Could AI be saviour of your ESG strategy?: The Legal Director writes to ICON

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Kiley Tan (Image credit: The Legal Director)

In this thought piece Kiley Tan from The Legal Director tells ICON readers what role Artificial Intelligence can play in meeting their environmental, social, and corporate governance targets.

 

For many SMEs, energy consumption is a very real concern. A recent survey by Paragon Bank suggests nine out of 10 SMEs have reported hikes in energy costs in 2023 – with 50% increasing their prices to mitigate the impact.

In the context of the drive to Net Zero Carbon, and a growing commitment by British businesses to adopt climate friendly policies and processes, UK SMEs are up against it to maintain their commitment and turn a profit. The weight of responsibility is on their shoulders: SMEs account for 99% of all UK businesses and there is widespread recognition that quite simply, there is no net zero without them

As a result, Paragon notes that in the UK, 38% of businesses surveyed have invested in their own operations to increase their energy efficiency. But how are these investment decisions being informed, and what role can Artificial Intelligence (AI) play in making the right choices?

Artificial Intelligence: friend or foe?

AI has hit the headlines in a myriad of ways: depending on your perspective it is either a panacea or a painful reminder that artificial intelligence is changing the world of work forever. In 2020 the World Economic Forum predicted AI would replace 85 million jobs across the world by 2025, notably in data and technology.

But AI’s ability to process and analyse data, identify trends, and highlight opportunities for incremental improvement is where it can make a real difference to a business’s bottom line. And energy is the obvious place to start.

Data, information, knowledge, and wisdom

Often data is being created but remains uncollected. Beyond capture, we need to understand what data is useful and disregard the noise. As an example, AI can help us understand where the main use of power is in a business, pulling out peaks and troughs, and highlighting areas we might wish to challenge. (‘Why is my energy consumption high in this particular season?’). This will enable a business to understand its costs at a granular level.

Machine learning can help predict when costs will be high and seek solutions – whether that be through tweaking tariffs, switching energy supplier, investing in carbon reduction strategies – or building resilience by generating energy directly.

Predicting consumption and analysis energy usage means SMEs are better able to understand their business’s carbon emissions, empowering them to take proactive steps to reduce carbon emissions.

Avoid the danger of greenwashing

Using AI tools is one way to manage energy consumption, predicting peaks in demand, and mitigating environmental and financial costs by developing an appropriate energy management strategy.

From a legal perspective, managing your carbon footprint is an essential part of any business ESG (Environmental and Social Governance) strategy and requires good governance to ensure compliance.

Although large UK corporations have to disclose their greenhouse gas emissions each year, only 1 in 10, according to the British Chambers of Commerce, are measuring theirs. And, only 26% of firms employing more than 50 employees are doing the same. By using machine learning to identify and predict energy hot spots these businesses can better manage consumption, develop plans for energy reduction and meet their ESG targets.

Honeywell’s Q3 2023 Environmental and Sustainability Index suggests that while most organisations continue to take a balanced approach to achieving near term environmental sustainability goals, taking a technology-based approach does appear to be growing in popularity. For high energy consumers such as the manufacturing sector, it will be an essential tool to manage the threat of rising energy costs, and potentially, shift businesses from ‘survival mode’ to success.

 

Kiley Tan is a commercial lawyer, Client Legal Director for The Legal Director and Net Zero/Sustainability Consultant. You can listen to Kiley’s recent podcast on Net Zero Carbon here.

 

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