Building a Sustainable Future: How AI and ESG Are Transforming SMEs

Adopting sustainable practices and digital technologies, specifically AI, is increasingly essential for SMEs to remain locally and globally competitive.

Small and Medium Enterprises (SMEs) and entrepreneurs play a crucial role in driving Environmental, Social, and Governance (ESG) and digital transitions due to their significant impact on the economy, fostering innovation, and their combined ESG footprint. Adopting sustainable practices and digital technologies, specifically Artificial Intelligence (AI), is increasingly essential for SMEs to remain locally and globally competitive. By prioritising ESG practices, businesses can build a competitive advantage and enhance their brand image.

However, many face difficulties transforming their business models and investing in these transitions. Imagine running a small or medium-sized business. You have big dreams but face tough competition, limited resources, and the constant pressure to stay ahead. What if there was a way to make your business more sustainable, responsible, and successful? Enter the world of AI and ESG principles.

The Power of AI: A Helping Hand for SMEs
AI is becoming an integral part of our everyday lives, bringing about rapid changes. While it presents thrilling opportunities, it can also be somewhat daunting. According to a report by Accenture, AI has the potential to increase productivity by up to 30% in some sectors, leading to cost savings of up to US$ 140 billion by 2025. An MIT Sloan Management Review study found that companies that adopt AI are more likely to outperform their peers regarding profitability and revenue growth.

Currently, the most talked-about advancement in AI is generative AI. Generative AI is AI that can create - from words and images to videos, music, computer applications, and even entire virtual worlds. Generative AI tools enable SMEs to produce detailed data analyses of their operations quickly, create personalised business strategies, develop new product concepts, and design custom promotional materials in seconds. These are just a few examples; the possibilities are almost endless.

Embracing ESG: Doing Good While Doing Business
The Alliance Bank Malaysia Berhad’s 2023 ESG survey report, ESG Insights from Malaysian SMEs: Building A Better Future Together, revealed that three out of five SMEs believe embedding ESG practices in their business will create long-term value, build a strong workforce and increase business opportunities.

The Magic of Combining AI and ESG
For SMEs, achieving profitability and sustainability can feel like a juggling act. However, the magic of combining AI and ESG principles offers a powerful solution.

Due to resource constraints, implementing sustainable practices has traditionally been a hurdle for SMEs. Here’s where AI steps in as the great equaliser. Its data-crunching prowess can analyse operations, pinpoint areas for waste reduction, and optimise resource use. This translates into immediate benefits for SMEs - cost savings through efficient processes, a smaller environmental footprint, and a more robust ESG profile.

This profile is increasingly important as consumers and investors become more environmentally and socially conscious. The magic does not stop there. AI can automate tedious tasks related to ESG reporting, freeing up valuable time and resources for SMEs. This allows them to focus on core business activities while demonstrating their commitment to sustainability. By leveraging AI to streamline ESG efforts, SMEs can compete effectively with larger companies and attract investors seeking businesses with strong ESG credentials.

In essence, AI and ESG have become potent concoctions for SMEs. By embracing this combination, SMEs can transform from sustainability laggards to nimble leaders. They can positively impact the environment and society while achieving long-term growth and success. This paves the way for a future where small businesses are profitable and responsible stewards of our planet and society.

AI can identify patterns and make precise predictions in order to use resources more efficiently and minimise environmental impact.

The Road Ahead
While AI and ESG offer incredible benefits, they come with challenges. SMEs must ensure data privacy and security, invest in employee training, and manage the costs of implementing new technologies. However, the long-term rewards make these efforts worthwhile.

In this ever-changing world, SMEs like Sarah’s Boutique and John’s Restaurant can thrive by embracing AI and ESG principles. These tools and practices make businesses more efficient and responsible, ensuring long-term sustainability and success. So, if you’re running an SME, consider taking a page from Sarah and John’s book. Embrace AI to streamline your operations and use ESG principles to build a responsible and sustainable business. Your future self – and the world – will thank you.

The magic of combining AI and ESG principles offers a powerful solution.

Elain Lockman, CEO of Ata Plus, has extensive experience in government-linked organisations and start-up businesses, specifically in the areas of management & operations (business strategy, business development, stakeholders relationship management [government, corporates & influencers], branding, marketing and corporate communications).