Why it is time to focus on digitalization when financing climate action

Ericsson has been demonstrating how mobile broadband can be an enabler of sustainable development since the early 2000s, when this technology was still in its infancy. These efforts have ranged from showing the connection between mobile broadband penetration and GDP growth to enabling access to education through connected schools.

Today, tackling climate change is one of the greatest areas of potential impact. But investments in digital infrastructure and solutions do not yet receive the recognition and incentives they deserve, particularly in Europe.

The convergence of digital and climate transitions is already reshaping our world at an unprecedented speed. The urgency of addressing climate change demands a comprehensive approach, and digital technologies have the potential to revolutionize how we use resources, improve efficiency and drive sustainability efforts.

5G as a key tool for climate action

Advanced technologies like 5G, artificial intelligence (AI), and the internet of things (IoT) can significantly improve how efficiently we work. As an open innovation platform, 5G will directly affect different parts of our society and industries, such as transportation, manufacturing, public safety and energy production and distribution.

As stated in our new report, Digital transformation of industries to enable Net Zero, these same advanced technologies can play a crucial role not only in driving industrial changes but also in achieving global reductions in greenhouse gas emissions.

See how we are manufacturing a 5G future at our smart factory in Texas in the US

According to Ericsson’s research, legacy information and communications technology (ICT) solutions have the potential to enable a reduction in global greenhouse gas emissions by up to 15 percent by 2030 while being responsible for only 1.4 percent of the global carbon footprint. In a separate research focused on the European Union, we found that solutions relying on connectivity and 5G could bring a potential emissions reduction of nearly 20 percent, which is equal to the emissions of Spain and Italy combined.

Additionally, an extensive macroanalysis, conducted by Ericsson Research across 181 countries from 2002 to 2020, has established a clear connection between connectivity and the reduction in carbon emissions. The analysis found that a 10 percent increase in mobile broadband usage led to a 7 percent decrease in emissions per person.

It is important to acknowledge the rebound effect, which means that even if digital solutions lead to lower emissions directly, the increased number of connected devices and systems could still result in higher energy usage. However, the evidence indicates that as the number of subscriptions to fixed and mobile broadband services has increased, emissions have decreased at the country level.

Green and digital transitions on parallel paths

The European Union has established its Green Deal with ambitious climate and sustainability targets. Through the European Climate Law, the EU aims to reduce net greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels. It strives for climate neutrality by 2050 by utilizing low-emission technologies and sustainable products and services.

During her 2023 State of the Union Address, European Commission President Ursula Von der Leyen emphasized the significance of the European Green Deal and its unmatched ambition, positioning it as the focal point of the economy.

However, green and digital transitions are frequently on parallel paths, while regulations and policies are too often developed through separate policy-making processes. Connecting these transitions could lead to a more efficient approach, yielding better outcomes.

Time to strike a balance in climate financing

It is time to connect the two transitions by recognizing the enabling impact of industries like ICT. While it is crucial to encourage heavy emitters to change their approach, it is equally important to speed up the development and deployment of solutions that help them reduce emissions.

The EU uses a system, called the EU taxonomy for sustainable activities, to guide investments toward supporting the objectives of the European Green Deal. Currently, public communication networks are not considered eligible economic activities in the EU taxonomy for sustainable activities, inadvertently diverting investments away from essential digital technologies and infrastructure needed for the green transition.

This approach seems to miss an open goal. There is clear evidence of the importance of digital technologies in reducing emissions and transforming industries and societies for the better. However, while connectivity and high-speed networks are the backbones of digital transformation, only a small part of this sector is included in the taxonomy.

Europe’s climate finance strategy is in great contrast with its global partners and competitors, such as the US, Japan and China, which are investing heavily in digital solutions. To attract capital and incentivize an increased deployment of 5G in Europe, it is vital that the EU acknowledges the deployment of transformative connectivity solutions as an eligible activity under the regulation.

The green bond illustrates the potential of ICT

I was thrilled to be part of Ericsson’s first, EUR 500 million green bond issuance late last year, using the company's green finance framework. The proceeds will be exclusively allocated to investments that make Ericsson’s portfolio even more energy-efficient, which will enable further societal climate action through solutions powered by mobile connectivity.

We have already taken major strides on this journey. As highlighted in our recently published 2023 Sustainability and Corporate Responsibility report, we managed to reduce the energy consumption of typical base station sites by about 30 percent in just two years. Therefore, we are well on our way to reach our 2025 target of a 40 percent reduction.

The response from the investor community surpassed our expectations, indicating a strong interest from the financial markets in ICT solutions in the climate transition.

We are proud of our green bond, but government regulators and lawmakers have a clear role in helping to guide investments toward the most impactful areas. It is important that they create a standard set of rules that applies to all companies in our industry.

Building a resilient, low-carbon society

Including ICT in climate-related financing will not only encourage investments in transformative climate solutions but also promote the use of digital technologies in diverse industries, helping to strengthen global efforts to reach climate goals.

Furthermore, the inclusion of ICT will signal a clear commitment to harnessing the power of technology for environmental sustainability. This will not only enhance Europe's position as a leader in the global transition to low-carbon economy but also encourage innovation and collaboration across sectors.

This is a widely held position. The CEO Alliance for Europe represents 10 leading European companies across sectors, with over 1.5 million employees and over EUR 500 billion annual revenue. Ericsson President and CEO Börje Ekholm is currently the chair of the Alliance, which recently published a paper “Digitalisation for Sustainability” with a concrete focus on incentivizing investments in digital infrastructure.

Let’s seize this opportunity to create an impactful change and propel Europe toward a greener, digitally empowered tomorrow.