“Artificial Intelligence (AI) and climate change are not parallel disruptions — they are converging forces set to define the next decade of business. Together, they present a once-in-a-generation chance to redesign systems, accelerate innovation, build resilience, while creating strategic advantages that competitors cannot easily replicate.
“This isn’t about optimisation, it’s about transformation and value creation – and boards must take the lead,” say Liselotte Engstam and Fernanda Torre, Board Directors and recognised experts on innovation and governance.
Liselotte is Chair, and Fernanda the Operations Director, of Boards Impact Forum, our Nordic Chapter . Liselotte is also a Climate Governance Initiative Ambassador
The double-edged sword of AI
AI is both a catalyst for climate innovation and a contributor to environmental and social stress. On the one hand, it is already powering breakthroughs, optimising energy grids, decarbonising supply chains, predicting extreme weather, and accelerating clean-tech discovery. Insurers use AI to monitor and price climate risks, while financial institutions apply it to direct capital towards sustainable portfolios.
On the other hand, AI is resource hungry. Its demand for energy, water, and critical minerals are growing and adding new pressures to already fragile ecosystems – pressures that are further compounded by geopolitics and supply chain dependencies. Boards must therefore approach AI as a double-edged opportunity: harnessing its transformational potential, while governing its environmental footprint and social impact.
Materiality as a strategic compass
Most boards are familiar with risk matrices, but fewer use opportunity matrices with equal weight. This is where materiality assessments can become a powerful governance tool.
Traditionally, materiality has been associated with risk disclosure and sustainability reporting. But it can — and should — serve as a strategic compass for identifying where AI and sustainability intersect with the company’s priorities. Too many AI pilots lack strategic alignment and a business case. A robust double materiality assessment anchors AI initiatives in what truly matters – enabling both resilience and long-term value creation.
By integrating AI and sustainability into the materiality process, companies can uncover new sources of differentiation, operational resilience, and competitiveness.
Where AI creates business and climate advantage
AI’s potential extends beyond optimisation; it enables companies to rethink entire systems, for example:
Agriculture: Companies are using AI to design regenerative agricultural models that restore soil health while increasing yields.
Urban planning and construction: In the built environment, AI-driven simulations are enabling climate-positive urban planning — from zero-emissions districts to dynamic infrastructure that adapts in real time to extreme weather.
Finance: Algorithmic models are being trained to shift capital flows toward sustainable portfolios, aligning investment with planetary boundaries
Materials discovery: AI is also being deployed to accelerate materials discovery, helping industries replace fossil-based inputs with biodegradable or circular alternatives.
Early leaders are already reaping results. Guided by their boards, companies like the global energy leader Ørsted uses predictive modelling to optimise wind farms, while the world-renowned shipping company Maersk is applying AI across logistics and operations to reduce emissions and unlock efficiency at scale. Meanwhile, IKEA is deploying AI to make its supply chain more sustainable, from optimising transport routes to reducing food waste, and cutting costs while advancing its climate-positive commitments.
“For boards, the message is clear: the fusion of AI and sustainability is not about ESG compliance or surface change – it is a strategic moat. Proprietary data, trusted stakeholder relationships, integrated value chains and ecosystems become advantages that competitors cannot easily replicate“
Three priorities for boards
Our recent research on AI Leadership for Corporate Boards, to be published in a book later this year, shows that innovation and bold decision-making must be driven at the board level to ensure resilience and value creation at speed.
To unlock business opportunities with AI that also address climate and social disruption, board directors should focus on three priorities:
- Set the foundations for change
Use materiality assessments to identify where AI and sustainability intersect with business priorities — guiding innovation towards areas that are both strategically relevant and impactful. - Balance and enhance guidance with supervision
Boards must set the agenda for innovation, while supervising risks such as algorithmic bias, legal liability, or cybersecurity threats. Too much oversight can stifle opportunities and transformation progress; too little can expose companies to systemic and reputational risk. - Build hard-to-copy strategic advantages
Boards should guide management to combine AI and sustainability in ways that create unique data, deepen stakeholder trust, and strengthen supply chain ecosystems. In an era where geopolitics increasingly influences access to technology, talent and resources, these integrated advantages are critical to create resilience and secure long-term value and leadership.
The Board’s Call to Action
The convergence of AI and climate will determine winners and losers across every industry. Boards that act now – steering innovation, balancing risks, and embedding AI into sustainable business strategies – will secure not only resilience, but also competitive edge.
Take a deeper dive into how boards can steer AI and business in “AI Leadership for Corporate Boards – Leading Responsible AI for Value Creation” the forthcoming book by Liselotte Engstam and Fernanda Torre, co-written with Professor Robin Teigland of Chalmers University, with contribution from Professor Stanislav Shekshnia, INSEAD. The book will be published by Springer Nature this November.
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