#1 - JANUARY 2024
Unleashing the power of AI
Three approaches to transformation for sustainable success
Margherita Pagani
Director of SKEMA Centre for Artificial Intelligence
SKEMA Business School
In a rapidly changing world, the combination of artificial intelligence (AI) and sustainability principles is opening up new opportunities for exploration and innovation (Di Vaio et al., 2020; Su et al., 2023). This convergence between ultra-sophisticated AI technologies and a flourishing environmental awareness is transforming industries and redefining AIâs role in developing sustainable business practices (Vinuesa et al., 2019). As we come to grips with the complexity of the situation, it is becoming increasingly clear that businesses have a key role to play in generating growth, while keeping to the UN’s 2030 Sustainable Development Goals.
Realising the potential of artificial intelligence
AI’s ability to process vast datasets, run complex simulations and generate accurate forecasts makes it a remarkable tool for sustainable development. AIâs scope of application is truly enormous, and includes optimising energy consumption, revolutionising waste management and transforming traditional agriculture. What is more, the emergence of quantum computing and digital twins in the industrial metaverse considerably enhances the potential for operational excellence, consolidating AIâs role as a vehicle for transformation.
However, with all these advances on the horizon, we need to strike the right balance between innovation and sustainability. It is thus crucial to look into the energy consumption of AI-based processes, and ensure that we use AI in a conscious, environmentally friendly way (Pagani and Champion, 2023).
Ethical issues linked with integrating AI
As AI takes its place within companies, new ethical and societal considerations are surfacing (Pagani and Champion, 2021). Beyond the simple matter of profitability, these developments call for in-depth consideration of the ethical implications of algorithmic decision-making. The whole difficulty lies in striking the delicate balance between the benefits of sustainable AI-based practices and ethical subtleties that require a solid structure to prevent bias, improve transparency and foster accountability.
In our recent publication, Artificial Intelligence for Business Creativity (Pagani and Champion 2023), we take a detailed look at how AI can help companies tackle business challenges creatively, thus improving their products and processes and encouraging new forms of collaboration. This topic is of particular interest to the SKEMA Centre for Artificial Intelligence, a research centre dedicated to studying and promoting the economic, societal and ethical value generated by human-centric AI systems for business.
To help companies use AI on behalf sustainable development, we propose three ideas drawn from current research, seminars and debates with researchers and the companies concerned.x
What effect does the integration of CSR have on practices?
Sabrina Roszak
Associate Dean of the Digitalisation Academy
SKEMA Business School
Recent scandals have shown that greenwashing remains a considerable risk and that the answer does not seem to lie in more reporting â whether financial or non-financial â even if it sometimes gives the illusion of control. Recently, in France, the obsession of Orpea’s directors with profit led to a cost-cutting policy that severely impaired the quality of care and employees’ working conditions. And yet the company had very good CSR (Corporate Social Responsibility) indicators in its reports: results mainly due to the weight of the business sector in calculating these indicators. As rightly stressed by the Observatoire de la MatĂ©rialitĂ© des Enjeux Sociaux et Environnementaux (Observatory on the materiality of environmental issues), these reporting requirements are “obligations to say,” not “obligations to do”!
Secondly, there is a real risk that internal resources initially dedicated to integrating CSR into operational practices will be diverted to meet regulatory requirements. In an interview in September 2023, Tjeerd Krumpelman, Group Head of Reporting & Regulation at ABN AMRO Bank, shared his thoughts on the risks arising from these growing regulations. The organisation had made a radical strategic change in 2018, adopting a new mission to âimprove banking for future generationsâ and a new group strategy designed to “accelerate the transition to sustainability.” Just when the bank had launched a major transformation programme to implement these new guidelines, the regulatory agenda became more complex, slowing down the transformation process.
“We discussed this transformation with the Board of Directors in 2021. At the same time, we launched a regulatory programme that started out with two people, then three, and now involves 300. As concerns the Board, and the CFO in particular, we have devoted 300 full-time jobs to CSR regulations. But this is not making things move any faster or in the right direction. All we’re doing is complying with regulations. That doesn’t make us any more sustainable.â
Three visions for AI-supported sustainable development
1. A data-driven vision for informed decision-making
To achieve sustainability objectives, it is essential to make data central to the decision-making process. By setting up robust AI-powered data collection and analysis systems, companies can obtain real-time information on a range of environmental and social parameters. By integrating AI-powered analysis systems, it is possible to extract hidden patterns from very large datasets and highlight areas for improvement.
Walmart, for example, uses AI to sift through its supply chain data. This has enabled it to pinpoint malfunctions and reduce transport-related emissions. Anticipating various effects of climate change such as heat waves and heavy rainfall between now and 2050, the assessment has identified goods that are particularly sensitive to these phenomena. By partnering with its suppliers to grow heat-resistant plants, Walmart is boosting the resilience of its supply chain, adding further to its achievements in terms of energy efficiency, waste reduction and transparency (Walmart 2023).
2. Predictive modelling for optimising resources
AI’s predictive modelling capabilities are a powerful asset for sustainable development projects. By combining historical data and external factors, companies can create sophisticated models for predicting future environmental effects and resource requirements.
DHL has set up an AI-based predictive maintenance system for its huge vehicle fleet, which analyses performance indicators and plans the necessary actions. The system has reduced maintenance costs by 10% and vehicle downtime by 15%, improving fleet management, operational efficiency and sustainability while limiting its environmental impact (DHL 2023).
3. Improved transparency and commitment from partners
The convergence of AIâs catalytic power and the transparency of blockchain marks a significant turning point for sustainable initiatives. The combined use of blockchain and the Internet of Things (IoT), particularly in food supply chains, gives consumers access to information on the origin of products, and ensures compliance with sustainability principles. All this encourages responsible consumption and stimulates innovation
(Gaur & Gaiha 2020).
For example, Ripe.io uses blockchain to boost transparency concerning food, enabling consumers to trace the sources of products and access reliable information on the entire supply chain from producer to consumer. This approach fosters trust and compliance, as it connects producers with customers and regulators, helping to create a more sustainable system (Ripe.io, 2023).
As companies harness the transformative potential of AI to strengthen their sustainable development initiatives, they must simultaneously adopt a responsible approach in a context where environmental protection and commercial success are closely intertwined. By obeying these fundamental principles, businesses can lay the foundations for a future where AI drives innovation and paves the way to a more sustainable and prosperous world.
To help companies use AI on behalf of sustainable development, we propose three ideas drawn from current research, seminars
and debates with researchers and the companies concerned.
Margherita Pagani, SKEMA Business School