Is AI Itself an ESG Issue?

Over the past two years, artificial intelligence (“AI”) has rapidly moved from an emerging technology to a boardroom buzzword. Across annual reports, ESG disclosures and corporate announcements, more and more organisations are keen to state that they have “adopted AI” or “integrated AI into their operations”.

Yet an important question is rarely examined in depth:

Should AI itself be treated as an ESG issue?

While the core objective of ESG is to support long-term, sustainable value creation, the current enthusiasm for AI deserves closer and more critical examination.

Beyond the headline: when “using AI” becomes a superficial signal of progress

For many organisations, AI adoption is still framed in a relatively simplistic way: greater efficiency, lower costs and enhanced competitiveness.

In practice, however, we have also seen cases where AI implementation is quickly followed by large-scale workforce reductions, with “automation” positioned as a straightforward productivity win.

This raises a difficult but necessary question:

Does such an approach genuinely contribute to sustainable development, or does it prioritise short-term financial efficiency at the expense of social resilience?

From an ESG perspective, technological advancement alone is not inherently positive. What matters is how the benefits and costs are distributed, and whether appropriate transition measures are in place for affected stakeholders.

Environmental considerations: AI is not a low-impact technology

AI is often perceived as an intangible, almost invisible tool. In reality, it is underpinned by highly resource-intensive infrastructure.

Large-scale AI models rely on energy-hungry data centres, which require:

• substantial and continuous electricity supply
• significant cooling capacity
• stable and resilient energy systems

Even a single AI query consumes measurable electricity. At scale, this energy demand becomes material, particularly in a global context where renewable energy penetration remains uneven.

It is also worth noting that the current accessibility and affordability of AI services are partly driven by aggressive pricing strategies and ongoing investment by major technology firms. This does not mean AI is low-cost; rather, many of its environmental and economic costs are not yet fully visible to end users.

From an environmental standpoint, widespread AI deployment without corresponding progress in clean energy raises legitimate sustainability concerns.

Social impacts: what happens when thinking is increasingly outsourced?

Another dimension of AI adoption lies in how it reshapes human behaviour and capabilities.

As AI tools become embedded in daily work, communication and problem-solving, there is a risk that over-reliance may gradually erode:

• critical thinking
• independent judgement
• human creativity

AI outputs are often presented in a confident and authoritative tone, yet they are not inherently correct. Without sufficient domain knowledge and professional scepticism, users may struggle to assess the quality or limitations of AI-generated responses.

From a social sustainability perspective, a future in which human judgement is weakened rather than enhanced should give organisations pause.

Economic and workforce implications: concentration of value and erosion of entry pathways

The economic structure of today’s AI ecosystem is highly concentrated. A small number of global technology companies control the majority of:

• computing power
• proprietary models
• strategic data assets

At the same time, many organisations are reassessing entry-level roles, on the assumption that “AI can do the work more cheaply and faster”. This creates a structural challenge: if junior professionals are no longer given opportunities to develop foundational skills, how will future senior experts emerge?

Professional expertise does not develop in isolation. It requires experience, judgement and gradual progression, precisely the capabilities needed to evaluate and govern AI responsibly.

A labour market that systematically removes these pathways may undermine its own long-term capability base.

Is the current AI trajectory compatible with sustainable development?

Viewed through an ESG lens, the current AI boom raises several important questions:

• Are we consuming environmental resources today in ways that compromise future resilience?
• Are we weakening human capital development in pursuit of short-term efficiency?
• Are we reinforcing economic concentration rather than inclusive value creation?

If AI deployment is driven primarily by competitive pressure, market dominance and short-term returns, without sufficient consideration of these impacts, it is difficult to describe such a trajectory as truly sustainable.

Conclusion: the issue is not AI, but governance and intent

This is not an argument against AI. The core issue is not the technology itself, but the values and governance frameworks that shape its use.

If AI is to be considered within the scope of ESG, organisations should move beyond the question of whether they use AI, and instead ask:

• Why are we using it?
• What environmental and social impacts does it create?
• How do we ensure accountability, oversight and responsible adoption?

A sustainable approach to AI may ultimately be one that is not simply faster or cheaper, but more deliberate, transparent and human-centred.

GreenCo is a professional ESG advisory firm accredited with ISO 9001 in the Provision of ESG / Sustainability Reporting, Sustainanbility and Climate Disclosures and GHG Accounting Advisory Services. Established in 2016, we were born to tackle ESG and climate risk management challenges. GreenCo has a professional team consists of talents with multiple backgrounds with

• PhD
• Practitioner Member of the Institute of Sustainability and Environmental Professionals (ISEP)
• CFA (the CFA Institute) and Certificate in ESG Investing
• EFFAS Certified ESG Analyst (CESGA)
• GRI Certified Sustainability Professional
• Certified Public Accountant (for assurance in accordance with ISAE 3000)
• Member of Global Association of Risk Professionals
• Master’s degree in envirnomental science

GreenCo has solid track record in ESG advisory for over 70 listed companies in Hong Kong, Mainland China, Singapore and Korea, covering all industries under the Hang Seng Industry Classification System.