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The Impact of Regulation on Data Centres: Balancing Sustainability and Demand

This article explores the shift to greener practices, scrutiny from regulators and stakeholders, and the need for robust Directors and Officers (D&O) insurance to navigate corporate liabilities.

11/07/2025 · 5 minute read

As the data centre industry navigates increasing regulation and sustainability demands, it is essential for data centre companies to prioritise comprehensive protection and efficient resource management. Contact our experts to discuss how they can help support your business's future development.

Historically, data centres have operated away from the limelight. But as their significant role in powering the AI revolution and supporting the digital economy begins to be recognised, the industry is likely to attract more scrutiny and greater regulatory oversight. That may mean that the companies that own and run these facilities, along with their board members and executives, could be subject to investigations and potential lawsuits.

Going greener

Sustainability is a key corporate issue as organisations strive to reduce their impact on the environment. Companies are required to provide detailed climate-related information in compliance with regulations such as the International Sustainability Standards Board (ISSB), previously the Task Force on Climate-related Financial Disclosures (TCFD), and standards set by the EU and the US Securities and Exchange Commission (SEC).

The data centre industry’s environmental performance, as heavy consumers of energy and water and generators of heat, is increasingly under the microscope. Regulators, investors, and other stakeholders are keen to know how data centres will operate in a world that is warming and how they plan to manage the growing risks that are associated with more frequent and more extreme weather events, such as heatwave-induced droughts and severe convective storms. 

In Europe, more than 100 data centre operators and trade associations have signed up to the Climate Neutral Data Centre Pact, in which they agree to make their industry climate neutral by 2030. However, they may face the challenge of balancing their environmental responsibilities with the needs of their customers.

If predictions prove correct about how reliant society will become on AI, the demand for processing and storing data will increase exponentially. This surge in demand could pose challenges for data centres in meeting their net-zero commitments.

The tech industry has been proactive in looking for renewable, low-carbon energy sources to power its needs, while also finding ways to do more with less energy. This includes the development of more energy-efficient technologies and new design and architectural techniques that reduce water consumption needed for cooling.

These measures could come at a heavy cost to data centre owners and operators, which creates risks. But the risks of not reducing reliance on fossil-fuel-generated energy as data demand surges could be even greater, especially as organisations are being held accountable for their carbon footprint.

Data now an essential part of life

Data centres’ crucial importance in everyday life has been recognised by the UK government, which included data centres in its list of critical national infrastructure. The designation may provide the sector with more government support in the event of a cyberattack or extreme weather event. But it could also mean that data centres’ own resilience plans will attract greater attention.

In some instances, data centre operators have been sued by their customers, who allege that system failures following a ransomware attack were due to the data centre’s inadequate security measures. Individual executives or board members could be named in investigations — and subsequent lawsuits — if their decisions led to their data centre’s systems being vulnerable.

Prioritising comprehensive protection for companies and executives

In today’s complex business environment, the need for robust directors and officers (D&O) insurance extends beyond just protecting individual executives. It is essential for safeguarding the entire organisation against corporate liabilities, particularly for publicly listed companies that must comply with SEC regulations and face various potential exposures. As data centre companies navigate increasing scrutiny and regulatory challenges, understanding these risks should be a top priority for both directors and the organisations they lead.

Comprehensive D&O coverage not only shields executives from personal liability but also fortifies the company against financial repercussions stemming from legal claims, regulatory investigations, and corporate governance issues. Governance, as a critical component of Environmental, Social, and Governance (ESG) frameworks, plays a vital role in ensuring that companies adhere to ethical standards and regulatory requirements. By prioritising this protection, data centre firms can better position themselves to manage risks, enhance governance practices, and uphold stakeholder confidence.

Addressing water demand in data centres

As the demand for data centres continues to expand, their significant water demands could become a concern. The reliance on water for cooling systems and other operational needs places data centres under environmental scrutiny. This issue is likely to gain prominence alongside data centre’s carbon emissions, as stakeholders and regulators focus more on sustainable practices.

Data centre operators must proactively address their water usage and implement strategies for conservation and efficiency. Understanding and managing water-related risks will be essential for data centre companies to thrive in an increasingly resource-conscious world.

If you would like any more information, please visit Marsh’s Data Centre Insurance and Risk Management Services. Additionally, to better understand how comprehensive directors and officers (D&O) insurance can protect your organisation and its executives, feel free to get in touch with your Marsh representative.

Our people

Nicolae Muturniuc

Nicolae Muturniuc

Management Liability Client Executive

  • United Kingdom

Edmund Woolcock

Edmund Woolcock

Senior Managing Consultant, Marsh Advisory

  • United Kingdom

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James Crask

Head of Multinational Clients, Marsh Advisory

  • United Kingdom

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