Europe’s Companies Enhance AI Disclosures

Europe’s largest companies are progressively addressing the growing demands from investors, regulators, and the public for enhanced transparency in their AI practices, according to a new study conducted by Trinity Business School and FTI Consulting. This research highlights a significant shift towards strong AI disclosures across organizations, emphasizing the integration and value of AI in their operations.

The comprehensive report titled Decoding AI Disclosure examines the AI-related statements found in the annual and sustainability reports of Europe’s 50 largest companies listed in the STOXX Europe 50 Index—a benchmark for sector leaders in Europe. It delves into the AI disclosures across 10 essential categories, including AI policy, risk management, Board oversight, audits, and key performance indicators (KPIs).

Interestingly, eight companies have been identified as frontrunners in disclosure, reporting on at least eight of the ten categories assessed: Allianz, AstraZeneca, Deutsche Telekom, GSK, Mercedes-Benz, Prosus, RELX, and Zurich Insurance. As noted by Niamh O’Brien, a Senior Consultant at FTI Consulting, the act of incorporating AI activities into annual reports serves as a powerful indicator of a company’s adaptation to the unfolding AI revolution. This trend in performance tracking through indicators and audits will likely become increasingly critical in the future.

Daniel Malan, an Assistant Professor at Trinity Business School, echoed this sentiment, highlighting the study as a foundation for understanding current practices in AI disclosure. He noted the excitement surrounding future collaboration with FTI Consulting to continue monitoring progress in light of the European Union’s new AI Act.

Key Findings from the Report

• Comprehensive AI Strategy and Usage Disclosure: All 50 companies disclosed some level of information regarding their AI strategies, with 42 companies providing specific examples of AI use cases, suggesting a recognition of the necessity to prepare for the future of AI.
• Governance and Risk Management Gaps: Only 23 companies reported on board oversight, while 20 provided insights on risk management frameworks and 19 on AI policy. Addressing these gaps is crucial for companies to demonstrate their ability to mitigate potential risks associated with AI.
• Inconsistent Governance: The findings reveal a mixed governance landscape: some companies excel in certain areas, yet exhibit unexpected deficiencies in others, particularly regarding leadership’s accountability in AI-driven decisions.
• Sector Comparisons: Sectors leading in AI innovation, such as technology, media, and telecommunications, are more inclined to report on the role of leadership and the development of knowledge regarding AI. In contrast, financial sectors focus more on risk management, responding to their regulatory obligations.

Moreover, Arnaud Cave, a Director at FTI Consulting, emphasized the necessity for companies to bridge the gap between their strategic intent, usage of AI, and effective governance. He urged that comprehensive disclosure regarding material AI risks is no longer optional but a requirement that investors are demanding assurances on.

The report concludes with best practice examples and offers ten recommendations for improving AI reporting practices. Among these are documenting board-level oversight of AI activities, establishing strong KPIs enriched with qualitative insights about AI deployment, and providing detailed examples of use cases categorized by their impact and function.

For those interested, the complete report is available on the Trinity Business School website.