Evaluating a company's impact (the case of Microsoft)

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You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

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THIS WEEK’S COMPANY

Microsoft

This week we dive deep into Microsoft’s environmental and social impact.

Microsoft is a global technology company that develops, licenses, and supports a wide range of software products, hardware devices, cloud services, and digital solutions. It is currently the world’s third-largest company by market cap, valued at $3.16 trillion (as of October 25th).

Some interesting facts:

• When Microsoft was founded in 1975, Bill Gates was only 19 years old, and Paul Allen was 22.

• Microsoft once saved Apple: In 1997, Microsoft invested $150 million in Apple, which was struggling financially. This partnership was instrumental in keeping Apple afloat.

COMPANY’S IMPACT

Microsoft’s overall impact score

Microsoft has a general impact score of +2.35 (on a scale from -5 to +5). Its impact is spread across 11 UN Sustainable Development Goals (SDGs) and 10 topics, split between positive and negative analyses.

In the socio-economic sphere,

Microsoft plays a pivotal role in shaping the modern world by empowering businesses, governments, and individuals through cutting-edge technology, productivity tools, and cloud infrastructure. Azure powers critical systems for industries like healthcare and finance, supporting 95% of Fortune 500 companies. Tools like Microsoft 365 (Word, Excel, PowerPoint, and Teams), used by over a billion people, facilitate remote work, collaboration, and education, with Teams alone reaching 280 million active users in 2023.

Windows, powering 76% of the world’s desktops, serves as the backbone for personal, business, and government computing. LinkedIn, with 950 million members, drives recruitment and career development, while Xbox, with 120 million players, reshapes entertainment through consoles, Game Pass, and cloud gaming. Together, these platforms reflect Microsoft’s vast influence across work, learning, and play, fostering global productivity, connectivity, innovation, and engagement.

However, from 1998 and onwards, Microsoft faced numerous antitrust charges and legal accusations, including price fixing, buying out competitors, and limiting competition to reduce consumer choices. It was fined over $2.4 billion for breaching competition rules and $613 million for tie-in sales practices. Microsoft also settled bribery charges for $25.3 million, involving illegal profits used to bribe government officials. Additionally, the company was sued for $330 million for restricting the second-hand license market by offering conditional discounts that prevented companies from reselling former lifelong licenses. These cases highlight Microsoft’s persistent issues with unfair competition and regulatory compliance.

Environmentally,

although the company is a leading buyer of carbon removal credits and renewable energy, its 2023 GHG emissions rose by 29.1% from 2020, reaching 15.4 million tonnes of CO2 equivalent. The company also uses more than 7.8 million m³ of water annually, 20% in medium-high, high, or extremely high water-stressed areas. Additionally, it generates over 36,000 tonnes of waste (recycles 68% of it), and its end-of-life waste from sold products amounts to an estimated 45,000 tonnes annually.

_{*The impact score is current as of October 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology here and the information sources here.}

ESG VS IMPACT SCORE

What is Microsoft’s ESG rating?

For comparison, Microsoft has an AA rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Microsoft’s impact scores by SDG

Positively (and by weight), the company scores the highest in the Industry, Innovation, and Infrastructure SDG (+3.54), followed by Good Health and Wellbeing (+0.19), and Reduced Inequalities (+3.43).

Negatively, the company scores the worst in the Responsible Consumption and Production SDG (-3.08), followed by Peace, Justice, and Strong Institutions (-3.10), and Climate Action (-3.43).

*the analysis takes into account the weight of the SDGs

Microsoft impacts SDG 3 – Good Health and Wellbeing in both positive and negative ways through its Xbox platform. While Xbox provides entertainment and fosters social connections for millions, it also contributes to the global issue of gaming addiction.

CONCLUSION

Materiality Map & Final Words

So, Microsoft’s key social and environmental impact lies in …

its transformative influence on business, education, and entertainment through technology. Microsoft’s products and platforms, including Azure, Microsoft 365, Windows, LinkedIn, and Xbox, foster global productivity, connectivity, innovation, and engagement, supporting industries, governments, and millions of individuals and organizations worldwide.

However, Microsoft has also faced persistent challenges with antitrust violations, unfair competition, data privacy, and bribery charges, raising concerns about regulatory compliance and business ethics. Environmentally, while Microsoft is a leader in renewable energy and carbon removal efforts, it continues to grapple with rising emissions, significant water use, and waste generation.

Microsoft’s overall impact score of +2.35, demonstrates a balance between the company’s vital contributions to society, while highlighting the complexities it must navigate in competition and environmental sustainability.

If you’d like to delve deeper into Microsoft’s impact, you can explore it here.

If you'd like to learn more about the scoring methodology, you can do so here.

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

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