Why AI is critical to meet rising ESG demands

Could artificial intelligence (AI) help companies meet growing expectations for environmental, social and governance reporting?

Certainly, over the past couple of years, ESG issues have soared in importance for corporate stakeholders, with increasing demands from investors, employees and customers. According to S&P Global, in 2022 corporate boards and government leaders “will face rising pressure to demonstrate that they are adequately equipped to understand and oversee ESG issues — from climate change to human rights to social unrest.”

ESG investing, in particular, has been a big part of this boom: Bloomberg Intelligence found that ESG assets are on track to exceed $50 trillion by 2025, representing more than a third of the projected $140.5 trillion in total global assets under management. Meanwhile, ESG reporting has become a top priority that goes beyond ticking off regulatory boxes. It’s used as a tool to attract investors and financing, as well as to meet expectations of today’s consumers and employees.

But according to a recent Oracle ESG global study, 91% of business leaders are currently facing major challenges in making progress on sustainability and ESG initiatives. These include finding the right data to track progress, and time-consuming manual processes to report on ESG metrics.

“A lot of the data that needs to be collected either doesn’t exist yet or needs to come from many systems,” said Sem J. de Spa, senior manager of digital risk solutions at Deloitte. “It’s also way more complex than just your company, because it’s your suppliers, but also the suppliers of your suppliers.”

ESG data challenges driving use of AI

That is where AI has increasingly become part of the ESG equation. AI can help manage data, glean data insights, operationalize data and report against it, said Christina Shim, VP of strategy and sustainability, AI applications software at IBM.

“We need to make sure that we’re gathering the mass amounts of data when they’re in completely different silos, that we’re leveraging that data to improve operations within the business, that we’re reporting that data to a variety of stakeholders and against a very confusing landscape of ESG frameworks,” she said.[…]