Microsoft published its 2025 Environmental Sustainability Report on May 29. The report covers the company's fiscal year 2024, which ended in June 2024, and measures progress against a 2020 baseline. It is the report at the halfway point between Microsoft's 2020 announcement and its 2030 goals of being carbon negative, water positive and zero waste.
The headline figure is that Microsoft's total emissions, covering Scopes 1, 2 and 3, were 23.4% higher than in 2020. The company attributes the increase to growth-related factors including AI and cloud expansion. Over the same period, according to the report, Microsoft's energy use rose 168% and its revenue grew 71%.
Where the emissions come from
The breakdown shows two very different trends. Microsoft's Scope 1 and 2 emissions, those from its own operations and purchased electricity, fell 29.9% from the 2020 baseline in fiscal 2024. That decline reflects large purchases of carbon-free electricity and environmental attributes. Scope 3 emissions, those in the value chain, increased 26% from the 2020 baseline.
For a company like Microsoft, Scope 3 is dominated by emissions embedded in what it buys: the steel and concrete used to build data centers, the chips, servers and networking equipment that fill them, and the fuels used in its supply chain. The rapid build-out of data centers to support AI and cloud services therefore drives Scope 3 emissions even when the electricity powering those facilities is matched with carbon-free supply.
Carbon-free electricity contracts
Microsoft says it has contracted 34 gigawatts of carbon-free electricity across 24 countries since starting its procurement program, about an eighteenfold increase since 2020. In calendar 2024 alone, the company contracted 19 GW of new renewable energy across 16 countries through power purchase agreements.
These contracts have made Microsoft one of the largest corporate buyers of renewable power in the world. Long-term power purchase agreements from large technology buyers have been a significant source of revenue certainty for wind and solar developers in the United States and Europe.
The report also signals a change in approach. Microsoft says that as it shifts away from procuring non-additional environmental attribute certificates, it must bring more carbon-free electricity onto the grids where it operates. That refers to unbundled renewable energy certificates, which can be bought without financing new projects and have been criticized as a weak tool for reducing actual grid emissions.
Carbon removal
Microsoft has become the largest corporate buyer of carbon removal. The report says that in fiscal 2024 the company signed long-term agreements for nearly 22 million metric tons of carbon removal, more than in all previous years combined, and nearly 30 million metric tons since the program began. Its purchases include direct air capture, bioenergy with carbon capture, enhanced rock weathering and nature-based removal such as reforestation. Microsoft co-founded the Symbiosis Coalition, which is targeting up to 20 million metric tons of nature-based carbon removal credits by 2030.
The carbon negative goal depends heavily on these purchases. Even with deep reductions in its own emissions, Microsoft will need removals to offset residual emissions and, under its goal, remove more than it emits.
Water and data center design
The report says Microsoft is on track to replenish more water than it consumes across global operations. It describes a new data center design optimized for AI workloads that uses zero water for cooling, avoiding an estimated 125,000 cubic meters of water a year per facility. The company is also moving from air-cooled data centers to chip-level liquid cooling designs at all owned data centers.
Water has become a sensitive issue for data center development, particularly in water-stressed regions of the US Southwest, Spain and Chile. Zero-water cooling designs rely on closed-loop systems that reuse the same coolant, which reduces water consumption but can increase electricity use for cooling on hot days.
Construction materials
Microsoft says its first data centers built with mass timber, in a hybrid construction model, are projected to reduce embodied carbon by up to 65% compared with typical precast concrete. Embodied carbon in steel and concrete is one of the largest components of a data center's Scope 3 footprint during construction. The company has also signed agreements to buy lower-carbon steel and concrete, though these markets remain small.
What it means for power markets
Microsoft's report illustrates the gap between energy growth and reported emissions in the technology sector. A 168% increase in energy use over four years is a large addition to electricity demand. The fact that Scope 1 and 2 emissions fell over the same period depends on the accounting methods used, in particular market-based Scope 2 accounting that credits contracted renewable energy.
For electricity markets, the important question is whether contracted carbon-free power is additional, meaning it would not have been built without the contract, and whether it is delivered in the same grid region and at the same time as consumption. Microsoft's stated shift away from non-additional certificates points toward more project-specific contracts, which have greater effect on what gets built.
The growth in demand also affects grid planning. Utilities serving Microsoft's data center campuses, including in Virginia, Texas, Arizona, Iowa and Wisconsin, are planning new generation and transmission. Some of that new generation is gas-fired, which affects grid emissions even if Microsoft's own reported emissions are offset through contracts elsewhere.
How the numbers fit together
Read together, the figures show where the pressure is. Purchased electricity is the part of the footprint that contracts can address, and it fell. Construction and hardware are harder, because lower-carbon steel, cement and semiconductors are not yet available at the scale a hyperscale buildout requires. That puts more weight on supplier requirements. The report says select large suppliers are required to move to 100% carbon-free electricity for the goods and services they deliver to Microsoft, and that the company saw a tenfold increase in such transitions among device manufacturing facilities in fiscal 2024.
What to watch
Microsoft's fiscal 2025 data, due in its 2026 report, will cover a period of further acceleration in data center construction. Key indicators will be whether Scope 3 emissions continue to rise, how much new carbon-free capacity is contracted, and whether the company's new nuclear agreements, including the planned restart of the Crane Clean Energy Center in Pennsylvania, change the shape of its procurement.