Data Centers, AI, and the Hidden Tradeoff Problem

It’s time to talk about LCA in the context of data center impacts. A life cycle assessment (LCA) is a powerful way to show how a win in one area, like lower carbon, can quietly trigger surprising tradeoffs elsewhere, such as higher water use. As skyrocketing demand for compute drives higher energy and water use, companies involved in the data center complex need better analytical tools. LCA reveals tradeoffs across the full system, helping organizations understand how sustainability solutions and targets that optimize one metric, may shift environmental impacts somewhere else.

This piece explores how applying LCA as a decision-making framework can help companies building and operating data centers understand those tradeoffs and turn a complex systems’ challenge into a competitive advantage.

Why This Matters Now

In 2024, U.S. data centers consumed a little over 4% of the country's electricity. Most of that power is used by hardware, such as servers and storage, while the remainder supported infrastructure systems like cooling and power distribution. According to the U.S. DOE and the Electric Power Research Institute, when accounting for expected AI and digital infrastructure expansion that share could rise to 9-12% by the end of the decade, putting significant pressure on power grids and reshaping energy planning across many regions.

Switching from water-intensive cooling to air cooling reduces onsite water use but often increases energy demand. More energy demand means more electricity drawn from the grid, which can increase indirect water consumption in data centers since the U.S. grid is a significant water user. While some low-carbon sources like nuclear power require substantial water use, others such as wind and solar have minimal water footprints, though they may present other tradeoffs, such as biome disturbance. The point is that every decision has a ripple effect. Unexamined tradeoffs have a way of compounding.

Companies Building AI Infrastructure Responsibly Will Win

Awareness of the environmental and societal impacts associated with data centers is growing, with much of the recent media coverage focused on rising electricity costs for end consumers. Meanwhile, expectations from investors, government agencies, regulators, and enterprise customers are more nuanced and requests for information on upstream and downstream impacts are becoming more frequent.

Against this backdrop, companies that can show how they measure their impacts by evaluating often-overlooked tradeoffs are in a fundamentally different position than those who are only able to point to net-zero pledges and renewable energy certificates. The former builds trust. The latter is increasingly subject to scrutiny.

Applying LCA To Understand Tradeoffs In Data Center Design

LCA is a methodology that quantifies environmental impacts across the full life cycle of a product or a complex system comprised of multiple products. This includes impacts associated with construction materials (including embodied carbon in steel, aluminum, and copper) and operations (including upstream electricity generation and distribution) to end-of-life. LCA can be a key tool that enables informed decision-making and reveals tradeoffs visible they become liabilities.  

Understanding tradeoffs is critical at the design and development phase, when engineering decisions are locked in for 20 to 30 years. For data centers, we are talking about site selection, cooling technology, and building material and hardware choices. Using steel and other building materials with low embodied carbon, for example, can influence the cradle-to-grave life cycle of a digital service delivered through the servers in that facility (hint – we will be talking about low carbon steel in our next update on this topic). LCA applied early transforms these decisions from guesses into informed choices. It can also inform end-of-life facility design, such as planning spaces for future reuse.

Carbon and water targets are both included as complementary aspects of a responsible data center scaling strategy. However, it is necessary to understand and measure how design decisions affect each area of environmental concern so that choices can be optimized.   

Doing so requires shifting from single-metric narratives to multi-dimensional comparisons that show water and carbon impacts side by side across the full lifecycle. Framing decisions in terms of system-level outcomes — rather than isolated sustainability wins — helps decision-makers understand where improvements in one dimension may create pressures in another.

Beyond carbon and water, LCA can reveal additional impacts like smog formation, acidification, eutrophication of water resources, ozone depletion, and resource depletion, providing a more holistic view of environmental performance.

From Constraint To Competitive Advantage

The innovation push is moving us closer to a net-zero and water-positive data center reality. Achieving that future requires building coalitions across the supply chain, aligning on standardized methodologies that collectively raise the bar for what credible sustainability target-setting and disclosures for data centers should entail.

To the above point, our colleagues in SCS Global Services are spearheading groundbreaking work with a coalition, including World Resources Institute, World Wildlife Fund, and UN-backed CEO Water Mandate, to build more rigorous reporting on water use consumption and efficiency data and metrics relevant to data center sustainability targets and water stewardship projects. An update on this effort to standardize reporting was previewed by Reuters – the next SCS Consulting Services installment in this series on LCA and data centers will further explore this exciting development. Our mandate is to ensure we have the right LCA experts at the table to support this important effort.  

AI infrastructure sustainability presents both design-level architectural and governance challenges. We must caveat all of this with the disclaimer that today’s tradeoffs may look very different than tomorrow’s. This further underscores why an LCA-driven approach to evaluating datacenter impacts brings more certainty into the equation precisely because it is multi-dimensional and data-driven. If your sustainability strategy isn't structured around tradeoffs, it's time to integrate LCA.