How AI can help organisations embed ESG as a core value
In recent years, the agenda for ESG initiatives has evolved. Not only have certain priorities become more urgent – such as net zero targets and supply chain transparency – but what’s at stake and the risks associated with falling behind have increased.
While ESG may have previously been seen as simply ‘good for the image’, the increasing accusations of greenwashing or diversity failures have shown that ESG initiatives have to be strategic and stand up to scrutiny from customers, media and the regulator.
ESG and the role of general counsels
The broadening scope and requirements of ESG means that a greater range of people and job functions need to be involved in both the strategy and implementation, often spanning HR, marketing, communications and sustainability. General counsels also have an important role to play.
The introduction and tightening of regulation and legislation covering emissions, pay gap reporting, sanctions and ESG investment labels has turned ESG into a legal and regulatory issue—not just a reputational or social one.
To effectively manage potential risks and challenges associated with ESG initiatives, general counsels need to engage early and at a strategic level. For example, ahead of new regulations coming into force or in response to developing events like human rights crises or national and global social action campaigns.
Embedding ESG as a core value
Early involvement ensures that ESG initiatives are genuine, and enables GCs to collect feedback and insight from a range of stakeholders before committing to a specific action. The other side of their “connector” role is to ensure that ESG is taken seriously and embedded as a core company value, particularly at a board level.
This involves communicating ESG values and educating on ESG issues and risks in a way that resonates with different stakeholders. As ESG risks are nuanced, they can be hard to define, even when general counsels are involved at the right stage and level.
Embedding ESG values into board discussions and company culture only goes so far when it’s not clear whether business decisions conflict with the values and activities of the company’s suppliers, clients and partners.
One example is Ikea’s sustainability strategy from 2021 which was called into question due to a report that its products used wood illegally sourced from Russia.
Uncovering ESG risks with AI
It’s nearly impossible for companies to manually engage in continuous research to ensure all possible ESG risks and conflicts are identified and addressed. Still, there are now AI-driven tools which legal teams – among others – can use as a resource to gather real-time insights and stay ahead of emerging risks.
Self-disclosed data from suppliers, potential clients and investments has been shown to be unreliable in numerous greenwashing scandals. Tools like Xapien’s enhance this information by using AI to search publicly available online data like corporate records, individuals’ career history and news articles, alongside traditional databases.
The resulting insights can flag values-led risks which would otherwise only become apparent much later, if at all.
In their roles as ESG “connectors”, general counsels can also use AI to produce reports for company leadership and board members early enough to inform strategic decisions. With the ability to automatically generate greater transparency and insight on ESG-driven decisions, general counsels have an unprecedented opportunity to ensure corporations fully buy in to ESG values and act consistently with them.
How can Xapien help?
Xapien’s ready-to-share reports give GCs the confidence to make decisions around ESG risks while being certain that they have the full picture. Read more about the power of open source information here, or fill in the form below to chat with our team.
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