Vive la ESG-volution (powered by AI)
FIDO CEO Victoria Edwards takes a look at what new AI tools mean for people responsible for, reporting on, and investing in corporate environmental, social and governance (ESG) issues.?
IN 1762, a philosopher called Jean-Jacques Rousseau wrote a book called the Social Contract. In it he explained how living by mutually accepted principles is the bedrock of social harmony.
It certainly struck a chord with the French, then reached a crescendo in 1789 and all ended rather badly for Louis XVI.
The French Revolution is one of democracy’s defining moments and an abject lesson in what happens when inequality of resources reaches a tipping point.
The world is facing just such a revolutionary moment right now; and the battleground is water. Unless mankind’s biggest users learn to share, they might, like Louis the Last, find themselves on the wrong side of history.
ESG: a social contract for business
Thankfully, the most enlightened businesses and corporations see this and are starting to act in inventive and effective ways.
Environmental, social and governance policies or ESG are the equivalent of a social contract for business. ESG expands on the concept of a social licence to operate (LTO) but with emphasis on the environment and outcomes.
The fact that ESG is such a big thing in 2024 shows that it’s no longer good enough for corporations to just supply goods and services and make money for their owners. Thanks to globalisation, transnational trade, tax and impacts have become more complex and less transparent. Modern investors and regulators want to know they’re nudging the world in the right direction.
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Getting ESG right: the failure of off-setting
ESG is a way to demonstrate corporate adherence to multiple expected societal norms and get ongoing approval for their business operations.
But one of the biggest current problems for businesses is that the unfolding catastrophe of climate change, combined with issues like income and resource inequality, is hardening the view of the public and regulators towards corporate ESG.
The recent carbon off-setting scandal undermined the trust in many previously well-regarded schemes.
One result is that even governments and investors traditionally set against state regulation are now seeing the value of common reporting tools to make it much easier to compare and challenge companies on their real performance. Europe is one of the first out of the blocks with its new European Sustainability Reporting Standards which came into force this month.
Three building blocks for great ESG
With so much at stake, it’s never been more vital for corporations to direct their investment cash towards initiatives that rapidly and demonstrably improve outcomes at the point of impact.
As drought and the growing number of conflicts over supplies shows, water is a great place to start.
So here are the Ethics Centre’s three critical components for social responsibility with my take on how they relate to water:
1.???? Legitimacy
For ESG to be legitimate it must be something which chimes with the legal, social and other norms expected by the communities it operates in. This is often why ESG commitments often take the form of policies on fair tax, safety at work or net zero. In terms of water scarcity, it means water stewardship and water equity.
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2.???? Credibility
For ESG to be credible, the organisation needs to be able to satisfactorily prove it is fulfilling the commitments it makes. This is usually using metrics which are reported publicly, sometimes through any one of more than 600 ESG disclosures and standards, like CDP or the Dow Jones Sustainability Index. In the case of water stewardship, the metrics need to be provably volumized. The go-to standard is Volumetric Water Benefit Accounting (VWBA).
3.???? Trust
This is the difficult one. It’s a measure of how willing an organisation is to concede some of its own potential interests to meet the needs of another; a true measure of collaboration. This could not be more important than it is for water. Water sources don’t respect natural boundaries. Engineered projects to improve availability in one part of a catchment can have catastrophic impacts in another. UNESCO’s International Centre for Water Cooperation has called for more co-ordinated water governance.
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Using AI to capture and report water and carbon ESG impacts
ESG schemes, then, need to deliver impacts which are immediate, local and transparent and enable multiple environmental, social and economic outcomes across community, sector and national frontiers.
And they need to do it yesterday.
Fortunately for corporates and investors mankind knows more about water resources and the pipeline networks we use to transport them than we ever have. And there’s one particular tool that’s rapidly changing the game on potential impacts. That’s AI.
AI now exists which can extract real-time insight on multiple aspects of water loss and demand management simultaneously from curated acoustic pipeline data. FIDO AI gives a near instant picture of water use and loss from which to benchmark ESG commitments and then provides exceptional insight (for instance on the locations of the largest leaks) to realise localised benefits using VWBA.
And if you know how much carbon goes into sourcing, treating and transporting your water, you can provably volumize the associated reduction of that too.
This also makes FIDO the perfect reporting tool. Multiple regulatory and state bodies are actively pursuing this aspect of our AI technology as a standardised way of measuring water stewardship. That could be a credible way to assess and defuse potential conflicts. Being able to show how water’s being used and replaced is a powerful diplomatic tool.
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AI-led water positivity
The corporate water positive movement is a great example where the innovative use of AI is building new models for water ESG. This is where businesses pledge to replenish more water into a watershed than they take out of it themselves.
This level of water stewardship passes the legitimacy test by replenishing an essential resource at point of use, making availability more equitable and allowing sustainable growth with better environmental responsibility.
It passes the credibility test, because the results are transparently provable using VWBA. And it passes the trust test, because FIDO AI unites non-traditional partners like never before. By removing the risk of applying and scaling technology in the poorly resourced utility sector, corporates like Microsoft are using FIDO AI to create new catalytic communities around the common goal of water replenishment.
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AI-led catalytic communities for water scarcity
This is the most exciting element for me. Having immediate, local, measurable and transparent results makes forming mutually beneficial allegiances much easier. When everyone can see their impacts clearly and get fast reassurance on the impact of changing their operations, it’s much easier to meet in the middle.
It’s a proposition that multiple cross-sector stakeholders can get behind. And it’s easy to see how such collaborations powered by corporate resource and know-how could extend way beyond their initial cohort and attract other non-traditional stakeholders in ways not yet conceived.
This is a new way to think about ESG. It’s outside the box of creating benefits for shareholders and customers.
It’s a way of creating a much wider movement of positive change for everyone. By actively engaging with all stakeholders, including the most outspoken or powerless and by using AI in new ways to find and eliminate harm.
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Victoria will be talking about her work on catalytic communities at GreenBiz24 on February 14 as part of a panel including Microsoft water lead Eliza Roberts and Will Sarni of Water Foundry. Tickets still available at