- Microsoft is constructing its first datacenters using superstrong ultra-lightweight wood to reduce reliance on steel and concrete, significant sources of carbon emissions. - The hybrid approach incorporates cross-laminated timber, a fire-resistant wood material that decreases embodied carbon footprint by 35 percent compared to steel and 65 percent compared to precast concrete. - These hybrid datacenters illustrate Microsoft's commitment to decarbonizing its operations, aiming to be carbon negative by 2030 and remove all emitted carbon by 2050. - Microsoft achieved a 6.3 percent reduction in direct emissions over three years, though indirect emissions rose significantly due to datacenter growth. - The company is implementing various strategies, including updating contract language for low-carbon materials and requiring suppliers to use carbon-free electricity by 2030. - Investments in low-carbon building materials are being increased to accelerate supply and to include innovations like hydrogen-powered steel production. - Microsoft launched a $1 billion Climate Innovation Fund to invest in companies developing climate solutions, having already committed $761 million to transformative technologies. - The fund seeks to enhance commercial availability of low-carbon materials across key areas like carbon-free electricity and advanced materials. - Microsoft is also investing in companies like Sweden’s Stegra and Boston Metal, which focus on new methods of steel production with significantly reduced emissions. - Investments in low-carbon concrete technologies include CarbonCure, which injects CO2 into concrete, and Prometheus Materials, which uses microalgae for zero-carbon cement. - Cross-laminated timber is being used in Microsoft's new datacenters, promoting its benefits as a strong and stable alternative to conventional materials. - The installation of prefabricated CLT can be more efficient and safer compared to traditional materials, despite its higher costs. - Microsoft is positioned uniquely to influence the adoption of green building technologies due to its scale and sustainability priorities. - Ongoing planning reflects the complexities of integrating low-carbon technologies into datacenter construction while aiming for a net-zero carbon future. - Microsoft's strategy emphasizes a comprehensive approach across the entire value chain to ensure the effectiveness and durability of new materials.

 Microsoft builds first datacenters with wood to slash carbon emissions

Published October 31, 2024

Tucked beside a northern Virginia suburb, an experiment is underway to see if one of the oldest building materials on the planet can help Microsoft meet its ambitious climate goals.

Microsoft is building its first datacenters made with superstrong ultra-lightweight wood in a bid to slash the use of steel and concrete, which are among the most significant sources of carbon emissions.

A wood datacenter may sound strangely old-fashioned, if not improbable. But Microsoft engineers have developed a hybrid approach using cross-laminated timber, or CLT, a fire-resistant prefabricated wood material that will enable the company to reduce the use of steel and concrete. The hybrid mass timber, steel and concrete construction model is estimated to significantly reduce the embodied carbon footprint of two new datacenters by 35 percent compared to conventional steel construction, and 65 percent compared to typical precast concrete.Cross-laminated timber being used in two new Microsoft datacenters under construction in northern Virginia will enable the company to reduce the use of steel and concrete, two big contributors to carbon emissions. Photo courtesy of Microsoft.

Microsoft’s hybrid datacenters are the latest examples of how it is working to decarbonize its datacenter and construction operations. In 2020, Microsoft unveiled ambitious sustainability goals: By 2030, it would be “carbon negative” – meaning it would take more carbon out of the atmosphere than it emits. And by 2050 it would remove from the atmosphere the equivalent of all the carbon the company has emitted since its founding in 1975.

Four years later, there has been meaningful progress. In May, Microsoft announced it had achieved a 6.3 percent reduction in direct emissions over three years. But indirect emissions increased 30.9 percent, driven by the growth of datacenters and the hardware housed inside. Indirect emissions are particularly difficult to manage since they include carbon emitted during extraction, processing, manufacturing and even transportation of materials, and so are outside Microsoft’s direct control.

In response, Microsoft has mobilized a company-wide effort to accelerate decarbonization. “It’s an all-hands-on-deck task,” says Jim Hanna, who leads sustainability for Microsoft’s datacenter engineering team.

While no single action will close the gap between 2030 goals and current trends, Microsoft has multiple levers to pull.

Contract language is being updated to accelerate decarbonization by including low-carbon requirements for materials and equipment used in datacenter construction. Select high-volume suppliers will be required to use 100 percent carbon-free electricity by 2030. Investments in low-carbon building materials – from concrete that permanently traps carbon dioxide to hydrogen-powered steel production – are being ramped up in a bid to accelerate commercial supply. And cross-laminated timber, a staple of low-carbon building in the European Union that has only recently begun to catch on in the U.S., is being put to the test in what Microsoft believes is one of the first hyperscale examples of engineered wood in a U.S. datacenter.


Microsoft isn’t the only company working hard to meet its sustainability goals. Many big companies and suppliers have their own ambitious carbon-reduction targets – and are tackling similar challenges.

“A lot of our suppliers are on the same journey as we are,” says Richard Hage, who leads global strategy for datacenter engineering at Microsoft. Everyone is “implementing key initiatives to lower the embodied carbon of their materials and their products.”
Accelerating the market for climate solutions

Green startups face a range of complex challenges, from high initial costs and limited clean energy to fragmented regulatory frameworks and lack of storage and transportation infrastructure for highly volatile materials like hydrogen.

That’s where Microsoft’s $1 billion Climate Innovation Fund comes in. The Climate Innovation Fund, which was created the same year Microsoft unveiled its climate goals, invests in companies and venture funds to accelerate the development of markets for climate solutions like lower carbon building materials and clean energy. To date it has committed $761 million to a variety of transformational technologies – in other words, technologies with the potential for scalable, systemwide impact instead of incremental gains – with a path to mainstream adoption by 2030.

The Climate Innovation Fund was launched in 2020 alongside Microsoft’s sustainability commitments “as a recognition that what we do within our four walls to accomplish our sustainability goals is in many ways dependent on the available technologies,” says Brandon Middaugh, who manages the Climate Innovation Fund program and strategy.

The Climate Innovation Fund works across Microsoft’s businesses to identify gaps and opportunities to accelerate commercial availability of low-carbon building materials in four critical areas where market forces have not done enough to spur supply: carbon-free electricity, advanced materials, sustainable fuels and carbon removal.





What’s not so common is to see an investor like Microsoft come to the table and say I want to both provide you with capital and also sign a contract to buy the output.



Climate Innovation Fund investments also complement Microsoft policy advocacy to help accelerate decarbonization of global supply chains by adding more carbon-free energy to the grid, modernizing and expanding electricity transmission and ensuring a robust clean energy supply chain.

Decarbonizing the global supply chain for building materials is especially challenging given the high-carbon emissions generated by the production of steel and cement. Steel manufacturing accounts for about 7 percent of carbon emissions globally, while cement production represents about 8 percent, according to the World Economic Forum.

Higher costs compared to traditional building materials is another challenge. Transitioning steel to low-carbon production methods is hugely expensive for steelmakers and depends on the availability of carbon-free energy, another critical commodity in short supply.

While transitioning to low-carbon concrete production is not as capital intensive as steel manufacturing, the supply chain is fragmented and many smaller producers operate on very thin margins, another hurdle that impedes the adoption of new techniques. Production timelines for low and zero-carbon concrete can also be long due to more complex manufacturing processes.

To help reduce its future reliance on traditional steel, Microsoft last year became an investor in Sweden’s Stegra (formerly H2 Green Steel), which is building the world’s first large-scale green steel plant in northern Sweden, with up to a 95 percent reduction in carbon emissions compared to traditional steelmaking.

Instead of coal, Stegra uses hydrogen derived from renewable energy. Their method emits water vapor rather than the carbon output typical of traditional blast furnaces, the principles of which have scarcely evolved since the Middle Ages.

In addition to its investments, Microsoft is pursuing the use of low-emissions steel in its supply chain and is a member of the Sustainable Steel Buyers Platform of RMI, a nonprofit that works to transform global energy systems through market-driven solutions.

While all startups need to raise capital, “what’s not so common is to see an investor like Microsoft come to the table and say I want to both provide you with capital and also sign a contract to buy the output,” says Middaugh. “What we’re trying to do is be the catalyst, for lack of a better word, that gets these early contracts done.”

Microsoft is also an investor in Boston Metal, which uses renewable electricity and has developed a unique process that generates oxygen instead of carbon dioxide when making steel.

To help spur market development of the carbon-free energy on which green steel depends, last year Microsoft invested in Electric Hydrogen, a Natick, Massachusetts startup that uses electricity to split water into oxygen and hydrogen.

“Part of the solution is (figuring out) how do you make sure that our suppliers have the enabling technologies they need to develop the green solution,” says Middaugh.

Microsoft’s Climate Innovation Fund has also made several investments in low-carbon concrete technologies including CarbonCure, which injects carbon dioxide into concrete, and Prometheus Materials, which uses microalgae to produce zero-carbon cement. Microsoft is using CarbonCure at select U.S. datacenters and plans to use Prometheus low-carbon cement in its two new Virginia datacenters in small amounts as a pilot to test its strength and durability over time.
Leveraging scale to drive new markets

Other industries outside the technology sector, such as education and healthcare, are also making moves to adopt more green building materials, but few companies operate at the kind of scale Microsoft does. “Microsoft is in a unique position just because they’re so large,” says Thomas Hooker, an associate in the New York office of Thornton Tomasetti, the structural engineering firm in New York. Thornton Tomasetti worked alongside Gensler, which is responsible for the design of Microsoft’s two new Virginia datacenters.

“They can almost be like a market mover and to some extent actually push some of these technologies to more widespread use just because it’s a high priority for Microsoft,” Hooker said.

Cross-laminated timber is an example of a market that has already found its commercial footing. Because engineered wood is naturally low in carbon, abundant and far less complex to manufacture than, say, green hydrogen, CLT has been in increasingly wide use in the U.S. and Europe, where it has become a staple of green building for at least a decade. In 2021 Microsoft built its new Silicon Valley headquarters out of CLT, the company’s first large-scale use of CLT.


A lot of our suppliers are on the same journey as we are…everyone is implementing key initiatives to lower the embodied carbon of their materials and their products.

Cross-laminated timber is typically made of spruce, pine or Douglas fir. Stronger, lighter and more stable than ordinary wood, CLT is made by gluing together 3 to 9 layers of timber stacked in alternate directions, and then pressing it into a solid panel. Unlike steel, which deforms and fails more quickly under high temperatures, CLT develops a layer of char that provides insulation and maintains the integrity of the structure for longer.

The sustainably harvested CLT Microsoft is using will displace a portion of the thick concrete typically used for flooring and ceilings. To ensure durability and waterproofing, a thin layer of concrete will be applied for reinforcement. Even including that thin protective layer, the result will be a much lighter building requiring far less steel, another factor reducing the embodied carbon of the building.
Cost-benefit analysis

Prefabricated offsite, CLT can be installed more quickly and safely than corrugated steel used in large commercial buildings, notes David Swanson, a structural engineer who works on Microsoft datacenter design. While increasingly common in the U.S., CLT still commands a premium and not all building trades have experience with the material. On average, CLT can increase material costs by 5 to 10 percent compared to traditional timber used to build a single-family home, though that can vary based on local market conditions. But for large projects, like a headquarters or datacenter, it can be cost effective due to reduced construction time, less need for skilled labor and economies of scale.

This kind of cost-benefit analysis has become a big part of the datacenter planning process. “We’re constantly trying to validate the suitability of these novel materials for use in a datacenter environment,” says Swanson. “We want to make sure that they’re going to perform, they’re going to be safe, they’re going to be resilient, and provide all the features that we’ve grown accustomed to all these hundreds of years that we’ve been using those other materials.”

Until low-carbon materials become widely available, planning for a net-zero carbon future is expected to remain a complex exercise, reflecting the many variables that can influence mainstream adoption of emerging technologies.

“We have to be system thinkers across the entire value chain of these materials that go into our datacenters and the equipment that supplies our datacenters,” says Hanna. “That’s what makes it hard, but certainly not impossible.”

Related links:

Learn more: Climate Innovation Fund

Read more: Microsoft lays foundation for green building materials of tomorrow

Read more: Sustainable by design: Transforming datacenter water efficiency

Read more: Sustainable by design: Innovating for energy efficiency in AI, Part 1