The AI-ESG Nexus: A Critical Juncture for Business 

The AI-ESG Nexus: A Critical Juncture for Business 

Integrating AI into ESG goals marks a critical juncture for businesses. While AI holds promise, it is energy-intensive.

Paradox of AI’s Energy Demands vs. ESG Goals

Integrating Artificial Intelligence (AI) into Environmental, Social, and Governance (ESG) goals marks a critical juncture for businesses. The question we face is not just about readiness but also about necessity. While AI holds promise, it is energy-intensive, i.e. 1-1.5% of global electricity use is from data centres. Further, with Large Language Models (LLMs) such as ChatGPT dominating the AI landscape, some studies have projected their potential electricity consumptions between 85.4 to 134.0 terrawatt-hour (TWh) – which is equivalent to Sweden or Argentina’s annual electricity use by 2027. This energy demands pose a paradox: can we use AI to further ESG goals without compromising environmental sustainability? This delicate balance is where the future of responsible business pivots. 

Investment Shifts: ESG as a Strategic Asset

There is a noticeable shift in investment trends, aligning ESG with profitability. It is no longer just about ethical practices; it is smart business. Investors are waking up to the reality that sustainable practices can be more than just ethical – they are strategic, potentially enhancing financial returns. This is not just speculation. It is supported by research and market data. For instance, NTT Group, Japan's leading telecommunications company, exemplifies how deep ESG integration is used as a comprehensive and flexible pattern to proceed and continue the development of smart cities. The "plan-do-check-act cycle" can ensure long-term growth and improvement by learning from data and people's needs. 

Practical AI Applications: for Greater Good

AI's applications in various business sectors offer glimpses into its potential for societal good. From enhancing data analysis for sustainable investing to improving operational efficiency, AI is gradually becoming a cornerstone of responsible business practices. This is not just about technology for technology's sake. It is about harnessing AI for the greater good, creating a win-win for businesses and society.  

Oracle's integration of AI with ESG initiatives has significantly enhanced data analytics, risk assessment investment strategies, and compliance in various sectors. Notably, SailGP utilises Oracle Cloud Infrastructure (OCI) for sophisticated forecasting and optimising athletes' performance worldwide. Similarly, the Norwegian Institute of Bioeconomy Research (NIBIO) employs OCI's data platform and smart sensors for sustainable forest management. These applications showcase Oracle's AI technology as a powerful tool for aligning business objectives with sustainable values, exemplifying the transformative impact of AI on ESG practices. 

Questions for Reflection

With the backdrop of global energy crisis and widespread of digitisation and automation with advanced AI models, data centres are leveraging renewable energy solutions to mitigate environmental impact. Similarly, to reduce the AI carbon footprints, researchers are doing more with less by tuning to small AI models or Small Language Models in which the computational efficiency and cost-effectiveness are redefined. For businesses and investors, it is essential to reflect on a few key areas: the level of digital readiness, the commitment to investing in relevant technologies, such as renewable data centre and small AI models, and the strategic importance of integrating AI into ESG initiatives. These reflections are crucial in determining the preparedness and potential for success in leveraging AI for sustainable and responsible business practices. 

Where to Next: Fostering Responsible Innovation

Navigating the AI-ESG intersection requires fostering a mindset of responsible innovation. By leveraging AI responsibly, we can collectively tackle not only the environmental challenges and issues but also the social dilemma and paradox. This journey, while complex, guides us towards a sustainable future if navigated with care.

23 April 2024



Say Yen Teoh, Yiliao Song, Yee Ling Boo (School of Accounting, Information Systems and Supply Chain, College of Business and Law, RMIT University)

Kush Kahadugoda (Oracle Consulting)

23 April 2024


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Acknowledgement of Country

RMIT University acknowledges the people of the Woi wurrung and Boon wurrung language groups of the eastern Kulin Nation on whose unceded lands we conduct the business of the University. RMIT University respectfully acknowledges their Ancestors and Elders, past and present. RMIT also acknowledges the Traditional Custodians and their Ancestors of the lands and waters across Australia where we conduct our business - Artwork 'Luwaytini' by Mark Cleaver, Palawa.