Power, Profit, and the Planet: Data Centers and Corporate Climate Impact

Data centers have quickly become the backbone of the modern digital economy, not to mention a flash point in debates about energy costs and how infrastructure affects local communities. But, while these facilities power critical functions for our lives and work, such as the internet, cloud storage, and artificial intelligence (AI) tools, their rapid expansion introduces a complex set of risks for businesses that use them.

The demand for services powered by data centers continues to surge, so much so that the World Economic Forum anticipates global capacity to nearly triple by 2030. For corporate leaders navigating this terrain, recognizing how climate hazards and energy policy intersect with data center strategy is essential to long-term planning.

Data Centers – A Strategic Risk Factor?

It’s no secret that data centers are resource intensive. Their operations require substantial electricity and significant amounts of water for systems to cool computer equipment, and with 24/7 operations, the heat generated by servers must be managed continuously. Many cooling methods, particularly traditional water-based systems, rely on local water supplies.

As a result, data centers can place strain on both local electricity and water infrastructure. For businesses, this strain can translate into tangible risks:

• Financial: Higher electricity and water costs can erode margins or increase expenses
• Operational: Power interruptions or water shortages can disrupt services
• Reputational: Using energy or water sourced from carbon-intensive grids or water systems that are already stressed can complicate community and other stakeholder relationships, and threaten vulnerable ecosystems

These risks are not hypothetical. Due to their scale, the operational demands of data centers rise above a company-level issue to become a state-level infrastructure and policy challenge. This shift has already prompted government action to address impacts on energy and water systems.

State and Federal Responses

In response to these real and potential impacts, U.S. state and federal bodies have enacted policies to protect utility systems, natural resources, and infrastructure. Each set of policy responses brings implications for companies working in the field of data centers and services.

Grid Planning and Load Management

Some states have created specialized tariffs or new customer classes for large energy users, aiming to manage grid stress and more fairly distribute costs. As of late 2025, nine states, including California, Delaware, Michigan, and Virginia, have implemented or are exploring policies that differentiate high-load customers (like data centers) from traditional commercial users.

Takeaway for companies: Companies relying on data center infrastructure should factor new and emerging regulatory frameworks into site selection, budgeting, and contract negotiations.

Infrastructure and Impact Studies

Other states, including Arizona and Washington, are taking a less direct approach, commissioning studies to evaluate the impacts of data center growth. Similarly, North Carolina, Ohio, and Texas have taken steps to study and determine grid infrastructure needs to better meet electricity demand.

At the regional level, transmission organizations such as PJM Interconnection are revising interconnection rules to prevent delays and energy shortages.

Takeaway for companies: Infrastructure studies and grid reforms can affect project timelines and operational risk. Businesses need to monitor regulatory developments and incorporate potential delays or capacity constraints into their operational planning.

Short-Term Reliance on Fossil Fuels

In some regions, states have turned to coal plant extensions or natural gas expansion to meet increased power demands. While this can help with near-term reliability, it can undermine GHG emission reduction efforts which often rely on cleaner energy grids.

Takeaway for companies: Companies with decarbonization commitments should assess risks presented by their energy sourcing choices. Reliance on grid power can affect progress towards GHG emissions targets as each grid’s energy sources vary and introduce reputational risk.

Data Center Energy Costs

At the federal level, U.S. senators recently introduced a piece of legislation addressing power sources for data centers. The Guaranteeing Rate Insulation from Data Centers (GRID) Act is a bipartisan proposal that would require large data centers to source their own power and ensure that the cost of grid infrastructure upgrades isn’t passed on to residential ratepayers. It would also increase transparency around energy usage and prioritize consumer access to electricity.

Takeaway for companies: Energy-intensive data center infrastructure is under closer federal scrutiny. Companies planning significant data center build-outs should evaluate how evolving policy could affect energy sourcing options.

Strategic Considerations for Corporate Leaders

As data center development accelerates and state policy responses evolve, the implications for cost, reliability, and sustainability are becoming more pronounced. Corporate leaders can reduce risk by integrating data center considerations into core business planning. Key actions include:

• Evaluate how data center energy and water use interact with electricity costs, grid reliability, and corporate climate goals
• Incorporate emissions, energy sourcing, and sustainability requirements into capital allocation, data center site selection, and long-term planning
• Prioritize data center development in regions with adequate grid capacity, low water stress, and renewable energy integration
• Assess on-site or dedicated power generation options to help manage electricity costs and mitigate risks related to regulations or grid reliability
• Engage proactively with utilities and regulators to anticipate policy changes, manage infrastructure constraints, and reduce the risk of unexpected cost or reliability impacts

Taken together, these steps amount to more than managing risk. Companies that anticipate rate shifts, infrastructure limitations, and evolving sustainability expectations are better positioned to turn the energy challenges associated with data centers into opportunities for resilience and efficiency.

Where to Start

Companies navigating energy and water risks related to data centers need a clear understanding of how state policies and proposed legislation could intersect with operational planning and climate commitments.

G&A supports companies in evaluating data center-related risks, assessing regulatory and policy exposure, and integrating these considerations into sound climate strategy, risk management, and disclosures.

ABOUT CHRISTINA CARLTON
Senior Sustainability & Climate Analyst, G&A Institute

Christina Carlton is a Senior Sustainability & Climate Analyst at Governance & Accountability Institute. She supports both sustainability and climate engagements, and her work bridges sustainability planning and reporting with targeted climate initiatives, helping companies enhance their ESG performance and integrate resilience into their overall sustainability frameworks.