Digital transformation is progressing at an unprecedented pace, reshaping economies, societies, and the way we live. While digitalisation has been a key driver of economic growth, it also holds the potential to be a powerful tool to support the sustainability agenda. As we celebrate the marvels of technological advancement, we are also presented with a critical challenge that this digital revolution aligns with the urgent need for environmental sustainability and inclusive development. This is the central theme of the United Nations Conference on Trade and Development (UNCTAD) Digital Economy Report 2024, which emphasises the need for policies that steer digital growth while safeguarding the planet and ensuring equitable access to digital tools.

The hidden environmental cost of digitalisation

At first glance, the digital economy almost seems intangible. After all, data flows through invisible networks and is stored in what we often describe as the “cloud.” Yet, beneath the surface of this seemingly immaterial system lies a heavy environmental footprint. The infrastructure supporting our digital world demands vast amounts of energy, water, and raw materials.

Data centres, for instance, are the digital age’s engine rooms, processing and storing the billions of bytes we produce daily. However, this comes at a price: energy consumption by these centres is skyrocketing. Global electricity use by data centres is expected to more than double by 2026, putting immense pressure on power grids and contributing to carbon emissions. As digital technologies like artificial intelligence and blockchain, which are set to grow exponentially, continue to develop, the environmental burden is set to rise even further.

This presents a critical and urgent challenge for countries already grappling with the effects of climate change. Without immediate and decisive intervention, the growth of the digital economy could exacerbate environmental degradation, pushing the limits of natural resources, from the water-intensive cooling systems of data centres to the raw materials required to manufacture devices.

Policies for a circular digital economy

A shift toward a circular digital economy is not just desirable—it is essential to address these growing concerns. The concept of a circular economy revolves around waste reduction, reusing resources, and ensuring that products are designed with their life cycle in mind. For the digital economy, this means rethinking how devices are produced, used, and eventually discarded.

Electronic waste, or e-waste, is one of the fastest-growing waste streams globally. Millions of smartphones, laptops, and other digital devices are discarded each year, contributing to pollution and resource depletion. A large proportion of this waste ends up in developing countries, where it is often poorly managed, leading to severe environmental and health consequences.

Policymakers can help mitigate these effects by promoting responsible consumption and incentivising manufacturers to adopt sustainable practices. At the same time, robust e-waste management systems must be developed, particularly in developing countries, to ensure that digitalisation does not leave a legacy of environmental harm.

Green energy for digital revolution

Another key area for policy intervention outlined in the report is energy use. Digital infrastructure is an energy-intensive sector, and without a conscious shift toward renewable energy, its carbon footprint will only grow. Governments need to set energy efficiency standards for digital infrastructure and encourage the use of renewable energy sources like wind and solar. By creating policies that support greener technologies, such as more energy-efficient cooling systems for data centres, the environmental impact of digital infrastructure can be reduced. As digital economies expand, integrating green energy into the heart of this expansion will be critical in ensuring that economic growth is not achieved at the expense of environmental sustainability.

Sustainable sourcing of raw materials

Digital technologies are highly dependent on minerals and metals like lithium, cobalt, and rare earth elements, which are critical for manufacturing devices and building digital infrastructure. The demand for these resources is skyrocketing, driven by both the digital economy and the transition to renewable energy. However, the extraction of these minerals often occurs in environmentally fragile areas, with developing countries such as the Democratic Republic of Congo(DRC), Botswana, Sierra Leone, and Sudan bearing the brunt of the environmental and social costs.

For many of these countries, the booming demand for minerals presents a double-edged sword. On the one hand, it offers opportunities for economic growth; on the other, it can lead to environmental degradation, water shortages, and human rights abuses, especially in artisanal and small-scale mining operations.

Thus, international policies must promote sustainable mining practices to ensure that digitalisation does not come at the expense of communities in resource-rich regions. This involves improving transparency in supply chains, enforcing environmental regulations, and ensuring that mining communities benefit from the wealth generated by the extraction of these critical materials. Global cooperation is needed to strike a balance between the economic opportunities offered by the digital economy and the environmental risks of mineral extraction.

Conclusion

The rapid expansion of the digital economy presents both opportunities and challenges. If managed properly, digitalisation can be a powerful tool for driving sustainable development, improving resource efficiency, and fostering economic inclusion. However, without the right policies in place, the environmental and social costs could be devastating. Governments must act now to ensure that the digital future we are building works for everyone and is in harmony with the planet. This will require bold, forward-thinking policies that prioritise sustainability and inclusivity at every step of the digital journey.