Boards also need to ask if management has reviewed the organisation’s strategic choices by reference to the availability of the different grants, tax exemptions, loans and financial instruments that are part of the EU Green Deal.
The benefits go beyond the Green Deal. Organisations with an ambition to achieve more than compliance can realise significant value. They will be better placed to turn their climate ambition into action, reduce the risk of greenwashing, and improve their access to sources of green finance on the capital markets. At the same time, more ambitious organisations will be better placed to provide a compelling story to investors and financial markets about how sustainability will deliver economic value, creating a positive impact on the valuation of the business.
In these circumstances boards need to look at how their organisation can systematically identify and exploit strategic opportunities presented by sustainability regulation and ask if the processes and resources are in place to monitor and analyse policy and regulatory developments on a continuous basis.
Exploit AI’s potential for sustainability
Boards also need to exploit the sustainability potential of artificial intelligence (AI). They must push management to explore the potential of AI to support the achievement of sustainability objectives while being mindful of the technology’s environmental, societal and ethical challenges.
The technology has significant potential to create positive sustainability outcomes and accelerate an organisation’s sustainability transformation, but the opportunities must be balanced against the challenges.
AI can analyse vast volumes of structured and unstructured data to provide insights into climate change, helping in predictive modelling and informing better environmental policies. But advanced AI systems consume significant amounts of energy contributing to larger carbon footprints. There are also ethical and societal risks to be taken into consideration. This will require a difficult balancing act on the part of organisations using the technology as well as other stakeholders.
Against this backdrop, boards need to examine how AI solutions can be implemented that align with the organisation’s sustainability objectives while mitigating associated risks. In addition, they should look at the governance practices that need to be adopted to responsibly harness AI for sustainability.
Key questions for boards
Summary
Embracing sustainability can help organisations achieve their value creating objectives. This requires them to go beyond compliance with existing and new regulations and to leverage technology to support their sustainability journeys. Boards have a key role to play in this by pushing management to adopt a proactive and bold approach to sustainability.
