Feeling the Heat? A Series on AI & the Corporate Paths to Net-Zero

Use Cases & Projects Valentine Reltien

Over a third of publicly listed companies have set net zero goals in 2022. The need to slash global emissions by half by 2030 has been demonstrated as essential to ensure the medium-term livability of our planet. That gives us the same seven years as NASA had to put a man on the moon — but history tells us that moonshots and other major feats start with epic targets. Achieving the seemingly impossible lies in a vision, will power, and cooperation within and between corporations (or even co-opetition). And today, we get to call on AI for added support.

This blog series will explore how Everyday AI can help us land our Earthshot. In this introduction, we’ll start by laying out the playing field: what are the current global climate targets, as articulated in reports, regulations, and the international conferences devoted to the subject? How will they affect corporate policy and best practices? And where does AI fit into all of this?  Following posts will focus on industry verticals, from Retail to Life Sciences, to highlight optimal decarbonization hotspots for you to leverage AI successfully and impactfully.

Taking the Temperature With Reports

The year 2022 came in pairs: two critically conclusive environmental reports, two United Nations’ Conference of the Parties, two bold new reporting directives and two impactful new regulations in the USA and EU. All of which will inform business’ 2023 agenda. Indeed, the year asserted a post-pandemic new normal in which the only constants were geopolitical uncertainty, climate deregulation and the rise of Everyday AI.  

The International Panel on Climate Change (IPCC)’s sixth assessment report emphasized the irreversibility, devastating and now dangerous scale of human-caused climate change for earthlings of all countries and classes. The United Nations Environmental Program (UNEP) then released an emissions gap report: “The Closing Window – Climate crisis calls for rapid transformation of societies”. This report revealed we are on track for a +2.7C warming by 2100.

But the game is not over just yet, and reports emphasize that our generation is the last one with the power to avert full-on catastrophe. Provided the international public/private community acts boldly within the next two years on industry-wide net-zero emission pathways, we still have a chance of avoiding the worst consequences of climate change.

From Reports to Regulations

The year 2022 also brought two new regulations on business leaders' radars: the Corporate Sustainability Reporting Directive (CSRD) in the EU, and the Security Exchange Commission’s proposal (SEC) in the US. Businesses are being required to concretely demonstrate their earnest engagement in the transition from a shareholder to a stakeholder business model. 

It’s worth presenting the CSRD and SEC’s proposal side by side given their convergence with the Taskforce on Climate-Related Financial Disclosures’ recommendations. Ultimately, both imply companies will have to industrialize transparent data management to be fit for mandatory third-party review. Their main divergences relate to breadth and depth. While the SEC’s proposal applies to public companies, it’s very likely that investors will require companies preparing an IPO to file SEC-compliant reports. Meanwhile, the CSRD’s scope has close to quadrupled to encompass all large and listed companies on EU regulated markets. Both CSRD and SEC require disclosures of a detailed, evidence-based climate risk management strategy and GHG emission reduction roadmap framed within medium-term targets (vs 10+ years away).

The EU also passed legislation in December 2022 to block products linked to deforestation from its markets, including commodities such as cocoa, soy, and palm oil, among others. The legislation now requires that companies disclose proof of having performed due diligence, including the demonstrable tracing of commodities’ precise provenance. While this can be tricky to do in hyper-globalized supply chains, AI solutions that help companies sift through and screen massive datasets can be a massive help. 

The EU’s climate legislation was echoed in the US by the Inflation Reduction Act. The $370 billion government subsidies and tax credits aims to accelerate companies’ decarbonization by incentivising their transition to a low carbon economy. Provisions include tax cuts for the installation of renewables, on-site battery capacity, insulation of buildings and carbon capture storage to name a few. Strategically, this can enable improved financial performance thanks to energy efficiency gains, and can “de-risk” companies’ activities by advancing their competitiveness in tomorrow’s low carbon economy. As we’ll discuss in the next blog post in this series, investment in AI solutions can help companies take advantage of the the changes to the sustainability landscape wrought by the Inflation Reduction Act.

A Global Meeting of Minds

Last year ended with two annual sessions of COP — the Conference of the Parties for the United Nations Framework Convention on Climate Change. COP27 at Sharm-el-Sheikh brought a first-of-its-kind agreement to set up a Loss and Damage Fund in support of developing countries who disproportionately carry the brunt of climate change’s consequences. Though how the fund will be paid for and who is to receive it are yet to be determined, the agreement sets a precedent for a balancing of the scales between developed and developing countries. Ultimately, COP27 stood out as a privileged nexus for public-private collaboration driving industrial innovation for a faster implementation of decarbonization. 

Also of note was the launch of the Net Zero Data for Public Utility (NZDPU) program, announced by the Climate Data Steering Committee at COP27. The program seeks to “bring transparency to efforts to transition to a net-zero economy by addressing data gaps, inconsistencies, and barriers to information that slow climate action.”

2022 wrapped up with COP15 — also known as the UN Convention on Biological Diversity (CBD), in Montreal. This amounted to a non-binding global agreement affirming the need to halt and reverse the scientifically identified, human-caused sixth mass extinction. The Montreal-Kunming Global Biodiversity Framework resulted in twenty-three targets which run from effectively tackling ecosystem pollution, integrating natural capital accounting in corporate reporting, and the removal of financial subsidies linked to activities harming biodiversity. 

Most notable among these targets is the formal agreement to protect 30% of land and water by 2030, to dedicate $200 billion to biodiversity conservation and to make mandatory the reporting by multinational companies of their “risks, dependencies and impacts on biodiversity”. COP15 thus suggested biodiversity’s arrival on the corporate agenda in a comparable way to carbon accounting. 

Here too,  AI is proving key in advancing biodiversity conservation and restoration initiatives thanks to computer vision, image labeling, and intricate satellite imagery analysis which significantly expands the scope rangers can monitor by themselves. Trailblazing FTSE100 companies have even started quantifying their value in natural capital, putting them ahead of the curve when it comes to double materiality.

Facing the Coming Climate With Dataiku

Companies are realizing how compatible data-driven decarbonization is with their Everyday AI journeys. From improved data collection, cleaning, and manipulation, to easy-to-build demand and production forecasting models, integrated AI solutions are empowering companies to combine meaningful climate action with profitable business.

When it comes to corporate sustainability targets, Dataiku’s platform can empower line-of-business analysts, data scientists, and data engineers to work collaboratively on model development and deployment. Effectively collecting, measuring, and turning value-chain data related to sustainability into useful insights can be a major challenge for most companies. Yet advanced analytics and AI tools like Dataiku can help overcome these, thanks to their ability to wrangle all types of unstructured or alternative data into reporting and forecasting models.

I’m excited to expand on Everyday AI’s unique potential in moving the needle on the world’s evolving climate goals. In our next post, we'll talk about retail supply chains, and how not to miss the forest for the trees.

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