As pressure to meet net-zero goals mounts, so too does the need for innovative technologies at every level – from smart meters giving consumers greater control over their energy usage, to connected devices that enable predictive maintenance and machine automation that drives renewable energy production and efficiency. Achieving carbon neutrality goals is no longer a distant ideal but an urgent necessity, and it is inextricably linked to technological innovation.
Major players in the energy and tech sectors have already begun integrating advanced digital technologies into their sustainability efforts, creating impactful synergies that drive both innovation and environmental progress. For example, leading energy companies are using AI to enhance grid management and predict energy demand more accurately, thereby reducing energy waste. Some energy providers have harnessed digital twins and smart sensors to monitor energy infrastructure, enabling predictive maintenance and reducing downtime, while tech giants are using AI-powered platforms to optimize energy usage in data centers in support of their carbon-neutral targets. These initiatives are not just about adopting new technologies as an end in itself. They are part of a larger strategy to address global climate challenges, reduce operational costs, and maintain a competitive edge in an increasingly sustainability-conscious market.
But, as with all new technologies, leveraging these tools comes with its share of risks which need to be carefully managed. Key areas that executives should keep top-of-mind include:
- Cybersecurity: Heightened interconnectivity and digitalization can leave organizations increasingly vulnerable to cyberattacks. The risks associated with the integration of IoT devices, AI systems, and digital infrastructure demand robust cybersecurity strategies to protect both data and physical assets. Interventions by bad actors in this space can disrupt operations and have significant environmental, economic and national security consequences. In the EU and U.S., new laws and standards regulating the protection of critical infrastructure (e.g., power plants, grids, etc.) have intensified compliance pressures for energy producers. Cybersecurity governance and digital resilience within organizations are more important than ever, and they are increasingly matters of regulatory requirement rather than choice.
- Product liability: New technologies that are present in our daily lives – such as solar panels, electric vehicle batteries, and smart meters – can pose safety risks. The navigation and management of those risks inevitably involve potential legal consequences. Companies involved in the development, manufacturing, supply and deployment of these types of products and technologies need to take care to follow applicable regulatory requirements (including comprehensive risk assessments and robust testing protocols) to ensure that their products do not cause harm to users, other businesses and the environment. The financial and reputational consequences can otherwise be severe. The risk of such liability is heightened for companies using AI when one considers the expanding regulatory regimes governing business use of AI. The EU’s AI Liability Directive, for example, applies to any type of damage (covered under national law) caused by AI systems.
- AI regulation: As AI use gains traction around the world, expanded regulatory oversight could pose new challenges for companies that have already embraced the technology in the energy sector. For instance, the EU has already enacted comprehensive legislation and requirements, like the EU AI Act. Meanwhile, AI regulation in the U.S. is in a state of flux; whilst the previous administration invested in an AI risk management framework, with various federal agencies overseeing AI-related risks, the new administration has alluded to a light-touch regulatory approach. Regulatory bodies are increasingly concerned with how AI is used, particularly in decision-making processes that affect environmental, social, and governance (ESG) outcomes with key issues including algorithmic transparency, ethical AI use, and potential bias in energy allocation systems.
- Greenwashing: Litigation related to claims of “greenwashing” have risen in recent years – particularly as ESG reporting requirements come into force – embroiling several high-profile companies in complex disputes. In an effort to meet consumer expectations and regulatory pressures, businesses may risk overstating their environmental efforts, exposing themselves to legal and regulatory scrutiny as well as to reputational damage. As technologies continue to create new ways to lower emissions, companies could also eventually find themselves facing shareholder claims, arguing that they should have taken steps (e.g., by adopting new technologies) sooner to fight climate change. The prevailing winds in this space may turn, however: the legal discourse around business strategies relating to ESG and environmental concerns is evolving, particularly in the U.S. shifting political landscape. While the EU continues to promote its Green Deal objectives, there are some indications of growing skepticism and a more conservative approach in the U.S., and companies navigating this evolving regulatory environment may need to carefully manage their sustainability strategies in the face of conflicting directions of travel.
The energy transition, one of the most critical drivers of change across industries, is inextricably linked to technological innovation and will take place alongside advancements in digitalization, automation, and data. The intersection of energy transition and cutting-edge technologies offers an unprecedented opportunity to unlock the full potential of renewable energy sources, and to do so more efficiently and effectively. To ensure their organizations stay abreast of these developments, today’s business leaders must balance the adoption of new technologies with effective risk management and compliance processes.