Microsoft Cloud for Sustainability: Generative AI, Scope 3 Data Capabilities for ESG Reporting Coming Soon

Microsoft Cloud for Sustainability will gain generative AI (artificial intelligence) capabilities for ESG (environmental, social and governance) reporting as part of a software update that's expected sometime between April 2024 and September 2024, the company has disclosed.

First, the big picture: Microsoft Cloud for Sustainability involves a "growing set of ESG capabilities from Microsoft and our global partners, empowering organizations to accelerate sustainability progress and business growth," the company asserts.

Key offerings include Microsoft Sustainability Manager, a tool that "unifies data to help you monitor and manage your environmental sustainability performance," the company says.

Microsoft Cloud for Sustainability: Copilot, Scope 3 Reporting Capabilities

As part of the Microsoft Cloud for Industry strategy, a 2024 release wave 1 will include multiple sustainability enhancements, according to a blog from the software company.

Key enhancements in the release, according to the company, will include:

• Expanded CSRD reporting capabilities. CSRD is the European Union's Corporate Sustainability Reporting Directive, which impacts thousands of companies worldwide.
• LLM (Large Language Model) experiences through Microsoft Copilot for Sustainability. Microsoft Copilot is the company's "AI companion" for everyday use cases.
• A push to make the ESG value chain solution generally available. That solution enables users to "gather data directly from your value chain partners and use that data to calculate your scope 3 emissions."
• Updated Project ESG Lake capabilities on Microsoft Fabric to "help customers track and disclose evidence data for regulatory compliance."
• Expanded insights -- though we don't quite know specific plans here.

We expect more details may emerge on February 13, 2024, when Executive VP Judson Althoff is scheduled to present during a Microsoft AI for Sustainability virtual event. Key speakers on the event also will include:

• Melanie Nakagawa, chief sustainability officer;
• Satish Thomas, corporate VP for industry clouds; and
• Shelly Blackburn, global VP of sustainability go-to-market.

Microsoft Cloud for Sustainability: Why Technology Partners Should Care

The Microsoft Cloud for Sustainability enhancements could help partners and customers to more easily address compliance mandates worldwide.

For example: Under the European Union's Corporate Sustainability Reporting Directive (CSRD), roughly 50,000 companies are subject to mandatory sustainability reporting. The figure includes non-EU companies that have subsidiaries operating within the EU or are listed on EU regulated markets, KPMG notes. For companies with the year-ending December 2024, the first CSRD reports will be due in 2025.

Meanwhile, U.S. technology partners need help ramping on up sustainability know-how. Among the proof points: When it comes to sustainability expertise, U.S.-based partners trail their counterparts in Europe and Asia-Pacific, according to research from Canalys.

Amid that backdrop, Microsoft and rival ESG software developers have been working to ensure their platforms support Scope 1, Scope 2 and Scope 3 reporting. At the same time, Microsoft has been ramping up its sustainability partner ecosystem.

Definition: What Are Scope 1, 2 and 3 Emissions?

According to our Sustainability Glossary:

• Scope 1 involves emissions from sources that an organization owns or controls directly – for example from burning fuel in our fleet of vehicles.
• Scope 2 involves emissions that a company causes indirectly when the energy it purchases and uses is produced. For example, if a company has a fleet electric vehicles, then the emissions from the generation of the electricity they're powered by would fall into this category, according to National Grid.
• Scope 3 involves emissions up and down a company's value chain.

Related: Here is Microsoft's overall sustainability strategy, led by Chief Sustainability Officer Melanie Nakagawa.