The European Union is working on a new sustainability labeling system for data centers, which are large facilities that house servers and support internet services, cloud computing, and digital operations. The system would require data center operators to share information about their energy and water use, with the goal of encouraging more sustainable practices. The European Commission, which sets policies for the EU, is focusing on data centers with a capacity of over 500 kW, which are typically larger and more energy-intensive. These facilities are expected to play a growing role in the EU’s efforts to increase digital independence and reduce reliance on American tech companies. To support this digital growth, the EU plans to expand its data center capacity threefold within the next seven years. However, this expansion could put pressure on local power grids and natural resources, such as water, and may lead to higher carbon emissions. According to the International Energy Agency, data centers in the EU used 68 terawatt-hours of electricity in 2024, and this is projected to rise to 114 terawatt-hours by 2030—accounting for more than three percent of the EU’s total electricity use. The European Commission has stressed the importance of making data centers more energy- and water-efficient and integrating them sustainably into the broader energy system. The proposed labeling system will not require data centers to reveal their total energy consumption or set limits on how much energy they use. Instead, it will ask them to disclose how their water use compares to local water stress levels, which refers to the balance between water availability and demand in a given area. Data center operators will also be required to share information about whether they are contributing to the local energy system, such as by using waste heat for nearby buildings or other purposes. This information could influence the development of minimum performance standards for data centers in the future. The European Commission has begun a two-month consultation period, allowing the European Parliament and Council to review and potentially challenge the proposed rules before they become official. If the rules are approved, data centers are expected to start publishing sustainability labels next year. The initiative aims to promote transparency and sustainability in the growing data center industry while supporting the EU’s broader goals of digital sovereignty and environmental responsibility.