announced a partnershipwith Alaska Airlines and SkyNRG to supply an amount of
SAF that will cover Microsoft employees’ travel on threefrequently traveled Alaska routes—between Seattle and
San Francisco, San Jose, and Los Angeles. The SAF,
supplied by SkyNRG and produced from waste oil, is one
way for the aviation industry to reduce carbon emissions
on a lifecycle basis. It is also a way for us to reduce theemissions associated with our business travel in Scope 3.
This first-of-its-kind partnership in the US is a modelother companies can use to reduce their employees’
carbon emissions associated with business travel.
Our partnership with Alaska builds on our commitment
to more sustainable air travel that we started in October
2019 via a partnership with KLM, where we committed
to purchase the SAF equivalent to all flights taken by
Microsoft between the US and the Netherlands on KLM
and Delta Airlines.

Rethinking travel
For the past several years, we’ve encouraged employees
to rely more on Microsoft Teams and less on travel towork with their colleagues and customers. In 2020, prior
to COVID-19, we began empowering employees withmore information and new choices, including
TripTrackerLite, which delivers personal travel statistics
including carbon impact from travel. We worked with
our travel partner, Concur, to provide the estimatedcarbon emissions of flights and help employees
compare the carbon costs, as well as financial costs,of their travel options.

We’ve encouraged employees to rely more on Teams and less on airline travel.

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Carbon negative (continued)

1.3M
metrictons

Removing carbon
In 2018, the Intergovernmental Panel on Climate Change(IPCC) special report on 1.5°C found that reducing
emissions by transitioning to zero-carbon energy, avoiding
deforestation, and increasing energy efficiency will be vital,
but insufficient, to prevent the level of warming rising tounsafe levels. Carbon removal—the process of extracting
carbon dioxide from the atmosphere and storing it innature and deep in the Earth—will be crucial to achieving
our climate goals. Microsoft’s commitment to becomecarbon negative will require us to purchase an increasing
amount of carbon removal.

of carbon removal
contracted for in 2020,
exceeding our goal of
1M metric tons.

Meeting our goal will require the market to evolve—
offering many more, better-quality carbon removal
services at increasingly affordable rates. We intend to use
our procurement of carbon removal to drive demand forhigh-quality carbon removal methods through ourcriteria, projects, and market innovations.

Our initial portfolio focused on nature-based solutions.

Results of the first carbon removal RFP
In July 2020, we issued a request for proposal (RFP)
to source carbon removal from a range of solutions.
Our initial portfolio focused on nature-based climate
solutions due to pricing and availability. We will shift toa blend of nature and technology-based solutions as
they become more viable. Our portfolio includes:

In 2020, we launched our removal program, with a goal
to contract for the removal of 1 million metric tons ofcarbon dioxide from the environment.
We began with establishing key principles and defining
our scope. We also enlisted the support of third-party
scientific and market advisors, including NGO Winrock
International and the advisory firm CarbonDirect, toinform our procurement strategy.

• Reforestation projects in Peru, Mississippi, Nicaragua,
and India.

Carbon removal will be crucial to achieving our climate goals.

• Improved forestry projects in the US.
• Soil carbon removal projects in the US and Australia.

Carbon removal solutions

Carbon removal principles
Net
negativity

Scientificverification

Avoidanceof harm

Other
considerations** Consideration of scalability, affordability, climate equity, geographic location, and technology innovation.

Afforestation
andreforestation* (BECCS).

Soil carbon
sequestration• Biochar projects in Europe and Australia.
Bioenergy
with carbon
capture andstorage*

Direct air
capture(DAC)• Engineered solutions such as direct air capture and biooil sequestration.
Beyond the projects we supported, our RFP process
brought us a new level of insight about quality andvolume on the market today. We need far clearer
standards for carbon removal durability and reversal
risk, and we need collective buying and investment toaccelerate and scale this nascent market.

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22

Driving innovation

Digital tools
for carbon
reduction
We believe that Microsoft’s
most important contribution tocarbon reduction will come notfrom our own work alone, but by
helping our customers, partners,
and suppliers reduce their carbon
footprints through our learnings
and with the power of data, AI,and digital technology.

Microsoft Sustainability Calculator
We have introduced the Microsoft Sustainability
Calculator, which provides our customers withtransparency into their carbon emissions resulting
from their cloud usage, making Microsoft the only
cloud provider to provide full transparency tocustomers across all three scopes of emissions. Using
AI and advanced analytics, the Sustainability
Calculator shows reduction trends for customer cloudusage over time, providing the ability to forecast
cloud emissions and simplify carbon reporting. It uses
consistent and accurate carbon accounting toquantify the impact of Microsoft cloud services oncustomers’ environmental footprint and can compile
the information into reports for voluntary or statutory
reporting requirements.
Find out
more here

10K

Over 10,000 users of EC3tool, hosted on Azure,
to improve transparencyof carbon emissions inbuilding materials.

Helping our customers, partners, and suppliers around theworld reduce their carbon footprints.

Embodied Carbon in Construction
Calculator (EC3)
Launched in November 2019 and hosted on Azure, thefree EC3 tool reveals the embodied carbon in materials
so architects, engineers, and contractors can makeinformed choices, selecting materials with the lowest
climate impact.
There are now over 10,000 users of the EC3 tool. It
received the World Green Building Council΄s Chair΄sAward on Global Green Building Entrepreneurship in2020 and has a global database of carbon data foralmost 5,000 individual building products across major
material categories.
Find out
more here

Microsoft Sustainability Calculator.

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Driving innovation (continued)

40%

Enabling customers and partners
across industries

Advancing the energy transition
BP and Microsoft have formed a strategic partnershipto further digital transformation in energy systems andadvance the net zero carbon goals of each company. In
2020, the companies signed an agreement to co-explore
co-innovation opportunities across several key areas ofdecarbonization that are important for our journey aswell as for the world. We are currently focused on IoT,
AI, and cloud solutions that are intended to advancesmart and clean cities, clean energy parks, andconsumer energy.
Supporting technology-backed geological carbon
sequestration
In the last quarter of 2020, Microsoft signed amemorandum of understanding (MOU) to explore ways
to support the Northern Lights carbon dioxide transportand storage project. It is a joint effort of the Norwegian
government and energy firms Equinor, Shell, and Total
that chains together technologies developed for theenergy industry across decades, using them in new
ways to provide for the effective transportation, receipt,
and permanent storage of carbon in a reservoir in
Norway’s North Sea. As part of the MOU, Microsoft
and Northern Lights partners will explore opportunities
to integrate digital expertise, supporting the work to
standardize and scale carbon capture across Europe
and use the transport and storage facilities as partof Microsoft’s climate ambitions.

In the US, buildings
account for 40 percent
of overall energy
consumption.

Enabling new energy efficiencies
A robust partner ecosystem, relying on Azure, isaccelerating Microsoft’s impact on carbon reduction.
ABB energizes the transformation of society andindustry to achieve a more productive, sustainable
future. The IoT cloud platform for ABB Ability solutions isbased on Azure. Honeywell is using Azure in Honeywell
Forge, its Enterprise Performance Management softwarethat integrates with Microsoft Dynamics 365, enabling
predictive maintenance applications to improve
performance and energy efficiency across enterpriseenvironments. Johnson Controls and Microsoft
expanded their partnership in December 2020 with a
new collaboration to digitally transform how buildings
and spaces are conceived, built, and managed to deliver
energy optimization among other benefits. Together with
Microsoft Azure, Schneider Electric’s EcoStruxure digitalsolutions empower all to make the most of our energy
and resources, bridging progress and sustainability.
You can learn more about these and otherpartner solutions at:
Find out
more here

IoT and AI can improvebuilding efficiency.

Providing growers with insights to lower GHGs
Cloud Agronomics uses remote-sensing technology andAI, leading a new wave of proactive analytics to lower
greenhouse gas emissions and spur sustainable foodproduction. They scan crops and soils using
hyperspectral imaging, generating lab-grade analysis
from the air. Then, within Azure, calibration and analysis
algorithms convert the data into insights. Through theircrop nutrient and soil carbon measurement products,
Cloud Agronomics is building one of the largest tagged
datasets for agriculture, removing verification as a key
barrier to scale and boost soil-based carbon offset
projects around the world.
Unlocking sustainable agriculture
Land O’Lakes, Inc. and Microsoft forged a new alliancein 2020, aimed at pioneering new innovations inagriculture. The work is already underway to build aconnected Digital Ag platform on Azure that brings
Land O’Lakes΄ portfolio of digital tools into astandardized architecture. In addition, the teams havebeen collaborating on the initial build of soil healthtechnologies that bring data from sensors and satellites
together with farmer behavior data to predict carbon
sequestration. These estimates, as well as information in
Truterra Insights Engine, can help reduce carbon for theplanet while turning a profit for farmers.

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Enabling systems change

Catalyzing
innovation andcollective action
We are focused on new ways toharness the power of technology,
partnerships, investments, and policy
to drive impact at scale and pace tohelp the world get to carbon zero.

1/8th

Research and development
Researchers at Microsoft are charged with inventing thefuture of Microsoft and addressing societal challenges.
With that mandate, teams around the globe aredeveloping new technology approaches aimed atproviding better performance than today’s state-of-theart, while also using energy and materials more
efficiently. Research ideas being explored include
radically different datacenter architectures, use of novel
materials and techniques to store and transport data,
and more computationally- and energy-efficient methods
for training and deriving predictions from AI models.

Project Natick evaluates
the benefits that
underwater datacenters
have on reliability,
efficiency, andsustainability.
Jonathan Banks.

Failure rate of undersea
servers comparedwith land-based
control group.

Datacenter systems
In July 2020, Project Natick retrieved its underwater
datacenter from the sea floor off Scotland’s Orkney
Islands. This project had previously demonstrated thefeasibility of undersea deployment. Its latest phaseevaluated practical concerns, with many promisinglearnings for environmental sustainability:• Servers failed at one-eighth the rate of a land-based
control group—prolonging the life of the computersand reducing the need for replacement components
and materials.
• Cold seawater can be used for cooling servers—
without detectable temperature impact a few meters
downstream, without tapping critical freshwater
resources, and with greater cooling efficiency than air.
• The datacenter ran reliably on a renewable energy grid
supplied 100 percent by wind, solar, and experimental
green energy technologies. It also provided an
attractive location for sea life—it was quickly colonizedby multiple species of fish and other sea life.

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Enabling systems change (continued)>60%

Datacenter storage
The demand for long-term data storage in the cloudis reaching unprecedented levels, and continues togrow into the zettabytes (tens of billions of gigabytes).
This reality demands step-change growth in storage
densities, material lifetimes, and large-scale storage
system architectures to avoid costs and environmental
impacts from vastly scaling up storage facilities withtoday’s technologies. Fundamentally new approaches
we are developing for archival storage include quartz
glass and synthetic DNA:
• Project Silica is capitalizing on recent discoveries inultrafast laser optics to store data in quartz glass byusing femtosecond lasers. In a 2019 proof of concept,
the project was able to store and retrieve the entire
Warner Bros. Superman movie on a piece of glass
roughly the size of a drink coaster (75 by 75 by 2 mm
thick). Now, researchers are working closely with our
Azure team to build a completely new storage systemfrom the ground up around this technology. This effort
opens up an exciting opportunity to completely
re-think traditional storage system design, and to
co-design the future hardware and software
infrastructure for the cloud.

DNA-based storage
could reduce GHG
emissions, energy, andwater consumption
by more than 60
percent each.

• Researchers at Microsoft and the University ofWashington are collaborating to advance long-term
storage of digital data in synthetic DNA, including
system architectures supporting random access andencoding schemes. DNA storage is attractive because
it is both extremely dense and long-lasting: it could
hold up to 1 exabyte of data (1 billion GB) per cubic
inch, with durability from hundreds to thousands ofyears. These features make it attractive for avoiding
construction, material (embedded carbon), operational(energy), and other environmental impacts of scaling
up use of existing technologies. Based on these
impacts, a recent lifecycle analysis estimated that
relative to archival storage on tape, DNA-basedstorage could reduce greenhouse gas emissions,energy, and water consumption by more than 60
percent each.

Researchers fromMicrosoft and University ofWashington in the wet lab,working on DNA data
storage experiments.
Dennis Wise/University of Washington.

Datacenter networking
Emerging workloads such as distributed machinelearning training and memory disaggregation will
require orders of magnitude higher bandwidth andlower latency than today’s applications. It will be very
hard to meet these demands with today’s electricalswitch-based infrastructure due to the fundamental
challenges in scaling electrical bandwidth in a cost andpower-effective way and in providing sub-microsecond
predictable latency at scale. Project Sirius is investigating
whether ultra-fast optical switching within datacenters
could allow us to sidestep these disruptions. It aims todevelop an all-optical, datacenter-wide network that iscompletely flat. By eliminating the inefficiencies ofhierarchy and using the strengths of optics, such a
network could provide better and more predictableperformance with higher reliability and at lower cost.
AI efficiency
The rise of data and AI means we must also pursue avariety of approaches to increase efficiency in AI
hardware and software. Azure AIOps is building on
AI systems research to make more efficient use ofcomputational resources in the cloud. Advances indeep learning research are reducing the computational
intensity of AI model training and inferencing. The
Weightless PARSEC algorithm efficiently identifies
high-performing deep neural network architectures,and in our tests, uses 100 times less computational costto achieve levels of accuracy similar to comparable
models. Platform-Aware Search enables similar
efficiencies at inference time, by accounting foradditional constraints such as latency or energy usage;
Factorized Neural Layers speed up training and inference
and enable reductions in model size with minimal impact
on performance.

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26

Enabling systems change (continued)
Climate Innovation FundOur Climate Innovation Fund is focused on accelerating
existing technology and investing in the innovationof new technologies to help Microsoft and the world
reach net zero emissions.
In the first year of our fund, we have made commitments
to carbon removal and carbon reduction technologies
across a range of sectors, including designing a carbon
removal project finance facility with direct air capture
pioneer Climeworks, to support its first-of-a-kindcommercial-scale, fully renewable carbon capture andmineralization plant, located in Iceland.

$50M

8 percent of global emissions, and low-GHG
innovations like CarbonCure can reduce the carbon
footprint of our built environment. Microsoft used theCarbonCure product in concrete mixes provided to our
LinkedIn Bay Area campus where our collective
low-carbon concrete strategies will keep
approximately 4.8 million pounds of carbon out of theatmosphere, a 30 percent reduction in business as
usual. We see CarbonCure as a technology solution
to decarbonize our global construction activities, aswell as a market enabler for productive use of
captured carbon.

investment in Energy
Impact Partners΄ global
investment coalition,
focused on newtechnologies.

• Aclima, a climate technology company with apioneering approach to mapping hyperlocal air
pollution and greenhouse gases block by block. Theirtechnology supports data-driven environmental
decisions with consideration for climate equity.

We are seeding the global economy’s future portfolioof climate solutions with early stage investments such as:• $50 million in Energy Impact Partners’ (EIP) global
investment coalition, a leading private equity platform
focused on new technologies enabling the transition
to cleaner, more resilient, and more inclusive energy
and transportation ecosystems, two sectors that
account for most greenhouse gas emissions. EIP
follows a uniquely collaborative impact investment
model by partnering with over 30 of the world’s
largest, most innovative, and environmentallyconscious corporate firms as highly engaged,
strategic investors.

Our portfolio to date includes a mix of fund partnerships
and direct investments. Each commitment represents a
key ingredient in the technology roadmap to net zero.
In particular, our investments target inflection points intechnology development and deployment where capitalis scarce, and investment can make an outsized impact
on growth prospects and early adoption.

• CarbonCure, a low-GHG concrete technology
company, in a round with Amazon and BreakthroughEnergy Ventures. Cement accounts for approximately

Carbon removal and reduction will change all sectors of the economy.

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27

Enabling systems change (continued)
Transformational partnerships
Transform to Net Zero. Microsoft is a founding memberof Transform to Net Zero, launched in July 2020. This
small group of established leaders aims to demonstrateand enable the business transformation needed toachieve net zero emissions by 2050, in addition to driving
broader change with a focus on policy, innovation, andfinance. The initiative is led by A.P. Moeller – Maersk,
Danone, Mercedes-Benz AG, Microsoft, Natura & Co.,
Nike, Starbucks, Unilever, and Wipro, as well as theEnvironmental Defense Fund. It is supported by BSR,
which is serving as the secretariat.
The initiative intends to complete the outputs of thiswork by 2025. Already, the group has produced:
The Building Blocks for Net Zero Transformation.
PwC and Microsoft have created a blueprint to help
guide companies to embed net zero aspirations andactions within and across their business. Delivering on
net zero requires wholesale business transformation, andfunctions across the organization need to play a vitalrole. The guide includes good practices for net zerotransformation for stakeholders across a business.
Find out
more here

Pathways to Net Zero: A Guide for Business.
This report from EDF+Business, with analytical researchsupport from Deloitte Consulting and contributions fromTransform to Net Zero members including Microsoft,
provides specific recommendations for thetransportation and agriculture sectors, and for the retailand technology industries to begin and maintain apathway towards net zero. It includes a roadmap withdetailed action items that companies, industries, andsub-sectors can take today to accelerate net zeroprogress in their own operations, investments,
coordination, and advocacy.
Find out
more here

The Transform to Net Zerocoalition will focus on moving
beyond commitments tobusiness transformation by:• Sharing the business transformationeach company is undertaking.
• Delivering robust emission reductions
across the business and value chains.
• Working jointly with our partners
across supply chains.
• Innovating and investing at scale inproducts, services, and business models
that amplify impact.
• Engaging with policymakers to incentivize
progress toward net zero.
• Ensuring a just and sustainable transition.

Playing for the Planet. Our gaming business has
partnered with the United Nations Environment
Programme on the Playing for the Planet initiative. Its
goals are to reduce the impact of the gaming ecosystemon the environment through better carbon accounting
and educating gamers everywhere on sustainablecauses. For example, the Minecraft Build a Better World
Initiative delivers in-game content, ranging from theneed to protect and conserve, and matching funds tocharitable organizations focused on conservation.

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28

Enabling systems change (continued)
PolicyFuture climate-related risks would be reduced by the
upscaling and acceleration of far-reaching, multilevel,
and cross-sectoral climate mitigation and by bothincremental and transformational adaptation. Thoseefforts must be guided by policy that accelerates carbon
reduction and removal opportunities.
In past years, we have supported carbon pricing andclean energy policy efforts at the state and national levelin the US, through direct lobbying, engagement, andgroups such as the Climate Leadership Council, CERESBICEP Network, Advanced Energy Economy, Climate andClean Energy Solutions, and the Renewable Energy
Buyers Alliance.
In 2020, we committed to using our voice to speak out
on four public policy issues that we think can advancethe world’s carbon efforts:• Expanding global basic and applied research efforts
on carbon, funded by governments, and reorienting
them towards targeted outcomes and enhanced
cross-border collaboration to develop the
breakthrough technologies needed to achieve net
zero global emissions.
• Removing regulatory barriers to help catalyze
markets to enable carbon-reduction technologies
to scale quicker.
• Introducing market and pricing mechanisms
so people and businesses can make more informedcarbon purchasing decisions.
• Empowering consumers through transparency basedon universal standards to inform purchasers about the
carbon content of goods and services.

We have seen progress against the following
areas already:Clean energy
Microsoft advocated for several bills that would provide
a critical boost to research, development, anddeployment of clean energy and carbon reducing
technologies such as energy storage, direct air capture,and other carbon removal technologies, such as S. 2657,
the American Energy Innovation Act. Congress approveda package of these measures authorizing over $35 billion
in new climate R&D as part of the omnibus spending bill.
Distributed energy resources
Microsoft has been advocating for the Federal Energy
Regulatory Commission (FERC) to update its rules on
distributed energy resources (DERs) to participate inwholesale electricity markets, provide resiliency, andspeed up innovation en route to a zero-carbon grid. In
2020, FERC approved a historic final rule, Order 2222,
enabling DER aggregators to compete in all regionalorganized wholesale electric markets.
Carbon markets
In 2020, Virginia joined the Regional Greenhouse Gas
Initiative (RGGI) after ongoing advocacy and support byMicrosoft. RGGI is a multi-state cap-and-invest programin the Northeast and Mid-Atlantic US, and the revenue
generated through RGGI is reinvested into the states
through energy efficiency mechanisms and bill savings,
renewable energy markets, and other initiatives tobenefit the community and reduce emissions.
Carbon pricing
Microsoft was a lead member in the largest businessgathering on Capitol Hill to advocate for climate
legislation in over a decade, the Lawmaker Education &Advocacy Day (LEAD) in 2019. We followed up in 2020 tourge Congress to keep the focus on a green recovery
and investments in a net zero economy.

Microsoft has been
actively engaged in policy
efforts to advance clean
energy, well-functioning
carbon markets and carbon
pricing, reduction targets,
product transparency andmore in both the UnitedStates and Europe
throughout 2020.

In September 2020, Microsoft filed comments to support
FERC’s proposed carbon pricing policy and provided
input on how to incorporate state-determined carbon
prices in wholesale electricity markets.
GHG reduction
In Europe, we have used our voice in support of more
ambitious carbon reduction targets through the EU
Climate Law, for example by signing an open letter by
the Corporate Leaders Group Europe, calling on the
EU leaders to reduce GHG emissions by at least 55
percent by 2030, as a milestone towards the EU’s
2050 net zero goal.
Transparency on products
We advocated for increased transparency in reportingthe carbon footprint of products, services, andorganizations, through legislative initiatives as part of the
EU Green Deal. In 2020, we submitted comments to the
public consultations on the revision of the Non-Financial
Reporting Directive, Renewed Sustainable Finance
Strategy, and Green Claims to begin shaping legislative
proposals expected in 2021.
Efficiency of datacenters
Microsoft has been supporting the EU’s efforts to developa policy proposal on climate neutral datacenters. We also
helped commission a major think tank study on
datacenter energy efficiency issues for use in advocacy
efforts and are helping create dedicated trade association
projects in Brussels and Dublin to engage in the related
policy efforts.

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29

Key learnings

What we’ve
learnedHow to get started on carbon
in your organization

We need clearer standards, betteraccounting, and new ways tocontract to get to net zero—which
will require partnerships across
many carbon market stakeholders.

12

Concentration matters. Our current atmosphericconcentration of greenhouse gas emissions iscatastrophically high to keep the climate stable,
and far too dilute to make carbon easily
removable from the atmosphere. The worldmust build a carbon removal market on an
unprecedented scale and timeline, from nearly
scratch. This work will be incredibly hard,requiring integrity, public-private coordination,and heavy investment simultaneously.
Contracts are the building blocks of the newcarbon economy. Our bold carbon negative goal
was splashy—but the real work is in contracting,whether to decarbonize our supply chain or tofund net new carbon removal. Contracts today
do not include a price on carbon, or the cost ofgetting and keeping carbon out of theatmosphere—and they must. Passive purchasing
is not sufficient; we must also invest in marketmaking activities to boost supply of technologies
for carbon reduction and removal alike.

3

We need to raise the bar on standards. In ourJanuary 2020 event and accompanying blog post,
we focused on the need to get real on carbon
math. The methodologies for carbon accounting
are ambiguous and discretionary, which won’t
hold us collectively accountable on a path to
1.5°C. We need clearer protocols to ensure that
progress reported on the balance sheet is truly
progress in the real world. Meanwhile, theaccounting of carbon removal is far fromstraightforward. These much-needed market
improvements will require partnership among
many carbon market stakeholders.

Building Blocks
for Net Zero
Transformation:a how-to guide toestablishing a net zerostrategy, including
clarity on terminology
and carbon offset
engagements.
Find out
more here

Microsoft’s
Sustainability Guide: ashort guide and longer
playbook offer
companies guidanceon how to get started
in a technology-led
sustainabletransformation.
Find out
more here

Sustainability. Good
for Business. Executive
Playbook: part how-to
guide, part inspirationfrom real case studies,
the playbook offers allcompanies, particularly
those in Western
Europe, a way to begin
or accelerate their workon sustainability.
Find out
more here

Explainer Video –Carbon Math: get
smarter on thechallenge of carbon,
and why we need to bereal about carbon math.
Find out
more here

Carbon Negative by
2030: check out theannouncement of ourstrategy, featuring CEO
Satya Nadella, CFO
Amy Hood, andPresident Brad Smith.
Find out
more here

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Appendix30

What΄s next?

Our focus
for 2021

1

2
3

In 2021, we will continue to make progressagainst our carbon negative agenda, andregularly share results and learnings. We will scale
up our supply chain work, including deeper
engagement with top suppliers to reduce theircarbon emissions and collect carbon data fromthe activities they undertake in their business with
us. Also, given how frequently our supply chain
overlaps with those of our customers, we will
explore new ways of working together to obtainaccurate data, improve reporting, and support
our suppliers’ sustainable transformations.
Another key area of growth is in technologybased carbon removal options, as we begin to
shift our carbon removal portfolio towards abalance of nature-based and technology-based
solutions. We will seek partners to co-finance andco-offtake from innovative carbon removal
projects. Microsoft alone cannot bring about thismarket change, and we are committed to forming
alliances that can have catalytic impact.
Technology and data will also play a role in our
product strategy. We aim to expand thefunctionalities of the Microsoft Sustainability
Calculator to better serve our customers, while
also bringing new solutions accelerators andfeatures to market, via our product stack and ourpartner network. Looking for new approaches totest how to use real-time electricity data to pave apath towards always-available renewable energy,
technology pilots focused on verification ofsequestration in soils, and engineered solutions
and expanded partner capabilities in driving
energy efficiency across all industries.

Carbon removal and increasing transparency will be key to our success in FY21.

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Water
positive

Appendix31“Microsoft is taking
responsibility for our own
water use and developing
technology to help others
do the same.”
Brad Smith, President

Contents
Our approach

32

Getting to water
positive

35

Reducing our water
footprint

35

Replenishing water

37

Improving access to water 37
Driving innovation:
Digitizing water

38

Enabling systems change

40

Key learnings

42

What’s next?

43

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Appendix32

Our approach

Overview

The context
According to the World Bank, the reduction in
freshwater availability due primarily to climate change,
coupled with increased demand, could reduce water
availability in cities by more than 66 percent by 2050.
Getting ahead of the world’s imminent water crisis will
require a reduction in the amount of water used tooperate economies and societies while ensuring there
is sufficient and clean water for all. This will require atransformation in the way water data is collected andmanaged, the way we build solutions and approaches
to water, and a concerted effort for all organizations
to properly account for and balance their water use.
Microsoft has taken steps to reduce the water
consumption in our datacenters and buildings over the
past decade. With the latest scientific data on water
scarcity in mind, we expanded our efforts in 2020,
setting a new commitment to be water positive by 2030.

We will reduce the water intensityof our direct operations, replenish
in water-stressed regions where
we work, and enable access to 1.5
million people—becoming water
positive by 2030.

Find out
more here>66%

Our progress to date

Climate change andincreased demand could
reduce water availability
in cities by more than66 percent by 2050.

Co-founded the Water
Resilience Coalition.

$10M

Invested $10 million in the Emerald
Technology Ventures’ Global Water
Impact Fund to support innovativetechnologies for water conservation,access, and quality.

Ensuring there is sufficient and clean water for all.

1.5M

Launched water accessibility work to
help provide 1.5 million people accessto safe drinking water and sanitation.

7X

Increased our replenishment project
portfolio by nearly 700 percent from
FY19. To date, we have invested innearly 20 replenishment projects insix states and two countries throughpartnerships with organizations suchas The Nature Conservancy, Trout
Unlimited, and Ducks Unlimited.

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33

Our approach (continued)

Our water
commitments

Driving collective action
We will partner with others to drive
collective action, which begins withjoining the Water Resilience Coalitionas part of the United Nations Global
Compact CEO Water Mandate.

With the latest scientific
data on water scarcity inmind, we expanded ourefforts in 2020, setting a
new commitment to bewater positive by 2030.

We will work withcompanies around theworld to drive innovation
and adoption of watertechnologies.

Investing in the future of water
We will work with companies aroundthe world to drive innovation andadoption of water technologies.

Digitizing water data
We will use our technology to
generate actionable insights, increaseawareness of water issues, andoptimize water replenishment.

Becoming water positiveby 2030

Influencing policy
We will use our voice at the local,
national, and global levels to increasewater access and availability, improve
quality, and ensure the integration ofwater into climate strategies.

We will reduce the water intensity ofour direct operations, replenish inwater-stressed regions where we work,and enable access to 1.5 million people.

Empowering our customers
and partners
We are developing solutions to help
customers and partners understandwater-related risks.

1.5M

We will enable access towater to 1.5 million people
in seven countries by 2030.

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34

Our approach (continued)
Table 1

Water availability: replenish more water than we use globally by 2030 (m³)
FY17

FY18

FY19

FY20

Water withdrawals

5,148,454

6,718,985

7,505,081

7,618,089

Water consumption

1,912,934

3,325,664

3,945,783

3,966,639

96,906

235,380

1,621,629

Water replenishment¹¹ Reported volumes represent total incremental contracted water replenishment projects for each fiscal year. Reported volumes may be adjusted once individual water replenishment projects are completed and volumes verified.

Table 2

Water accessibility: enable the provision of water and sanitation services to 1.5 million people
in 7 countries by 2030
Population provided water access (thousands)

1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
FY20

 India Indonesia

 China

FY21

 Brazil

FY22

FY23

 Mexico

 South Africa

Straight line projections are subject to change as water accessibility projects are implemented.

FY24

 Malaysia

FY25

FY26

FY27

FY28

FY29

FY30

FY31

In FY20 we increased ourwater replenishment by
1,621,629 m3.

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35

Water positive

Getting towater positive
To meet our commitment to being
water positive by 2030, we will
reduce our water footprint acrossour direct operations, while
replenishing and increasing water
access in water-stressed regions
where we work.

Reducing our water footprint
We are innovating in water collection, treatment, reuse,
and water use intensity at our campuses and datacenters
across the globe.
Net zero water campus
Our new Silicon Valley campus, due to come online in
2021, will be among the first large office buildings in theworld to be certified by a third party as a net zero water
facility. It will feature an on-site rainwater collection
system and waste treatment plant to ensure 100 percentof the site’s non-potable water comes from on-site
recycled sources. An integrated water management
system will manage and reuse rainwater and wastewater.
By recycling our water, the campus will save an estimated
4.3 million gallons of potable water each year.
New offices, less water
We help support water-stressed communities byrecycling, reusing, and replenishing water where
possible. When regional water shortages hit
Johannesburg, South Africa in 2018, we built an on-site
greywater treatment plant and began collecting
rainwater to reduce the amount of water our local officeneeded to operate. Since then, we’ve built on thisapproach in other campuses around the globe.
Beijing is one of the world’s most water scarce cities. At our
Beijing West campus, we are taking steps to minimize our
impact. We have installed a greywater treatment systemthat allows the recycling of HVAC condensed water,
followed by water purification. Current recycled water
averages around 1,100 cubic meters per month. The
recovered water represents approximately 10 percent
of daily domestic water consumption in the campus.

35%

Our new Herzliya,
Israel campus featureswater-efficientplumbing fixturesthat drive up water
conservation by
35 percent.

At our new Herzliya, Israel campus, water collected fromair conditioners will be used exclusively to water plants
on-site. In addition, water-efficient plumbing fixtures will
drive up water conservation by 35 percent.
In India, where several of its most populous cities are
struggling with water shortages, our Hyderabad campus
has a different challenge—high annual rainfall and floods
that jeopardize water quality. That is why the newest
building on our Hyderabad campus will support 100
percent treatment and reuse of wastewater on-site forlandscaping, flushing, and cooling tower makeup.
Even in the rainy Pacific Northwest, water is an issue, withquality affected by runoff from urbanization and climatechange. At our headquarters modernization in Puget
Sound, all new office buildings will reuse harvested
rainwater in flush fixtures and low-flow systems, which is
projected to save more than 5.8 million gallons annually.
We also were awarded Salmon Safe certification,
confirming that our designs protect local watersheds.

Herzliya campus withwater reuse to minimize
potable water
consumption.

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36

Water positive (continued)

350M

Cooling with less water
While energy has received most of the attention as ourcloud has grown, datacenters generate significant
amounts of heat, which has typically been addressed byusing water for cooling. We have taken steps over the
past decade to minimize our water consumption,
including new approaches such as fresh air and adiabatic
cooling. This optimizes the use of both energy and waterin a way most efficient for the local climate, while still
delivering maximum computer power and performance.

Saved 350 million litersof water at Arizona
datacenter thanks to solar
energy from First Solar.

5.8M

Saving water in the desert
At our new datacenter region in Arizona, slated to open
in 2021, we will use zero water for cooling for more thanhalf the year, taking advantage of adiabatic cooling.
We are also partnering with First Solar to provide solar
energy rather than traditional electricity generation,
which is expected to save more than 350 million litersof water annually.
Working to avoid Zero Day in South Africa
In South Africa, we use atmospheric water generation tocollect water out of the air to fill storage tanks for use incooling our datacenters. These systems function as
industrial dehumidifiers.

Projected to save 5.8 million
gallons of water annually at
our new Puget Sound headquarters.

Community engagement
Our community engagement programs focus onaddressing community freshwater needs, alleviatingcompetition for water resources, and improving local
water quality and accessibility. For example, in Quincy,
Washington, we installed a water reuse system. Industrial
water reuse systems are designed to address growing
water supply deficiencies in water-stressed areas while
avoiding the need to develop additional potable watersupplies. In South Africa, we supported the installationof smart water meters at 53 public hospitals in the Cape
Town region. These meters provide greater visibility into
water consumption to ensure that hospitals can remain
operational despite a water crisis.

Minimizing water
consumption in
datacenters using fresh air
and adiabatic cooling.

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37

Water positive (continued)

1.5M

Replenishing water
Water replenishment seeks to return water to theecosystem from which an organization has consumed orsourced it, while also generating co-benefits. Our water
replenishment efforts complement our reduction efforts
by enabling us to make investments beyond our four
walls in the communities where we operate. We are oneof the first technology companies to adopt such a target.
Our strategy includes investments in projects such as
wetland restoration and the removal of impervious
surfaces like asphalt, which will help replenish waterback into the basins that need it most. We focus ourreplenishment efforts on roughly 40 highly stressedbasins where we have operations, using the World
Resources Institute’s Aqueduct tool to identify areas
subject to water stress.
Wetland restoration in Chennai
In partnership with The Nature Conservancy, we arehelping to demonstrate the potential of a scientificwetland restoration approach at Sembakkan Lake in
Chennai, India. This project will support the local
ecosystem’s health, reduce pollution, recycle nutrients,
act as carbon and flood sinks, and contribute towards
increasing resilience to severe weather events like floods
and droughts.
Audubon Dakota Urban Woods and Prairie Initiative
We are supporting the National Audubon Society torestore and enhance riparian grassland, wetland, andwoodland habitats along the Red River in Fargo, North
Dakota and Moorhead, Minnesota. The restoration of 44
acres of wetland and prairie habitat will improve water
storage and quality, and enhance urban wildlife habitat.
In addition to investment, Microsoft has participated inthree stewardship events to plant nearly 2,000 native
flowers and harvest seed.

We are working with
non-governmentalorganizations (NGOs)
to ensure more than
1.5 million people haveaccess to sustainable,
safe drinking waterand sanitation.

Pole Mountain wetland and riparian restoration
We are supporting the National Forest Foundation ina unique water project. By decommissioning seldomused roads, the project will support wetland and riparian
improvement, water replenishment, and sediment
reduction in the Pole Mountain area near Cheyenne,
Wyoming, home to one of our datacenter regions. As of
2020, over 6 acres of national forest were restored, which
is helping to increase water yield, decrease erosion, andprotect the quality of Cheyenne’s drinking water.
Water conservation in Lake Mead
We are supporting a project led by the Colorado Indian
Tribes that allocates 150,000 acre-feet of “systemconservation” water to shore up levels of Lake Mead.
Project benefits include fostering stabilized water levels
in Lake Mead, preventing shortages in California,
Arizona, and Nevada, and supporting tribal water plans
and infrastructure development. Microsoft has played acatalytic role in this project with a one-to-one match on
contributions from the philanthropic community, as wellas paving the way for eight additional companies,
including The Coca-Cola Foundation, Procter & Gamble,
and Intel, to make similar investments.

Water replenishment
returns water while
generating co-benefits.

Improving access to water
Our reduction in water use intensity and ourreplenishment commitments address the key issue ofwater availability, which is the amount of water that canbe used to meet demand. That, however, is only part ofthe challenge. Equally important is the issue ofaccessibility, which involves having access to reliable andsafe drinking water and sanitation services.
We are working with NGOs to ensure more than 1.5
million people have access to sustainable, safe drinking
water and sanitation, focused on seven countries. We
started this work in 2020, and will grow it in 2021.
Enabling via microfinanceWe’ve begun work with Water.org, a leading global
non-profit focused on underserved communities, to help
people in Brazil, India, Indonesia, and Mexico. Ourinvestments will enable Water.org and its network of
microfinance institutions to offer water supply andsanitation (WSS) loans that are used to install householdlevel taps and toilets, community water and sanitation
solutions, and rainwater harvesting and storage.
Water.org expects nearly 90 percent of the participants
to be women living below the poverty line. Thispartnership will provide reliable drinking water and/or
sanitation access for 140,000 people by the end of FY21
and empower 840,000 people by the end of FY23.
Microsoft΄s investment will be leveraged 68:1 and enable
at least $200 million in microloans.
In addition to the human impact, we will assess thevolumetric water benefits in strategic high-stresswatersheds and river basins overlapping with ourbusiness. We’ll then expand this work with partners in
China, Malaysia, and South Africa.

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Appendix38

Driving innovation

Digitizingwater
We believe that Microsoft’s mostimportant contribution to water
reduction will come not from ourown work alone, but by helping ourcustomers, partners, and suppliers
around the world reduce their water
footprints through our learnings
and with the power of data, AI,and digital technology.

As we worked to establish our water strategy, we quickly
realized we would need to address and overcome several
key challenges specific to water data.
Water data is often segmented and siloed, both within
an organization and across multiple organizations
operating in the same watershed, which makes
managing a shared resource particularly challenging.
Water data often lacks context, meaning it is provided
without an understanding of underlying conditions in
the area. This makes it difficult for any single
organization to assess its impact on a water basin, which
in turn complicates or obscures the most impactfulintervention to address water issues in that area. In
addition, water data often suffers from discontinuities,
where data collection is interrupted due to equipment
failure or lack of funding for observational networks.
The digitizing of water data is about overcoming theselimitations to make water data credible, transparent,
useful, and actionable.

$200M
We will enable nearly$200 million in
microfinance loans to
support water andsanitation accessprojects.

Leak detection
Several organizations in our partner ecosystem have
deployed water solutions focused on leak detection andmitigation running on Azure. One such partner is Ecolab,
who is working to reduce water consumption andincrease water recycling, starting with leak detection in
manufacturing and industrial settings.

Measuring quality and consumption
Microsoft is developing solutions to help customers
understand water-related risks due to climate change,
use data to reduce water use, and make smarter
decisions about water. In the past year, we’ve launched
new solutions accelerators on Azure IoT Central that
include remote, real-time water quality monitoring andwater consumption monitoring, geared toward reducing
water consumption.
Find out
more here

Our partner ecosystem has deployed water solutions for leak detection and mitigation.

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Appendix39

Driving innovation (continued)

40%
Risk assessment
In partnership with Microsoft and S&P Trucost,
Ecolab offers the Water Risk Monetizer and Smart
Water Navigator to businesses and organizations
around the world. The Water Risk Monetizer provides
actionable information to help organizations
understand water-related risks and quantify them infinancial terms to inform responsible decisions thatenable growth. This tool is available to the public at:

The UN estimates global
demand for water will
exceed supply by
40 percent by 2030.

Find out
more here

The Smart Water Navigator helps companies reduce
their water usage at a facility level by generating a
tailored, industry- and location-specific guide. This
information helps facilities reduce water and energyuse, and, in aggregate, aids companies in achieving
corporate water reduction targets while reducing
costs. The tools are available to the public at no cost.
An updated, integrated version of these tools isplanned for release in March 2021, which
will include new features such as context-based
approaches to local water challenges andorganizational benchmarking.
Find out
more here

Optimizing crop yields with IoT sensors.

Tackling water consumption acrossproduct lifecycle
Unilever continues to grow and evolve its business in apurpose-driven way to reduce its environmental impact,
improve global health and well-being for 1 billion
people, and enhance the livelihoods of millions. Unileverand Microsoft have collaborated for many years on new
ways to use digital solutions, from enabling affordable
internet access and community engagement to
deploying IoT sensors in field crops and manufacturing
facilities to discover new, actionable insights. This
capability has allowed factories to generate new data
insights that reduce water wastage in production andways to optimize crop yields. In addition, Unilever andMicrosoft are educating global communities about water
quantity and quality to enable everyone to access safe
and clean water.

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40

Enabling systems change

Catalyzing
innovation andcollective action
We are focused on new ways toharness the power of technology,
partnerships, investments, and policy
to drive impact at scale and pace tohelp the world more effectively
address water availability
and accessibility.

Driving collective action with
the UN and customers
Microsoft was a founding member of the Water
Resilience Coalition, launched in 2020. It is an initiativeof the United Nations Global Compact CEO Water
Mandate. Initially comprised of seven companies,
the coalition has since grown to 18 industry-leading
corporations, all of whom have pledged to workcollectively on availability, quality, and accessibility
issues in water-stressed locations. The Coalition is
working together to identify priority basins forcollective action in 2021 and to set targets for improving
conditions in those basins.

$10M
Invested $10 million in
the Emerald Technology
Ventures' Global Water
Impact Fund focused on
emerging watertechnologies.

Funding innovation via CIF
Through our Climate Innovation Fund (CIF), we haveinvested $10 million in the Emerald Technology Ventures$100 million Global Water Impact Fund, whose otherinvestors also include Temasek, Ecolab, and SKion Water.
The fund partners with early-stage to expansion-stage
companies from around the world, to drive innovation inwater technologies and market adoption. It focuses onsolving key challenges, including water conservation,water efficiency and quality, reduction of carbon
emissions in water treatment, and climate adaptation.
This fund is one of the few funds solely focused on
emerging water technologies.

Perception Reality Engine uses data on rainfall, groundwater,
and plant growth to map water availability.

Capitalizing on AI
Through our AI for Earth program, we are also supporting
startups and non-profits capitalizing on the cloud, data,
and AI to accelerate the pace of innovation in water.
Gaining insights into water conditions
Vector Center utilizes Azure in its Perception Reality
Engine to collect, correlate, and analyze water-related
data to produce an overall picture of what’s happening
in a city, region, or watershed in real time. Their uniqueapproach combines state-of-the-art satellite data, social
sentiment analysis, and on-the-ground investigative
research to deliver focused intelligence, scenarios,
contexts, and response strategies about the world’s
water, food, and energy supplies in a disruptive era.

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41

Enabling systems change (continued)
Assessing agricultural practices with AI
The Freshwater Trust and Upstream Tech are using
Azure and AI tools to expand the BasinScout Platform,
which pinpoints where changes in agricultural
management will result in the greatest benefits forsurface water quality and groundwater conditions. Theirapproach applies machine learning and water resource
models to satellite/aerial data, available farmmanagement and environmental data to assess thepotential for improving field-level agricultural practices
and to quantify the impact on water resources.
Stakeholders can then design scenarios of optimalchanges across multiple farms to improve the use ofwater in a cost-efficient manner. BasinScout Platform has
accelerated the process to protect and restore
watersheds, as field-scale environmental and economic
impact now takes months instead of years; watershed
program planning now takes minutes, instead of months.

Improving water resource management
Leadership Counsel for Justice and Accountability is a
California non-profit focused on various environmental
justice issues in underserved communities. They are
working to address the challenge of drinking water
availability in California’s San Joaquin Valley. Nearly 2
million people in the state rely on private domestic wells fordrinking water, and many of these wells often fail during
drought or due to groundwater management issues. The
Leadership Counsel is using AI to predict domestic well
failure resulting from groundwater changes and resulting
drinking water shortages. They are providing thisinformation to affected residents and local, regional, andstate agencies that can use it to prevent well failure andimprove water resource management and planning.

PolicyGovernments play a fundamental role in ensuring theavailability of safe, clean drinking water, maintaining andexpanding water infrastructure, protecting critical water
ecosystems, and responding to water crises. As part ofour water positive commitment, we outlined areas inwhich we will advocate, including the following:
Improving data in water-stressed areas
We will advocate for the development of more accurate
and up-to-date assessment of ground and surface waterlevels and how they are changing over time. This data
can help local stakeholders calculate and forecast
demand and supply balances, track water quality,
facilitate disaster prevention and early warning systems,
and ultimately develop innovative solutions.

3,600

Predicting the quality of river water
SOS Mata Atlântica in Brazil has developed an AI
solution to predict the quality of the water in several
rivers in the region. The project relies first on 3,600
volunteers mobilized in groups from diverse
backgrounds, such as schools, universities, churches,
scouts, community centers, and others, who monitor
water quality with a kit. The results are uploaded to
Microsoft Azure, where AI resources are applied,
providing more effective and accurate insights. In the
future, it will be possible to cross-reference data fromdifferent sources, such as public health reports, and toassess the correlation between water quality andepidemic outbreaks.

The SOS Mata Atlântica
project in Brazil has
3,600 volunteers
participating to monitor
water quality.

Upgrading water infrastructure
We need governments to invest in upgrading andexpanding water infrastructure. This is critical to provide
safe drinking water, treat storm and wastewater, manage
water levels, and protect against climate impacts,
particularly in the most vulnerable communities.
Integrating water into climate strategies
Water is the primary means through which climatechange will be experienced. As such, we need
governments to address climate and water challenges
in a more integrated way. One way to do this is throughthe long-term goals that countries set as part of theirnational climate plans or Intended Nationally
Determined Contributions (INDCs) under the Parisclimate agreements.
In 2020, we have begun this work by:• Joining WaterEurope, the leading association in
Europe focused on technology and innovation aspectsof water, with a focus on digital water. We will use our
voice in the organization to call for improved
collaboration in the water sector, advocating forproper inclusion of water-related topics in EU policies,
European funding programs, and shared research.
• Supporting the creation of the Common European
Green Deal data space, as part of the European
Strategy for Data, that aims to harness the potential ofenvironmental data to help achieve the EU’s ambitious
climate objectives.
• Encouraging our trade associations and coalitions
to look for opportunities to support the inclusion ofwater infrastructure into COVID-19 recovery packages
and foster innovative solutions.

We are advocating for improved data in water-stressed areas.

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42

Key learnings

What we’ve
learned2

Creating credible, transparent,
and trusted platforms for sharing
water data is foundational tofunctioning ecosystems.

1

Water is local and your commitments should
be too. While carbon is a global pollutant andemission reduction and removal projects can besourced anywhere, water is a local resource andcommitments to improve water conditions needto align spatially with where your facilities areusing or sourcing water. This requires building
awareness of the water context where you
operate, as well as being able to source projects
that are informed by that context and that will
improve conditions in those locations. Building
up this local awareness and these partnerships,
and working with groups like the Water Resilience
Coalition to facilitate and expedite this work,
will be crucial for driving impact that ismeaningful and relevant.

3

Time matters as much as place. Given that thedemand for and the quality and supply of water
varies over time, it’s important to account for this
temporal variability when tailoring your water
strategy. For example, if a given location
experiences acute scarcity during the summer
months or if water quality is exacerbated during
the months when heavy rains typically occur,then the interventions you support should reflect
this variation. When we established ouravailability target, we considered annual baselinewater stress as well as monthly baseline water
stress and while it will be challenging, we will
strive to inform our replenishment workwith this nuance.
Water data is too little, too late. Water data,
especially water quality, often is not available,
if it is available at all, until it is too late to inform
real-time adjustments. It also is often siloed,making it difficult to generate and sharemeaningful insights that inform management
decisions. And the lack of widely used waterclimate scenarios hinders the ability to makelong-term planning investments. Remedying thisby creating credible, transparent, and trusted
platforms for sharing water data is particularly
critical, especially for a resource that cuts acrossmultiple sectors and is foundational tofunctioning ecosystems.

How to take action on waterin your own organization:

Explainer video:
Get inspired by ourstrategy.
Find out
more here

Water Risk Monetizer:
use this free tool, built
by Microsoft andEcolab, to assess thetrue value of water andrisk exposure you face.
Find out
more here

WRI Aqueduct Tool:
understand the local
water stress andscarcity concerns
where you operate.
Find out
more here

Learn how tocreate a water
quality monitoring
application in
Azure IoT.
Find out
more here

Learn how tocreate a water
consumption
monitoring
application in
Azure IoT.
Find out
more here

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Appendix43

What΄’s next?

Our focus
for 2021

1
2
3

Sourcing replenishment projects that drive
collective action and have transformative impact
in our priority locations.

Enabling drinking water and/or sanitation
access for 140,000 people by the end of FY21
through our partnership with Water.org.

Creating new tools:• Hosting the next generation of global climate
projections so that the World Resources
Institute and its partners can generate futurewater projections, thereby enabling waterclimate scenario analysis and enhancing
understanding of future water risks.
• Supporting the development of an enterprisescale water stewardship self-assessment toolin partnership with the CEO Water Mandate.
• Working with our partners to build new tools
or accelerate the deployment of existing
tools, such as BasinScout Platform, to empower
our customers to achieve their water goals.

45

Improving the usefulness of our water
consumption data.

Using our Emerald Technology Ventures
investment to identify technology adoption
opportunities for emerging water technologies
from our Climate Innovation Fund that can help
Microsoft achieve our water positive commitment
and support our customers.

Identifying adoption opportunities for emerging water technologies.

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Zero
waste

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Appendix

44“Waste isalmost purely
synonymous with
opportunity.”
Dr. Lucas Joppa, Chief Environmental Officer

Contents
Our approach

45

Getting to zero waste

48

Driving innovation: Digital
tools for circularity

51

Enabling systems change

53

Key learnings

55

What’s next?

56

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Appendix45

Our approach

Overview

We will reduce as much waste as wecreate across our direct operations,products, and packaging—
becoming zero waste by 2030.

The context
Every year, the world collects 11 billion tons of waste,according to the United Nations Environment
Programme. Waste, including plastics, e-waste, and foodwaste, pollutes our land, clogs our waterways, depletes
natural resources, and contaminates the air we breathe.
We recognize the urgent need to protect the world’s
ecosystems, give equal access to a healthy environment,
meet the needs of a growing population, and reducethe carbon emissions that come from the creation,
distribution, and disposal of waste. Moreover, we see
incredible economic and environmental benefitsof taking a circular approach to materials management,
which reduces waste and keeps products and materials
in use. There’s a big opportunity to unlock a “triple
bottom line“ with circularity—delivering societal,
environmental, and economic benefits. Accenture
Strategy predicts a $4.5 trillion market for circular
economy business models by 2030.
Microsoft aims to unlock these opportunities via ourcommitment to change our operations, drive innovation,and invest in new solutions that accelerate the transition
to a circular economy. In the third quarter of 2020,
we established our new waste commitments.
Find out
more here

Our progress to date

We are accelerating the transition to a circular economy.

Collaborated with Ellen MacArthur
Foundation network members
to develop Circular Business
to Business Transport
Packaging Solutions.

$30M

Invested $30 million in Closed
Loop Partners’ funds to accelerate
recycling and composting
infrastructure, innovation, andbusiness models for supply chain
digitization, e-waste collection,
food waste reduction, andrecycling industry products tobuild a more circular economy
at scale.

Zero

Achieved Zero Waste Certificationof datacenters in Dublin, Ireland
and Boydton, Virginia.

90%

Successfully piloted our first
Microsoft Circular Center in
Amsterdam, which shows CircularCenters can contribute toincreased reuse of servers by
90 percent by 2025.

60K

In FY20, we diverted more than
60,000 metric tons of the solid
waste otherwise headed tolandfills and incineration fromour campuses and datacenters.

10,500Engaged 10,500 employees
in Ecochallenges to reduce
personal waste footprints.

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Our approach (continued)

Our waste
commitments

Investing in the futureof circularity
We will partner with companies
around the world to drive circular
economy innovation and adoptionof technologies to reduce waste andreuse materials and products.

By 2030, Microsoft will be
zero waste across our direct
waste footprint.

Transforming waste accounting
We will improve waste data collection
to ensure auditability and reporting.

Making fully recyclable
Surface devices

Eliminating single-use plastics

We will manufacture Surface devices
that are 100 percent recyclable in
Organization for Economic
Cooperation and Development(OECD) countries by 2030.

Driving to zero waste
in operations
We will reduce as much waste as wecreate across our direct operations,products, and packaging.

By 2025, we will eliminate single-use
plastics in all Microsoft primary
product packaging and all IT asset
packaging in our datacenters.

Increasing reuse of servers
and components throughCircular Centers
By 2025, 90 percent of servers andcomponents within our regional
datacenter network will be reused.

“Zero waste is an ambitiousgoal, but minimizing ourown waste footprint isessential to preserving
the natural resources andreducing carbon emissions
to ensure our economies
and societies around theworld thrive for generations
to come.”Brad Smith, President

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Appendix47

Our approach (continued)
Table 1

Table 2

90% or90%
or moremorediversion
diversionof generalgeneralwaste
wastebyby20302030

90%
90% reusereuse ofof servers
servers andandcomponents incomponents
in DCsDCs byby 2025
2025

92%
Diversion
rate
75%
Diversion
rate

90%

79%
Diversionrate% waste generated (metric tons)

100%

74%

90%

$4.5
trillion
The market forcircular economy
business models will
be $4.5 trillion by 2030.

FY19

80%
70%
60%
50%
40%
30%

90%

20%
10%
0%
FY19

 Landfill
 Recycling

FY20

84%

 Incineration  Reuse Compost- - - 10% diversion threshold

FY20

 Reuse rate

TargetDriving technologies to reduce waste and reuse materials and products.

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48

Zero waste

Getting tozero waste
To meet our commitment to being
zero waste by 2030, we are looking
at our waste footprint in facilities
and datacenters, launching ourinnovative Circular Centers, cutting
waste in our devices, and engaging
our employees.

Our focus on waste reduction initiatives began in 2008,
when our facilities implemented single-stream recycling
and composting across our Puget Sound offices anddining services.
Since then, we’ve hosted certified zero waste events,
like our Hackathons. Microsoft’s Puget Sound campus,
our largest campus and accounting for nearly half ofour global facilities floor area, has been zero waste
certified since 2016.
This commitment spans the globe. In India, ourBengaluru Ferns site installed a biogas plant, which uses
anaerobic digestion (also called a biodigester) to break
down and recycle 1,430 pounds of food waste each day,turning it into biogas. It creates enough biogas for halfof the site’s daily cooking fuel needs. At our sitesaround the world, we have implemented zero waste
best practices, including ensuring proper signage andeducation materials to increase awareness of how
to properly dispose of waste and reduce waste
contamination in order to minimize our impact
on the environment.

50%

Half of daily cooking
fuel at our Bengaluru
Ferns site in India comesfrom biogas madefrom food waste.

90%

Our target to divert
solid waste fromlandfills and incineration
is 90 percent.

Zero waste facilities
We are committed to diverting at least 90 percent of thesolid waste headed to landfills and incineration from ourcampuses and datacenters. In addition, as we continue
to grow, we will achieve, at a minimum, 75 percent
diversion of construction and demolition waste for all
projects. Some of our largest campus projects to datehave shown exemplary performance in this area. On
our campus in Israel, we demonstrated a 77 percent
diversion rate and in Silicon Valley we achieved a 96
percent diversion rate. Our campus modernization
project in Puget Sound is currently demonstrating a
95 percent diversion rate as we continue ourconstruction process. In 2020, we also achieved Zero
Waste Certification at our datacenters in Dublin, Ireland
and Boydton, Virginia.

Our Puget Sound campus has been zero waste certified since 2016.

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Appendix49

Zero waste (continued)

100%

Launch of Circular Centers
To meet the growing demand for our cloud services, ourdatacenter footprint—and the 3 million servers and related
hardware that power it on an annual basis—must expand.
But we must do this with our sustainability goals in mind, andthat is more than just reducing the power they consume.
Today, these servers have an average lifespan of five years.
To better manage this waste stream, Microsoft is increasing
control and innovating to create closed loop models.

All cloud packaging will
be reusable, recyclable,or compostable by 2025.

The Circular Centers are an integral part of our designfor-sustainability workstreams, providing a responsive
feedback flow of information, with learnings linked toreuse, disassembly, reassembly, and recycling sharedwith our design and supply chain teams to inform futuresustainable generations of equipment. We are
expanding from our pilot in Amsterdam to our Virginia,
Sweden, and Dublin sites. The Circular Centers willcontribute to and increase our reuse of servers andcomponents up to 90 percent by 2025.

Our programs enable waste reduction and help
eliminate the community concept of waste throughmindful inputs and highest-value use of by-products.
Programs include projects such as research into
decommissioned datacenter battery reuse for
distributed energy projects, and training computer
vision models to identify types of waste for recycling.
In 2020, we partnered with The Recycling Partnershipto build two recycling units at an existing solid waste
drop-off location in Mecklenburg County, Virginia
where residential recycling services are currently limited.
This project will allow residents to recycle plastic, glass,aluminum, steel, cardboard, and mixed paper, andprovide public education for residents and operational
training for county staff.

In 2020, we announced our first-of-its kind approachto repurpose and reuse servers and network hardware
through new Microsoft Circular Centers, which will belocated on every new major datacenter campus. Using
intelligent scheduling via Dynamics 365, these centerswill process servers on-site through a varietyof reuse routes working in close collaboration with
datacenters, key suppliers, and partners.
Already, we are up and running in Amsterdam. We haveseen increased availability of server and network partsfor reuse and producer returns. We reduced downtime
and transportation miles, extended the lifecycles ofservers in use, and demonstrated savings linked to sparesand repairs. We are seeing a 70 percent increase in value
return for components that we are processing throughour new disposition routes. We are also seeing an
increased flexibility and new opportunities for end-oflife processing working with our partners.

Community engagement

Extending circularity in datacenters
to packaging
Given the number of components coming through ourdatacenters, in 2020 we launched our new Microsoft
Cloud Responsible Packaging Goals for 2025. These
guide our work on IT asset transportation packaging
at our datacenters. Our goals include:• All packaging will have a minimum of 50 percent
recycled content.
• 100 percent of all cloud packaging will be reusable,
recyclable, or compostable.
• Single-use plastics will be eliminated in all IT asset
packaging in our datacenters.
• Packaging weight will be reduced by a minimumof 10 percent from a December 2020 baseline.

Repurposing and reusing
servers and hardware
through Microsoft
Circular Centers.

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50

Zero waste (continued)
Cutting waste in devices
The sustainability of our devices begins with their design,
including what our devices are made of, how they are
made, and their lifespan. For more information, see theDevices Sustainability Report:
Find out
more here

Achieving EPEAT Gold for key Surface products
EPEAT, managed by the Green Electronics Council, isthe leading global ecolabel for the IT sector that awards
points based on sustainability categories such as productsubstance management, materials selection, andpackaging. Microsoft has achieved the highest possible
rating, EPEAT Gold, for the Surface Laptop 3, Surface Pro
X, Surface Go 2, Surface Pro 7+, and Surface Laptop Go
in the US and Canada.
100% recyclable Surface
We set a new target to reach 100 percent recyclable
Surface devices by 2030. Today, our assessment foundSurface Pro X and Surface Book 3 (15”) both achieved arecyclability rating of 95 percent. In 2021, we’ll integrate
our new innovations, technologies, and learnings fromour most recyclable products to the rest of our products.

New research on circularity
We partnered with KPMG to measure the circularity of
our Surface devices and their packaging. The work
explored how we could and should measure circularity,
how our devices measure up to those methodologies
today, how we should set targets for improvement, andhow to assess impact. Circular Transition Indicators (CTI)
results provided us with ranked opportunities to increase
the circular inflows and outflows for our products. Top
opportunities include increasing the recycled content
of aluminum in our device enclosures and resins usedin components.

Solving packaging problems
Our target is 100 percent recyclable
packaging by 2030 and elimination of
single-use plastics by 2025. The
recyclability of our packaging
portfolio was 88 percent and plastic
constituted 7.7 percent of our
packaging material use at the endof FY20. For Surface devices
specifically, the recyclability ofour packaging was 95 percent.
We are developing programs
to drive to 100 percent
by 2030.

Engaging our employees
We recognize that our employees are our biggest asset
in advancing innovation in our journey to zero waste
and we have created opportunities to enable them tocontribute to our efforts, while reinforcing the principlethat individual action leads to collective impact.

“No one person ororganization can solve
the global waste problem.
It will take all of us doing
our part, including using
better data to understandthe problem andmake smart waste
policy decisions.”
Brad Smith, President

Waste reduction
Our Employee Waste Data Dashboard, introduced in
2020, provides Microsoft employees with transparency
to the Puget Sound campus monthly waste data. It alsoenables us to test effectiveness of waste reduction
campaigns, implementation of waste prevention
initiatives, and more.
Gamifying behavior change
Ecochallenges provide our employees with theopportunity to learn and practice habits that support
them on their personal zero waste journey. In 2020, welaunched two:
• Our LinkedIn Ecochallenge lasted three weeks in honorof Earth Day 2020. Over 2,000 employees participated,
resulting in 7,500 plastic bottles not sent to landfill,
nearly 250 trees planted, and almost 220,000 poundsof carbon saved.
• The Microsoft Ecochallenge lasted 19 days in
November 2020. Nearly 8,500 employees participated,
resulting in nearly 20,000 plastic containers not sent tolandfill and almost 1,300 pounds of waste composted.
The collective learning and ongoing behavior changes
from the ecochallenges, if maintained over a year, could
lead to significant impact, including nearly 280,000
plastic bottles and over 380,000 plastic containers notsent to landfill, nearly 25,000 pounds of waste
composted, over 4,200 trees planted, and close to
4 million pounds of carbon saved. Microsoft worked
with Ecochallenge.org, an easy-to-adopt platform forany organization.

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Appendix51

Driving innovation

Digital tools
for circularity
We believe that Microsoft’s mostimportant contribution to waste
reduction will come not from ourown work alone, but by helping ourcustomers, partners, and suppliers
around the world reduce their waste
footprints through our learnings andwith the power of data, AI, anddigital technology.

Today, there is no consistent, high-quality data about
the amount of waste, the type and quality, where it isgenerated, and where it goes.
Waste data needs a standardized methodology, bettertransparency, and higher quality. Without more accuratedata, it’s nearly impossible to understand the impact ofoperational decisions, what goals to set and how toassess progress, or to set an industry standard for waste
footprint methodology.
We are investing to digitize waste data across thecompany in FY21 to identify opportunities to improve
waste data collection, both for ourselves and for ourcustomers. We plan to use technology to track andreport on waste, using Power BI platforms to visualize
e-waste chain-of-custody, and improving Microsoft
Power Apps to capture real-time waste data.
Already, in 2020, we΄ve put our technology to workfor ourselves and our customers.

We are transitioning e-waste data to Power BI dashboards.

60K

In FY20, we diverted
more than 60,000
metric tons of thesolid waste otherwise
headed to landfills andincineration from ourcampuses anddatacenters.

Serving as customer zero
In 2020, we worked with our e-waste vendors to convert
monthly e-waste data Microsoft Excel reports into
real-time, chain-of-custody API reporting with Power BI
dashboards. We’re transitioning e-waste data across ourcompany to this format, from the technology provided
to employees to the IT assets in datacenters. In our
Circular Centers, we will scale up the use of AI to processservers and hardware that are being decommissioned
on-site. Our packaging team is using Dynamics 365 tomanage its data, which acts as a data aggregator, withthe ability to pull and push data to and from other tools.
When linked with Power BI, the system has delivered a
step change in our ability to manage data and reporting.

Blockchain for circularity
Blockchain can provide a secure and stable account ofdata across enterprises. It also works well as a solution
to track materials over a full supply chain, which isnecessary to reduce waste and bolster a circular
economy. One organization using blockchain to support
their work is the Madaster Foundation. Using Microsoft
technologies, the Madaster Platform functions as apublic online library of materials in the built
environment. It links the identity of materials andproducts to a location and registers the information ina material or building passport. Through the passport,materials keep their identities, changing every building
into a depot of materials with a certain value.

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Appendix

Driving innovation (continued)
Data and insights in recycling
Colchester Borough Council provides services to 192,500
residents, from licensing to recycling. The Council is using
Dynamics 365 to unify its data, like the recycling tracking
system that provides reporting via Power BI, showing datalike heatmaps of problem spots for collections or whereresidents need more encouragement to recycle.
The insights derived from Power BI close the loop fordevelopment, providing KPIs that help the Boroughimprove both the app and recycling services to improve
landfill diversion rates.

IoT to cut food waste
A new platform, Alsense, entered the market in 2019,
driven by a Danfoss and Microsoft collaboration.
The new cloud-based service solution is powered by
Azure and provides retailers with new ways to manage
operations. Action can be taken quickly to prevent
temperature changes and avoid inefficient energy usage.
This will lead to reduced food waste and a more energy
efficient supermarket.

Improving circularity with AI
Chase and Microsoft are jointly building a traceable
waste treatment system. Microsoft AI and cloudtechnologies are helping Chase digitize its industrial
waste process and tracing. Using Azure, Microsoft AI,
and IoT solutions, Chase is able to manage its business,from dispatch and garbage collection to sensors that
capture the weight and composition of bin contents.
The data is used for a wide range of scenarios including
flagging improper bin contents to prevent potential
quality risk in developing renewable products. Chasehas noted that Microsoft has inspired them to becomea waste management-as-a-service company, providing
smart circular economy solutions and creating
comprehensive, transparent, and safe service offerings.

HoloLens and AI to capture
plastics in waterways
To tackle the increasing problem of riverpollution, DEME has installed a Marine
Litter Hunter on the river Scheldt on behalfof De Vlaamse Waterweg. The project consistsof a fixed installation that passively collects
floating and suspended waste from the waterand a mobile system that actively collects
bigger pieces of waste. This includes a smart
detection system, a work boat that cannavigate autonomously, and a charging point.
Floating waste is detected using artificial
intelligence by smart cameras.
The work boat intercepts waste and pushes it toa collection pontoon, where a crane equippedwith a grab transfers the waste into a container.
The crane is operated remotely by an operator
using virtual reality and 3D vision technology
using Microsoft HoloLens. By reducing theamount of macro plastics in the rivers,
De Vlaamse Waterweg will prevent themfrom affecting the ocean and marine life.

Reducing plastics in waterways with HoloLens.

52

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53

Enabling systems change

Catalyzing
innovation andcollective action
We are focused on new ways toharness the power of technology,
partnerships, and investments todrive impact at scale and pace tohelp the world more effectivelytransform to a circular economy.

Collaborating on innovation
We kickstarted an Ellen MacArthur Foundation network
project with Aquafil, BASF, CHEP, Cisco, and Flex to create
an alternative circular supply chain packaging solution to
replace the existing linear plastic-based shrink/stretch
wrap material used to stabilize and protect products intransit. The volume of business-related packaging issignificant, as are its environmental impacts. Most of the
difficult-to-recycle non-consumer packaging waste iscomprised of single-use plastic, contributing to the 6.8
million tons of plastic waste sent to landfill each year.
Co-innovation in material alternatives and redesigning
packaging ecosystems, including the transportation of
packaging and improvements in the wider collection,sorting, and plastic recycling infrastructure, are urgently
needed to reduce this waste stream and progress
towards circular supply chains.

$30M
Invested $30 million
in Closed Loop Partners’'
funds to help build
a circular economy
at scale.
΄

Funding innovation
Our Climate Innovation Fund combines economic
opportunity with benefits to wider society and theenvironment. We have invested $30 million in Closed
Loop Partners΄ funds to accelerate infrastructure,
innovation, and business models for supply chain
digitization, e-waste collection, food waste reduction,and recycling industry products to build a more circular
economy at scale.

Creating alternative circular B2B packing solutions.

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Enabling systems change (continued)
Investing in AI
Through our AI for Earth program we are supporting
startups and non-profits using cloud, data, andAI to accelerate the pace of innovation in waste,
including the following projects:
Citizen science + AI = waste reduction
Sustainable Coastlines Charitable Trust is using Azure
and AI tools to enhance its groundbreaking LitterIntelligence program, enabling communities around
Aoeteroa, New Zealand to collect litter data, gain insights,
and take action for a litter-free world. The non-profit
hosts its citizen science technology platform and Learning
Management System on Azure, while scaling andimproving data quality by deploying machine learningtechniques and computer vision to train its litterclassification and count model. Litter Intelligence has
established the country΄s first official marine litter
database, and for the first time is enabling citizen science
to be used at the highest levels of government reporting.
Computer vision to detect waste
Recycleye has developed a computer vision systemthat replicates the power of human vision to identify
every item in waste streams, using AI to automate
waste sorting and improve recycling. The organization
recognized the huge issue of waste management andthe importance of accelerating the transition towards
a circular economy. It is using deep learning and AI
advancements with a low cost, rapidly deployable,
decentralized, scalable, and fully automated sorting
solution which can be deployed inside waste
management facilities. Their goal is to create waste
removal chains that are just as efficient as today΄ssupply chains, bringing transparency, accountability,
and traceability to the waste management industry.

Machine learning to prevent ocean plastics
The Ocean Cleanup is known worldwide for its
innovative efforts to rid the ocean of plastics. It has
also started focusing on eliminating plastics at major
sources—rivers— before they reach the sea. The
organization deployed plastic-removal technology inrivers in Indonesia and Malaysia to remove plastics,
and a key aspect of this work was figuring out how to
identify the waste that was floating down the river—is
it plastic or other material? For two Microsoft global
Hackathons, in 2018 and 2019, team members in
Redmond and from around the world worked withThe Ocean Cleanup to build a machine learningmodel to help quantify the amount of plastic pollution
flowing down rivers en route to the ocean.
Subsequent models were then developed to replicate
the process on cameras mounted to drones and ships
crossing the ocean, and a blueprint for cloudcomputing infrastructure was created to help the
project in the future.

The Ocean Cleanup focuses on efforts to rid the ocean of plastics.

54

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55

Key learnings

What we’ve
learnedThe presence of waste in any system
requires a closer look—including
creativity, systems thinking, data
science, and material science.

2
We need to identify the next best use to optimize materials.

1

Creativity kills waste. Examine any waste stream
and it will reveal stories of unrealized value andproducts that weren’t designed with end-of-lifein mind. And, if you look a bit closer, you’ll also
see a grand opportunity. When we looked at thequantity and quality of electronic equipment
leaving our datacenters to be responsibly
refurbished or recycled by our partners, werealized that most of this hardware, or a subset
of its components, still had significant value andcould be reused at least once before being
recycled. We recognized the opportunity toapply creativity and systems thinking to the
problem and intervene in an existing system withthe use of our Circular Centers, which are on-sitereuse and repurposing facilities at our
datacenters. Applying this solution allows us toretain the value of our hardware for longer andalso introduces a feedback loop to share thelearnings from disassembly with our designers
so we can continue to extend the useful life andimprove disassembly moving forward.
The presence of waste in any system requires
a closer look, and with creativity and systems
thinking in mind.

3

Material science and data science are better
together. Our ambition is to improve our waste data
to make more informed decisions about design,
reuse, and disposition. As we’ve improved our
accounting, we have been reminded at nearly every
turn that without improvement and innovations inmaterial science, progress will be much slower. For
example, we’ve greatly improved our quantificationand tracking of single-use plastics in Microsoft
packaging and suppliers’ IT asset packaging in our
datacenters. However, to continue to make progress
towards eliminating single-use plastics in our
packaging, some of our solutions will require amaterial replacement that can meet or exceed
necessary functional requirements. Selecting
sustainable material alternatives requires materialscience to ensure that the materials will circulate
within existing waste management infrastructure
and, if mismanaged, not end up as pollution in theenvironment. By using both material science anddata science, we can solve waste and pollution
problems, not create new ones.
Next best use needs to move from theory topractice. To keep products and materials circulating in
the economy, we need the ability to efficiently identify
the next best use so we can optimize materials andlimit adverse environmental impacts, like carbon
emissions. Right now we lack a principled approachon how to consistently consider the next best use of
products and materials across our business. We
believe technology can benefit our decision-making
process by modeling disposition options and related
environmental impacts, then recommending next
best use based on a principled approach that aligns
with current theories of waste reduction, like theWaste Hierarchy of Highest and Best Use.

How to get started on waste
in your organization:
Microsoft
Sustainability Guide:
Guidance on how
companies can get
started in atechnology-led,sustainabletransformation.

Try the Ellen
MacArthurFoundation Material
Circularity Indicator,
a tool we use as well.

Find out
more here

Run an ecochallenge
to give your employees
the opportunity tolearn and practice
habits that support
them on their personal
zero waste journey.

Sustainability. Good
for Business. Executive
Playbook: A way forcompanies to begin or
accelerate their workon sustainability.
Find out
more here

Learn more about our
Circular Centers.
Find out
more here

Build a connected
waste application in
Azure IoT Central.
Find out
more here

Find out
more here

Find out
more here

Find out where andhow to recycle yourMicrosoft devices,
courtesy of Microsoft.
Find out
more here

Achieving Operational
Zero Waste: An inside
look into Microsoft's
operational zerowaste journey.
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What΄’s next?

Our focus
for 2021

12
3
4In 2021, we will continue to make progress
towards our zero waste by 2030 agenda andshare results and learnings from our journey.
One key area that we are focused on now is thetransformation of our waste accounting using a
mix of technology and “boots on the ground“
tactics, like waste auditing. We look forward to
sharing more details of our transformation, as
customer zero, later this year.
We will deepen our involvement in building
an ecosystem of partners and suppliers to
reduce single-use plastics in consumer andtransportation packaging. Our critical work with
Ellen MacArthur Foundation network members
will focus on shrink wrap/film in transportation
packaging. We will also continue to scale ourwork with our cloud supply chain to quantify
and identify alternatives to plastic waste shipped
into Microsoft’s datacenters.
Our datacenters will roll out a global initiative
to train employees on company-wide andsite-specific procedures to operationalize zerowaste. We will continue to identify opportunities
within our consumer devices to transition to
circular models and utilize recycled andrenewable materials. We are mapping
opportunities to an effort and impact graphto chart the next phases of our journey.
We will continue to partner with our suppliers
to run a series of feasibility tests to determine
if recovered ocean plastics can be processed
and used in Microsoft products.

We are transforming waste accounting using technology.

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Ecosystems

57“Only when we have amassive amount ofplanetary data andcompute can we begin
to answer the complex
question—how do wemanage the Earth ’s natural
resources to ensure a
climate-stable future.”
Dr. Lucas Joppa, Chief Environmental Officer

Contents
Our approach

58

Taking responsibility for
our land footprint

60

Driving innovation: Building
the Planetary Computer

61

Enabling systems change

63

Key learnings

67

What’s next?

68

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Our approach

Overview

The context
Nature, and the benefits that it provides, are thefoundation of our society, cultures, and the global
economy. We depend on well-functioning ecosystems
for clean air, water, food, medicine, energy, and building
materials. But these very ecosystems are threatened or
already in decline. When a species dies off, theimplications for the ecosystem can be catastrophic.
One critical barrier to protecting our ecosystems is ourcurrent understanding of them. We know more about
the rate of decline than we know about the species,
biodiversity, and ecosystems that are vital to our healthand prosperity. Simply understanding where the world’s
forests, fields, and waterways are remains a daunting
task of environmental accounting. There is very little
scientific data on what species call those ecosystems
home and why they thrive or decline.

We will aggregate environmental
data from around the world
and put it to work through data,
AI, and technology with thePlanetary Computer.

Scientists around the world are making tremendous
progress collecting this data and answering key
questions. However, when the work is done, it frequently
takes too long—the assessments that do this work arethousands of pages, cite tens of thousands of scientificsources, and take years to publish. Assessing the planet’s
health must become a more sustained, efficient, andintegrated practice that allows us to understand exactly
what is happening over time.
Fortunately, there is massive potential for technology to
revolutionize our environmental assessment practices, sothey can be conducted faster and cheaper, and—for the
first time—be able to operate at a truly global scale.
Find out
more here-87%

Our progress to date

Wetlands that purify
and store waterand provide habitats forthousands of species
have been reduced by
87 percent relative topre-industrial levels.

Ecosystems are threatened or in decline.

700

Grew the AI for Earth community toover 700 AI for Earth grantees in morethan 100 countries around the world,
including 17 strategic partnerships withkey platforms using the Azure cloud
to provide conservation andsustainability services.

10PB

On-boarded 10 petabytes ofenvironmental and Earth observation
data to Azure that is now freely available
for use by the conservation community.

Protect

Established partnerships with The
Nature Conservancy and the National
Fish and Wildlife Foundation to fulfill
our commitment to protect more land
than we use by 2025.

Supported passage of the Great
American Outdoors Act, which
Microsoft directly advocated forthroughout the legislative process.

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59

Our approach (continued)

Our ecosystemcommitments
In 2020, we established new
goals around ecosystems.

-60%

Mammals, birds, and otherwildlife populations aredown almost 60 percent
in the last 40 years.

Use our voice on ecosystemrelated public policy issues
We will support and advocate for public
policy initiatives that measure andmanage ecosystems at the nationaland global scale.

Table 1

Protect
more
land
we
Protect
more
land
than
weuse
useby
by20252025

We will aggregate environmental
data from around the world andput it to work through computing
and machine learning in a new
Planetary Computer.

We will use the Planetary Computer to develop
and deploy the digital technology that helps
our partners and customers with environmental
decision-making in their organizational activities.

Take responsibility for
our land footprint
We will take responsibility for the
ecosystem impacts of our direct
operations by protecting more land
than we use by 2025.

100%
90%
Land protection (%)

Empower partners and customers
around the world

Build a Planetary Computer

80%
70%
60%
50%
40%
30%
20%
10%
0%
FY20

 Targeted land protection
 Current land use
 Projected land use

FY21

FY22

FY23

FY24

FY25

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60

Protecting ecosystems

Takingresponsibility
for our land
footprint
To meet our commitment ofprotecting more land than weuse by 2025, we are partneringwith global organizations thatcan guide our data and sciencedriven approach to prioritizing
the protection of ecosystems
most at risk.

Changing land use and land coveris the most significant driver ofterrestrial biodiversity loss
Previously, we have worked to address our land use
impacts on a site-by-site basis in our campus anddatacenter work. This is perhaps most visible in our
Silicon Valley campus rebuild, where, to help restore
Stevens Creek, we’ve planted nearly 600 trees,
installed a three acre green roof, and created alandscape that mimics pre-development biodiversity.

Our commitment
In 2020, we committed to permanently protect
and restore more land than we use company-wide
by 2025, using approaches like land acquisition,conservation easement, national park creation, andcommunity or indigenous-led conservation. While
we do not have a particularly large footprint,
Microsoft does directly operate on approximately
11,000 acres of land globally—that’s equal to about
three-quarters the size of Manhattan in New York
City. We’ll protect and restore land in partnershipwith The Nature Conservancy (TNC) globally and
the National Fish and Wildlife Foundation (NFWF)
in the United States.
We will use science and data to prioritize protecting
ecosystems most at risk, using TNC’s newly launchedlast chance ecosystem framework and the NFWF’s
national landscape conservation framework.

“We must work together
to determine how wemaximize the benefits thatnature provides to people
while minimizing theenvironmental harm of
our activities. It won’t beeasy, but it is possible if
we put the pieces together.”
Brad Smith, President

11,000Prioritizing the protection of ecosystems, guided by data and science.

Microsoft operates on 11,000
acres of land globally.

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Driving innovation

Building thePlanetaryComputer
We believe that Microsoft’s mostimportant contribution to protecting
ecosystems and biodiversity isdelivering the Planetary Computer,which provides access to the world’s
critical environmental datasets,
AI, and digital technology.

AI for Earth: a global program and theprecursor to the Planetary Computer
In 2017, we launched our AI for Earth program.
Our aim was simple, but ambitious—to put cloudand AI technology into the hands of the world’s
leading ecologists and conservation technologists,and organizations around the world that are working
to protect our planet.
So far, we’ve provided over 700 grants to organizations
working on game-changing environmental innovations
in more than 100 countries around the world. Our AI for
Earth grantees authored more than 80 research papers
as part of the program and have released over 50 GitHub
repositories to the open-source community.
Find out
more here

However, as we grew the program, we also learned whatgaps still existed. Researchers needed much greater
access to data, more intuitive access to machine learning
tools, and a greater ability to share their work and buildon the work of others. We recognized the need not only
to host datasets on the cloud, but also to build thescaling infrastructure that would make it possible for thesustainability community to work with that data: data
curation, computational platforms, the ability to train
algorithms and run them at planetary scale, and theability to serve the results of those algorithms asapplications available to users anywhere in the world.

Our new focus: the Planetary Computer
Based on these lessons learned, in 2020, we committed
to building the Planetary Computer: a platform thatprovides access to the world’s critical environmental
datasets. We will continuously on-board more data withour customers and partners and build the tools thatmake it easier for scientists to ask global-scale questionsof large datasets, then present those results inapplications that support environmental monitoring,
forecasting, planning, and attribution.
Since we announced our commitment to the PlanetaryComputer, we have on-boarded over 10 petabytes ofenvironmental science data from dozens of sources.
Some key examples include:• The Sentinel-2 satellite program, which provides thehighest-resolution satellite imagery that’s available
to the public at no cost. We have brought four years
of Sentinel-2 data to Azure and processed it to an
analysis-ready format, allowing environmental
scientists to ask questions about the state of land use,
forests, glaciers, and other critical landscape features.
• Landsat 8, which is the newest satellite in the Landsat
program, a network of satellites that has been
continuously monitoring the Earth since 1972.

700+

We’ve worked to empowerover 700 organizations
through our AI for
Earth program.

80

Our AI for Earth grantees
have authored more than
80 research papers as part ofthe program.

We have on-boarded four years of Landsat 8 data to
Azure, the first step in making available a complete
Landsat archive that will enable scientists to ask
questions about long-term ecosystem change.
• The National Oceanic and Atmospheric Administration(NOAA), which provides invaluable information about
weather and climate from a network of monitoring
stations that includes both satellites and ground-based
radar stations. We have on-boarded several key NOAA
datasets to allow scientists to build a picture ofweather and climate, including weather forecast datafrom NOAA’s GFS4 system, historical estimates ofglobal precipitation from NOAA’s Global Hydro
Estimator program, historical surface weather
conditions from NOAA’s Integrated Surface Data
program, satellite-based weather imagery fromNOAA’s GOES-R weather satellites, and radar datafrom NOAA’s NEXRAD program.
• Large-scale geospatial data, which is critical forenvironmental science, but training the next
generation of AI-based biodiversity monitoring
solutions requires lots of annotated wildlife monitoringdata. In partnership with conservation biologists
around the world, we’ve assembled on Azure thelargest publicly available collection of AI-readytraining data for wildlife conservation including
data from motion-triggered camera traps, drones,
satellites, and aircraft.
Find out
more here

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Driving innovation (continued)
Empowering customers and partners
Building the Planetary Computer will take several years,
but there is much we can do in the meantime. Already,with Azure IoT and AI, we have tools and services to help
customers around the world understand the ecosystem
around them today as it exists, monitor and modelchanges from climate or human behavior, and manage
these in a way that protects biodiversity, theircommunity’s well-being and way of life, and the planet.
We announced and enhanced partnerships in 2020 thatwill help us do so, including the following:
Supporting scientific organizations
CSIRO, Australia΄’s national science agency, signed
a partnership agreement with Microsoft to harness
artificial intelligence and other digital technologies
to accelerate critical research and ambitious projects
targeting advances in areas including illegal fishingprevention, removing plastic from rivers, andsmarter farming.

“Maintaining nature forthe benefit of current
and future generations
is one of humanity’s
greatest challenges.
Deploying technology
to support this global
effort is one of ours.”
Brad Smith, President

Delivering geospatial data andanalysis to the world
Esri is the global market leader in geographic
information systems (GIS). Microsoft and Esri share thegoals of making geospatial data and analysis—meaning
the gathering, display, and manipulation of information
about Earth systems—available to every sustainability
researcher and practitioner around the world, andensuring that every conservation organization cancontribute its local data back to that global repository.
From mapping forest loss to combating elephantpoaching, organizations depend on Esri’s tools andexpertise to understand and protect the ecosystems inwhich they operate. We are already working with Esri to
on-board key satellite datasets to Azure, and we will
make sure that every user of the Planetary Computer hasaccess to the vast repository of critical datasets in Esri’s
Living Atlas of the World.

Space age intelligence
Microsoft and SpaceX announced a partnership thatwould marry the tech leader΄’s Azure computing system
΄ Starlink satellite internetwith the space company’s
service. Through Starlink, SpaceX plans to use thousandsof satellites that will provide high-speed internet
anywhere on Earth. Microsoft Azure will connect thosesatellites to cloud storage. Conservation biologists acrossthe world are tasked with the protection of biodiversity
in remote areas that lack cellular connectivity. Starlink
opens a completely new potential mechanism to addressthese connectivity issues, not just making monitoring
more efficient, but also allowing the deployment of
biodiversity monitoring networks at previously
impossible scales.

Starlink satellite internet service and Azure provide conservation biologists with connectivity.

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63

Enabling systems change

Catalyzing
innovation andcollective action
We are focused on new ways toharness the power of technology,
partnerships, investments, and policy
to drive impact at scale and pace tohelp the world protect ecosystems
and biodiversity.

92B

Investing in AI
Our AI for Earth grantees show how AI can drive
exponential scale. A few that have pushed boundaries
this year include the following:
Closing the gap to real-time biodiversity surveys
NOAA΄s Alaska Fisheries Science Center and UWCICOES are working with Microsoft on training AI tools
to distinguish a beluga whale’s call from a dredging
machine’s squeak, to better understand how humannoise might be related to the lack of recovery for thisendangered and declining population. This type of data
allows scientists to devise strategies to reduce negative
effects from increased human activity in the whales΄habitat. Machine learning is achieving more than 96
percent accuracy in classifying detections compared toa more traditional approach, and even picking up things
human analysts miss. The model can also process a large
amount of data very quickly—moving datasets from two
weeks of processing and manual classification tocompleting a batch of six months of sound recordings
in just two days.

Microsoft Azure andhigh-resolution satellite
imagery was used tocount 92 billion trees
in the US.

Distinguishing whale callswith AI.

Measuring biodiversity
In April 2020, we announced a new AI for Earthcollaboration with the Group on Earth Observations
Biodiversity Observation Network (GEO BON). This
$1 million Essential Biodiversity Variables (EBVs) on thecloud grant program was launched to help advanceefforts to monitor Earth’s biodiversity and create usefulmeasurements required for the study, reporting, andmanagement of biodiversity change that inform
conservation decisions across the globe. In October 2020,
we announced five winners that will receive financial
support, as well as access to resources from Microsoft andEsri. These projects include: mapping Belize’s coastal andmarine ecosystems, detecting change in essential
biodiversity for citizen science initiatives, improving
mapping accuracy of mountainous ecosystems, creating
open source tools to analyze bioacoustics data, andcombining data sources to assess EBVs.
Advancing forestry and sequestration measurement
Accurate forest inventories are an essential tool for
conservationists, governments, and landowners who seek
to promote ecological, social, and economic health.
Microsoft has worked with SilviaTerra to accelerate theircutting-edge approach to precision forestry, and radicallyincrease the scope, efficiency, and resolution of forest
inventories. They produced the first ever comprehensive
forest map of the US, covering every acre of thecontiguous US and accounting for almost 92 billion trees.
SilviaTerra applies this annually-updated data to predict
carbon sequestration on each forest parcel, bringing tomarket a new gigaton-scale supply of forest carbon
credits. They are also working to explicitly measure
co-benefits such as wildlife habitat, water yield, and firerisk reduction. Microsoft is also supporting SilviaTerra’s
΄
work by purchasing carbon credits generated by theirpilot project.

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Appendix64

Enabling systems change (continued)
Maps of natural resources
With support from Esri, The Nature Conservancy,and Microsoft΄’s AI for Earth program,
NatureServe has created a comprehensive set of
habitat models for over 2,200 at-risk species in thecontiguous United States, including those ranked
as Globally Critically Imperiled or Globally
Imperiled, or those listed as full species under
the U.S. Endangered Species Act. Analyzed inconjunction with boundaries of protected areas,
these data support mapping areas of highbiodiversity importance—an invaluable input
to guide effective conservation decision-making.

Guiding conservation decision-making with habitat models for at-risk species. Chris Lukhaup

Indigenous knowledge plus AI
The Healthy Country partnership in Kakadu National
Park is a pioneering program that is mixing responsible
AI and science with Indigenous knowledge to solve
complex environmental management problems andcare for animal species and habitats. The partnership ispart of the National Environmental Science Program(NESP)΄s Northern Australia Environmental Resources
Hub. It brings together Kakadu Traditional Owners andindigenous rangers, CSIRO, Microsoft, Parks Australia,
the University of Western Australia (UWA), and Charles
Darwin University (CDU). Under the direction ofIndigenous Traditional Owners and rangers, drones
capture video footage in Kakadu National Park.
The data is collected, labeled, and interpreted using a
combination of Indigenous knowledge, Microsoft AI,
data visualization, and scientific research. The models
allow rangers to regularly survey large areas that are
difficult to access and remove the need for people toreview thousands of hours of video. The Healthy Country
AI project represents an end-to-end solution to support
adaptive co-management.

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Enabling systems change (continued)
Advancing policy
Governments play a unique and important role inmeasuring and managing ecosystems and biodiversity
as they collect and make publicly available massive
amounts of data critical to environmental science. They
also own billions of acres of public land that they can use
to protect, manage, and restore critical ecosystems. And
they establish and implement policies governing the use
and management of natural resources and ecosystems.
As part of our 2020 commitment, we will act on policyby calling for:• National ecosystem assessments which help
governments understand what is happening in acountry’s natural environment and what actions areneeded to safeguard critical ecosystem services.
• Infrastructure to accelerate measuring and monitoringof ecosystems, including digital tools and broadband
connectivity to help collect, integrate, and makepublicly available data and real-time insight into thehealth of our ecosystems.
• Public land and water conservation, including
government funding for the acquisition andmaintenance of land and water for conservation,
recreation, and natural preservation.
• Public-private partnerships that encourage andfacilitate investments by non governmentalorganizations, individuals, and the private sector
to protect and restore critical ecosystems.

Already, we’ve seen our advocacy play a meaningful rolein policy solutions, including:• The release in 2020 of the EU Biodiversity Strategy for2030 in Europe, which Microsoft supported and willcontinue to engage on, as key initiatives under the
strategy are expected in 2021. The strategy aims toincrease protected areas across the EU, and to identify
new measures for managing and restoring ecosystems.
A dedicated “Biodiversity Partnership” will linkresearchers and practitioners, and support data-driven
research to stop the loss of biodiversity.

65

$9.5B

Great American
Outdoors Act provides
funding for the Landand Water Conservation
Fund and $9.5 billion
over five years for
National Parks.

• The Great American Outdoors Act, which Microsoft
directly advocated for and publicly supported during
the legislative process, and which was passed andenacted into law in 2020. The Act has two main
components: fully and permanently funding the Landand Water Conservation Fund at $900 million per year,
and providing $9.5 billion over five years to address
maintenance backlogs at US National Parks.
• The Trillion Trees Initiative, which was unveiled at theWorld Economic Forum (WEF) in 2020. The US Chapter
was launched in the third quarter of 2020 by WEF andAmerican Forests and was bolstered by a presidential
executive order to establish a high-level USinteragency council. Microsoft serves on the Steering
Committee of the initiative and submitted one of theinitial corporate pledges. We have been working withthe organizers on ways to design the initiativein a way that accelerates reforestation and verifiably
removes carbon.

Governing the use and management of natural resources and ecosystems.

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66

Enabling systems change (continued)“It΄’s what we all dotogether that will
make the difference.”

Scaling through new partnerships

OS-Climate
In Q3, Microsoft joined Allianz, Amazon, and S&P Global
as initial founding members of OS-Climate, a new
initiative hosted by the Linux Foundation to help close
the $1.2 trillion annual gap in investment urgently
needed for decarbonization and climate resilience.
OS-Climate is a collaborative, member-driven, non-profit
platform for developing open data and open source
analytics to enable climate aligned investing, finance,and business by resolving the major barrier of costly,
poor quality, highly fragmented data, and a lack ofanalytic tools. The initiative serves not only the financecommunity but also governments, companies, NGOs,
and academia. Microsoft has already begun sharing its
relevant sustainability data to advance modeling andunderstanding of climate change impact on businesses,
as well as contributing new solutions accelerators
focused on ESG reporting and risk management.
One Planet Business for Biodiversity
Microsoft joined One Planet Business for Biodiversity(OP2B), an international cross-sectorial, action-oriented
business coalition on biodiversity with a specific focus onagriculture, launched at the United Nations Climate
Action Summit in 2019. The coalition is determined todrive transformational systemic change and catalyze
action to protect and restore cultivated and natural
biodiversity within the value chains, engage institutionaland financial decision-makers, and develop
and promote policy recommendations for the2021 CBD COP15 framework.
Business for Nature Call to Action
Microsoft joined 560 other companies in September
2020 in signing the Business for Nature Call to Action,
urging governments to adopt policies now to reverse
nature loss in this decade.

Dr. Lucas Joppa, Chief Environmental Officer

1t.org—Conserving, restoring and growing 1 trillion trees by 2030.

The signatories are committing and acting to restore andprotect ecosystems, and through this call, advocate forgovernments to work together and create a positive
policy feedback loop.
C4IR Ocean
In the third quarter of 2020, Microsoft joined the World
Economic Forum’s Center for the Fourth Industrial
Revolution Network for ocean innovation andtechnology in Norway (C4IR Ocean). C4IR Ocean isdedicated to using data, technology, and governanceframeworks to protect the world’s oceans and increase
the sustainability of ocean-based industries.

We’re one of the founding organizations working with
C4IR Ocean on its Ocean Data Platform. This global,
open-source platform gives data scientists, app
developers, and marine spatial planners access to data
coming from historic and real-time data sources todevelop solutions for a healthy and productive ocean.
1 Trillion Trees
Microsoft submitted a pledge to 1t.org in 2020 withcommitments and policies that grow and conserve trees, aswell as activities that support forests. Launched in January
2020, 1t.org is a 10-year effort to support the UN Decade on
Ecosystems Restoration from 2021 to 2030, which aims toconserve, restore, and grow one trillion trees by 2030.

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67

Key learnings

What we’ve
learned2

We need to accelerate the collection
and collaborative analysis of
ecosystems data through AI andmachine learning, so scientists allover the world can work on acommon platform.

1

The skills gap is real. In many cases, the barrier
preventing environmental scientists from using
the scale of the cloud isn’t technical, it’s expertiseinertia. Climate and Earth science has developedon local computing infrastructure at universities,
and if we want to provide that community withthe ability to serve their work globally and use
the cloud for collaboration, we have to lower thatbarrier, and we can’t ask the community to
become cloud infrastructure experts.
Consequently, we need to double down on the
education component of our AI for Earth grants
program, and we need to provide simplified
computing infrastructure for the Earth sciencesthat abstracts away the details of managing cloudcomputing and lets scientists focus on science.

3

Fifteen years is too long. Ecosystems are declining
at an alarming rate, and the volume of data thatneeds to be collected and analyzed to quantify thatdecline is daunting: the 2019 Global Assessment
Report on Biodiversity and Ecosystem Services wasnearly five years in the making, and was publishednearly 15 years after its predecessor, the Millennium
Ecosystem Assessment. Waiting this long before thenext assessment would be disastrous; reportingneeds to be continuous, not limited by long cyclesof annual conferences and funding bottlenecks.
Consequently, we need to accelerate the collectionof ecosystems data through AI and machinelearning (letting conservation researchers spend
less time annotating data, and more time planning
conservation), and accelerate the collaborative
analysis of ecosystems data through cloud-based
tools that make global data available, so scientists
all over the world can work on a common platform,
reducing the time required for communicationand iteration.
The world needs building blocks. Microsoft is atour best when we’re building horizontally rather
than vertically, putting in place the fundamental
tools that support our customers and partners
who are studying natural systems and guiding
climate policy. Consequently, our role won’t bebuilding all the applications and AI models thatare necessary to accelerate environmental
sustainability, but putting in place the data,
models, APIs, and open-source examples thatallow the sustainability community to work at
peak efficiency. That’s why we’re investing in ourPlanetary Computer, a platform that will bring
together conservation scientists and practitioners
around common tools that accelerate their work.

How to get started on ecosystem andbiodiversity work in your organization

Hear Dr. Lucas Joppa
discuss the PlanetaryComputer.
Find out
more here

Check out the
explainer video on thePlanetary Computer.
Find out
more here

Learn how to be a partof AI for Earth.
Find out
more here

Explore how you canaccess geospatial data
and AI with Microsoft
and Esri.
Find out
more here

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Appendix68

What΄’s next?

Our focus
for 2021

1
2
3

Build our open-source Planetary Computer
tools, which will simplify access to large
datasets and powerful computing resources
for the environmental science community.

Expand our data hosting program to 15 key
environmental datasets that will power
Planetary Computer solutions.

Work with our land protection partners
to identify the specific areas of land that
Microsoft will safeguard, and initiate land
procurement and protection.

The Planetary Computer will simplify access to datasets and computing resources.

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Appendix

Appendix

69

Contents
A – Commitments

70

A – Partnerships

71

A – How we report72

B – Our environmental
data

73

C – Materiality

82

D – Governance85

E – Policy

91

F – Assurance95

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Appendix70

Appendix A

Commitments
Our history 2012–2019

Our commitments 2020–2050

2030
2025
2012

2016

2017

2018

2019

100% carbon neutral

Zero-waste campus
certification

AI for Earth launch

Supplier carbon
engagement in China
launched

Carbon fee raised to $15

Internal carbon fee
instituted

LEED Gold certification
for new datacenters

Net zero potable water
Silicon Valley campus
groundbreaking

Water replenishment
goal set

Operate with 100%
renewable energy
Find out
more here

2025
Protect moreland than Microsoft uses
Find out
more here

Becomecarbon negative
Find out
more here

2030

2050

Become zero waste

Remove all
historical emissions

Find out
more here2030
Become water positive
Find out
more here

Find out
more here

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71

Appendix A (continued)
Partnerships
Founding member of Transform to Net Zero, with eight leadingorganizations with aim to accelerate corporate transition to net zero.
Find out
more here

Founding member of Water Resilience Coalition, which will provide
tools and guidance to improve water resiliency.
Find out
more here

Memberships

Recognitions
Just 100: For the third year in a row, Microsoft took first place on The 2020
Just 100, a list by Just Capital and Forbes to rank companies perceived as“the best at doing right by America”.
Find out
more here

EcoAct Dow Sustainability Rankings: Microsoft was rated as the highest
performing company across all indices within the CAC 40, Dow 30, FTSE 100,and IBEX 35.
Download
hereFounding member of Climate Finance Foundation to help modelclimate risks.
Find out
more here

Partner to Center for the Fourth Industrial Revolution Oceans (C4IR)
to develop technology-based solutions to improve ocean health.
Find out
more here

Named to CDP A List for Climate Change and Water Security for 2020.
Find out
more here

EPA Green Power: Microsoft won the top award for Sustained Excellencein Green Power Use, for its green power commitment, focus on innovation,and sustained commitment to direct project engagement.
Find out
more here

Ellen MacArthur Foundation
With members of the Ellen MacArthur Foundation, we developed
a group on Circular Business to Business Transport Packaging Solutions.
Find out
more here

America΄s Most Responsible Companies 2021: Microsoft was ranked third
by Newsweek΄s assessment of companies across leading ESG areas.
Find out
more here

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72

Appendix A (continued)

How wereportReporting standards
GRI: Microsoft works to align our corporate social
responsibility (CSR) commitments and reporting to
global standards. We inform our CSR reporting using
the Global Reporting Initiative (GRI) Sustainability
Reporting Standards.
TCFD and SASB: Microsoft is committed to fully aligningwith the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD) and theSustainability Accounting Standards Board (SASB)
standards. We adapted these frameworks, where
necessary, to map them to our current operations,programs, and processes as they relate to climate risks
and opportunities assessment and management with
the intent to publish our disclosure in 2021.
SDGs: We΄re actively engaged in supporting the UN
Sustainable Development Goals (SDGs) and publicly
report how Microsoft contributes to the global effort
to achieve them. More information on this year’s report
can be found here:
Our commitment tosustainable development

Our policies and practices

Governance

Additional information

We work to apply the power of technology to earn andsustain the trust of the customers and partners weempower and the communities in which we live andwork. This focus extends to our work to build asustainable future where everyone has access to thebenefits and opportunities that technology can bring.
It’s central to our mission to empower every person andorganization to achieve more, and it΄s why many of ouremployees come to work every day.

Microsoft has made sustainability part of its business,
including embedding it deeply into its governancestructure. The Microsoft Board is engaged in oversightof climate-related risks and opportunities, andmanagement is fully engaged in assessing andmanaging risks and opportunities. Additional
information about our governance structure forsustainability can be found in Appendix D as wellas in our CDP responses.

We regularly publish progress on our work on
environmental sustainability, as well as our larger
CSR work. This year’s CSR report can be found here:

Working together with stakeholders
We know that the decisions we make affect ouremployees, customers, partners, shareholders, suppliers,
and communities, and we take their voices into account.
Microsoft receives input from millions of people eachyear—from individual customers to policymakers andglobal human rights specialists. We bring outside
perspectives into the company and inform our businessdecisions through a variety of feedback channels. We go
beyond formal channels, proactively engaging with key
stakeholders, advocacy groups, industry experts, CSR
rating agencies, CSR-focused investors, and many others.
We also share our learnings and practices thereby
generating industry dialogue, informing public debate,
and advancing greater progress.

Identifying material issues
Our CSR materiality assessment reflects input gatheredfrom our stakeholder engagement processes,
consultation with Business for Social Responsibility andother external experts, and consideration of the impactof our core businesses.
In 2020, Microsoft conducted a new materiality
assessment with a focus on environmental sustainability,
which can be accessed in Appendix C.
Read more
Appendix C

Read more
Appendix D

Forward-looking statements
This report includes estimates, projections, and other“forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995, section
27A of the Securities Act of 1933, and section 21E of the
Securities Exchange Act of 1934. These forward-looking
statements generally are identified by the words“believe,” “project,” “expect,” “anticipate,” “estimate,”“intend,” “strategy,” “future,” “opportunity,” “plan,” “may,”“should,” “will,” “would,” “will be,” “will continue,” “willlikely result,” and similar expressions. Forward-looking
statements are based on current expectations andassumptions that are subject to risks and uncertainties
that may cause actual results to differ materially.
We describe risks and uncertainties that could cause
actual results and events to differ materially in ourreports filed with Securities and Exchange Commission.
We undertake no obligation to update or revise publicly
any forward-looking statements, whether because of
new information, future events, or otherwise.

Download our2020 CSR Report

Previous reports can be found here:
Our Reportshub

Our Sustainable Devices FY20 report can be found here:
Microsoft Devices
Sustainability Report FY20

Our yearly data sheet, with greater detail on ouremissions and impacts, is in Appendix B:
Read more
Appendix B

Our current year CDP responses on Climate and Water,
both named to the A List, can be found here:
Read our CDP responseon Climate
Read our CDP response
on WaterOverview

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Appendix73

Appendix B

Ourenvironmental
data

Table 1

Greenhouse gas emissions (mtCO2e)
FY17

FY18

FY19

FY20

107,452

99,008

117,956

118,100

Scope 2 – Location-based²

2,697,554

2,946,043

3,557,518

4,102,445

Scope 2 – Market-based1,2

139,066

183,329

275,420

228,194

Scope 3 – Purchased goods & services3,54,090,000

4,120,000

4,190,000

4,050,000

Scope 3 – Capital goods3,5

1,670,000

2,230,000

2,180,000

2,750,000

Scope 3 – Fuel- and energy-related activities (Location-based)5

540,000

550,000

650,000

770,000

Scope 3 – Fuel- and energy-related activities (Market-based)5

89,000110,000

170,000

180,000

Scope 3 – Upstream transportation3,5

50,00050,000100,000

100,000

700

500

1,100

800

Scope 3 – Business travel1,4

419,020

461,787

476,457

329,356

Scope 3 – Employee commuting2,5343,000

345,000

411,000

317,000

Scope 3 – Downstream transportation2,5

85,00098,00057,00044,0004,103,000

4,230,000

3,753,000

3,025,000

Scope 3 – End-of-life of sold products2,5

31,00018,00018,00017,000

Scope 3 – Downstream leased assets

700

1,700

800

4,600

Total – Scope 1, Scope 2, and Scope 36

11,128,000

11,947,000

11,751,000

11,164,000

Scope 11,2

As part of Microsoft’s commitment
to disclose information about ourenvironmental footprint, the tables
on pages 73–81 are a compilationof environmental indicators
including our greenhouse gas
emissions, energy consumption,water consumption and discharge,
and waste.

Scope 3 – Waste5

Scope 3 – Use of sold products

2,5

All reported values represent best available data at thetime of publication. Data is adjusted to incorporate
updated methodology, structural changes, and/or minor
corrections. Additional detail on these changes is
included as footnotes where applicable.

1
2
3
4
5
6

Included in carbon neutral boundary. For Scope 3 business travel, only emissions from air travel are included.
Emissions calculations have been adjusted to include methodology improvements and/or structural changes, which have been applied to all years reported in this factsheet.
The emissions calculations for these categories have been adjusted to include latest supplier emissions reported through CDP Supply Chain.
Business travel now incorporates emissions from hotel night stays, rail travel, taxi, mileage reimbursement, and rental cars. Previously reported years have been adjusted to reflect these emission sources.
The reported emissions for this category represent an estimate based on broad-based assumptions and have therefore been rounded.
Scope 2 and 3 market-based emissions included in this total. Total rounded to nearest thousand mtCO2e.

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Appendix74

Appendix B (continued)
Through CDP (formerly the Carbon Disclosure
Project) we have voluntarily reported our carbon
footprint since 2004 and our water footprint since2012. Please see our CDP submission for moredetailed information.
The greenhouse gas, energy, and water data in our
CDP filings and this report represent 100 percent ofMicrosoft’s global operations and revenue. The datain this factsheet includes the integration of LinkedIn
following our acquisition of this group in 2016.
To allow meaningful year-over-year comparisons,
we have adjusted our data for previous years toreflect this integration.
This factsheet also reports both location andmarket-based Scope 2 emissions, per the World
Resources Institute Greenhouse Gas Protocol Scope 2
guidance. Location-based emissions represent thephysical emissions from local energy production,
while market-based emissions represent emissions
from choices related to electricity supply and products.
For Microsoft, market-based emissions take into
account more than 10.2 billion kilowatt-hours (kWh) ofrenewable energy attributes that we purchased as partof our 100 percent renewable energy commitment.

Table 2

Greenhouse gas emissions normalized by revenue (mtCO2e/M$)
FY17

FY18

FY19

FY20

1.1

0.9

0.9

0.8

Scope 2 – Location-based

27.9

26.7

28.3

28.7

Scope 2 – Market-based

1.4

1.7

2.2

1.6

Scope 3 – Business travel

4.3

4.2

3.8

2.3

FY17

FY18

FY19

FY20

Total energy use⁷

6,756,779

7,781,383

9,249,361

10,757,166

Electricity⁷

6,344,700

7,357,636

8,744,834

10,244,377

412,078

423,748504,527

512,788

6,104,758

7,357,636

8,744,834

10,244,377

6,104,340

7,357,235

8,744,247

10,244,059

On-site renewable energy

418

400

587

318

Percentage of renewable electricity

96%

100%

100%

100%

Scope 1

Table 3

Energy use (MWh)Other fuels

7,8

Renewable energy usage
Renewable energy credits and power purchase agreements

7 Values have been adjusted to include methodology improvements and structural changes, which have been applied to all years reported in this factsheet.
8 Other fuels include natural gas, LPG, diesel, jet fuel, district heating, and chilled water.

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Appendix75

Appendix B (continued)
Table 4

Table 6

Carbon neutrality (mtCO2e)

Waste generation (metric tons)12
FY17

FY18

FY19

FY20

GHG emissions within carbon neutral boundary9,10

573,871652,282

781,345612,927

Offsets purchased

573,871652,282

781,345612,927

0

0

0

0

100%

100%

100%

100%

Net GHG emissions within carbon neutral boundary
Percent of total GHG emissions balanced by carbon offsets9
9 Represents the value prior to historic benchmarking due to acquisitions and methodology changes.
10 Carbon neutral boundary includes global Scope 1, Scope 2 market-based, and Scope 3 business air travel.

Table 5

FY17

FY18

FY19

FY20

Reused

325

40

1,325

3,016

Recycled

17,077

11,20048,36447,542Composted

5,920

5,883

8,397

10,069Landfilled

2,047

1,602

12,063

15,870Incinerated

690

342

7,563

566

Hazardous waste (included in the categories above)

2,188

1,405

14,534

9,469

Recycled hazardous waste (included in the categories above)

2,122

1,376

7,280

9,461

12 FY19 and FY20 now encompass global data across Microsoft’s direct waste footprint, including estimates where needed. Currently only data captured from our largest officecampuses is included as part of our limited assurance verification. As we continue improving our waste accounting, our reported values may change. Values currently exclude wastefrom construction and demolition.

Water metrics (m³)11
FY17

FY18

FY19

FY20

Water withdrawals

5,148,454

6,718,985

7,505,081

7,618,089

Water consumption

1,912,934

3,325,664

3,945,783

3,966,639

Water discharge

3,235,520

3,393,321

3,559,298

3,651,450

11 In FY18 we adjusted our water data collection methodology to include more accurate datacenter withdrawal estimates. FY17 withdrawal estimates were not retroactively adjusted.
50% of the change from FY17 to FY18 is from the methodology adjustment, and the other 50% is from organizational growth. We also began estimating water consumption in FY18,
backfilling FY17 using the same estimation methodology. Values have been adjusted to include methodology improvements and structural changes, which have been applied to all
years reported in this factsheet.

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Appendix76

Appendix B (continued)

Additional
environmental
indicators

Table 7

Greenhouse gas emissions (mtCO2e)
FY17

FY18

FY19

FY20

Scope 1 – CO2

82,44881,263

95,667

96,700

Scope 1 – CH4

45

45

50

53

CH4 emissions – Asia

5

4

3

4

CH4 emissions – Europe, Middle East, Africa

16

15

26

28

CH4 emissions – Latin America

9

9

5

5

CH4 emissions – North America

16

17

16

16

Scope 1 – N2O

248

261

256

236

Scope 1 – HFCs

24,71017,40821,951

21,070

Scope 1 – PFC

–

–

–

–

Scope 1 – SF613

–

32

32

41

Scope 1 – Asia

9,699

6,483

7,330

8,650

Scope 1 – Europe, Middle East, Africa

44,873

41,276

57,95761,719

Scope 1 – Latin America

6,260

6,173

3,919

3,871

Scope 1 – North America

46,62045,07648,75043,859

Scope 2 – Location-based – Asia

439,035

528,277

691,772804,567

Scope 2 – Location-based – Europe, Middle East, Africa

399,194

519,058

681,743

860,858

Scope 2 – Location-based – Latin America

20,96823,45025,40315,707

Scope 2 – Location-based – North America

1,838,358

1,875,258

2,158,601

2,421,314

Scope 2 – Market-based – Asia

121,930

174,533

266,725

219,416

Scope 2 – Market-based – Europe, Middle East, Africa

14,460

7,301

7,463

7,376

Scope 2 – Market-based – Latin America

2,053

751

632

594

Scope 2 – Market-based – North America

623

744

600

808

CO2 Intensity – Scope 1 + Scope 2, Location (mtCO2e/MWh)

0.42

0.39

0.40

0.39

13 In FY18 we began estimating SF₆ leakage at datacenters.

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77

Appendix B (continued)
Table 8

Table 9Carbon offsets

Other emissions (metric tons)14
FY17

FY18

FY19

FY20

Percent of total scope 3 GHG emissions balanced
by carbon offsets

3%

3%

3%

2%

Potential for carbon trade based on recent performance

No

No

No

No

FY17

FY18

FY19

FY20

223

209

215

202

NOx emissions – Asia

13

6

7

7

NOx emissions – Europe, Middle East, Africa

152

145

144

137

NOx emissions – Latin America

25

24

16

16

NOx emissions – North America

33

34

49

41

13

13

12

12

SOx emissions – Asia

2

1

1

1

SOx emissions – Europe, Middle East, Africa

7

7

7

7

SOx emissions – Latin America

1

1

1

1

SOx emissions – North America

3

3

4

4

199

184

185

170

VOC emissions – Asia

10

3

5

5

VOC emissions – Europe, Middle East, Africa

148

141

133

124

VOC emissions – Latin America

24

23

15

16

VOC emissions – North America

17

16

32

26

PM emissions

7

7

8

8

CO emissions

1,860

1,704

1,721

1,584

Ozone depleting substances

1,330

1,116

579

415

NOx emissions

SOx emissions

VOC emissions

14 Values have been adjusted to include methodology improvements and structural changes, which have been applied to all years reported in this factsheet.

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78

Appendix B (continued)
Table 10

Table 11

Other emissions normalized by revenue (metric tons/M$)

Electricity consumption (MWh)

FY17

FY18

FY19

FY20

NOX emissions

0.00230.00190.00170.0014

SOX emissions

0.000140.000110.000100.00009

CH4 emissions

0.00050.00040.00040.0004

FY17

FY18

FY19

FY20

6,344,700

7,357,636

8,744,834

10,244,377

Electricity consumed – Asia

682,713804,024

1,066,033

1,225,534

Electricity consumed – Europe, Middle East, Africa

971,073

1,265,961

1,654,384

2,102,486

Electricity consumed – Latin America

90,929106,936

117,222

113,456

Electricity consumed – North America

4,599,985

5,180,715

5,907,195

6,802,901

204,937–––

Non-renewable electricity purchased & consumed – Europe, Middle
East, Africa

17,391–––

Non-renewable electricity purchased & consumed – Latin America

3,603

–

–

–

–

–

–

–

Non-renewable electricity by source – coal

42,746–––

Non-renewable electricity by source – petroleum

34,058–––

Non-renewable electricity by source – natural gas

148,643–––

Non-renewable electricity by source – nuclear

484

–

–

–

Electricity consumption normalized by revenue (MWh/M$)

66

67

69

72

Total electricity consumed

Non-renewable electricity purchased & consumed – Asia

Non-renewable electricity purchased & consumed –North America

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79

Appendix B (continued)
Table 12

Table 13

Renewable energy consumption (MWh)Other energy consumption (MWh)15
FY17

FY18

FY19

FY20

Renewable energy purchased & consumed – Asia

466,243804,024

1,066,033

1,225,534

Renewable energy purchased & consumed – Europe,
Middle East, Africa

941,343

1,265,961

1,654,384

2,102,486

Renewable energy purchased & consumed – Latin America

85,935

106,936

117,222

113,456

Renewable energy purchased & consumed – North America

4,611,239

5,180,715

5,907,195

6,802,901

Renewable energy purchased & consumed – wind

5,974,762

6,919,601

7,742,416

8,588,040–––

Renewable energy purchased & consumed – biomass

61,02947,129Renewable energy purchased & consumed – hydro33,174

Renewable energy purchased & consumed – landfill gas

Renewable energy purchased & consumed – geothermal
Renewable energy purchased & consumed – solar

FY17

FY18

FY19

FY20

412,078

423,748504,527

512,788

Non-renewable energy purchased & consumed – Asia

34,096

20,44021,97524,877

Non-renewable energy purchased & consumed –Europe, Middle East, Africa

187,087

177,234

266,221287,890

Non-renewable energy purchased & consumed –Latin America

23,99623,23913,977

13,906–

Non-renewable energy purchased & consumed –North America

166,899

202,835

202,354

186,116

2,347–

Non-renewable energy purchased & consumed – coal

–

–

–

–

186,434

309,873440,834

Non-renewable energy purchased & consumed – natural gas

107,687

110,863

196,644

218,557–

72,000461,586

409,511

152,915

152,034

147,297

132,472

228,612805,992

Non-renewable energy purchased & consumed –crude oil/diesel

164,324

35,795

Non-renewable energy purchased & consumed –LPG/propane/jet fuel43,40250,37847,43740,450Non-renewable energy purchased & consumed – gasoline

46,99644,60443,47443,000Non-renewable energy purchased & consumed – chilled water

30,121

52,77552,93751,026

Non-renewable energy purchased & consumed –hot water/steam

19,54912,213

12,002

12,458

Scope 3 – Category 3 (transmission and distribution losses)

510,000

600,000

730,000

850,000

1,700

4,100

1,900

11,200Total non-renewable energy purchased & consumed

Scope 3 – Category 13 (downstream leased assets)
15 Non-electricity.

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80

Appendix B (continued)
Table 14

Table 14

Water (m3)16

Water (m3)16 (continued)
FY17

FY18

FY19

FY20

5,148,454

6,718,985

7,505,081

7,618,089

4,931,662

6,291,706

7,032,580

7,085,228

Water withdrawals – surface water

–

–

–

–

Water withdrawals – ground water

16,517

29,14034,495––

Water withdrawals – rain water

90,622

Water withdrawals – process water

FY17

FY18

FY19

FY20

3,235,520

3,393,321

3,559,298

3,651,450

Water discharges – Asia

551,142626,965

658,101

600,280

Water discharges – Europe, Middle East, Africa

521,107467,731591,370

735,168

15,636

Water discharges – Latin America

66,714

48,201

43,33935,416––

Water discharges – North America

2,096,557

2,250,423

2,266,487

2,280,586

103,550

104,148

89,115

109,653294,589

333,858

428,110

Water withdrawals – Asia

972,666

1,244,256

1,482,174

1,532,830

Water withdrawals – Europe, Middle East, Africa

710,744

850,909

1,115,579

1,433,632

Water withdrawals – Latin America

93,291

114,575

113,885

108,617

Water withdrawals – North America

3,371,753

4,509,245

4,793,443

4,543,009

1,912,934

3,325,664

3,945,783

3,966,639

1,775,047

3,127,918

3,715,190

3,650,118

Water consumption – surface water

–

–

–

–

Water consumption – ground water

2,927

4,020

3,449

1,564

–

–

–

–

Water consumption – rain water

25,30829,83330,042

24,780

Water consumption – process water

109,653

163,893

197,102

290,177

Water consumption – Asia

421,525

617,291

824,073932,550

Water consumption – Europe, Middle East, Africa

189,636

383,178

524,209698,464

Water consumption – Latin America

26,577

66,37470,546

73,201

Water consumption – North America

1,275,196

2,258,821

2,526,955

2,262,423

Total water withdrawals
Water withdrawals – municipal supply

Water withdrawals – salt/brackish water

Total water consumption
Water consumption – municipal supply

Water consumption – salt/brackish water

Total water discharges – municipal treatment

16 For more information on our water data, please see our CDP Water response at www.cdp.net.

Overview

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Water

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Appendix81

Appendix B (continued)
Table 15

Verification
FY17

FY18

FY19

FY20

Scope 1 – GHG emissions

Yes

Yes

Yes

Yes

Scope 2 – location-based GHG emissions

Yes

Yes

Yes

Yes

Scope 2 – market-based GHG emissions

Yes

Yes

Yes

Yes

Scope 3 – business air travel GHG emissions

Yes

Yes

Yes

Yes

Scope 3 – GHG emissions from all categories

No

No

Yes

Yes

Total energy consumed

Yes

Yes

Yes

Yes

Total electricity consumed

Yes

Yes

Yes

Yes

Total renewable electricity consumed

Yes

Yes

Yes

Yes

Total offsets purchased

Yes

Yes

Yes

Yes

Total water withdrawals

Yes

Yes

Yes

Yes

Overview

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Appendix82

Appendix C

Materiality—
identifying
what matters
Our material issues articulate whatmatters most to our business andour stakeholders. This awarenessis crucial to identify and manage
our risks and opportunities,
and to respond effectively to
our stakeholders.

Approach and process

In 2020 we worked with an external agency to carry out
a materiality assessment, following a six-step process:Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Identifying issues

Refining the list

Scoring the issues

We initiated ourmateriality assessment
by identifying a long listof potentially material
topics by using theexpertise of ourexternal agency,
relevant sustainability
frameworks (including
GRI and SASB), as wellas Microsoft’s businessand sustainability
mission and priorities.

We carried out research
to refine the long list ofissues for stakeholders
to consider and rank.

Understanding
internal andexternal
stakeholder
perspectives

Prioritizing theissuesValidating theoutcomes

We prioritized
Microsoft’s key issues
using two parameters:

We held a workshopthat included thecompany’s
environmental
sustainability experts,
including the Chief
Environmental Officer,
where the group
reviewed, refined, andultimately affirmed themateriality results.

Our research comprised
an assessment of recent
media and social media
conversations related tothe environment, as
well as relevant trends
and emerging issues.

Next we conducted aseries of internal andexternal interviews
and surveys with key
stakeholders to gain
their perspectives on
top issues.
The stakeholders wereselected based on theirexpertise andknowledge ofMicrosoft’s business.

We appliedprioritization criteria
and weighting to theresults of our
stakeholder interviews
and surveys to support
issue scoring.
Issue scoring also
included inputs fromour external agency
based on their industry
knowledge, bestpractice, andexpectations.

• The importanceof each issue tostakeholders.
• The importanceof each issue on
business success.

Carbon

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Appendix C (continued)

Appendix•

Materiality
matrix2 Ecological impacts

We used the results of ourmateriality assessment to generatea sustainability materiality matrix.

5 Environmental policy or
management system andcompliance

The outcomes of the materiality
assessment reflect environmentallyfocused material topics from acrossour value chain that consider socialand governance aspects ofenvironmental performance.
While the placement of issues on
the matrix provides insight into ourpriorities, the relative importance ofan individual issue often differs bybusiness unit, geographic location,and stakeholder group.

Environmental
1

Air quality

83

Sustain/communicate

Prioritize

3 Waste and hazardous materials
management
4 Water and wastewater
management

7 Tech solutions for societal
challenges
8 Energy management
9 GHG emissions
10 Product lifecycle impacts

Social•11 Climate misinformation
12 Supplier’s environmental andclimate performance
13 Environmental and climate justice
14 Just transition
15 Employee activism

Governance•

16 Responsible sourcingof raw materials
17 Compliance
18 Public policy engagements

•
•
•
•
•
••
•
•
•
•
10

6 Climate change risk

Importance to stakeholders

Overview

6

12

17

16

7

8

9

19

18

5

4

•
1

3

13

14

2

20

15

11

19 Responsible product innovation
20 Risk and opportunity management

Monitor, comply, manage

Continue internal efforts
Importance to business successOverview

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Appendix84

Appendix C (continued)

Materiality
topic index
As the focus of this report ison Microsoft’s environmental
sustainability strategy and ourfour focus area commitments,
our materiality topic index provides
links to this report or otherMicrosoft documents where
you can access the most detailed
information for each material topic.

Material topic

Location in this report

Air quality

We intend to reporton this in the future.

Climate change risk
Climate misinformation

Material topic
Public policy engagement

Carbon – Enabling
systems change

Ecosystems – Enabling
systems change

We intend to reporton this in the future.

Responsible productinnovation and use

Carbon – Driving
innovation
Water – Driving
innovation

Environmental
Compliance►

Ecosystems – Taking
responsibility for ourland footprint

Ecosystems – Driving
innovation

Responsible sourcingof raw materials

Energy management

Carbon - Getting tocarbon negative

Risk and opportunity
management

Carbon - Getting tocarbon negative

Supplier environmental
climate performance

Environmental policyor management systemand compliance

Carbon - Getting tocarbon negative

GHG emissions

Carbon - Getting tocarbon negative

Just transition

Carbon - Getting tocarbon negative

Product lifecycle impacts

Carbon - Getting tocarbon negative

Microsoft Devices
Sustainability Report
FY20

Waste – Driving
innovation

Waste – Getting
to zero waste►

Other location

Water – Enabling
systems change

Employee activism

Environmental andclimate justiceLocation in this report

Appendix D –GovernanceCompliance
Ecological impacts

Other location

Tech solutions forsocietal challenges

Microsoft Devices
Sustainability Report
FY20
Appendix D –Governance►

Carbon - Getting tocarbon negative

Microsoft Devices
Sustainability Report
FY20

Carbon – Driving
innovation
Water – Driving
innovation
Waste – Driving
innovation
Ecosystems – Driving
innovation

Microsoft Devices
Sustainability Report
FY20

Waste and hazardous
materials management

Waste – Getting
to zero waste

Water and wastewater
management

Water – Getting
to water positive

Microsoft Devices
Sustainability Report
FY20

Overview

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Appendix85

Appendix D

Governance

Key area

Description of work

Board oversightof climate risks• The charter for the Regulatory and Public Policy Committee of our Board of Directors includes the
responsibility to provide guidance to management on environmental matters.

Source location
Downloadhere• Climate change is included under the umbrella of “environmental sustainability,” and therefore this Committee
is responsible for reviewing and providing guidance on the company’s climate-related policies and programs.
• The Regulatory and Public Policy Committee meets three times a year with a varied agenda including updates
on the company’s commitments to environmental sustainability, climate, and renewable energy procurement.
• Our President and Chief Legal Officer (CLO), together with our Chief Environmental Officer,
presents to this Committee on these topics, including climate change, as appropriate.

Seniormanagement
assessment andmanaging risks
and opportunities• The President and Chief Legal Officer (CLO) is responsible for our Corporate, External and Legal Affairs (CELA)
group, which monitors climate-related issues and the company’s progress toward climate objectives.
• Our Chief Environmental Officer leads our corporate Environmental Sustainability team, leading ouroverall environmental sustainability vision, strategy, and program execution.
• Our Carbon Program Manager, part of the Environmental Sustainability (ES) team, leads Microsoft’s carbon
mitigation efforts, which include energy efficiency, renewable energy, carbon offsetting, identification of
additional energy and carbon reduction opportunities, and assessment and management of climate risks.
• The charter of the corporate ES team includes assessment and management of issues related to climatechange. By focusing on operations, products, partners, and policy, the team strives to reduce our company’senvironmental impact while empowering societal change through technology.
• For guidance on globally changing dynamics, this team engages with experts around the world,
including internal finance, regulatory/policy, technology and environmental professionals, as well as
external subject matter experts.
• Environmental Compliance and Climate Risk + Resilience (CR+R) Lead, part of the ES team, leads our new
CR+R Working Group to oversee our CR+R Plan. The CR+R Working Group holds representation from acrossthe business.*• In FY20, Microsoft established a Climate Council, comprising a number of executives from across the company
charged with monitoring climate-related risks and opportunities and coordinating and providing oversight forsustainability initiatives across the organization.*.... Download
here*italics denotes new
disclosures not included
in 2020 CDP ResponseOverview

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Appendix86

Appendix D (continued)

Strategy

Key area

Description of work

Climate-relatedrisks andopportunities• At a company level, the corporate ES team brings leaders from across the business together to identify which
short-, medium- and long-term climate risks and opportunities could have substantive financial or strategic
impact on the organization. This is complemented by formal identification and assessment processes.
• Microsoft Treasury assesses property risks (short-term) annually to value the global property insurance
program using industry-standard risk models to estimate the probable impact from hazards like hurricanes,
floods, and fires, each of which may be subject to increasing frequency and severity due to climate change.

Source location
Download
here*italics denotes new
disclosures not included
in 2020 CDP Response• The Microsoft Enterprise Business Continuity Management (EBCM) program’s Business Continuity Standard andService Resilience Standard identify the baseline requirements for implementing business continuity disasterrecovery and overall resilience at Microsoft, to help ensure our capability of recovery and preparedness in theevent of a major or catastrophic business disruption that affects our ability to meet customer expectations.
• At an asset level, business groups within our operating segments have their own processes.
• In FY19, we initiated quantitative and qualitative physical (medium-term) and transition (long-term) risk andopportunity assessments for key Microsoft regions. In addition, we are assessing our alignment with the Task
Force on Climate-related Financial Disclosures (TCFD) to ensure we are properly managing these risks andopportunities within our business and adequately planning for the future.*

Impact of climaterelated risks andopportunities• The ES team brings leaders from across the company together to align on management decisions to
mitigate, transfer, accept, or control the identified climate-related risks and opportunities. To make decisions
on risk, we use our enterprise risk management (ERM) risk prioritization criteria in the context of business
continuity and service resilience, which include the scope of impact (e.g. reputational, regulatory, and cost),
potential return on investment, and time and resources required to implement changes.
• The EBCM program works with the ERM program to ensure consistent alignment among risks and risk
prioritization criteria and, ultimately, the final risk ratings.
• In FY19, we committed to powering our datacenters with 70 percent wind, solar, or hydropower energy
by 2023, and in FY20, we extended that commitment companywide and to 100 percent by 2025.
• One method we use to respond to climate-related opportunities is our Sustainability Grants program, which
drives climate-related energy and technology innovation; this program awarded more than $10 million in FY19
to projects or programs focused on better managing climate-related business activity.*

T

Download
here*italics denotes new
disclosures not included
in 2020 CDP ResponseOverview

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Appendix

87

Appendix D (continued)

Strategy(continued)

Key area

Description of work

Source location

Resiliency acrossscenarios fororganizational
strategy• A physical and transition risk assessment was conducted on 400 of Microsoft’s most important facilities.
Two scenarios were considered in this analysis: 1) a business as usual scenario where the world warms over
4°C above pre-industrial temperatures; and 2) a 2°C aligned scenario. The analysis quantified, in financial terms,
the top climate-related risks and opportunities. The analysis quantified climate risk in financial terms by:*italics denotes new
disclosures not included
in 2020 CDP Response- Integrating climate and business data from multiple sources including governmental, academic, public,
and commercial.
- Translating this data into consistent formats mapped onto coherent spatial and temporal grids.
- Statistically processing data into probability distribution functions at each point, allowing the hazard
data to be coupled to econometric models, producing financial impact curves.
- Translating this into financial terms to provide decision-relevant information.
The software used has global coverage, spans decadal time periods from 2010 to 2100, and is aligned with the
TCFD framework*.
• The top 400 Microsoft facilities were included in the analysis—facilities selected for highest value andhigh-energy consuming sites and covering all geographies. The selection included datacenters, retail stores,
offices, and executive suites.
• The analysis findings revealed that we may experience significant impacts. These findings warrant that we
act now to mitigate the risks, build adaptive capacity, maximize our opportunities, and enhance the resilienceand equity of our enterprise and the communities where we live and work.
• We are currently assessing the adaptive capacity of our most at-risk facilities to the identified climate risks
and identifying opportunities to enhance resilience.

Overview

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Appendix

88

Appendix D (continued)

Risk
management

Key area

Description of work

Identification
and assessmentof climaterelated risks• Subject matter leadership on climate change risk resides with our Environmental Sustainability (ES) team,led by our Chief Environmental Officer. This team assesses Microsoft’s climate-related physical and transition
risks and opportunities across the business portfolio using quantitative and qualitative scenario analysis,along with other risk assessments (including the use of internal company methods).

Source location
Downloadhere• The results from these analyses are assessed and validated through consultation with subject matter
experts across the company and then used to inform Microsoft’s formal, robust, and rigorous enterpriserisk assessment process led by the Enterprise Risk Management (ERM) program.
• The ERM program’s formal risk assessment process is used to assess the size, scope, financial impact, andrelative significance of any risk that Microsoft may face, today and into the future, including those related
to climate change.
• The process involves categorizing risks according to their inherent impact on a scale of 1 (minimal) to 5
(critical) in four categories: trust or reputational; operational scope; legal, compliance, or environmental;
and enterprise value. Risks are then rated according to their inherent likelihood on a scale of 1 (remote) to
5 (expected). These two ratings are used to produce an inherent risk score and are then aggregated witha management action/control effectiveness rating for a residual risk calculation.

Organizational
processes for
managing
climate risks• The quantitative climate risks analysis focused on seven climate physical hazards (chronic temperature
increase effects on energy demand, extreme temperatures, heat storms or waves, sea level rise, flood intensity,
drought frequency, and drought length) in 2030 and 2060 and several transition risks and opportunities(energy efficiency, energy resilience, materials efficiency, renewable price stability, water efficiency,
employee impacts from climate change).*

Processes for
identifying,assessing, andmanaging risks inrisk management
strategy• To determine our enterprise risks related to climate change, we use our enterprise risk management (ERM)risk prioritization criteria in the context of business continuity and service resilience, which include the scopeof impact (e.g. reputational, regulatory, and cost), potential return on investment, and time and resources
required to implement changes.
• An example of a physical risk managed through this process is the risk of facility damage from an acuteweather event, such as flooding. To mitigate this risk, the Microsoft Enterprise Business Continuity
Management (EBCM) program uses its relevant standards to help ensure the existence of effective,
reliable, well-tested plans, systems, and processes during such a disruptive event to support thecontinuity and resilience of business operations and services and minimize adverse impacts.
• The EBCM program works with the ERM program to ensure consistent alignment among risks and risk
prioritization criteria and, ultimately, the final risk ratings.

*italics denotes new
disclosures not included
in 2020 CDP Response

DownloadhereOverview

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Appendix89

Appendix D (continued)

Metrics
and targets

Key area

Description of work

Metrics forassessment ofclimate-relatedrisks andopportunities• From July 2012, we began charging a fee based on the emissions associated with our operations. In FY19
(the reporting period), we applied the carbon fee to Scope 1, Scope 2, and Scope 3 business air travel emissions
across the company. As of FY21, the carbon fee will apply to all Scope 1, Scope 2, and Scope 3 emissions, with the
Scope 3 fee starting at a lower amount and increasing to meet the Scope 1, Scope 2, and Scope 3 business air
travel fee over time. Our internal carbon fee isn’t a “shadow fee” that is calculated but not charged.

Source location
Downloadhere• Our fee is paid by each division in our business based on its carbon emissions, and the funds are used to
pay for sustainability improvements. By charging business groups based on the emissions they generate,
we help to drive efficiency initiatives and innovation across our business. The carbon fee affects investment
decisions by providing an incentive, the financial justification, and in some cases the funds for climate-related
energy and technology innovation. The fee also helps drive culture change by raising internal awareness ofthe environmental implications of our business and establishing an expectation for environmental andclimate responsibility within the company. In FY19, the carbon fee fund was used to support investments in:- 8,741,807 MWh in renewable electricity globally (the US portion of which earned Microsoft the US EPA
Green Power Partnership as the number two US purchaser).
- Offset purchases in five countries to reduce more than 750,000 mtCO2e, preserve forests, and grow the
low-carbon economy in developing nations.
- Technology innovation projects that formed the basis of our AI for Earth program.
- More than 50 internal emissions reduction and energy efficiency projects.

Disclosure of
GHG emissions
and risks• We annually disclose our Scope 1, 2, and 3 emissions as part of CDP and sustainability reporting.
• We also annually disclose our water consumption as part of our CDP and sustainability reporting.
• Through our Reporting Hub, we also disclose our annual data factsheets with environmental indicators covering:(1) greenhouse gas emissions (absolute values and normalized by revenue), (2) energy use, (3) carbon neutrality
and greenhouse gas emissions balanced by carbon offsets, (4) water metrics including withdrawals,
consumption, and discharge, (5) waste generation, and (6) electricity consumption.

,..

DownloadhereOverview

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Appendix90

Appendix D (continued)

Metrics
and targets(continued)

Key area

Description of work

Targets tomanage risks andopportunities• In FY20, we made a commitment that by 2030 we would be carbon negative, both for our own operations andacross our value chain, and by 2050 we would remove from the environment all the carbon the company has
emitted either directly or by electrical consumption since it was founded in 1975.
• To reach our carbon negative commitment, we will invest in a portfolio of negative emission technologies (NETs)
potentially including afforestation and reforestation, soil carbon sequestration, bioenergy with carbon captureand storage (BECCS) and direct air capture (DAC).
• We recently announced a target to be water positive in our direct operations by 2030, which will consistof reducing our water-use intensity and replenishing the water we consume through our operations inwater-stressed regions.

Source location
Find out
more here

Overview

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Appendix

91

Appendix E

PolicyMicrosoft supports carbon, clean
energy, and sustainability policy
efforts at the state and national levelin the US, the European Union, andelsewhere. The table on pages 91–94
outlines key sustainability policy andadvocacy actions Microsoft has
taken over the past five years.

Date

MarketDescription

04/2016

US

Filed amicus brief in support of Clean Power Plan

04/2016EU

Joined Advisory Board of EU Parliament Network on Energy Solutions

09/2016

GlobalParticipated in statement in support of Montreal Protocol Amendment to phase out HFCs

11/2016

Virginia

Joined letter to Virginia State Corporation Commission asking for more options to purchase renewable energy

11/2016

GlobalAttended UN COP22 Climate Meeting in Morocco

04/2017Japan

Joined letter to Japanese METI to encourage more renewable energy options

05/2017

US

Participated in advocacy for US to remain in Paris Agreement

06/2017

US

Issued Microsoft statement opposing US exit from Paris Agreement

07/2017

Washington

Secured regulatory approval of contract to self supply Microsoft campus with 100 percent zero carbon energy

09/2017

US

Filed comments to US Federal Energy Regulatory Commission to protest Notice of Proposed Rulemaking (NOPR) for coaland nuclear bailout

11/2017

GlobalParticipated in UN COP23 Climate Meeting in Germany

11/2017

Ireland

Filed comments on design of a new Renewable Electricity Support Scheme in Ireland, issued by the Department of Communications,
Climate Action & Environment

12/2017EU

Joined letter in support of EU Renewable Energy Directive

01/2018

Washington

Testified in support of legislation to establish an economy-wide carbon fee in Washington state

02/2018

Virginia

Participated in letter to Virginia Legislature in support of bill to remove restrictions to 100 percent renewable energy purchasing

Overview

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Appendix

92

Appendix E (continued)

Policy(continued)

Date

MarketDescription

03/2018

Virginia

Sent letter to Virginia Governor Northam to adjust new cap on projects qualifying for renewable energy tax credit

04/2018

US

Testified at US Federal Energy Regulatory Commission technical meeting in support of distributed energy resources

05/2018

US

Selected as Leadership Circle for US We Are Still In coalition in support of Paris Climate Agreement

05/2018

US

Submitted comments to US Department of Energy to protest Notice of Proposed Rulemaking (NOPR) for coal and nuclear bailout

06/2018

US

Filed comments to US Federal Energy Regulatory Commission to allow storage and distributive energy resources to participate inwholesale markets (This docket formed the foundation for FERC Order 2222 approved in 2020 which opens wholesale markets todistributive energy resources such as solar panels, batteries, fuel cells)

07/2018

US

Joined CERES Business for Innovation Climate & Energy Policy Network

08/2018

California

Participated in California Clean Energy Lobby Day

09/2018

California

Participated in letter to California Governor Brown to sign direct access bill to allow more choice for renewable energy

09/2018

Washington

Advocated for I-1631 to establish an economy-wide carbon fee in Washington state

10/2018

California

Testified to California Public Utility Commission on customer choice

11/2018

US

Filed comments to US Federal Energy Regulatory Commission on pricing of the PJM regional market to reflect corporate renewableenergy purchases

12/2018

GlobalParticipated in UN COP24 Climate Meeting in Poland

01/2019

Virginia

Joined letter to Virginia Legislature in support of bill to remove restrictions to 100 percent renewable energy purchasing

01/2019

Virginia

Participated in Virginia Clean Energy Lobby Day

02/2019

US

Joined letter calling on US to ratify Montreal Protocol Amendment to phase down HFCs

Overview

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Appendix

93

Appendix E (continued)

Policy(continued)

Date

MarketDescription

04/2019

Washington

Supported legislation to create 100 percent zero carbon grid in Washington state

04/2019

US

Joined Climate Leadership Council to advocate for a robust federal carbon price05/2019

Virginia

Joined letter to Virginia State Corporation Commission protesting utility’s IRP due to low assumptions for renewable energy
and storage penetration

05/2019

US

Participated in US Congressional Carbon Pricing Lobby Day

06/2019EU

Joined letter to EU Commission to remove regulatory barriers to corporate renewable energy purchasing across the EU

10/2019

US

Submitted comments to US House Energy & Commerce Committee on policies to address climate change

10/2019

Singapore

Submitted comments to Singapore National Climate Change Secretariat on low carbon strategy

11/2019

Virginia

Joined letter to Virginia State Corporation Commission protesting utility’s renewable energy tariff due to participation restrictions andunnecessarily high cost

11/2019

US

Submitted comments to US House Select Climate Crisis Committee on policies to address climate change

11/2019

GlobalParticipated in UN COP25 Climate Meeting in Spain

12/2019

US

Joined CEO and labor union letter to reiterate support for Paris Climate Agreement and deepen climate action

01/2020

Virginia

Participated in letter to Virginia Legislature in support of bill to remove restrictions to 100 percent renewable energy purchasing

01/2020

Washington/Oregon

Joined letter in support of carbon pricing mechanism in the US Northwest

03/2020

Virginia

Participated in letter in support of bill that authorizes Virginia to join the Regional Greenhouse Gas Initiative carbon pricing mechanism

04/2020

EU

Joined the European Alliance for a Green Recovery in support of including climate goals in recovery plans

Overview

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Appendix

94

Appendix E (continued)

Policy(continued)

Date

MarketDescription

05/2020

US

Participated in US Congressional Carbon Policy and Pricing Lobby Day

06/2020

US

Organized and issued statement to support passage of Great American Outdoors Act (S.3422) to permanently fund the Land & Water
Conservation Fund, which was passed into law in August 2020

06/2020

US

Participated in statement in support of the Growing Climate Solutions Act under consideration in the US Congress

06/2020EU

Filed submission to the EU public consultation on the review of the Non-Financial Reporting Directive

07/2020EU

Filed submission to the EU public consultation on the Renewed Sustainable Finance Strategy

08/2020

US

Submitted Trillion Tree pledge; joined US Trillion Tree stakeholder committee

09/2020

EU

Joined letter in support of increasing EU 2030 GHG emissions reduction target to at least 55 percent net GHG emission reductions
compared with 1990 levels

09/2020

EU

Joined Corporate Leaders Group Europe to advocate for progressive public policy that supports progress towards net zero in Europe

09/2020

US

Participated in letter in support of American Energy Innovation Act (later named Energy Act of 2020)

09/2020

EU

Joined Water Europe to advocate for smart water policies in the EU

10/2020

Virginia

Participated in letter to Virginia SCC to require utility to incorporate more cost-effective clean energy in its investment plan

10/2020EU

Submitted comments to EU public consultation on “Empowering the consumer for the green transition”

11/2020

US

Filed comments to US Federal Energy Regulatory Commission in support of FERC issuing policy guidance on integrating state carbon
pricing into power market designOverview

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Appendix

95
91

Appendix F

Sustainability
data assurance
statements

Microsoft GHG and energy
verification statement
Downloadhere

Microsoft water
verification statement
Downloadhere96

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Visit our Sustainability page to learn
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www.microsoft.com/en-us/
sustainability