AI adoption for sustainable growth – a board of directors’ perspective
Professor Agnes KY Tai, Governing Board member of the Climate Governance Initiative, explores the pivotal role of boards in overseeing AI-driven sustainability initiatives, and looks at real-world applications of AI in addressing environmental and social challenges.
Highlights
- corporate boards play a pivotal role in navigating AI adoption while aligning initiatives with sustainability goals through accountability, transparency, ethics and resource allocation
- AI is revolutionising sustainability efforts across sectors, with real-world applications – such as climate scenario analysis, deforestation tracking, carbon emissions reduction and predictive maintenance – driving innovation and efficiency
- by leveraging AI tools for sustainability reporting, risk management and talent acquisition, boards can enhance transparency, build strategic leadership and align organisations with long-term environmental goals.
In today’s rapidly evolving business landscape, the intersection of AI and sustainability presents both unprecedented opportunities and challenges for corporate boards. As stewards of long-term value creation, boards must navigate the complex terrain of AI adoption while ensuring their organisations remain committed to sustainable practices. This article explores the multifaceted role of boards in AI and sustainability initiatives, highlighting real-world applications and case studies.
The board’s role in AI adoption
The board of directors plays a crucial role in guiding AI adoption within organisations, particularly as it relates to sustainability efforts. Board responsibilities encompass several key areas.
Accountability and responsibility. Boards must ensure that AI initiatives align with the company’s overall strategy and values, including its sustainability goals. They are responsible for setting the tone from the top and fostering a culture of responsible AI use. As with any decision made by the board, it is ultimately fully accountable for the outcome. Entities operating in the EU and the Chinese mainland, for instance, must ensure compliance with regulatory requirements to minimise reputational risks and fines.
Transparency and fairness. Directors should advocate for transparent AI systems and ensure that these technologies are deployed fairly across the organisation and also, to a certain extent, throughout the ecosystem in which the organisation operates. This includes addressing potential biases in AI algorithms that could impact sustainability efforts and operations.
Ethics and guardrails. Establishing ethical guidelines and risk management frameworks for AI use is a vital board function. This involves creating guardrails to prevent misuse of AI technologies and to ensure they contribute positively to sustainability goals. Requiring AI and the associated data-related risks to be incorporated into the risk register for regular review is an important act.
Subject knowledge. While boards don’t need deep technical expertise, they should have a basic understanding of AI and its implications for sustainability. This may involve ongoing education and the addition of directors with relevant experience. Board directors should be well equipped to ask good, relevant questions and to discern whether the responses received are reasonable and feasible.
Resource allocation and management authority. Boards must ensure that management has the necessary resources and authority to implement AI initiatives effectively. This includes approving budgets and overseeing the delegation of responsibilities.
Pilots, progress and scaling. Directors should monitor AI pilot projects, assess their progress and make informed decisions about scaling successful initiatives. This involves regular updates from management and a critical evaluation of results.
AI tools enhancing sustainability
AI is revolutionising sustainability efforts across various sectors. Real-world applications are evolving and boards that are bold in trying out suitable tools can steer their organisations ahead of their peers.
Climate scenario analysis
Nuveen, a global investment manager, used ClimateAi’s tools to forecast future climate conditions across its holdings. This allowed Nuveen to identify key risks, such as water scarcity, and to take proactive measures like securing water rights. According to ClimateAi’s 2024 Climate Resilience Playbook, the investment company calculated a 17x return on investment from this technology, as it enabled more efficient due diligence and identification of growth opportunities in renewables and agriculture lending.
Weather risks and deforestation tracking in agriculture
Advanta Seeds leveraged ClimateAi’s predictive modelling to identify an unexpected precipitation event two months in advance. This early insight allowed the Australian seed company to transport seed to the affected location before competitors, resulting in a 5% to 10% increase in sales. Elsewhere, Google Research uses AI to accurately predict riverine flooding and help protect livelihoods in over 80 countries up to seven days in advance, covering 460 million people, including in data-scarce and vulnerable regions.
According to the World Economic Forum, the Amazon Environmental Research Institute (IPAM)’s Cerrado Deforestation Alert System uses satellite imagery and AI to map deforestation down to a 10-squaremetre resolution in the Cerrado, the world’s most biodiverse savannah. Similar tools are being deployed in deforestation monitoring of Singapore-listed Olam’s supply chain.
Mitigating climate risks
IBM used AI to analyse its supply chain data and identify areas for improvement in carbon emissions. By optimising logistics routes, the company achieved a 12% reduction in carbon emissions, demonstrating AI’s potential in driving sustainability improvements through data analysis.
ClimateAi’s ClimateLens platform deploys technology to assess climate risk exposure for specific locations, predict weather events, and make projections for crop yield and quality to ensure supply reliability. It allows users to quickly onboard using informative templates, receive key alerts and insights, and build customised, shareable dashboards within minutes.
Predictive factory maintenance
Nestlé deployed AI-driven sensors in its manufacturing facilities to monitor water consumption, detect leaks and identify conservation opportunities. This resulted in a 15% reduction in water usage and increased water recycling rates.
Customer preferences and trends
Walmart implemented AI algorithms to analyse customer purchasing patterns and preferences related to sustainable products. This data-driven approach allowed the company to optimise its product offerings and promote more environmentally friendly options.
Renewable energy solutions
Google’s DeepMind AI was used to optimise energy use in Google’s data centres, reducing energy consumption for cooling by up to 40%. This application of AI demonstrates its potential in enhancing energy efficiency and promoting renewable energy solutions.
Sustainability investments
The Southeast Asia Climate and Nature-based Solutions (SCeNe) Coalition is utilising Google’s AI infrastructure to map nature-based carbon projects in the region. This initiative not only aids in carbon sequestration efforts, but also ensures that these projects deliver co-benefits to local communities and the local biodiversity.
Disclosures and reporting
AI is also transforming how companies approach sustainability disclosures and reporting, with benefits that extend beyond merely complying with ESG reporting regulations.
Strategy tool
EnerSys uses ChatGPT Enterprise to analyse large datasets related to sustainability metrics, including Scope 1 and Scope 2 emissions, travel data and waste data. This AI tool helps the team uncover insights more quickly than manual analysis, informing strategic decision-making.
Communication tool with stakeholders
EnerSys uses ChatGPT Enterprise to assist in answering customer questionnaires and surveys about its sustainability practices. By uploading sustainability reports and internal policies to the platform, the company can generate responses to customer inquiries more efficiently, cutting the time spent on questionnaires by roughly 50%.
Productivity enhancement tool
AMP’s AI platform, AMP NeuronTM, uses cameras to scan mixed waste streams and identify the different materials. AMP CortexTM, the body to AMP Neuron’s brain, is a high-speed intelligent robotics system that can sort recyclables at a rate of 80 items per minute with an accuracy of up to 99%.
Tool for talent management
Unilever has implemented AI-powered tools in its recruitment process to identify candidates whose values align with the company’s sustainability goals. The AI system analyses video interviews and assesses candidates based on predetermined criteria, including their commitment to sustainability. This approach has helped Unilever build teams that are more aligned with its sustainability mission and values.
A means to demonstrate industry leadership
Microsoft has taken a leadership role in using AI for sustainability reporting. The company has developed AI models to analyse and report on their carbon footprint across complex global operations, setting an example for transparent and comprehensive sustainability disclosures.
Conclusion
As AI continues to reshape the business landscape, boards of directors must take an active role in guiding its adoption and ensuring its alignment with sustainability goals. By leveraging AI tools for climate scenario analysis, risk management, sustainability reporting and talent acquisition, companies can enhance their sustainability efforts while driving innovation and efficiency.
The case studies presented here demonstrate the transformative potential of AI in addressing environmental challenges and promoting sustainable business practices. However, it is essential that boards remain vigilant about the ethical implications and potential risks associated with AI use.
Moving forward, boards should focus on:
- developing a comprehensive AI governance framework that incorporates sustainability considerations
- ensuring ongoing education and upskilling of board members in AI and sustainability topics
- fostering collaboration between AI experts, sustainability professionals and business leaders
- regularly reviewing and updating AI strategies to align with evolving sustainability goals and regulations, and
- promoting transparency in AI-driven sustainability initiatives and their outcomes.
By embracing AI as a tool for sustainability, boards can position their organisations at the forefront of innovation while contributing to a more sustainable future. The journey towards AI-driven sustainability is complex, but with proper governance and strategic oversight, it offers immense potential for creating long-term value for businesses and society alike.
“By embracing AI as a tool for sustainability, boards can position their organisations at the forefront of innovation while contributing to a more sustainable future.”
Professor Agnes KY Tai PhD CCB.D SCR®, ESG Investing, Responsible AI, FRM CAIA MBA FHKIoD
Governing Board member of the Climate Governance Initiative
