BackAI Complicates Sustainability Profiles of Tech Companies — ESG Insight
Although using AI could carry negative environmental implications for tech firms, system optimization projects using the technology could improve their performance
Premium• Training AI-powered models requires high levels of energy and water consumption, but they can also be used to help offset greenhouse-gas emissions and control water consumption by making systems more efficient
• Energy management and water-and-wastewater management aren’t considered financially material for the technology and communications sector, although it contains most AI-focused companies
• Among the 10 largest companies in the Wisdom Tree Artificial Intelligence and Innovation Index, Microsoft and Alphabet lead in energy management, while Nvidia, Meta Platforms and Microsoft are among the leaders for water-and-wastewater management, Dow Jones sustainability data shows
The increasing development and implementation of artificial intelligence by businesses has both positive and negative sustainability implications for companies, specifically those in the technology and communications sector.
Training AI-powered models, such as the one behind ChatGPT, requires significant levels of energy and water consumption, as data centers use large amounts of water for cooling. For instance, training an AI-powered model such as GPT-3 can generate up to 552 metric tons of carbon emissions from the energy it uses, equivalent to three times a jet plane’s carbon emissions for a round trip from San Francisco to New York, according to researchers at Cornell University.
When it comes to water usage, Alphabet’s Google used up to an estimated million liters of water to train its large-language model, known as LaMDA, according to research by Shaolei Ren, a professor of electrical and computer engineering at the University of California Riverside, The Wall Street Journal reported.
However, AI-powered tools can also be implemented to help offset greenhouse-gas emissions and control water consumption by making systems more efficient. For instance, since 2018, Google has developed an AI-powered project called the Google Flood Forecasting Initiative to predict floods in India and Bangladesh. More recently, the company said it is using AI-powered tools to reduce “the energy of training a model by up to 100 times and emissions by up to 1,000 times."
For sustainability-focused investors, the positive and negative implications of the use of AI aren’t straightforward. There isn’t a systematic way to measure or compare the positive impacts of AI, and most of the major companies working on AI fall into the technology and communications sector, for which the energy and water-management categories aren’t classified as financially material by the Sustainability Accounting Standards Board. More broadly, companies in the technology and communications sector are, on average, laggards when it comes to environmental considerations, placing three points below the global average, according to the Dow Jones sustainability scores.
Hardware Companies Lead in Disclosure
In the technology and communications sector, hardware companies—which produce and assemble desktop computers, laptops and computer peripheral devices such as servers—lead in the disclosure of how they manage their energy and water usage, Dow Jones sustainability data show.
Taking the top 10 largest component companies in the Wisdom Tree Artificial Intelligence and Innovation Index, Microsoft and Alphabet lead with a score of 80.9 in the disclosure of information related to energy management, while Lattice Semiconductor places last with a score of 17.8, according to Dow Jones sustainability data. Meanwhile, when it comes to water-and-wastewater management, most companies within this top 10 have a score of 73.7, such as Nvidia, Meta Platforms and Microsoft, while Lattice Semiconductor continues to be a laggard with a score of 13.1, the data shows.
In order to meet sustainability goals, leading companies have implemented AI-powered projects to reduce water and energy consumption. Nvidia has partnered with several AI-driven startups to improve its energy efficiency, such as by using an aerial imagery platform called DroneDeploy that employs AI to “evaluate solar farm layouts, maximize energy generated per site and automatically monitor the health of solar panels and other equipment in the field," the company said. Similarly, Microsoft created a Cloud for Sustainability that uses machine learning on the company’s Azure platform to help organizations centralize data to improve their sustainability strategy, according to the company. Over time, these programs could have positive implications for the companies’ sustainability performance.
Write to Catalina Makhmudova Petrenko at catalina.makhmudova@wsj.com
ESG Insights are written by WSJ Pro Research analysts, whose commentary is independent of the news coverage by reporters at the Journal.
Milestone Alert!Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.
