Sustainable data centre development in the EU: added value or legal requirement?

The rapid expansion of technology worldwide, particularly in relation to artificial intelligence (AI), has driven significant growth in the data centre sector – infrastructure which is essential for processing the vast amounts of data needed to meet growing digital demands. 

In the EU, digitisation is central to the transition towards a climate-neutral and resilient economy, and the sustainability of data centres is a key priority for investors. Although digital technologies are already supporting decarbonisation across sectors such as agriculture, transportation and energy, data centres themselves are presenting significant environmental challenges. 

Current and upcoming regulations, therefore, require stakeholders across the data centre sector to improve efficiency and increase renewable energy use, so as to minimise existing environmental impacts.

European Green Deal's approach to data centres

Data centres and data transmission networks accounted for around 1.5% of global energy consumption in 2024, according to the International Energy Agency, with projections indicating this will increase to 8% by 2030. Large volumes of water are consumed through these networks for cooling and energy generation. They also generate electronic and hazardous waste such as servers, cables, batteries and coolants.

This has led to the EU publishing its digital strategy documents, which call for greater energy efficiency, increased renewable energy use and the adoption of waste and heat recovery systems in data centres to achieve climate neutrality by 2030.

Against the backdrop of the European Green Deal (EGD) that sets ambitious sustainability targets – including achieving net-zero emissions by 2050 and transitioning to a circular economy model – the  EU continues to implement comprehensive legal frameworks for a green transition that impose obligations on businesses, including in the data centre sector, to deliver on these targets. This includes the accurate reporting of environmental impacts and adopting measures to minimise adverse effects. Under the EGD, sustainability is, therefore, no longer just a competitive differentiator but a legal requirement.

What are the main legal frameworks on sustainability affecting data centres, and their mandatory reporting obligations?

Energy Efficiency Directive  

The Energy Efficiency Directive (EU) 2023/1791 (EED) and supplementary Commission Delegated Regulation (EU) 2024/1364 impose reporting obligations on data centres that install IT infrastructure with an electrical demand of at least 500 kW.

Owners and operators of this category of data centres must collect and publish data using a standard EU template that includes key energy performance and water footprint indicators such as surface area, installed power and performance metrics, such as energy consumption, capacity utilisation, waste heat, and water consumption. The scope of these reporting requirements may expand in the future.

The data that is collected records fundamental sustainability metrics, including energy efficiency, use of renewable energy and waste heat, cooling efficiency, coal efficiency and freshwater use. Data must be reported annually by 15 May to the EU database via, where established, national reporting system. The Commission then analyses this data and creates a common EU platform for assessing data centre sustainability and developing new information and communications technology regulations. Aggregated data will then be made publicly available to protect confidentiality.

These reporting obligations represent the first step towards mandatory environmental targets for data centres across the EU. Data centre owners and operators subject to these reporting obligations should ensure they prepare adequately by defining reporting scope and establishing data collection processes. Non-compliance risks reputational harm and impacting an entity's credibility with counterparties, business partners, and investors.

Corporate Sustainability Reporting Directive 

Some data centre owners or operators may also fall within scope of additional reporting requirements set out in national regulations implementing the Corporate Sustainability Reporting Directive (CSRD), which requires certain EU and non-EU companies to report on their climate and environmental impacts across their entire supply chain. 

This means that smaller companies – albeit not directly in scope of the CSRD – will, in turn, be required to collect data for reporting by their contracting parties and take measures to minimise any adverse sustainability impacts. However, some companies may ultimately fall outside of the scope of the regime in light of simplification proposals put forward by the Commission as part of its sustainability "omnibus" package that remains under review by EU lawmakers.

The European Sustainability Reporting Standards (ESRS) sets detailed reporting guidelines on the broad range of data that companies must disclose about their sustainability performance. This data is categorised into general disclosure requirements, environmental issues, social issues and business conduct. 

Environmental impact reporting then covers emissions, air pollution, water resource management (a key reporting requirement for data centres that consumer large amounts of water), biodiversity and ecosystems, as well as resource use and waste management (including the use of recycled materials). 
The CSRD in its current form also includes a requirement for companies to set sustainable development targets, such as greenhouse gas emission reductions and demonstrate progress towards achieving these goals in subsequent reports, with clearly defined goals in environmental, social and governance reports and sustainability strategies and detailed action plans.

Businesses that fall within the scope of the CSRD reporting should undertake a gap analysis on their practices to determine which impacts require mitigation through specific policies and procedures. This may include protecting biodiversity and ecosystems – areas of increasing focus for EU legislators.

Energy Performance of Building Directive: new requirements 

Data centres comprise not only technical infrastructure and modern IT equipment but also the buildings that host them. These buildings will soon be required to meet stringent requirements aimed at achieving zero emissions. The latest revision of the Energy Performance of Building Directive (EPBD) introduces requirements for buildings to improve their energy efficiency and overall performance and achieve climate neutrality by 2050.

Its requirements will apply to both private and public buildings and include setting minimum energy performance standards, ensuring the use of solar energy in new buildings, specifying requirements for technical systems and sustainable mobility infrastructure, and unifying energy performance certificates. 

Member States are required to implement the provisions of the EPBD into national laws by May 2026. Businesses will be wanting, therefore, to familiarise themselves with these requirements and consider them when planning new investments and assessing the need to modernise existing ones.

European Blue Deal: managing water resources

Carbon-footprint reduction is an immediate focus for the EU, but minimising negative impacts on other natural resources, such as water, is equally crucial. The EU is, therefore, developing a new water management strategy, the European Blue Deal, to establish a unified policy on water management and conservation.

The Blue Deal aims to promote the reduction, reuse and recycling of water, while eliminating practices leading to water pollution and waste, promoting economical and efficient water use and water recycling. It also includes requirements to develop green technology infrastructure and provide financial support for innovative projects. 

Data centres, which account for a substantial portion of Europe's water consumption will be impacted by the Blue Deal and so must take steps to improve water efficiency and reduce their impact on water quality. Major technology companies already publish data on their water consumption and smaller competitors are likely to follow suit to remain competitive. 

'Greening' data centres: accurate communication

Companies implementing environmental impact reduction measures may also wish to promote this action to their customers. However, any advertising or marketing will need to be considered carefully to mitigate risks of greenwashing. Greenwashing can occur when false or exaggerated data is provided or when messaging is too general, inaccurate, or selective.

As an example, highlighting the level of renewable energy use of a data centre may become problematic if this covers only a small portion of the total energy consumption of the business as a whole or the data centre has a significant negative environmental impact elsewhere. The use of offsetting mechanisms, such as purchasing carbon credits, also poses risks when advertising carbon reduction.

Businesses should prioritise reducing emissions generated by their operations rather than relying solely on offsetting mechanisms. Proper planning and selecting partners with the right expertise and experience in adapting to new requirements will help build a responsible and reliable business image.

Managing supply chains

CSRD and ESRS reporting requires the disclosure of information on significant effects, risks and opportunities related to a company's activities and its entire value chain. This, therefore, affects both downstream entities, such as distributors and customers, as well as upstream entities, such as suppliers of raw materials and components. Companies must therefore examine the activities of their entire supply chain, including indirect customers and suppliers.

Where an entity does not fall within scope of CSRD reporting requirements, it will still be required to collect data for in-scope parties it has a contractual relationship with and take measures to reduce adverse impacts to remain competitive. 

Other new sustainability regulations, such as the Corporate Sustainability Due Diligence Directive (CS3D) also impose due diligence procedures in the selection of contractors. The CS3D requires large companies to implement comprehensive policies to identify and mitigate environmental, labour and human-rights issues risks both within their own activities and those of companies across their supply chains and adopt preventive and corrective action plans. Breaches may result in significant financial penalties and, in some cases, compensation obligations.

Implementing CS3D requirements may prove challenging for businesses, particularly those in the technology industry where rare-earth elements mined in countries with labour and human-rights violations are used. Finding alternative suppliers may be difficult but presents opportunities for developing local supply chains.

Osborne Clarke comment

Embedding sustainability into data centre business models is now unavoidable given current and forthcoming regulatory frameworks. Doing so, however, will enhance business credibility and attractiveness to partners and investors and mitigate risks of legal non-compliance. Businesses should, therefore, consider putting in place the following measures to help build responsible, reliable business reputation and deliver tangible long-term benefits for themselves and customers: 

• Implement a regulatory horizon scanning system to help map existing obligations and prepare for future requirements.
• Set up a comprehensive sustainability strategy with clear objectives and detailed action plans, and implementing concrete steps to achieve these goals, while mitigating greenwashing risks.
• Plan effectively and select knowledgeable partners in its supply chains.