Microsoft Copilot and Data Privacy: What Teams Need to Know

Microsoft Copilot is now built into Word, Excel, Teams, Outlook, and dozens of other Microsoft 365 apps. That is useful, but it also means your organisation's data is flowing into an AI system at a scale most teams have not stopped to consider. Understanding how Copilot handles that data is now a basic IT and compliance task, not an advanced one.

Which Copilot are you talking about?

Microsoft has multiple Copilot products, and the data-handling terms differ significantly between them. Microsoft 365 Copilot, available to business users on E3 or E5 licences, or via the Copilot add-on, is the enterprise product with the strongest data protections. Copilot in Windows, Bing Copilot, and the free consumer Copilot are separate products with different, weaker terms. When writing your AI policy, specify which product is approved and which is not.

What Microsoft 365 Copilot does with your data

Microsoft 365 Copilot does not train its foundational models on your organisation's data. Your content stays within your Microsoft 365 tenant boundary. Microsoft confirms that prompts and responses are not used to improve third-party or foundational models, and your data is subject to your existing Microsoft data-processing terms and GDPR Data Processing Agreement. The European Data Boundary commitment also applies for EU-based organisations.

What the consumer Copilot experience does

If your team members use Copilot via personal Microsoft accounts or Bing.com, they are on consumer terms. Those terms allow Microsoft to use conversational data for service improvement unless users opt out, and most users never do. This is the same business-versus-consumer distinction that applies to ChatGPT and Gemini. Your AI policy should close this gap explicitly by naming which product and account type is approved for work use.

What to include in your AI policy

Specify that only Microsoft 365 Copilot on your business tenant is approved for work involving company data, client information, or personal data. Personal Microsoft accounts using Copilot are not approved for these uses. Record the GDPR DPA confirmation, Microsoft provides this as part of M365 licensing, in your data processing register. A clear internal distinction between the enterprise product and the consumer experience prevents the most common compliance gap for Microsoft-heavy organisations.