THE PARADOX OF DIGITAL TRANSFORMATION: HOW INCREASING DATA CENTER ENERGY CONSUMPTION FOR DIGITAL LOGISTICS AFFECTS NET-ZERO GOALS

Abstract

The rapid evolution of digital technologies in supply chains and logistics domains is widely regarded as an enabler of achieving global and corporate net-zero visions. However, this vision overlooks a fundamental paradox: the carbon and energy cost of the digital infrastructure (e.g., artificial intelligence, data centers, and cloud computing) required to make these efficiencies affordable is massive and rising exponentially. This study introduces a new theoretical approach to quantitatively examine this "digital sustainability paradox." We develop a discrete-event simulation model of a multi-echelon supply chain to compare the quantity of carbon reduced by optimizing logistic operations with that of the carbon emissions caused by the enabling digital infrastructure. Our scenario analysis reveals that while digital transformation always increases operational effectiveness, overall carbon impact may not necessarily be minimized. The study's most significant discovery is that the environmental benefits of digital logistics are very much contingent upon the source of energy powering the data centers. We demonstrate that without substituting to renewable power for digital equipment, carbon reductions from efficiency improvements are largely reversed, and in some cases, the total carbon footprint increases. This research provides 3a critical and integrated perspective on the green implications of digitalization, providing actionable policy recommendations for policymakers and practitioners to ride out this paradox and guide a truly sustainable digital future.