AI will spot your greenwashing
It used to be that robots were coming for our jobs. Now, they’re coming for our company reports.
Annual reports used to have hiding places. By overloading professional scrutinisers with masses of information, it may have once been possible to throw the scent off a particularly worrying disclosed business risk. Or, neat presentation and attractive word structure could just about convince a reader that all was rosy.
But, as the use of technology has become more prevalent, it’s becoming harder to hide information in the weeds of corporate communications. Crucially, this has huge implications if you’re integrating ESG factors into your business and making related disclosures.
Let us introduce you to ClimeBert. He’s a dual citizen of Germany and Switzerland and has a crack team of researchers to thank for his development. You’ve probably guessed – he’s an AI that focuses on addressing companies’ climate-related disclosures.
ClimeBert’s in the deconstruction business; pulling apart corporate reports to assess who’s really committed to making valuable climate disclosures and who’s all talk.
Over the past six months you may have seen headlines about how, when the Taskforce on Climate-Related Financial Disclosures put the AI to the test, it found more than 800 companies were greenwashing in their reports.
There are some caveats to bear in mind here. Mandatory ESG disclosures are still in their infancy. Most jurisdictions still don’t require them – though obviously the tide is turning.
Likewise, it’s been possible to “greenwash” in reports because very few have been held to account in this regard until recently. Think about when the first time was you even heard the term “greenwashing”.
The use of AI to address firms from an ESG standpoint is a fairly new development. There may even be some trepidation about using this technology. Can it really be a substitute for sustainability-minded human scrutiny of complex documents? Quantitative, model-based ESG scoring of companies has failed in the past. What if the bots are wrong?
On the other hand, we know more disclosures are coming. More documentation is being produced. AI companies are advertising their offerings as an efficient way of tackling this.
So, it’s best to prepare for the future. Act as if no stone will remain unturned. You can wait for an algorithm to throw up a red flag, or you could manage the communications now.
The introduction of mandatory disclosures – whether they be on climate, diversity or otherwise – aren’t an end point. They’re the beginning. The beginning of greater scrutiny, higher standards, more vigorous stakeholder action and more innovation aimed at holding organisations to account.
Whether or not you’re going to have to plead your case to a robot, it’s best to prepare.