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Gartner: 3 Factors That Could Raise ESG Risks for Enterprises

Gartner

Undoubtedly, automation has always been a top of the mind solution for improving speed, reducing costs, and benefiting quality, especially in the current inflationary environment. It has also proven to be attractive as a way to reduce the cost of doing business. But those benefits can come at a social cost and result in job losses and inequality. As CEOs increasingly prioritize sustainable business, even automation needs to be viewed through the lens of responsibility.

 

Responsible automation is a vision, concept and framework that goes beyond economic benefits to enable social, environmental and governance (ESG) outcomes and without due attention, automation can conflict with investor priorities for ESG.

Three ways to think about automation benefits and ESG risks

 

No. 1: Earnings-driven automation

Earnings-driven automation focuses on improving financial performance. Gartner estimates that automation could result in a $15 trillion benefit to the global economy by 2030. Executive leaders apply earnings-driven automation to improve productivity.

Automation can reduce the volume of talent needed, but it may also exacerbate skills mismatches (such as the lack of data and analytics talent), which are already an issue. Earnings-driven automation may also warrant upskilling and reskilling existing employees.

Quite often, higher productivity and better bandwidth for an existing employee would result in performing high-value tasks that were not getting done, such as nurturing high-value client relationships. Training a robot might be a new job profile. Business domain knowledge would be mandatory.

Earnings-driven automation can be used to mitigate inflation. It can also be a response to an economic downturn, alleviate talent shortages, and improve operating margins and productivity.

Some of the potential risks include:

  • Worker displacement and potential long-term unemployment
  • Widening inequality
  • Competition for highly skilled workers, such as data scientists
  • Capital expenditure (capex) required to implement automation
  • Hidden operating expenditure (opex) costs of automation (maintenance, training, aversion to change)

 

No. 2: Experience-focused automation

Experience-focused automation seeks to improve the overall experience and accuracy for customers, employees, investors and partners, among others. It focuses on automating tedious tasks to increase accuracy and improve the quality of work.

 

Many manufacturing companies in emerging markets use automation and machines to improve quality reporting and quality assurance.

How an experience focussed automation can impact business

  • Lack of available skills on the market to implement a responsible automation strategy
  • Abandonment of automation before full return on investment (ROI) is seen
  • Workers augmented out of jobs (there’s a fine line between augmenting work and automation that eliminates headcount)
  • Technology is trusted over the voice and experience of workers ▶

 

No. 3: Equity-oriented automation

Equity-oriented automation can be used to drive new revenue streams, create new and high-quality jobs, and support DEI. This automation reduces the level of employee knowledge needed to perform tasks and therefore upskills workers to perform at a higher level.

Robotics can be used in manufacturing to improve worker safety and reduce strain for people with disabilities. HR can leverage artificial intelligence to screen resumes and reduce hiring practices bias. Equity-oriented automation does, in fact, recognize the risks of incorporating human biases.

Few identified risks of using equity-oriented automation

  • Machine rights may become as important as human rights
  • Machine control could lead to unintended consequences
  • Ethical bias

 

(The author is Ms. Kristin Moyer, Distinguished VP Analyst at Gartner and the views expressed in this article are her own)

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