Navigating the Compliance Maze: A Well-Needed Helping Hand from AI
ESG frameworks, such as the latest regulation published by the European Commission, the Corporate Sustainability Reporting Directive (CSRD), present a unique set of challenges for corporations not only within Europe but also beyond the EU’s borders. Corporates are indeed facing numerous new concepts including gap assessments, Double Materiality Assessment, and data collection issues, each of which demands a specific set of expertise and skills to master.
In our “The State of Play of the CSRD” survey, we highlighted the fact that merely 23% of surveyed businesses have commenced their CSRD reporting preparations, while an additional 29% plan to initiate the process within the next six months. Nevertheless, this leaves a substantial majority unprepared for the impending start date.
Undertaking the CSRD reporting exercise, or any other ESG reporting exercise, is no small task, and AI will have a crucial role in helping corporates not only comply but also improve their sustainability strategies. Let’s dive into the reasons why with industry expert Alexandra Serras.
AI Integration: An All-Round ESG Reporting Advisor
Alexandra Serras comments:
With AI included in your reporting, you can benefit from an all-round ESG advisor at every step of your reporting journey. From understanding the complex legislations, to helping gather information from documents for the CSRD data points, all the way to helping improve sustainability performance with best practices from peers. This is an excellent example of how AI will be an asset to any ESG team or lead that is embarking on the challenging road to compliance.
In the realm of ESG reporting, the multitude of global frameworks can be overwhelming, often comprising extensive and intricate documentation. If we take the example of the CSRD, there are over 1.300 data points that need to be collected with descriptions on hundreds of pages.
However, with AI as your ally, the days of struggling with voluminous legislations are over. AI swiftly sifts through countless pages, distilling crucial information into a comprehensible format, thereby becoming your go-to companion for consolidating data seamlessly.
But Concretely, how is AI Technology being Used to Enhance ESG Reporting Processes?
Solutions like Greenomy not only alleviate the burdens associated with ESG reporting, but they go that extra step by integrating AI into them. This not only fosters a deeper understanding of diverse frameworks but also makes the entire process more agile and time-efficient. AI technology ensures adaptability to evolving frameworks. The different ESG frameworks are living regulations and are still subject to changes and updates. With AI, it is easy to always be updated with the latest version of the regulation, taking away some of the burden of regulatory watch for ESG teams. Using AI or having AI-driven ESG reporting solutions, will allow you to sustain compliance in the years to come, especially for ESG teams often constrained by tight budgets.
It is important to note that AI will likely not replace human capital; instead, it complements and reinforces small ESG teams. By streamlining processes, AI acts as a cost-effective team member, reducing compliance costs and demanding minimal training. This proves particularly beneficial for ESG teams operating on limited budgets, offering increased bandwidth and efficiency.
Will AI really be a Game-Changer in the ESG Reporting World?
Looking ahead, AI's influence on ESG reporting will continue to evolve, presenting numerous opportunities. Beyond simply expediting reporting, AI allows for the reallocation of resources, enabling teams to focus on implementing sustainability initiatives. It serves as a strategic ally in identifying gaps, recognising patterns, and uncovering opportunities for sustainable improvements within a company.
Challenges and Considerations: The Human Touch in AI Integration
While AI promises transformative benefits, challenges remain. Alexandra Serras adds:
AI's inherent imperfections necessitate human intervention to ensure accuracy given the ever-evolving nature of the ESG regulations. Additionally, the computational challenge posed by an increasing volume of documents requires a delicate balance to prevent data overload. Indeed, Large Language Models (LLMs) currently have a big context window (this is the amount of information you can feed into the model), but it is highly advised to keep the context short in order to prevent the LLM from being confused and discarding random information.
Going one step further, we also need to make sure that we always feed relevant information as recent studies show that LLMs pay more attention to information at the end of the context window. We cannot dump information randomly and expect the LLM to make sense of it.
One last challenge to consider is that the articles models ingest are often in legal wording, it makes it harder to select the correct context to use as usually tools work well with only sustainability text or legal text, not both. Despite these challenges, AI's integration into ESG reporting is undeniably transformative.
As AI continues to evolve, its role in ESG reporting is set to expand. AI-driven solutions are just the beginning. The future promises tailored recommendations and advanced capabilities, allowing companies to set specific sustainability goals and receive nuanced guidance from AI.
Our Generative AI Expert illustrates:
For example, a company could ask “I want my water management reduced by 40%” and AI will be able to go further in its recommendations saying: “This company did this and reduced by 35%, you could also do this or that”.
Embracing AI for a Sustainable Future
Incorporating AI into ESG reporting is an invaluable asset for businesses navigating the complexities of evolving frameworks. AI not only reduces time and costs but also provides a trustworthy foundation for further human intervention. With the processing power of AI and the high number of documents that AI can access, AI might also become a true business ally, helping teams within companies have a broader view on information available at the company and could potentially even give insights that go one step further.
As AI becomes an integral part of our daily lives, its role in ESG reporting will undoubtedly amplify, propelling companies worldwide toward a more sustainable future.
How is AI integrated into the Greenomy solution?
Greenomy's integration of Generative AI and sustainability provides a glimpse into the future of sustainable practices, revolutionising the reporting process and enabling companies to make informed decisions that align with environmental goals and global sustainability initiatives. To find out more about how Greenomy is integrating AI in our solution, read our dedicated article. As technology continues to evolve, Greenomy's commitment to innovation and sustainable solutions positions them as a leading force in the realm of sustainable development and reporting.
Greenomy is a comprehensive ESG Reporting solution that helps corporates navigate the complex and ever-changing regulatory landscape. Our mission is to help you reach that stage where all the necessary information lays at your fingertips to identify and implement impactful sustainability initiatives. Our solution streamlines the entire reporting process through AI-driven automations and step-by-step guides, while encouraging collaboration with an embedded workflow feature. Greenomy also offers supportive services including Advisory from ESG experts and team training with the Greenomy Academy for a seamless start on your reporting journey.
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