Helle Bank Jørgensen, Founder of Competent Boards, and Dr Henning Stein, Finance Fellow at Cambridge Judge Business School, explain how the technology can empower boards to address sustainability challenges.
ESG considerations have been rising up corporate agendas for years, yet meaningful knowledge of them often remains poor at the highest levels. A recent study by Competent Boards and Copenhagen Business School provides alarming evidence of this problem.
According to an analysis of publicly available data on Fortune 500 companies in the US and Europe, the boards of many of the world’s largest businesses still lack sustainability expertise. Incredibly, some appear to have no relevant competences whatsoever.
Just 2% might be described as ‘sustainability superstars’, which is to say their boards possess substantial sustainability acumen. This represents a shockingly small minority in an age when financial performance is increasingly affected by not-yet-financial factors.
The most obvious way of dealing with this issue is for board members to undertake training explicitly focused on sustainability, governance and stewardship. This allows them to develop a necessary understanding of all the risks, opportunities, standards and regulations in this space.
But might technology also have a part to play? In light of the tremendous advances witnessed during the past few years, would a board’s approach to sustainability and ESG be enhanced if there were a seat at the table for artificial intelligence (AI)? Could progress in fields such as generative AI, natural language processing and machine learning assist in tackling major challenges such as climate change, social equity and ethical governance?
We believe so. With many boards knowing far too little about sustainability and ESG, there is a compelling case for utilising a form of tech that seems to know everything. It is vital to understand, though, that such an approach must be conditioned by a number of significant caveats.
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