Understanding the Impact of AI on ESG

As ESG frameworks begin to move from voluntary to mandatory, the data required to meet these obligations will increase. Artificial Intelligence (AI) solutions will have to replace traditional approaches to managing information if organizations want to remain compliant.
As ESG frameworks begin to move from voluntary to mandatory, the data required to meet these obligations will increase. Artificial Intelligence (AI) solutions will have to replace traditional approaches to managing information if organizations want to remain compliant.

Over the last few years, the world has started to look like a very different place. A global pandemic, international political instability, a drastic increase in climate-related disasters and greater calls for an end to social inequalities are changing the way we look at the world and the way we interact with our stakeholders. As just one example, according to the World Meteorological Association, there have been 11,000 reported weather-related disasters resulting in more than 2 million deaths and USD $3.64 trillion in damage since 1970. With many environmental researchers predicting that this is likely to worsen in the decades ahead, it becomes clear that we are living in a time of unprecedented disruption, which means that many of our traditional business strategies are not going to be good enough anymore.

With environment, social and governance (ESG) priorities now at the forefront of business strategy and compliance, organizations need to embrace new ways of managing the massive amounts of data generated by ESG reporting requirements. Artificial Intelligence (AI) will be an important tool for helping organizations manage this burden, but it won’t come without both opportunities and challenges.

AI Opportunities for ESG

AI’s powerful data-management capabilities provide several benefits, such as the ability to automate the collection of environmental data, respond to environmental events and predict the impact of human behavior on ecosystems over time, which can assist with environmental protection and conservation, including biodiversity, ecological sustainability, air quality and disaster resilience.

For example, AI can optimize energy use in real time, including supporting more efficient grid systems that use renewable energy. It can also monitor oceans for pollution and temperature levels, detect current air pollution levels to send residents environmental warnings in real time and model the impact of extreme weather conditions on infrastructure and other systems.

AI is ideally suited to manage the data-intensive requirements of these tasks, which will have a significant impact on sustainability efforts to reduce climate change and help the world meet the goals of the United Nations Sustainable Development Goals (SDGs).

AI Challenges

In a global community, the interactions between stakeholders are complex. What benefits one party doesn’t always benefit another, and it’s possible for ESG priorities to work against one another.

Although AI provides many benefits for meeting the goals of ESG, when implemented without an awareness of the complex interactions of diverse stakeholders, it can also inhibit others. For example, AI requires significant computing power, which can have an adverse impact on clean energy and climate change goals. Other negative outcomes, like poorly trained algorithms that reinforce biases and stereotypes, the potential for manipulation by unscrupulous agents and a biased emphasis towards the priorities of the wealthy countries at the forefront of AI development, must all be anticipated and prevented by those looking to use the power of AI to promote ESG goals.

Understanding the impact of AI on ESG requires careful due diligence to ensure it doesn’t contribute to negative interactions resulting from unanticipated interactions between diverse stakeholders. Our latest Insight Report, AI and ESG: Opportunities and Challenges, provides a more in-depth look at these interactions, as well as solutions that can help to ensure AI provides maximum benefit to the greatest number of people. Our complementary piece, A Summary of the United Nations Sustainable Development Goals, provides additional context to the role of the UN SDGs in forming the framework for ESG initiatives

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