AI in Sustainability Reporting

Businesses will increasingly use AI like GenAI to analyze data and generate sustainability reports, driving eco-friendly practices.

Environmental, Social, and Governance (ESG) factors are no longer a back-burner issue. Private companies are recognizing their importance, driven by growing pressure and the emergence of mandatory disclosure standards in some countries. These standards highlight the complexity of measuring sustainability across entire value chains, making transparent methodologies and reliable data collection crucial.

The surge in AI use fuels the need for robust regulations to manage both its benefits and potential drawbacks.

The impending surge in AI adoption necessitates a collaborative effort between businesses and governments to develop robust regulations. These regulations should address the potential benefits and drawbacks of this technology.

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AI technologies offer a double win for sustainability initiatives. First, they can help businesses uncover new methods for tracking and understanding ESG issues by analyzing vast amounts of data (big data). Second, AI can significantly reduce the cost of tracking and reporting on ESG performance.

Thaipat Institute recently held a webinar on "Innovating Sustainability: The Generative AI Revolution" for the Sustainability Disclosure Community (SDC) with over 160 members.

The seminar introduced the draft GRI Sustainability Taxonomy, a framework developed by the Global Reporting Initiative (GRI) to enable digital sustainability reporting using XBRL. This will streamline reporting aligned with IFRS and the EU's CSRD, promoting transparency and consistency in corporate sustainability disclosures.

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By unlocking the power of sustainability data with Generative AI, reporting organizations can streamline report preparation, freeing up time to focus on enhancing data quality and accuracy. This ultimately leads to more efficient and productive reporting processes.

While widespread AI adoption offers substantial benefits, it's crucial to acknowledge potential risks like job displacement, copyright infringement, and privacy concerns. Effective ethical frameworks and strong governance are essential to ensure responsible AI use.

Leading the way, the European Union enacted the world's first AI Act in March 2024, promoting responsible innovation while safeguarding fundamental rights.

To ensure responsible development, the EU's AI Act classifies AI technologies based on risk.

  • Unacceptable AI like government social scoring systems, is banned.
  • High-risk AI such as machinery or medical devices, requires registration and certification before use. Finally, low-risk AI, including mobile apps and games, faces minimal restrictions.

The EU's AI Act extends its influence beyond the EU to regulate AI systems in several ways. This includes:

  • Banning the export of AI systems for activities outlawed by the Act.
  • Enforcing consistent requirements on all AI providers, preventing discrimination.
  • Demanding compliance with EU regulations for AI-generated content imported into the EU.
  • Requiring even AI systems operating outside the EU to follow the regulations if they impact EU citizens.

The Future of Sustainability Reporting: Powered by GenAI
The integration of Generative AI (GenAI) into sustainability reporting is rapidly approaching an inevitability. This technology offers a powerful tool to streamline data analysis and reporting, ultimately enhancing a company's environmental and social impact. However, sustainability professionals must be prepared to adapt their skillsets to leverage this new technology effectively. While some job displacement may occur, the rise of GenAI is more likely to reshape the field, creating new opportunities for those who embrace this powerful tool for a more sustainable future.

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