In the European Union, large companies and most publicly traded companies will be required to publish updated information on the environmental and social risks they face, with reports due to be published from 2025.
Across the pond, the Securities and Exchange Commission announced new rules earlier this month requiring companies to disclose their greenhouse gas emissions to investors. “That's going to be a reality for many chief financial officers,” said John Mennell, a managing director at Deloitte.
With disclosure requirements emerging in countries from India to China, we expect to see increased demand for tools that help companies track environmental, social, and governance factors. Many of these tools will rely on artificial intelligence to help multinational companies stay compliant, but also transform their businesses in the process.
“As you can see, about 40% of the world's GDP now requires full sustainability, not just climate change disclosure. Tim Mohin, partner and director at Boston Consulting Group.
“I think this is a really great thing for companies,” says Meera Clark, an early investor at Redpoint Ventures. “Now that we have visibility, we are building this benchmark around actually setting up a reporting infrastructure that we can rely on for the next five, 10 or 20 years.”
AI is already helping companies track ESG goals in a variety of ways, with some of the most popular use cases ranging from machine learning to improve the accuracy of ESG metrics and address disclosure gaps, to This ranges from the use of AI-powered satellite technology for assessments. Predictive modeling to calculate risks, and greenhouse gas emissions.
“There are a wide variety of areas where AI can play a meaningful role,” said Matt Slovic, head of global sustainable finance at Morgan Stanley.
But companies should proceed with a degree of caution, Slovic added. “Is this a problem that AI can solve?” asks Slovic. “If so, what does that solution look like and what does it mean in the context of your organization, cost structure, and other goals to ultimately make the right decision?”
Redpoint Ventures says the company spends the majority of its focus on software and data infrastructure companies, looking for mass market opportunities and the key reasons startups shouldn't exist today when they didn't exist before. Clark said.
“The regulatory environment continues to evolve,” Clark said, which he believes justifies the Redpoint Ventures-led $13 million Series A investment in AI sustainability platform Greenplaces. “It is clear that companies need to be able to report this data more effectively.”
One of the issues that is emerging as demand for AI and generative AI tools increases is the energy usage required for such computations. “Data centers continue to consume huge amounts of energy, and unless that energy comes from renewable sources or there is some way to actually reduce consumption, there is an even bigger downside to this story. “There will be a lot of confusion,” Mohin warned.
Susannah Shattuck, head of product at Credo AI, an AI governance software provider, says if an organization has set a goal of reaching carbon zero by 2050, make risk-based decisions and “We need to recognize the fact that large-scale language models are important.” The carbon footprint can be huge, so we're deciding whether to actually deploy it in the use cases that can have the biggest impact on the business. ”
Large-scale language models can contain hallucinations and biases, expose organizations to adversarial attacks, can mislead the models, and can make it difficult for businesses to rely on these tools. Reliance can create new governance risks.
“Organizations that want to use their technology securely need to ensure that appropriate guardrails are in place to protect against those possible risks and negative consequences,” says Shattuck. .
Deloitte's Mennell says ESG AI tools can not only help companies stay compliant with new standards, but can actually transform them. For example, agricultural companies can use his AI to track the environmental footprint of new low-carbon alternative protein sources and market those claims to consumers. “With the data I can generate, where are the opportunities to create fundamentally new products and new businesses that create value?” Mennell asks.
Canada-based Geotab has been using AI to help Fortune 500 companies and the public sector manage their fleets for more than a decade, helping companies learn more about the efficiency, safety, and sustainability of the vehicles they use. We have provided data intelligence to make informed decisions. “Sustainability decisions and efficiency can overlap quite a bit,” says Neil Cawse, his CEO at Geotab.
The most sustainable solution is simple: reduce vehicle idling. From there, the public and private sectors can review the scope of the route and see if the vehicle type fits the route's requirements, Kause says. But one common mistake he sees is that some companies are too aggressive in switching to electric vehicles. This is a costly mistake where part of the vehicle is stopped because it cannot complete the trip.
“Good decisions come from good data,” adds Kaus. “Let the AI decide what you need to focus on first.”
In February, Geotab announced a generative AI analytics assistant called Geotab Ace. It leverages billions of daily data points, including predictive safety analytics, predictive maintenance, trip data, EV statistics, and GPS tracking, to answer customer questions.
Meanwhile, C3 AI sells AI-enabled software to sustainability teams that helps them collect, manage, and analyze data, identify risks, and execute plans to achieve ESG goals. “Demand for these ESG applications is about to go through the roof,” says Tom Siebel, Chairman and CEO of C3 AI.
Siebel doubts whether ESG disclosure requirements will bring about meaningful change, saying it would be costly for companies to report on such standards. Companies only need to publish data to comply with regulations arising in Europe, the United States, and other markets without actually having to take any action.
C3 AI's hope is that the tools it provides will lead to action and prove that reducing energy use for businesses means lower costs and is ultimately better for customers, shareholders, and the planet. is.
“We will allow them to plan and mitigate measures to reduce carbon emissions and reduce energy consumption in order to achieve the goals they have set,” Siebel said. Masu.