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How AI in ESG can help drive net zero

How AI in ESG can help drive net zero

There has been a significant rise in the number of disruptive platforms, apps, new products and services emerging in the ESG space in recent years. As sustainability has become more integrated into the corporate landscape, and targets and reporting are enshrined in legislation, ESG technology catering to these changing requirements has fast become an industry in its own right.

Research conducted by PwC in January 2022 showed that over 60% of corporate-level executives consider ESG and sustainability to be integral to long-term business planning. Tech has a significant role to play in delivering on those intentions, from reporting and disclosures, to climate risk assessments, governance processes, tax, and strategic roadmapping.

According to Brian Flynn, chief technology officer (CTO) at Rio ESG – a software platform that leverages artificial intelligence (AI) to help organisations and investors implement sustainability and ESG strategies through streamlined data management, effective governance and skills development – while the technology community is already making a significant impact in this space, not all platforms are created equally. Indeed, too many are pure technology propositions, failing to underpin innovation with sector expertise and insight.

“We’re seeing a lot of apps emerge from the tech community, offering services like carbon calculations, footprint assessments and so on,” he says. “These are often pretty lightweight, raising a lot of questions around completeness and integrity of data.

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“There’s also no real sense they’re built with the involvement of knowledgeable sustainability professionals. These tech companies can make it look good, they get the UX [user experience] right and so on. Look under the surface, however, and there’s not a huge amount of intelligence or transparency behind them. They can be great for beginning engagement with these things and creating awareness, but that’s not really our space.”

ESG expertise for all

That space can be surmised as the democratisation of ESG expertise and, from a tech perspective, what Flynn refers to as “the automation of consultancy”. This involves leveraging both proprietary software and in-house sustainability consultants to grant enterprises of all sizes access to the sort of actionable insight that has not typically been universally available.

“Because we’ve been ahead of the curve on a lot of ESG developments, our platform is aimed at helping organisations improve their sustainable practices in a way that other platforms can’t,” Flynn says. “We assess their current position, then utilise intelligent rule-based analysis alongside more conventional data analysis to gain a better understanding of how to make improvements at a pace that suits each individual business.

“Data is key to this process, and for that reason our onboarding of clients is extremely detailed in order to get the data we need and to ensure it is of the right quality. From that perspective, the good thing about ESG’s growing popularity is that it has raised the profile of the kinds issues we focus on, and clients get why we need to get as granular as we do when it comes to data collation.”

For Flynn, a key innovation since ESG has risen to prominence has been the rise of data as a service (DaaS). This is performed through scraping board reports, publicly available information on companies, and initiating natural language processing on documents, extracting relevant information, tagging it, patching it up, and sending it along the business pipeline. It helps deliver an understanding of where enterprises stand and a benchmarking against industry standards and best practices, but often still lacks granularity and nuance.

“In the future, these kinds of services will play an important role in the automation of ESG reports and infographics,” Flynn says. “At the moment, however, most of what’s available on the market is still surface level. There’s no real test of the quality of the data. There’s no dive into the story behind each of those things where granularity is key.

“Most platforms are lightweight when it comes to the detail. What Rio does is partner with bigger organisations with more complex data requirements and works with them to understand their position, utilising intelligent systems and people-facing as a way of building as full a picture as possible.”

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Trusting AI in ESG

Despite the fact that AI and machine learning (ML), like ESG, have been on an accelerated track to enterprise maturity in recent years, Flynn still considers there is work to be done to convince customers of their true value and best uses.

AI and ML have long prompted concerns around their potential impact on the manual workforce. But Flynn argues that AI should be viewed through the prism of supplementing and the scaling up of those human skills, rather than replacing them – especially in ESG.

“This is particularly true of the ESG space, where there is a lack of availability of people with the requisite training and experience,” Flynn says. “In terms of driving chatbot technology and producing reports tailored to each client’s specific needs, digitising knowledge has been vital for expanding access to tailored ESG services. But expert oversight and transparency is required to ensure trust and quality is baked in.

“AI flags up on our end when consultations need to happen, and on the user side, can assess data positions and flag up any inefficiencies, missing data or overpayment for services. And it’s still evolving. But those consultations, inefficiencies, missing data profiles and overpayment problems still need to be dealt with by a very real, very human workforce.”

The role of democratisation

Like all potentially business-altering platforms, one can only maximise tech’s impact if those using the platform are fully aware of its capabilities and functionalities and how to use them. For Flynn, this comes down to clear training protocols and making the use experience as streamlined and simple as possible.

“This democratisation of technology is key,” Flynn says. “Rio’s original raison d’être was about automating consultancy, but without properly training the very people who are going to be using your platform, it can be time-consuming, inefficient and very expensive. We want to make the process as accessible as possible to organisations of all sizes, and we can only do that if businesses stop thinking about automation as a niche concern for experts.

“Our first clients tended to be smaller and medium-sized businesses, and through working with them we knew how to build systems in line with their needs. But the systems have now also reached a level of sophistication where they can meet the needs of global corporations and investment portfolios too. Typically, we’d say that for every manual consultant who works on a project, the platform adds another four times the productivity.”

Governance as bottom line

The perception that harnessing big data, be it ESG or otherwise, requires businesses to hire more data scientists, is not necessarily true, as platforms such as Rio emerge to help democratise analytics. What actually needs to happen, Flynn says, is for all parts of the organisation, tech and otherwise, to become more involved in ESG conversations. Indeed, even as tech solutions become more prevalent, it is not tech leaders who should take the lead on platform selection and operations.

“If not chief sustainability officers, then we’re talking to CFOs and CEOs more than CTOs,” says Flynn. “We see it as a validation of our approach that everything tech-related is already simplified by the time it reaches C-suite; something even as simple as locating the data and getting it into a usable format.

“A CTO might have input integrating into other systems, taking specific security considerations into account, and individualising what each business does, but good governance means putting the right technological input and knowledge into the hands of everyone.”

Click here to read our original feature in Tech Monitor.