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AI Sustainability - I by IMD

Artificial Intelligence

AI x Sustainability: The new innovation engine

Published 4 February 2025 in Artificial Intelligence • 5 min read

Artificial intelligence (AI) is widely recognized as a driver of productivity, while sustainability, despite its benefits to the environment, is often seen as a cost burden. When combined, however, we believe they form a powerful synergy that can unlock new opportunities for innovation, efficiency, and competitive advantage.

The global AI race is accelerating, with governments and corporations pushing the boundaries of innovation. However, focusing solely on fostering AI development without sustainable infrastructure is short-sighted; deregulation in some markets may speed up AI development, as we are currently seeing in the US, but it risks ignoring the broader shift toward green technologies.

We’ve already seen how vulnerable even the tech giants in Silicon Valley are to disruption in fast-evolving spaces like AI. A company like Chinese AI startup DeepSeek, for instance, was able to quickly enter and challenge established players, showcasing the difficulty in building market entry barriers. The speed of innovation in tech makes it harder for any single country, even the US, to maintain an iron grip on AI dominance. The race is not just about pushing out new technologies but building the long-term infrastructure that can keep those technologies sustainable and competitive in a global market.

“By integrating AI into sustainability initiatives, organizations can optimize operations and accelerate the adoption of low-carbon technologies.”

Why AI and sustainability must go hand in hand

By integrating AI into sustainability initiatives, organizations can optimize operations and accelerate the adoption of low-carbon technologies. This combination not only improves efficiency but also fosters the development of new business models that align environmental responsibility with economic growth. The urgency for this approach is growing, fueled by regulatory changes, investor expectations, and resource scarcity.

We believe that businesses that embrace AI-driven sustainability will be better positioned to meet market demands and tackle global challenges like climate change.

AI can serve as a "supercharger" for industrial transformation, enabling companies to scale and optimize clean technologies such as renewable energy, energy-efficient manufacturing, and electric vehicles.

AI + sustainability: A market advantage

A recent report, A New Pace of Change: Industrial AI x Sustainability, created by Reuters in collaboration with Siemens, underscores the vast untapped potential of industrial AI to reshape industries and drive sustainability at scale. The report highlights that AI can serve as a “supercharger” for industrial transformation, enabling companies to scale and optimize clean technologies such as renewable energy, energy-efficient manufacturing, and electric vehicles. However, the report also points out that the full potential of AI is still in its early stages. While AI is playing a crucial role in improving efficiency, companies must invest heavily in technology, expertise, and data to fully capitalize on its capabilities.

There is reason for optimism. AI-driven sustainability is already reshaping industries by optimizing operations, reducing waste, and enabling new business models. In industrial sectors, companies like Siemens are pioneering the use of digital twin technology to create real-time virtual models of industrial processes. These digital twins allow for predictive maintenance, improved energy efficiency, and waste reduction, setting a new standard for sustainable manufacturing.

This potential is not just theoretical. A simulation by SystemiQ demonstrates that AI could play a pivotal role in reducing global carbon emissions by up to 6 gigatons of CO2-equivalent by 2035 through the acceleration of low-carbon technologies. The study shows how AI can improve efficiency across key sectors: optimizing energy production and distribution from renewable sources; enhancing the scalability of alternative protein sources; and improving the adoption of electric vehicles through predictive maintenance and smarter infrastructure.

Beyond industrial applications, AI is driving the transition toward a circular economy. Decathlon, for instance, uses AI-powered reverse logistics to streamline product reuse and recycling, ensuring that materials are repurposed instead of discarded. IKEA is also leveraging AI to predict product lifespan, optimize resale programs, and guide customers toward more sustainable purchasing choices, reducing overall waste and promoting environmentally friendly consumption habits.

The impact of AI extends to urban infrastructure and mobility as well. NEOM, the ambitious cognitive city in Saudi Arabia, is incorporating AI for energy efficiency, water management, and emission-free transportation. One of its key projects, The Line, eliminates car dependency by implementing AI-powered mobility solutions that prioritize sustainability. In addition to The Line, NEOM is developing Oxagon, the world’s largest floating industrial hub, which will feature automated logistics, renewable energy plants, and AI-enabled manufacturing processes. These ambitious projects represent a new era of urbanization, where technology and sustainability work in tandem to create smarter, greener cities. Similarly, Singapore has adopted AI-driven traffic management systems to minimize congestion and emissions, creating a smarter and more sustainable urban environment.

By integrating AI into sustainability efforts, businesses and governments are unlocking new opportunities for innovation and long-term competitiveness. This convergence is not just a trend – it is shaping the future of industry, commerce, and urban living, ensuring that economic growth and environmental responsibility go hand in hand.

Integrating AI with sustainability is no longer a choice but a strategic necessity

The future: AI + sustainability as a business imperative

We believe that integrating AI with sustainability is no longer a choice but a strategic necessity. Organizations that successfully merge these two forces will not only stay ahead of regulatory requirements but also unlock new markets and secure long-term investment. While some argue that sustainability-focused AI frameworks could slow innovation, ethical AI guidelines provide businesses with a roadmap for long-term resilience. They align corporate strategies with evolving regulations and foster consumer trust, making AI-driven sustainability a powerful differentiator in competitive markets.

Different regions are adopting varied approaches to this transformation. China is actively embedding AI into key sustainable sectors such as electric vehicles and renewable energy, cementing its position as an emerging leader in green technology. Meanwhile, the European Union has embraced a “twin transformation” strategy that integrates both digital and sustainability initiatives to drive progress toward global sustainability targets. In the United States, despite governmental headwinds, many corporations continue to invest heavily in AI-driven sustainability projects, particularly in clean energy solutions.

For businesses, the opportunity is clear. AI-driven sustainability is poised to define market leadership in the coming decades. Companies that recognize and act on this convergence today will be the ones setting new standards for innovation, environmental responsibility, and long-term competitiveness in the future.

All views expressed herein are those of the authors and have been specifically developed and published in accordance with the principles of academic freedom. As such, such views are not necessarily held or endorsed by TONOMUS or its affiliates.

Authors

Julia Binder

Julia Binder

Professor of Sustainable innovation and Business Transformation at IMD

Julia Binder, Professor of Sustainable Innovation and Business Transformation, is a renowned thought leader recognized on the 2022 Thinkers50 Radar list for her work at the intersection of sustainability and innovation. As Director of IMD’s Center for Sustainable and Inclusive Business, Binder is dedicated to leveraging IMD’s diverse expertise on sustainability topics to guide business leaders in discovering innovative solutions to contemporary challenges. At IMD, Binder serves as Program Director for Creating Value in the Circular Economy and teaches in key open programs including the Advanced Management Program (AMP), Transition to Business Leadership (TBL), TransformTech (TT), and Leading Sustainable Business Transformation (LSBT). She is involved in the school’s EMBA and MBA programs, and contributes to IMD’s custom programs, crafting transformative learning journeys for clients globally.

Michael Wade - IMD Professor

Michael R. Wade

TONOMUS Professor of Strategy and Digital

Michael R Wade is TONOMUS Professor of Strategy and Digital at IMD and Director of the TONOMUS Global Center for Digital and AI Transformation. He directs a number of open programs such as Leading Digital and AI Transformation, Digital Transformation for Boards, Leading Digital Execution, Digital Transformation Sprint, Digital Transformation in Practice, Business Creativity and Innovation Sprint. He has written 10 books, hundreds of articles, and hosted popular management podcasts including Mike & Amit Talk Tech. In 2021, he was inducted into the Swiss Digital Shapers Hall of Fame.

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