“Developing ESG goals and then monitoring and making progress towards them are among the greatest challenges faced by global businesses today. The incoming data sources are complex and divided, leading to insufficient analyses, inconsistent reporting, and unfulfilled promises.”
Climate change has brought about uncertain times, which has had a cascading impact on private players, from customers to investors. This has brought about a situation where all stakeholders want companies to pull up their socks, especially when it comes to ESG (Environment, Social, and Governance) reporting. “Developing ESG goals and then monitoring and making progress towards them are among the greatest challenges faced by global businesses today. The incoming data sources are complex and divided, leading to insufficient analyses, inconsistent reporting, and unfulfilled promises.” says a report by World Economic Forum titled ‘ Without AI, we won’t meet ESG goals and address climate change’.
In 2021, the European Commission adopted a proposal that will require companies to report on social and environmental impacts starting in 2024. The United Kingdom, Hong Kong, Singapore, and China have all updated their environmental and social disclosure guidance. And in August 2022, the US Securities and Exchange Commission proposed regulations to enhance and standardize climate-related disclosures. In such a situation, artificial Intelligence (AI) can help. “Those with automated solutions for emissions measurements are 2.2 times more likely to measure emissions comprehensively and 1.9 times more likely to reduce emissions in line with their ambitions.” adds WEF.
AI adoption will also help promote transparency, which is key to delivering honest reports. In fact, new recruits want to work with companies that are ESG-compliant. AI is necessary not just for ESG reporting but also improving overall company efficiency. “AI allows previously separated data streams to be integrated and reconciled and informs goal setting that takes the complete picture into account.” says the report. The technology is not just limited to streamlining ESG information, but overall company functions.