Considering ESG Principles in Developing a Metaverse Strategy | Insights

The Metaverse adds a new layer to the traditional Internet, rich in virtual and augmented realities. At the same time, the environmental, social and governance (ESG) movement is developing new criteria by which companies are judged by investors and assessing corporate performance against ESG standards. Companies developing metaverse strategies would do well to consider the prospect of new technologies that may help or hinder the implementation of ESG goals and how they can provide evidence for each action.

The environmental implications of the Metaverse assumption

The Metaverse offers immersive experiences. Users can create their own worlds and even choose how the laws of nature apply in those worlds. But however otherworldly these applications may appear to the user, they rely on massive computational processes that impact the real world.

Investors are increasingly turning to environmentally conscious companies. However, data center processing consumes energy, which can increase the carbon footprint. For example, artificial intelligence and cryptocurrencies are key metaverse technologies. A recent study found that training a single AI model can emit up to 626,000 pounds of carbon dioxide equivalent.1 That’s nearly five times the lifetime emissions of the average American car. One researcher reports that “an average Ethereum transaction uses 60% more energy than 100,000 credit card transactions, while an average Bitcoin transaction uses 14 times more energy.”2 While data centers and cryptocurrencies are changing dramatically to reduce their carbon footprint, environmental concerns remain and should be addressed.

On the other hand, virtual reality and augmented reality are ideal for remote work and collaboration. Used correctly, they can drastically reduce the transport-related CO2 emissions of a nationwide or global workforce. In addition, many companies create “digital twins” of their warehouses or factory floors. Companies that are able to massively simulate industrial activities can streamline processes to produce more with fewer natural resources, reduce industrial waste, and limit workplace injuries.

The Social Impact of the Metaverse Adoption

Investors also insist on companies that are socially responsible, including when it comes to workers. “Digital twins” can have a significant impact on workplace safety, a key component of social responsibility. For example, an automaker that makes millions of cars with countless customizations created a digital twin of their factory floor in the Metaverse. In this way, the company was able to virtually simulate what it’s like to see 300 cars moving on a conveyor belt and determine which routes through the factory are safest for employees during a shift.3

At the same time, organizations must take thoughtful steps to ensure their metaverse properties are inclusive, secure, and support corporate values. As companies have learned from a spate of Americans with Disabilities Act lawsuits involving websites and apps, virtual real estate still needs to address very real barriers some users will encounter and support appropriate adaptive technologies. Differences in access to new technologies between different communities need to be addressed to avoid widening the digital divide. The ability to customize avatars will raise new concerns about diversity and inclusion. Finally, particularly as some metaverse technologies involve haptics (the sense of touch), reducing the risk of metaverse sexual harassment will be critical.

The governance implications of the Metaverse adoption

All of these risks and opportunities require management. Investors insist that management from the board down is accountable, transparent, diverse and experienced. Many organizations add a Chief Metaverse Officer or equivalent as part of the governance of metaverse risk.4 Others spread the responsibility for introducing metaverses among several existing stakeholders. For most organizations, either approach can be acceptable as long as the pros and cons are carefully considered and appropriate to the circumstances.

Holland & Knight’s Metaverse strategy team includes experienced attorneys who are recognized thought leaders in the field. The Metaverse strategy team represents dozens of clients ranging from Fortune 500 companies to technology startups as those companies navigate the Metaverse landscape.