The hype around the twin transitions paints a seductive picture of the power of AI to provide solutions for countless sustainability challenges. AI’s boost in computing power helps firms identify opportunities and address the risks of sustainable innovations. The AI revolution has immense power to generate new solutions and transform business models, making them less wasteful, more energy-efficient, and more socially responsible. The potential to use AI to reimagine business and develop sustainable models for long-term value creation seems boundless. Recent research shows, for example, that firms using AI for decarbonization purposes gain more financial benefits by reducing operational costs through improved energy efficiency and waste-reduction initiatives.
However, there is considerable concern about AI spinning out of control when used in an irresponsible and disorderly fashion. The global AI race could involve tech firms cutting corners while downplaying the risks. Firms using AI to improve their sustainability performance must be aware of the social responsibility hazards that come with it.
AI’s fast-increasing carbon impact from soaring energy consumption is a serious concern. Big Tech is receiving heavy criticism about the exponential growth in AI-driven data center energy consumption. AI risks following in the footsteps of blockchain and cryptocurrency, both of which suffered significant reputational damage due to excessive energy consumption.
Given that AI leads to data-driven decision-making, there is worry about the potential consequences for people’s privacy, data security, and exposure to bias and discrimination. Scandals stemming from algorithms leading to ethnic profiling and discrimination abound.
How can firms strike a balance between relying on AI for sustainable solutions and not creating social and environmental problems?
We propose a framework to help managers harness the seemingly uncontrollable elements. Using the analogy of the butterfly effect, our framework shows how managers can use AI for sustainability while putting simple guardrails in place to harness opportunities responsibly and prudently curtail risks (see Figure 1).
The framework demonstrates how managers can leverage AI’s unique attributes to perform the tasks of monitoring, measuring, modeling, and managing to improve sustainable business practices while keeping undesirable consequences stemming from reliance on data-driven decision-making based on algorithms at bay. By highlighting AI’s positive and negative impacts across social and environmental dimensions, we explain how using AI for sustainability can create complex decision-making scenarios that need careful thought before taking action.
[For more on this topic, see: “Harnessing AI Butterfly Effect for Sustainability: Digital Boost or Recipe for Disaster?”]
