Microsoft’s new sustainability report, released late last week, shows how a carbon-heavy economy can weigh on a company that wants to be carbon light.

Since 2020, the company’s carbon emissions are up 23.4%, mostly a result of breakneck data center buildout to support its growing cloud and AI operations. Buying enough clean electricity is actually the easy part — it’s the facilities themselves that are laden with carbon-intensive materials and products, including steel, concrete, and computer chips.

“We reflect the challenges the world must overcome to develop and use greener concrete, steel, fuels, and chips,” a Microsoft spokesperson told TechCrunch via email. “These are the biggest drivers of our Scope 3 challenges.”

Scope 3 emissions are those that are outside a company’s direct control, including raw materials, transportation, and purchased goods and services. Emissions in Scope 3 represent nearly all of Microsoft’s carbon footprint, just over 97% for fiscal year 2024, which the 2025 sustainability report covers. 

Microsoft’s Scope 3 profile is dominated by capital goods and purchased goods and services, with the two contributing about three-quarters of the company’s total carbon emissions.

The construction of data centers has been the main driver behind Microsoft’s stubborn Scope 3 emissions. The steel used in the buildings comes from a supply chain that relies on blast furnaces heated by fossil fuels, and concrete used in the foundation is the product of a chemical reaction that’s both powered by and a producer of carbon dioxide. Some startups are working to decarbonize both steel and cement, and Microsoft is an investor in the space, but it’ll be years before those bets will have a significant impact.

Carbon emissions are embodied in the computer chips inside the data center, too. Semiconductor lithography is dependent on chemicals that have extremely high global warming potential. For example, hexafluoroethane, which is used to etch features on chips, is a potent greenhouse gas, with 1 ton generating as much warming as 9,200 tons of carbon dioxide.

Even in green electricity, which is easier to find, hurdles have popped up as data centers aren’t always built near abundant clean energy sources. Because of that, Microsoft has had a difficult time finding nearby sources of zero-carbon electricity, forcing it to rely on purchases elsewhere. “Our electricity consumption has grown faster than the grids where we operate have decarbonized,” the spokesperson said.

Overall, Microsoft’s 2024 emissions were down slightly compared with 2023, suggesting that the company is getting better at building data centers with lower climate impacts. Still, it has a long way to go to meet its 2030 goal of removing more carbon pollution than it generates. By its own forecast, Microsoft will have to cut its emissions by more than half while also significantly ramping up its carbon-removal efforts.

There are signs that Microsoft is making some headway on both fronts. It has been one of the leading investors in and buyers of solar power in recent months, and its zero-carbon electricity portfolio now stands at 34 gigawatts of capacity. Plus, it has recently signed some very large deals that promise to remove millions of metric tons of carbon. 

However, 2030 is just a few years away, and the company’s push into AI and cloud may be profitable — but it’s made reaching its sustainability goals that much harder.