The Metaverse And Its Impact On ESG
In July 2021, Facebook CEO Mark Zuckerberg announced plans to convert his company into a Metaverse concern, then rebranded Facebook into META in October. The subsequent hype in the technology sector led most businesses to start adopting the Metaverse in some shape or form. However, how beneficial is the Metaverse from an ESG angle? Let's explore what it means for ESG.
What is the Metaverse?
The Metaverse is a user-generated online world that exists as a parallel universe to our own, a virtual world where people can interact with each other and create their own avatar, or digital self. Today, the Metaverse is also home to many businesses and organisations that use it as a way to engage with their customers or employees.
The possibilities for the Metaverse are endless, but its most notable impact has been on the world of online gaming. In the past few years, the Metaverse has become increasingly popular as a way for people to connect with each other and play games. The Metaverse has also had a significant impact on the world of online gambling, with many online casinos now using the Metaverse as a way to allow their customers to gamble in a safe and secure environment. It is also being used by businesses to train their employees or provide customer service. The Metaverse is constantly evolving and expanding, and businesses are adopting it based on their customer needs.
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How will the Metaverse impact ESG?
Environment, Social and Governance (ESG) has become increasingly important in recent years, with investors more conscious of the need to consider environmental, social, and governance factors when making investment decisions. The Metaverse presents a unique opportunity for businesses to address these issues in a new and innovative way. In my opinion, with both positive and negative ESG impacts.
Positive Impacts:
The Metaverse can help businesses to track and report their environmental impact, engage with their customers on social issues, and develop new governance models that are more responsive to stakeholder needs. In doing so, businesses will not only be able to improve their financial performance, but also make a positive contribution to society.
One of the most significant impacts is the way in which it is enabling companies to engage with their stakeholders on a more personal level, by providing a virtual space to do so, thus increasing transparency and communication. This is particularly important when it comes to environmental and social issues, as it allows companies to directly address concerns and respond to them in real-time. For example, when a company proposes a new industry set-up in a specific location, stakeholders can actually do a virtual visit and assess the overall impact which that industry establishment is likely to make on the environment and livelihood of people living in that area.
Employee engagement within the company, i.e., the ‘social’ part of ESG. During the pandemic, more people have been working remotely, and the Metaverse enables employees and teams to connect virtually and make them feel they are working together. Many employees or students are living away from their homes, and in such situations, the Metaverse can act as a shared interaction space that helps them bond with others and combat depression, hypertension, or other kinds of mental problems.
Negative Impacts:
The Metaverse has a drastic impact on the environment since the data centres which will run the Metaverse’s persistent worlds are highly expensive from an energy consumption standpoint. Tech giant Intel states that to run the Metaverse we would need to expand our collective computing power by 1,000 times, which would increase its carbon footprint even further.
According to a 2020 “Greening The Beast” study, high-end gamers who have the hardware needed for cutting-edge VR might spend up to $2,200 on electricity over the course of five years and emit up to 2,000 pounds of carbon dioxide per year.
The additional energy required for cloud gaming, according to a 2016 study by researchers at the Lawrence Berkeley National Laboratory, can result in annual electricity use increases of 40% to 60% for desktops, 120% to 300% for laptops, 30% to 200% for consoles, and 130% to 260% for streaming devices. It is important to note, however, that a number of businesses have committed to taking actions to lessen the environmental impact of the data centres that power the Metaverse. For instance, Google has promised that all of its data centres will run continuously on carbon-free electricity by 2030. By the same time, Microsoft wants to be "carbon negative," which includes giving up using diesel in its data centre generators. Perhaps surpassing these goals, by 2025 Amazon Web Services (AWS) wants to run all of its operations using only renewable energy.
Outlook
Indeed, the Metaverse has the potential to revolutionise the way we interact with each other and with the world around us. However, it is still in its early stages of development and there are many unanswered questions about its impact on society, particularly about how the Metaverse will affect ESG issues.
Will the Metaverse be a force for good or will it exacerbate existing problems? Only time will tell, but it is important to keep an eye on these issues as the Metaverse develops into something we may all start to use ourselves on a daily basis.
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