Artificial intelligence has recently taken the news and financial markets by storm. But with that, the conversation has also turned to some of its dangers. Fortunately, new tools to assess and mitigate the risks of AI and their consequences for environmental, social, and governance issues have emerged.
DQ Institute (DQI), a global organization focused on setting standards for digital intelligence, has launched Digital-ESG Assessment and Reporting Standards to address AI concerns and promote a more human-centered approach to the technology.
DQI partnered with South Korea’s leading think tank Taejae Future Consensus Institute, to create standards for digital risks such as cyber-attacks, child online safety issues, data and news manipulation, and privacy concerns. Also, it will tackle ESG issues that are easily overlooked in the digital world.
Photo Courtesy DQ Institute
“The introduction of the Digital-ESG Assessment and Reporting Standards marks a significant milestone in setting a new global agenda,” said DQI in a recent statement. “The guidelines provide a comprehensive checklist and framework for companies or investment communities to address digital-related risks while fostering “human-centered technology” in the AI age.”
DQI explains that a huge digital transformation is taking place with the emergence of big data and AI. But along with that, a loophole has opened up where businesses involved in the digital environment can avoid ESG responsibilities “without facing significant risks to their investment portfolio or reputations,” it further notes. “By incorporating Digital-ESG into sustainability strategies, a balance can be struck between harnessing the potential of technology and protecting citizens, digital and physical planets, and global society.”
Photo Courtesy DQ Institute
DGI, which operates as a non-profit in the U.S. and Singapore, has also launched a Taskforce on Digital-related Financial Disclosure (TDFD) to help businesses adopt, integrate and report on the Digital-ESG goals. Taskforce members come from all sectors, industries, academia, financial institutions, and governmental agencies.
According to Financial Tribune, TDFD states that 30% of the global economy in 2022 was digitally based. This is equivalent to $30 trillion. As such, its Digital-ESG tools will work in addition to traditional ESG frameworks, providing a holistic support system for companies.
The Digital-ESG framework seeks to address three areas of concern that still need to be covered by mainstream ESG solutions. First, TDFD finds that the mainstream ESG guidelines downplay industry opportunities that can be created. Second, the social and governance guidelines only apply sometimes due to differences in culture across various regions worldwide. And third, the guidelines for disclosure of social and business risks inherent to AI and rapid digitalization need to be revised.
The task force’s goal will be to work on two main issues: addressing the “S” and the “G” in the digital-related risks and identifying digital-related opportunities to improve on the “E.”
To address the shortcomings of S and G in the digital domain, TDFD has developed “less controversial, culture-neutral and more objective standards for businesses.”
The framework provides the methodology and tools to measure the impact of a firm’s performance across all Digital-ESG metrics. It helps companies measure their digital abilities to minimize ESG risks and maximize ESG opportunities.
Photo Courtesy DQ Institute
“Our aim is to provide industry leaders with a practical tool and guidance that will assist every company striving to adopt AI and digital technology,” said Dr. Yuhyun Park, founder of DQ Institute. “Digital-ESG empowers companies to drive their technological advancements with transparency, accountability, and ethical standards. With Digital-ESG, companies can maximize empowerment and resources while minimizing their harm and control.”
This will help companies positively contribute to society and the environment while pursuing digital-based profit goals.
DQI introduced the new framework at a forum on the digital age and sustainability. Participants included United Nations representatives, academics, and business leaders.
“The private sector plays a crucial role in achieving sustainability and needs to be held accountable from an Environmental, Social, and Governance (ESG) perspective,” said Mr. Ban Ki-moon, the 8th UN Secretary-General. “
Digital components need to be incorporated into ESG as we try to update our sustainability goals, with the global race for AI dominance raging on. We need to expand the traditional ESG framework to encompass various aspects of companies’ digital activities, such as digital inclusion, digital skills, digital safety and security, digital rights, and more.”
